United States Securities Exchange Commission v. Carrillo, Ennis, Jaeckel

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT
________________________ FILED
U.S. COURT OF APPEALS
No. 02-12285 ELEVENTH CIRCUIT
MARCH 28, 2003
________________________
THOMAS K. KAHN
CLERK
D. C. Docket No. 93-00685 CV-WDF

UNITED STATES SECURITIES AND EXCHANGE COMMISSION,

Plaintiff-Appellee
Cross-Appellant,

versus

BOSQUE PUERTO CARRILLO,

Defendant-Cross-Appellee,

TERENCE JAMES ENNIS,
RALF STEFAN JAECKEL,

Defendant-Appellants
Cross-Appellees.

________________________

Appeals from the United States District Court
for the Southern District of Florida
_________________________
(March 28, 2003)

Before EDMONDSON, Chief Judge, BARKETT and COX, Circuit Judges.

PER CURIAM:
 In the absence of a controlling statute, district courts have the discretion to

award prejudgment interest to prevailing litigants. In this case, the district court’s

order awards prejudgment interest to the plaintiff but does not specify the interest rate

or the date from which interest accrues, and we must determine whether the order

constitutes a final judgment under 28 U.S.C. § 1291. Because the calculation of

prejudgment interest in this case is not merely a “ministerial” task, we conclude that

the district court’s order is not a final judgment. Accordingly, we dismiss this appeal

for want of jurisdiction.

I. BACKGROUND & PROCEDURAL HISTORY

In 1993, the United States Securities and Exchange Commission (SEC) filed

a complaint against Bosque Puerto Carrillo (“Bosque”), a Costa Rican corporation,

and two former vice-presidents of Bosque, Ralf Stefan Jaeckel and Terence James

Ennis, alleging that the defendants fraudulently offered and sold unregistered

securities to finance Bosque’s operations1 in violation of federal securities laws. The

defendants allegedly promoted unregistered Bosque securities by placing

advertisements in the complimentary in-flight magazines of American Airlines and

Lacsa Airlines. Jaeckel and Ennis also allegedly arranged for favorable articles about

Bosque’s securities to appear in the Lacsa Airlines magazine.

1
Bosque owns and operates a teak tree plantation in Costa Rica.

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 The defendants filed a motion to dismiss for lack of personal jurisdiction, and

the district court granted the motion. On appeal, this court concluded that the district

court had personal jurisdiction with respect to all defendants and remanded the case

for further proceedings. SEC v. Bosque Puerto Carrillo, 115 F.3d 1540, 1548 (11th

Cir. 1997). Following remand, the defendants failed to answer the SEC’s complaint,

and the district court granted the SEC’s motion for a default judgment. The district

court entered a judgment against Bosque, Jaeckel, and Ennis that enjoined the

defendants from violating federal securities laws and declared them jointly and

severally liable to pay $10 million as disgorgement. The district court also ordered

the defendants to pay prejudgment interest in the sum of $8,457,802.00 to the SEC.

Bosque filed a motion under Fed. R. Civ. P. 60(b) to set aside the default

judgment. The district court granted the motion in part and denied the motion in part;

the court denied the motion to set aside the entry of default and denied the motion as

to injunctive relief, but granted the motion to set aside the judgment for money

damages (disgorgement). The court then held an evidentiary hearing on damages.

During the evidentiary hearing, the SEC stated that the proper method for

calculating disgorgement is to determine the total amount that Bosque’s United States

shareholders paid for their shares and subtract the total value of those shares at the

time of their purchase. The SEC offered evidence to support its position that, under

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this method, the defendants should be ordered to disgorge $15,293,100.00.

Furthermore, the SEC asked the court to award $16,023,788.45 in prejudgment

interest, which was calculated based on the IRS underpayment rate established in 26

U.S.C. § 6621. In response, Bosque argued that only the individual defendants,

Jaeckel and Ennis, should be liable for disgorgement because an order of

disgorgement against Bosque would harm the company’s current shareholders; the

SEC countered that the company shared in the proceeds from the fraudulent sale of

unregistered securities and therefore should be liable for disgorgement. In an

apparent attempt to contest their liability for securities fraud, Jaeckel and Ennis

argued that they had little experience in developing and obtaining investment for this

type of business.

