United States Court of Appeals,
Eleventh Circuit.
No. 93-8981.
Sherri Kay SMITH, Plaintiff-Appellee,
v.
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK,
Defendant-Appellant.
April 24, 1995.
Appeal from the United States District Court for the Northern
District of Georgia. (No. 1:90-CV-2217-HTW), Horace T. Ward, Judge.
Before HATCHETT and COX, Circuit Judges, and JOHNSON, Senior
Circuit Judge.
PER CURIAM:
American International Life Assurance Company of New York
("AILACNY") appeals from the district court's award of accidental
death benefits to Plaintiff Sherri Kay Smith under an insurance
policy governed by the Employee Retirement Income Security Act of
1974 ("ERISA").1 AILACNY challenges the interest rate used by the
district court in calculating the pre-judgment interest on the
award. We affirm.
I.
After the death of her husband, Smith submitted a claim to
AILACNY to recover benefits under an accidental death insurance
policy provided by her employer and governed by ERISA. After
AILACNY denied Smith's claim, Smith filed suit against AILACNY
seeking to recover the accidental death benefits. After a bench
trial, the district court awarded Smith judgment for the benefits,
1
29 U.S.C. §§ 1001-1461 (1993).
together with pre-judgment interest at 12% per annum and
post-judgment interest at 3.54% per annum. AILACNY appeals.
II.
AILACNY raises several issues on appeal. However, the only
issue worthy of discussion is whether the district court erred in
utilizing a 12% pre-judgment interest rate.2 We review an award of
pre-judgment interest under ERISA for abuse of discretion. See
Moon v. American Home Assurance Co., 888 F.2d 86 (11th Cir.1989).
Because we find that the district court did not abuse its
discretion, we affirm the award of pre-judgment interest at 12% per
annum.
III.
In its memorandum opinion, the district court observed that
although the determination of the appropriate pre-judgment interest
rate under ERISA is a matter of federal law, federal courts often
look to state law for guidance. Here, the district court applied
an interest rate of 12% per annum based on O.C.G.A. § 7-4-12, which
establishes Georgia's post-judgment interest rate.
AILACNY disputes the district court's application of the state
rate. AILACNY contends that in the absence of evidence pointing to
a different rate that more accurately compensates the plaintiff,
the rate prescribed in 28 U.S.C. § 1961(a) for post-judgment
interest on federal judgments should also be applied as the
pre-judgment interest rate under ERISA. Section 1961 provides:
(a) Interest shall be allowed on any money judgment in a civil
case recovered in a district court.... Such interest shall be
2
We find that AILACNY's other arguments are meritless and
affirm without opinion. See 11th Cir.R. 36-1.
calculated from the date of the entry of the judgment, at a
rate equal to the coupon issue yield equivalent (as determined
by the Secretary of the Treasury) of the average accepted
auction price for the last auction of fifty-two week United
States Treasury bills settled immediately prior to the date of
the judgment. The Director of the Administrative Office of
the United States Courts shall distribute notice of that rate
and any changes in it to all Federal Judges.
28 U.S.C. § 1961(a). AILACNY argues that the rate prescribed by
section 1961(a) must be the correct rate with which to compensate
for the loss of the use of the money before judgment because
Congress chose this as the appropriate rate by which to compensate
plaintiffs after entry of judgment. Furthermore, AILACNY proposes
that the use of the section 1961(a) rate will further the goal of
uniformity underlying ERISA. According to AILACNY, uniformity will
be undermined if district courts are allowed to exercise discretion
and apply state interest rates without the presence of special
circumstances.
We recognize that some circuit courts have approved the use
of the section 1961(a) post-judgment rate to compute pre-judgment
interest. E.g. Sweet v. Consolidated Aluminum Corp., 913 F.2d 268,
270 (6th Cir.1990); Blanton v. Anzalone, 760 F.2d 989, 993 (9th
Cir.1985). However, section 1961(a) only mandates the rate for
post-judgment interest; it does not speak to pre-judgment interest
rates. There is no similar statute mandating the pre-judgment
interest rate. Furthermore, under the law of this circuit, "[t]he
award of an amount of prejudgment interest in an ERISA case is a
matter "committed to the sound discretion of the trial court.' "
Nightingale v. Blue Cross/Blue Shield of Alabama, 41 F.3d 1476,
1484 (11th Cir.1995) (quoting Moon v. American Home Assurance Co.,
888 F.2d 86, 89-90 (11th Cir.1989)). Other circuits agree.
Quesinberry v. Life Ins. Co., 987 F.2d 1017 (4th Cir.1993); Hansen
v. Continental Ins. Co., 940 F.2d 971 (5th Cir.1991). Because
district courts have discretion in determining pre-judgment
interest rates, we hold that district courts are not required to
use section 1961(a) in computing such interest.
However, we must still review the district court's award of
pre-judgment interest for an abuse of discretion. Nightingale, 41
F.3d at 1484. In Nightingale, the district court awarded
pre-judgment interest at a rate of 1.5% per month or 18% per annum.
The district court derived this rate from Ala.Code § 27-1-17(b)
(1986), which provides the rate of interest to be paid by an
insurer to an insured if a claim has been denied for invalid
reasons. The district court applied this rate instead of the
Alabama statutory interest rate of 6% per year. We found that the
district court's use of the higher interest rate was not an abuse
of discretion, reasoning that "[i]t was clearly within the district
court's discretion to use § 27-1-17(b) as an analogy to fill a gap
in ERISA law." Id.
In this case, the district court looked to Georgia's
post-judgment interest rate for guidance in determining the
interest rate to compensate Smith. As this court explained in
Nightingale, a district court can look to state interest rates to
fill a gap in ERISA law. The district court in this case has done
nothing more than that which we approved in Nightingale.
AILACNY further complains that the district court's exercise
of discretion may undermine the policy of uniformity underlying
ERISA legislation. It is true that uniformity of rights and
obligations is a primary goal of this federal legislation. Pilot
Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56, 107 S.Ct. 1549, 1557, 95
L.Ed.2d 39 (1987). We have, however, in other contexts allowed the
district court discretion in the face of unifying federal law. For
example, a district court can exercise discretion in determining
the pre-judgment interest rate in admiralty cases. E.g.,
Kilpatrick Marine Piling v. Fireman's Fund Ins., 795 F.2d 940, 947,
948, n. 11 (11th Cir.1986) (looking to the interest rate at which
the injured party borrows money for guidance); Geotechnical Corp.
of Del. v. Pure Oil Co., 214 F.2d 476, 478 (5th Cir.1954) (applying
the state statutory interest rate); Fisher v. Agios Nicolaos V,
628 F.2d 308, 319 (5th Cir.1980), cert. denied, 454 U.S. 816, 102
S.Ct. 92, 70 L.Ed.2d 84 (1981) (consulting a variety of factors for
guidance). Therefore, in determining the pre-judgment interest
rate in ERISA cases, a district court may look for guidance to
those factors which are appropriate in an ERISA context.
IV.
We hold that the district court did not abuse its discretion
in looking to the state statutory interest rate for guidance in
determining the appropriate pre-judgment interest rate.
AFFIRMED.