Johnson v. Continental Airlines Corp.

• Decision Date: 21 May 1992
• Docket Number: Nos. 89-1283,s. 89-1283
• Citation: 964 F.2d 1059
• Parties: Karen Svea JOHNSON and Robert Cooke, Jr., wife and husband, Plaintiffs-Appellees, v. CONTINENTAL AIRLINES CORPORATION, a Delaware Corporation, Defendant-Appellant. & 89-1296.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1059

964 F.2d 1059

Karen Svea JOHNSON and Robert Cooke, Jr., wife and husband, Plaintiffs-Appellees, v. CONTINENTAL AIRLINES CORPORATION, a Delaware Corporation,

Defendant-Appellant.

Nos. 89-1283 & 89-1296.

United States Court of Appeals,

Tenth Circuit.

May 21, 1992.

Robert M. Tyler, Jr. (Brenda G. Meier with him, on the brief) of Elam, Burke and Boyd, Boise, Idaho, for plaintiffs-appellees.

Frederick C. Schafrick (Richard M. Sharp, and Alok Ahuja of Shea & Gardner, Washington, D.C., Hall & Evans, and Tilly & Graves, P.C., Denver, Colo., with him on the briefs), Shea & Gardner, Washington, D.C., for defendant-appellant.

Before ANDERSON and BRORBY, Circuit Judges, and COOK, ^* Senior District Judge.

BRORBY, Circuit Judge.

This case presents a single issue for consideration on appeal: Which state governs the availability of prejudgment interest in a diversity case where, by consent, Colorado law governs liability and Idaho law governs compensatory damages? This is an issue of first impression, entitled to de novo review. Mitchell v. State Farm Fire & Casualty Co., 902 F.2d 790, 792 (10th Cir.1990); Needham v. Phillips Petroleum Co. of Norway, 719 F.2d 1481, 1483 (10th Cir.1983). Unlike the district court, we conclude that when making choice of law determinations, prejudgment interest must be considered an inseparable element of compensatory damages. Accordingly, we reverse and remand the present case with instructions to enter judgment consistent with this opinion.

I. Background

This case represents an "exemplar" trial on the common issues of liability for compensatory and punitive damages in multidistrict litigation arising from an airplane crash. Due to the complex nature of this litigation, we outline the factual and procedural history only to the extent necessary to address the relevant issue.

Preliminary Proceedings

On November 15, 1987, Continental Flight No. 1713, bound for Boise, Idaho, crashed during takeoff from Stapleton International Airport in Denver, Colorado. Twenty-eight persons were killed, and up to fifty-four others were injured in the accident. In re Air Crash Disaster at Stapleton Int'l Airport, 720 F.Supp. 1433, 1434 (D.Colo.1988). Karen Svea Johnson, Plaintiff in this exemplar case, was among those injured. She was domiciled in Idaho at the time of the accident, as were many of Flight 1713's passengers. On February 24, 1988, Ms. Johnson and her husband, Robert Cooke, Jr., filed an action for her injuries and his loss of consortium in the United States District Court for the District of Idaho against Continental Airlines, Inc. and its parent, Texas Air Corporation. ¹ Subsequently, the Judicial Panel on Multidistrict Litigation, pursuant to 28 U.S.C. § 1407, ordered that all federal cases arising from the accident, including Ms. Johnson's, be consolidated in the District of Colorado for pretrial proceedings. In re Air Crash Disaster at Stapleton Int'l Airport, 683 F.Supp. 266, 267-68 (J.P.M.L.1988). The Panel designated Chief Judge Sherman G. Finesilver as presiding judge. Id. at 268.

On November 29, 1988, Judge Finesilver transferred all pending cases to the District of Colorado pursuant to 28 U.S.C. § 1404(a). In re Air Crash Disaster at Stapleton Int'l Airport, 720 F.Supp. 1455, 1458 (D.Colo.1988). The common liability and punitive damages issues were bifurcated and consolidated for trial. Judge Finesilver ordered that the common issues would be tried in conjunction with the claims of an individual "exemplar" plaintiff. Id. at 1458-59. The Plaintiffs' Steering Committee selected Ms. Johnson's case as their lead case. Defendants similarly chose a lead case for the exemplar proceeding, however, that case was settled prior to trial.

In preparation for trial, the parties and the district court reached certain agreements as to the governing law. For example, "[t]he parties ... agreed that issues of liability for negligence would be resolved under Colorado law. Also by agreement, issues of compensatory damages would be resolved under the law of a plaintiffs' [sic] domicile." In re Air Crash Disaster at Stapleton Int'l Airport, 720 F.Supp. 1467, 1472 (D.Colo.1989) (emphasis added). The parties were unable, however, to agree as to what law should govern Plaintiffs' punitive damages and deceptive advertising claims. After briefing, the district court ruled the law of Texas, the location of Continental's headquarters, would govern punitive damages awards and deceptive advertising liability. Id.; In re Air Crash Disaster at Stapleton Int'l Airport, 720 F.Supp. 1445, 1454 (D.Colo.1988); In re Air Crash Disaster at Stapleton Int'l Airport, 721 F.Supp. 1185, 1188 (D.Colo.1988).

