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Timestamp: 2018-03-22 11:35:38
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AUER v. THE STATE OF NEW YORK, 86167
AUER v. THE STATE OF NEW YORK, #2001-001-009, Claim No. 86167, Motion No. M-62356
Claimants' motion for reargument and/or renewal of the Court's August Judgment pursuant to CPLR 2221 is denied.
2001-001-009
M-62356
The following papers were read and considered on claimants' motion for reargument and/or renewal pursuant to CPLR 2221: Notice of Motion, dated September 8 and filed September 12, 2000; Affidavit in Support of Claimants' Motion to Reargue and/or Renew of Michael W. Kessler, Esq., sworn to September 8 and filed September 12, 2000; Claimants' Memorandum of Law in Support of Motion, undated and received September 12, 2000; Affirmation in Opposition of Risa Viglucci, Esq., AAG and Belinda A. Wagner, Esq., AAG, dated September 21 and filed September 25, 2000; Defendant's Memorandum of Law, dated September 21 and received September 25, 2000; Supplemental Motion, dated and filed September 29, 2000; Affidavit in Support of Claimants' Supplemental Motion of Michael W. Kessler, Esq., sworn to and filed September 29, 2000, with attached Exhibit; Affirmation in Opposition to Claimants' Supplemental Motion, dated October 12 and filed October 16, 2000; Letter from Michael W. Kessler, Esq., dated December 22 and received December 26, 2000, with attached Affidavit of Gary Pollard, sworn to December 18 and filed December 26, 2000; and Daily Reports of March 9 and March 13, 2000.
I. History of Prior Relevant Proceedings and Decisions
This claim was originally assigned to the Honorable James P. King. Judge King found liability in favor of claimants Sarah E. Auer, as guardian of Melody Dawn Auer, and Sarah E. Auer and Franklin H. Auer, individually (collectively "claimants"), and against defendant State of New York ("defendant" or "the State") in a Decision dated November 4 and filed November 16, 1998; he determined damages in a Decision dated December 29 and filed December 30, 1999. The Judgment subsequently entered on January 11, 2000 directed payment of the awards on the derivative claims of Sarah E. and Franklin H. Auer; and directed that the amount awarded to Melody Dawn Auer, through her guardian Sarah E. Auer, would be held in abeyance pending a hearing pursuant to CPLR article 50-B.
Judge King retired on December 31, 1999, and so the parties' attorneys met with this Court on March 8, 2000 and identified issues for a CPLR article 50-B evidentiary hearing at which expert testimony was contemplated regarding the discount and interest rates applicable to the award to Sarah E. Auer, as guardian of Melody Dawn Auer. The Court and counsel narrowed the issues for the hearing, which was scheduled for March 17, 2000, to (1) whether certain portions of the damages awarded to Sarah E. Auer, as guardian of Melody Dawn Auer, should be considered as past or future damages; (2) whether the Court should award interest at 9%; (3) how the discount rate should be determined and what it should be; (4) how to perform the present value calculations; (5) the manner in which the State guaranteed the purchase of an annuity contract; (6) the amount of any set-offs, liens or disbursements; and (7) the reasonableness of attorneys' fees, which claimants' counsel were asked to support by presenting to the Court a summary of their work on behalf of claimants (see, Daily Report dated March 9, 2000).
On March 13, 2000, the Court received a faxed copy of a stipulation dated March 12, 2000 in which the parties' attorneys agreed to (1) submit affidavits and/or briefs to the Court on the issue of whether certain portions of the damages awarded should be considered past or future damages; (2) submit affidavits and/or briefs to the Court on the issue of the proper interest rate; (3) use a discount rate of 6.25%; (4) submit a joint article 50-B computation of the judgment following the Court's decision on the identified issues remaining unresolved or, in the event the parties' attorneys could not agree on a joint computation, submit alternative proposed CPLR article 50-B computations; (5) try to resolve the manner in which the State guaranteed the purchase of an annuity contract, which otherwise the Court would determine following entry of judgment; and (6) request adjustments to the award for past damages to reflect the agreed upon amounts of collateral source payments and the social services lien. In addition, claimants' attorneys committed to submit an affidavit setting forth their disbursements. The Court and counsel concluded that this stipulation obviated the need for the evidentiary hearing scheduled for March 17, 2000, which was therefore canceled (see, Daily Report of March 13, 2000 and stipulation dated March 12, 2000).
The parties subsequently submitted affidavits and briefs to address those issues identified at the conference of March 8, 2000 and not resolved by the stipulation dated March 12, 2000, which were (1) whether certain adjustments should be made to the award for past damages; (2) whether purportedly "overdue" future damages should be designated and paid as past damages; (3) the proper interest rate; and (4) what amount to deduct for litigation expenses. By Decision and Order dated June 21 and filed June 22, 2000 ("June Decision"), the Court decided these issues and directed counsel to submit a joint or separate CPLR article 50-B computations, as provided for in the stipulation dated March 12, 2000.
The parties subsequently submitted proposed CPLR article 50-B computations as well as a stipulation dated July 24, 2000 in which the parties' attorneys agreed to all sums except the amount of post-decision (pre-judgment) interest (CPLR 5002) on the various components of future damages and on the portion of the award of attorneys' fees attributable to future damages. The parties were unable to agree on these sums because they disputed the applicable discount rate and period, and so submitted affidavits and/or briefs to advocate their respective positions.
By Decision dated and filed August 30, 2000 ("August Decision"), the Court decided these issues. By Order dated and filed August 30, 2000 ("August Order"), the Court set forth the various awards computed in accordance with the parties' attorneys' stipulations dated March 12 and July 24, 2000, the June Decision and the August Decision. The Clerk entered Judgment on August 30, 2000 ("August Judgment"). Both parties timely appealed.
