Erhart v. Bofi Holding Inc., No. 3:2015cv02287 - Document 406 (S.D. Cal. 2023)
Court Description: ORDER granting in part and denying in part 384 Plaintiff Charles Matthew Erhart's Motion for Prejudgment Interest. The Clerk of Court shall enter an amended judgment that awards Erhart $169,872.74 in prejudgment interest. Signed by Judge Cynthia Bashant on 9/28/2023. (BAS)
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Erhart v. Bofi Holding Inc. Doc. 406 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 CHARLES MATTHEW ERHART, Plaintiff, 12 13 14 Case No. 15-cv-02287-BAS-NLS consolidated with 15-cv-02353-BAS-NLS ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR PREJUDGMENT INTEREST (ECF No. 384) v. BOFI HOLDING, INC., 15 Defendant. 16 17 18 And Consolidated Case 19 20 In 2015, Defendant BofI Holding, Inc. terminated one of its internal bank 21 auditors—Plaintiff Charles Matthew Erhart—after learning he reported information 22 to the Government. Seven years later, after a winding legal journey, a jury found 23 BofI violated the law and awarded Erhart $1.5 million. 24 To make up for lost time, Erhart asks the Court to tack on $1.19 million in 25 prejudgment interest. He applies an 8% interest rate with daily compounding to 26 reach this number. BofI challenges Erhart’s request with a full suite of arguments, 27 including that Erhart waived his right to prejudgment interest and proposes the 28 wrong interest rate. –1– 15cv2287 Dockets.Justia.com 1 Ultimately, prejudgment interest is appropriate, but several of BofI’s 2 arguments are compelling. The Court also finds it should not deviate from using 3 the standard interest rate found in 28 U.S.C. § 1961. The Court thus awards Erhart 4 $169,872.74 in prejudgment interest. 5 I. Background 6 Pretrial. In October 2015, Erhart filed this action claiming BofI retaliated 7 against him for reporting information to the Government. (Compl., ECF No. 1.) 8 The Complaint alleged BofI forced Erhart out of his job in March 2015 and later 9 “officially fired” him in June 2015. (Id. ¶¶ 61, 72.) Erhart asked for compensatory 10 damages and “an award of interest, including prejudgment interest, at the legal 11 rate.” (Id. 36:11–13; accord Second Am. Compl. 38:6–7, ECF No. 124.) After 12 protracted motion practice and discovery, the case neared trial in 2020. 13 COVID-19 pandemic and scheduling accommodations added two more years, 14 leading to the Court setting a three-week jury trial for early 2022. The 15 Along the winding way, the Court made more pretrial rulings than can be 16 fairly summarized here. One, though, limited Erhart’s recoverable damages. The 17 Court found Erhart disregarded Federal Rule of Civil Procedure 26 by failing to 18 provide any estimate of his calculable damages throughout discovery. (Order on 19 Mot. in Limine No. 5, ECF No. 244.) Those damages included his “claims for 20 future wages and earnings, lost employment benefits, bonuses, overtime, vacation 21 benefits, medical expenses, and back pay.” (Id.) The Court also found he could not 22 avoid the automatic sanction under Rule 37(c)(1). This ruling meant Erhart could 23 seek only “emotional distress damages, reputational damages, and punitive 24 damages” at trial. (Id.) 25 Trial. Erhart prevailed at trial. The jury found BofI violated the Sarbanes- 26 Oxley Act, California Labor Code section 1102.5, and California public policy 27 when the Bank terminated him. (Jury Verdict 2–3, ECF No. 314.) In line with the 28 –2– 15cv2287 1 Court’s damages ruling, the jury assessed Erhart’s “emotional distress or harm to 2 his reputation” for these claims. (Id. 4.) The jury awarded him $1 million. (Id.) Erhart also prevailed on his California state law defamation claim, and the 3 4 jury awarded him $500,000. (Jury Verdict 5–6.) The jury hung on punitive 5 damages, leading to a retrial of that issue in August 2022. (ECF No. 359.) The 6 second jury found punitive damages were not appropriate. (ECF No. 370.) 7 Judgment. Following the punitive damages retrial, the Court circulated a 8 Proposed Judgment, which was silent on prejudgment interest, and invited 9 objections. (ECF No. 376.) See Fed. R. Civ. P. 58(b)(2). Erhart asked the Court to 10 add seven years’ worth of interest to the judgment, but he did not propose a starting 11 date for the calculation, an interest rate, or a total amount of interest. (ECF No. 12 378.) 