Opinion
Civil No. 97-2185 (JRT/RLE)
September 27, 2002
Aubrey M. Daniel, III, Philip A. Sechler, Mary Beth Long, Bradley J. Bondi, Williams Connelly, LLP, Washington DC, Jerry W. Snider, Faegre Benson, Minneapolis, MN, for plaintiff.
Alan L. Kildow, Jennifer K. Eggers, Timothy C. Krsul, Sonya R. Braunschweig, Oppenheimer, Wolff Donnelly, LLP, Minneapolis, MN, Shand S. Stephens, Aon Law Division, San Francisco, CA, for defendant.
MEMORDUM OPINION AND ORDER
Plaintiff Archer Daniels Midland Company ("ADM") brought this action against Aon Risk Services of Minnesota ("Aon") alleging that Aon breached a contract, breached its fiduciary duties and committed broker malpractice by failing to obtain contingent business interruption and extra expense coverage for the $50 million to $100 million layer of ADM's Difference in Conditions ("DIC") insurance program. ADM claimed that it sustained over $100 million in losses as a result of the 1993 flood and that $50 million of its losses would have been covered by the contingent business interruption and extra expense portion of its insurance program had Aon properly executed its duties. Aon claimed that the failure to obtain the requisite insurance for the $50 million to $100 million layer did not cause ADM any damage because ADM's losses would not have been covered under the policy and because ADM did not in fact suffer more than $50 million in losses due to the flood. A jury trial on these claims was held from March 4 through March 21, 2002 and April 1 through April 11, 2002. On April 15, 2002, the jury returned a verdict in ADM's favor on all claims and awarded the company $16.5 million in damages.
This matter is before the Court on Aon's motions for a new trial, judgment as a matter of law, and stay of execution of judgment. Also before the Court is ADM's motion for prejudgment interest, postjudgment interest and amendment of the final judgment. For the reasons that follow, Aon's motion is denied and ADM's motion is granted.
DISCUSSION I. Defendant's Motions for New Trial, Judgment as a Matter of Law, and Stay of Execution of Judgment A. Motion for A New Trial
Under Rule 59, the Court may grant a motion for a new trial to all or any of the parties on all issues or on particular issues. Fed.R.Civ.P. 59(a). The standard for granting a new trial is whether the verdict is against "the great weight of the evidence." Butler v. French, 83 F.3d 942, 944 (8th Cir. 1996). Any other standard "`would destroy the role of the jury as the principal trier of the facts, and would enable the trial judge to disregard the jury's verdict at will.'" White v. Pence, 961 F.2d 776, 780 (8th Cir. 1992) (quoting Fireman's Fund Ins. Co. v. Aalco Wrecking Co., 466 F.2d 179, 187 (8th Cir. 1972)). In evaluating a motion for a new trial pursuant to Rule 59(a), the "key question is whether a new trial should have been granted to avoid a miscarriage of justice." McKnight v. Johnson Controls, Inc., 36 F.3d 1396, 1400 (8th Cir. 1994).
Aon moves for a new trial on numerous grounds, many of which are based on alleged errors in the Court's evidentiary rulings and in its instructions to the jury. Erroneous evidentiary rulings do not warrant a new trial unless they affected the "substantial rights of the parties." Fed.R.Civ.P. 61 ; Anderson v. Genuine Parts Co., 128 F.3d 1267, 1270 (8th Cir. 1997); Norton v. Caremark, Inc., 20 F.3d 330, 338 (8th Cir. 1994). An erroneous jury instruction can warrant a new trial only where the objecting party can show that it was prejudiced by the erroneous instruction. McKay v. WilTel Communication Sys., Inc., 87 F.3d 970, 976 (8th Cir. 1996); Fink v. Foley-Belsaw Co., 983 F.2d 111, 113-14 (8th Cir. 1993) (improper jury instructions or failure to comply with Rule 51 may be ground for a new trial, but only if the moving party can show material prejudice).
Rule 61 of the Federal Rules of Civil Procedure provides:
No error in either the admission or the exclusion of evidence and no error or defect in any ruling or order or in anything done or omitted by the court or by any of the parties is ground for granting a new trial . . . unless refusal to take such action appears to the court inconsistent with substantial justice.
