United States Court of Appeals
For the First Circuit
No. 15-1397
IN RE: REDONDO CONSTRUCTION CORPORATION,
Debtor
___________________
PUERTO RICO HIGHWAY AND TRANSPORTATION AUTHORITY,
Plaintiff, Appellant,
v.
REDONDO CONSTRUCTION CORPORATION,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Francisco A. Besosa, U.S. District Judge]
Before
Torruella, Hawkins,* and Barron,
Circuit Judges.
Héctor Benítez-Arraiza, with whom Quiñones & Arbona, P.S.C.,
was on brief, for appellant.
Charles A. Cuprill-Hernández, with whom Law Offices
Charles A. Cuprill, P.S.C., was on brief, for appellee.
February 10, 2016
* Of the Ninth Circuit, sitting by designation.
TORRUELLA, Circuit Judge. This case returns to us
following our remand in In re Redondo Construction Corp. (Redondo
III), 678 F.3d 115 (1st Cir. 2012). The Puerto Rico Highway and
Transportation Authority ("the Authority") appeals the district
court's affirmance of the bankruptcy court's award of prejudgment
interest to Redondo Construction Corporation ("Redondo") on its
contract claims under Article 1061 of the Puerto Rico Civil Code,
31 L.P.R.A. § 3025, accruing through the payment of principal. As
explained below, we reject the Authority's contention that Redondo
forfeited its claim to prejudgment interest under Article 1061 but
agree with its argument that 28 U.S.C. § 1961 exclusively controls
awards of postjudgment interest in federal court. We thus find
that we must vacate and remand for a calculation of § 1961 interest
and, to prevent double recovery, a recalculation of Article 1061
interest.
I.
Because one of the main issues in this appeal is whether
Redondo preserved its claim to Article 1061 interest, we focus on
the parties' motion practice. We direct readers interested in the
factual history of this case to the bankruptcy court's opinion in
Redondo Construction Corp. v. Puerto Rico Highway & Transportation
Authority (Redondo I), 411 B.R. 89 (Bankr. D.P.R. 2009).
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In the 1990s, Redondo contracted with the Authority to
work on three construction projects.1 Each contract described the
projects' design plans, the construction sites' anticipated
conditions, and the procedures for implementing variances. In
certain situations, Redondo could claim extra compensation for
unforeseen additional work. These terms proved important because
all three of the construction projects experienced unanticipated
problems.
Redondo filed claims against the Authority on all three
contracts seeking compensation for additional work performed.
Before these claims were resolved, however, Redondo filed for
Chapter 11 bankruptcy. Through the Chapter 11 proceedings, Redondo
filed three complaints against the Authority for money owed under
the construction contracts. In each of these complaints, Redondo
stated it was entitled to not only damages, but also prejudgment
interest accruing at a rate of 6.5% per annum. Following a bench
trial, Redondo filed a memorandum reiterating its request for
prejudgment interest at a rate of 6.5% per annum.2
1 Redondo contracted to build a bridge and access road ("the
Patillas project"), to replace a different bridge ("the Dorado-
Toa Alta project"), and to improve a highway ("the Mayagüez
project").
2 Neither the complaints nor the post-trial memorandum clearly
stated under which statute Redondo was claiming prejudgment
interest. The complaint regarding the Mayagüez project stated
Redondo was entitled to prejudgment interest because federal funds
were used in the project. Redondo's post-trial memorandum,
however, cited only Puerto Rico Rule of Civil Procedure 44.3 and
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The bankruptcy court ruled in Redondo's favor. Id. at
89. In addition to awarding Redondo damages, the bankruptcy court,
without stating its legal basis for doing so, found that Redondo
was entitled to prejudgment interest accruing at 6.5% per annum.
The Authority subsequently filed a timely motion to
amend the judgment pursuant to Federal Rule of Civil Procedure
59(e) and Federal Rule of Bankruptcy Procedure 9023. Among other
claims, the Authority argued that the bankruptcy court erred in
awarding Redondo prejudgment interest. Noting that prejudgment
interest is typically a matter of state law, the Authority argued
that it had not acted with temerity or obstinacy as required by
Puerto Rico Rule of Civil Procedure 44.3(b) in order to impose
prejudgment interest.3
argued that the Authority acted obstinately by delaying its
payment.