13 allowed Erhart to file a motion to amend the judgment that addressed the variables 14 for calculating interest. (ECF No. 379.) The Court thus entered judgment without any prejudgment interest but 15 Erhart filed a combined Motion for Attorneys’ Fees and Prejudgment 16 Interest. (Mot., ECF No. 384-1.) The Court addresses his $1.19m prejudgment 17 interest request here. 1 (Id. 15:4–18:3.) BofI opposes any prejudgment interest. 18 (Opp’n 23:5–25:18, ECF No. 390.) 19 II. Analysis 20 Erhart asks the Court to award prejudgment interest on his total damages— 21 $1.5 million—from the date BofI terminated him to the date of judgment. (Mot. 22 17:11–13.) BofI argues Erhart faces four obstacles in his track. (Opp’n 23:5– 23 25:18.) First, Erhart waived his right to prejudgment interest. Second, California 24 state law precludes interest on his state law claims. Third, awarding prejudgment 25 interest on the Sarbanes–Oxley claim would be unfair. 26 awarded, prejudgment interest should be calculated using a lower interest rate. 27 28 1 And fourth, even if Erhart’s request for prejudgment interest is timely and appropriately brought under Rule 59(e). See Fed. R. Civ. P. 59(e); see also McCalla v. Royal MacCabees Life Ins. Co., 369 F.3d 1128, 1130 (9th Cir. 2004) (applying prior version of Rule 59(e)). –3– 15cv2287 1 A. Waiver 2 BofI contends Erhart should not receive prejudgment interest because he did 3 not ask for it in the Pre-Trial Order. (Opp’n 24:1–8.) “Indeed, BofI was not aware 4 that Erhart was seeking prejudgment interest until he submitted his objections to the 5 Court’s Proposed Judgment.” (Id. 24:5–9.) 6 This waiver argument is unpersuasive for two reasons. First, BofI points to 7 no controlling authority to support its position. The Court has found little from this 8 century, but the caselaw favors Erhart. A Ninth Circuit decision issued around 9 Apollo 11 reasoned a party’s “right to recover prejudgment interest was not 10 affected by [its] failure to demand interest in its federal pleadings.” Soderhamn 11 Mach. Mfg. Co. v. Martin Bros. Container & Timber Prod. Corp., 415 F.2d 1058, 12 1064 (9th Cir. 1969). Similarly, in 1982, the Ninth Circuit rejected the claim that 13 “silence of the pretrial order as to interest” was a “deliberative waiver of the right to 14 interest.” Gelfgren v. Republic Nat. Life Ins. Co., 680 F.2d 79, 82 (9th Cir. 1982). 15 More recent persuasive authority likewise supports Erhart. See Jerra v. United 16 States, No. 2:12-cv-01907-ODW (AGRx), 2018 WL 1605563, at *12 (C.D. Cal. 17 Mar. 29, 2018) (rejecting argument that the plaintiff waived his right to interest by 18 not pleading it “in the operative complaint, pretrial conference order, or initial 19 disclosures”); see also RK Co. v. See, 622 F.3d 846, 853–54 (7th Cir. 2010) (relying 20 on Rule 59(c) to resolve this contention, which provides a prevailing party will be 21 granted all the relief to which it is entitled, “even if the party has not demanded that 22 relief in its pleadings”). 23 Second, unlike some plaintiffs, Erhart requested “an award of interest, 24 including prejudgment interest, at the legal rate” in his October 2015 Complaint. 25 (Compl. 36:11–13.) BofI has always been on notice that if it lost at trial, Erhart 26 may seek prejudgment interest. The Court thus rejects BofI’s waiver argument. 27 28 –4– 15cv2287 1 B. State Law Claims 2 BofI contends state law should control prejudgment interest for Erhart’s 3 California claims, and this law precludes interest here. (Opp’n 23:11–26.) Erhart 4 counters that BofI’s “discussion of state law obfuscates the issue.” (Reply 10:4–5, 5 ECF No. 394.) 6 A court is not “free to disregard the alleged” impacts of state law. Erie R. 7 Co. v. Tompkins, 304 U.S. 64, 71 (1938). Under the Erie doctrine, “federal courts 8 sitting in diversity jurisdiction apply state substantive law and federal procedural 9 law.” In re Exxon Valdez, 484 F.3d 1098, 1100 (9th Cir. 2007). Erie principles 10 apply equally when the court has supplemental jurisdiction over state law claims. 11 Id. It is also “well settled that prejudgment interest is a substantive aspect of a 12 plaintiff’s claim, rather than a merely procedural mechanism.” Id. at 1101; accord 13 U.S. Fid. & Guar. Co. v. Lee Invs. LLC, 641 F.3d 1126, 1139 (9th Cir. 2011). 