The district court entered judgment on March 27, 2002. In its order, the court

concluded that Bosque was not liable for disgorgement. The court held that Jaeckel

and Ennis were jointly and severally liable for disgorgement in the amount of $1.7

million, the amount of money that was “unaccounted for” in a 1995 audit. Notably,

the district court awarded “$1.7 million dollars plus interest” and “retain[ed]

jurisdiction to determine the amount of the interest.” (R.4-166 at 7 (emphasis

added).) Jaeckel and Ennis appealed the order, and the SEC filed a cross-appeal.

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 II. ISSUES ON APPEAL

The parties raise several issues on appeal, but prior to oral argument this court

sua sponte raised another issue for the parties’ consideration: whether the district

court’s March 27, 2002, order – which appears to contemplate an award of

prejudgment interest – constitutes a final judgment for the purposes of 28 U.S.C. §

1291? We asked the parties to address this issue at oral argument and to file

supplemental briefs on this issue following oral argument. After careful consideration

of the parties’ arguments and their supplemental briefs, we conclude that the district

court’s March 27, 2002, order is not a final judgment for the purposes of 28 U.S.C.

§ 1291. Because we lack appellate jurisdiction, we do not reach the merits of the

issues raised by the parties on appeal.

III. STANDARD OF REVIEW

As a court of limited jurisdiction, we must evaluate our appellate jurisdiction

sua sponte even if the parties have not challenged it. See Rinaldo v. Corbett, 256

F.3d 1276, 1278 (11th Cir. 2001); Rembert v. Apfel, 213 F.3d 1331, 1333 (11th Cir.

2000).

IV. CONTENTIONS OF THE PARTIES

The parties agree that the district court’s March 27, 2002, order awarding

“$1.7 million dollars plus interest” contemplates an award of prejudgment – not

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postjudgment – interest. In its supplemental brief, the SEC argues that the district

court’s failure to calculate the amount of prejudgment interest does not affect the

finality of the judgment because the calculation of prejudgment interest in this case

is a ministerial task. During the evidentiary hearing, the SEC asked the district court

to employ the IRS underpayment rate established in 26 U.S.C. § 6621 to calculate

prejudgment interest. Bosque did not challenge the SEC’s proposed method for

calculating prejudgment interest, and the defendants did not offer an alternative

method of calculation. Because the only proposed method for calculating

prejudgment interest was provided in the SEC’s Prejudgment Interest Report, the SEC

contends that prejudgment interest “can be computed mechanically by plugging the

disgorgement amount ($1.7 million) into the prejudgment interest formula that the

[SEC] supplied to the district court during the remedies trial in this case.” (SEC

Supp. Letter Br. at 5.) Bosque, Jaeckel, and Ennis agree that only one method for

calculating prejudgment interest was proposed to the court and that no objections

were made by any party, and therefore only a ministerial calculation of prejudgment

interest is necessary.

V. DISCUSSION

As an initial matter, we agree with the parties that the court’s March 27, 2002,

order awards prejudgment interest, not postjudgment interest, to the SEC. The

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prevailing party in this case, the SEC, is statutorily entitled to postjudgment interest

under 28 U.S.C. § 1961. The district court does not have any discretion to deny or

modify the terms upon which the SEC may receive postjudgment interest under §

1961; section 1961(a) establishes the applicable interest rate and instructs that interest

shall be calculated from the date of the entry of the judgment. 28 U.S.C. § 1961(a).

If we were to read “$1.7 million dollars plus interest” to award postjudgment interest,

the court’s references to “interest” would be rendered superfluous because, by virtue

of the statute, the SEC is already entitled to such interest. See Student Loan Mktg.

Ass’n v. Lipman, 45 F.3d 173, 176 (7th Cir. 1995) (concluding that a district court

order awarding postjudgment interest would be “potentially confusing” because the

reference to postjudgment interest would be “wholly superfluous”). Moreover, the

district court heard testimony regarding the propriety of awarding prejudgment

interest and the calculation of such interest, and we decline to hold that the court’s

reference to “interest” awards postjudgment interest to the SEC – when such a

decision is not within the court’s discretion in light of § 1961(a) – while

simultaneously denying the SEC’s request for prejudgment interest sub silentio. See

id. at 177. Finally, we note that the court originally awarded the SEC over $8 million

in prejudgment interest when the court entered its default judgment against the

defendants, and in doing so, the court evinced its willingness to award prejudgment

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interest in this case. Thus, it is clear that the court’s March 27, 2002, order awards

prejudgment interest to the SEC, and we must now consider whether the order is an

appealable final judgment.

