MILWAUKEE v. CEMENT DIV., NATIONAL GYPSUM CO.
After a ship owned by the Cement Division of National Gypsum Co. sank in a winter storm while berthed in a slip owned by Milwaukee, National Gypsum brought an admiralty suit for damages, alleging that the city had negligently breached its duty as a wharfinger. The city denied fault and filed a counterclaim for damage to its dock, alleging that National Gypsum was negligent in leaving the ship virtually unmanned. The District Court found that both parties were negligent, apportioned liability primarily to National Gypsum, and entered a partial judgment for the stipulated amount of National Gypsum's damages, excluding prejudgment interest. The court held that the fact that National Gypsum's loss was primarily attributable to its own negligence and the existence of a genuine dispute over the City's liability were special circumstances justifying a departure from the general rule that prejudgment interest should be awarded in maritime collision cases. In reversing, the Court of Appeals held that mutual fault cannot provide a basis for denying prejudgment interest.
Does the fact that a plaintiff's loss was primarily attributable to its own negligence, together with the existence of a genuine dispute over liability, justify a District Court's departure from the general rule that prejudgment interest should be awarded in maritime collision cases?
No. In an 8-0 opinion delivered by Justice John Paul Stevens, the Court held that neither a good-faith dispute over liability nor the existence of mutual fault justifies the denial of prejudgment interest in an admiralty collision case. In calculating the amount of the loss for which the relatively innocent party is responsible, the Court found that a denial of prejudgment interest on the basis of mutual fault would unfairly penalize a party twice for the same mistake. "The existence of a legitimate difference of opinion on the issue of liability is merely a characteristic of most ordinary lawsuits. It is not an extraordinary circumstance that can justify denying prejudgment interest," wrote Justice Stevens. Justice Stephen G. Breyer took no part in the consideration or decision.
Argument of David A. Strauss
Chief Justice Rehnquist: We'll hear argument next in Number 94-788, the City of Milwaukee v. Cement Division, National Gypsum Company.
Mr. Strauss: Thank you, Mr. Chief Justice, and may it please the Court:
The question in this case is whether a district court in an admiralty collision case may in the exercise of its discretion withhold prejudgment interests on the ground that the plaintiff was the party predominantly at fault, and that the defendant, throughout much of the litigation, had reason to believe it would not be held liable at all.
The collision involved in this case occurred on Christmas Eve, 1979, when a storm blew up in Lake Michigan near Milwaukee.
A ship called the EM FORD, loaded with cement, broke away from its mooring, crashed into its berth, took on water, and sunk.
The respondents are the owners and insurers of the ship, and they sued in admiralty for $6.5 million.
They claim that the city was negligent in not warning of the danger of storms.
The city denied negligence and said that the accident had been caused by the negligence of the ship's master in leaving the ship essentially unattended in its berth, without any means to monitor the weather or to call for help.
The city also counterclaimed for a quarter of a million dollars in damage to its dock.
The suit didn't come to trial until 1986, at which point the issue of liability was tried.
The district court decided the liability issue in 1989, and it ruled at that point that the respondents were almost entirely at fault.
Specifically, the city was liable for only 4 percent of the damages.
That ruling of the district court, 10 years after the accident, was reversed by the Seventh Circuit a year later.
The Seventh Circuit held that the district court had inadequately explained its apportionment of liability.
Instead of remanding, however, the Seventh Circuit itself reapportioned the liability, still assigning the bulk of the share to respondents, two-thirds to respondents, one-third to the city.
At that point, the parties entered into a settlement agreement on the liability issue.
The city agreed to pay $1.67 million, compared to the $6.5 million initially sought, to the respondents.
The parties further agreed in this settlement that the district court would determine whether prejudgment interest was to be awarded, and if so, in what amount.
The district court then denied the respondents' request for $5.3 million in prejudgment interest.
The district court recognized, and it is common ground here, that in admiralty the presumption is in favor of awarding prejudgment interest, but the district court denied prejudgment interest in this case on the ground that the plaintiff was far more at fault than the city, and that throughout most of the litigation, nearly all of the litigation, there was a good chance that the city would not be held liable in any way.
The Seventh Circuit again reversed, holding that the district court may never exercise discretion to withhold prejudgment interest on the grounds that the plaintiff was at fault, and this Court then granted certiorari.
Now, there is no general Federal prejudgment interest statute.
Instead, judge-made rules govern prejudgment interest in Federal courts in admiralty, and in cases arising under Federal statutes that are silent on the matter of prejudgment interest.
The one constant in these--
Unknown Speaker: Are you saying there's no Federal statute governing prejudgment interest, period, or prejudgment interest in admiralty cases?
Mr. Strauss: --There is no Federal statute governing prejudgment interest in admiralty cases.
There's also no umbrella Federal statute, as there is for postjudgment interest.
There are prejudgment interest provisions in certain specific Federal programmatic statutes.
In the judge-made cases that govern admiralty and also the Federal statutes that are silent on prejudgment interests, the one constant has been that an award of prejudgment interest is by no means automatic, as this Court said in its most recent such case.
Rather, the trial court has discretion in deciding whether to award prejudgment interest.
Here, the district court exercised its discretion, and withheld prejudgment interest because two factors coalesced.
First, for the first 11 years of the 13-year litigation, the city had every reason to think that it would be subject to no significant liability.
The suit was initially brought by a ship that had broken loose from its mooring.
The city did not moor the ship.
The claim was only negligent failure to warn.
When the district court decided the liability issue, the district court reapportioned the liability on a 96 to 4 basis, holding the city only 4 percent at fault.
Even after the court of appeals reversed, the plaintiffs were still the party predominantly at fault by a ratio of 2 to 1, and that was the second factor that influenced the district court's exercise of its discretion.
Unknown Speaker: Well, of course, that line... how far along in that 11-year period did the 96-4 percent judgment come?
I mean, that's not the whole 11 years.