14 These rules apply here. The Court has jurisdiction over Erhart’s state law 15 claims under the supplemental jurisdiction statute, 28 U.S.C. § 1367, and 16 prejudgment interest is a substantive aspect of these claims. California law thus 17 controls for those claims. See Exxon Valdez, 484 F.3d at 1101; accord Cannon v. 18 Peck, 36 F.4th 547, 577 (4th Cir. 2022) (“When reviewing state-law claims based 19 on supplemental jurisdiction, ‘the award of prejudgment interest rests on state 20 law.’”); Chassin Holdings Corp. v. Formula VC Ltd., No. 15-CV-02294-EMC, 21 2017 WL 66873, at *14 (N.D. Cal. Jan. 6, 2017) (same). 22 Turning to California law, several statutes address prejudgment interest. The 23 prevalent one is California Civil Code section 3287(a), which “authorizes an award 24 of interest when a person is entitled to recover” liquidated damages. Union Pac. 25 R.R. Co. v. Santa Fe Pac. Pipelines, Inc., 231 Cal. App. 4th 134, 199 (2014). 26 Liquidated damages are those that are “certain, or capable of being made certain by 27 calculation.” Cal. Civ. Code § 3287(a). Damages meet this test “where there is 28 essentially no dispute between the parties concerning the basis of computation of –5– 15cv2287 1 damages if any are recoverable but where their dispute centers on the issue of 2 liability giving rise to damage.” Warren v. Kia Motors Am., Inc., 30 Cal. App. 5th 3 24, 44 (2018). Conversely, where the damages are unliquidated and “cannot be 4 resolved except by verdict or judgment, prejudgment interest is not appropriate” 5 under section 3287. Wisper Corp. v. Cal. Com. Bank, 49 Cal. App. 4th 948, 960 6 (1996). 7 The damages awarded for Erhart’s state law claims—emotional distress and 8 reputational damages—are unliquidated. They were not capable of determination 9 until the jury rendered its verdict. Therefore, prejudgment interest is not available 10 under Civil Code section 3287 for these claims from the date of Erhart’s 11 termination until the verdict. See Wisper Corp., 49 Cal. App. 4th at 199. 12 Erhart does not show that any of the other possibilities for recovering 13 prejudgment interest under California law apply. 14 Homeowners Ass’n v. City of Los Angeles, 26 Cal. 3d 86, 102–03 (1979) (applying 15 California Civil Code section 3288, which requires a jury determination on this 16 issue); O’Hara v. Storer Commc’ns, Inc., 231 Cal. App. 3d 1101, 1117–19 (1991) 17 (applying California Civil Code section 3291, which requires a statutory offer to 18 compromise). Hence, BofI is correct, and the Court finds Erhart cannot recover 19 prejudgment interest for his state law claims. 2 See Greater Westchester 20 C. Federal Claim 21 Erhart’s federal claim is the last one standing for prejudgment interest. BofI 22 argues it would be unfair to award prejudgment interest on this claim because 23 24 25 26 27 28 2 California law may authorize post-verdict interest under Civil Code section 3287(a) because Erhart’s noneconomic damages became certain on the date of the jury’s verdict. See Holdgrafer v. Unocal Corp., 160 Cal. App. 4th 907, 935 (2008). Erhart does not address this issue—or any of California law for that matter. (See Reply 10:3–10.) The Court will not sift through this maze unaccompanied. Erhart already had two opportunities to justify his prejudgment interest request. See Hamilton v. Wal-Mart Stores, Inc., No. 19-56161, 2022 WL 2374445, at *3 (9th Cir. June 30, 2022). –6– 15cv2287 1 Erhart recovered “purely non-economic damages.” (Opp’n 24:9–15.) In contrast to 2 above, the Court now applies the law for victims of federal law violations. 3 “Prejudgment interest is a measure that ‘serves to compensate for the loss of 4 use of money due as damages from the time the claim accrues until judgment is 5 entered, thereby achieving full compensation for the injury those damages are 6 intended to redress.’” Schneider v. Cnty. of San Diego, 285 F.3d 784, 789 (9th Cir. 7 2002) (quoting West Virginia v. United States, 479 U.S. 305, 311 n.2 (1987)). 8 Awarding prejudgment interest “under federal law is a matter left to the sound 9 discretion of the trial court.” Purcell v. United States, 1 F.3d 932, 942–43 (9th Cir. 10 1993) (quoting United States v. California State Bd. of Equalization, 650 F.2d 11 1127, 1132 (9th Cir. 1981)). 