1. Choice of Law
Aon argues first that the Court should have applied Illinois law to ADM's claims. Under Minnesota choice-of-law principles, however, the Court need only make a choice of law determination if there is an actual conflict between the law of competing jurisdictions. Vetter v. Security Cont'l Ins. Co., 567 N.W.2d 516, 521-22 (Minn. 1997). In this case, although Aon repeatedly urged the Court to follow prior rulings rendered in the Phoenix litigation which favored its position, Aon did not demonstrate to the Court that the legal principles and standards of contract interpretation, negligence or breach of contract and fiduciary duty conflicted between the two jurisdictions. Accordingly, the Court concludes that it did not err in this regard.
2. Business Interruption
Section 13Q "covers against loss of earnings and necessary extra expense resulting from necessary interruption of business." In construing the term "interruption of business" the Court instructed the jury as follows:
The phrase "interruption of business" as used in Section 13Q of the DIC policy does not require ADM to show that its corn processing plants stopped or slowed production. An "interruption of business" means some harm to the insured's business, including the payment of extra expense, that would not have been incurred but for damage that an insured peril has caused to the property of any supplier.
Instruction No. 31.
Aon argues that the Court erred in ruling that the word "interruption" in § 13Q of the all-risk DIC policy does not require a shutdown or slowdown in operations to recover contingent extra expense. The Court disagrees. In providing the instruction quoted above, the Court relied on Magistrate Judge Erickson's October 5, 1999 order, in which he observed that Aon need not prove a cessation or slowdown of its business. The Magistrate Judge, who in turn relied upon Judge Foreman's ruling in the Phoenix litigation on this issue, found that an "interruption" in business as used by section 13Q referred only to "some harm to the insured" and that absent such harm, there is nothing for an insurer to indemnify.
The Court also relied on the fact that the purpose of extra expense coverage is to provide coverage for additional costs incurred to avoid a cessation or slowdown in operations. This interpretation is supported by the policy language, which defines "extra expense" as "the excess, if any of the total cost during the `period of restoration' chargeable to the conduct of the insured's business over and above the total cost that would normally have been incurred to conduct the business during the same period had no peril insured against and not excluded occurred." Section 10.B.1 also makes clear that the section covers "extra expense which is necessary to continue as nearly as practicable the normal conduct of the insured's business." (Emphasis added.)
Aon's reliance on cases such as Butwin Sportswear Co. v. St. Paul Fire Marine Ins. Co., 534 N.W.2d 565, 566 (Minn.Ct.App. 1995) for the proposition that an "interruption" of business requires a suspension is misplaced. The policy language in that case expressly required a "suspension" of operations for coverage to apply. By contrast, the term interruption can mean something less than suspension. It can also mean the "state of being interrupted," which includes being "hinder[ed] or interfere[d]" with." Webster's Third New International Dictionary at 1182. In this case, a business is harmed or hindered when it incurs extra expense to secure raw materials as a result of an insured peril's damage to the property of any supplier. For these reasons, the Court concluded that the payment of extra expense under the DIC policy is a sufficient hindrance to qualify as an "interruption" under section 13Q.
3. Identification of Suppliers and Damage to Supplier's Property
Aon contends that ADM was required to identify the particular suppliers who were unable to supply corn to ADM because of damage to their property caused by the flood. The Court addressed this issue in a motion in limine and at trial. On both occasions, the Court rejected Aon's position based on the plain language of the DIC Policy. Section 13Q refers to "any supplier of goods or services . . ." (emphasis added). In its instructions to the jury, the Court defined "any supplier" to include those farmers in the Midwest who supplied ADM with grain or could have supplied ADM with grain, even if indirectly, through country elevators." Instruction No. 32. This instruction was consistent with the Court's in limine ruling on July 25, 2001, and Judge Foreman's ruling in the Phoenix litigation, in which he stated, that "the farmers may be an indirect supplier of the grain, but they are a supplier nonetheless. Had either of the parties wanted to limit the coverage to `direct' suppliers, they could easily have added language to that effect." Archer-Daniels Midland Co. v. Phoenix Assurance Co. of New York, 936 F. Supp. 534, 543-44 (S.D.Ill. 1996). The DIC policy did not require anything further. It covers loss to ADM for injury caused by damage to the property of any supplier.
The term "supplier" was further defined to include the United States Government, specifically, the U.S. Coast Guard and the U.S. Army Corp of Engineers.
