General Electric Capital Corporation et al v. Nebraska Investment Finance Authority
Filing
200
OPINION AND ORDER: re: 183 MOTION for Reconsideration re; 178 Order on Motion for Conference, Awarding Prejudgment Interest, filed by Nebraska Investment Finance Authority. For the foregoing reasons, NIFA's motion for reconsideration is DENIED. The Clerk of Court is respectfully directed to close the motion at Docket No. 183, and as further set forth in this order. (Signed by Judge Lorna G. Schofield on 3/28/2018) (ap)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
GENERAL ELECTRIC CAPITAL
:
CORPORATION, et al.,
:
Plaintiffs, :
:
-against:
:
NEBRASKA INVESTMENT FINANCE
:
AUTHORITY,
:
Defendant. :
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3/28/18
15 Civ. 1069 (LGS)
OPINION AND ORDER
LORNA G. SCHOFIELD, District Judge:
Plaintiffs GE Funding Capital Market Services, Inc. and Trinity Funding Company, LLC
(collectively, “GE”) bring this action against Defendant Nebraska Investment Finance Authority
(“NIFA”) seeking declaratory relief and money damages arising from NIFA’s alleged breach of
several investment agreements (the “Investment Agreements”). Each of the Investment
Agreements was established in connection with a certain series of bonds issued by NIFA and
obligated GE to pay a fixed interest rate to NIFA on amounts under deposit. The present dispute
turns on whether NIFA was entitled to interest payments following redemption of the bonds. A
trial was held in which the jury reached a verdict for GE, finding that for each Investment
Agreement, the redemption of the listed bond series terminated GE’s obligation to pay NIFA
interest; that for three of the bond series, NIFA invested more than was permitted; and that NIFA
owed GE $27,768,773. By Order dated November 17, 2017, GE was awarded $11,510,546 in
prejudgment interest on the verdict amount. NIFA moves for reconsideration of the prejudgment
interest award under Local Civil Rule 6.3 and Federal Rule of Civil Procedure 59(e). For the
following reasons, NIFA’s motion is denied.
Familiarity with the underlying facts and procedural history of this motion is assumed.
LEGAL STANDARD
The decision to grant or deny a motion for reconsideration, whether under Local Rule
6.3, Rule 59(e) or 60(a), rests within “the sound discretion of the district court.” See Aczel v.
Labonia, 584 F.3d 52, 61 (2d Cir. 2009) (internal quotation marks omitted). “A motion for
reconsideration should be granted only when the defendant identifies an intervening change of
controlling law, the availability of new evidence, or the need to correct a clear error or prevent
manifest injustice.” Kolel Beth Yechiel Mechil of Tartikov, Inc. v. YLL Irrevocable Tr., 729 F.3d
99, 104 (2d Cir. 2013) (internal quotation marks omitted). The Court gives full consideration to
NIFA’s motion because GE was awarded statutory prejudgment interest before NIFA had an
opportunity to submit a response to GE’s letter requesting that relief. See, e.g., WWBITV, Inc. v.
Vill. of Rouses Point, 589 F.3d 46, 50 (2d Cir. 2009) (“Due process requires that before state
actors deprive a person of her property, they offer her a meaningful opportunity to be heard.”).
The parties agree that the choice of law provision in the Investment Agreements requires
application of New York law to the entire action. See, e.g., Arch Ins. Co. v. Precision Stone,
Inc., 584 F.3d 33, 39 (2d Cir. 2009) (“The parties’ briefs assume that New York substantive law
governs the issues . . . presented here, and such implied consent is, of course, sufficient to
establish the applicable choice of law.”).
DISCUSSION
NIFA’s motion is denied because GE is entitled to prejudgment interest. The New York
prejudgment interest statute states, “Interest shall be recovered upon a sum awarded because of a
breach of performance of a contract . . . .” CPLR § 5001(a). “Interest shall be at the rate of nine
per centum per annum.” CPLR § 5004. In general, “a plaintiff who prevails on a claim for
breach of contract is entitled to prejudgment interest as a matter of right.” U.S. Naval Inst. v.