12 considerations of fairness and are awarded when it is necessary to make the 13 wronged party whole.” Id. at 943. 14 Prejudgment interest awards “are governed by Moreover, “prejudgment interest is an element of compensation, not a 15 penalty.” Barnard v. Theobald, 721 F.3d 1069, 1078 (9th Cir. 2013). And 16 prejudgment interest is available for both economic and noneconomic damages; 17 those “damages awarded for a plaintiff’s pain and suffering are ‘just as much an 18 “actual loss” (for which prejudgment interest is in order)’ as purely economic 19 damages.” Id. (quoting Murphy v. City of Elko, 976 F. Supp. 1359, 1364 (D. Nev. 20 1997)). 21 To illustrate, in Wooten, the defendant railroad terminated the plaintiff after 22 he reported an on-the-job injury. Wooten v. BNSF Ry. Co., 387 F. Supp. 3d 1078, 23 1090 (D. Mont. 2019). The jury found the defendant violated federal safety laws 24 and awarded the plaintiff “$500,000 for his mental and emotional humiliation or 25 pain and anguish.” 26 appropriate to “fully compensate” the plaintiff for his injury. Id. at 1105. Hence, 27 the court awarded prejudgment interest from the date the defendant terminated the 28 plaintiff to the date of entry of judgment. Id. at 1106. Id. The court reasoned that prejudgment interest was –7– 15cv2287 1. 1 Interest under Sarbanes–Oxley 2 Erhart prevailed on his claim for retaliation in violation of the Sarbanes– 3 Oxley Act, 18 U.S.C. § 1514A. Sarbanes–Oxley authorizes a broad swath of 4 remedies: 5 (c) Remedies.– 6 (1) In general.–An employee prevailing in any action under subsection (b)(1) shall be entitled to all relief necessary to make the employee whole. 7 8 (2) Compensatory damages.–Relief for any action under paragraph (1) shall include– 9 10 (A) reinstatement with the same seniority status that the employee would have had, but for the discrimination; (B) the amount of back pay, with interest; and 11 12 13 (C) compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees. 14 15 16 17 18 U.S.C.A. § 1514A(c). 18 damages, including emotional distress and reputational harm.” Halliburton, Inc. v. 19 Admin. Rev. Bd., 771 F.3d 254, 266 (5th Cir. 2014) (per curiam). And that is what 20 Erhart recovered here. 21 mandatory for “backpay,” but preserves the court’s discretion to award interest on 22 other types of damages. See Purcell v. United States, 1 F.3d 932, 943 (9th Cir. 23 1993) (explaining Congress can override the default rule by making interest 24 mandatory). 25 This statute “affords noneconomic compensatory Further, Sarbanes–Oxley makes prejudgment interest BofI recognizes as much. It acknowledges the Court can award prejudgment 26 interest on federal noneconomic claims. 27 however, that Erhart “does not cite a single [Sarbanes–Oxley] case in which the 28 Court awarded prejudgment interest for purely non-economic damages.” –8– (Opp’n 24:12–17.) BofI highlights, (Id.) 15cv2287 1 Even so, the Court remains persuaded that discretionary prejudgment interest is 2 available here. Sarbanes–Oxley affords “all relief necessary to make the employee 3 whole,” 18 U.S.C. § 1514A(c)(1) (emphasis added), and awarding prejudgment 4 interest for noneconomic damages serves to achieve “full compensation” for an 5 injury under the law, see Schneider, 285 F.3d at 789. 6 In the same vein, the Court is unpersuaded that the jury’s verdict already 7 incorporates any prejudgment interest awardable to Erhart. Courts have grappled 8 with this issue before. 3 Here, neither the jury instructions nor the verdict form 9 addressed prejudgment interest and asked the jury to adjust Erhart’s damages to 10 account for the delay in his recovery. (See Court’s Instruction No. 37 – Damages, 11 ECF No. 319; Verdict Form; Jury Verdict 4.) Hence, the Court must determine 12 whether Erhart should recover prejudgment interest on the damages he recovered 13 under Sarbanes–Oxley. 2. 14 Allocation Between State and Federal Claims 15 There is a wrinkle. The jury verdict does not distinguish between Erhart’s 16 damages for his Sarbanes–Oxley, California wrongful termination, and California 17 Labor Code section 1102.5 claims. With the parties’ support, the Court combined 18 the verdict form’s damages interrogatory for these causes of action out of concern 19 “that having a damages section at the end of each cause of action could lead to 20 double counting for what is essentially one harm.” (Tr. 23:1–2, ECF No. 261.) 