Aon also contends the Court erred in instructing the jury concerning damage to ADM's suppliers. According to Aon, the policy required ADM to show that the flood caused a distinct, demonstrable physical alteration to the property in question. The Court disagrees. Minnesota courts have held that direct physical loss to property under an all-risk insurance policy can exist in the absence of structural damage to the insured property. It is sufficient to show that the insured property is injured in some way. General Mills v. Gold Medal Ins. Co., 622 N.W.2d 147, 151-52 (Minn.Ct.App. 2001); Sentinel Mgmt. Co. v. New Hampshire Ins. Co., 563 N.W.2d 296, 300-01 (Minn.Ct.App. 1997). The Court's instruction to the jury was consistent with this caselaw.
Instruction 33 reads as follows:
Under Section 13Q, ADM must show damage or destruction to the real or personal property of any supplier, as defined for you in the previous instruction. Damage may exist in the absence of structural damage to the insured property; it is sufficient to show that the insured property is injured in some way. For instance, damage to the property in question may be shown if the property is unable to perform its intended function.
4. Pass On Theory and Exclusion of Dr. Tyner
Aon takes issue with the Court's exclusion of Aon's pass through theory. In particular, Aon sought to prove that ADM did not incur extra expense for the purchase of corn in the wake of the flood because it passed that extra expense on to its customers by raising prices and actually profiting from the flood. Prior to trial, the Court granted ADM's motion in limine to exclude this evidence because the language of the DIC Policy created two separate and distinct types of coverage: 1) loss of earnings; and 2) extra expense. July 20, 2001 Order at 8-12. Unlike the insurance provisions at issue in other cases which explicitly tied extra expense coverage to lost earnings, the DIC policy in this case expressly disjoined the two concepts. Id. Section 10.B.1, which defined the extra expense coverage throughout the policy, provided for a cost-based measurement for extra expense claims. The Court continues to believe that the language of the DIC Policy controls and therefore required the exclusion of this evidence.For similar reasons, the Court properly excluded the testimony of Dr. Wallace Tyner. Dr. Tyner opined that ADM should have produced more fructose and produced more profits. Like the pass through theory, profits were not relevant to the determination of ADM's extra expense claims. The Court further held that the other portion of Dr. Tyner's testimony regarding whether ADM was a "rational profit-maximizing" firm was not relevant because nothing in the policy permitted insurers to challenge ADM's decision-making or alter its normal business operations. Order July 25, 2001 at 3. The Court affirms these pretrial rulings.
5. Moral Hazard Theory and Exclusion of Wilson and Andreas
In its next two claims, Aon contends that the Court erred in excluding testimony regarding ADM's criminal conduct. In the first instance, Aon argues that the Court should have permitted two of its experts to testify that ADM could not have obtained DIC insurance had the insurer known of ADM's criminal activity. By Order dated August 10, 2001, the Court excluded this so called "moral hazard theory" on the ground that "relevant caselaw provides that an insured does not have an affirmative legal duty to disclose risks to an insurer." Id. at 2-3 (citing Federal Savings Loan Ins. Corp. v. Transamerica Ins. Co., 705 F. Supp. 1328, 1339 (N.D.Ill. 1989). The Court excluded this evidence on the additional basis that its probative value is substantially outweighed by its prejudicial effect. Id. at 3-4. As the Court emphasized in its August 10 Order, the Court was concerned that the introduction of evidence concerning ADM's anticompetitive activity would have a prejudicial impact on the jury and that the evidence itself was only marginally relevant to the issues presented in this broker malpractice lawsuit. Id.
The Court further affirms its pretrial ruling excluding the testimony of Terrance Wilson and Michael Andreas. The Court properly excluded the testimony of Wilson as moot in light of the Court's exclusion of Aon's pass through theory. With respect to Andreas, although the Court permitted Aon to present evidence of ADM's hedging, the taking of his deposition would be unduly cumulative in light of the documents and testimony already in the record concerning ADM's hedging operations.
6. Exclusion of Evidence Relating to Insurance Coverage
Aon contends the Court erred in precluding it from presenting evidence that Aon never understood, nor agreed to provide coverage for the increased cost of corn due to a crop failure or expenses associated with the closing of a river. If such evidence had been allowed, Aon claims it would have established that no contract to procure such coverage was ever formed by the parties because there was no offer or acceptance by the parties of the essential terms of the contract.