Mr. Strauss: That was 11 years after the accident, Justice Scalia.
Unknown Speaker: The first decision was 11 years--
Mr. Strauss: The first... the decision was 10 years after the accident.
The court of appeals did not reverse it until 11 years after the accident.
Unknown Speaker: --So at most 10 years.
At most, 1 year they thought they were not very much responsible.
Mr. Strauss: Well, the district court, which was--
Unknown Speaker: You leap to the conclusion from the fact that the district court gave a 96-4 break that all during the period up until then the city thought it would have negligible liability.
I don't know why that follows.
Certainly it's reasonable to say that from the time of the district court decision until the time of the court of appeals decision the city thought, what the heck, I'm not... the interest won't amount to anything.
It's only for that 1 year.
That's not such a big deal.
Mr. Strauss: --Well, Justice Scalia, I think that's quintessentially the kind of issue that the district court is in a position to resolve, and were the district court to say, in the exercise of its discretion, you should have known all along that you might be held substantially liable, the district court could exercise its discretion and award prejudgment interest in some amount.
But the district court here reached the opposite conclusion, and all we're contending for is that the district court should be able to exercise its discretion in that regard.
Unknown Speaker: Then what--
--How did this award get... excuse me.
How did this award get to be $5 million of interest on a $1 million award?
Mr. Strauss: The accident occurred on Christmas Eve, 1979, Justice Kennedy, and the interest was accumulating all that time.
Unknown Speaker: What was the base sum on which the interest was accumulating?
Mr. Strauss: 1.677 million.
That's the claim, is for $5.3 million.
That's the claim that the respondents are making.
As I said, the other factor that influenced the district court and that has been prominent in the--
Unknown Speaker: I'm still somewhat astounded that it can be almost two-and-a-half times the amount of the principal.
Mr. Strauss: --And needless to say, Justice Kennedy, we'd be delighted if it were a lower amount, but that's the amount the respondents are asking for, I assume calculating it at prime rate, which is of course a serious question whether that should be the rate, when it's a municipal government that's being asked for the interest, but respondents make that calculation.
Unknown Speaker: Did you challenge that as well?
Mr. Strauss: Well, we, in... the district court denied all prejudgment interest.
The Seventh Circuit reversed that and remanded for a calculation of the... of interest.
Unknown Speaker: So in the district court you were just arguing straight up interest or no interest, not any question if interest, then the rate.
Mr. Strauss: We also argued about the rate in the district court, Justice Ginsburg, and it's our position that prime rate is completely inappropriate for a municipal government that can, after all, borrow in the market at less than half of prime rate, and that would continue to be our position.
Unknown Speaker: That issue would still be open to you if you--
Mr. Strauss: That--
Unknown Speaker: --If the Seventh Circuit were to be affirmed--
Mr. Strauss: --If the Seventh Circuit were to be affirmed, the issue of rate would still be open, that's right, Justice Ginsburg, although the Seventh Circuit did seem to say that prime rate... the choice should be between prime rate and the short term borrowing rate of the city, so it made some remarks about the rate, but the issue of rate would, subject to those limits placed on it by the Seventh Circuit, be open on remand, that's right.
Unknown Speaker: --I guess I don't know why the amount should depend on what the city could borrow for as opposed to what the person to whom the city should have paid the money sooner would have been able to get for the money.
Mr. Strauss: Well, there again, Justice Scalia, that points to a problem that I think the district court is in a position to resolve, although I should say that our contention is the district... what we're asking this Court to do is simply to announce the principle that in a case where the plaintiff is predominantly at fault and the defendant had a reason to think it wasn't liable, the district court can exercise its discretion.
The other factor, as I said, that influenced the district court was just, as this Court has said in its prejudgment cases, the relative equities of the parties, a factor that this Court has frequently said should play a role in deciding the award of prejudgment interest, and the district court was influenced by the fact that the plaintiffs were not only at fault but predominantly at fault.
After all, in a regime of contributory negligence, which to be sure admiralty has never had, in a regime of contributory negligence, a party who is even somewhat at fault receives nothing.
Unknown Speaker: How does it work out in the Jones Act?
For example, a sailor is found to be two-thirds at fault and the ship one third, would that person, even though he was two-thirds at fault, get prejudgment interest?
Mr. Strauss: I... under the Jones Act, I believe, Justice Ginsburg, prejudgment interest is not available, I believe.
The Jones Act remedial provisions are aligned with those of the FELA, and this Court decided in Monessen that there's no prejudgment interest available under the FELA, so that while I can't say that it's a settled issue, I believe prejudgment interest is simply unavailable under the Jones Act.
Unknown Speaker: Is there any other comparative negligence analogy in the realm of admiralty where this question comes up, other than collision?
Mr. Strauss: In personal injury cases as well, other than Jones Act cases, such as a personal injury arising out of a collision, the issue would come up.
I don't know of any other context in which it comes up.
Unknown Speaker: And how would it be resolved in that context?
Mr. Strauss: I think that's the same question as the Court is faced with here.
That's a question that's open.
Traditionally, the cases have said the district court has discretion.
The presumption is in favor, which we don't contest, but the district court has discretion, and the position that we contend for and that many courts of appeals have endorsed is that when there's a dispute about the existence of any liability, and the plaintiff is at fault, the district court may... need not, but may exercise its discretion to deny prejudgment interest.
Unknown Speaker: What are the cases in which the presumption is operative?
Mr. Strauss: I believe all admiralty... all admiralty cases, I believe, Justice Ginsburg.
All admiralty collision cases.
I don't know if the presumption is operative in general average cases, for example.
I don't know the answer to that.
Unknown Speaker: Did the plaintiff recover damages from any other defendant in this case other than the City of Milwaukee?
Mr. Strauss: I believe not.
Is that... I believe not, Your Honor, but I'll have an answer to that for you on rebuttal.
Unknown Speaker: Mr. Strauss, I guess I'm just missing the basic logic of the position.
