- D.C. Judgment Debtors: Be Sure to Promptly Pay Post-Judgment Interest
- August 4, 2011
- Law Firm: Semmes Bowen Semmes A Professional Corporation - Baltimore Office
Burke v. Groover, Christie, & Merritt, P.C., No. 507-CV-1407 & 07-CV-1420 (District of Columbia Court of Appeals, July 21, 2011)
The District of Columbia Court of Appeals made clear in a recent case that delaying the payment of a judgment is rarely justified and comes with serious consequences. In 2000, a patient sued his doctors for malpractice after he suffered a stroke. The jury awarded the patient 5.7 million dollars in damages. The doctor appealed the case, arguing that the award exceeded the cap on non-economic damages and that the co-defendant had already paid some of the judgment. Three (3) years later, the doctors won the appeal, but the parties disputed the amount of post-judgment interest that was owed to the patient.
The post-judgment interest rate is calculated in relation to the interest rate for unpaid taxes owed to the IRS. Each fiscal quarter, the IRS’s interest rate is recalculated. Over the three (3) years between the time when the patient was awarded the substantial verdict and the time when the doctors eventually paid the judgment, the interest rate had changed, beginning at just three percent (3%) and ending at six percent (6%). The doctors argued that although the IRS’s interest rate fluctuated, the post-judgment interest rate in the District of Columbia was intended to “lock in” at the time judgment is entered, meaning that for the entire three (3) years that the judgment went unpaid, it was accruing just three percent (3%) interest.
The Court of Appeals disagreed with the doctors’ interpretation. The rate of interest for non-payment of tax continues to fluctuate during the time it is owed, so it only makes sense that the interest for non-payment of a judgment would also fluctuate. Furthermore, the Court did not want to create an incentive for judgment debtors to be able to put their money into savings, where it could earn interest at a rate higher than post-judgment interest. If that were the case, a financially savvy debtor could actually make money by failing to pay a judgment promptly, especially if the post-judgment interest rate was “locked in” when the national interest rate was particularly low.
The District of Columbia Code also has a “good cause” exception for the payment of post-judgment interest. If the judgment debtor has good cause for delaying the payment of the judgment, then the court may waive the post-judgment interest. In Jerome Mgmt. v. District of Columbia Rental Housing Comm’n, 682 A.2d 178, 186 (D.C. 1996), the Court had held that where an appeal was delayed for nine years because of an administrative backup at the fault of neither party, there was good cause to waive post-judgment interest. However, this case was distinguishable. The appeal had taken just three (3) years, a relatively common and likely anticipated amount of time. Furthermore, the doctors could not claim unfair surprise, since they knew that the interest rate could potentially be variable. Also cutting against the doctors good cause argument was the fact that the judgment originally awarded against them was decreased by over two million dollars ($2,000,000.00) after the appeal. This good cause exception should only apply in the unusual case when equity compels. If good cause could be found in as common a case as this one, then courts in the future would be hard-pressed not to find good cause in any ordinary appeal.
The patient also requested that the Court grant them post-judgment interest on at least the three percent (3%) post-judgment interest for the time during the pendency of the interest-related appeal. After the first appeal regarding the judgment cap, the two parties disagreed about the amount of post-judgment interest that should be paid, but they did agree that the amount was at least three percent (3%). The patient argued that because the minimum amount owed was easily discernable, he should be awarded interest on that sum. The doctors, on the other hand, argued that there is no authority under the District of Columbia’s law to award interest on unpaid interest. This interest-on-interest was likened to pre-judgment interest. Under neither D.C. Code § 15-108 nor § 15-109 was pre-judgment interest mandated; however, the Court ultimately held that in a tort action, a trial court has the equitable power to award “pre-judgment” interest on the part of an interest award whose validity is undisputed. As such, the case was remanded in order for the trial court to exercise its discretion on the matter.