United States District Court, D. Maryland
Joel I. Sher
RBC Capital Markets, LLC
L. Russell, III United States District Judge
before the Court is Defendant's, RBC Capital Markets, LLC
(“RBC”), Motion to Alter or Amend the Judgment
Pursuant to Federal Rule of Civil Procedure 59(e) (ECF No.
155). No hearing is necessary. See Local Rule 105.6
(D.Md. 2016). For the reasons outlined below, the Court will
deny the Motion.
August 26, 2015, the Court issued an Order denying RBC's
Motion for Summary Judgment, granting Plaintiff's, Joel
I. Sher, Chapter 11 Trustee for Thornburg, Inc. (the
“Trustee”), Cross Motion for Summary Judgment,
and entering judgment in favor of the Trustee in the amount
of $26, 259, 188 plus prejudgment interest at New York's
statutory rate of 9% from August 14, 2007 though the date of
judgment. (ECF No. 153). On September 22, 2015, RBC filed the
present Motion to Alter or Amend the Judgment Pursuant to
Rule 59(e) (ECF No. 155), arguing the Court clearly erred in
applying state law to determine the prejudgment interest
award. The Trustee filed an Opposition on October 9, 2015
(ECF No. 157), and RBC submitted a Reply on October 26, 2015
(ECF No. 158).
Court may only alter or amend a final judgment under Rule
59(e) in three circumstances: “(1) to accommodate an
intervening change in controlling law; (2) to account for new
evidence not available at trial; or (3) to correct a clear
error of law or prevent manifest injustice.” Pac.
Ins. Co. v. Am. Nat'l Fire Ins. Co., 148 F.3d 396,
403 (4th Cir. 1998). Rule 59(e) “permits a district
court to correct its own errors, ‘sparing the parties
and the appellate courts the burden of unnecessary appellate
proceedings.'” Id. (citation omitted).
Altering or amending a final judgment “is an
extraordinary remedy which should be used sparingly.”
Id. (quoting 11 Wright et al., Federal Practice
& Procedure § 2810.1, at 124 (2d ed. 1995)).
Accordingly, a party may not use a Rule 59(e) motion
“to raise arguments which could have been raised prior
to the issuance of the judgment” or “to argue a
case under a novel legal theory that the party had the
ability to address in the first instance.” Id.
party argues that Rule 59(e) relief is necessary to correct a
clear error of law or to prevent manifest injustice, mere
disagreement with the Court's previous decision will not
suffice. U.S. ex rel. Becker v. Westinghouse Savannah
River Co., 305 F.3d 284, 290 (4th Cir. 2002) (quoting
Hutchinson v. Staton, 994 F.2d 1076, 1082 (4th Cir.
1993)). Rather, to justify altering or amending a judgment on
this basis, “the prior judgment cannot be ‘just
maybe or probably wrong; it must . . . strike [the court] as
wrong with the force of a five-week-old, unrefrigerated dead
fish.'” Fontell v. Hassett, 891 F.Supp.2d
739, 741 (D.Md. 2012) (alteration in original) (quoting
TFWS, Inc. v. Franchot, 572 F.3d 186, 194 (4th Cir.
2009)). Hence, a “factually supported and legally
justified” decision does not constitute clear error.
See Hutchinson, 994 F.2d at 1081-82.
preliminary matter, the Trustee argues RBC's Rule 59(e)
Motion is procedurally barred. First, RBC is precluded from
using Rule 59(e) to challenge the prejudgment interest award
because in its summary judgment briefs, RBC did not oppose
the Trustee's request for prejudgment interest. In other
words, RBC waived its right to contest the Court's
prejudgment interest award. To be sure, “[a] motion
under Rule 59(e) is not authorized to enable a party to
complete presenting his case after the court has ruled
against him.” Pac. Ins. Co., 148 F.3d at 403
(citation omitted). At the summary judgment stage, however,
RBC argued it is not liable for breaching the parties'
Master Purchase Agreement and, therefore, the Trustee is not
entitled to any damages. (See generally
Def.'s Mem. Supp. Mot. Summ. J., ECF No. 131). Because
prejudgment interest is an element of damages, RBC implicitly
argued against an award of prejudgment interest. See Eden
v. Amoco Oil Co., 741 F.Supp. 1192, 1196 (D.Md. 1990).
What is more, the Trustee cites no authority for the
proposition that a defendant must argue why the plaintiff is
not entitled to every specific form of damages when the
defendant contests all liability.
the Trustee contends Rule 59(e) is only an appropriate
vehicle to resolve prejudgment interest claims when a
plaintiff wins a damage award and then, after judgment is
entered, moves to add prejudgment interest to the award.
According to the Trustee, only the plaintiff should be
permitted to “wait to see” if the Court finds the
defendant liable and awards damages. (Pl.'s Mem.
Opp'n Def.'s Mot. Alter or Amend J. at 9, ECF No.
157). At least one court in the Fourth Circuit, however, has
permitted a defendant to use a Rule 59(e) motion to challenge
a prejudgment interest award. See Attard Indus., Inc. v.