3 Rule 44.3(b) states:
Except when the defendant is the Commonwealth of
Puerto Rico, its municipalities, agencies,
instrumentalities or officers acting in their
official capacity, the court will also impose on
the party that has acted rashly the payment of
interest at the rate fixed by the Board by virtue
of the previous subsection which is in effect at
the moment the judgment is pronounced, from the
time the cause of action arises in every case of
collection of money and from the time the claim is
filed in actions for damages until the date
judgment is pronounced, to be computed on the
amount of the judgment. The interest rate shall be
stated in the judgment.
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Redondo filed a response motion defending the bankruptcy
court's prejudgment interest award, arguing (1) that the three
construction projects "had federal funds participation allowing
for the computation of the pre-judgment interest award[]"
(presumably referring to 41 U.S.C. § 7109(a)(1), which allows
parties to recover interest on the principal on contracts in which
the federal government is a party) and (2) that Article 1061
allowed for "indemnity" interest under Puerto Rico law.
Although the bankruptcy court ruled in the Authority's
favor on some claims, it left the prejudgment interest award
intact. In re Redondo Constr. Corp. (Redondo II), 424 B.R. 29, 36
(Bankr. D.P.R. 2010). The bankruptcy court concluded that the
parties contracted to incorporate the rate used for government-
party contracts as set by 41 U.S.C. § 7109(a)(1).4 Id. at 33.
Following the bankruptcy court's ruling, the Authority
sought review first in the district court, and then in this Court.
In Redondo III, we found that the record did not show that 41
U.S.C. § 7109(a)(1) applied either independently or by
incorporation through contract. 678 F.3d at 125-26. We considered
alternative bases under which the bankruptcy court could have
awarded prejudgment interest (including Civil Rule 44.3 and
4 The bankruptcy court cited 41 U.S.C. §§ 601-13, the provisions
of the U.S. Code previously containing 41 U.S.C. § 7109(a)(1).
See Act of January 4, 2011, Pub. L. No. 111-350, 124 Stat. 3677,
3816.
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Article 1061), but concluded there was no support in the record
that the bankruptcy court did so. Id. at 126. As a result, we
instructed the district court to "vacate the award of prejudgment
interest and return the case to the bankruptcy court for a
determination of whether prejudgment interest [was] appropriate
and, if so, at what rate and for what periods." Id.
On remand, Redondo argued it was entitled to prejudgment
interest under Article 1061. The bankruptcy court agreed and
awarded Redondo Article 1061 interest accruing at a rate of 6% per
annum from the date of substantial completion for each construction
project, through the date of the Authority's final payment on the
principal. In re Redondo Constr. Corp. (Redondo IV), 505 B.R.
388, 401 (Bankr. D.P.R. 2014).
Following the bankruptcy court's decision, the Authority
moved to amend the judgment, arguing that Redondo forfeited its
Article 1061 claim and that the bankruptcy court used incorrect
start and end dates for the accrual period. After the bankruptcy
court denied the Authority's motion, In re Redondo Constr. Corp.
(Redondo V), 515 B.R. 410, 416 (Bankr. D.P.R. 2014), the Authority
appealed to the district court. The district court affirmed the
bankruptcy court's decision in its entirety. In re Redondo Constr.
Corp. (Redondo VI), 523 B.R. 339, 346 (D.P.R. 2014). This timely
appeal followed.
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II.
"When state-law claims (such as the contract claims
at issue here) are adjudicated by a federal court, prejudgment
interest is normally a matter of state law." Redondo III, 678
F.3d at 125. Article 1061 of the Puerto Rico Civil Code provides
parties to a breach of contract with a right to interest as an
indemnity for default. Rivera v. Crescioni, 77 D.P.R. 47, 77
P.R.R. 43, 50 (1954). It states in full that
[s]hould the obligation consist in the payment of
a sum of money, and the debtor should be in default,
the indemnity for losses and damages, should there
not be a stipulation to the contrary, shall consist
in the payment of the interest agreed upon, and
should there be no agreement, in that of the legal
interest.
