Jou v. Adalian et al
Filing
195
ORDER DECLARING THE APPLICABLE POST-JUDGMENT INTEREST RATE re: 189 . Signed by JUDGE J. MICHAEL SEABRIGHT on 11/23/2015. (afc)"[T]he court DETERMINES that the federal post-judgment interest rate set forth in 2 8 U.S.C. § 1961 applies to the December 23, 2010 Judgment. The court further finds that Defendant has paid such debt in full." CERTIFICATE OF SERVICEParticipants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications were served by first class mail on the date of this docket entry
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
EMERSON M.F. JOU, M.D.,
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Plaintiff,
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vs.
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GREGORY M. ADALIAN,
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Defendant.
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________________________________ )
CIVIL NO. 09-00226 JMS-BMK
ORDER DECLARING THE
APPLICABLE POST-JUDGMENT
INTEREST RATE
ORDER DECLARING THE APPLICABLE POST-JUDGMENT
INTEREST RATE
I. INTRODUCTION
This case has a long and complicated history -- many of the details
are explained in the court’s February 5, 2015 Order that denied Plaintiff Emerson
M.F. Jou’s (“Plaintiff”) motion seeking an order incarcerating Defendant Gregory
M. Adalian (“Defendant”) for his failure to pay an outstanding Judgment. See
Doc. No. 161, Jou v. Adalian, 2015 WL 477268 (D. Haw. Feb. 5, 2015). The only
remaining matters are the rate and amount of post-judgment interest due to
Plaintiff. Specifically, the question is whether Defendant owes post-judgment
interest of ten percent under Hawaii law (Hawaii Revised Statutes (“HRS”) § 4783) or, alternatively, a much lower rate given current schedules under federal law
(28 U.S.C. § 1961).
Before the court is Plaintiff’s September 16, 2015 “Motion for
Determination that the Contractual Interest Rates Apply,” Doc. No. 189, which the
court construes as a motion seeking a declaration of the applicable post-judgment
interest rate (“Motion”). Based on the following, the court determines that the
federal interest rate under § 1961 applies.
II. BACKGROUND
Plaintiff filed this diversity action on May 19, 2009, seeking payment
of monies owed by Defendant under various agreements and promissory notes.
Doc. No. 1, Compl. Pursuant to a July 6, 2010 Settlement Agreement and Release
(“SA”), the parties agreed to dismiss this action upon Defendant’s payment of
“$25,000.00, on or before July 6, 2010 and $155,000 no later than September 30,
2010.” Doc. No. 69-3, SA ¶ 3. The current dispute arises from the following
clause in the SA titled “Jurisdiction And Enforcement:”
This Agreement shall be governed by the laws of the
State of Hawaii. In the event that enforcement of any
term of this Agreement is necessary, the prevailing party
is entitled to recover all costs, interest, and legal fees
incurred in such enforcement procedure.
Id. ¶ 10.
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Defendant made the first payment, but did not make the September
30, 2010 payment. Consequently, on October 6, 2010, Plaintiff filed a Motion to
Enforce Settlement Agreement and for Damages, Attorney’s Fees, Costs and
Judgment (“Motion to Enforce”). Doc. No. 69. The Motion to Enforce did not
specifically seek interest on the amount not paid. On November 19, 2010,
Magistrate Judge Kevin S.C. Chang issued a Findings and Recommendation to
Grant in Part and Deny in Part the Motion to Enforce (“F&R”). Doc. No. 80. The
F&R recommended (1) that Defendant be ordered to pay the balance of $155,000
within one week of this court taking final action on the F&R; (2) entry of final
judgment of $155,000 in favor of Plaintiff and against Defendant; (3) denial of
Plaintiff’s request for civil contempt, damages, and sanctions; and (4) an award of
fees and costs incurred in connection with the Motion to Enforce. Id. at 2-3. The
F&R made no mention of interest on any amounts past due under the SA.
Accordingly, on November 22, 2010, Plaintiff’s counsel submitted a
Declaration seeking $18,654.44 in attorney’s fees, and $303.94 in costs incurred in
connection with enforcing the SA. Doc. No. 81. On November 23, 2010,
Magistrate Judge Chang issued a Supplement to the F&R that recommended an
additional award of $6,365.36 in attorney’s fees, tax, and costs (thus rejecting
many of the hours sought by Plaintiff’s counsel), also to be paid within one week
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of this court taking final action on the F&R. Doc. No. 82, Suppl. at 3. Defendant
objected to the F&R as supplemented, and Plaintiff filed a cross-objection. Doc.
