State Dept. of Corrections v. Fluor Daniel

• Decision Date: 06 July 2007
• Docket Number: No. 78290-3.,78290-3.
• Citation: 161 P.3d 372,160 Wn.2d 786
• Court: Washington Supreme Court
• Parties: STATE of Washington DEPARTMENT OF CORRECTIONS, in its own capacity and as assignee of claims of University Mechanical Contractors, and Pacific Construction Systems, Inc., Respondents, v. FLUOR DANIEL, INC., a foreign corporation, and Fireman'S Fund Insurance Company, a foreign corporation, Petitioners.

161 P.3d 372

160 Wn.2d 786

STATE of Washington DEPARTMENT OF CORRECTIONS, in its own capacity and as assignee of claims of University Mechanical Contractors, and Pacific Construction Systems, Inc., Respondents, v. FLUOR DANIEL, INC., a foreign corporation, and Fireman'S Fund Insurance Company, a foreign corporation, Petitioners.

No. 78290-3.

Supreme Court of Washington, En Banc.

Argued February 15, 2007.

Decided July 6, 2007.

Richard Miles Stanislaw, Christopher Wright, Stanislaw Ashbaugh LLP, Seattle, WA, for Petitioners.

Douglas D. Shaftel, Office of the Atty. General, Steve Edwin Dietrich, Attorney General of Washington, Olympia, WA, for Respondents.

CHAMBERS, J.

¶ 1 The parties before us agreed to resolve their underlying dispute in binding arbitration. Fluor Daniel, Inc. (Fluor) prevailed and moved to reduce the arbitration award to judgment. Concluding that the arbitration award liquidated previously nonliquidated damages, the trial court reduced that award to judgment and added prejudgment interest from the date the arbitrator rendered the award to the time it was entered into judgment. We conclude that an arbitration award does not transform an unliquidated claim into a fully liquidated sum entitling the prevailing party to prejudgment interest. Unliquidated damages accrue interest from the date of judgment, not the date of an arbitration award. We affirm the Court of Appeals and remand to the trial court for entry of judgment without prejudgment interest.

FACTS

¶ 2 The Department of Corrections (Department) contracted with Fluor to build a prison. Clerk's Papers (CP) at 3. The parties tell us that "major disputes developed," leading to "extremely expensive" litigation. CP at 3.¹ Shortly before the scheduled trial, Fluor and the Department negotiated and signed a partial settlement and dispute resolution agreement, agreeing to resolve their dispute through binding arbitration. The dispute proceeded to arbitration and the arbitrator found in favor of Fluor for $5,997,645.

¶ 3 Twenty one days later, Fluor reduced the award to judgment. Fluor asked, over the Department's objection, for prejudgment interest from the date of the arbitration until judgment. Fluor's request for prejudgment interest was based on the theory that the amount of damages became liquidated by virtue of the arbitration award. The trial judge agreed and awarded Fluor prejudgment interest of $43,380.22. The Department appealed only the award of prejudgment interest.² The Court of Appeals reversed. Dep't of Corrs. v. Fluor Daniel, Inc., 130 Wash.App. 629, 126 P.3d 52 (2005). Fluor sought and we granted review. Dep't of Corrs. v. Fluor Daniel, Inc., 158 Wash.2d 1005, 143 P.3d 829 (2006).

ANALYSIS

¶ 4 Only questions of law are presented. Our review is de novo. Parents Involved in Cmty. Schs v. Seattle Sch. Dist. No. 1, 149 Wash.2d 660, 670, 72 P.3d 151 (2003).

¶ 5 A party is entitled to prejudgment interest if the damages awarded are liquidated. Historically, contract damages were considered "liquidated" if they could be determined by "reference to a fixed standard contained in the contract, without reliance upon opinion or discretion," and interest has long been available from the moment of breach. Mall Tool Co. v. Far W. Equip. Co., 45 Wash.2d 158, 176, 273 P.2d 652 (1954) (emphasis omitted); see also Wright v. City of Tacoma, 87 Wash. 334, 353, 151 P. 837 (1915) (same); 14A KARL B. TEGLAND, WASHINGTON PRACTICE: CIVIL PROCEDURE § 35.13, at 434 (2003). It is comparatively easy to determine whether damages are liquidated when the parties' own contract so provides. E.g., Trompeter v. United Ins. Co., 51 Wash.2d 133, 316 P.2d 455 (1957) (claim was liquidated where the amount due was specifically provided for in the insurance policy). Sometimes statutory law will provide fixed standards that will allow damages to be liquidated. E.g., Egerer v. CSR W., L.L.C., 116 Wash.App. 645, 653-56, 67 P.3d 1128 (2003) (claim was liquidated where measure of damages to be used was fixed by statute as the difference between the contract price and the prevailing market price at the time of the breach). This court has recently found a claim for overtime was liquidated when we could determine the amount precisely. Bostain v. Food Exp., Inc., 159 Wash.2d 700, 723, 153 P.3d 846 (2007) (claim for overtime was liquidated where objective evidence indicated the overtime due with exactness). These principles have been applied even occasionally in the tort context. E.g. Hansen v. Rothaus, 107 Wash.2d 468, 473-75, 730 P.2d 662 (1986). However, damages that cannot be calculated without the use of discretion are not liquidated. E.g., Safeco Ins. Co. v. Woodley, 150 Wash.2d 765, 773, 82 P.3d 660 (2004) (claim for legal fees could not be considered liquidated where the amount of expenses lied within the discretion of the trial judge); Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wash.2d 654, 687, 15 P.3d 115 (2000) (claim for damages from an environmental clean-up project was unliquidated where determining the amount required testimony allocating certain clean-up bills between areas covered and not covered by insurance); Maryhill Museum of Fine Arts v. Emil's Concrete Constr. Co., 50 Wash.App. 895, 903, 751 P.2d 866 (1988) (museum's claim for damages resulting from water leaks was unliquidated where the museum was unique and thus lacked a market value and the measure of damages was consequently left to the trial court's discretion).

