60 F.3d 305 (7th Cir. 1995), 95-1072, S.A. Healy Co. v. Milwaukee Metropolitan Sewerage Dist.

Docket Nº:95-1072.
Citation:60 F.3d 305
Party Name:S.A. HEALY COMPANY, Plaintiff-Appellant, v. MILWAUKEE METROPOLITAN SEWERAGE DISTRICT, Defendant-Appellee.
Case Date:July 13, 1995
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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60 F.3d 305 (7th Cir. 1995)

S.A. HEALY COMPANY, Plaintiff-Appellant,



No. 95-1072.

United States Court of Appeals, Seventh Circuit

July 13, 1995

Argued May 31, 1995.

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Jane C. Schlicht, Godfrey & Kahn, Milwaukee, WI, Vivian Katsantonis, Mark Sgarlata, Timothy F. Brown (argued), Watt, Tieder & Hoffar, McLean, VA, for plaintiff-appellant.

Robert Crawford (argued), Milwaukee Metropolitan Sewerage Dist., Milwaukee, WI, for defendant-appellee.

Before POSNER, Chief Judge, RIPPLE, Circuit Judge, and NORGLE, District Judge. [*]

POSNER, Chief Judge.

This is a sequel to S.A. Healy Co. v. Milwaukee Metropolitan Sewerage District, 50 F.3d 476 (7th Cir.1995), where we affirmed a judgment of $1,574,021 for Healy in its diversity suit for breach of contract. During the litigation, Healy had made a settlement demand upon the sewage district of $1,125,000, which the district had rejected. Thirty-four days after the entry of judgment, Healy had moved the district court to award it double its taxable costs plus interest on the judgment at the rate of 12 percent from the date of the demand to the date on which the judgment is paid. At the time the motion was made, the sum of the costs and interest demanded was almost $200,000.

The legal basis for the demand was Wis.Stat. Secs. 807.01(3), (4). These sections provide that if a plaintiff's settlement demand is rejected and the plaintiff goes on to win a judgment larger than the demand, he is entitled to twice his taxable costs plus interest at the rate of 12 percent from the date of the demand to the date when the judgment is paid. The district court denied Healy's motion on the ground that Rule 68 of the Federal Rules of Civil Procedure occupies the field of settlement offers in federal litigation and precludes the application of state rules dealing with the subject even when, because the basis of federal jurisdiction is diversity of citizenship, the substantive rules of decision are state rather than federal. Rule 68 provides that if a defendant makes a settlement offer which is rejected and the plaintiff wins a smaller amount at trial, the plaintiff shall be liable for the costs that were incurred after the making of the offer. The Wisconsin statute contains a nearly identical provision. Wis.Stat. Sec. 807.01(1). But unlike the Wisconsin statute, Rule 68 makes no provision for settlement demands (that is, plaintiffs' offers as distinct from defendants').

The sewage district argues that Healy's motion, filed as we have said 34 days after the entry of judgment, was untimely, and therefore was rightly denied irrespective of its merits. A local rule of the U.S. District Court for the Eastern District of Wisconsin requires that the bill of costs be filed within 15 days of the judgment, E.D.Wis.R. 9.01; and a request for prejudgment interest must, the sewage district argues, be filed within 10 days of the judgment because it is a request to alter or amend the judgment and is therefore governed by Fed.R.Civ.P. 59(e), which has a 10-day deadline.

Because Fed.R.Civ.P. 54(d) specifies no deadline for filing a bill of costs, the time for filing such a bill is normally governed by local rules such as that of the Eastern District of Wisconsin. See, e.g., Matei v. Cessna

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Aircraft Co., 35 F.3d 1142, 1147 (7th Cir.1994); Congregation of the Passion v. Touche, Ross & Co., 854 F.2d 219, 220-21 (7th Cir.1988); Bittner v. Sadoff & Rudoy Industries, 728 F.2d 820, 827 (7th Cir.1984). And prejudgment interest, unlike postjudgment interest, normally is considered an element of the judgment itself, that is, of the relief on the merits, and hence governed by Rule 59(e). Osterneck v. Ernst & Whinney, 489 U.S. 169, 176, 109 S.Ct. 987, 991, 103 L.Ed.2d 146 (1989). But the Wisconsin rule on the consequences of turning down a plaintiff's settlement demand is not a rule about the taxing of costs, or the awarding of prejudgment interest, in the usual senses of "costs" and of "prejudgment interest." The rule imposes a sanction on defendants for turning down reasonable settlement demands. "Costs" and "prejudgment interest" (actually partly prejudgment and partly postjudgment, for the interest is computed from the date of the demand to the date of the payment of the judgment, but we shall ignore this refinement) are merely the measuring rods for determining the amount of the sanction. Wisconsin could have said to defendants that if they reject a modest settlement demand--modest because the plaintiff won a larger judgment at trial--they must pay the plaintiff $200,000 above his judgment. Then it would be plain that this additional relief was entirely separate from the judgment--that it was like an award of attorney's fees to a defendant as a sanction for filing a frivolous suit. The logic of the measuring rods actually used is transparent. Since as a prevailing party the plaintiff would be entitled to an award of costs anyway, doubling them provides a sanction equivalent to that imposed on a plaintiff who turns down a settlement offer by the defendant and then does worse at trial. But there is an additional asymmetry between plaintiffs and defendants: delay in accepting the plaintiff's demand allows the defendant to earn interest on money that (it is subsequently determined) should really be the plaintiff's. The award of interest from the date of the settlement demand deprives the defendant of this incentive to reject rightful demands.

Healy sought "regular" Rule 54(d) costs, the kind awarded to the prevailing party more or less as a matter of course--and was turned down for missing the 15-day deadline--before it asked for double costs and prejudgment interest under the Wisconsin settlement rule. And it made a timely motion for "regular" prejudgment interest, which the district judge denied on the ground that the contract claim was not sufficiently definite to support such an award under the Wisconsin law of contracts. The issues underlying the motion for prejudgment interest that Healy filed under the Wisconsin...

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