II. The Present Motion to Reargue and/or Renew
A. CPLR 2221
(Motion affecting prior order)
A motion to reargue must be based upon matters of fact or law allegedly overlooked or misapprehended by the court in determining the prior motion, but shall not include matters of fact not previously offered (CPLR 2221 [d] [2]). Conversely, a motion to renew must be based on "new facts not offered on the prior motion that would change the prior determination or shall demonstrate that there has been a change in the law that would change the prior determination" (CPLR 2221 [e] [2]) and must present a "reasonable justification for the failure to present such facts on the prior motion" (CPLR 2221 [e] [3]). If a single motion is made to reargue and renew, as is the case here, each item of relief sought must be separately identified and supported, and the court is to decide each part of the motion as if separately made (CPLR 2221 [f]).
CPLR 2221 further provides that a timely motion to reargue a prior motion in the trial court must be made within 30 days after service of the order sought to be reargued, with notice of entry (CPLR 2221 [d] [3]). Prior to CPLR 2221's amendment in 1999 (see, L 1999, ch 281), case law had established that a motion to reargue must be made within the 30-day time to appeal from the original order (Matter of Huie [Furman], 20 NY2d 568); however, this 30-day limitations period was subject to exceptions for a motion to reargue a motion determining an interlocutory order (Liss v Trans Auto Sys., 68 NY2d 15, 20 ["[R]egardless of statutory time limits concerning motions to reargue, every court retains continuing jurisdiction to reconsider its prior interlocutory orders during the pendency of the action" (citations omitted)]); or a timely appealed prior order (Bermudez v New York City Hous. Auth., 199 AD2d 356 [motion to reargue brought more than 30 days after order determining original motion timely because timely notice of appeal had been filed and motion to reargue was brought within reasonable time]; see also, Lachman v Lachman, 258 AD2d 875, 876 ["When a notice of appeal has been timely filed, a motion to reargue may be made at any time ‘prior to the submission of the appeal or at the latest before the appeal is determined' " [quoting Bray v Gluck, 235 AD2d 72, 74, lv dismissed 91 NY2d 1002]). Although CPLR 2221 did not codify these exceptions, it has been suggested that they continue to exist (see, Aloe, Revamping Motions to Reargue or Renew, NYLJ, Oct. 1, 1999, at 1, col 1). No limitations period applies to a motion to renew under CPLR 2221, either as codified or under prior case law.
B. Claimants' Arguments
On September 8, 2000, claimants moved pursuant to CPLR 2221 to reargue and/or renew with respect to the June Decision and part of the August Decision and the accompanying August Order; and on September 29, 2000, claimants made what its attorney styled a "supplemental" motion to reargue and/or renew. Specifically, claimants moved to reargue and/or renew the June Decision insofar as the Court exercised her discretion pursuant to State Finance Law § 16 to set post-decision (CPLR 5002) interest at a rate of 5.23%; and post-judgment (CPLR 5003) interest at a rate equal to the average of the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price at the June 1, 2000 auction of 52-week Treasury bills (6.375%) and at all succeeding auctions up to and including the last auction settled immediately prior to payment of the awards (rounded to the nearest hundredth of a percent). Claimants moved to reargue and/or renew the August Decision and the accompanying August Order insofar as the Court declined to discount various components of future damages and the portion of the award of attorneys' fees attributable to future damages at a rate other than the 6.25% discount rate stipulated to by the parties.
Claimants' attorney states on the original motion that "[t]he additional facts and arguments set forth herein address issues that were created for the first time by the Court's Decision and Order dated June 21, 2000 and therefore could not have been raised or anticipated until the Court's determination" (Affidavit in Support of Claimant's Motion to Reargue and/or Renew of Michael W. Kessler, Esq., sworn to Sept. 8 and filed Sept. 12, 2000 ["Kessler Aff. I"], pp 2-3). He identifies and describes those facts and arguments as well as another argument purportedly created by the August Decision as follows:
(1) This Court misapprehended the Court of Appeals holding in Rodriguez v New York City Housing Auth. (91 NY2d 76), which claimants' attorney reads as establishing a "two-pronged test" by which a defendant who seeks an interest rate lower than 9% must establish "a ‘discrepancy' between the statutory rate and other ‘market' rates" and "that there are no circumstances that can justify the nine percent rate" (Kessler I, pp 4- 5) or, as formulated elsewhere, must "clearly establish[ ] that there is no reasonable basis upon which the presumptively reasonable nine percent (non-compounded) rate of return could be justified" (id., at p 7) so as to support the trial court's determination that "extraordinary circumstances make the [statutory] rate invalid" (id.). By not following this hitherto unphrased two-pronged test lately extracted by claimants' counsel from Rodriguez and by "inappropriately analogiz[ing] and adopt[ing] the legal principles applicable to the setting of interest rates in condemnation cases" (id., at p 10), the Court has allegedly abrogated the Rodriguez holding. The Court has also supposedly substituted her judgment for the Legislature's decision, as embodied in CPLR 5004, to set a fixed rate in order to promote stability, uniformity and simplicity (id., at p 11). Indeed, "when the nine percent rate was adopted [by the Legislature] in 1981, T-bill rates were in fact lower than nine percent" (id., at p 8).