No. 86. Plaintiff’s cross-objection took issue with the reduction in the amount of
fees sought, id. at 3, but did not object to any lack of an award of interest.
On December 23, 2010, this court adopted the F&R as supplemented,
declining to increase the award of fees, costs, and tax from amounts recommended
by Magistrate Judge Chang. Doc. No. 88, Order Adopting November 19, 2010
Findings and Recommendation to Grant in Part and Deny in Part Plaintiffs’
Motion to Enforce Settlement Agreement and for Damages, and the November 23,
2010 Supplement to the Findings and Recommendation (the “December 23, 2010
Order”) at 7. The court directed Defendant to pay all outstanding amounts within
one week and retained jurisdiction to enforce the terms of the SA. Id. at 8-9. And
on December 23, 2010, final judgment was entered as follows:
IT IS ORDERED AND ADJUDGED that Judgment is
entered in favor of the Plaintiff Emerson M. F. Jou,
M.D., in the amount of $155,000.00 and against the
Defendant Gregory M. Adalian and all claims asserted in
the Second Amended Complaint are dismissed with
prejudice, pursuant to the “Order Adopting the
November 19, 2010 Findings and Recommendation to
Grant in Part and Deny in Part Plaintiffs’ Motion to
Enforce Settlement Agreement and for Damages, and the
November 23, 2010 Supplement to the Findings and
Recommendation”, filed on December 23, 2010. It is
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further ordered that Plaintiff is awarded $5,796.00 in
attorneys’ fees, $273.11 in tax, and $296.25 in costs for a
total of $6,365.36.
Doc. No. 89, Judgment.
Defendant did not pay the outstanding amounts within one week, and
Plaintiff initiated numerous attempts to collect the Judgment, primarily by use of
the court’s contempt powers. See Doc. No. 161, Order Denying Plaintiff’s Motion
for an Order for Arrest and Incarceration of Defendant at 2-12; Jou, 2015 WL
477268, at *1-5 (summarizing attempts to collect the Judgment, and determining
that contempt powers were not available for such purposes). Proceedings were
significantly delayed during Defendant’s various bankruptcy proceedings in the
U.S. Bankruptcy Court for the District of Pennsylvania. Id. After completion of
bankruptcy proceedings, on February 5, 2015, this court concluded that contempt
powers were inapplicable to collection of a judgment -- rather, collection was
controlled by Federal Rule of Civil Procedure 69 by executing on the Judgment.
Id.
On August 24, 2015, a Stipulated Order was filed as part of a
proposed resolution of this action. Doc. No. 187. A dispute, however, remained
as to the rate and amount of post-judgment interest. The parties noted that
Defendant paid $50,000 to Plaintiff on April 10, 2015, and the parties agreed in
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part that:
(1) Defendant would pay $113,555.02, representing the balance due
on the Judgment and post-judgment interest at the federal rate under
28 U.S.C. § 1961 of 0.30 percent, plus an additional payment of
interest at this rate from August 8, 2015 until the date of payment;
(2) Defendant’s payment of that amount will stop the accrual of any
further post-judgment interest until resolution by the court of the rate
and amount of interest; and
(3) Plaintiff would file a motion to determine “what post-judgment
interest rate applies, and how it is to be applied based on the payment
already made.” If the court applies the Hawaii rate of interest,
Plaintiff would be entitled to an additional amount.
Doc. No. 187, Stip. Order ¶¶ 4-5, 7.
Accordingly, Defendant paid Plaintiff $113,571.80 on August 25,
2015, and Plaintiff filed the instant Motion on September 19, 2015. Defendant
filed his Opposition on October 5, 2015, Doc. No. 192, and Plaintiff filed a Reply
on October 16, 2015. Doc. No. 193. On October 28, 2015, the court determined
that this matter is suitable for disposition without a hearing under Local Rule
7.2(d). Doc. No. 194.
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III. DISCUSSION
Plaintiff contends that post-judgment interest should be calculated at
the Hawaii statutory interest rate of ten percent set forth in HRS § 478-3,1 rather
than the federal rate of 0.30 percent -- the weekly average for the one-year
constant maturity U.S. Treasury yield for the week preceding the date of judgment
as set forth in 28 U.S.C. §1961, and as published by the Board of Governors of the
Federal Reserve System. More specifically, Plaintiff argues that pursuant to the
SA, the parties explicitly agreed to apply the Hawaii rate rather than the federal
rate generally applicable to diversity actions for post-judgment interest. The court
disagrees.
