The Court of Appeal Time Machine – Interest Calculations on Modified Judgments

time_machine_04

Still from The Time Machine (1960)

If you obtained a judgment against your former client for over $7.7 million, and had the court of appeal knock it down to around $1.7 million, and the trial court entered judgment in that reduced amount 14 months after the date of the original judgment, you would want interest to run on the judgment — even from the reduced amount — from the date of the original judgment, right? Of course you would. After all, 14 months of interest at a simple 10% on the $1.7 million amount is nearly $200,000. That’s not pocket change. (Well, not for me, anyway.)

But in Chodos v. Borman, case no. B260326 (2d Dist. August 18, 2015), the trial court ordered that interest on the judgment was to run only from the date of entry of the later judgment entered after the original appeal. That’s $200,000 up in smoke. Chodos, the judgment creditor, appealed.

And wins. The Court of Appeal points out that whether interest runs from the date of the original judgment or the date of the later judgment depends on whether its disposition in the original appeal amounted to a reversal of the judgment (in which case interest would run from the later judgment only) or merely a modification of the judgment (in which case the interest would run from the date of the original judgment).

Well, that should be an easy question, right? After all, the court knows what it did in the last appeal. But let’s just say it was not obvious to everyone. The trial court got it wrong.

As in many areas of the law, one must look past the form of the Court of Appeal’s prior opinion and identify its substance. The court had phrased its disposition in the prior appeal as a reversal:

The judgment is reversed and the matter is remanded to the trial court with instructions to enter a new judgment based on that portion of the special verdict form that awarded the attorney a $1.8 million lodestar amount based on the jury’s finding of a reasonable hourly rate of $1,000 and a reasonable number of hours expended on the two divorce cases and the Marvin action of 1,800. As it did in the original judgment, the trial court shall make adjustments to the $1.8 million award by adding the amount of $24,921 and deducting the amount of $107,000.

Despite the use of the word “reversed,” however, the disposition was really a mere modification of the judgment. It directed the trial court to enter a judgment in favor of the original prevailing party in a reduced amount, rather than returning the case to theatrical court for any further hearings on the amount of the judgment.

Thus, appellant is able to “return” to the date of the original judgment via the Court of Appeal Time Machine, and watch the interest accrue from that date.

Judge’s disqualification results in new trial for failure to issue a statement of decision

Appeals based on a trial court’s refusal to issue a statement of decision require some soul searching. Usually, a successful appeal will merely result in the case being remanded to the trial court to issue a statement of decision, and the successful appellant may find himself no better off than he was before.

But what if the judge that tried the case is not available to issue the statement of decision? In Wallis v. PHL Associates, Inc., case no. C066545 (3d Dist., October 17, 2013), you will find out. The judge who conducted the bench trial in Wallis was peremptorily disqualified after the bench trial. Since he was thus unavailable to prepare a statement of decision, the Court of Appeal decides that “the only appropriate appellate remedy in this case is a remand for a new trial on the equitable causes of action.”

“Normally, we would begin by . . . ” — departures from the usual analytical framework on appeal

Any time a Court of Appeal decision starts its analysis with “normally,” you should sit up and take notice. It gives you a hint that the case may suggest ways for you to depart slightly from the normal analytical framework when the right case presents itself.

This time, the tip comes from Liberty Mutual Ins. Co. v.  Brookfield Crystal Cove, LLC, case no. G046731 (4th Dist., August 28, 2013, modified September 26, 2013). The plaintiff was an insurer that sued a contractor in subrogation to recover costs for its insured’s relocation expenses incurred while repairs were being made to property damage resulting from construction defects. The contractor successfully demurred on the ground that the complaint was barred by the limitations period in the Right to Repair Act (Civ. Code, § 895 et seq.). On appeal, the insurer contended that the Right to Repair Act did not abrogate common law remedies for construction defects resulting in actual property damage.

The case presents a straight-up question of statutory construction: is the Right to Repair Act the exclusive remedy for construction defects that result in property damage?

Typically, one begins analysis of statutory construction with the language of the statute itself, but Liberty Mutual suggests there may be cases where the most persuasive argument may be to start elsewhere:

The issue before us is whether Liberty Mutual’s complaint in subrogation falls exclusively within the Right to Repair Act, and therefore is time-barred. We start with a brief history of the Act and identification of the problem it was intended to address. Normally, we would begin by analyzing the language of the statute. In this case, however, the language of the statute can be best considered with an understanding of the Act‟s impetus and purpose.

(Emphasis added, footnote omitted.)

Here, what made the legislative history such an attractive starting point for the appellant and the court was that the intent to overturn case law was explicitly stated in a committee report on the bill. From there, it was easy to explain the limited intent of the statute and prevent a broader application that would require dismissal of the appellant’s complaint. The judgment of dismissal was reversed.

Lesson learned: just because there are particular analytical rules that usually apply, don’t feel hidebound.

When the Attorney General agrees with you

Respondents sometimes must concede minor points along the way while arguing that such points do not require reversal. But seldom does one see the respondent agree that a judgment is even partially reversible.

