Devex Corp. v. General Motors Corp.

• Decision Date: 13 September 1984
• Docket Number: Nos. 83-1770,84-5011,84-5003,83-1892,83-1771,84-5139 and 84-5141,s. 83-1770
• Citation: 749 F.2d 1020
• Parties: DEVEX CORPORATION, Technograph, Inc., William C. McCoy, Theodore A. TeGrothenhuis, Frederick B. Ziesenheim, Marjorie TeGrotenhuis, William C. McCoy, Jr., and Katherine M. Bassett, Plaintiffs-Appellants, Cross-Appellees, v. GENERAL MOTORS CORPORATION, Defendant-Appellee, Cross-Appellant. . Submitted Under Third Circuit Rule 12(6) on
• Court: U.S. Court of Appeals — Third Circuit

Page 1020

749 F.2d 1020

224 U.S.P.Q. 544

DEVEX CORPORATION, Technograph, Inc., William C. McCoy Theodore A. TeGrothenhuis, Frederick B. Ziesenheim, Marjorie TeGrotenhuis, William C. McCoy, Jr., and Katherine M Bassett, Plaintiffs-Appellants, Cross-Appellees, v. GENERAL MOTORS CORPORATION, Defendant-Appellee, Cross-Appellant.

Nos. 83-1770, 83-1771, 83-1892, 84-5003, 84-5011, 84-5139

and 84-5141.

United States Court of Appeals Third Circuit.

Submitted Under Third Circuit Rule 12(6)

on September 13, 1984.

Decided Nov. 28, 1984.

As Amended Dec. 5, 1984.

Robert K. Payson, Potter, Anderson & Corroon, Wilmington, Del., Sidney Bender, Aaron Lewittes, Janine L. Bender, Leventritt, Lewittes & Bender, Garden City, N.Y., William H. Sudell, Morris, Nichols, Arsht & Tunnell, Wilmington, Del., for plaintiffs-appellants, cross-appellees.

Arthur G. Connolly, Arthur G. Connolly, Jr., Connolly, Bove, Lodge & Hutz, Wilmington, Del., for defendant-appellee, cross-appellant; William A. Schuetz, Gen. Motors Corp., Detroit, Mich., George E. Frost, Barnes, Kisselle, Raisch, Choate, Whittemore & Hulbert, Birmingham, Mich., of counsel.

Before GIBBONS, GARTH, and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

This appeal arising out of the final stages of a 28 year old lawsuit for patent infringement, involves questions pertaining to postjudgment interest and interest on costs. Defendant General Motors (GM) has been ordered to pay plaintiffs (collectively referred to hereafter as Devex) reasonable royalties in the amount of approximately $8.8 million, prejudgment interest in the amount of approximately $11 million, and approximately $7 million in postjudgment interest. Disputes remain over the rate at which postjudgment interest should have been assessed; whether plaintiffs should have been awarded interest on postjudgment interest; and whether plaintiffs should have been awarded interest on costs. We affirm.

I. Litigation History

Plaintiffs are the owners and licensees of Re-issue Patent # 24,017 (the Devex or Hendricks patent), which covered a lubricating process used in the cold forming of automobile parts under pressure, and which expired in 1969.

The original complaint in this case was filed in 1956 in the Northern District of Illinois. That court held in 1962 that the Devex patent was invalid. The United States Court of Appeals for the Seventh Circuit reversed and remanded to the district court. Devex Corp. v. General Motors Corp., 321 F.2d 234 (7th Cir.1963), cert. denied, 375 U.S. 971, 84 S.Ct. 490, 11 L.Ed.2d 418 (7th Cir.1963). At that juncture, GM successfully moved to have the case transferred to Delaware. Devex Corp. v. General Motors Corp., 146 U.S.P.Q. 346 (N.D.Ill.1965).

After an unsuccessful motion for summary judgment by Devex, and the ensuing trial for patent infringement, the United States District Court for the District of Delaware ruled that General Motors had not infringed Devex's patent. 316 F.Supp. 1376 (D.Del.1970). Devex appealed to this court, which reversed. Devex Corp. v. General Motors Corp., 467 F.2d 257 (3d Cir.1972), cert. denied, 411 U.S. 973, 93 S.Ct. 2145, 36 L.Ed.2d 696 (1973).

The district court ruled on the damages issue in 1980, basing its decision partly on the report of the Special Master. Devex Corp. v. General Motors Corp., 494 F.Supp. 1369 (D.Del.1980). The court awarded Devex a judgment of $19,726,236.55, consisting of $8,813,945.40 in royalties and $10,912,291.15 in prejudgment interest. ¹ Postjudgment interest and costs in an undetermined sum were also awarded. GM appealed this determination to this court which affirmed the holding of the district court. Devex Corp. v. General Motors Corp., 667 F.2d 347 (3d Cir.1981).

In response to petitions of GM and Devex, the Supreme Court granted a writ of certiorari to GM on the issue of the applicable standard for determining whether prejudgment interest should be awarded. The Court affirmed the award of prejudgment interest. General Motors Corp. v. Devex Corp., 461 U.S. 648, 103 S.Ct. 2058, 76 L.Ed.2d 211 (1983).

While the parties were preparing for the Supreme Court case, the plaintiffs obtained an order from this court ordering GM to pay the amount of the uncontested part of the judgment, royalties in the sum of $8,813,945.40. GM paid this amount on July 7, 1982. After the Supreme Court's decision, in June 1983, GM paid $11,022,854.97, the amount of the prejudgment interest.

