United States District Court, D. Minnesota
MEMORANDUM OPINION AND ORDER
RICHARD NELSON, UNITED STATES DISTRICT JUDGE.
the Court is the Motion for Prejudgment Interest [Doc. No.
4739] filed by Plaintiff ResCap Liquidating Trust
(“ResCap”). For the reasons set forth below,
Plaintiff's motion is granted in part and denied in part.
facts of this litigation have been thoroughly addressed in
prior rulings, which are incorporated by reference. In brief,
Residential Funding Company, LLC (“RFC”)
commenced this action against Defendant Home Loan Center,
Inc. (“HLC”) on December 16, 2013. (Residential
Funding Company, LLC v. Home Loan Center, Inc., No.
14-cv- 1716 (SRN/HB), Affs. of Service [Doc. No. 1-15])
(indicating that service of the Complaint was effected on
December 16, 2013); Minn. R. Civ. P. 3.01(a) (stating that an
action is “commenced” upon service of process).
years preceding its bankruptcy, RFC was in the business of
acquiring and securitizing residential mortgage loans from a
number of originating lenders, including HLC. (See
Scheck Decl. [Doc. No. 3258], Ex. 10 (Horst Dep. at 620-23);
id., Ex. 36 (Ruckdaschel Dep. at 40-41);
id., Ex. 19 (Corr. Hawthorne Rpt. ¶ 17).) RFC
then sold the pooled loans into residential mortgage-backed
securitization (“RMBS”) trusts (“the
Trusts”). (See id., Ex. 19 (Corr. Hawthorne
Rpt. ¶ 17).) The relationships between RFC and the
originating lenders, including HLC, were governed by
contracts and a detailed document known as the Client Guide.
(Id.) Pursuant to the terms of the Client Guide, HLC
made various representations and warranties
(“R&Ws”) concerning the quality of the loans
that it sold to RFC. (Id.) In addition, the Client
Guide contained the following indemnification provision:
“[HLC] also shall indemnify GMAC-RFC and hold it
harmless against all court costs, attorney's fees and any
other costs, fees and expenses incurred by GMAC-RFC in
enforcing the Client Contract.” (Client Guide §
HLC made R&Ws to RFC pursuant to the Client Guide, RFC
made various R&Ws to the Trusts concerning the quality of
the loans pursuant to the contracts between RFC and the
Trusts. (Scheck Decl., Ex. 19 (Corr. Hawthorne Rpt. ¶
17.) Ultimately, the loans in the RFC-sponsored
securitizations experienced a high rate of default.
(Id. ¶ 19.) The Trusts and some of their
monoline insurers experienced significant financial losses.
(Id.) In approximately 2008, multiple entities
demanded that RFC repurchase its loans and/or filed lawsuits
against RFC to recoup their losses. (Id. ¶ 20.)
2012, RFC filed for Chapter 11 relief in the U.S. Bankruptcy
Court for the Southern District of New York
(“Bankruptcy Court”). It ultimately entered into
comprehensive settlements with the Trusts and monoline
insurers, subject to the Bankruptcy Court's approval. In
December 2013, in a 134-page ruling, the Bankruptcy Court set
forth its reasons for confirming and approving RFC's
bankruptcy plan, including the settlements. (See
id., Ex. 28 (Bankr. Findings of Fact).)
litigation, RFC asserted breach of contract and
indemnification claims under Minnesota state law based on the
losses and liabilities it incurred in the Bankruptcy Court
settlements. (Residential Funding Company, LLC v. Home
Loan Center, Inc., No. 14-cv-1716 (SRN/HB), First Am.
Compl. [Doc. No. 1-2] ¶¶ 78-85; 86-89.) Following
the consolidation of this case with numerous other cases
brought in a “first wave” by RFC, the parties
engaged in intensive discovery. The case against HLC was the
only of the first-wave cases to go to trial, as Plaintiff and
other Defendants settled many of the actions. Shortly before
the HLC trial, pursuant to the parties' stipulation,
ResCap withdrew its breach of contract claim and proceeded to
trial against HLC solely on its indemnification claim.
(See Oct. 4, 2018 Order on Stip. [Doc. No. 4515].)
Court presided over the jury trial between ResCap and HLC
from October 15 through November 8, 2018. On November 8,
2018, the jury found HLC liable, and required it to indemnify
ResCap for its underlying losses and liabilities.
(See Redacted Jury Verdict [Doc. No. 4705].) It
awarded ResCap damages in the amount of $28.7 million.
now moves for an award of prejudgment interest, comprised of
the following: (1) $14, 066, 931.50 in preverdict prejudgment
interest running from the commencement of this action through
the jury's verdict; (2) preverdict prejudgment interest
on any award of attorney's fees and costs, as determined
by the Court; and (3) postverdict prejudgment interest
running from the date of the verdict through entry of final
judgment at a rate of 10% per annum on the total of the
jury's award, any attorney's fees and costs, and
opposes the motion, arguing that: (1) the jury's damages
award was for “future damages, ” which are not
subject to prejudgment interest; (2) Plaintiff is not
entitled to prejudgment interest on any award of
attorney's fees and costs; (3) any award of preverdict
interest should be reduced in light of Plaintiff's
dilatory requests for damages discovery; and (4) Plaintiff is
not entitled to postverdict prejudgment interest.