If we reject the contributory negligence concept in which the... you know, the tortfeasor is not going to get a nickel, so that we do not have a per se rule that those who commit torts or are in some way responsible for their own damages get nothing, and in fact we do, as here, have a rule in which the only thing you are paying for is the share with respect to which you are at fault, why should you be treated any differently from any other tortfeasor who is at fault, whether in fact there was negligence on the part of the other party or not?
Why shouldn't you pay for the time value of the damage that you caused?
Mr. Strauss: Well, Justice Souter, we're not asking to be treated any differently from any tortfeasor.
The common law rule was that you don't recover prejudgment interest in torts.
You recover it only in contract cases, or in cases where the damages were ascertainable, which I think meant liquidated.
Unknown Speaker: And that... now, you correct me.
I assume that did not survive the rejection of the old contributory negligence concept, did it?
Mr. Strauss: That's an independent rule, Justice Souter, even in cases not involving contributory negligence.
Unknown Speaker: But wasn't that the difference between admiralty and common law?
Mr. Strauss: Yes.
Unknown Speaker: At admiralty it was, you just had the opposite rule.
Mr. Strauss: At admiralty you had the presumption in favor, that's right.
The common law was much more hostile to prejudgment interest than admiralty, which was not hostile to it, but--
Unknown Speaker: So let's take, then, in the admiralty setting, Justice Souter's question.
Why, when you're just paying on your percentage of the fault, and the main rule in admiralty is interest, prejudgment interest, why doesn't the... why shouldn't that rule apply?
Mr. Strauss: --Well, I think the answer, Justice Ginsburg, is that prejudgment interest has had a separate status in our system.
Prejudgment interest hasn't been seen as something that automatically went along in order to make the plaintiff whole.
Unknown Speaker: Yes, but maybe the point of the question is, why should it?
In other words, there... I suppose we're simply invoking a concept of equity or fairness.
If you are not being forced to pay for anything more than your own negligence, why shouldn't you pay the time value of the... for the period of recovery?
Mr. Strauss: --Justice Souter, I mean, I think the... if the sole objective of the system were to provide a plaintiff with full compensation, there would be no answer to your question.
Unknown Speaker: All right.
What's the countervailing objective that justifies a different result?
Mr. Strauss: Well, there are two things really, Justice Souter.
The first is not... I don't know if it's an objective, but it's the traditional treatment of prejudgment interest.
Unknown Speaker: No, but that's just... if I'm selling you short, don't let me do it, but it seems to me you're saying, well, we just haven't done it.
Mr. Strauss: --Well, what it would mean in this case, saying that prejudgment interest must be awarded not as a matter of discretion but must be awarded, period--
Unknown Speaker: Not to be awarded without a good reason, and I'm saying what are the good reasons, and your first answer is, well, it's been treated differently, which is I think the equivalent of saying we just haven't.
Mr. Strauss: --Well, there really... okay, Justice Souter there are two questions, and I think I may have been confused over which you were asking.
If the question is, why should there be any discretion at all, then my principal and only answer is to say that... is that to say there's no discretion would be to overrule over 100 years of precedent with which Congress has apparently been satisfied.
Unknown Speaker: Okay.
Mr. Strauss: If the question is, given that there's discretion, why should it be exercised in a case like this, then there really are two points to be made.
The first is that awarding prejudgment interest puts pressure on a defendant to settle.
There may be cases in which, the district court apparently thought this was one, that it would be unfair to put so much pressure on a defendant to settle.
When prejudgment interest is going to be awarded, defendant, the city in this case, is in the position of saying to itself, if we don't settle on whatever terms the plaintiff is offering, we are in effect going into the market and borrowing money from them and guaranteeing them a return at possibly prime rate for the duration of the litigation, 13 years.
That's a major decision for a city.
It's a nice thing for a plaintiff to have, a guaranteed investment at that rate.
Unknown Speaker: But it's a major decision for any party in litigation in which there may be discretion exercised to award such interest.
I mean, the little angel on the other shoulder of the city can say, if we don't settle, and it takes a long time to pay... to litigate, then it's going to... and we lose to some degree, then they are going to be a long time without the value which we ultimately will be adjudicated to have taken from them.
Mr. Strauss: Yes, that's right, Justice Souter, and it's why we don't contend for anything more than a degree of discretion in the district court when it decides, as it evidently did here, that the defendants have acted in a reasonable fashion, it can then withhold the award of prejudgment interest.
Unknown Speaker: Now, what's the... you had a second reason.
Mr. Strauss: Well, the second reason is this history of using prejudgment interest to respond to equity-like considerations, the relative equities of the parties, considerations of fundamental fairness, which I think is best interpreted as reflecting the kinds of concerns that underlay both contributory negligence and different kinds of comparative fault rules.
There are, after all, comparative fault regimes in which a plaintiff that is 50-percent at fault doesn't recover at all, and the best interpretation, I think, of the Court's repeated references to fundamental fairness, considerations of the equities, is to say that a district court can say, well in this case the plaintiff was so much more at fault that we're going to deny not its recovery, it gets its recovery, but we're going to deny it prejudgment interest.
Unknown Speaker: Do you think historically the reason was the divided damages rule?
Mr. Strauss: No, I don't--
Unknown Speaker: Because it... interest... to the extent the divided damages rule produced an inequity, an economic inequity, prejudgment interest can distort that even further, but you don't think that's the reason for the solicitude over the years?
Mr. Strauss: --No, not at all, Justice Souter.
I mean, there are many reasons to believe the contrary, one of which is the body of cases Justice Ginsburg alluded to.
In personal injury actions in admiralty the rule has always been comparative fault, yet courts applied the principle there as well.
Unknown Speaker: I thought that they applied that, the exception only if a defendant had protracted the litigation, some notion of litigation misconduct, but not in this situation.
