The opinion of the court was delivered by: BASSLER
A jury found for Plaintiffs on their state law negligent misrepresentation claims against The Howard Savings Bank ("Howard"). Plaintiffs now move for pre- and post-judgment interest on the amount they are due, $ 1,532,575.41, which represents the jury award less amounts deducted as a result of the jury's findings of comparative negligence and less set offs for previously settling defendants. Defendant Federal Deposit Insurance Corp. ("FDIC"), acting as receiver of the failed Howard, opposes this motion, arguing that any award of interest is improper. This Court has jurisdiction pursuant to 28 U.S.C. § 1332 (diversity). For the reasons stated below, the Court holds that: (1) Plaintiffs are entitled to full pre-judgment interest from June 10, 1991, the date Plaintiffs' suit was filed, through October 2, 1992, the date the FDIC was appointed receiver of Howard; (2) after October 2, 1992, Plaintiffs are entitled to pre-judgment interest from the time, and to the extent, that a ratable distribution was paid to other creditors of Howard; (3) pre-judgment interest is to be calculated pursuant to New Jersey's R. 4:42-11(b); and (4) Plaintiffs are entitled to post-judgment interest, calculated pursuant to 28 U.S.C. § 1961, to the extent that a ratable distribution has been paid to other creditors.
On June 10, 1991, Plaintiffs filed an action against Howard asserting state law claims of fraud and negligent misrepresentation. On October 2, 1992, the FDIC was appointed as receiver for Howard. The FDIC began paying Howard's approved claimants as early as December 31, 1992. According to Plaintiffs' undisputed submissions, the FDIC made ratable distributions on all approved claims as follows:
(Affidavit of Jared B. Stamell PP 5-6 & Exs. B, C.) As of October 27, 1997, all approved unsecured creditors have been paid 95.56% of the principal portion of their claims. (Id. P 7; Affidavit of Peter H. MacDonald, Ex. A.) According to the FDIC, however, these creditors are still owed over $ 137 million, which represents the remaining 4.44% of the principal portion of their claims. (Affidavit of Peter H. MacDonald PP 7-8.)
The parties went to trial in November 1997. The jury returned a verdict in favor of Plaintiffs on their negligent misrepresentation claims. After taking into account amounts received from previously settling Defendants and the jury's findings concerning Plaintiffs' comparative negligence, the principal amount owed to each Plaintiff, according to the submissions of the parties, is as follows:
Augustus Condus $ 356,530.88
Christopher C. Harding $ 59,584.44
John D. Conner $ 356,530.88
Abram Schmier $ 183,118.05
Howard Phillips $ 288,405.58
David Oltchick $ 288,405.58
Leo A. Gutman $ 0.00
Georgia Gutman $ 0.00
Total $ 1,532,575.41
A. Interest Accruing Post-Receivership
"The FDIC, as receiver, is [required] to distribute the assets of a failed bank to all creditors on a pro rata basis pursuant to the National Bank Act at 12 U.S.C. §§ 91 and 194, and [the Financial Institutions Reform, Recovery and Enforcement Act ("FIRREA")] at 12 U.S.C. § 1821(i)(2)." Adams v. Zimmerman, 73 F.3d 1164, 1171 (1st Cir. 1996) (citation omitted); see also United States ex rel. White v. Knox, 111 U.S. 784, 786, 28 L. Ed. 603, 4 S. Ct. 686 (1884) ("Dividends are to be paid to all creditors ratably; that is to say, proportionally. To be proportionate they must be made by some uniform rule. . . . All creditors are to be treated alike."). Moreover, pro rata distribution is made "upon the amount of each claim as of the date of insolvency." Ticonic Nat'l Bank v. Sprague, 303 U.S. 406, 411, 82 L. Ed. 926, 58 S. Ct. 612 (1938) (citing Knox, 111 U.S. 784, 28 L. Ed. 603, 4 S. Ct. 686).