Until another rate is fixed by the Government,
interest at the rate of six percent (6%) per annum
shall be considered as legal.
31 L.P.R.A. § 3025.
In its appeal, the Authority renews its arguments
regarding the bankruptcy court's award under Article 1061: that
Redondo forfeited its claim, and that even if such an award was
warranted, the bankruptcy court used incorrect start and end dates
for accrual. "On appeal from a district court decision reviewing
a bankruptcy court order, we review the bankruptcy court order
directly, disturbing its factual findings only if clearly
erroneous, while according de novo review to its conclusions of
law." In re Furlong, 660 F.3d 81, 86 (1st Cir. 2011) (quoting
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Spenlinhauer v. O'Donnell, 261 F.3d 113, 117 (1st Cir. 2001)).
All of the Authority's arguments concern questions of law so our
review will be de novo. We turn first to the Authority's
forfeiture arguments.
III.
The Authority proffers two main arguments for finding
that Redondo forfeited its claim to Article 1061 interest. First,
the Authority argues that Redondo raised its claim through the
wrong procedural vehicle. Second, the Authority argues that even
if Redondo's claim was procedurally proper, Redondo failed to
adequately develop its claim. Although we agree with the Authority
that Article 1061 interest is discretionary (and therefore
forfeitable),5 neither of these claims has merit.
5 Redondo argues that we need not address the Authority's
forfeiture arguments because Article 1061 interest automatically
attaches upon judgment and as such, cannot be waived or forfeited.
All of the cases Redondo cites in support of its claim concern
Rule 44.3. See Municipio de Mayagüez v. Rivera, 113 D.P.R. 467, 13
P.R. Offic. Trans. 597, 602 (1982) ("[A]ccording to [Rule
44.3(a)'s] provisions, the court must, upon rendering a money
judgment, impose the payment of legal interest on the amount of
judgment, without exception."); Fuentes v. Hull Dobbs Co. of P.R.,
88 D.P.R. 562, 88 P.R.R. 544, 553 (1963) (awarding prejudgment
interest on appeal after concluding "that appellee's action in
defending itself in this case was manifestly obstinate" even though
it "ha[d] not been claimed in the complaint"). The Puerto Rico
Supreme Court has unambiguously stated that Rule 44.3 and Article
1061 are different in kind:
In [the case of Rule 44.3], interest should be
considered automatically part of the judgment, by
express provision of law. However, [Article 1061]
interest is not in the same category. It is not an
integral part or inherently inseverable from the
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The bankruptcy court found Redondo's Article 1061 claim
preserved by its response motion in Redondo II. The Authority now
argues that a Rule 59 response motion is not the proper vehicle
through which a party may claim prejudgment interest.6 Rule 59
principal obligation, but is considered as an
independent indemnity for damages, by way of
penalty, for default in payment.
Rivera, 77 P.R.R. at 51. Based on this view, the Puerto Rico
Supreme Court found that Article 1061 interest "may be waived by
the creditor by not appealing to this Court from the failure of
the lower court to order its payment." Id. at 51-52. We thus
conclude an Article 1061 claim can be forfeited if not raised at
the appropriate stage.
6 The Authority makes much of our statement in Redondo III that
Article 1061 "was [not] cited to the bankruptcy court." 678 F.3d
at 126. The Authority argues that we definitively decided that
Redondo did not raise Article 1061 until appeal and, under the law
of the case doctrine and mandate rule, the bankruptcy court could
not look at Redondo's pre-remand motions for discussion of Article
1061. But forfeiture was not a legal issue in Redondo III: all
we decided in Redondo III was that Article 1061 could not have
been the basis of the bankruptcy court's award in Redondo II. Id.