(2) The Court overlooked or misapprehended the facts by setting interest rates that are simply too low because (a) no investment professional responsible for a multi-million dollar portfolio would invest exclusively in short-term Treasury securities (id., at p 12); and/or (b) other instruments currently pay interest rates higher than those set by the Court, the State pays a higher rate on income tax refunds and earned a higher rate on its investments and the inflation rate for medical services is higher as well (id., at pp 13-14); and/or (c) the interest rate on judgments in New York has not been lower than 6% in more than 120 years (id., at pp 14-15); and/or (d) there is no separate compounding of post-decision and post-judgment interest under the CPLR (id., at p 16); and/or (e) awarding interest at a rate lower than 9% singles out these claimants for "unique and inequitable treatment", which is "manifestly unfair and . . . a denial of equal protection under the Constitution" (id., at p 15); and/or (f) the Court set inconsistent rates for the different claimants (id., at pp 19-20).
(3) Because the Court overlooked or misapprehended the effect of the absence of compounding, she inadvertently set interest at a rate lower than the yield of the short-term Treasury securities upon which she purported to rely (id., at pp 16-18).
(4) The Court overlooked or misapprehended principles of fairness and equal protection under the United States and New York Constitutions by setting lower interest rates in this claim than on awards to identically situated claimants. To illustrate this point, claimants' counsel again points to the Court's decision to exercise her discretion to award interest at 9% in Wielgosz v State of New York (Ct Cl, unreported decision filed Feb. 4, 2000, Read, J., Claim No. 91798) (id., at pp 18-20).
(5) The Court overlooked or misapprehended principles of stare decisis and collateral estoppel, which require her to award interest at 9% (id., at pp 20-24).
(6) The Court overlooked or misapprehended the facts by setting a post-judgment (CPLR 5003) interest rate that (a) requires constant recalculation; (b) prevents the parties from ascertaining the effect of non-payment; and (c) creates a disincentive to pay the judgment, settle the claim or promptly perfect appeal. The parties are purportedly required to recalculate interest each quarter, which "may require expert analysis and perhaps a further hearing, delay, and expense to the parties" (id., at p 25).
(7) The Court overlooked or misapprehended the facts and the law by discounting the various components of future damages and the portion of the award of attorneys' fees attributable to future damages at a rate different from the post-decision (CPLR 5002) interest rate and/or at a rate higher than the post-decision interest rate (id., at pp 25-27).
In his "supplemental" motion to reargue and/or renew, claimants' attorney submitted a copy of the Court's decision in Powers and Levenberg v State of New York (Ct Cl, unreported decision filed Aug. 3, 2000, Read, J., Claim No. 95920). He characterizes this decision as "directly impact[ing] upon not only the underlying determination by this Court of June 21, 2000, but the pending motion" (Affidavit in Support of Claimants' Supplemental Motion to Reargue and/or Renew of Michael W. Kessler, Esq., sworn to and filed Sept. 29 ["Kessler Aff. II"], p 2) because the Court again, as in the Wielgosz claim, exercised her discretion to award interest at 9% over the "identical time period" as is relevant here (id., at p 3). More recently, claimants' attorney informed the Court that the Hudson River Bank & Trust Company is considering making a loan at a rate of 10.50 percent to finance the purchase of a handicapped-accessible van for Melody Dawn Auer (Letter from Michael W. Kessler, dated December 22 and received December 26, 2000, with attached Affidavit of Gary Pollard, sworn to December 18 and filed December 26, 2000).
The State argues that claimants have failed to allege new facts that could change the Court's prior determinations or to allege reasonable justification for their failure to present putative new facts in their prior motions: "One might seriously argue that this instant motion is actually only a motion to reargue which, because of the time limitations set forth in Rule 2221 (d), would limit this Court to only the August 30, 2000 decision, which appears to be less of a worry to the claimants" (Defendant's Memorandum of Law, dated September 21 and received September 25, 2000 ["Def. Mem."], p 5). The State also argues that even if claimants' motion to reargue the Court's June Decision is timely, "nothing in the claimants' [motion papers] should disturb this Court's earlier assessment of the evidence provided by the State. The Rodriguez Court provided this Court discretion in determining post-decision (CPLR 5002) and post-judgment (CPLR 5003) [interest] and the Court did not abuse that discretion" (Def. Mem., p 9). As for the Court's August Decision, the State observed that for claimants' counsel to contend that the parties had not stipulated to a discount rate of 6.25% for all purposes in this proceeding "seems less than honest" (id.).
A. CPLR 5015 (a) (Relief from judgment or order on motion)
A motion to renew under CPLR 2221 (e) presupposes new facts, and claimants have presented none on this motion. A motion to reargue must be made within 30 days after service of the order sought to be reargued, with notice of entry (CPLR 2221 [d] [3]); therefore, the branch of claimants' motion seeking to reargue the June Decision would appear untimely unless the exceptions under prior case law survived the 1999 codification of CPLR 2221 and apply in these circumstances. In fact, however, because the June Decision and interlocutory order and the August Decision were subsumed in a final order and final judgment before claimants moved to reargue and/or renew, such considerations are beside the point: "When a proceeding has been reduced to a final judgment . . . the proper procedural remedy [to seek relief from the trial court] is a motion pursuant to CPLR 5015 (citations omitted)" rather than a motion pursuant to CPLR 2221 (Matter of Willard v Town Board of the Town of Hamburg, 216 AD2d 861, 862; see also, Reed v County of Westchester, 243 AD2d 714 [where final judgment dismissed special proceeding on the merits, petitioner proffering allegedly newly discovered evidence should have moved pursuant to CPLR 5015 and not by way of CPLR 2221 motion to renew]; Able v Able, 209 AD2d 972 [final judgment made after trial not subject to CPLR 2221 motion to reargue]).
CPLR 5015 (a) authorizes a court to vacate its judgment "upon such terms as may be just" on motion of any interested party with such notice as the court may direct, based upon five listed grounds.[1] Moreover, "[t]he court has inherent discretionary power to vacate its judgments and orders for good cause shown, not limited by the CPLR 5015 [a] list" (Siegel NY Prac § 426, at 693 [3d ed]).
