The opinion of the court was delivered by: Katharine S. Hayden, U.S.D.J.
On March 9, 2009, the Court issued an opinion and accompanying order [D.E. # 116, 117] in this contract dispute, holding that judgment should be rendered for defendants in the amount of $6,564,698.00. This figure represents: (1) quarterly distributions payable to defendants in 2003 and 2004 based on William Soroka's interest in the Huff investment venture; and (2) the final capital account balance to which defendants were entitled as of December 31, 2004. The Court's order directed the parties to submit a stipulated form of judgment reflecting its opinion, and the Court entered judgment as stipulated on March 24, 2009 [D.E. # 120].*fn2
Having reserved the right to do so in the stipulation [D.E. # 118], defendants filed this motion under Rule 59(e) of the Federal Rules of Civil Procedure, seeking to amend the judgment to include prejudgment interest [D.E. # 121].*fn3 Huff opposes the motion.
A federal district court sitting in diversity applies the forum state's law with respect to prejudgment interest. Salas by Salas v. Wang, 846 F.2d 897, 909 n.13 (3d Cir. 1988) (citing Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938)); Jarvis v. Johnson, 668 F.2d 740, 746 (3d Cir. 1982). In New Jersey, whether and to what extent prejudgment interest is awarded on a contract judgment rests in the discretion of the trial court. Cty. of Essex v. First Union Nat'l Bank, 186 N.J. 46 (2006). In exercising its discretion, the Court may use New Jersey court rules regarding pre- and postjudgment interest in tort cases as a benchmark (see infra), but ultimately must square its decision with the equities of the particular case before it. See Gleason v. Norwest Mortg., Inc., 253 F. App'x 198, 204 (3d Cir. 2007) (citing Cty. of Essex, 186 N.J. at 61-62).
The governing premise of prejudgment interest in contract cases is that the unsuccessful party has had the use of the funds in question, and the prevailing party has not; ―the interest factor simply covers the value of the sum awarded for the prejudgment period during which the [unsuccessful party] had the benefit of monies to which the [prevailing party] is found to have been earlier entitled.‖ Rova Farms Resort, Inc. v. Investors Ins. Co., 65 N.J. 474, 506 (1974); see also Unihealth v. U.S. Healthcare, Inc., 14 F. Supp. 2d 623, 642 (D.N.J. 1998) (―The purpose of awarding prejudgment interest is to compensate the claimant for the loss of income the money owed would have earned if payment had not been delayed.‖). Prejudgment interest should neither be imposed as a punitive measure, New Jersey Mfrs. Ins. Co. v. Nat'l Cas. Co., 393 N.J. Super. 340, 354 (App. Div. 2007), nor should it be withheld due to the unsuccessful party's ―honest disputation over legal liability,‖ Rova Farms, 65 N.J. at 506; see also Sylvia B. Pressler, Rules Governing The Courts of the State of New Jersey, R. 4:42-11, cmt. 8 (―Prejudgment interest is not a penalty but rather its allowance simply recognizes that until the judgment is entered and paid, the [unsuccessful party] has had the use of money rightfully the [prevailing party's].‖).
Here, defendants seek prejudgment interest, running from the date on which the partnership agreement terminated-December 31, 2004. Def. Br. at 7. They further request that the Prime Lending Rate (―prime rate‖) be applied, and compounded on an annual basis. Id. at 7-8. Opposing the motion, Huff makes three principal arguments. First, it claims that defendants waived the right to seek prejudgment interest. Pl. Opp. Br. at 4-6. Second, it argues that in any event, equity precludes an award of prejudgment interest here. Id. at 7-12. Third, it argues alternatively that should the Court conclude that prejudgment is appropriate here, a number of considerations require a substantially lower interest figure than that which defendants request. Id. at 12-16. The Court addresses each argument in turn.
A. Defendants Did Not Waive the Right to Seek Prejudgment Interest
Huff argues that defendants waived the right to seek prejudgment interest because they failed to request prejudgment interest in their counterclaim [D.E. # 2] or in the pretrial order [D.E. # 51], and because § 5.6 of the Operating Agreement expressly excludes an award of prejudgment interest. Pl. Opp. Br. at 4-5. Neither claim has merit.