Preverdict Prejudgment Interest from Commencement of Action
Through Jury Verdict
asserts that Minn. Stat. § 549.09 governs the
application of preverdict prejudgment interest for the
following reasons: (1) the value of its claim had to be
determined by litigation; (2) the proper damages methodology
was disputed; (3) there were significant variations in
Plaintiff's damages methodologies; and (4) the amount of
Plaintiff's claim was dependent on the jury's
discretion. (Pl.'s Mem. Supp. Mot. for Prejudgment Int.
(“Pl.'s Mem.”) [Doc. No. 4741] at 4-6.) Thus,
ResCap argues that it is entitled to prejudgment interest on
the jury's award.
opposition, HLC does not dispute the general applicability of
Minn. Stat. § 549.09 to awards of prejudgment interest.
Rather, it argues that ResCap is not entitled to preverdict
interest on the jury's damages award because the damages
constitute “future damages” for liabilities that
ResCap has yet to pay. (Def.'s Opp'n Mem.
(“Def.'s Opp'n”) [Doc. No. 4778] at 4-9.)
ResCap's indemnification claim was asserted under state
law, Minnesota law governs Plaintiff's request for
prejudgment interest. See Ewald v. Royal Norwegian
Embassy, No. 11-cv-2116 (SRN/SER), 2015 WL 1746375, at
*21 (D. Minn. Apr. 13, 2015) (stating general rule that
“prejudgment interest is a substantive remedy governed
by state law when state-law claims are brought in federal
court.”). Under Minn. Stat. § 549.09,
“[w]hen a judgment or award is for the recovery of
money, . . ., interest from the time of the verdict . . .
until judgment is finally entered shall be . . . added to the
judgment or award.” Minn. Stat. § 549.09, subd.
1(a). Where the judgment or award exceeds $50, 000, subject
to certain exceptions that are inapplicable here, “the
interest rate shall be ten percent per year until
paid.” Id., subd. 1(c)(2).
Minnesota Supreme Court has recognized that preverdict
interest is “not conventional ‘interest,
'” but rather, “it is an element of damages
awarded to provide full compensation by converting
time-of-demand . . . damages into time-of-verdict
damages.” Marvin Lumber & Cedar Co. v. PPG
Indus., Inc., 401 F.3d 901, 918 (8th Cir. 2005) (citing
Lienhard v. State, 431 N.W.2d 861, 865 (Minn.
1988)). It is designed to “compensate[ ] [the
plaintiff] for the loss of the use of money occasioned by the
defendant's conduct.” Poehler v. Cincinnati
Ins. Co., 899 N.W.2d 135, 150 (Minn. 2017) (citing
Lienhard, 431 N.W.2d at 865)). Additionally, the
preverdict interest statute aims to promote good faith
settlement negotiations. Skifstrom v. City of Coon
Rapids, 524 N.W.2d 294, 297 (Minn.Ct.App. 1994).
damages “are not readily ascertainable, ”
preverdict interest “should be calculated exclusively
under section 549.09.” Hogenson v. Hogenson,
852 N.W.2d 266, 274 (Minn.Ct.App. 2014). For instance,
section 549.09 applies “when there exist numerous
methods of computing damages which reach vastly different
results.” Matthew v. Unum Life Ins. Co. of
Am., 639 F.3d 857, 865 (8th Cir. 2011); see also
Hutchinson Utils. Comm'n v. Curtiss-Wright Corp.,
775 F.2d 231, 242 (8th Cir. 1985) (finding damages not
readily ascertainable where plaintiff submitted two different
methods of computing damages, the court used a third method,
and damages were “further complicated” by
possible issues concerning allocation of damages between
defendants). Plaintiff here developed three damages
methodologies, two of which were precluded on summary
judgment, and the case also involved allocation issues among
the originating lenders.
where the value of a claim must be determined by litigation,
as was the case here, it is not “readily
ascertainable.” Hogenson, 852 N.W.2d at 274.
HLC strongly contested ResCap's valuation, although it
did not develop its own damages methodology. (See
May 28, 2015 Hr'g Tr. [Doc. No. 509] at 95, 96; Trial Tr.
[Doc. No. 4722] at 2797.) Moreover, Minnesota courts have
also found that where damages depend upon a jury's
discretion, they are not readily ascertainable. See
Potter v. Hartzell Propeller, 189 N.W.2d 499, 504 (Minn.
1971); Noble v. C.E.D.O., Inc., 374 N.W.2d 734, 743
(Minn.Ct.App. 1985). As noted, the damages in this case were
awarded by a jury.
case involved multiple damages methodologies, and the value
of Plaintiff's claim was determined by litigation and a
jury verdict. Accordingly, the Court finds that the damages
in this case were not readily ascertainable, and are subject
to the provisions of Minn. Stat. § 549.09 for awards of
prejudgment interest, absent some exception.