The Court therefore treats the claimants' motion to reargue and/or renew as an application to vacate the judgment pursuant to CPLR 5015 (a). Since the "facts and arguments" proposed by claimants are "not susceptible, even with a little push, of being lodged under a listed ground" (id.) in CPLR 5015 (a), the Court will determine whether claimants have demonstrated "good cause" for the Court to vacate the August Judgment.
B. The Court's interpretation and application of Rodriguez
Rodriguez establishes that a statute providing that interest awarded "shall not exceed" a stated rate (9% in the case of State Finance Law § 16, applicable in this case) does not mandate the stated rate, but rather sets a maximum or ceiling; however, the stated rate is presumptively fair and reasonable. In other words, a court's application of any of these shall-not-exceed statutes requires a case-by-case determination of a proper rate within the maximum or ceiling[2] and in light of a presumption of reasonableness (see generally, Siegel, NY Prac § 412, at 668-669 [3d ed]).
A presumption is a statute or court-made rule concerned with matters of evidence-- matters of fact, not of law or argument--and here defendant presented evidence to rebut the court-made presumption that the 9% statutory interest rate specified in State Finance Law § 16 is the fair and reasonable rate of interest on the award against the State in this claim (cf., People ex rel. Wallington Apts. v Miller, 288 NY 31 [presumption of an assessment's validity is not evidence in certiorari proceeding but serves in place of evidence until opposing party comes forward with proof, and then presumption disappears]; People v Richetti, 302 NY 290 [presumption of regularity attending judgments of conviction exists only until substantial contrary evidence is presented, at which time presumption is out of the case]; Matter of FMC Corp. v Unmack, 92 NY2d 179 [presumption of an assessment's validity disappears when petitioner challenging an assessment comes up with substantial evidence to the contrary, a minimal standard requiring merely demonstration of a valid and credible dispute regarding valuation]). Reasoning by analogy to the condemnation cases in which this particular court-made presumption was developed and to which the Court of Appeals alluded in Rodriguez, the Court considered the State's and claimants' competing evidence relating to whether the 9% rate was unreasonably high for the relevant period of time; found the State's evidence more telling for the reasons stated in the June Decision; and awarded post-decision interest at a rate (5.23%) supported by the State's economist, Kevin Decker, who opined that the interest rate should be set between 5% and 5.25%, a range reflecting a blend of 3-month Treasury bill and 30-year Treasury bond rates.[3]
The first, part of the second, fourth and fifth arguments presented by claimants in their motion as well as claimants' argument in their "supplemental" motion (see, pp 7-9, supra) dispute the Court's interpretation and application of Rodriguez, summarized above and, of course, more fully explained in the June Decision. First, claimants clearly view the operation and effect of the presumption in these cases through a different lens than does the Court. Specifically, claimants now espy a variously articulated "two-pronged test" in Rodriguez, which seems to require proof of a negative and to convert the presumption of reasonableness from rebuttable to conclusive. The Court of Appeals, however, did not proclaim any "two-pronged test" and this trial court declines to surmise the proffered test, which strikes her as against the grain of the operation and effect of a traditional presumption.
In a related vein, claimants argue that it is inconsistent, unfair and even unconstitutional for the Court to exercise her discretion to award interest at a rate lower than 9% in this claim because she awarded interest at a rate of 9% in two other recent supposedly "identical" claims, Wielgosz and Powers and Levenberg, supra. In Wielgosz and Powers and Levenberg, however, the State did not contest the presumption; therefore, the Court awarded interest at the presumptively fair and reasonable statutory rate of 9%, which she understands is the proper way for her to exercise discretion on a case-by-case basis in such circumstances.[4] By contrast, defendant rebutted the presumption in this claim with evidence found persuasive by the Court, who therefore awarded interest at a rate lower than 9% as supported by the proof.
Second, claimants complain that the Court has "inappropriately analogized and adopted the legal principles applicable to the setting of interest rates in condemnation cases" (Kessler I, p 10) without specifying those aspects of the Court's analysis to which they object on these grounds. Of course, interest in a condemnation case is part of the damages--the constitutionally guaranteed just compensation--while interest on the damages in a personal injury case is a matter of legislative grace. Consequently, interest on a condemnation award may, in fact, exceed the shall-not-exceed presumptively fair and reasonable statutory rate in State Finance Law § 16 upon a proper showing by the condemnee, whereas a personal injury litigant may never recover interest at a rate exceeding the statutory rate. It has also been held that a condemnor challenging the reasonableness of a shall-not-exceed presumptively fair and reasonable statutory rate bears the burden of proving that the statutory rate is unreasonably high and that a lower rate would be constitutionally sufficient (Matter of Metropolitan Transp. Auth. v American Pen Corp., 253 AD2d 366, affd on other grounds, 94 NY2d 154). The Court, however, fails to grasp how any of this makes it "inappropriate" for her to consider the kinds of circumstances or evidence that trial courts have traditionally found relevant when the presumption of reasonableness is contested in a condemnation case; or precludes her from concluding that market interest rates, not rates of return on equities or on a diversified portfolio of equities and other instruments, are the proper standard against which to compare the statutory interest rate when the presumption is contested, and that Treasury bill rates (rates on Treasury securities issued with maturity dates of one year or less, which are issued at a discount) reasonably reflect prevailing market interest rates; or from awarding interest at a rate lower than 9% in view of the several percentage point discrepancy between 9% and Treasury bill rates for or at the relevant time period; or, correlatively, from relying on the State's expert's opinion that yields of United States Treasury securities properly define a fair and reasonable interest rate.
