Opinion ID: 1488138
Heading Depth: 1
Heading Rank: 7

Heading: The Adoption Of a Flat Prejudgment Interest Rate

Text: Finally, MCHC claims that the Court of Chancery erred by setting the prejudgment interest rate at a flat 8.25%. That rate represented the legal rate of interest, which is defined by 6 Del. C. § 2301(a) as the federal discount rate plus 5%. MCHC does not dispute the Court's adoption of the legal rate of interest. What MCHC contends is that the Court was required to adjust that rate to reflect the periodic changes to the federal discount rate. 8 Del. C. § 262(h) directs the Court of Chancery to determine the fair value of a stockholder's shares, together with a fair rate of interest, if any. Although the legal rate has historically been considered as the benchmark for prejudgment interest, the Court of Chancery has broad discretion to determine the appropriate rate of interest, and may award a different rate. [54] The decision to award a particular rate of interest is within the sound discretion of the Court of Chancery. [55] Accordingly, we review the Vice Chancellor's determination of the interest rate for abuse of discretion. MCHC argued before the Court of Chancery that the appropriate rate of interest was the legal rate. The Court accepted MCHC's argument. MCHC did not argue that the legal rate should track the historical variations in the federal reserve discount rate during the prejudgment interest period. Thus, the Court adopted a flat rate of 8.25%, based on the 3.25% federal discount rate on the merger date. Although the Court noted that it would be more accurate to adopt a varying rate that reflected changes to the federal discount rate over the course of the litigation, the Vice Chancellor adopted the flat rate in this case, because MCHC had presented no evidence of any changes in the federal discount rate. Despite that, MCHC now argues that the Court of Chancery erred by not adjusting the 8.25% legal rate at regular intervals to reflect changes in the federal discount rate between the merger date and the date of final judgment. MCHC did not present that argument to the Court of Chancery during post-trial briefing, however, nor did it introduce evidence of any federal reserve discount rate other than 3.25%. In essence, MCHC contends that the Court of Chancery should have, sua sponte, taken judicial notice of the changes in that discount rate, because those rates are published and readily available in an online database. This argument fails for two reasons. First, this Court will not entertain a claim or argument that was not fairly presented to the trial court. [56] Second, the interests of justice exception to that rule does not apply so as to require us to resolve MCHC's belated claim. [57] The rules of evidence require a court to take judicial notice of facts only if the court is requested by a party and supplied with the necessary information. [58] Otherwise, the Court has discretion to decide whether or not to take judicial notice of certain facts. [59] Here, MCHC neither provided the necessary information nor requested that the Court take judicial notice. Absent any such request, the Court quite properly relied on MCHC's position and the evidence before it, and set the only interest rate that was supported by that evidence: a flat rate. In the circumstances, it was not an abuse of discretion for the Vice Chancellor to do that. We therefore uphold the Court's prejudgment interest rate determination.