As an initial matter, the Court questions the relevance of this evidence in light of Aon's concessions with respect to contract formation and breach of contract issues at trial. Even if the issue was still somehow relevant, the Court is unaware of any legal requirement that an insured must demonstrate that when they purchase a policy, they or the insurers specifically had in mind all possible future applications of its provisions. Rather, the entire purpose of an all-risk policy is to provide coverage for risks not usually covered under other policies, including all fortuitous losses not expressly excluded from coverage. Sentinel Mgmt. Co. v. New Hampshire Inc. Co., 563 N.W.2d 296, 299 (Minn.Ct.App. 1997). Finally, to the extent Aon claims ADM had the burden to prove that the extra expense coverage it allegedly wanted is available in the insurance market and that it could have obtained such coverage, the record established that the DIC policy was otherwise available to ADM; it had procured such coverage for the subject period from Wausau.
7. Inadmissible Witness Testimony
The next series of objections focuses on alleged errors the Court made in allowing: 1) Bruce Scherr to testify concerning corn costs unrelated to ADM's total costs; 2) Steve Mills to testify on hedging results; and 3) ADM's accountants to testify at trial. As previously mentioned, erroneous evidentiary rulings do not warrant a new trial unless they affected the "substantial rights of the parties." Fed.R.Civ.P. 61. The Court does not find this standard satisfied as to any of the objections stated above.
Aon first argues that the Court should have excluded the testimony of Dr. Scherr because: 1) he looked only at the price of corn in the marketplace, not what ADM paid for it; and 2) he did not take ADM's hedging results into account in computing its "total costs" under the DIC policy. The Court did not err in allowing Dr. Scherr to testify at trial. ADM points the Court to portions of the record in which Dr. Scherr examined ADM's practices and costs in procuring corn. ADM further emphasizes the testing conducted by Dr. Scherr to confirm statistically that the changes in the market prices he analyzed demonstrated the extra expense incurred by ADM. Tr. at 602-08 (discussing two types of regression analyses conducted by Dr. Scherr, regressing the price that ADM paid for corn at its Decatur and Peoria plants against the central Illinois elevator bid price of corn and the price received by farmers). Dr. Scherr's methodology was a sufficiently reliable and sound way to determine the impact the flood had on ADM's extra expense costs.
The Court further affirms its pretrial ruling permitting Dr. Scherr's testimony even though he did not take hedging into account in his analysis. As the Court stated in its July 25, 2001 Order, his expert testimony is still relevant and reliable for determining the extra expense ADM incurred when it purchased the corn for its plants. In this regard, his testimony would still assist the jury "to determine a fact in issue." Fed.R.Civ. 702.
The Court also did not err in permitting Steve Mills to testify concerning ADM's hedging results. Mills testified as a fact witness to the accounting records and financial results concerning ADM's hedging activities. As the Court explained in ruling on this objection at trial, the fact that Mills testified to ADM's hedging activities and their accounting treatment does not elevate him to expert status under Rule 702. The core of Aon's objection to Mills' testimony concerns the way in which he calculated hedging results in 1994. Aon contends Mills "transformed" a $22.3 million gain reported to the SEC and the investing public on ADM's 1994 income statement into a $51 million loss. This issue was hotly disputed, but ultimately, the Court concluded that the issue was one to be explored on direct and cross examination and for the jury to resolve. Aon has failed to show that the Court's resolution of the issue in this manner was erroneous or substantially affected its rights.
Next, Aon claims the Court erred in allowing ADM accountants Alan Just and Steve Maulberger to testify regarding the amount of ADM's flood losses. This argument fails. ADM is entitled to prove its insurance losses by calling the accountants who computed the insurance claims without calling each of the operational witnesses with knowledge of the underlying facts. The decision in Diamond Shamrock Corp. v. Lumbermens Mut. Cas. Co., 466 F.2d 722, 727 (7th Cir. 1972) establishes this principle. Id. at 726-27 (allowing a company insurance director to testify to the company's insurance losses where the director compiled the final claim after reviewing ledger entries entered by other employees). The reports underlying the accountants' calculations were admissible under the business records exception to the hearsay rule. Fed.R.Evid. 803(6).
8. Burden of Proof
Aon continues to argue that the Court erred in placing the burden of proving exclusions under the DIC policy on Aon, rather than ADM. The Court dealt with this issue at great length during the trial. After obtaining lengthy argument and briefing on this issue, the Court held that Aon bears the burden of proving that an exclusion under the policy precludes coverage. The Court based this decision, in part, on the principles set forth in a leading insurance treatise, which provides:
In a suit against the broker based on his or her negligent failure to procure coverage, the broker bears the burden of showing, as a defense to the action, that the requested policy would not have covered the loss.