Courts have expressed a number of purposes for the ratable distribution rule. The rule is in effect "to avoid prejudice from the inevitable delay of court proceedings for liquidation; to facilitate administration; [and] because on [the] date [of insolvency] the creditors acquire a right in rem against the assets in the hands of the receiver." Id. (citations omitted). And while there are exceptions to the rule, "the statutory framework is distinctly unfriendly to the recognition of special interests or preferred claims." Adams, 73 F.3d at 1172 (citation omitted) (internal quotation marks omitted).
Accordingly, in order to ensure equality among creditors as of the date of insolvency, interest accruing after the date of insolvency is generally not recoverable. Ticonic, 303 U.S. at 411; see Adams, 73 F.3d at 1175; Citizens State Bank of Lometa v. FDIC, 946 F.2d 408, 416 (5th Cir. 1991). However, in understanding this general rule against interest, it is critical to remember that it is the underlying purpose of equal treatment of creditors that drives the rule. Therefore, "interest is proper where the ideal of equality is served, and so a creditor whose claim has been erroneously disallowed is entitled on its allowance to interest on his dividends from the time a ratable amount was paid other creditors." Ticonic, 303 U.S. at 411; see First Empire Bank-N.Y. v. FDIC, 634 F.2d 1222, 1224 (9th Cir. 1980) ("While interest, after insolvency of the bank, cannot be included in the claim against the bank, it is proper to allow interest upon an erroneously disallowed claim from the date a ratable amount was paid to other creditors."); see also Burnett Plaza Assocs. v. NCNB Tex. Nat'l Bank, 1994 U.S. Dist. LEXIS 7781, at *70, No. 3:89-CV-1290-X (N.D. Tex. May 12, 1994) (awarding pre-judgment interest beginning from the date that other creditors received payments on the ground that: "Although creditors generally are not entitled to post-insolvency interest in bank receivership proceedings, they are entitled to pre-judgment interest from the date their claims should have been paid.") (citation omitted).
The FDIC contends that Plaintiffs are not entitled to an award of post-receivership interest because such an award would violate the rule of ratable distribution. (FDIC's Opposition Mem. at 4-7.) The FDIC seeks to distinguish Ticonic and First Empire by arguing that in those cases the party seeking interest was a secured, as opposed to unsecured creditor, and thus entitled to preference, or that there were adequate funds to pay 100% of the claims of all creditors so that an interest award to some creditors would not deny other creditors' recovery of principal. The FDIC argues that, in contrast, awarding interest to Plaintiffs while other claimants are still owed on the principal portion of their claims would result in unequal treatment. (FDIC's Surreply at 2-4.) The FDIC has it backwards. No creditor will be denied their ratable distribution as a result of an award of interest from the time, and to the extent, that the FDIC has made ratable distributions. The FDIC has paid all other approved unsecured creditors 95.56% of the principal portion of their claims. In other words, everyone but Plaintiffs has been paid almost 96 cents on the dollar. This amount was paid out over the last 5 years, which means that these creditors have had years of use of this money. For these same years, the FDIC has denied Plaintiffs' claims, preventing Plaintiffs from using their money. If Plaintiffs only now receive dividends worth 95.56% of the principal amount they were damaged, then it is the Plaintiffs who will be treated unfairly. Thus, and as the Ticonic Court held, equality is served, not thwarted, by awarding interest from the time other claimants receive ratable distributions. See Ticonic, 303 U.S. at 411.
The FDIC has also argued that First Empire has been overruled by the passage of FIRREA and the enactment of 12 U.S.C. 1821(i). (FDIC's Surreply at 4.) While the First Empire decision may have been superseded in part by statute; see Branch v. FDIC, 825 F. Supp. 384, 414 (D. Mass. 1993); Lawson v. Fleet Bank of Maine, 807 F. Supp. 136, 143 (D. Maine 1992), aff'd, 3 F.3d 11 (1st Cir. 1993);
nothing has undercut the compelling logic of Ticonic 's and First Empire's holdings: when a receiver is required to make ratable distributions, equality among unsecured creditors, which is the fundamental purpose of the ratable distribution system, is furthered by awarding post-insolvency interest from the time, and to the extent, that other unsecured creditors have received payments.