21 As anticipated, the evidence for damages overlapped at trial. There was no 22 indication that Erhart suffered different emotional or reputational damages when 23 24 25 26 27 28 3 See Miller v. Schmitz, No. 1:12-CV-0137 LJO, 2014 WL 68883, at *2 (E.D. Cal. Jan. 8, 2014) (rejecting the defendants’ argument “that there is no need to compensate Plaintiff for prejudgment interest because the jury likely already accounted for prejudgment interest when it rendered its verdict” and gave its award “in present value terms”); see also Copart, Inc. v. Sparta Consulting, Inc., 339 F. Supp. 3d 959, 1004 (E.D. Cal. 2018) (reasoning jury award did not already adequately compensate prevailing party because the court did not instruct on prejudgment interest); cf. Towey v. Catling, 743 F. Supp. 738, 742 (D. Haw. 1990) (reasoning prejudgment interest was available on part of damages award because it was possible the jury “simply added past and future damages together” and did not adjust damages to present value “from the time of the accident until the entry of judgment”). –9– 15cv2287 1 BofI wrongfully retaliated against him under California law versus when BofI did 2 so under the Sarbanes–Oxley Act. 3 Erhart cannot recover prejudgment interest for his state law claims, BofI does not 4 address this allocation point. (See Opp’n 24:9–25:19; see also id. 23:11–25.) Nor 5 does Erhart. Moreover, although BofI generally argues 6 A court struggled with this issue in Jadwin v. County of Kern, 767 F. Supp. 7 2d 1069, 1092–97 (E.D. Cal. 2011). There, the plaintiff prevailed on state and 8 federal employment causes of action, and the jury’s damages award similarly did 9 not distinguish between the two. Id. at 1087. With no binding guidance, the court 10 ultimately blended the interest rates from state and federal law. Id. at 1092–97. 11 The court then applied the blended rate to the maximum amount of the damages 12 award that could serve as the basis for awarding prejudgment interest. See id. 13 By comparison, in Thomas v. iStar Financial, Inc., 629 F.3d 276, 280 (2d 14 Cir. 2010), the plaintiff also “received an award of damages that compensated for 15 both federal and state claims without distinguishing between the two.” The Second 16 Circuit determined “judgments that are based on both state and federal law with 17 respect to which no distinction is drawn shall have applicable interest calculated at 18 the federal interest rate.” Id.; see also Vera v. Alstom Power, Inc., 189 F. Supp. 3d 19 360, 390 (D. Conn. 2016) (applying federal law where judgment was “based on 20 both state and federal claims, and is not apportioned between the two”); Arnold v. 21 Pfizer Inc., No. 10-CV-01025-AC, 2015 WL 1262775, at *3 (D. Or. Mar. 18, 2015) 22 (reasoning where “the jury did not allocate damages based on violations of state or 23 federal law,” it was appropriate to award prejudgment interest using the federal 24 rate). These comparisons are not airtight, though, because in these cases state law 25 was typically more favorable than federal law for prejudgment interest. 26 Given the overlap in the evidence at trial, and the lack of argument on this 27 issue, the Court finds it is fair to attribute the $1 million damage verdict to the 28 Sarbanes–Oxley claim for determining prejudgment interest under federal law. – 10 – 15cv2287 1 This outcome is consistent with the Court’s rationale for combining the damages 2 inquiries to begin with: BofI’s retaliation under state and federal law led to Erhart 3 suffering the same harms in the form of emotional distress and reputational damage. 4 To suggest otherwise and compare the nuances of the different causes of action 5 would be splitting hairs. The Court thus considers whether the equities support 6 awarding prejudgment interest on Erhart’s $1 million recovery under Sarbanes– 7 Oxley. 1. 8 Equities 9 A “district court should consider the balance of the equities” when 10 determining an award of prejudgment interest. Barnard, 721 F.3d at 1078. For 11 example, in Barnard, the plaintiff recovered $1.6 million for pain and suffering on 12 his Fourth Amendment excessive force claim. Id. at 1074. The court, however, 13 denied the plaintiff’s request for prejudgment interest. Id. at 1074. In a truncated 14 analysis, the “court explained that prejudgment interest may not be appropriate 15 when applied to an award of non-economic damages.” 