McCalla v. Royal Maccabees Life Ins. Co., 02-17051.

• Decision Date: 03 June 2004
• Docket Number: No. 02-17051.,02-17051.
• Citation: 369 F.3d 1128
• Parties: Vincent McCALLA, Plaintiff-Appellee, v. ROYAL MacCABEES LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1128

369 F.3d 1128

Vincent McCALLA, Plaintiff-Appellee, v. ROYAL MacCABEES LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 02-17051.

United States Court of Appeals, Ninth Circuit.

Submitted April 12, 2004.^*

Filed June 3, 2004.

C. Mark Humbert, Pohls & Humbert, Walnut Creek, CA, for the defendant-appellant.

George F. McNally, The McNally Law Firm, Reno, NV, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Nevada, Howard D. McKibben, District Judge, Presiding. D.C. No. CV-97-00027-HDM.

Before T.G. NELSON, W. FLETCHER, and BERZON, Circuit Judges.

BERZON, Circuit Judge.

The primary question in this case is whether revising a judgment to include mandatory prejudgment interest is a correction of a clerical error within the meaning of Federal Rule of Civil Procedure 60(a), which sets no time limit within which correction must occur. We hold that such a motion is not a correction of a clerical error, but is instead an alteration or amendment of the judgment under Federal Rule of Civil Procedure 59(e), which requires that the motion be filed no later than ten days after entry of the judgment.

Here, the district court granted Vincent McCalla's postjudgment motion for prejudgment interest although the motion was made nearly three years after judgment was entered. We reverse the order granting prejudgment interest.

I

The facts underlying the substantive dispute in this case are unimportant to the present appeal. Briefly: McCalla purchased a disability insurance policy from Royal MacCabees in 1992 but omitted seemingly important information during the application process. When McCalla contracted Lyme disease in 1996, Royal MacCabees sought to rescind the policy on the ground that McCalla's omissions were fraudulent; under the policy, nonfraudulent omissions would not suffice for rescission. McCalla sued for, inter alia, breach of contract. A jury found that the omissions were not fraudulent and issued a verdict for $236,504 in favor of McCalla.

Early on in the litigation, the district court entered the following stipulation:

IT IS HEREBY STIPULATED AND AGREED by and between the parties through their respective counsel herein, that the applicable choice of law and all related issues as it pertains to Plaintiff's Complaint, Defendant's Answer, Defendant's Counterclaim and Plaintiff's Reply to Counterclaim shall be in accordance with California law.

Judgment was entered on March 2, 1999. The judgment was silent as to prejudgment interest. An appeal and cross-appeal to the Ninth Circuit challenging the judgment followed. This court affirmed the decision of the district court in an unpublished order, filed in July 2001.

On January 7, 2002, McCalla moved under Rule 60(a) for prejudgment interest, relying upon Nevada Revised Statutes § 17.130.¹ Opposing the motion, Royal MacCabees argued that Rule 59, not Rule 60, governs postjudgment motions for prejudgment interest, and that McCalla's motion was untimely because it was filed after Rule 59(b)'s ten-day deadline. In addition to insisting that his motion was properly characterized as a Rule 60(a) motion, McCalla argued, in the alternative, that Nevada law governs. He contends that Nevada law allows a prevailing plaintiff to move for prejudgment interest at any time, rendering inapplicable any federal filing deadline for his motion.

After briefing and argument, the district court granted the motion for prejudgment interest, stating:

Plaintiff's application for prejudgment interest is allowed in accordance with the provisions of NRS 17.130. The court concludes that the choice of law stipulation entered into by the parties does not preclude plaintiff's entitlement to the judgment interest.

II

Whether state or federal law applies to determine the amount and availability of prejudgment interest, and whether, if federal law applies, such a motion falls under Rule 59(e) or under Rule 60(a) are both purely legal questions, reviewed de novo. See Torre v. Brickey, 278 F.3d 917, 919 (9th Cir.2002) (reviewing Erie R.R. Co. v Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), question de novo); Osterneck v. Ernst & Whinney, 489 U.S. 169, 173-78, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989) (analyzing de novo the question whether motion was governed by Rule 59).

As the motion for prejudgment interest was first made under Rule 60(a), we initially decide whether, assuming that federal law does govern, McCalla's postjudgment motion for prejudgment interest would be governed by Rule 59 or by Rule 60. After that, we consider McCalla's alternative proposition, apparently acceded to by the district court, that Nevada law governs the timeliness issue.