Next, claimants argue that the Court substituted her judgment for the Legislature's decision, reflected in CPLR 5004, to set a fixed 9% rate of interest on damage awards. Of course, this claim involves State Finance Law § 16, which sets a shall-not-exceed rate of 9%, not a fixed rate.
Finally, claimants invoke common law precedent and stare decisis and collateral estoppel as barriers to an award of interest at a rate lower than 9% in this claim without explaining how these concepts arguably fit the circumstances. The Court assumes, however, that claimants intend to bolster their insistence that because most (but by no means all) trial courts have exercised their discretion to award interest at the presumptively fair and reasonable 9% rate since the Court of Appeals decision in Rodriguez, this Court either could not or should not do otherwise, especially in light of the bull market of the 1990's, a consideration found relevant and virtually dispositive by several trial courts and relied on by claimants here.[5]
The decisions of courts of coordinate jurisdiction are persuasive but not definitive authority on the issues left open by the Court of Appeals in Rodriguez, such as the kinds of circumstances or evidence relevant for the trial court to consider when the presumption is contested, and this Court rather comprehensively catalogued and reviewed other trial court decisions in her June Decision.[6] She understands Rodriguez to instruct her to make a case-by-case determination of a proper rate of interest within the 9% maximum or ceiling in State Finance Law § 16 and in light of the presumption of reasonableness; and, when the presumption is contested, she is surely required to provide a reasoned explanation for the interest rate that she determines. None of this means, as claimants appear to argue, however, that this trial court may not decide that United States Treasury securities are a proper standard for the interest rate in this case because many (but apparently not all; e.g., see, Anderson, 9% Still Usual Rate for City, NYLJ, Sep. 29, 1998, at 1, col 5) trial courts have declined to set an interest rate on this basis;[7] or, conversely, that this trial court must award interest at the presumptively reasonable statutory rate because other trial courts have done so on the basis of evidence similar to that of claimants' experts in this claim; or that she is ignoring precedent or stare decisis if she declines to award interest at the presumptively reasonable statutory rate; or that the equitable doctrine of collateral estoppel precludes the State from contesting the presumption in this claim because the State either did not contest or did not overcome the presumption in some other claim.[8]
Moreover, the Court agreed with the State that the reasonableness of an interest rate on a damages award is unrelated to equity rates of return, the hallmark of claimants' evidence. In connection with her decision in this regard, the Court comprehensively reviewed condemnation case law to see whether trial courts in New York had traditionally considered rates of return on equities when determining the proper interest rate in those instances where claimants contested the presumption of reasonableness, and found that they had not. Instead, parties in condemnation cases generally proffered and trial courts considered evidence of market interest rates--usually, yields on various fixed income securities--to establish whether the presumptively fair and reasonable 9% statutory interest rate reasonably reflected prevailing market interest rates for the relevant time period.
In fact, the Court found no condemnation case in New York prior to Rodriguez (see, June Decision, at 16-20) and no federal eminent domain case (id., at 20, n 9) in which a trial court even mentioned evidence of the rate of return on equities in this regard. The Court also reviewed numerous non-eminent domain federal court decisions awarding prejudgment interest without finding any case in which the court established an interest rate with reference to equity rates of return.
In short, evidence of equity rates of return was evidently not routinely proffered by counsel and considered by trial courts when the presumption of reasonableness was contested in a condemnation case in state court, or a federal judge established a rate of prejudgment interest in a federal court action. Perhaps this state of affairs merely denotes a lapse of adversarial or judicial imagination. In addition, state court condemnees most recently contested the presumptively fair and reasonable statutory rate during the unlamented era of double-digit inflation, high, often double-digit, interest rates and--concomitantly--a bear market; and the stock market's performance in the 1990's was spectacularly sustained and robust. Nonetheless, this prior state and federal case law demonstrates the relative novelty of the approach urged by claimants.
C. The CPLR 5002 (Post-decision) and CPLR 5003 (Post-judgment) rates set
Having concluded that a post-decision interest rate in the low 5% range was fair and reasonable in light of Treasury bill rates, the Court selected a specific rate (5.23%) within the 5% to 5.25% range supported by the State's expert by averaging the results of the nineteen auctions for 52-week Treasury bills settled after November 4, 1998 (the date of the liability decision) and before her June Decision.[9] This number fell near the top of the range for the obvious reason that Treasury bill rates generally rose over this roughly 20-month interval and, indeed, were hovering around 6% by early 2000.[10] In fact, the 52-week Treasury bill rate of 6.375% determined for the May 31, 2000 auction (see, n 9, supra), was fully a percentage point higher than the post-decision interest rate of 5.23%. Accordingly, the Court devised a formula based on 52-week Treasury bill rates to determine a going-forward, post-judgment interest rate; specifically, she awarded post-judgment interest at a rate equal to the average of the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price at the May 31, 2000 auction (see, n 9, supra) of 52-week Treasury bills and at all succeeding auctions up to and including the last auction settled immediately prior to payment of the awards (rounded to the nearest hundredth of a percent).[11]
Part of the first, and the second, third and sixth arguments presented by claimants in their motion (see, pp7-9, supra) characterize the rates determined by the Court as inadequate for various reasons and therefore unreasonable and unfair. Specifically, claimants argue that Treasury bill rates are both always and uniquely lower than the 9% statutory rate. For example, claimants assert that even "when the nine percent rate was adopted [by the Legislature] in 1981, T-bill rates were in fact lower than nine percent" (Kessler I, p 8). Indeed, they were not: during 1981, the 52-week Treasury bill rate varied from a high of 17.26% in September to a low of 11.58% in November; the rates for the twelve months in 1981, when averaged, equal 16.2% (see, 28 USC § 1961 [Historical and Statutory Rates]). Similarly, the annual rate (average yield) of 3-month Treasury bills was 14.03% (see, <http://www.federalreserve.gov/releases/H15/data/htm>). This is not surprising. The Legislature's action in 1981 to increase the CPLR 5004 rate from 6% to 9% was, at the time, viewed as "modest in comparison to prevailing double-digit interest rates" (see, Bill Jacket, L 1981, ch 258, Mem of The Association of the Bar of the City of New York, dated June 23, 1981). Because Treasury bill rates reasonably reflect prevailing market interest rates, they were high in relation to the statutory rate in 1981 because prevailing market interest rates were similarly high in relation to the statutory rate even after it was increased from 6% to 9%. Accordingly, Treasury bill rates have been low in relation to the 9% statutory interest rate over the interval since the liability decision in this claim because prevailing market interest rates have been low in relation to the statutory rate over this time period, not because--as claimants contend--Treasury bill rates are always low because riskless.