A.
Legal Standards
Generally, “[i]n diversity actions, state law determines the rate of
prejudgment interest, and postjudgment interest is governed by federal law.’” Am.
Tel. & Tel. Co. v. United Computer Sys., Inc., 98 F.3d 1206, 1209 (9th Cir. 1996)
(citing Northrop Corp. v. Triad Int’l Mktg., S.A., 842 F.2d 1154, 1155 (9th Cir.
1988) (per curiam)); see also In re Cardelucci, 285 F.3d 1231, 1235 (9th Cir.
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HRS § 478-3 provides: “Interest at the rate of ten per cent a year, and no more, shall be
allowed on any judgment recovered before any court in the State, in any civil suit.” Similarly,
HRS § 478-2 provides, in part: “When there is no express written contract fixing a different rate
of interest, interest shall be allowed at the rate of ten per cent a year.”
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2002) (“It has long been the rule that an award of post-judgment interest is
procedural in nature and thereby dictated by federal law.”). Under federal law, the
rate of post-judgment interest is governed by 28 U.S.C. § 1961, which provides:
Interest shall be allowed on any money judgment in a
civil case recovered in a district court. . . . Such interest
shall be calculated from the date of the entry of the
judgment, at a rate equal to the weekly average 1-year
constant maturity Treasury yield, as published by the
Board of Governors of the Federal Reserve System, for
the calendar week preceding the date of the judgment.
28 U.S.C. § 1961(a). Nevertheless, an “exception to § 1961 exists when the
parties contractually agree to waive its application.” Fid. Fed. Bank, FSB v.
Durga Ma Corp., 387 F.3d 1021, 1023 (9th Cir. 2004); see, e.g., Tricon Energy
Ltd. v. Vinmar Int’l, Ltd., 718 F.3d 448, 456-57 (5th Cir. 2013) (“[I]t is well
settled that parties may contract for a different [post-judgment interest] rate.”).
To be effective, an agreement to waive application of § 1961 and
apply a different interest rate to judgments requires explicit language that is clear,
unambiguous, and unequivocal. See Tricon Energy Ltd., 718 F.3d at 456-57
(explaining that to waive application of § 1961, parties must “specifically contract
around the general rule that a cause of action reduced to a judgment merges into
the judgment and the contractual rate therefore disappears for post-judgment
purposes”) (emphasis added); see also, e.g., Kanawha Gauley Coal & Coke Co. v.
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Pittston Minerals Grp., Inc., 501 F. App’x 247, 254 (4th Cir. 2012) (determining
that lease provision specifying particular interest rate for late payments did not
constitute the “necessary clear, unambiguous, and unequivocal language
indicating the parties’ express intent to agree on a post-judgment interest rate”);
FCS Advisors, Inc. v. Fair Fin. Co., 605 F.3d 144, 147 (2d Cir. 2010) (“[P]arties
are free to agree to a different post-judgment interest rate by contract, provided
that they do so through clear, unambiguous and unequivocal language.”) (internal
citation and quotation marks omitted); In re Riebesell, 586 F.3d 782, 794 (10th
Cir. 2009) (“If parties want to override the general rule on merger and specify a
different post-judgment interest rate, they must express such intent through clear,
unambiguous and unequivocal language.”); Citicorp Real Estate, Inc. v. Smith,
155 F.3d 1097, 1107-08 (9th Cir. 1998) (affirming waiver of § 1961 where the
parties stipulated to an arbitration award specifically applying the contractual
interest rate both before and after the judgment until collection).
B.
Application of Standards
The SA provides, under a heading titled “Jurisdiction And
Enforcement,” that it “shall be governed by the laws of the State of Hawaii,” and
that “[i]n the event that enforcement of any term of this [SA] is necessary,” then
“the prevailing party is entitled to recover all costs, interest, and legal fees
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incurred in such enforcement procedure.” Doc. No. 69-3, SA ¶ 10. The question
is whether this contractual language clearly, unambiguously, and unequivocally
demonstrates that the parties intended to waive application of § 1961 in lieu of the
rate in HRS § 478-3 for post-judgment interest.