3 Lee R. Russ, Couch on Insurance 3d 46:72 (3d ed. 1995 Supp. 2000). The Court also found relevant the respective burdens that apply in an insured-insurer case involving an "all-risk" policy. In both General Mills, Inc. v. Gold Medal Ins. Co., 622 N.W.2d 147, 153 (Minn.Ct.App. 2001), and Pillsbury Co. v. Underwriters at Lloyd's, London, 705 F. Supp. 1396, 1399 (D.Minn. 1989), Minnesota courts made clear that an insurer bears the burden to show than an express exclusion precludes coverage under an all-risk policy. In the Court's view, it would be illogical that an insurance broker, who is alleged to have failed to procure proper coverage, could be afforded a lesser burden in a broker malpractice case than an insurer in a traditional insurance coverage case.
The Court also rejects Aon's claim that the Court erred in instructing the jury that it had to show that the exclusion was the "overriding cause" of the loss in order for the exclusion to apply. See Instruction No. 27. The caselaw relating to this issue was clear and well-established. SCSC Corp. v. Allied Mutual Ins. Co., 536 N.W.2d 305, 314 (Minn. 1995) ("the insurer bears the burden to show that an excluded cause was the overriding cause of the damages even if other covered causes contributed"); Henning Nelson Constr. Co. v. Fireman's Fund American Life Ins. Co., 383 N.W.2d 645, 653 (Minn. 1986); Campbell v. Insurance Serv. Agency, 424 N.W.2d 785, 789 (Minn.Ct.App. 1988). Aon's motion for a new trial on this ground is thus denied.
9. Erroneous Evidentiary Rulings
As a final catch-all argument, Aon has submitted a chart of the Court's evidentiary rulings that it claims were erroneous and require a new trial. The Court has reviewed each of the issues raised in the chart and concludes that none of the rulings, even if in error, rise to the level of entitling Aon to a new trial under Rule 61.
B. Motion for Judgment as a Matter of Law
Under Rule 50, judgment as a matter of law is appropriate if no reasonable juror could have returned a verdict for the nonmoving party. Weber v. Strippit, Inc., 186 F.3d 907, 912 (8th Cir. 1999). The standard is a demanding one. Children's Broadcasting Corp. v. Walt Disney Co., No. 3-96-CIV-907 (DDA) (Jan. 15 1999) (unpublished opinion). In analyzing a Rule 50 motion, the Court must consider the evidence in the light most favorable to the nonmovant, resolve all factual conflicts in the nonmovant's favor and give the nonmovant the benefit of all reasonable inferences. Ogden v. Wax Works, Inc., 214 F.3d 999, 1002 (8th Cir. 2000). However, the nonmovant is not entitled to "the benefit of unreasonable inferences, or those at war with the undisputed facts." Heating Air Specialists v. Jones, 180 F.3d 923, 932 (8th Cir. 1999). Nor is a "mere scintilla" of evidence adequate to support a verdict. Id. "Judgment as a matter of law is appropriate when the record contains no proof beyond speculation to support the verdict." Id.
Aon claims it is entitled to judgment as a matter of law because: 1) ADM failed to exhaust the underlying policy limits; 2) ADM failed to establish the essential elements of Section 13Q; 3) Claims 26A and 26B are not based on a fortuitous event; and 4) ADM's alleged corn costs are excluded under the growing crops exclusion. The Court addresses each argument in turn.
1. Exhaustion of Policy Limits
As its first argument, Aon resurrects one of the first legal rulings the Court made in this case. Specifically, Aon claims that ADM's entire case is dismissible because it failed to exhaust the underlying levels of insurance. According to Aon, ADM had to collect the actual $50 million before the upper $50 million layer of coverage was triggered. In Aon's view, ADM's settlement for $34.5 million with its underlying insurers does not satisfy the exhaustion requirement contained in the relevant policies.
By order dated February 25, 1999, the Court rejected this argument. Relying on prevailing authority, including Drake v. Ryan, 514 N.W.2d 785, 786-87,789 (Minn. 1994), the Court held that ADM had exhausted the limits of its underlying policies by agreeing to settle with the carriers for a partial sum and choosing to absorb the losses between that sum and the $50,0000 level. Id. at 14. In its current motion, Aon does not present any new argument which might persuade the Court to reconsider its prior ruling. Accordingly, this portion of Aon's motion is denied.
2. Essential Elements of § 13Q
Aon next argues that ADM failed to establish the essential elements of § 13Q of the DIC Policy. Specifically, Aon claims ADM failed to prove that a supplier's property was damaged, a supplier was unable to supply ADM locations and that ADM suffered a necessary business interruption. The Court disagrees. ADM presented evidence, including government reports, USDA data, the testimony of Steve Mulberger, controller for ADM's corn procurement company known as ADM Growmark, and the analysis of Dr. Bruce Scherr to sufficiently establish these elements of its claim.