Mr. Strauss: No, I think this principle that... mutual fault with a good faith dispute is the way they put it, meaning, I think, that the defendant had reason to think it would not be held liable at all, they've applied that principle as well.
That's a separate principle from the plaintiff's prolonging its... prolonging the litigation.
Unknown Speaker: Do you have cases to that effect outside when it was the old 50-50 rule?
Mr. Strauss: Well, we have cases to that effect involving personal injury which was never subject to the 50-50 rule cited in our brief, a case called Ceja from the Fifth Circuit, another case called Pluyer from the Fifth Circuit, which was cited in our brief.
But there are other reasons for this as well.
This... I mean, if what you were... when courts--
Unknown Speaker: That's not a very long tradition that you're referring to.
I mean, two cases?
Mr. Strauss: --The tradition, Justice Scalia... the tradition is a tradition of discretion in the awarding of prejudgment interest, of not regarding prejudgment interest simply as an element of the plaintiff's compensation.
Unknown Speaker: Yes, but I... but what's important to me is why should the discretion be exercised in this case?
You assert that the prejudgment interest is sort of a penalty upon the losing party for not settling sooner.
I don't know why one has to look at it that way.
One can look at it as simply natural justice.
The person who's been injured has been deprived of the value of what was taken from the time it was taken, not from the time the judgment occurred.
Why isn't that an equally valid way to look at it, and if you look at it that way, I see no reason to reduce the amount simply because the city had no reason to think it was going to lose.
The fact is, the city was at fault to a certain amount, and it should pay up and do justice.
What's wrong with that?
Mr. Strauss: If the... Justice Scalia, if the sole objective were to provide the plaintiff with full compensation, it would be very difficult to explain why prejudgment interest at some rate shouldn't be awarded.
The rate would be highly controversial.
But prejudgment interest, like attorney's fees, is one of the elements of our system, or like indirect economic costs, or like approximate causation, these are elements of our system in which compensation of the plaintiffs has not been the sole objectives.
Plaintiffs aren't fully compensated when they have to pay their own fees.
Nonetheless, in our system they have to pay their own fees.
They're not fully compensated when they don't get prejudgment interest, but the tradition in our system for over 100 years, which Congress not only hasn't changed, but when Congress thought about enacting a general Federal law, it left discretion alone--
Unknown Speaker: The only substantial series of cases that you show where this discretion was exercised are cases where it was exercised in order to again move in the direction of greater fairness, not taking account of the fact that the city couldn't settle.
Certainly, the majority of cases where it was exercised, it was exercised to mitigate the old rule that no matter how minimally negligent you were, you ended up paying 50 percent.
Mr. Strauss: --Justice Scalia, I don't want to deny that some courts of appeal used the rule that way, but it's not the case that discretion was only exercised to mitigate unfairness.
In fact, one of--
Unknown Speaker: What else was it used for?
Mr. Strauss: --Well, one of the cases we cite from this Court, The Scotland, Justice Bradley's opinion from 1884 or '5, upheld a denial of prejudgment interest, and Justice Bradley, explaining why he was upholding the denial, talked about how reasonable it was for the defendant in this case to pursue the position it was pursuing in the case.
Unknown Speaker: Was that a case of 50 percent?
Mr. Strauss: --It was not, Justice Ginsburg.
I think it was a case of undivided damages.
Now, the Court--
Unknown Speaker: How is it in this case that it took 10 years to get to trial, to get a trial court decision?
Mr. Strauss: --I'm sorry, Justice O'Connor.
Unknown Speaker: How is it that it took 10 years in this case to get a trial court decision?
Mr. Strauss: There are no findings on this point, Justice O'Connor, but so far as one can infer from the record, there were really, well, three things going on.
One was there was some collateral litigation about a plaintiff, disqualification of plaintiff's counsel.
Plaintiff's original lead counsel was disqualified for a conflict of interest, and there was a trip to the court of appeals about that.
The second was the case was transferred from the docket of one district judge to another, and the third was that the district judge took 3 years from the date of the submission of the case to the date of rendering the judgment, so those three factors, combined with the usual delays of discovery, so far as I can tell from the record.
As I say, there are no findings on the question of--
Unknown Speaker: Mr. Strauss, may I just go back and ask you another question about the case that you referred to in answering Justice Ginsburg?
You said that was a case of undivided damages.
Would it have been a divided damages case if there had been fault on the other side?
Mr. Strauss: --Yes, it would.
It was a... this is the Scotland, the case from this Court?
Unknown Speaker: Yes.
Mr. Strauss: Yes, it would.
Unknown Speaker: Okay.
Mr. Strauss: It was I believe a limitation of liability case.
As I said in answer to Justice Souter's question about the one reason that the district court... that the court of appeals gave for denying all discretion in these cases, the court of appeals said that that discretion had been used to offset the harsh effects of the divided damages rule.
We lay out many reasons in our brief, including the one I mentioned to Justice Souter, the cases that were cited, that we cited in our brief that the divided damages rule wasn't in play and nonetheless this mutual fault approach to prejudgment interest was applied, but I suppose the best way to explain the weakness of the court of appeals reasoning is that this... denying prejudgment interest is a very crude way of dealing with the supposed inequities of the divided damages rule.
When lower courts wanted to deal with those... with the perceived harshness of that rule, what they did was to design rules to deal with it, the so-called major-minor fault rule, that when a party was only somewhat at fault they would not divide damages, and the so-called in extremis rule, which operated to somewhat the same effect.
Unknown Speaker: What amount of discretion did the Seventh Circuit's opinion in this case leave to district courts in the future to deny prejudgment interest?
Mr. Strauss: None on the grounds of the plaintiff being predominantly at fault, or the defendant having a reasonable litigation position throughout the litigation.
None on that ground.
The... I believe they left open the possibility that prejudgment interest could be denied if the plaintiff delayed in litigating, although, of course, Justice Scalia's line of questions could be asked about that, too, even if the plaintiff's delaying, the defendant still has the money, the plaintiff still doesn't have the money, why not award the interest.