Two months later, the district court ruled that the rate of postjudgment interest would be 16% per annum. It ordered General Motors to pay the sum of $7,170,344.39 in postjudgment interest on the original $19 million judgment. Devex Corp. v. General Motors Corp., Civ. Action No. 3058 (D.Del. Sept. 9, 1983). GM contended, however as it does now, that the correct rate of postjudgment interest was 6%, and paid plaintiffs only $2.2 million approximately; the remainder was paid into court pending the outcome of this appeal. The district court also awarded plaintiffs interest on their costs, but denied Devex's motion for "delay damages"--interest on the postjudgment interest.

GM appeals from the district court's ruling fixing the rate of postjudgment interest at 16% and from its award of interest on costs. Devex cross-appeals from the court's denial of its motion for interest on the postjudgment interest.

II. The Rate of Postjudgment Interest

GM argues that the district court erred in awarding postjudgment interest at the rate of 16%. In determining the rate under state law pursuant to 28 U.S.C. Sec. 1961 (1976), the district court held that, under 6 Delaware Code Sec. 2301(a), the correct rate was 16%--5% over the Federal Reserve discount rate. Devex Corp. v. General Motors Corp., 569 F.Supp. at 1365-67.

Section 2301(a) provides:

Where there is no expressed contract rate, the legal rate of interest shall be 5% over the Federal Reserve discount rate including any surcharge as of the time from which interest is due, provided that where the time from which interest is due predates April 18, 1980, the legal rate shall remain as it was at that time.

Del.Code Ann. tit. 6, Sec. 2301(a) (Cum.Supp.1982) (emphasis added).

GM emphasizes that in the instant case the complaint was filed in 1956, and damages amounting to payment of a reasonable royalty were calculated as of that date. Devex Corp. v. General Motors Corp., 667 F.2d at 363-364. Therefore, according to GM, the time from which interest is due predates 1980, and the district court should have applied the legal rate as it was prior to 1980, which was 6%. ²

In support of this contention, GM cites Delaware cases and federal diversity cases decided under Delaware law, which hold that, where damages are calculated as of a time before April 18, 1980, the prejudgment interest on those damages will be calculated at 6%, and that the postjudgment interest should be calculated at the same rate as the prejudgment interest. Pack & Process, Inc. v. Nabisco, Inc., Civ. 78-285, slip op. at 2-5 (D.Del. Sept. 18, 1984); Helmut A. Papendick v. Robert Bosch GmbH, 562 Civ.1977, letter op. at 3-5 (Del.Super.Ct. Aug. 4, 1981), affirmed No. 238, 1981 (Del. Aug. 4, 1981); Rollins Environmental Services, Inc. v. WSMW Industries, Inc., 426 A.2d 1363, 1367 (Del.Super.Ct.1980). The district court found these cases to be inapposite, because they involved prejudgment interest which had been calculated at 6% according to Delaware law, and reflected a policy of the Delaware courts that the same rate be applied to prejudgment and postjudgment interest, in order to avoid segmentation of interest. We agree with the district court that the cases cited by GM do not apply to the instant case where the prejudgment interest was determined according to federal law, 35 U.S.C. Sec. 284. ³

28 U.S.C. Sec. 1961 provides only that postjudgment interest "shall be calculated from the date of the entry of the judgment, at the rate allowed by State law." (Emphasis added.) We interpret this statute literally, and hold that the district court correctly borrowed from Delaware law only its current interest rate of 16%. But cf. Turner v. Japan Lines, Ltd., 702 F.2d 752, 757-58 (9th Cir.1983) (court applied previous state interest rate, according to Oregon precedents which held that a change in the rate of statutory interest did not apply to judgments entered before rate change).

This result best advances the policy underlying 28 U.S.C. Sec. 1961: compensation of the wronged party for loss of the use of money, in a changing economy where changes in the state statutory interest rate reflect changes in the value of the use of money. ⁴ We therefore hold that the district court did not err in its determination that the correct postjudgment interest rate was 16% per annum.

III. Interest on Postjudgment Interest

We now turn to the questions of whether the plaintiffs should have been awarded "delay damages"--interest on postjudgment interest--and whether Delaware law or federal law applies to this determination. Both GM and the district court assumed that 28 U.S.C. Sec. 1961 (1976) mandated the application of state law on the issue of delay damages. We disagree.

28 U.S.C. Sec. 1961 provides:

Interest shall be allowed on any money judgment in a civil case recovered in a district court.... Such interest shall be calculated from the date of the entry of the judgment, at the rate allowed by State law.

28 U.S.C. Sec. 1961 (1981) (amended 1982) (emphasis added). ⁵

There is federal authority for the proposition that when a cause of action arises from a federal statute, the question of whether interest may be allowed, as distinguished from the rate, is governed solely by federal law. See Dependahl v. Falstaff Brewing Co., 653 F.2d 1208, 1219 (8th Cir.), cert. denied 454 U.S. 968, 102 S.Ct. 512, 70 L.Ed.2d 384 (1981); Carpa v. Ward Foods, Inc., 567 F.2d 1316, 1321 (5th Cir.1978), overruled on other grounds, Copper Liquor v. Adolph Coors Brewing Co....