16 rationalized “that prejudgment interest was inappropriate because it was unclear 17 which portion of [the plaintiff’s] award, if any, was intended to compensate him for 18 future pain and suffering.” Id. at 1075. Id. The court also 19 The Ninth Circuit later cast doubt on the district court’s prejudgment interest 20 ruling. Barnard, 721 F.3d at 1075. Citing the rules mentioned above, the Ninth 21 Circuit explained that “to the extent the district court denied prejudgment interest 22 because it thought such interest is unavailable for non-economic damages, the 23 district court abused its discretion.” 24 explained the court could “consider whether it is appropriate to award prejudgment 25 interest for at least that portion of the award that was likely given to [the plaintiff] 26 in order to compensate him for his past pain and suffering and medical expenses.” 27 Id. Id. at 1078. Further, the Ninth Circuit 28 – 11 – 15cv2287 1 BofI raises two points on balancing the equities. First, BofI argues 2 prejudgment interest is inappropriate because “it is unclear when Erhart suffered 3 emotional distress or reputational harm from a compensable event (if at all).” 4 (Opp’n 24:16–21.) This argument is a nonstarter. The jury found Erhart suffered 5 emotional distress and reputational harm, and the Court will not decline to award 6 prejudgment interest on this ground. 7 (rejecting defendant’s argument “that the balance of equities does not support the 8 award of pre-judgment interest because the award itself is ‘excessive,’ unsupported 9 by the evidence, and ‘undoubtedly” made [the plaintiff] ‘more than . . . whole.’”). See Wooten, 387 F. Supp. 3d at 1105 10 BofI’s second point echoes the concern addressed in Barnard above. BofI 11 argues the jury was entitled to award Erhart damages for future emotional distress, 12 and “there is no way of knowing when his emotional distress ended (if at all).” 13 (Opp’n 24:23–25:2.) Hence, BofI argues the Court is unable to parse Erhart’s past 14 and future damages to ensure that prejudgment interest is being awarded for only 15 Erhart’s past harms. (Id.) 16 The Court agrees that awarding prejudgment interest on damages for future 17 harms is nonsensical. Erhart, unhelpfully, does not propose a solution to this 18 problem. (See Reply 10:14–23.) Some courts have examined the parties’ closing 19 arguments to infer how much a jury awarded in damages for future harm. See, e.g., 20 Jerra v. United States, No. 2:12-cv-01907-ODW (AGRx), 2018 WL 1605563, at 21 *13 (C.D. Cal. Mar. 29, 2018). For example, in Jerra, the district court reduced a 22 $500,000 compensatory verdict by $179,000 when calculating prejudgment interest 23 because $179,000 was the amount the plaintiff “requested, at most, as future 24 damages.” Id.; see also Barnard v. Las Vegas Metro. Police Dep’t, No. 2:03-CV- 25 01524-RCJ, 2013 WL 4039067, at *2 (D. Nev. Aug. 7, 2013) (prorating 26 prejudgment interest on remand based on the plaintiff’s argument that he was 27 thirty-nine years old and should receive pain and suffering damages to compensate 28 – 12 – 15cv2287 1 him for thirty-six years until reaching age seventy-five), reversed in part on other 2 grounds, 649 F. App’x 414, 417 (9th Cir. 2016). 3 There is no simple solution here. Although the brunt of Erhart’s damages 4 likely occurred around the time of his termination, he has many years ahead of him. 5 Erhart testified he is affected daily by what happened. (E.g., Trial Tr. Vol. 4 at 6 260:20–261:2, ECF No. 290.) His counsel later reminded the jury that “he is 7 entitled to be compensated both for his past emotional harm and future emotional 8 harm. . . . There is no number of years that is a limit on how much time he can be 9 compensated for.” (Trial Tr. Vol. 12 at 208:9–13, ECF No. 310.) 