Air Separation, Inc. v. Underwriters at Lloyd's of London

• Decision Date: 06 September 1994
• Docket Number: No. 93-15275,93-15275
• Citation: Air Separation, Inc. v. Underwriters at Lloyd's of London, 45 F.3d 288 (9th Cir. 1994)
• Parties: AIR SEPARATION, INC., Plaintiff-Appellant, v. UNDERWRITERS AT LLOYD'S OF LONDON, etc., et al., and Participating Insurance Companies, et al., Defendants-Appellees. G.A. HAYNES, and British Aviation Insurance Company, Ltd., Cross-claimants, v. WILLIAM H. CAULEY, INSURANCE, INC., Cross-defendant. . Submitted Aug. 12 1994. * Memorandum Filed
• Court: U.S. Court of Appeals — Ninth Circuit

Page 288

45 F.3d 288

AIR SEPARATION, INC., Plaintiff-Appellant, v.UNDERWRITERS AT LLOYD'S OF LONDON, etc., et al., andParticipating Insurance Companies, et al.,

Defendants-Appellees.

G.A. HAYNES, and British Aviation Insurance Company, Ltd.,Cross-claimants, v.WILLIAM H. CAULEY, INSURANCE, INC., Cross-defendant.

No. 93-15275.

United States Court of Appeals Ninth Circuit.

Submitted Aug. 12 1994. ^*

Memorandum Filed Sept. 6, 1994.

Order and Opinion Filed Jan. 17, 1995.

James M. Wagstaffe, Cooper, White & Cooper, San Francisco, CA, for plaintiff-appellant.

John W. Shaw, Kern and Wooley, Los Angeles, CA, for defendants-appellees.

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

Before: FLETCHER, HALL, and WIGGINS, Circuit Judges.

ORDER

The memorandum disposition filed September 6, 1994, is redesignated as an authored opinion by Judge Hall.

OPINION

CYNTHIA HOLCOMB HALL, Circuit Judge:

Air Separation, Inc., the owner of an aircraft insured by Underwriters at Lloyd's of London and Participating Insurance Companies ("Underwriters"), appeals from the district court's denial of its motion for postjudgment interest and sanctions in connection with its successful claim for payment under an insurance policy for loss by theft of avionics equipment.The district court had jurisdiction pursuant to 28 U.S.C. Sec. 1332.This court has jurisdiction pursuant to 28 U.S.C. Sec. 1291.We affirm in part and reverse in part.

I.

This case arises out of an insurance coverage dispute.On December 20, 1984, avionics equipment was stolen from an aircraft owned by Air Separation and insured by Underwriters at Lloyd's of London and Participating Insurance Companies ("Underwriters").Although Air Separation was the designated loss-payee under the insurance policy, Underwriters paid the claim to a company that was leasing the aircraft.Air Separation sued Underwriters to recover under the policy, and the district court found Underwriters responsible to Air Separation for the amount of the loss, costs, and prejudgment interest, as well as postjudgment interest.¹

Underwriters appealed from the court's judgment.On December 5, 1991, before the appeal was concluded, the district court stayed execution of the judgment and ordered Underwriters to post a $200,000 bond.Underwriters never posted bond, and on June 17, 1992, this court affirmed the district court's judgment, 967 F.2d 583(9th Cir.1992).

On June 22, 1992, Air Separation's counsel submitted to Underwriters a letter calculating the amount due on the judgment at $271,336.14, including postjudgment interest of $15,014.77 if paid by Thursday, June 25, 1992, plus $32.37 per day thereafter.On June 26, 1992, realizing that a mistake had been made because the calculation did not include postjudgment interest on the prejudgment interest component of the award, Air Separation's counsel faxed a correction letter and a new figure to Underwriters.Air Separation's counsel also spoke to Underwriters' counsel regarding the miscalculation.

On either July 7 or 9, 1993, Air Separation's counsel received a check from Underwriters in the amount of $271,727.03 as set forth in Air Separation's withdrawn letter.Air Separation's counsel subsequently informed Underwriters that the check was insufficient because it did not include postjudgment interest on the prejudgment interest award as explained in the second letter.

After Underwriters indicated that it would not pay postjudgment interest on the prejudgment interest award, Air Separation, on August 27, 1992, filed a motion in the district court requesting immediate payment and sanctions.On January 4, 1993, the district court denied Air Separation's motion.Air Separation appeals.

II.

Air Separation contends that the district court erred by not interpreting 28 U.S.C. Sec. 1961, which mandates that "[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court," to require that postjudgment interest be paid on all elements of a money judgment, including prejudgment interest.Elements of statutory interpretation that inform the district court's decisions are reviewed de novo.Oviatt v. Pearce, 954 F.2d 1470, 1481(9th Cir.1992).

