Opinion ID: 1401911
Heading Depth: 3
Heading Rank: 5

Heading: It Was Error to Apply the Enhanced Interest Provision to Postjudgment Interest.

Text: Before trial, Kerkove made an offer of judgment for $30,000, inclusive of costs, interest, and attorney's fees. Sherbahn and SBS did not accept the offer. The jury awarded $25,000, which exceeded the offer when the court factored in costs, interest, and attorney's fees under the formula articulated in Farnsworth v. Steiner. [32] In its final judgment the superior court applied the enhanced interest rate to past economic and non-economic damages as well as the future economic loss until paid. Sherbahn and SBS contend that the superior court erred in applying the enhanced interest provisions of former Rule 68 and former AS 09.30.065 to postjudgment interest because the provisions only allow a court to enhance the interest rate up to the date of final judgment. We agree. Former Alaska Rule of Civil Procedure 68 provides that if a defendant refused an offer of settlement that was more favorable than the final judgment, a court should enhance the rate of prejudgment interest up to the date of final judgment: (b) If the judgment finally rendered by the court is not more favorable to the offeree than the offer, the prejudgment interest accrued up to the date judgment is entered shall be adjusted as follows: .... (2) if the offeree is the party defending against the claim, the interest rate will be increased by the amount specified in AS 09.30.065. [33] (Emphasis added.) Former AS 09.30.065 specifies the amount of the rate increase: If the judgment finally entered on the claim as to which an offer has been made under this section is not more favorable to the offeree than the offer, the interest awarded under AS 09.30.070 and accrued up to the date judgment is entered shall be adjusted as follows: .... (2) if the offeree is the party defending against the claim, the interest rate shall be increased by five percent a year. (Emphasis added.) Both former Rule 68 and former AS 09.30.065 state that only the interest accrued up to the date judgment is entered shall be adjusted. Moreover, the purpose of the rule and statute is to avoid protracted litigation by encouraging parties to settle before trial. [34] This rationale no longer applies once a court enters final judgment after trial. Because the plain language of the rule and statute limit the enhanced interest rate to interest accrued before final judgment and because the legislative purpose is accomplished upon entry of final judgment, it was error to award an enhanced interest rate on damages until paid. [35] We thus reverse and remand for entry of a judgment consistent with former Rule 68 and former AS 09.30.065.