U.S. Fire Ins. Co., No. 1:10CV121 AJT/TRJ, 2010 WL
4670704, at *1, *4 (E.D.Va. Nov. 9, 2010). Furthermore, as a
matter of equity, it would be unfair to permit a plaintiff to
wait to address prejudgment interest until after a final
judgment, but prohibit a defendant from also doing so,
especially when the defendant contests all liability.
Accordingly, the Court rejects both of the Trustee's
arguments and concludes RBC's Rule 59(e) Motion is not
argues the Court clearly erred when it applied state law to
determine the prejudgment interest award because the law
applicable to prejudgment interest depends upon the basis of
jurisdiction, not the nature of the underlying claim. RBC
asserts that because the Court's jurisdiction is based on
federal bankruptcy statutes, not diversity of citizenship,
the Court must apply federal law. RBC highlights that the
Trustee originally filed this action in bankruptcy court,
invoking jurisdiction based on 28 U.S.C. §§ 157 and
1334, not § 1332. (See Compl. ECF No. 8). After
the Court granted RBC's Motion to Withdraw the Reference,
the Trustee filed an Amended Complaint that also invoked
bankruptcy jurisdiction. (See Am. Compl. ¶ 3,
ECF No. 52).
contends that under federal law, the Court must exercise its
discretion in determining a prejudgment interest award. In
exercising this discretion, RBC argues the Court should
decline to apply New York's 9% prejudgment interest rate
for three reasons: (1) it is excessive and unreasonable in
light of market rates prevailing over the prejudgment period;
(2) it is substantially in excess of what the Trustee earned
on its capital prior to the bankruptcy petition; and (3) it
is orders of magnitude greater than what the Trustee has
lawfully been permitted to earn managing the estate's
cash, consistent with limitations imposed by the United
States Bankruptcy Code.
also maintains 9% interest wrongfully punishes RBC and
creates an unwarranted windfall for the Trustee, emphasizing
that the prejudgment interest totals $18, 997, 212.87-72% of
the compensatory damages award. To fairly compensate the
Trustee for the use of its capital, RBC asserts the Court
should award 1.15% interest for the period from the date of
default to the date of bankruptcy petition and 1% interest
for the remaining prejudgment period.
when awarding prejudgment interest at New York's
statutory rate, the Court cited Marine Midland Bank v.
Kilbane, 573 F.Supp. 469, 471 (D.Md. 1983). In
Marine Midland, this Court explained that under
Klaxon v. Stentor Electric Manufacturing Co., 313
U.S. 487 (1941), district courts sitting in diversity must
apply the choice of law rules of the forum state. Marine
Midland, 573 F.Supp. at 470, 471. Because Maryland's
choice of law rules provide that courts will honor choice of
law provisions in contracts and the guaranty between the
parties provided that it “shall be construed under the
laws of New York state, ” this Court applied New York
law to the issue of prejudgment interest. Id.
relying on Marine Midland, the Court implicitly
concluded that it had diversity jurisdiction over this
matter. This conclusion, however, was erroneous because the
Trustee never pled complete diversity of citizenship or
invoked 28 U.S.C. § 1332. Nevertheless, the Trustees
argue, this error was “harmless” because even in
the absence of diversity jurisdiction, In re Merritt
Dredging Co., Inc. (“Merrit
Dredging”), 839 F.2d 203 (4th Cir. 1988) justifies
the Court's application of New York law. The Court
Merrit Dredging, the Court held that when dealing
with bankruptcy cases, a district court should apply the
conflict of law rules of the forum to resolve issues of state
law. Id. at 205-06. This case began as a bankruptcy
proceeding and prejudgment interest is an issue of state
substantive law. See In re Vulcan Materials Co., 674
F.Supp.2d 756, 772 (E.D.Va. 2009) (explaining that
prejudgment interest is an issue of state substantive law),
aff'd sub nom. Vulcan Materials Co. v. Massiah,
645 F.3d 249 (4th Cir. 2011); see also In re Exxon
Valdez, 484 F.3d 1098, 1102 (9th Cir. 2007) (explaining
that the “usual rule” is “that prejudgment
interest is an aspect of the substantive state law
claim”). Accordingly, the Court concludes it did not
clearly err when it applied New York's prejudgment
interest rate because Merrit Dredging justifies the
Court's decision. See Hutchinson, 994 F.2d at
1081-82 (explaining that a “legally justified”
decision does not constitute clear error).
it is not a Fourth Circuit case, Maternally Yours v. Your
Maternity Shop, 234 F.2d 538 (2d Cir. 1956) also
justifies the Court's decision. The Second Circuit
explicitly stated that “it is the source of the right
sued upon, and not the ground on which federal jurisdiction
over the case is founded, which determines the governing
law.” Id. at 540 n.1. As such, “the Erie
doctrine applies, whatever the ground for federal
jurisdiction, to any issue or claim which has its source in
state law.” Id. In Klaxon, the
Supreme Court extended the Erie doctrine to choice
of law rules. 313 U.S. at 496. Thus, notwithstanding that the
Court's jurisdiction over this case is based on federal
bankruptcy statutes, under both Merritt Dredging and
Maternally Yours, Maryland's choice of law rules
apply because prejudgment ...