Under the provisions of 28 U.S.C. Sec. 1961, postjudgment interest on a district court judgment is mandatory.SeePerkins v. Standard Oil Co., 487 F.2d 672, 674(9th Cir.1973)."The purpose of awarding interest to a party recovering a money judgment is ... to compensate the wronged person for being deprived of the monetary value of the loss...."Turner v. Japan Lines, Ltd., 702 F.2d 752, 756(9th Cir.1983);see alsoKaiser Aluminum & Chem. Corp. v. Bonjorno, 494 U.S. 827, 834, 110 S.Ct. 1570, 1575, 108 L.Ed.2d 842(1990)("the policy underlying the postjudgment interest statute[is] compensation of the plaintiff for the loss of the use of the money").Costs of the loss of use of a money judgment should not be borne by the injured plaintiff, but by the "defendant whose initial wrongful conduct invoked the judicial process and who has had the use of the money judgment throughout the period of delay."Perkins, 487 F.2d at 676;see alsoDevex Corp. v. General Motors Corp., 577 F.Supp. 429, 433(D.Del.1983)(reasoning that because money has time value, the only way to make a party whole is to award interest from the time the party should have received the money."), aff'd, 749 F.2d 1020(3d Cir.1984), cert. denied, 474 U.S. 819, 106 S.Ct. 68, 88 L.Ed.2d 55(1985).Failure to award postjudgment interest would create an incentive for defendants to exploit the time value of money by frivolously appealing or otherwise delaying payment.SeeBailey v. Chattem, Inc., 838 F.2d 149, 152(6th Cir.1988), cert. denied, 486 U.S. 1059, 108 S.Ct. 2831, 100 L.Ed.2d 931(1988);R.W.T. v. Dalton, 712 F.2d 1225, 1235(8th Cir.1983), cert. denied, 464 U.S. 1009, 104 S.Ct. 527, 78 L.Ed.2d 710(1983).

In light of these considerations, this Court has determined that "once a judgment is obtained, interest thereon is mandatory without regard to the elements of which that judgment is composed."Perkins, 487 F.2d at 675;see also28 U.S.C. Sec. 1961(interest "allowed on any money judgment")(emphasis added);Wheeler v. John Deere Co., 986 F.2d 413, 415(10th Cir.1993)(quoting Perkins).Accordingly, postjudgment interest has been applied to attorneys' fees, Perkins, 487 F.2d at 675; costs, Wheeler, 986 F.2d at 425; punitive damages, Brown v. Petrolite Corp., 965 F.2d 38, 51(5th Cir.1992); exemplary damages, id.; and fraud penalties.In re Resyn Corp., 945 F.2d 1279, 1284(3d Cir.1991).

Most important, it is well-established in other circuits that postjudgment interest also applies to the prejudgment interest component of a district court's monetary judgment.SeeQuesinberry v. Life Ins. Co. of North America, 987 F.2d 1017, 1030(4th Cir.1993)(en banc)("[T]he district court should have ordered that postjudgment interest would accrue on $147,885.21, the $82,500 proceeds of the insurance policy plus the pre-judgment interest awarded by the court.");Fuchs v. Lifetime Doors, Inc., 939 F.2d 1275, 1280(5th Cir.1991)("[W]e direct the district court to award post-judgment interest on the entire amount of the judgment, including damages, prejudgment interest, and attorney's fees.");Arthur Young & Co. v. Reves, 937 F.2d 1310, 1338(8th Cir.1991)("28 U.S.C. Sec. 1961specifically authorizes postjudgment interest, and we believe such interest is appropriate on both the damages and prejudgment interest"), aff'd sub nom.Reves v. Ernst & Young, --- U.S. ----, 113 S.Ct. 1163, 122 L.Ed.2d 525(1993);Sun Ship, Inc. v. Matson Navigation Co., 785 F.2d 59, 63(3d Cir.1986)("28 U.S.C. Sec. 1961 ... provides for postjudgment interest and ... that interest should be calculated on the amount of the district court's judgment--that is $4,272,864.88 plus prejudgment interest");Parsons & Whittemore v. Yeargin Construction Co., Inc., 744 F.2d 1482, 1485(11th Cir.1984);United States v. Hannon, 728 F.2d 142, 145(2d Cir.1984);see alsoPalmer v. Barry, 794 F.Supp. 5, 7(D.D.C.1992), aff'd sub nom.Palmer v. Kelly, 17 F.3d 1490(D.C.Cir.1994);Devex, 577 F.Supp. at 431; cf.In re Tucknall, 94 B.R. 277, 278-79(Bankr.D.Conn.1989).²2] Underwriters identifies no case to the contrary.

The district court's judgment included the principal sum, plus costs, plus prejudgment interest.Given the policy motivating the award of postjudgment interest, and in light of authority in other circuits, we hold that postjudgment interest under 28 U.S.C. Sec. 1961 applies to the prejudgment interest component of a monetary award.Section 1961 appears to mandate this result.Not only does the plain language of the statute not distinguish between the component parts of a judgment, but there in fact appears to be no material distinction between judgments for prejudgment interest and judgments for the principal sum in the context of this provision.Cf.Wheeler, 986 F.2d at 415("For the purposes of interest under Sec. 1961, we see no practical difference between an award of costs, an award of attorneys' fees, or an award of damages.");Perkins, 487 F.2d at 675("[T]here exists no real distinction between judgments for attorneys' fees and judgments for other items of damages.").Moreover, failure to apply postjudgment interest to prejudgment interest would result in the injured plaintiff bearing the cost resulting from the loss of the use of money and would thereby reward the defendant for having delayed satisfying the judgment.

Accordingly, we find that the district court erred when it denied Air Separation's motion for postjudgment interest.

III.

Air Separation contends that Underwriters should be sanctioned under the court's inherent power, Fed.R.Civ.P. 11, or 28 U.S.C. Sec. 1927 for disobeying the district court's order to post a bond pursuant to the judgment awarded Air Separation and for misrepresenting facts to the...