Opinion ID: 433470
Heading Depth: 1
Heading Rank: 15

Heading: pre-judgment interest rate.

Text: 75 The district court awarded damages plus pre-judgment interest from the date of payment by the underwriters at the rate of 8% per annum. (Findings & Conclusions at 22; ER 107.) The judgment included this interest, calculated to a dollar sum, and also assessed post-judgment interest at the rate of 9.29%, in accordance with 28 U.S.C. Sec. 1961. (Judgment at 2; ER 79.) The HIGGINS, in her cross appeal, argues that the award of pre-judgment interest at the rate of 8% was inadequate to compensate the underwriters. 76 It is well-established that compensatory damages in maritime cases normally include pre-judgment interest. M/V MARINA L, 633 F.2d at 797; The PRESIDENT MADISON, 9 Cir., 1937, 91 F.2d 835, 845; see generally Turner v. Japan Lines, Ltd., 9 Cir., 1983, 702 F.2d 752, 756 & n. 4. Although the award of pre-judgment interest is within the discretion of the trial judge, this discretion must be exercised with a view to the fact that pre-judgment interest is an element of compensation, not a penalty. M/V MARINA L, 633 F.2d at 797; Rosa v. Insurance Co. of Pennsylvania, 9 Cir., 1970, 421 F.2d 390, 393. An award of pre-judgment interest at below market rates does not fully compensate the prevailing party and, in addition, tends to discourage prompt litigation because delay gives an economic benefit to the debtor. Sea-Land Service, Inc. v. Eagle Terminal Tankers, Inc., W.D.Wash., 1977, 443 F.Supp. 532, 534. 77 There was uncontroverted evidence that when the underwriters paid Western Pacific Fisheries for the loss of the HIGGINS, in December 1980, the prevailing prime rate of the major New York banks was 20.000%, that the rates on 90-day certificates of deposit ranged from a high of 17.625% (in December 1980) to a low of 11.620% (in December 1981), and that the actual cost of money to the underwriters was (in aggregate) 19.53% calculated on a funds borrowed basis or 17.85% on a funds invested basis. See Kingsley letter of February 25, 1982 (Exh. A-49, SER 43). Calculated on these respective bases, the pre-judgment interest award would have been $116,887.36 or $106,677.76. (Id. at 8, ER 50.) This is significantly higher than the $63,639.81 awarded based on an 8% rate. (Judgment at 2; ER 79.) 78 The GRANT argues that the rate of pre-judgment interest was within the discretion of the trial court and should not be rejected without a showing of abuse. The very case that the GRANT cites, however, emphasizes that the district court should exercise its discretion to award the income which the monetary damages would have earned, and that should be measured by interest on short-term, risk-free obligations. Independent Bulk Transport v. Vessel MORANIA ABACO, 2 Cir., 1982, 676 F.2d 23, 27. The many authorities cited by both parties are consistent with this approach to pre-judgment interest. See, e.g., Edinburgh Assur. Co. v. R.L. Burns Corp., 9 Cir., 1982, 669 F.2d 1259, 1262-63; Sauers v. Alaska Barge & Transport, Inc., 9 Cir., 1979, 600 F.2d 238, 248. We are especially unpersuaded by the GRANT's argument that since we awarded pre-judgment interest at the rate of 8% in Sauers for the period of 1973 to 1979, an award at 8% is appropriate to the period of 1980 to 1982, when market interest rates were significantly higher. 79 In 1982, Congress amended 28 U.S.C. Sec. 1961 to provide that district courts must set the interest accrued after civil judgment by reference to 52-week U.S. Treasury bill rates. Pub.L. 97-164, Sec. 302. Congress intended to remove the economic incentives to delay that exist when judicially-awarded interest rates are less than the contemporary cost of money. S.Rep. No. 97-275, 97th Cong., 2d Sess. 30, reprinted at 1982 U.S.Code Cong. & Ad.News 40. Although Sec. 1961 does not provide for pre-judgment interest, it is entirely compatible with awards of such interest. Id.; Bricklayers' Pension Trust Fund v. Taiariol, 6 Cir., 1982, 671 F.2d 988, 989; Jarvis v. Johnson, 3 Cir., 1982, 668 F.2d 740, 741 n. 1. 80 We conclude that the measure of interest rates prescribed for post-judgment interest in 28 U.S.C. Sec. 1961(a) is also appropriate for fixing the rate for pre-judgment interest in cases such as this, where pre-judgment interest may be awarded, unless the trial judge finds, on substantial evidence, that the equities of the particular case require a different rate. Absent such a finding, pre-judgment interest in this case should be calculated from the date of payment by the underwriters 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 payment by the underwriters. 28 U.S.C. Sec. 1961(a). 81