3. Fortuitous Event
Aon argues that ADM failed to show that its damages were the result of a fortuitous event. All-risk insurance "extend[s] to risks not usually covered under other insurance and recovery under such a policy will, as a general rule, be allowed for all fortuitous losses not resulting from misconduct or fraud, unless the policy contains a specific provision expressly excluding the loss from coverage." Sentinel Mgmt. Co. v. New Hampshire Ins. Co., 563 N.W.2d 296, 299 (Minn.Ct.App. 1997) (quoting 13A George A. Couch, Couch on Insurance 2d § 48:141)). An implied requirement under an all-risk policy is that the loss be fortuitous. Id. "An occurrence is fortuitous if `the outcome of the event * * * [is not] known in advance by the insured.'" Id. Aon contends that ADM, through the testimony of Dr. Scherr, attempted to obtain coverage for non-fortuitous events, such as muddy soil conditions. The Court's instruction to the jury on this issue adequately addressed Aon's concerns. The instruction provided as follows:
Under the all-risk DIC policy, ADM must show that a loss occurred and that the loss resulted from a fortuitous event. Unusually heavy rainfall, flooding or surface waters may be fortuitous events if they happen by chance or accident, occurring unexpectedly.
Instruction No. 24. In a footnote, Aon also contends that the Court's inclusion of "unusually heavy rainfall" in the instruction was erroneous because it is not a fortuitous event. In several cases, including one case first cited to the Court by Aon, courts have held that heavy rainfall is a fortuitous event for purposes of recovery under an all-risk policy. Davis v. Tillman, 370 So.2d 1323, 1325 (La.Ct.App. 1979) (holding that heavy rainfall was a fortuitous event because, while rain may be foreseeable, "excessive rain to the extent of 21 inches above normal, with abnormal frequency . . . does not seem reasonably foreseeable"); Maxwell v. United States, 297 F.2d 554, 556 (Ct.Cl. 1962) ("The unforeseen results caused by the heavy rains was a fortuitous happening for which the defendant cannot be penalized.").
4. Growing Crops Exclusion
Finally, the Court rejects Aon's contention that ADM's claims are precluded under the growing crops exclusion of § 7A of the DIC Policy. As the Court explained at length in its order of July 25, 2001 and reiterated at trial, this exclusion applies only to claims involving the insured's own property and not the property of ADM's suppliers. July 25, 2001 Order at 2-3.
Judge Foreman in the Phoenix litigation reached the same conclusion. Archer Daniels Midland Co. v. Phoenix Assurance Co. of New York, 95 CV-4001 (Sept. 22, 1997) (unpublished opinion).
Thus, for all the foregoing reasons, the Court denies Aon's motion for a new trial, and for judgment as a matter of law.
II. Plaintiff's Motion for Prejudgment Interest, Postjudgment Interest and Amendment of Final Judgment
ADM moves for an award of prejudgment interest, postjudgment interest calculated pursuant to 28 U.S.C. § 1961 and amendment to the final judgment. The Court addresses each of these arguments in turn.
A. Prejudgment Interest under Minn. Stat. § 549.09
ADM moves for prejudgment interest in the amount of $3,618,246.58 pursuant to Minn. Stat. § 549.09. This statute provides, in relevant part: Except as otherwise provided by contract or allowed by law, preverdict, . . .
interest on pecuniary damages shall be computed as provided in clause (c) from the time of the commencement of the action . . . until the time of verdict . . . if the amount of its offer is closer to the judgment or award than the amount of the opposing party's offer. If the amount of the losing party's offer was closer to the judgment or award than the prevailing party's offer, the prevailing party shall receive interest only on the amount of the settlement offer or the judgment or award, whichever is less, and only from the time of commencement of the action . . . until the time settlement offer was made. Subsequent offers and counteroffers supersede the legal effect of earlier offers and counteroffers.
§ 549.09, subd.1(b). Under clause (c) of § 549.09, prejudgment interest is "computed as simple interest per annum" according to the interest rates set by the state court administrator." The statute serves dual purposes: 1) it is intended as an element of damages awarded to provide a party with full compensation; and 2) to promote settlement. Johnson v. Kromhout, 444 N.W.2d 569, 571 (Minn.Ct.App. 1989); Simeone v. First Bank Nat'l Ass'n, 73 F.3d 184, 190-91 (8th Cir. 1996) (interpreting Minn. Stat. § 549.09).
