Opinion ID: 772475
Heading Depth: 2
Heading Rank: 4

Heading: Rate of Prejudgment Interest

Text: 30 Appellees contend that the district court erred in applying a federal prejudgment interest rate rather than the state statutory rate. Whether the rate of prejudgment interest in a diversity case should be that specified by state law rather than the federal prejudgment rate is a question of law and should be reviewed de novo. See Kisco Co., Inc. v. Verson Allsteel Press Co., 738 F.2d 290 (8th Cir. 1984). 31 Mo. Rev. Stat. 351.455(3) expressly states that a dissenting shareholder seeking appraisal is entitled to judgment based on the fair value of the stock as of the day prior to the date of the vote approving the corporate action, together with interest thereon to the date of such judgment. Appellees claim that Mo. Rev. Stat. 408.020 mandates a rate of 9% interest whenever, as in this case, the statute requires prejudgment interest but does not specify the rate. 4 We agree. 32 Although postjudgment interest is a procedural matter governed by federal law, Weitz Co., Inc. v. Mo-Kan Carpet, Inc., 723 F.2d 1382, 1385-86 (8th Cir. 1983), state law determines the rate of prejudgment interest. Nodaway Valley Bank v. Continental Cas. Co., 916 F.2d 1362, 1367 (8th Cir. 1990); Kisco Co., Inc. v. Verson Allsteel Press Co., 738 F.2d 290 (8th Cir. 1984). As a result, the district court erred in applying the federal rate of interest under 28 U.S.C. 1961, which is reserved for postjudgment interest. Although Mo. Rev. Stat. 351.455 does not expressly refer to the interest rate specified by 408.020, 408.020 should be applied whenever a rate is not specified because it is the default prejudgment interest rate under Missouri law. See Denton Const. Co. v. Missouri State Highway Comm'n, 454 S.W.2d 44, 59 (Mo. 1970) (applying 408.020 when payment is due even though there is a dispute over legal liability); Burger v. Wood, 446 S.W.2d 436, 443 (Mo. Ct. App. 1969) (using 408.020 to determine prejudgment interest). The purpose of the prejudgment interest is to fully compensate plaintiffs for their loss. Because the loss of the minority shareholders did not result from any market changes, the legal rate of interest dictated by 408.020 is more appropriate than the federal rate of interest based on market information. See Nika Corp. v. City of Kansas City, 582 F. Supp. 343, 359 (W.D. Mo. 1984) (awarding prejudgment interest under Mo. Rev. Stat. 408.020 to compensate for losses not calculated at market rates). This result is also compelled by our decision that the minority shareholders should not be confined to market influences to determine the value of their shares. 33 The Company argues that 408.020 only applies when the amount of the judgment is liquidated or is readily ascertainable by computation or by determination according to a recognized standard. United States v. Dimarco Corp., 985 F.2d 954, 959 (8th Cir. 1993). However, liquidation is only relevant in determining whether interest can be recovered, not the rate of interest. See Ritter Landscaping, Inc. v. Meeks, 950 S.W.2d 495, 497 (Mo. Ct. App. 1997) (stating that prejudgment interest is not recoverable at all if there is no readily ascertainable method of determining the amount at stake); Wulfing v. Kansas City Southern Indus., Inc., 842 S.W.2d 133, 160 (Mo. Ct. App. 1992) (holding that interest is not allowed altogether on unliquidated damages); Burger v. Wood, 446 S.W.2d at 444 (proclaiming that prejudgment interest must be available, even when the precise principal amount of the recovery is placed in doubt). We therefore hold that the district court erred in not applying the state statutory interest rate mandated by Mo. Rev. Stat. 408.020 to the appellees' prejudgment interest. Appeal No. 00-2234