General choice-of-law provisions do not demonstrate a clear and
unequivocal intent to waive application of § 1961 in favor of state statutory
interest rates. See Fid. Fed. Bank, FSB, 387 F.3d at 1023 (determining that
choice-of-law clause in contract, without any reference to interest rates, evinced
no agreement between the parties to apply state statutory interest rate to postjudgment interest and therefore, failed to waive application of § 1961); see also
Jack Henry & Assocs, Inc. v. BSC, Inc., 487 F. App’x 246, 260 (6th Cir. 2012)
(ruling a “bare choice-of-law provision . . . [that referenced a statutory] default
contractual interest rate, without more,” insufficient to waive application of
§ 1961); FCS Advisors, Inc., 605 F.3d at 147 (determining that the choice of law
provision in the parties’ contract could not be deemed a clear expression of intent
to have New York statutory interest rate, rather than federal law, apply to the
calculation of post-judgment interest).
And contractual provisions regarding interest generally, absent a
specific reference to post-judgment interest, are insufficient to demonstrate a clear
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and unequivocal intent to waive § 1961. See In re Riebesell, 586 F.3d at 794-95
(applying § 1961 based on finding that promissory note’s provision that specific
interest rate would accrue “until payment” was insufficient to demonstrate the
parties’ intent to contract for a post-judgment interest rate); see also In re Trigeant
Holdings, Ltd., 523 B.R. 273, 279 (S.D. Fla. 2015) (“[T]o permit deviation from
section 1961, . . . an unquestionable reference to the potential for a future . . .
judgment and the imposition of a specific interest rate thereafter must appear in
the text.”); Crosthwaite v. Tim Kruse Constr., Inc., 2014 WL 4683719, at *7 (N.D.
Cal. Sept. 17, 2014) (applying § 1961 where contractual provisions setting interest
rate for delinquencies neither “expressly state that the parties agree to a specified
post-judgment interest rate, nor expressly state that the parties agree to contract
around [§ 1961]”).
Here, the SA’s language specifying that it “shall be governed by the
laws of the State of Hawaii” is no more than a general choice-of-law provision.
Although Hawaii law applies when interpreting the SA, without more this clause
does not demonstrate clearly, unambiguously, and unequivocally that the parties
intended to waive application of § 1961 in lieu of HRS § 478-3 for a postjudgment interest rate. And neither the provision entitling the prevailing party in
enforcement procedures to interest, nor any other provision of the SA contains
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language expressly referencing post-judgment interest, a specific interest rate, or
waiver of § 1961. In short, the SA fails to show clearly, unambiguously, and
unequivocally that the parties waived application of § 1961.
Plaintiff’s arguments to the contrary are unpersuasive. Plaintiff
argues that, under Hawaii law, contractual interest rates “pass through” to the
judgment. Doc. No. 189-1, Pl.’s Mot. at 3. He relies on Metro. Mortg. & Sec. Co.,
448 B.R. 527 (D. Haw. 2011), aff’d, GBBY Ewa P ship v. Fin. Factors, Ltd., 584
F. App’x 366 (9th Cir. 2014) (“GBBY”) (indicating that a contractual interest rate
in a promissory note continues to apply even after entry of a foreclosure decree
and judgment based on the note’s default) and similar cases. But GBBY was
addressing a foreclosure judgment under Hawaii law under Hawaii’s bifurcated
foreclosure process -- not a federal money judgment such is at issue here with the
December 23, 2010 Judgment. Indeed, GBBY recognized the general rule that “an
award of post-judgment interest is procedural in nature and thereby dictated by
federal law” for a federal money judgment. Id. at 532 (quoting In re Cardelucci,
285 F.3d at 1235).
Plaintiff also argues that under Hawaii law, if a contract is silent
regarding post-judgment interest, it incorporates HRS § 478-3. See Quedding v.
Arisumi Bros., 66 Haw 335, 338, 661 P.2d 706, 709 (1983) (recognizing the
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“general rule that the existing law is part of a contract where there is no stipulation
to the contrary”); Honolulu v. Kam, 48 Haw. 349, 354-55, 402 P.2d 683, 687
(1965) (finding that the statutory interest rate was incorporated into a contract
which was silent on the rate itself). But this case is in federal, not state, court and
the SA does not explicitly waive the federal post-judgment interest rate as required
by federal law. See, e.g., Fid. Fed. Bank, FSB, 387 F.3d at 1023 (determining that
absent specific language referencing interest rates, contract failed to demonstrate
intent to apply state statutory post-judgment interest rates in lieu of § 1961); see
also Jack Henry & Assoc., Inc., 487 F. App’x at 260 (ruling that mere application
of state law referencing statutory interest rate without more to be insufficient to
waive § 1961).