For the same reason, Treasury bill rates are not uniquely low in relation to the 9% statutory rate. As the Court pointed out in the June Decision, the rates for various non-U.S. government fixed income securities were significantly lower than 9% during calendar year 1999 (see, June Decision, p 23, n 10).
Next, claimants again protest that no investment professional would invest exclusively in short-term Treasury securities,[12] which the Court understands as a way of positing the Prudent Investor Rule to support evaluating the reasonableness of the statutory interest rate with reference to rates of return on a diversified portfolio of equities and other instruments. While several experienced trial judges have found this analogy apt (id., at pp 13-14; n 6, supra), this Court does not.
The Prudent Investor Rule is a standard to guide and by which to judge whether a fiduciary holding funds for investment has invested those funds "in such securities as would be acquired by prudent men of discretion and intelligence in such matters who are seeking a reasonable income and preservation of their capital" (EPTL 11-2.2 [a] [1]). Since January 1, 1995, a trustee has been required "to diversify assets unless the trustee reasonably determines that it is in the interests of the beneficiaries not to diversify, taking into account the purposes and terms and provisions of the governing instrument" (EPTL 11-2.3 [b] [3] [C], 11-2.3 [a]).
The purpose of interest on a judgment, however, is not to provide a successful litigant with a reasonable income from judgment proceeds for the period of time between decision or verdict and payment. As noted in the June Decision, interest compensates a successful litigant for the loss of value and for the loss of access and use of the damages award during this interval of delay.
Claimants also now advance through their attorneys (not their experts) other actual market interest rates above 5.23% but below 9% (United States savings bonds [7.49% or 7.99%--claimants give both rates--when bought from May through October 2000]; rates in the fall of 2000 of 7.25% for 6-month and 7.50% for one-year federally insured certificates of deposit]), as well as other rates or factors of unspecified relevance to prevailing market interest rates (i.e., the medical inflation rate; the interest rate on a potential loan to claimants from a local bank [10.50%]; the rate of return earned by the State on its investments [8.8% compounded]; the rate of interest paid by the State [8% compounded daily] and by the federal government [9% compounded] on income tax refunds; and the length of time that CPLR 5004 provided for a statutory rate of 6%). With respect to the actual market rates now put forward by claimants' counsel, the Court notes that when this matter was originally under consideration claimants submitted no evidence to support any argument in the alternative to their argument that, for various reasons, the Court could not award interest at a rate lower than 9% and/or should not because this statutory shall-not-exceed rate actually significantly undercompensated claimants in light of equity rates of return; specifically, claimants might have offered evidence and expert opinion to support a rate pegged to some actual market interest rate or combination of actual market interest rates in addition to or in lieu of Treasury security rates but did not do so.
Claimants additionally argue that the Court must have set a post-decision interest rate lower than she intended because she ignored the effect of compounding on yield while basing her determination on the yield of 52-week Treasury securities. The Court in the June Decision and August Order intended to award post-decision interest as simple interest at a rate of 5.23%, and determined that rate on the basis explained in the June Decision and recapitulated here, not on any basis intended to yield a compounded return of 5.23% over the period from November 4, 1998 through August 30, 2000.
Finally, claimants protest that the post-judgment interest rate is unreasonable because it requires constant recalculation; is uncertain, preventing the parties from determining the effect of non-payment and creating a disincentive for the State to pay the judgment, settle or promptly perfect appeal; and "may require expert analysis and perhaps a further hearing, delay, and expense to the parties" (Kessler I at p 25). Claimants also generally complain that the rates of post-decision and post-judgment interest on the damages awarded to Sarah E. and Franklin H. Auer, individually, are inconsistent with the rates of post-decision and post-judgment interest on the damages awarded to Sarah E. Auer, as guardian of Melody Dawn Auer, because the rates are the same despite the eight-month difference in the dates of entry of judgment.
As noted earlier, Treasury bill rates generally rose over the 20-month interval from November 4, 1998 (the date of the liability decision) and the Court's June Decision. As a consequence, by early 2000 these rates were roughly a percentage point higher than the post-decision interest rate of 5.23%, but still sufficiently low in relation to the statutory rate to amount to more than slight variations or fluctuations. Rather than set post-judgment interest at a rate based on a Treasury bill rate or rates in June 2000--which would not have accounted for any further fluctuation of rates pending the appeal--or await the appeal's conclusion to determine the post-judgment interest rate--which would have required further proceedings, expense to the parties and inevitable delay in payment of the judgment as well as uncertainty--the Court devised a formula to determine a going-forward, post-judgment interest rate. Whether this solution was reasonable under the circumstances and in light of the record or an abuse of discretion is a matter for the appellate courts. The formula does not, however, require either constant recalculation or expert analysis to decipher as claimants assert: in order to determine the rate of post-judgment interest to apply, the Comptroller need only add a set of readily available figures (the 52-week Treasury bill rates for the auction held May 31, 2000 [see, n 9, supra] and every other auction held up to and including the last auction settled prior to the date of payment), divide the sum total by the number of figures in the set and round the quotient thus obtained to the nearest hundredth of a percent; i.e., perform the simple arithmetic task of averaging. Claimants are correct, however, that under this formula the exact rate of post-judgment interest is not currently ascertainable, depending as it does on future fluctuations in the 52-week Treasury bill rate and the length of time before disposition of the appeal.