If the Court has no further questions, I'll reserve the balance of my time.
Unknown Speaker: Very well, Mr. Strauss.
Argument of Harney B. Stover, Jr.
Mr. Stover: Mr. Chief Justice, and may it please the Court:
I'd like to go directly to a couple of questions asked here, because I've lived with this case since that ship went down and I saw it the next morning, and I know some of the answers and I don't think Mr. Strauss does.
First of all, in personal injury cases as well as in all admiralty cases, prejudgment interest is the rule.
As a matter of fact, Anderson v. Whittaker, which is cited in our brief, out of the Sixth Circuit, which disagrees with the Fifth Circuit, holds that prejudgment interest in a personal injury case is the rule.
All admiralty courts in all circuits, including the Fifth and the Eleventh, hold that prejudgment interest is to be awarded.
Now, whether you want to talk about it in terms of a court has the discretion to award it, or it is the rule and the court has discretion to deny an award of prejudgment interest, the measure is still the same.
Did the court abuse its discretion by denying prejudgment interest?
The reason we're here is because the Ninth, Sixth, and Seventh Circuits hold that the exception to awarding prejudgment interest is special circumstances, and all courts agree on that.
The Ninth, Sixth, and Seventh Circuits hold that mutual fault, or if you want to call it magnitude of fault, or if you want to call it genuine dispute in a mutual fault situation, they are not special circumstances, and they do not justify by themselves a denial of prejudgment interest.
The Third and Eighth Circuits have not ruled on the question, but have given indication in cases that they probably are going to go along with the Sixth, Seventh, and Ninth in that line of reasoning.
District courts in the First, Second, Third, Fourth, and Eighth Circuits have held that mutual fault is not a special circumstance.
The Fifth Circuit and the Eleventh Circuit, which generally goes along with it, have held that it is a special circumstance, and a judge may exercise his discretion to deny prejudgment interest if he wants to because of mutual fault, and that's why we're here.
There's a split in the circuits on this, and the majority rule is what I'm espousing, and the minority rule is what Mr. Strauss is espousing.
It seems to me that this is a relatively simple thing, although nothing is ever simple, I guess, in life, but the underlying philosophy for the award of a prejudgment interest is that it is a part of damages.
It is compensation.
It serves to compensate for the loss of the use of money as damages from the time of the... when the cause of action arose until the time of judgment.
In admiralty, which is a separate body of law, and I think this Court recognizes that because in Miles v. Apex Marine, where the Court spoke through Justice O'Connor, it very clearly talked about admiralty as a separate regime.
It has some statutory things that apply to it, but by and large it is a judge-made law, and has been since the beginning of this country.
Certainly, there are the Death on the High Seas Act, the Longshore & Harbor Workers Compensation Act, the Jones Act, the rules of the road and those kind of things, but by and large the law in admiralty in this country has been case law.
Unknown Speaker: Mr. Stover, if you're not accepting that, and assuming that we've got some policy choices to make, can you tell us what percentage of cases as a general rule in admiralty involve mutual fault, so that if we were to rule, for example, that mutual fault was a reason to deny them, what percentage of cases would we be excluding from the general rule if we did that?
Mr. Stover: Well, Justice Souter, I can't... you have to look at it two ways, I would think.
One is in what percentages of cases is fault ascribed by each party to the other, and that would probably--
Unknown Speaker: How about the cases in which fault is ascribed to each party by the ultimate fact-finder?
Mr. Stover: --I would think well over 50 percent of collision cases involve mutual fault.
Unknown Speaker: In... that is, they are finally resolved.
Mr. Stover: They are finally resolved as--
Unknown Speaker: So that we would be excluding, on your view, more than half the cases from the operation of the rule, of the interest rule.
Mr. Stover: --Not under my view.
Unknown Speaker: No, no, no--
Mr. Stover: I want interest awarded.
Unknown Speaker: --If we went Mr. Strauss' way, we would be excluding more than half the cases from the possibility of--
Mr. Stover: I would think so, oh yes, definitely--
Unknown Speaker: --Yes.
Mr. Stover: --and as a matter of fact you would be doing even more, because you'd be sending signals and doing all sorts of things which I'll get to a little later, but I... the majority of collision cases, if we're going to restrict this to collision cases, the majority of collision cases involve mutual fault, just as I think almost a rule of thumb in the insurance industry, when you're talking about intersection accidents with automobiles, I think they think that virtually all of them have dual fault on them, and they approach them on a 90-10 basis even when it's a rear end accident, but--
Unknown Speaker: This wasn't that sort of a collision.
This wasn't two vessels.
Mr. Stover: --No, this wasn't.
This was a collision of a vessel moored at a dock in Milwaukee in the outer harbor, and a violent storm occurred and the ship sank in the slip, an unusual circumstance, a little bit like looking at the Andrea... the Ile de France burning at the dock in New York.
But in admiralty, prejudgment interest has always been awarded.
You can go all the way back to the beginning of this country, and in the earliest cases, and these are cited in, I think, the briefs of both parties, there's a case, Del Col v. Arnold, way back in 3 Dallas, before they ever even were doing anything but summarizing cases.
And the Anna Maria, and the Amiable Nancy, both of which were decided by Chief Justice Marshall, were prize cases, and the rule developed from that that in the prize cases, where they were dealing with privateers who had seized vessels and seized cargo illegally, the rule was to have them pay back to the owner the value of the vessel or the value of the cargo plus interest to the date of judgment, and admiralty has always awarded prejudgment interest, except these exceptions.
Unknown Speaker: But there's always been a discretionary exception, hasn't there?
Mr. Stover: There has been a discretionary exception, but other than in the Fifth and Eleventh Circuits, where they exercise it to include mutual fault, it has never in any of the other circuits included mutual fault.
Unknown Speaker: How about The Scotland?
