Wrench LLC v. Taco Bell

United States District Court · Contracts

Contractsprejudgment interestpostjudgment interestdiversity jurisdictionM.C.L. § 600.6013(8)28 U.S.C. § 1961prejudgment interestpostjudgment interest

Facts

Plaintiffs sought prejudgment interest under Michigan law and postjudgment interest under federal law after obtaining judgment. Taco Bell did not dispute entitlement to postjudgment interest or to some prejudgment interest, but argued that prejudgment interest should not include the period when the case was on appeal and should stop at the original judgment entered June 4, 2003. The court addressed only those two timing questions concerning the prejudgment interest award. The case was in federal court under diversity jurisdiction.

Issue

In a diversity case applying Michigan prejudgment interest law, does prejudgment interest accrue during the period when the case was on appeal, and does it run through the date of the original judgment or through the date of the amended judgment awarding interest?

Rule

In diversity cases, federal law controls postjudgment interest and state law controls prejudgment interest. Under M.C.L. § 600.6013(8), prejudgment interest is calculated from the filing of the complaint on the entire amount of the money judgment, and this court predicted the Michigan Supreme Court would reject a judicially created exception stopping accrual during an appeal because the statute contains no such text-based exception. Prejudgment interest should continue through the date of the amended judgment awarding it when that best fulfills the statute's compensatory purpose.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nora Kim won a $420,000 money judgment in federal court in Detroit on a state-law contract claim against Lakefront Fabrication, Inc., with jurisdiction based solely on diversity. After judgment, she moved for both prejudgment and postjudgment interest.

Which law should the federal court apply to determine the two kinds of interest?

Explanation. In a diversity case, the governing framework is split: state law governs prejudgment interest, while federal law governs postjudgment interest. The majority opinion expressly applied state law to prejudgment interest and federal law to postjudgment interest under 28 U.S.C. § 1961.