One is more likely to see it in a criminal appeal than in a civil appeal, especially when the criminal appeal involves errors in sentencing, as in People v. Frausto, case no. B212054 (2d Dist. Dec. 28, 2009), where the attorney general agreed that the trial court erred in imposing three cumulative 5-year sentencing enhancements under Penal Code section 667, subdivision (a)(1) for each of three prior serious felony convictions tried in a single proceeding and that the defendant had been awarded only 464 of the 466 days of presentence custody credits to which he was entitled. (Not that it did the defendant much good. The 2 extra days of presentence custody credits — 2 days — were applied against  a sentence of 214 years to life. Since the three 5-year enhancements were added consecutively to that sentence, the 10-year reduction in enhancements was likewise not much comfort to the defendant.)

The first (and, so far, only) time I got a brief from the attorney general agreeing with my position, I was stunned. I noticed it when I skimmed through the headings of the respondent’s brief, and thought to myself, “Must be a typo. They left out the word ‘not.'” Even when I read the argument under the heading, I had to read it three times just to make sure that I was reading it correctly!

The Unexplained Concurrence

Here’s an interesting Howard Bashman’s column that explores the phenomenon of third justices who “concur in the result” without further comment on the majority opinion. 

NOTE: Somehow this post got marked “private,” so I’m not sure it ever showed up on the blog before.  But it’s possible it was posted for a while befopre it got marked “private,” in case you’re looking for an explanation for any deja vu you’re experiencing.)

The Scope of Plurality En Banc Decisions

In a post from the weekend cleverly titled to include “Ninth Makes Up its Mind on Inability to Make Up its Mind,” Ninth Circuit Blog performs a great public service by providing resources to help understand the scope of “fractured” en banc cases decided by plurality opinion. Definitely worth a read, especially if you are relying on such authority and want to “nail down” its strength and limitations.

Ninth Circuit Blog’s post concludes that there’s advantage to be had from ambiguity:

Come to think of it, if the federal judiciary is increasingly hostile to the rights of criminal (and particularly, indigent) defendants, maybe plurality decisions are good things. After all, an exploitable ambiguity is far better than a clear defense defeat. If that’s the case, keep up the good work, Supremes and Ninth!

Correction (3/3/08): The post addresses Supreme Court plurality opinions as well as en banc Court of Appeals decisions.

A “Cautionary Tale” on Post-Judgment Interest when Court of Appeals Directs Entry of Money Judgment

It’s always frustrating when you have to litigate over issues stemming from a court’s failure to do something that it should have done or even was required to do. Just ask the Oakland Raiders, who saw their new trial order reversed because the trial judge’s order did not satisfy the Code of Civil Procedure. The issue also arises in California courts where the trial court fails to rule on objections to evidence in the context of a summary judgment motion. The consequences of such failure have been discussed on a number of blogs recently, and The Appellate Practitioner has an excellent post regarding the Supreme Court’s recent grant of review in a case on that issue.

In Planned Parenthood v. American Coalition, case no. 06-35733 (Feb. 11, 2008), we see an example in the context of a federal requirement; specifically, where the Federal Rules of Appellate Procedure impose an obligation ot the Court of Appeals and the court fails to honor it.

The rule at issue is FRAP 37(b), which provides that “[i]f the court modifies or reverses a judgment with a direction that a money judgment be entered in the district court, the mandate must contain instructions about the allowance of interest.” In a previous appeal in the case, the Ninth reversed a punitive damages award as violative of due process and remanded for retrial unless the creditors accepted the judgment with a reduced punitive damages component, but the court failed to include in its mandate the date on which interest started to accrue on the judgment. The trial court entered a new judgment allowing for accrual of post-judgment interest as of the date of the original judgment.

The Ninth holds that failure to specify a judgment accrual date where required by FRAP 37(b) precludes a district court from entering the newly mandated judgment with interest accruing from the date of the original judgment. Interest accrues from the date where the amount of the judgment is “meaningfully ascertained.” and this ordinarily means the date of the mandate from the Court of Appeals if the mandate directs entry of a money judgment different from that in the original judgment.

Here, however, the judgment creditors get interest from the date of the original judgment in any event. The court recognizes that its omission was inadvertent and that despite the reduction in punitive damages on remand, the creditors’ right to interest on the reduced amount had been “meaningfully ascertained” in the original trial. Accordingly, it exercises its right to recall its prior mandate and amends it to include interest from the date of the original judgment.

That said, the court makes clear that it is affording this courtesy only because its prior jurisprudence was unclear, and that litigants should treat this case as a cautionary tale:

Henceforth, we expect that litigants in this circuit will clearly understand that if we modify or reverse a judgment with a direction that a money judgment be entered in the district court, our mandate must contain instructions about the allowance of post-judgment interest. Fed. R. App. 37(b). If our mandate omits such instructions, a party that believes it is entitled to interest from a date other than the date of entry of judgment on remand must expeditiously seek reform of the mandate.

Professor Martin calls this “an entirely just and equitable opinion.” I think that’s correct. But keep the court’s caution in mind.

I think a federal court litigant in this situation can have much more peace of mind than a party in a California case involving a new trial or summary judgment situation mentioned above. A party can expect a ruling one way of the other on a motion to recall and amend the mandate. Pleas to California trial courts to rule definitively on evidentiary objections often fall on deaf ears. And a party seeking a new trial is prohibited from doing too much to facilitate the trial court’s compliance with new trial procedures. Nonetheless, this greater peace of mind only applies if the party remembers to “expeditiously seek reform of the mandate.”