Mr. Stover: The Scotland I believe was the forerunner... I'm... if that steam navigation company case, they talked about prejudgment interest in it and said that it was to be awarded, but The Scotland and another case that's cited by the city, the Maggie Smith, involved limitation of liability and stipulations for value, or value bonds, which in those days were not required to contain interest and didn't, and so they said, you don't have to award it in these... under these circumstances.
Unknown Speaker: Well, but they do contain statements by the authors of the opinion that the award of prejudgment interest in admiralty is discretionary.
Mr. Stover: But no courts have denied prejudgment interest except... or not awarded it except where their.
--except in the Fifth Circuit and the Eleventh Circuit, except under... where there are special or peculiar circumstances, and the special or peculiar circumstances, except in those two circuits, have always been postcasualty or postaccident circumstances such as laches or even less than laches, delay in starting the lawsuit, delay in prosecuting a claim, exaggerated or fraudulent claims, postaccident fraud, frivolous claims, bad faith estimate of damages, no damages sustained.
Unknown Speaker: Mr. Stover, what about... this one case keeps running through my mind.
I don't know whether it makes a difference or not as to whether it's a special or unusual circumstance as you use the term, had the ultimate outcome been the same as at the end of the first trial, 96 percent fault on the part of the plaintiff and 4 percent fault on the part of the defendant, but this tremendous disparity, tremendous amount of damage makes this 4 percent... could make even the 4 percent a very significant item.
Would even a 96, 97 percent fault be a... possibly be an unusual circumstance that would justify denial of prejudgment interest?
Mr. Stover: I don't think so, Your Honor, but one of the basic reasons that that particular finding of the trial court was overturned was because 96 percent/4 percent is the exact ratio of the claimed damages, $6.5 million and a quarter of a million dollars, and that obviously is no grounds for apportioning fault under a true comparative negligence regime, and that's one of the reasons why it was turned over.
Unknown Speaker: No, but conceivably there could be a valid reason for that kind of an apportionment, and instead of it coming out even, it might have been the city's damages were just half of that amount, and then you'd have a lot of money involved.
Mr. Stover: Justice Stevens, to my way of thinking, and I think the correct way of thinking, is that prejudgment... is that mutual fault either is a reason or it is not a reason, but there's no halfway between.
Unknown Speaker: Well, logically what you say makes a lot of sense, but somehow or other it seems sort of strange to me to say somebody's 96 percent... assuming such a case, 96 or 99 percent fault, and they end up collecting a huge sum of money and getting prejudgment interest.
Somehow it doesn't seem to make sense.
Logically it, does, I--
Mr. Stover: But that's the true comparative negligence regime.
Unknown Speaker: --Yes.
Mr. Stover: You take into account the equities between the parties, their stance, their fault, whatever, down to the point of accident, when you apportioned your negligence.
That's true comparative negligence.
Prejudgment interest shouldn't have anything to do with the negligence.
It's an element of damages.
It has to do with compensation.
It's awarded to make the recovery, whatever the recovery is, the recovery today, not the recovery 5 years, 10 years ago, in this case 13 years before, because that isn't a just recovery.
The reason it isn't a just recovery is because the party that's getting it isn't getting... isn't being put in the place today that it would have been in had the accident not occurred, whereas the... and that's the object, I think, of tort liability.
That's the object of tort litigation, is to get the parties today where they would--
Unknown Speaker: But it doesn't work very well when there is such a long delay in getting the issue resolved.
I'm not sure which party ought to have to bear the burden of the fact that the court didn't get around to it for 10 years.
Mr. Stover: --Well, I can only quote, Justice O'Connor... not quote, but state what the Seventh Circuit said in the Amoco Cadiz decision, which is that delay isn't a reason not to award it.
Delay is a reason to award it.
In this particular case, the court questioned why the delay.
The only abnormal parts of this litigation were a 1-year delay due to the trial court changing, and there was a pending motion on disqualification of counsel, and the court that got it was burdened and didn't have time to do it, and took a year to decide.
The other is that the trial court took 3 years and 3 months to render a decision following the conclusion of submission of briefs.
I can't speak to that.
Unknown Speaker: Who was the judge, just out of curiosity?
Mr. Stover: Judge Curran.
Unknown Speaker: Was it?
Mr. Stover: Judge Thomas Curran in Milwaukee.
But I would like to speak to a couple of things, because I think it bears on what the Court would be interested in in this, and that is what would happen... I said before that to my way of thinking the underlying policy... and I think this is to this Court's way of thinking, too.
I think it was espoused very clearly in the West Virginia case.
The underlying policy or objective is not to put the parties in the same position they would have been in back at the time of casualty, but to put them in the same position today that they would have been in had the casualty not occurred, and the only way to do that is to award interest during the intervening period.
In a case of mutual fault and mutual damage like this, it doesn't make any difference in dollars and cents whether you assess the true comparative negligence and then take the damages and assess prejudgment interest on the city's damages and assess prejudgment interest on the ship's damages and then offset them, or whether you just offset the damages and assess prejudgment interest on the difference.
The dollars and cents comes out identically.
But what is important is that prejudgment interest achieves the objective of placing the parties today where they would have been today had the accident not occurred.
If this Court were to adopt a rule awarding prejudgment interest in mutual fault cases, or making it... well, awarding prejudgment interest in mutual fault cases, which is what I wanted to do, what would be the result?
It would only change the law in the Fifth and Eleventh Circuits, and strangely enough, the Eleventh Circuit, I don't quite understand what happened in the Eleventh Circuit, but--
Unknown Speaker: Both the Fifth and the Eleventh Circuits have a very substantial amount of admiralty business.
Mr. Stover: --Yes, they do, Your Honor, but I would... Mr. Chief Justice, but I would think that if someone claimed that the Fifth Circuit overshadowed the Second Circuit today in the admiralty field that would cause consternation in the ranks.