1. Counterclaim/Final Pretrial Order
Defendants did not include a specific claim for prejudgment interest until the Court ruled in their favor, but as the Seventh Circuit has stated, ―this is not dispositive.‖ Williamson v. Handy Button Mach. Co., 817 F.2d 1290, 1298 (7th Cir. 1987). Huff cites several cases standing for the general proposition that legal issues not presented before judgment is entered may be deemed waived. See, e.g., Kiewit E. Co. v. L&R Constr. Co., 44 F.3d 1194, 1204 (3d Cir. 1995); Falkenberg Capital Corp. v. Dakota Cellular, Inc., 925 F. Supp. 241, 243 (D. Del. 1996); St. Mary's Area Water Auth. v. St. Paul Fire & Marine Ins. Co., No. 04-1593, 2007 WL 1412240, at *6 (E.D. Pa. May 11, 2007); Steele v. Young, 11 F.3d 1518, 1520 n.1 (10th Cir. 1993). But Rule 54(c) of the Federal Rules requires that all judgments, save for those rendered in default, ―grant the relief to which a party in whose favor it is rendered is entitled, even if the party has not demanded such relief in his pleadings.‖ Fed. R. Civ. P. 54(c) (emphasis added); see also Williamson, 817 F.2d at 1298 (despite failure to raise prejudgment interest in pleadings, ―Rule 54(c) was designed to divorce the decision what relief to award from the pleadings and arguments of counsel; the court is to determine, and award, the right relief in each case even if the complaint is silent on the question.‖); Carter v. Diamondback Golf Club, Inc., 222 F. App'x 929, 931 (11th Cir. 2007) (unpublished) (―Rule 54 requires the district court to grant the relief to which each plaintiff is entitled, even if that relief is not requested in the complaint.‖).
The Court is satisfied that a party's failure to assert a demand for prejudgment interest in a pleading is ultimately trumped by Rule 54(c) if such an award would provide the relief to which a party is otherwise entitled. Accordingly, defendants' threshold omission of a demand for prejudgment interest in their counterclaim does not now hinder such an award.
Nor does the absence of a specific claim in the pretrial order bar defendants from obtaining prejudgment interest. At least two courts of appeals have rejected such an argument on Rule 54(c) grounds. See Rocket Jewelry Box, Inc. v. Quality Int'l Packaging, Ltd., 90 F. App'x 543, 547 (Fed. Cir. Feb. 12, 2004) (failure to request prejudgment interest in pretrialorder did not constitute a waiver of the claim) (unpublished); Dalal v. Alliant Techsystems, Inc., No. 94-1483, 1995 U.S. App. LEXIS 35559, at *17-18 (10th Cir. Dec. 18, 1995) (―We agree . . . that under Fed. R. Civ. P. 54(c), [plaintiff's] failure to request prejudgment interest [in the complaint and in the pretrial order] did not preclude the district court from making the award.‖) (unpublished); accord Cooper v. Ambassador Pers., Inc., 570 F. Supp. 2d 1355, 1359 (M.D. Ala. 2008) (Pursuant to Rule 54(c), ―the absence of any request for injunctive or declaratory relief in the pretrialorder in this case does not mean that [plaintiff] waived or withdrew any entitlement to such after trial.‖).
The Third Circuit has not squarely addressed the prejudgment interest question raised here, but has held that the ―decision of whether or not to permit a change [in a pretrial order] is within the discretion of the trial judge.‖ Ely v. Reading Co., 424 F.2d 758, 763 (3d Cir. 1970). In Springer v. Henry, 435 F.3d 268 (3d Cir. 2006), the Third Circuit upheld the district court's decision to permit testimony related to a falsity defense in a First Amendment case despite the defendant's failure to raise the issue in the pretrial order. Springer, 435 F.3d at 276 n.4. The court distinguished Ely, which had upheld the district court's refusal to permit an expert's testimony because the expert had not been listed in the pretrial order. Id. In so doing, the court explained that while the ―pretrial order is generally binding on the parties . . . our decision in Ely did not hold that an argument automatically is waived if not extant in the pretrial order.‖ Id.
The authority above is persuasive. Under Rule 54(c), the omission in the pretrial order is not fatal to defendants' claim for prejudgment interest. The Court thus finds that defendants did not waive the right to seek prejudgment interest as a ...