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Charter Commc’ns, Inc., 936 F.2d 692, 698 (2d Cir. 1991); see also Nature’s Plus Nordic A/S v.
Nat. Organics, Inc., 108 F. Supp. 3d 52, 57 (E.D.N.Y. 2015), aff’d, 646 F. App’x 25 (2d Cir.
2016). “New York law does not permit the trial court to exercise any discretion where a party is
entitled to such interest as a matter of right.” E.J. Brooks Co. v. Cambridge Sec. Seals, 858 F.3d
744, 750 (2d Cir. 2017).
The monetary component of the jury verdict was “a sum awarded because of a breach of
performance of a contract.” CPLR § 5001(a). GE’s only damages claims to survive NIFA’s
motion for judgment on the pleadings were for breach of contract, and the key issue for the jury
to decide was “whose interpretation of the investment agreement[s] is correct.” Because the jury
accepted GE’s interpretation, GE prevailed on the breach of contract claims as a matter of law.
Based on the unambiguous language of the statute, GE is entitled to prejudgment interest.
NIFA does not dispute that the verdict was “a sum awarded because of a breach of
performance of a contract.” CPLR § 5001(a). Instead, NIFA asserts that GE should not receive
prejudgment interest because such an award would impermissibly result in a windfall for GE.
NIFA argues that because the interest payments GE made to it were reinvested in the accounts in
question, GE never lost access to the money and was thus able to invest it and earn from it.
Thus, according to NIFA, awarding GE prejudgment interest, which is essentially compensation
for the lost time value of money, would lead to a double recovery for GE.
The New York Court of Appeals has not ruled on whether prejudgment interest can be
denied where a party would otherwise be entitled to it because such an award would result in a
windfall for the party. The Second Circuit recently certified the question to the New York high
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court, which is currently considering the issue. See E.J. Brooks Co., 858 F.3d at 751, certified
question accepted, 78 N.E.3d 1191 (June 27, 2017).1
This Court need not reach the issue because awarding GE prejudgment interest will not
result in a windfall. As NIFA acknowledges, GE offset its earnings from using NIFA’s funds
against the damages calculation GE presented to the jury. As GE’s damages expert Mr. Jackson
explained, the offset “look[ed] at what GE actually did with the money and what it benefited
from the use of that money during the post-redemption period.”2 Thus, any use GE may have
had from holding NIFA’s principal deposits and interest payments was excluded from the
damages figure GE proffered and the jury accepted. Awarding prejudgment interest will not lead
to double recovery.
Finally, NIFA argues that the offset calculation “does not eliminate the windfall” because
“GE earned those amounts, solely from its use of NIFA’s funds, at no risk to itself.” This
argument is incorrect. The funds in the investment accounts, including any reinvested interest,
were liabilities on GE’s balance sheet for which GE was answerable (and had to set aside capital)
regardless of the performance of any investment GE made with those funds. GE bore the risk of
any loss from those investments, as its liability to NIFA was fixed by its contractual obligation to
return NIFA’s money upon request and pay NIFA a fixed amount of interest.
1
“In a case in which the damages awarded are not clearly compensatory under New York law,
we find it hard to square the mandatory language of section 5001 with the import of the New
York [appellate division] decisions . . . that suggest that prejudgment interest under the statute is
not mandatory where a windfall is the likely result. Here, too, we think that resolving whatever
tension exists between the statutory language of section 5001(a), the New York State court
decisions, and the propriety of avoided costs as a measure of damages is better left to the New
York Court of Appeals.”
2
The prejudgment interest award primarily compensates GE for the time value of the interest
payments GE made to NIFA after NIFA redeemed each series of bonds. The award also
compensates GE for interest payments GE made to NIFA due to NIFA’s overfunding of certain
accounts. Mr. Jackson’s analysis accounts for both.
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CONCLUSION
For the foregoing reasons, NIFA’s motion for reconsideration is DENIED.
The Clerk of Court is respectfully directed to close the motion at Docket No. 183.
Dated: March 28, 2018
New York, New York
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