Unknown Speaker: Well, they do in numbers of cases decided--
Mr. Stover: They probably do.
Unknown Speaker: --I'm told.
Mr. Stover: They may now.
I don't think, Justice O'Connor, that anyone in New York would ever concede that they overshadow New York in history or in importance.
But if this Court were to adopt the rule that the Seventh Circuit and the Sixth Circuit and the Ninth Circuit follow, it would only change the law in the Fifth and Eleventh Circuits.
I started to say, strangely enough, Judge Nangle in a case, it's not cited in anyone's brief, but Judge Nangle of the Southern District of Georgia in June, June 29 of last year, decided a case, a Death on the High Seas Act case, and talked about this very thing, and said, I have already assessed the... taken into account the fault of the parties when I apportioned negligence, and I will not do it again.
Unknown Speaker: He came from the Eighth Circuit.
He used to sit in St. Louis.
Mr. Stover: Oh, did he?
I don't think that explains... well, maybe it does explain it, but he then awarded prejudgment interest to a plaintiff who was... in that case, this was a personal injury case, wrongful death, plaintiff decedent, awarded prejudgment interest to one who was 33-1/3 percent negligent.
Unknown Speaker: Other than saying that the law of the two circuits would be displaced, as opposed to a substantial number of others, would there be any other adverse effects from the rule that the petitioner--
Mr. Stover: Adverse effects from a rule that they want?
Unknown Speaker: --is espousing?
Mr. Stover: I would believe there would be if the rule that they want were adopted by this Court, which is that the Court has discretion to deny prejudgment interest or not to award prejudgment interest in mutual fault cases if it wants to.
It would change the law everywhere except the Fifth and Eleventh Circuits.
It would increase uncertainty in a mutual fault admiralty collision case, and there would be no uniformity.
And as a matter of fact, if that were the rule adopted, I don't know what would be the standard of review.
It would certainly be almost undiscernible as to when a court would abuse its discretion.
Unknown Speaker: I take it the district court under the proposed rule would have, of course, more discretion than the court of appeals on the same subject.
Mr. Stover: I would think so, yes, but how would you measure an abuse of discretion?
I can't see a way to do it.
Unknown Speaker: It would be hard to figure out what to settle for, if you didn't... a lot would depend on whether the district judge chose to give prejudgment interest or not.
Mr. Stover: Yes, sir.
I think it would preclude settlements, or slow them down because of the uncertainty, the lack of uniformity--
Unknown Speaker: Presumably a settlement itself would make the litigation itself and the amount payable become due much earlier, so that prejudgment interest would be a smaller factor than if you tried to assess it after trial and appeal.
Mr. Stover: --By the same token, Mr. Chief Justice, I think that leaving open the question as to prejudgment interest, leaving it up to the discretion of the trial judge, would encourage a party, particularly a party which had incurred lesser damages, to gamble, to roll the dice.
What have we got to lose?
If they decide against us, we just pay what we would have to pay anyway, but in the meantime, we have had... we gamble that we have had this interest free, because the judge in a mutual fault decision will deny prejudgment interest, whereas if the rule is to award it, there is certainty.
And in fact I think that a rule that would award prejudgment interest in mutual fault cases would encourage participation in such things as, certainly in bifurcation, because you know that when you get done with the initial trial on liability, you're going to have certainty.
It isn't going to come back and face you again when it comes to damages.
I think it would encourage the use of mini trials and summary trials again because of certainty.
You know that when you get a decision there it's going to be a reading on what is going to finally occur.
It may not be the exact reading, and half the time it doesn't agree with what you think it's going to be, but it's a reading, an educated reading on the case.
Unknown Speaker: The rule does... that the city advocates does give the district court some insulation against the shock produced by the court of appeals reallocating the fault that he assessed.
Mr. Stover: Well, Justice Kennedy, I don't think the Seventh Circuit is the only one that has ever stepped in and reassessed a fault and even said what it is instead of sending it back, and off-hand I can't cite you the authority, but I remember going through this at the time of the appeal, and they weren't the first who ever did that, but they followed the clearly erroneous rule, and on the face of it the 96-4 apportionment, which was in exact proportion to the damage occurred, claimed to be incurred by the parties, was not exactly cricket for that sort of thing.
Unknown Speaker: I was wondering how they got that percentage.
That's how it was, just the basis of how much each one had incurred.
Mr. Stover: Well, there was--
Unknown Speaker: So in other words, a pox on both of you, go bear your own loss, essentially.
Mr. Stover: --Yes, Justice Scalia.
They didn't exactly come out and say that, but--
Unknown Speaker: It's a sophisticated application of the old divided damage rule.
Mr. Stover: --Well, it seems to me that this Court has before it a true comparative negligence regime, and if you are considering true comparative negligence, then when you compare the negligence and reach a final conclusion as to it, it should be final, and however the outcome after that in damages one party probably is going to recover something from the other.
It may be a lot, it may be a little, but they're going to recover something.
If you want to look at it as each party recovering from the other, each party being a winner and a victim, and each party recovering something from the other, prejudgment interest should be awarded on each recovery, and then you offset them.
What we did here is just bypass that and offset them to begin with, and there was a net recovery.
But the party entitled to the net recovery is entitled to that recovery as if its value today, not its value in this case 13 years previously.
Unfortunately, litigation does take time once in a while.
Unknown Speaker: Would it be, in your view, a permissible special circumstance if the trial... finder of fact thought that the prevailing party for its share of the responsibility was guilty of wilful and wanton misconduct that in other contexts were adjusted by punitive damages?
Mr. Stover: Well, Justice Stevens, I think if one party is guilty of wanton and wilful misconduct in your comparison of negligence you take that into account.
Unknown Speaker: But even though what they did only contributed... was only the causal factor for half of the damages?
I mean, the malicious or wilful character of the conduct might not affect the division between whether it's 75-25, or 35-65, but it would just be a factor that would normally justify punitive damages.