Finally, the Court awarded post-decision interest to all the claimants at the rate of 5.23%, and awarded post-judgment interest to all the claimants at a rate to be derived by averaging the same set of figures. Because judgment on the derivative claims was entered approximately eight months before judgment was entered on the guardian's claim, claimants object that these awards are inconsistent.
Although the Court might have awarded post-decision interest on the derivative claims at a slightly different rate within the low 5% range than she awarded on the guardian's claim, this would have complicated the August Order to achieve a greater degree of precision and discrimination than she considers required or warranted by any fluctuations in short-term rates over this particular eight-month interval. Nor were the individual claimants disadvantaged by the Court's decision in this regard: because Treasury bill rates generally rose over the 20-month interval from November 4, 1998 (the date of the liability decision) and the June Decision, any arguably more precise post-decision interest rate on the damages awarded to the individual claimants would have been very slightly lower than 5.23%. Similarly, use of a set of figures related to the August 30, 2000 date of entry of judgment on the guardian's claim to derive the post-judgment interest rate on the damages awarded to both the guardian and the individual claimants does not appear to disadvantage the latter. If interest rates, in fact, fluctuate while the appeal is pending in such a way as to establish otherwise, the individual claimants may again move for relief from the August Judgment.[13]
The stipulated discount rate
In Pay v State of New York (87 NY2d 1011), the Court of Appeals established that the future damages included in a CPLR article 50-B structured judgment in a bifurcated case must be discounted back to the date of the liability determination for purposes of calculating post-decision interest on future damages. On the original motion, claimants contended that this discount rate, which they often refer to as the Pay discount rate, is necessarily 5.23% in this claim because the Court set a post-decision interest rate of 5.23% in the June Decision. The State objected that prior to the June Decision claimants had stipulated to a discount rate of 6.25% for purposes of making the calculations required for a structured judgment under CPLR article 50-B, and that a stipulation is binding.[14] In the August Decision, the Court ruled in favor of the State for this reason. On this motion, claimants have added nothing significant to arguments already addressed by the Court in the August Decision.
Based on the foregoing, the Court determines that claimants have not demonstrated "good cause" for the Court to vacate the August Judgment (see, CPLR 5015 [a]). The Court denies claimants' motion.
The five grounds listed in CPLR 5015 (a) are (1) excusable default; (2) newly-discovered evidence; (3) fraud, misrepresentation or other misconduct; (4) lack of jurisdiction; and (5) reversal, modification or vacatur of a prior judgment or order.
As noted later in the text, the stated rate in State Finance Law § 16 is not a maximum or ceiling in the singular instance of condemnation cases.
Mr. Decker made the following points: (1) interest is added to an award to compensate a claimant for purchasing and investment power lost during the delay between the date of decision (here, November 4, 1998) and payment; (2) the Court should look to the rate on those investments available to claimants since the date of decision offering the highest possible return at the lowest possible risk; (3) United States Treasury securities best meet this standard when compared to the potential alternatives of equities, with their inherent significant risk of the loss of capital, or corporate bonds, which do not provide the same level of protection against default, or certificates of deposit, which typically offer lower rates of returns; (4) in November 1998, claimants could have invested in a 30-year United States Treasury bond yielding 5.25% or, alternatively, between November 1998 and the date of Mr. Decker's affidavit (April 6, 2000), claimants could have invested in a series of 3-month United States Treasury bills and earned an average annual yield of 4.91%; (5) in light of these considerations, an appropriate rate of interest would be between 5% and 5.25%; and (6) the 9% statutory interest rate in CPLR 5004 was established in 1981at a time of very high inflation and interest rates, but inflation has not been higher than 6.2% since that time and short-term interest rates have been in the 4% to 6% range; therefore, an award of 9% interest in this claim would overcompensate claimants and there is no reasonable basis for such an award if interest is intended to insure that claimants are made whole. The Court relied on Mr. Decker's affidavit when establishing interest rates in this claim, although her reasons for determining that United States Treasury securities (in particular, short-term United States Treasury securities) were a proper standard against which to gauge the reasonableness of the statutory rate and a basis for se
tting a fair and reasonable rate were articulated slightly differently; i.e., by finding that short-term Treasury securities were a reasonable proxy for prevailing market interest rates.
The Court also notes that claimants repeatedly but incorrectly assert that the time periods for which claimants recovered interest in Wielgosz and Powers and Levenberg are "identical" to the time period for which interest was awarded on this claim: in Wielgosz, post-decision interest was recovered for the time period from October 7, 1997 to February 14, 2000; in Powers and Levenberg, post-decision interest was recovered for the time period from June 28, 1999 to August 18, 2000; in this claim, the Court awarded post-decision interest for the time period from November 4, 1998 to January 11, 2000 for Sarah E. and Franklin H. Auer, individually, and for the time period from November 4, 1998 to August 30, 2000 for Sarah E. Auer, as guardian of Melody Dawn Auer; and awarded post-judgment interest from January 11, 2000 until payment of the award to Sarah E. and Franklin H. Auer, individually, and from August 30, 2000 until payment of the award to Sarah E. Auer, as guardian of Melody Dawn Auer. Neither Wielgosz nor Powers and Levenberg was appealed; therefore, the time period for which post-judgment interest would have been recovered in those claims was necessarily brief.