10 Through his counsel, Erhart ultimately asked the jury for “$5 million for 11 emotional distress, and $7 million for the destruction of his reputation,” but did not 12 specify what portion of this amount should be for past or future harm. (See Trial 13 Tr. Vol. 13 at 175:23–25, ECF No. 312.) The jury then awarded Erhart $1 million 14 altogether for his federal claim. Considering Erhart’s arguments to the jury, and his 15 lack of a suggested solution to the Court, the balance of the equities supports 16 splitting his award down the middle for calculating prejudgment interest. The 17 Court determines $500,000 of his damages were for past harm and the remaining 18 $500,000 was for future harm. 19 2. Interest Rate 20 “Generally, the interest rate prescribed for post-judgment interest under 28 21 U.S.C. § 1961 is appropriate for fixing the rate of pre-judgment interest.” Van 22 Asdale v. Int’l Game Tech., 763 F.3d 1089, 1093 (9th Cir. 2014) (quoting 23 Blankenship v. Liberty Life Assur. Co. of Bos., 486 F.3d 620, 628 (9th Cir. 2007)). 24 Hence, “prejudgment interest is often calculated at the same rate as postjudgment 25 interest.” Id. 26 Under the postjudgment interest statute, the interest rate is “equal to the 27 weekly average 1-year constant maturity Treasury yield, as published by the Board 28 of Governors of the Federal Reserve System, for the calendar week preceding” the – 13 – 15cv2287 1 date of judgment. 28 U.S.C. § 1961(a). Further, the interest is computed daily to 2 the date of payment and “compounded annually.” Id. § 1961(b); see also Price v. 3 Stevedoring Servs. of Am., Inc., 697 F.3d 820, 839–843 (9th Cir. 2012) 4 (summarizing the arguments for using compound interest in the prejudgment 5 interest context when the court employs § 1961). 6 The court retains discretion, however, to deviate from this rate where it 7 “finds, on substantial evidence, that the equities of the particular case require a 8 different rate.” W. Pac. Fisheries, Inc. v. SS President Grant, 730 F.2d 1280, 1289 9 (9th Cir. 1984). For example, a plaintiff awarded disability benefits demonstrated 10 he was forced to divert personal funds to cover the shortfall that would have 11 otherwise returned 10.01% in a mutual fund. Blankenship, 486 F.3d at 628. The 12 Ninth Circuit held the district court did not abuse its discretion in awarding 13 prejudgment interest at this rate in lieu of the standard Treasury bill rate. Id. 14 In contrast, in Barnard, discussed above, the plaintiff on remand argued the 15 district court should deviate “from the general rule and apply a ‘fluctuating T-bill 16 rate.’” 649 F. App’x at 417. The court denied the plaintiff’s request and calculated 17 interest using 0.16%, which was the rate under § 1961 at the time of the original 18 judgment. Id. at 416–17. The Ninth Circuit held the court did not abuse its 19 discretion because it “correctly identified § 1961 as the source for pre-judgment 20 interest rates, recognized that there were exceptions for departing from such 21 statutory rate, and concluded there was not ‘sufficient cause’ to apply an 22 exception.” Id. at 417. 23 Here, the Clerk entered judgment on the morning of Friday, September 30, 24 2022. (ECF No. 380.) “[T]he calendar week preceding” this date ended on Friday, 25 September 23, 2022. See 28 U.S.C. § 1961(a); see also Goldstine v. FedEx Freight 26 Inc., No. C18-1164 MJP, 2021 WL 952335, at *1 (W.D. Wash. Mar. 12, 2021) 27 (noting the applicable rate is the one “issued for the full calendar week preceding 28 – 14 – 15cv2287 1 judgment”). For that week, the average 1-year constant maturity Treasury yield 2 was 4.08% according to the Federal Reserve. 4 3 Erhart was terminated no later than June 9, 2015. Between June 9, 2015, and 4 September 30, 2022, over seven years passed. For the initial seven years, with 5 $500,000 earning interest at 4.08% compounded annually, Erhart receives 6 $161,516.97 in interest.5 During the final partial year, 113 days passed between 7 June 9, 2022, and September 30, 2022. Erhart receives $8,355.77 in interest for this 8 period,6 bringing the total prejudgment interest to $169,872.74. 9 Each party, however, asks the Court to deviate from the interest rate specified 10 in 28 U.S.C. § 1961. Erhart asks the Court to use the interest rate for significant 11 corporate underpayments of tax obligations, which is found in 26 U.S.C. § 6621(c). 