A. Federal Law

Rule 59(e) of the Federal Rules of Civil Procedure requires that motions to alter or amend a judgment be filed "no later than 10 days after entry of the judgment." By contrast, a Rule 60(a) motion to correct "[c]lerical mistakes in judgments" may be brought "at any time." McCalla maintains that Rule 60(a) applies when adding mandatory prejudgment interest; Royal MacCabees argues for Rule 59(e).

The Supreme Court addressed the application of Rule 59(e) to a motion for discretionary prejudgment interest in Osterneck v. Ernst & Whinney, 489 U.S. 169, 109 S.Ct. 987, 103 L.Ed.2d 146 (1989). The Court's analysis in Osterneck began with a short, but important, summary of the role Rule 59(e) plays in federal practice:

Rule 59(e) of the Federal Rules of Civil Procedure provides that a motion to "alter or amend the judgment" shall be served within 10 days of the entry of judgment. Rule 4(a)(4) of the Federal Rules of Appellate Procedure provides that a notice of appeal filed while a timely Rule 59(e) motion is pending has no effect. Together, these Rules work to implement the finality requirement of 28 U.S.C. § 1291 by preventing the filing of an effective notice of appeal until the District Court has had an opportunity to dispose of all motions that seek to amend or alter what otherwise might appear to be a final judgment.

Id. at 173-74, 109 S.Ct. 987.

Because Rule 59(e) motions are the type of motions that ought to be ruled on by the district court before jurisdiction passes to the court of appeals, "a postjudgment motion will be considered a Rule 59(e) motion where it involves `reconsideration of matters properly encompassed in a decision on the merits.'" Id. at 174, 109 S.Ct. 987 (quoting White v. N.H. Dep't of Employment Sec., 455 U.S. 445, 451, 102 S.Ct. 1162, 71 L.Ed.2d 325 (1982)). Distinguishing postjudgment motions for costs and attorneys' fees, Osterneck held that a postjudgment motion for discretionary prejudgment interest falls under Rule 59(e), because, unlike attorneys' fees and costs, "prejudgment interest traditionally has been considered part of the compensation due plaintiff." Id. at 175, 109 S.Ct. 987. Moreover, because a ruling on discretionary prejudgment interest can require an examination of matters such as the availability of alternative investment opportunities to the plaintiff and the plaintiff's delay in bringing the suit, such a ruling is not "wholly collateral to the judgment in the main cause of action." Id. at 176, 109 S.Ct. 987 (quoting the test from Buchanan v. Stanships, Inc., 485 U.S. 265, 268-69, 108 S.Ct. 1130, 99 L.Ed.2d 289 (1988), which held that a motion for costs was not a "motion to alter or amend the judgment" under Rule 59(e)).

Although the parties disagree whether California or Nevada law governs this case,² they have both litigated on the shared premise that prejudgment interest is mandatory, not discretionary. It is not self-evident that this premise is correct. The Nevada prejudgment interest statute is undoubtedly mandatory. See Nev. Rev. Stat. § 17.130(2) (quoted supra at note 1). The California statute, by contrast, is, as written, ambiguous:

(a) Every person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in him upon a particular day, is entitled also to recover interest thereon from that day, except during such time as the debtor is prevented by law, or by the act of the creditor from paying the debt....

(b) Every person who is entitled under any judgment to receive damages based upon a cause of action in contract where the claim was unliquidated, may also recover interest thereon from a date prior to the entry of judgment as the court may, in its discretion, fix, but in no event earlier than the date the action was filed.

CAL. CIV. CODE § 3287. If McCalla's claim falls within subsection (a) of section 3287, he seeks mandatory prejudgment interest. If it falls within subsection (b), he only seeks discretionary interest, and this case falls within Osterneck's clear holding.

McCalla's claim for payment of insurance benefits would appear to fall within subsection (b) if dependent upon a factual determination concerning the date upon which the right to recover benefits vested, or upon other variables. The case law interpreting section 3287 provides, however, that contract damages can be "certain, or capable of being made certain" as that term is used in subsection (a), even though they can be computed by more than one method. See Leff v. Gunter, 33 Cal.3d 508, 189 Cal.Rptr. 377, 658 P.2d 740, 748 (1983). We need not further pursue the question which subsection applies, as Royal MacCabees has acceded from the outset to the assertion that prejudgment interest here is mandatory, not discretionary. We therefore proceed on the assumption made by the parties that if California law applies, it is subsection (a) of the California prejudgment interest statute that is pertinent, and that the prejudgment interest provision pertinent to this case is therefore mandatory, no matter which state's law applies.

Even on that assumption, we follow Osterneck and conclude that it is Rule 59(e) that governs. Although Osterneck involved discretionary...