Smith v. American International Life Assurance Co. of New York

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.