¶ 6 If damages are liquidated, interest accrues from the time they were incurred. Hansen, 107 Wash.2d at 473, 730 P.2d 662 ("plaintiff should be compensated for the `use value' of the money representing his damages for the period of time from his loss to the date of judgment.") (emphasis added). Nothing in our case law or the underlying jurisprudence supports the proposition that the character of damages changes from unliquidated to liquidated by virtue of being decided. See generally Weyerhaeuser Co., 142 Wash.2d at 686, 15 P.3d 115 (character of the claim determines whether damages are liquidated).

¶ 7 Generally, interest on a damage award begins to run when judgment is formally entered by a trial court, not when a jury reaches a verdict or a trial court announces a decision. RCW 4.56.110(4) and .115; Kiessling v. Nw. Greyhound Lines, Inc., 38 Wash.2d 289, 297, 229 P.2d 335 (1951). No Washington court has held that a damage award for breach of contract changed character by virtue of being decided, and every time the question has been posed, the court has decided that it did not. See, e.g., Kiessling, 38 Wash.2d at 297, 229 P.2d 335 (specifically rejecting argument that interest should begin to accrue when the verdict is rendered) (citing Rood v. Horton, 132 Wash. 82, 231 P. 450 (1924) (verdict of jury), and Phifer v. Burton, 141 Wash. 186, 251 P. 127 (1926) (award of a judge)). Instead, the moment damage claims are decided, they become subject to the civil rules and laws governing judgments.³

¶ 8 We turn now to Fluor's arguments. Fluor does not argue that its damages were liquidated before the arbitrator reached his decision.⁴ Thus, if this case had been tried in court rather than arbitrated, no prejudgment interest would be available. See Boespflug v. Wilson, 58 Wash.2d 333, 336, 362 P.2d 747 (1961) (error to give prejudgment interest when damages were not "computable by a standard fixed in the contract."). Fluor argues that it is entitled to prejudgment interest after the arbitrator reached his decision because that decision could not be appealed. Thus, it argues, the damages became fixed and liquidated by the arbitrator's award. Fluor advances two arguments to support its position. First, Fluor argues that arbitration awards in general should be considered liquidated when decided because arbitration awards are typically not appealable. Second, Fluor argues that the terms of its agreement with the Department made the award nonappealable, and that liquidated its damages in the nature of a judgment.

¶ 9 The vast majority of courts considering this issue have rejected pleas to add prejudgment interest to arbitrator's awards. As the Supreme Court of Nevada ruled more than a decade ago, "[t]he weight of authority supports [the] position that the addition of prejudgment interest upon confirmation of an arbitration award constitutes an impermissible modification of the award." Mausbach v. Lemke, 110 Nev. 37, 40, 866 P.2d 1146 (1994) (citing Creative Builders, Inc. v. Ave. Devs. Inc., 148 Ariz. 452, 715 P.2d 308 (Ariz.Ct. App.1986); McDaniel v. Berhalter, 405 So.2d 1027, 1030 (Fla.Dist.Ct.App.1981); Leach v. O'Neill, 132 N.H. 665, 568 A.2d 1189 (1990)); Westmark Props., Inc. v. McGuire, 53 Wash. App. 400, 766 P.2d 1146 (1989);⁵ see also Duncan v. Nat'l Home Ins. Co., 36 P.3d 191, 193 (Colo.App.2001) (award of prejudgment, postaward interest impermissible); Wolfe v. Farm Bureau Ins. Co., 128 Idaho 398, 403, 913 P.2d 1168 (1996) (trial court lacked power to give prejudgment interest even if arbitrator erred by failing to give it); Palmer v. Duke Power Co., 129 N.C.App. 488, 498, 499 S.E.2d 801 (1998) (same); but see Ebasco Constructors, Inc. v. Ahtna, Inc., 932 P.2d 1312, 1318 (Alaska 1997) (awarding postaward, prejudgment interest); but cf. Kalawaia v. AIG Hawai`i Ins. Co., 90 Haw. 167, 174, 977 P.2d 175 (1999) (trial court had the power to award prejudgment interest on proceedings to confirm arbitration award when "necessary to correct injustice caused by delay in the confirmation of the award"). Most states have found that adding prejudgment interest was an inappropriate modification of the arbitrator's award.

¶ 10 Fluor contends that a binding arbitration award is more like an entered judgment than a jury's verdict, on the theory that a jury's verdict is subject to substantial revision; a binding arbitration award, Fluor argues, is not. Cf. Kiessling, 38 Wash.2d at 297, 229 P.2d 335 (noting that one reason interest...