We do not believe our cursory statement about whether Article 1061
was discussed in the bankruptcy court proceedings was a legal
decision that bound the bankruptcy court on remand. See Naser
Jewelers, Inc. v. City of Concord, 538 F.3d 17, 20 (1st Cir. 2008)
("[W]hen a court decides upon a rule of law, that decision should
continue to govern the same issues in subsequent stages in the
same case." (quoting Arizona v. California, 460 U.S. 605, 618
(1983))).
The Authority also views Redondo's focus on 41 U.S.C.
§ 7109(a)(1) in previous litigation as inconsistent with its
Article 1061 claim on remand and therefore barred by judicial
estoppel. Judicial estoppel requires us to find (1) "the estopping
position and the estopped position [are] directly inconsistent,
that is, mutually exclusive" and (2) "the responsible party . . .
succeeded in persuading a court to accept its prior position."
Alt. Sys. Concepts, Inc. v. Synopsys, Inc., 374 F.3d 23, 33 (1st
Cir. 2004). We neither think Redondo's claims are inconsistent,
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motions are typically the proper way for a prevailing party to
raise prejudgment interest arguments. See Oserneck v. Ernst &
Whinney, 489 U.S. 169, 175 (1989) (holding that a motion for
discretionary prejudgment interest "constitute[d] a motion to
alter or amend the judgment under Rule 59(e)"); Redondo III, 678
F.3d at 122 ("While arguments presented for the first time in a
Rule 59(e) motion ordinarily are deemed forfeited, the grant or
denial of prejudgment interest is an exception to this general
rule." (citation omitted)). Redondo, however, developed its
prejudgment interest arguments in its response to the Authority's
Rule 59 motion. Of course, that is understandable as the
bankruptcy court gave Redondo the exact prejudgment interest
relief it requested in its complaints and post-trial memorandum.
We conclude that Redondo preserved its claim by stating
in its response motion that Article 1061 could support an award of
prejudgment interest as an alternative to 41 U.S.C. § 7109(a)(1).
Ruling in the Authority's favor would create a rule requiring
prevailing parties to file a Rule 59 motion to amend a favorable
judgment in order to preserve their ability to defend their
judgment on alternative grounds or assert alternative claims. Such
a rule goes against a commonsense understanding of the word amend
-- Redondo, understandably, would not want the bankruptcy court to
nor do we think our decision in Redondo III adopted the view that
Redondo pursued interest exclusively under 41 U.S.C. § 7109(a)(1).
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amend the favorable judgment. Even if it seemed highly probable
that the Authority would challenge the unexplained award of
prejudgment interest, Redondo was under no obligation to shore up
the bankruptcy court's reasoning until the Authority moved. See
Field v. Mans, 157 F.3d 35, 41-42 (1st Cir. 1998) (refusing to
view unchallenged holding by trial court that was unfavorable to
prevailing party as law of case on remand because "[i]t would be
extremely unrealistic to expect [the prevailing party's] attorney
to buttress his client's case by putting forward an alternate
theory in support of the lower court's judgment. . . . We are loath
to find that [the prevailing party] waived the [issue] merely by
failing to file either a procedurally dubious cross-appeal . . .
or to brief and argue what, to any attorney, might have seemed an
entirely redundant point" (citations omitted)); cf. Bath Iron
Works Corp. v. Coulombe, 888 F.2d 179, 179-80 (1st Cir. 1989) (per
curiam) (holding party could not appeal favorable judgment). We
are reluctant to find forfeiture based on Redondo's failure to
file a "procedurally dubious" Rule 59 motion. Field, 157 F.3d at
41.
Additionally, adopting the Authority's position would
disadvantage parties who raise a kernel of a prejudgment interest
claim prior to judgment vis-à-vis those who wait to file a Rule 59
motion. Our rule permitting prejudgment interest claims in Rule
59 motions is based, in part, on our belief that parties should
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not be "required to put the cart before the horse and argue about
prejudgment interest before the underlying issues of liability and
damages have been resolved." Redondo III, 678 F.3d at 122. We
thus find it excusable that Redondo did not develop every
conceivable prejudgment interest claim in its complaint and post-
trial memorandum, when the issue of any recovery was still open
and commanded its full attention. Redondo should not be held to
its merits stage theory when a party who did not apprise the court
at all would be allowed to litigate the issue fully in a Rule 59
motion. Finding Redondo's Article 1061 claim procedurally sound,
we turn to the Authority's argument that Redondo's response motion
did not adequately develop its claim.
