As this Court has noted in the past, the IRS rate provides an "objective measure of the value of money." Russo v. Unger, 845 F. Supp. 124, 127 (S.D.N.Y. 1994) (Haight, J.) (citation and internal quotation marks omitted). It is true that the IRS rate was at one time held to be excessive in certain cases.
The Court finds that the Secretary has adequately stated a basis for applying the higher interest rate. See Russo v. Unger, 845 F. Supp. 124, 126 (S.D.N.Y. 1994) (stating that "'the district court has discretion to apply the Section 6621 rate, provided it finds, based on the evidence before it, that that rate is an appropriate one consistent with Section 409's standard of making the plan whole, and the court must make specific determination as to that appropriateness'"). Furthermore, the Court notes that the equities weigh in favor of a higher interest rate given that Mr. Silva, in essence, stole from the Plan.
In the search for an appropriate interest rate that compensates without penalizing, district courts have also resorted to two separate federal statutes that purportedly reflect an objective measure of the value of money: 28 U.S.C. § 1961 and 26 U.S.C. § 6621. See, e.g., id. at 616 (affirming the district court's application of 26 U.S.C. § 1961); Russo v. Unger, 845 F. Supp. 124, 127 (S.D.N.Y. 1994) (awarding prejudgment interest at a rate determined by 26 U.S.C. § 6621(a)(1)). 28 U.S.C. § 1961 allows postjudgment interest on money judgments "at a rate equal to the weekly average 1-year constant maturity Treasury yield. . . ."
Such damages are being awarded and the present question is the appropriate method of calculating prejudgment interest, not the appropriate method of calculating damages. Plaintiffs also cite Russo v. Unger, 845 F. Supp. 124, 126 (S.D.N.Y. 1994) (quoting Diduck v. Kaszycki Sons Contractors, Inc., 974 F.2d 270, 286 (2d Cir. 1992)), for its statement that "assessing the appropriate amount of interest requires a comparison of what the plan earned during the time in question and what it would have earned had the money lost due to the breach been available." Russo, 845 F. Supp. at 127, however, declined to use the rate of return that the retirement plan had earned and instead used the Internal Revenue Code interest rate for tax underpayments and overpayments.
And the IRS underpayment rate has been previously used in ERISA cases to measure prejudgment interest. See Russo v. Unger , 845 F. Supp. 124, 126 (S.D.N.Y. 1994) (collecting cases). The district court's decision to use the IRS underpayment rate was well within the realm of permissible choice.
In fact, Holloway's efforts repeatedly exposed a bigger picture—that her co-trustees, as well as UPC, were intentionally trying to conceal information, that the Fund was not paying out claims, and that both the federal government and state governments were investigating the plan. See, e.g., Russo v. Unger, 845 F. Supp. 124, 128–129 (S.D.N.Y. 1994) (fiduciary's failure to protect the participants by turning a blind eye to her cofiduciary's action constitutes "gross delinquency," despite lack of willfulness or actual knowledge on her part). For instance, the Fund ultimately settled its differences with Oak Tree in late August, when the Fund agreed to pay Oak Tree $22,000 for its services.
See Restatement (Third) of Trusts §§ 76(2)(b), 83; Ream v. Frey, 107 F.3d 147, 156 (3d Cir. 1997). See, e.g., Russo v. Unger, 845 F. Supp. 124, 128-129 (S.D.N.Y. 1994) (fiduciary's failure to protect the participants by turning a blind eye to her cofiduciary's action constitutes "gross delinquency," despite lack of willfulness or actual knowledge on her part). In addition, a trustee must also take prudent precautions, such as by providing for a "suitable and trustworthy replacement," to ensure that his resignation does not harm the Fund or its beneficiaries.
See Safran v. Donagrandi, No. 08-12366, 2009 WL 1133462, at *2 (E.D. Mich. April 27, 2009). See also Russo v. Unger, 845 F. Supp. 124, 126-27 (S.D.N.Y. 1994) (discussing use of § 6621(a)(1) rate of interest in ERISA context). It is well-recognized law in the Sixth Circuit that "the district court may [award prejudgment interest] at its discretion in accordance with general equitable principles."
The rate given in subsection (a)(2) of 26 U.S.C. § 6621 is the appropriate rate to use in ERISA cases where a fiduciary, rather than a beneficiary, sues an employer for unpaid contributions. Russo v. Unger, 845 F. Supp. 124, 126 (S.D.N.Y. 1994) (noting the rate of pre-judgment interest used should be appropriate with the goal of making the ERISA plans whole, not with punishing the defendant). This means the appropriate rate in this case is the Federal short-term rate plus three percentage points.
Moreover, interest under 26 U.S.C. § 6621 "shall be compounded daily." 26 U.S.C. § 6622(a); see also Russo v. Unger, 845 F. Supp. 124, 128-129 (S.D.N.Y. 1994). A table calculating the interest rates mandated by 26 U.S.C. § 6621 is published by the Internal Revenue Service in a Revenue Ruling.