768 F.2d 1066 (9th Cir. 1985), 84-4125, Columbia Brick Works, Inc. v. Royal Ins. Co. of America

Docket Nº:84-4125.
Citation:768 F.2d 1066
Party Name:COLUMBIA BRICK WORKS, INC., Plaintiff-Appellee, v. ROYAL INSURANCE COMPANY OF AMERICA, Defendant-Appellant.
Case Date:August 13, 1985
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1066

768 F.2d 1066 (9th Cir. 1985)

COLUMBIA BRICK WORKS, INC., Plaintiff-Appellee,

v.

ROYAL INSURANCE COMPANY OF AMERICA, Defendant-Appellant.

No. 84-4125.

United States Court of Appeals, Ninth Circuit

August 13, 1985

Argued and Submitted May 6, 1985.

Page 1067

Michael E. Haglund, Lindsay, Hart, Neil & Weigler, Portland, Or., for plaintiff-appellee.

Gordon W. Moss, C. Val Tollefson, Lane, Powell, Moss & Miller, Seattle, Wash., for defendant-appellant.

Appeal from the United States District Court for the District of Oregon.

Before WALLACE and SNEED, Circuit Judges, and LEGGE [*], District Judge.

SNEED, Circuit Judge:

Defendant Royal Insurance Company of America (Royal) appeals an award of prejudgment interest to plaintiff Columbia Brick Works, Inc. (Columbia) on a marine cargo insurance claim. Although this case involves admiralty law, jurisdiction in the district court was based on diversity under 28 U.S.C. Sec. 1332 (1982). We have jurisdiction over Royal's timely appeal under 28 U.S.C. Sec. 1291 (1982). We affirm the judgment of the district court.

I.

FACTS

Columbia owns and operates a brick manufacturing plant in Gresham, Oregon. In 1980, Columbia contracted to purchase new brickmaking equipment from a Spanish manufacturer. Columbia received the shipments from Barcelona, Spain between 1980 and 1981. The equipment was insured against transit damage by Royal under an all-risk marine insurance policy. When the cargo arrived in Oregon, Columbia discovered that the equipment in eight of ten shipments had sustained damage from rust. Royal acknowledged liability under the insurance policy, but the parties disagreed about the amount owed by Royal.

Columbia brought this diversity action to determine the amount owed. At trial, the jury heard expert testimony about the diminution in value of the damaged equipment because of its reduced life expectancy and the probable need for future maintenance and repair.

The parties stipulated that the undamaged value of the eight shipments was $1,622,632. The district judge instructed

Page 1068

the jury to measure the damages by taking the difference between the stipulated value and the market value of the goods in their damaged condition. The figure obtained would represent the diminution in value of the equipment resulting from the damage. Based on this instruction, the jury awarded Columbia $850,000.

After judgment on the verdict, Columbia moved for prejudgment interest on the award from the date of the delivery of the damaged equipment. The district judge awarded prejudgment interest on $850,000 from the time of delivery at a rate of 12.801 percent. This was the rate paid on fifty-two week treasury bills on the date of delivery, March 24, 1981. Royal's timely appeal followed.

II.

DISCUSSION

Royal raises two objections to the district court's grant of prejudgment interest. First, Royal argues that the district court abused its discretion by awarding Columbia prejudgment interest on the entire jury award from the date of delivery. Second, Royal challenges the district court's determination of the rate of such interest on the ground that Oregon state law, not federal law, fixes its rate. We will address these contentions in turn.

  1. Standard of Review

    In admiralty law, the district court has discretion to award prejudgment interest to accomplish the just restitution of injured parties. Alkmeon Naviera, S.A. v. M/V Marina L., 633 F.2d 789, 797 (9th Cir.1980). The district court also has broad discretion to determine when prejudgment interest commences and what rate of interest to apply. Independent Bulk Transport, Inc. v. The Vessel Morania Abaco, 676 F.2d 23, 25 (2d Cir.1982). We therefore review the grant of prejudgment interest for abuse of discretion.

  2. Prejudgment Interest

    1. Should Prejudgment Interest Be Computed on the Basis of the Entire Jury Award?

    Discretion is abused if, as Royal argues here, prejudgment interest amounts to a penalty rather than compensation. See Stevens v. F/V Bonnie Doon, 655 F.2d 206, 209 (9th Cir.1981) (Bonnie Doon I ); Alkmeon Naviera, 633 F.2d at 797-98. This principle prohibits an award of prejudgment interest that either duplicates an item of compensation already awarded or compensates for a loss either that never will be suffered or that has not been suffered prior to judgment. Thus, prejudgment interest is not allowable when compensation for losses that occurred prior to judgment already has been computed by a method that includes interest at a proper rate from the date of the injury. See Stevens v. F/V Bonnie Doon, 731 F.2d 1433, 1437-38 (9th Cir.1984) (Bonnie Doon II ). Nor is prejudgment...

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