Claimants initially offered no evidence specifically relating to market interest rates, but instead urged the Court to award interest at the presumptively reasonable statutory rate because this rate was far exceeded during the relevant time period by the rate of return on a diversified portfolio of stocks and bonds constructed in hindsight; and/or the average annual compounded total rate of return on the Standard & Poors Index; and/or the rate of return for an "average" mutual fund for the relevant time period.
A Court of Claims colleague recently considered at length the kinds of circumstances or evidence relevant for a trial court to consider when the presumption is contested (Guido v State of New York, Ct Cl, filed Jan. 8, 2001, Rossetti, J., Claim No. 86905). Consistent with several other trial courts which (unlike this Court) found equity rates of return relevant, Judge Rossetti reasoned that "[a]nother way to look at fair and reasonable interest rates and prevailing market rates is from the point of view of a reasonably prudent investor in the position of a plaintiff" (id., at 5). Because the State had presented evidence limited to short-term Treasury securities, a standard that Judge Rossetti found to be inappropriate because riskless, he held that the State had not made a prima facie showing sufficient to overcome the presumption of the 9% rate's reasonableness.
Professor David D. Siegel suggests that the Court of Appeals in Rodriguez may have left the question of an appropriate standard open for the lower courts in the "apparent hope" that if and when the Court of Appeals returns to the subject of interest rates in shall-not-exceed statutes, it will have "the collective thinking of the state's lower courts to draw on" (69 Siegel's Practice Review, The Problem of the Interest Rate Applicable Against Government Entities Under the Rodriguez Case, at 4 [March 1998]).
Claimants have never specified the decisive issues in this claim alleged to be identical to issues necessarily decided and fully and fairly litigated by the State in Wielgosz or Powers and Levenberg or any other specific claim (see, Schwartz v Public Administrator of County of Bronx, 24 NY2d 65).
Beginning with the February 29, 2000 auction, the Treasury Department, Bureau of the Public Debt, reduced the auction schedule for 52-week Treasury bills from monthly to quarterly. The Court also notes that the second-quarter auction in 2000 was held May 31, 2000, not June 1, 2000 as indicated throughout the June Decision and the August Order (see, corrected date on the web site of the United States District Court, Southern District of New York,
; see also, private communication dated December 8, 2000 from Gail Jahrsdorfer, United States District Court, Southern District of New York, to this Court). The correction of this date does not require any recalculation of the award.
For example, the historical files of the Federal Reserve's H.15 release, which contains daily interest rates for selected United States Treasury and private money market and capital market instruments, include a bill rate (computed as a monthly average on an issue-date basis) for a 3-month Treasury bill of 4.44% for November 1998 and 5.92% for May 2000 (see, <
; see also, n 13, infra).
Under State Finance Law § 16 the rate so determined may never exceed the statutory rate of 9%, however.
Of course, this case, in part, involves a guardian, not an investment professional (cf., CPLR 1206 [d]).
Under the June Decision and the August Order, the first 52-week bill rate in the set of figures to be averaged to derive a post-judgment interest rate for each of the claimants is the 52-week bill rate determined at the auction held May 31 (see, n 9, supra) and settled June 1, 2000 (6.375%), the last auction settled immediately prior to entry of the August Judgment (N.B.: The auction held on August 29, 2000, referred to by claimants, was settled on August 31, 2000, the day after entry of the August Judgment.) The last auction settled immediately prior to entry of judgment on the derivative claims on January 11, 2000 was held on January 4 and settled on January 6, 2000 (5.997%). In addition, auctions were held and settled on February 1 and February 3, 2000 (6.287%) respectively, and on February 29 and March 2, 2000 (6.197%) respectively (see, <http:\\www.publicdebt.treas.gov/of/ofaicqry.htm>). Again, if interest rates fluctuate while the appeal is pending in such a way as to produce a higher post-judgment interest rate if these three rates (i.e., 5.997%, 6.287% and 6.197%) are added to the set of figures to be averaged to determine the post-judgment interest rate on the damages awarded on the derivative claims, claimants should move for relief from the August Judgment accordingly.
Application of the stipulated discount rate to discount future damages back to the date of the liability decision yields a less favorable outcome for claimants than they might have anticipated when they entered into the stipulation, which occurred before the Court decided to set an interest rate lower than the statutory 9% rate. The differences in the amount of post-decision interest awarded using discount rates of 5.23% and 6.25% are not great, however. For example, the Court in the August Order awarded post-decision interest on the attorneys' fees attributable to future damages, discounted at a rate of 6.25% for the applicable time period, in the amount of $329,288.05 (i.e., $3,455,828.48 [the figure presented by claimants for these future damages discounted back at a rate of 6.25%] x .0625 ÷ 365[daily rate of $495.17] x 665 [the number of days for which post-decision interest is payable]=$329,288.05). By contrast, post-decision interest on the attorneys' fees attributable to future damages, discounted at a rate of 5.23% for the applicable time period, totals $339,422.65 (i.e., $3,562,169.73 [the figure presented by claimants for these damages discounted back at a rate of 5.23%] x .0523 ÷ 365 [daily rate of $510.41] x 665 [the number of days for which post-decision interest is payable]=$339,422.65. Thus, at a 5.23% discount rate the attorneys would recover $10,134.60 more in interest on this element of the award than they recover at the 6.25% discount rate used by the Court.