Mr. Stover: Well, if that's your hypothetical, Justice Stevens, I would say that it should not be considered, but I don't think that would be a proper hypothetical, because I can't imagine a trial court faced with wanton and wilful misconduct on the part of one party and ordinary negligence on the part of the other party not taking that into account in apportioning the fault.
I would think every court would do that.
I would like to say one thing.
If this Court should see fit to uphold the Seventh Circuit and to uphold the underlying policy and all, I believe that it would be within the scope of the consideration and within the scope of this case if the Court could lay down some parameters for the awarding of prejudgment interest.
I don't mean talking about prime rate, or Government bonds, or U.S. Treasury bills, or anything like that, because that is within the discretion of the trial court, but fixing some parameters so that it is clear that prejudgment interest is to be awarded as compensation, as damages.
The purpose of it is to place the party that's getting... that's recovering the money in the position that it would have been today had the accident not occurred, and the way to do that is to assess interest during the intervening period at a reasonable... let's say to assess a reasonable or just interest during the intervening point... period from the point of view of the plaintiff to make the plaintiff receive... not the plaintiff, the recovering party, to make the recovering party receive just compensation.
Unknown Speaker: Mr. Stover, how does that differ from the holding of the Seventh Circuit that mutual fault of the parties in a collision case does not constitute a circumstance justifying denial of prejudgment interest.
What more do you want this Court to say, other than that's right or wrong?
Mr. Stover: Well, personally, if the Court will say that, and says I'm right, the Seventh Circuit is right, I wouldn't want any more, but I would just think that as a matter of policy, since this Court is considering prejudgment interest in a mutual fault case and this Court has a history of developing a philosophy to award prejudgment interest unless it's precluded by something in admiralty, by special or peculiar circumstances, of course where there's a statutory prohibition against it, where there's a longstanding legal principle against it, but in other cases this Court has been developing a history of awarding prejudgment interest, so this might be a likely case to fix some parameters, not specific or anything, but some general parameters for the award.
Thank you, Mr. Chief Justice.
Unknown Speaker: Thank you, Mr. Stover.
Mr. Strauss, you have 3 minutes remaining.
Rebuttal of David A. Strauss
Mr. Strauss: Thank you, Mr. Chief Justice.
Two clarifications, and then just one point.
I'm told that one party to the case did settle at the very beginning of the trial, but no effort was made to integrate that settlement with the settlement with the city.
Secondly, Justice Scalia, the passage in The Scotland I was thinking of is at 118 U.S. 519, at 519, the beginning of that page, and let me be clear about what my submission is.
The Scotland is not a mutual fault case, so the claim cannot be made that the prejudgment interest is being used to adjust the... to compensate for the divided damages rule.
What Justice Bradley did there, it seems to me, is to take into account the reasonableness of the defendant's posture in the litigation, and say that justified the exercise of discretion to deny prejudgment interest.
Unknown Speaker: Well, as I read what he says, the posture was that the defendant tried to put up the money into the court, and the court wouldn't have it.
Mr. Strauss: The issue was limitation of liability, and the defendants... what Justice Bradley is saying, I think, is that the defendant tried to pursue this in good faith.
Unknown Speaker: Proffer the money and the court wouldn't allow it.
Mr. Strauss: Right.
Unknown Speaker: Well, I can see a possible reason for... and the plaintiff refused it.
Mr. Strauss: There is a certain coherence to the idea that we should have a nondiscretionary regime in which prejudgment interest is simply awarded as a matter of course no matter what, in order to make the plaintiff whole and take away any windfall from the defendant.
There's a certain coherence to that regime.
Of course, that regime would require upsetting literally a century of precedent.
If we are not going to have that regime, if we are going to have a discretionary regime, then our submission is that a case in which one party pursued the litigation in a reasonable fashion, or at least so the district court apparently thought, and that party was much less at fault than the other, is an appropriate one in which to exercise discretion.
We're not saying that in all such cases prejudgment interest must be denied.
We're not saying that remotely.
What we are saying is that in those cases where the defendant is much less at fault than the plaintiff, and the defendant had reason to think it would not be liable at all, the district court, if there is to be discretion... if there is to be discretion... that is an appropriate case in which the district court should be allowed discretion.
Thank you very much.
Chief Justice Rehnquist: Thank you, Mr. Strauss.
The case is submitted.
Unknown Speaker: The honorable court is now adjurned until tomorrow at ten o'clock.
Argument of Speaker
Mr. Speaker: The opinion of the court order number 94-788, City of Milwaukee v. Cement Division, National Gypsum Company will be announced by Justice Stevens.
Argument of Justice Stevens
Mr. Stevens: This case arises out of American disaster that occurred on Christmas Eve in 1979, when a cargo ship sunk in Milwaukee harbor during a very severe winter storm.
The ship was worth about five million dollars and internally caused some damage to the wharf and the city and the owner of the ship got involved in litigation each accusing the other of negligence.
As result of a long trial and appeals and one thing and other, it was finally determined that the ship owner was primarily responsible for the loss.
Two-thirds of the responsibility requested on the ship owner and one-third on the city, which meant that when they figured out all the pluses and minuses, there was a net liability of about million-and-a-half dollars that the city owed to the ship owner.
The question we have to decide is whether or not pre judgment interest shall be paid on net amount for the period of time since the accident occurred.
The general rule in that time collision cases prejudgement interest is awarded, but there are exceptions for peculiar circumstances and the question in this case is whether either of the fact that the plaintiff which make the major recover was primarily responsible for the loss or the fact that there was the genuine dispute about liability constitutes a kind of exceptional circumstance that will justify a denial of prejudgement interest.
The Court of Appeals and the District Court held that no such interest should be awarded.
The Court of Appeals reversed and we agree with the views of the Court of Appeals and hold that prejudgment interest is appropriate.
Opinion is unanimous except for the fact that Justice Breyer took no part in the decision of the case.