The Statutory Historical Note provides for the following interest rates for the relevant years:
1997: 5 percent
1998: 5 percent
1999: 4 percent
2000: 5 percent
2001: 6 percent
2002: 2 percent
ADM contends it is entitled to interest on the $16.5 million awarded by the jury from the commencement of the lawsuit on September 25, 1997 until the time of the verdict on April 15, 2002. Aon contends that ADM is not entitled to prejudgment interest for two reasons. First, Aon claims interest cannot be awarded because the damage amount awarded by the jury is not a liquidated or sum certain amount. Second, even if an award of prejudgment interest is proper, Aon contends that ADM is limited in the amount it can recover because its offers of settlement were closer to the verdict than were ADM's offers.
The Court first addresses Aon's argument that prejudgment interest is not recoverable because the damage amount was not ascertainable. As stated above, Aon contends that an award of prejudgment interest is not proper where the damages are not readily ascertainable before trial. This argument fails, however, under Minnesota caselaw and the plain language of the statute. In Lienhard v. State, 431 N.W.2d 861 (Minn. 1988), the Minnesota Supreme Court explained that, "[i]n 1984 . . . section 549.09 was amended to allow pre-verdict interest irrespective of a defendant's ability to ascertain the amount of damages for which he might be held liable or to stop the running of interest." Id. at 865. The court characterized such interest as "an element of damages awarded to provide full compensation by converting time-of-demand (either by written settlement offer or commencement of action) damages into time-of-verdict damages." Id. The court thus concluded that "Minnesota's statutory provision for pre-verdict interest appears to represent a retreat from the defendant's point of view in favor of the plaintiff's perspective with respect to compensation." Id.
Numerous decisions have followed Lienhard's lead and have rejected the argument that prejudgment interest is unavailable because damages were unascertainable. Simeone, 73 F.3d at 191; Myers v. Hearth Technologies, Inc., 621 N.W.2d 787, 794 (Minn.Ct.App. 2001); Skifstrom v. City of Coon Rapids, 524 N.W.2d 294, 295-97 (quoting from Lienhard and holding that prejudgment interest is available to plaintiff irrespective of ascertainability). The Court also finds that the Lienhard rule is entirely consistent with the express language of § 549.09, which provides that "the prevailing party shall receive interest on any judgment or award." Emphasis added; see also Simeone, 73 F.3d at 191.
The Court recognizes there are some post-Lienhard decisions that continue to apply the ascertainability rule. See Millard v. Otter Tail County, No. C9-96-366, 1996 WL 665929 at *2-3 (Minn.Ct.App. Nov. 19, 1996) (unpublished opinion); T.B.T.G. Found. v. Pendleton, No. C7-00-615, 2000 WL 1693626 at *4 (Minn.Ct.App. Nov. 14, 2000) (unpublished opinion). However, as the court in Myers stated, "[b]ecause the supreme court has held that preve rdict interest is available `irrespective of a defendant's ability to ascertain the amount of damages,' we conclude that post-Lienhard cases that apply the ascertainability rule . . . are incorrect." 621 N.W.2d at 794.
Having concluded that ADM's claim is not barred for lack of ascertainability, the Court proceeds to Aon's second argument that ADM's award of prejudgment interest is limited by the offer-counteroffer provision contained in § 549.09. As a general rule, a prevailing party is entitled to interest from the time the lawsuit was commenced until the time of the verdict. However, in order to carry out the statute's second purpose of promoting settlement, the statute limits a prevailing party's interest award to the time and amount of a settlement offer if the opposing party's offer is closer to the verdict than the prevailing party's offer.
