Opinion ID: 592209
Heading Depth: 1
Heading Rank: 4

Heading: interest on the backpay award

Text: 87 The consent decree provided that six black firefighters should be retroactively promoted to the position of lieutenant, with their date of appointment set at March 9, 1979, and awarded backpay from that date, taking into account the applicable base rates of pay for fire lieutenant and their actual regular earnings (not including overtime) plus interest since that date. United States v. City & County of San Francisco, 696 F.Supp. at 1314. While the City and the appellees agree on the amount of backpay that is due the six lieutenants, they dispute the interest that the lieutenants should receive on their awards. The district court, utilizing a standard it first developed in Richardson v. Restaurant Marketing Assocs., 527 F.Supp. 690 (N.D.Cal.1981), determined that interest  'shall be calculated from the end of each calendar quarter, on the amount then due and owing, at 90% of the average prime rate [as obtained from the Federal Reserve Bank] for the year in which the calendar quarter occurs.'  747 F.Supp. at 1371 (quoting Richardson, 527 F.Supp. at 691). 88 The City challenges this determination on three grounds. It first argues that the district court should have utilized the rate of interest relied upon by the California Fair Employment and Housing Commission in 1982 when it held that the SFFD's promotion examination was invalid and retroactively appointed the six black firefighters in question here to the position of lieutenant. As discussed above, the California Court of Appeals subsequently vacated this relief pending resolution of the current round of federal litigation. City and County of San Francisco v. FEHC, 191 Cal.App.3d 976, 236 Cal.Rptr. 716, 726-728 (1987). Nonetheless, the City argues that since, in diversity actions, [t]he recognized general rule is that state law determines the rate of prejudgment interest, Northrop Corp. v. Triad Int'l Marketing, 842 F.2d 1154, 1155 (9th Cir.1988), the FEHC interest rate should be applied to the backpay award here since the lieutenants originally brought suit and were awarded relief in a state forum pursuant to state anti-discrimination law. 89 However, the consent decree which provides for the present award of backpay and interest constitutes the settlement of a federal action. The litigation which led to the decree was brought pursuant to two federal statutes, Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (1982), and the State and Local Fiscal Assistance Act of 1972, 31 U.S.C. § 6701 et seq. (repealed 1986). No state law claims were presented. The district court was thus well within its bounds in applying federal law to interpret the provisions of the consent decree. 90 The City next argues that if federal law principles are to govern the calculation of interest in this case, the rate should be set by reference to 28 U.S.C. § 1961 (1982). That statute provides that [i]nterest shall be allowed on any money judgment in a civil case recovered in a district court ... Such [post-judgment] interest shall be calculated from the date of the entry of the judgment, at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of judgment. While section 1961 speaks to the appropriate rate for post-judgment interest, we have held that the same rate should be applied to pre-judgment interest 'unless the trial judge finds, on substantial evidence, that the equities of a particular case require a different rate.'  Ford v. Alfaro, 785 F.2d 835, 842 (9th Cir.1986) (quoting Western Pacific Fisheries, Inc. v. SS President Grant, 730 F.2d 1280, 1289 (9th Cir.1984)). 91 In Richardson, which was decided in 1981, the district court deemed the adoption of a floating prime rate standard justified in light ... of the continued increases in the rate of inflation and rapid fluctuation of the prime rate in recent years.... 527 F.Supp. at 698. The same considerations warrant a departure from the May 1988 Treasury bill rate prescribed by section 1961 here. For much of the period subsequent to March 9, 1979, the date of the lieutenant's retroactive promotion, interest rates greatly exceeded those prevalent in 1988. The late 1970's and early 1980's, in particular, were a period of very high inflation and even higher short term interest rates. To apply to the entire period that backpay was owing to the lieutenants a rate of interest that prevailed in a past period of lower inflation would not compensate them fully for their loss of use of the backpay during that time. 92 The City argues, finally, that it should pay interest only on an amount equivalent to the lieutenants' backpay award as reduced by their federal income tax liability. This argument is foreclosed by the terms of the consent decree. The decree provided that the City would pay the lieutenants interest on their backpay award, not on some portion of it. The City may not use this litigation as a vehicle for modifying what it has previously agreed to do.