It is true that "issues adverted to in a perfunctory
manner, unaccompanied by argumentation are waived." Global NAPS,
Inc. v. Verizon New England, Inc., 706 F.3d 8, 16 (1st Cir. 2013)
(quoting United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)).
But Redondo's response motion did not mention Article 1061 in a
perfunctory manner. In response to the Authority's
characterization of Rule 44.3 as the only basis for prejudgment
interest under Puerto Rico law, Redondo argued the Authority
incorrectly "concentrate[d] itself on Rule 44.3 . . . and ignore[d]
the provisions of the Civil Code of Puerto Rico as to interest
relative indemnity [sic] for nonpayment of money" and quoted
Article 1061. We find these statements made it sufficiently clear
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that Redondo was proposing Article 1061 as an alternative basis
for awarding prejudgment interest and therefore reject the
Authority's contention that Redondo forfeited its claim to Article
1061 interest.7
IV.
We now address the Authority's contention that the
bankruptcy court calculated prejudgment interest based on an
incorrect time interval. We find no error with the bankruptcy
court's start date based on Puerto Rican law. However, because
federal law exclusively controls the award of postjudgment
interest, we conclude that the bankruptcy court should not have
extended the prejudgment interest accrual period past the entry of
judgment. As a result, we vacate and remand the bankruptcy court's
decision for further proceedings consistent with this opinion.
A. Start of Article 1061 Interest Accrual
Article 1061 does not provide for a specific accrual
period. It simply states that creditors have a right of indemnity
when "the obligation consist[s] in the payment of a sum of money,
7 Based on its view that Redondo raised Article 1061 for the first
time at oral argument, the Authority also argues that Redondo's
claim is barred by a fifteen-year statute of limitations. See 31
L.P.R.A. § 5294. We reject this argument by finding that Redondo
developed its claim to Article 1061 interest in its response motion
filed in Redondo II. We make no comment on whether § 5294
delineates the appropriate statute of limitations for Article 1061
or whether the statute of limitations would have run during the
litigation.
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and the debtor [is] in default." 31 L.P.R.A. § 3025. The parties
agree that under these terms, Article 1061 interest begins accruing
when a party defaults. They disagree, however, about when default
occurred in this case.
Looking to other provisions of the Puerto Rico Civil
Code, Article 1053 defines when parties default under contract
law. Normally, a party is in default "from the moment when the
creditor demands the fulfilment [sic] of [its] obligation,
judicially or extrajudicially." 31 L.P.R.A. § 3017. Pursuant to
this provision, the Authority argues that the bankruptcy court
should have started calculating the accrual of prejudgment
interest from the date Redondo filed its complaints demanding
additional compensation.
Article 1053, however, first provides two exceptions to
this rule: (1) as otherwise provided by law and (2) "[i]f by
reason of its nature and circumstances it may appear that the
fixing of the period within which the thing was to be delivered or
the service rendered was a determinate cause to constitute the
obligation." Id. § 3017(1), (2). Further, Article 1053 provides
that default for contracts of mutual obligation commences when
"one of the persons obligated fulfills his obligation the default
begins for the other party." Id. § 3017.
The Puerto Rico Supreme Court has held that construction
contracts, such as the ones between Redondo and the Authority, are
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contracts of mutual obligation. Constructora Bauzá, Inc. v. García
López, 129 D.P.R. 579, 1991 P.R.-Eng. 735, 859 (1991). Thus,
Article 1053's general rule that a party is in default only upon
the demand of the creditor does not apply. 31 L.P.R.A. § 3017.
