Court Opinion

ID: 9454931
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:04:12.137304+00
Date Added: 2024-06-11T17:34:22.973340
License: Public Domain

On Petitions for Rehearing of Defendants Victor Muscat and R. L. Huffines, Jr.
PER CURIAM:
The petitions for rehearing are granted. We remand to the district court for further consideration of prejudgment interest.
We agree with Judge Mansfield that the Court’s discretion in awarding pre judgment interest should be based on fundamental “considerations of fairness.” See Board of Commissioners v. United States, 308 U.S. 343, 352, 60 S.Ct. 285, 84 L.Ed. 313 (1943). But as we said in our original decision, such an award is, in the first instance, compensatory, even though we agree with Judge Mansfield’s view that the compensatory principle must- be tempered by an assessment of the equities. Compare Miller v. Robertson, 266 U.S. 243, 45 S.Ct. 73, 69 L.Ed. 265 (1939), with Ross v. Licht, 263 F.Supp. 395 (S.D.N.Y.1967). We think the district court should give further consideration to whether the pre judgment interest here is compensatory and whether, in light of the substantial sum involved, it is in accord with “fundamental fairness.”
In particular, the district court should make specific findings, first, on the personal wrongdoings of Huffines and Muscat. It also should consider whether Muscat’s “forced” sale changes the situ*1192ations. In making the award, Judge Mansfield may well have been influenced by the fact that Muscat, as a substantial stockholder in Defiance, would indirectly recoup part of the judgment. The trial court might well feel on further consideration, however, that nothing is changed, as Muscat should be able to receive a price for his shares which reflect the $1,500,000 award.
The district court should also consider whether Defiance was “deprived” of the principal sum so that prejudgment interest can in fact be termed compensatory. It was clearly correct in finding that Defiance suffered damages as a result of the issuance of almost 500,000 additional shares for grossly-overvalued consideration. See Hooper v. Mountain States Securities Corp., 282 F.2d 195 (5th Cir. 1960), cert. denied, 365 U.S. 814, 81 S.Ct. 695, 5 L.Ed.2d 693 (1960). But in reconsidering its discretionary award, the district court should consider whether Defiance passed up other, reasonably available and attractive opportunities to use these shares to raise cash or to purchase fully-valued assets.
Finally, there is one consideration with respect to the prejudgment interest which was awarded at the rate of 6% which we are not sure the district court passed upon. That is the claim that an unusually long period of time elapsed between the acts complained of, July, 1962, and the trial in February, 1968, with the judgment following promptly in May, 1968. It may well be that the defendants are at least equally responsible for the delay, but if it could be shown that the contrary is true to any substantial degree, it may well be that the district court would find it appropriate to fix the rate of interest at some lower percentage. Also, in awarding interest the district court may well have seen it in part as going to the corporation to cover counsel fees and litigation expenses. This approach would support the salutary principle of making appellants bear the fair cost of the damage they have done, while preserving the principal in its entirety for the corporation.
To permit further consideration of the prejudgment interest award, we grant these petitions for rehearing and remand to the district court, whose judgment stands affirmed in all other respects.