Arbitration/Award: 9th Circuit Rules Decision Arbitrator Decision To Award Interest On Contract Damages Does Not Foreclose District Court From Awarding Interest On Remaining Portions Of Award

 

Ninth Circuit Instructs District Court To Award Plaintiff/Appellant Interest On Non-Contract Damages In Arbitration Award

     Above:  Frenchman’s Flat, Nevada.  Atomic cannon test. 1953.  Library of Congress.

     Judge Duffy’s wry comment upfront signaled where the Ninth Circuit panel was going on this one:  “Lloyd’s pussyfooted for years only to eventually deny the claim . . . “  Pussyfooted.  After its policyholder Dr. Lagstein, a Nevada nuclear cardiologist, filed suit, Lloyd’s had moved to arbitrate a major disability claim with him, only to get whacked with a total damages award of over $6M, including $4M in punitive damages.  “Illustrating the maxim ‘be careful what you ask for’,” wrote Judge Duffy.  Lagstein v. Certain Underwriters at Lloyd’s of London, Nos. 11-17369; 11-17460 (9th Cir. August 5, 2013) (Duffy, D.J., sitting by designation) (published). 

     The arbitrators had awarded interest on $900,000 in contract damages.  Did this preclude the district court from awarding interest on the non-contract damages?  No.  “Courts do not lack authority to award interest where an arbitration award is silent.” [citations omitted].

     The district court’s calculation of interest is reviewed de novo, where as here, it turned on issues of statutory interpretation.  In diversity cases, such as this one, “the court looks to state law to determine the rate of pre-judgment interest, while federal law determines the rate of post-judgment interest.”

     A bit of judicial jujitsu was still necessary to determine the right to prejudgment interest here, because the leading Nevada case had stated, “absent statutory or contractual authority, a district court in a confirmation proceeding may not add prejudgment interest to the arbitration award . . . “  Mausbach v. Lemke, 866 P.2d 1146 (Nev. 1994).  Not to worry, says the Ninth Circuit – Mausbach really meant to say pre-award interest is not allowed in Nevada; it just used the wrong words.  So Dr. Lagstein gets post-award pre-judgment interest. 

     Additionally, post-judgment interest on a district court judgment is mandatory.  28 U.S.C. section 1861.  But since it wasn’t until the date of the 9th Cir. opinion that Dr. Lagstein’s “unconditional legal entitlement to pre[-]judgment interest was initially established,” Dr. Lagstein gets to collect post-judgment interest on the post-award, prejudgment interest as of the date of the 9th Cir. opinion.