And finally, Plaintiff appears to assert that the parties specifically
agreed to apply Hawaii law in any enforcement proceeding, thus necessarily
including Hawaii statutory interest rates in such an enforcement proceeding. But
the court is no longer addressing Plaintiff’s Motion to Enforce the SA -- that
Motion was granted in December 2010. See Doc. No. 88. In granting the Motion
to Enforce, the court awarded $155,000 and $6,365.36 in fees, costs, and
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applicable tax. Id. That award was reduced to final judgment.2 Doc. No. 89. The
court is now only addressing the rate and amount of post-judgment interest.
Plaintiff has already “enforced” the SA; he is now attempting to collect on a final
judgment. The court is simply determining the exact amount that he is entitled to
collect. Thus, even assuming arguendo that the SA could be read to include a
Hawaii statutory rate in a pre judgment enforcement action, such a figure would
not control the rate of post-judgment interest. Again, post-judgment interest
(absent specific, clear and unambiguous language to the contrary) is controlled by
federal law under 28 U.S.C. § 1961.
C.
Calculation of Post-Judgment Interest
On August 24, 2015, the parties stipulated that Plaintiff “will move
the Court . . . [for] an Order . . . as to what post-judgment rate of interest applies,
and how it is to be applied based on the payment already made.” Doc. No. 187,
Stip. ¶ 7. After Plaintiff filed the instant Motion seeking to apply Hawaii law, the
court instructed Defendant (if he sought to apply a different interest rate) to
provide the exact interest rate he sought to apply. Doc. No. 190. In his
Opposition seeking to apply the federal rate under § 1961, Defendant attached the
2
Whether Plaintiff could also have been awarded pre-judgment interest of ten percent
under Hawaii law based on the enforcement provision in the SA at that time, has no bearing on
the amount of post-judgment interest. The fact remains that the SA did not explicitly,
unambiguously, and unequivocally choose state law over federal law for post-judgment interest.
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applicable Post-Judgment Federal Interest Rate Table of 2010. Doc. No. 192-5.
He also detailed his calculations using those figures, explaining how he arrived at
the amount of the $113,571.80 payment. Doc. No. 192-6. These calculations
include post-judgment interest from December 23, 2010 until August 25, 2015.
See id. And in his Reply, Plaintiff did not specifically challenge those calculations
(assuming the federal rate applies).
Specifically, Defendant contends that he has paid all amounts due and
explains his calculations as follows:
Mr. Adalian specifically applied the federal postjudgment interest rate for the Judgment as fixed by the
weekly average for the one year constant maturity U.S.
Treasury yield for the week ending prior to the date of
the Judgment (the week ending 12/17/10), which was
.30%. See [Doc. No. 192-5, Def.’s Ex. 4] (Federal PostJudgment Interest Rate Publ. Table, at p.3). This amount
was applied from December 23, 2010 -- the date of the
Judgment in issue -- to the entire Judgment amount,
$161,356.36, and compounded annually, per the statute,
until April 11, 2015, at which time the $50,000 partial
payment was made.
Then, from April 11, 2015 to the date of the second
payment, Mr. Adalian applied the applicable .30%
federal post-judgment interest rate to the remaining
balance of $113,444.99. [See Doc. No. 192-6, Def.’s Ex.
5] (Payment/Interest Schedule). The balance on the
Judgment after application of the $50,000, plus interest
accruing from April 10, 2015 to August 25, 2015, came
to $113,571.80. This is the amount Mr. Adalian
therefore paid on August 25, 2015[.]
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Doc. No. 192, Opp’n at 2-3 (some internal citations omitted).
And pursuant to the August 24, 2015 Stipulated Order, the parties
agreed that Defendant’s second payment would stop the accrual of any further
post-judgment interest. Doc. No. 187 ¶ 5. Given this stipulation, along with
Defendant’s uncontested calculations (which the court has confirmed
mathematically), the court finds that Defendant has paid all amounts due under the
Judgment including attorney’s fees and costs, plus post-judgment interest at the
federal rate from December 23, 2010 to August 25, 2015.
IV. CONCLUSION
Based on the foregoing, the court DETERMINES that the federal
post-judgment interest rate set forth in 28 U.S.C. § 1961 applies to the December
23, 2010 Judgment. The court further finds that Defendant has paid such debt in
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full. There being no other matters before the court, the Clerk of Court is directed
to close the case file.
IT IS SO ORDERED.
DATED: Honolulu, Hawaii, November 23, 2015.
/s/ J. Michael Seabright
J. Michael Seabright
Chief United States District Judge
Jou v. Adalian, Civ. No. 09-00226 JMS-RLP, Order Declaring the Applicable Post-Judgment
Interest Rate
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