In this case, Aon contends that the offer-counteroffer exception applies because its first and second offers of $1 million and $1.5 million respectively are closer to the $16.5 million verdict awarded by the jury than ADM's counteroffers of $40 million and $34 million. While it is true that Aon's two offers are closer to the verdict, Aon's claim nonetheless fails because neither of the offers in question were in writing. The statute expressly states that "if either party serves a written offer of settlement, the other party may serve a written acceptance or a written counteroffer within 30 days." § 549.09, subd. 1(b) (emphasis added); see also Amber Express Co., Ltd. v. Heruth, No. C6-97-822, 1997 WL 739327 at *2-3 (Minn.Ct.App. Dec. 2, 1997) (unpublished opinion) ("To constitute a valid offer under Minn.R.Civ.P. 68 and under Minn. Stat. § 549.09, the offer must be in writing and propose sufficiently clear and definite terms that dispose completely of the claims between the parties"); Grab v. Jansport, Inc., 466 N.W.2d 762, 764 (Minn.Ct.App. 1991) (stating that Minn. Stat. § 549.09 expressly requires that all offers be in writing); Stewart v. Anderson, 478 N.W.2d 527, 529 (Minn.Ct.App. 1991) (stating that an offer will not trigger the offer-counteroffer provision under Minn. Stat. § 549.09 unless it is in writing). Accordingly, because the offers were not valid for purposes of § 549.09, ADM is entitled to interest from the time the lawsuit was commenced until the time of the verdict. The Court thus awards ADM $3,616,438.36 for this time period.
The Court computes this figure as follows:
September 25, 1997 to December 31, 1997 (98 days): $221,506.85
$16.5 million x 5% = $825,000.00 $825,000 / 365 days = $ 2,260.27 (per day) $2,260.27 x 98 (days) = $221,506.85
1998: $825,000.00 $16.5 million x 5% = $825,000.00
1999: $660,000.00 $16.5 million x 4% = $660,000.00
2000: $825,000.00 $16.5 million x 5% = $825,000.00
2001: $990,000.00 $16.5 million x 6% = $990,000.00
January 1, 2002 to April 15, 2002 (105 days): $ 94,931.51
$16.5 million x 2% = $ 330,000 $330,000/365 days = $ 904.11 (per day) $904.11 x 105 (days) = $94,931.51
TOTAL $3,616,438.36
ADM also moves for postverdict interest under clause (a) of § 549.09, which provides: "When a judgment is for the recovery of money . . . interest from the time of the verdict . . . until judgment is finally entered shall be computed . . . as provided in clause (c) and added to the judgment or award." Aon does not object to this portion of ADM's motion. The Court therefore awards ADM $1,808.22 in postverdict interest, which represents interest at a 2% rate for the two-day gap between the verdict (April 15, 2002) and entry of final judgment (April 17, 2002). The total amount of prejudgment interest that ADM is entitled to under § 549.09 is thus $3,618,246.58. Pursuant to Rule 59(e) of the Federal Rules of Civil Procedure, the Court amends the final judgment to add that amount to the verdict awarded by the jury. The final judgment is thus amended to be $20,118,246.58.
The Court computes this figure as follows:
(2%) ($16,500,000) (1/365) = 904.11 *2 (days) = $1808.22
This figure is computed as follows: $3,616,438.36 + $1,808.22 = $3,618,246.58
This figure is computed as follows: $16,500,000 + $3,618,246.58 = $20,118, 246.58
B. Postjudgment Interest
Finally, ADM claims it is entitled to postjudgment interest under 28 U.S.C. § 1961. This statute provides, in pertinent part:
Interest shall be allowed on any money judgment in a civil case recovered in a district court . . . Such interest shall be calculated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment . . .
(b) Interest shall be computed daily to the date of payment . . ., and shall be compounded annually.28 U.S.C. § 1961(a). The Federal Reserve has announced a weekly average 1-year constant maturity Treasury yield for the week ending April 12, 2002 of 2.53 percent. Under this rate, a judgment of $20,118,246.58 incurs $1,394.50 per day in postjudgment interest through the first year of indebtedness. The Court thus further amends judgment to reflect Aon's liability for postjudgment interest pursuant to the provisions set forth in 28 U.S.C. § 1961.
ORDER
Based upon the foregoing, the submissions of the parties, the arguments of counsel and the entire file and proceedings herein, IT IS HEREBY ORDERED that:
1. Aon's motion for new trial, judgment as a matter of law, and stay of execution of judgment [Docket No. 401] is DENIED.
2. ADM's motion for prejudgment interest, postjudgment interest and amendment of final judgment [Docket No. 403] is GRANTED.
3. Pursuant to Rule 59(e), the Court's order of final judgment, entered on April 17, 2002, is amended as follows:
a. The amount of final judgment is $20,118,246.58, which reflects the addition of prejudgment interest of $3,618,246.58 to the jury verdict of $16,500,000.
b. Defendant is obligated to pay plaintiff an amount of postjudgment interest based on the final judgment of $20,118,246.58 and calculated in the manner provided in 28 U.S.C. § 1961.
LET JUDGMENT BE ENTERED ACCORDINGLY.