12 (Mot. 17:3–21.) He claims this rate is 8% and should be compounded daily under 13 26 U.S.C. § 6622. (Id. 17:14–21.) Were the Court to use the same variables as 14 15 16 17 18 19 20 4 The Court obtained this interest rate through the Federal Reserve’s Data Download Program. The Court used the “Selected Interest Rates” data set, specified the instrument as “U.S. government securities/Treasury constant maturities/nominal,” selected the “1-year” maturity,” chose a frequency of “Weekly (Friday),” and requested the data for September 2022. See also Post-Judgment Interest Rates, U.S. Bankr. Ct, S.D. of Cal., www.casb.uscourts.gov/postjudgment-interest-rates (last visited July 28, 2023) (“In cases where the judgment date is the same as the release date, select the prior week’s release rate; interest rate releases are considered to be issued at the close of business on the date of release.”). 5 21 Year No. 1 2 3 4 5 6 7 22 23 24 25 26 $ $ $ $ $ $ $ Starting Balance 500,000.00 520,400.00 541,632.32 563,730.92 586,731.14 610,669.77 635,585.10 Total: Interest Rate 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% 4.08% Interest Accrued $ 20,400.00 $ 21,232.32 $ 22,098.60 $ 23,000.22 $ 23,938.63 $ 24,915.33 $ 25,931.87 $ 161,516.97 27 At the start of year eight, the principal balance is $661,516.97. Erhart is entitled to interest for 113 of 365 days. So, the remaining interest to be awarded is $661,516.97 * 0.0408 * 113/365 = $8,355.77. – 15 – 15cv2287 6 28 1 above but compound interest daily at 8%, the resulting prejudgment interest award 2 would be approximately $375,000. 3 There is some support for Erhart’s request to use this higher rate. He points 4 to Van Asdale, where the court awarded prejudgment interest on an award of 5 backpay under Sarbanes–Oxley. Van Asdale v. Int’l Game, Tech., No. 3:04-CV- 6 00703-RAM, 2011 WL 2118637, at *19 (D. Nev. May 24, 2011). There, the court 7 looked to a Department of Labor regulation, 29 C.F.R. § 20.58, which provides the 8 interest rate from 26 U.S.C. § 6621 “shall be sought for backwages recovered in 9 litigation by the Department.” 29 C.F.R. § 20.58(a). Notably, however, the 10 defendant did “not dispute that the large corporate underpayment rate applies.” Van 11 Asdale, 2011 WL 2118637, at *18. Hence, the court found it was appropriate to 12 use the interest rate from § 6621 given “the absence of any objection by” the 13 defendant. Id. at *19; see also Van Asdale v. Int’l Game Tech., 763 F.3d 1089, 14 1091 (9th Cir. 2014) (reasoning “we need not resolve in this case whether 15 prejudgment interest and postjudgment interest awards in Sarbanes–Oxley cases 16 must be based on the same interest rate” because the defendant “failed to raise this 17 issue before the district court”). 18 The Court is unpersuaded that § 6621’s large corporate underpayment rate 19 should apply. Van Asdale is distinguishable because the defendant there did not 20 argue for a different rate, and Erhart does not demonstrate the equities justify using 21 § 6621’s rate. 22 mentioned above where the plaintiff submitted evidence justifying a different 23 interest rate). Cf. Blankenship, 486 F.3d at 628 (approving the deviation 24 On the other hand, BofI suggests the Court must apply a fluctuating treasury 25 rate if 28 U.S.C. § 1961 applies. (See Opp’n 25:14–18 (arguing Erhart failed to 26 provide data on a fluctuating rate to the court).) The Ninth Circuit has permitted 27 this modified approach, but it is not the default rule. See Barnard v. Theobald, 649 28 F. App'x 414, 417 (9th Cir. 2016); see also Saavedra v. Korean Air Lines Co., 93 – 16 – 15cv2287 1 F.3d 547, 555 (9th Cir. 1996). And although there may be good reasons for 2 applying a fluctuating rate in this case, BofI identifies none. (See Opp’n 25:9–18.) 3 Simply put, neither side submits substantial evidence showing the Court 4 should deviate from the statutory rate in 28 U.S.C. § 1961. The Court returns to 5 where it started. After applying a 4.08% rate to $500,000 over the relevant period, 6 the Court awards Erhart $169,872.74 in prejudgment interest. 7 III. CONCLUSION 8 In light of the foregoing, the Court GRANTS IN PART and DENIES IN 9 PART Erhart’s motion for prejudgment interest (ECF No. 384). The Court will 10 direct the Clerk of Court to enter an amended judgment that awards Erhart 11 $169,872.74 in prejudgment interest. 12 IT IS SO ORDERED. 13 14 DATED: September 28, 2023 15 16 17 18 19 20 21 22 23 24 25 26 27 28 – 17 – 15cv2287
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