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Westport Insurance Corp. v. California Casualty Management Co.

United States District Court, N.D. California

May 30, 2017

WESTPORT INSURANCE CORPORATION, Plaintiff,
v.
CALIFORNIA CASUALTY MANAGEMENT CO., Defendant.

          ORDER GRANTING MOTION TO SET PRE-JUDGMENT INTEREST RE: DKT. NO. 82

          William H. Orrick United States District Judge.

         INTRODUCTION

         I granted summary judgment on plaintiff Westport Insurance Corporation's (“Westport”) motion, awarding judgment in favor of Westport in the amount of $2.6 million, plus interest, against defendant California Casualty Management Company (“California Casualty”) because California Casualty had refused to contribute to the settlement of the underlying sexual molestation claims. Final Judgment ¶ 4 (Dkt. No. 80). Westport now moves to set pre-judgment interest. Pursuant to Civil Local Rule 7-1(b), this matter is appropriate for resolution without oral argument, and the May 31, 2017 hearing is VACATED. For the reasons discussed below, Westport's motion is GRANTED; the judgment shall be corrected to include $755, 637.20 in pre-judgment interest.

         BACKGROUND

         The background of this case and the underlying claims is described in detail in the Order Granting Westport's Motion for Summary Judgment and Denying California Casualty's Motion for Summary Judgment (“Prior Order”)(Dkt. No. 78). Briefly, three students (Does 1, 2, and 3) at Joaquin Moraga Intermediate School in the School District alleged that they were sexually molested in the mid-1990s by their teacher. Compl. ¶ 2 (Dkt. No. 1). In January 2013, Does 1 and 2 filed one lawsuit against the Administrators and the School District, and the same month, Doe 3 filed a separate lawsuit against the Administrators and the School District. Id. ¶¶ 10, 19. Westport provided insurance for the School District via two policies of primary general liability insurance, under which the Administrators were also insured. DeLonday Aff. ¶ 2 (Dkt. No. 68). It also issued to the School District a series of excess liability insurance policies. Id. ¶ 8. In contrast with Westport, California Casualty provided only excess liability insurance that covered the Administrators, not the School District. Moreno Decl. ¶ 6 (Dkt. No. 63). On July 29, 2013, [1]Westport paid $1.8 million to settle the Doe 3 claim, and on June 26, 2014, it paid $14 million to settle the Doe 1 and Doe 2 claims. Third DeLonay Aff. ¶¶ 3-5 (Dkt. No. 82-1). California Casualty declined to contribute.

         On summary judgment, I ruled that because the settlements exhausted the applicable limits of Westport's primary policies, California Casualty was required to contribute to the settlements. Prior Order at 12-14 (Dkt. No. 78). Westport initially sought contribution of $2.7 million, see Westport's Mot. for Summ. J. at 23 (Dkt. No. 67), but in opposition to California Casualty's cross-motion for summary judgment, proposed allocating liability on an equal basis, apportioning 25 percent to each of the four defendants, Westport's Opp'n to Summ. J. at 18-21 (Dkt. No. 71). Since California Casualty insured only the Administrators and not the School District, this proposed apportionment reduced Westport's contribution request by $100, 000, to $2.6 million. Id. at 21. I agreed that the settlements should be allocated among the defendants, and awarded judgment against California Casualty and in favor of Westport in the amount of $2.6 million, plus interest. Final Judgment ¶ 4 (Dkt. No. 80).

         Westport now seeks to set pre-judgment interest at an annual rate of 10 percent, for an additional award of $755, 637.20. Westport's Mot. to Set Pre-Judgment Interest at 2 (“Mot.”)(Dkt. No. 82).

         LEGAL STANDARD

         Federal Rule of Civil Procedure 60(a) allows a court to correct clerical mistakes in judgments. Fed.R.Civ.P. 60(a). It “governs postjudgment motions for prejudgment interest when the original judgment explicitly allows for prejudgment interest but fails to specify the precise dollar value of interest, provided that the amount can be calculated later with relative certainty.” McCalla v. Royal MacCabees Life Ins. Co., 369 F.3d 1128, 1133 (9th Cir. 2004). Whereas when an original judgment does not allow for mandatory prejudgment interest, revising the judgment to include prejudgment interest requires amending the judgment under Federal Rule of Civil Procedure 59(e). Id. at 1131 (citing Osterneck v. Ernst & Whinney, 489 U.S. 169, 176-77 n.3 (1989)).

         DISCUSSION

         The Final Judgment awarded $2.6 million, plus interest. Final Judgment ¶ 4. It did not include a precise dollar amount for interest. Accordingly, I treat Westport's “motion to set pre-judgment interest” as a motion under Federal Rule of Civil Procedure 60(a) to correct the judgment, not to amend it under Federal Rule of Civil Procedure 59(e). California Casualty raises three arguments opposing Westport's motion. See California Casualty's Opp'n at 1 (“Opp'n”)(Dkt. No. 84). It contends that the appropriate interest rate is 7 percent, not 10 percent; it urges that the claim was unliquidated, and therefore an award of prejudgment interest is discretionary and not mandatory; and it insists that prejudgment interest is limited to a start date no earlier than the date this action was filed. Id.

         I.WESTPORT'S DAMAGES WERE CERTAIN AND AN AWARD OF PREJUDGMENT INTEREST IS MANDATORY

         “Prejudgment interest in a diversity action is a substantive matter governed by state law.” U.S. Fid. & Guar. Co. v. Lee Investments LLC, 641 F.3d 1126, 1139 (9th Cir. 2011)(quotation marks and alterations omitted). Under California law, “[a] person who is entitled to recover damages certain, or capable of being made certain by calculation, and the right to recover which is vested in the person upon a particular day, is entitled also to recover interest thereon from that day[.]” Cal. Civ. Code § 3287(a).

         Westport contends that its “damages became liquidated and certain on the date that it paid the underlying settlements.” Mot. at 3. California Casualty responds that “[t]he damages awarded by the Court were determined based upon the application of facts to the case that allowed the Court to allocate the settlement among the underlying defendants.” Opp'n at 3. It is true that the summary judgment order allocated the damages between the four defendants in the underlying actions, but it is not true that ...


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