Post-Trial Rulings on Prejudgment Interest

When the district court initially entered judgment on the verdict, ² Plaintiffs Johnson and Cooke were awarded "prejudgment interest at the rate established by applicable Idaho law." (Emphasis added). Plaintiffs moved, inter alia, to amend the judgment to reflect that Idaho Code § 28-22-104 prescribes a twelve percent interest rate. In response, Defendant urged the court to disallow prejudgment interest as Idaho law does not permit recovery for prejudgment interest on unliquidated tort claims. The district court requested further briefing on the issue of what law should govern prejudgment interest and deferred entry of an amended judgment pending such briefing. In re Air Crash Disaster at Stapleton Int'l Airport, 720 F.Supp. at 1488.

Given the opportunity to specifically brief the choice of law on prejudgment interest, Plaintiffs advocated the application of Colorado law. ³ The district court ultimately adopted Plaintiffs' position and amended its judgment, ruling that "Plaintiffs [Johnson and Cooke] are entitled to ... prejudgment interest at the rate established by applicable Colorado law" and that "plaintiffs in this multidistrict litigation shall receive prejudgment interest on claims for common law tort at a rate established by applicable Colorado law." In re Air Crash Disaster at Stapleton Int'l Airport, 720 F.Supp. 1505, 1532 (D.Colo.1989) (emphasis added). This appeal followed the district court's denial of Defendant's motion to reconsider.

II. Analysis

Defendant asserts that because Idaho law sets the measure of compensatory damages, Idaho law should also govern prejudgment interest as an element of compensatory damages. Plaintiffs, on the other hand, assert "prejudgment interest is an issue with its own set of underlying policies," requiring an independent choice of law analysis. ⁴

At the outset, we agree with Defendant that prejudgment interest is an element of compensatory damages. Courts have long characterized prejudgment interest as " 'an element of [plaintiff's] complete compensation.' " Osterneck v. Ernst & Whinney, 489 U.S. 169, 175, 109 S.Ct. 987, 991, 103 L.Ed.2d 146 (1989) (quoting West Virginia v. United States, 479 U.S. 305, 310 & n. 2, 107 S.Ct. 702, 706 & n. 2, 93 L.Ed.2d 639 (1987)). "Prejudgment interest is normally designed to make the plaintiff whole and is part of the actual damages sought to be recovered." Monessen S.W. Ry. Co. v. Morgan, 486 U.S. 330, 335, 108 S.Ct. 1837, 1842, 100 L.Ed.2d 349 (1988). See also Library of Congress v. Shaw, 478 U.S. 310, 321, 106 S.Ct. 2957, 2965, 92 L.Ed.2d 250 (1986) (adopting the view that "[p]rejudgment interest ... is considered as damages, not a component of 'costs' "); General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-56 n. 10, 103 S.Ct. 2058, 2062 n. 10, 76 L.Ed.2d 211 (1983) ("prejudgment interest represents 'delay damages' and [is] awarded as a component of full compensation"); McNickle v. Bankers Life & Casualty Co., 888 F.2d 678, 682 (10th Cir.1989) ("[t]he award of prejudgment interest ... serves to remedy the injury giving rise to the underlying action"); U.S. Industries, Inc. v. Touche Rosse & Co., 854 F.2d 1223, 1256 & n. 47 (10th Cir.1988) ("the rationale underlying an award of prejudgment interest is to compensate the wronged party for being deprived of the monetary value of his loss from the time of the loss to the payment of judgment"); Casto v. Arkansas-Louisiana Gas Co., 562 F.2d 622, 625 (10th Cir.1977) (personal injury damages are "compensatory and the [prejudgment] interest is of the same character"); Stemple v. Phillips Petroleum Co., 430 F.2d 178, 184-85 (10th Cir.1970) (denial of prejudgment interest award was based, in part, on appellant's argument that "prejudgment interest is an integral element of the measure of damages in a personal injury action"); Voight v. Colorado Mountain Club, 819 P.2d 1088, 1092 (Colo.App.1991) ("[p]re-judgment interest is considered an additional item of compensatory damages and is, thus, not interest in the strictest sense"); Leliefeld v. Panorama Contractors, Inc., 111 Idaho 897, 728 P.2d 1306, 1317 (1986) (quoting C. McCormick, Handbook on the Law of Damages § 50, at 205 (1935)) (prejudgment interest is " 'allowed ... as additional damages' "). Cf. Fleming v. Baptist General Convention, 742 P.2d 1087, 1096 (Okla.1987); Schwartz v. Piper Aircraft Corp., 90 Mich.App. 324, 282 N.W.2d 306, 308 & n. 2 (1979), superseded by statute, Gage v. Ford Motor Co., 133 Mich.App. 366, 350 N.W.2d 257 (1984) (prejudgment interest that is a percentage of a judgment is purely statutory and not an element of compensatory damages awarded by a jury).

Having thus concluded prejudgment interest is an integral element of compensatory damages, we must now decide whether prejudgment interest may be severed from the other elements of compensatory damages when making choice of law determinations. We look first to the Restatement (Second) of Conflict of Laws (1971) for guidance. ⁵ Section 171, comment c of the Restatement ⁶ unmistakably classifies prejudgment interest as an element of damages for purposes of applying the damage law of a given state to a conflict of law situation. ⁷ Logically, the same law should govern all issues related to the purpose of...