Rather, Article 1053's terms for contracts of mutual obligations
control and the Authority was in default from the time Redondo
fulfilled its obligations -- in other words, from the dates the
construction projects were substantially completed. Id. These
were the start dates used by the bankruptcy court and thus we find
no error.8
B. End of Article 1061 Interest Accrual
We must, however, vacate and remand the bankruptcy
court's calculation of prejudgment interest to the extent it
includes accrual past the entry of judgment. Although prejudgment
interest is usually governed by state law when the underlying
claims are based on state law, postjudgment interest is governed
exclusively by federal law under 28 U.S.C. § 1961. Vázquez-
Filippetti v. Cooperativa de Seguros Múltiples de P.R., 723 F.3d
24, 28 (1st Cir. 2013) ("[T]he plaintiffs tell us that the laws of
Puerto Rico require [the defendant] to pay postjudgment interest.
8 The parties stipulated that the dates of substantial completion
were: November 1, 1993 for the Mayagüez project; March 18, 1994
for the Patillas project; and September 5, 1995 for the Dorado-
Toa Alta project. These dates were adopted by the bankruptcy
court. Redondo IV, 505 B.R. at 399.
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Yet it is well established that federal law governs the entitlement
to postjudgment interest in any federal civil suit, including a
diversity suit such as the instant action."). And under federal
law, "[p]ostjudgment interest is mandatory and the prevailing
party is entitled to it even if the district court made no
provision for its payment." In re Redondo Const. Corp., 700 F.3d
39, 42 (1st Cir. 2012).9
The bankruptcy court's order in Redondo IV clearly
accrues Article 1061 interest past the entry of judgment, thus
overlapping with § 1961's postjudgment interest period. 505 B.R.
at 401. Because § 1961 interest is exclusive and mandatory, we
must remand Redondo's case to the bankruptcy court for a
calculation of postjudgment interest in accordance with § 1961's
terms.
Redondo argues that it is entitled to interest under
both statutes, but "a plaintiff is entitled to only one full
recovery, no matter how many different legal grounds may support
the verdict." Freeman v. Package Mach. Co., 865 F.2d 1331, 1345
(1st Cir. 1988). Redondo's full recovery entitles it to
prejudgment interest under Article 1061 and postjudgment interest
under § 1961 only. Allowing the Article 1061 interest accrual
9 This case is not part of the present litigation -- although it
involves the same parties, we reviewed different contracts,
claims, and proceedings.
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period to extend into the period already covered by § 1961 would
result in Redondo receiving more than its full recovery.
We also reject the bankruptcy and district courts'
reasoning in allowing recovery under both statutes. When
challenged by the Authority in a motion to amend, the bankruptcy
court explained in Redondo V that it believed that Redondo could
recover under both Article 1061 and § 1961 because Article 1061
interest is "an independent indemnity for damages, by way of
penalty, for default in payment." Redondo V, 515 B.R. at 414
(quoting Rivera v. Crescioni, 77 D.P.R. 47, 55-56 (1954)). The
district court echoed this reasoning in its affirmance. Redondo
VI, 523 B.R. at 345. We, however, find little support for the
bankruptcy and district courts' view that Article 1061 acts as a
separate "penalty" rather than compensation for delay based on the
time value of money,10 and Redondo never develops its claim beyond
a bare assertion. Finding no authority to the contrary, we must
direct that the Article 1061 interest award be recalculated to
take into account an award of postjudgment interest consistent
with § 1961's terms.
10 The bankruptcy court's reasoning also appears to be based in
part on its view that Article 1061 interest is an inseparable part
of the judgment. See Redondo V, 515 B.R. at 414 ("Moreover, pre-
judgment interest under Article 1061 may be awarded even when they
have not been claimed in the complaint. Hence, Article 1061
applies until the obligation is no longer in default." (citation
omitted)). We rejected this argument above in footnote 5 of this
opinion.
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V.
Although we find that Redondo is entitled to Article
1061 interest, we must vacate the district court's judgment to
allow for an award of postjudgment interest consistent with 28
U.S.C. § 1961 and a reduction of the Article 1061 interest award
to the extent their accrual periods overlap. The parties are to
bear their own costs.
Vacated and Remanded.
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