As a general rule (subject to exceptions not implicated by this case), federal

courts of appeals have jurisdiction to review only “final decisions” of lower federal

courts. 28 U.S.C. § 1291. A final decision “ends the litigation on the merits and

leaves nothing for the court to do but execute the judgment.” Catlin v. United States,

324 U.S. 229, 233, 65 S. Ct. 631, 633-34 (1945). Although the “final judgment rule”

serves many purposes, one of its central objectives is to ensure that this court does not

engage in piecemeal appellate review. See Constr. Aggregates, Ltd. v. Forest

Commodities Corp., 147 F.3d 1334, 1336 (11th Cir. 1998). If a party seeks to appeal

a district court order that does not constitute a “final decision” under § 1291 (and

does not fall within an exception to the final judgment rule), we must dismiss the case

for lack of appellate jurisdiction.

The final judgment rule does not require district courts to calculate the precise

amount of damages in every case, however. This is true even though it might appear

that the district court still has something left to do that goes beyond executing the

judgment. For instance, in Turner v. Orr, 759 F.2d 817 (11th Cir. 1985), we

acknowledged that when the district court awarded back pay, the court’s failure to

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calculate the precise amount of back pay did not affect the finality of the court’s

judgment. Id. at 820. On the contrary, we concluded that the calculation that was

required to determine the amount of back pay was “purely ministerial in nature” and

required only “a simple arithmetic calculation.” Id. Under these circumstances, we

concluded that the court’s failure to conduct the ministerial act of calculating the

amount of back pay did not prevent the court’s order from constituting an appealable

final decision under § 1291. Id.

Although an award of prejudgment interest differs in substance from an award

of back pay, the calculation of an award of prejudgment interest may be just as

susceptible to a simple, ministerial arithmetic calculation. The ministerial task of

calculating prejudgment interest can be accomplished if the judgment amount, the

prejudgment interest rate, and the date from which prejudgment interest accrues have

been established. See Kosnoski v. Howley, 33 F.3d 376, 379 (4th Cir. 1994). If these

three components have been established, the court’s failure to calculate the precise

amount of prejudgment interest does not prevent the court’s order from constituting

a final judgment under § 1291. See id. However, if the judgment amount, the

prejudgment interest rate, or the date from which prejudgment interest accrues is

unclear, the calculation of prejudgment interest is no longer a ministerial act and the

court’s order is not final. See Commercial Union Ins. v. Seven Provinces Ins. Co.,

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217 F.3d 33, 37 (1st Cir. 2000) (concluding that an order that retains jurisdiction to

calculate prejudgment interest without determining the date from which prejudgment

interest accrues is not a final decision under § 1291).

There is no dispute that the court established the judgment amount in this case:

$1.7 million. The central inquiry is whether the court’s order embodies a

prejudgment interest rate and indicates the time period for accrual. The court’s order

makes three references to “interest.” On two occasions, the court indicates that it has

awarded “$1.7 million dollars plus interest.” (R.4-166 at 7.) At the end of the court’s

order, the court states: “The Court retains jurisdiction to determine the amount of

interest and to consider motions for fees and costs.” (Id.) It is clear that the language

of the order is absolutely silent regarding the prejudgment interest rate and the time

period for accrual, and the parties do not argue that the order, by its terms, establishes

these crucial components that would render the calculation of prejudgment interest

a ministerial task. As a consequence, the calculation of prejudgment interest is not

a mere ministerial task based on the court’s March 27, 2002, order.

In an attempt to persuade this court that the district court’s order is nonetheless

an appealable final decision, the parties contend that the order implicitly adopts the

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calculation method proposed by the SEC.2 We reject this argument because we

decline to hold that the court’s silence regarding the method of calculation is

tantamount to its adoption of the SEC’s proposed method. While the court might

very well have intended to adopt the IRS underpayment rate and the time period

proposed by the SEC, we do not believe, based on the circumstances of this case, that

such a conclusion is compelled by the record. If, at a later date, the parties were to

ask the court to accomplish the purportedly ministerial task of calculating

prejudgment interest, we believe that the court could deviate from the SEC’s

proposed method – by applying a different interest rate, by employing a different time

period for accrual, or both – without departing from the terms of its March 27, 2002,

order. And if the district court were to deviate from the SEC’s proposed method one

or both parties may wish to appeal the court’s decision and contend that the court has

abused its discretion. See Indus. Risk Insurers v. M.A.N. Gutehoffnungshütte GmbH,

141 F.3d 1434, 1447 (11th Cir. 1998) (noting that the decision to grant prejudgment

interest, as well as the rate at which interest is awarded, are within the district court’s

discretion and are reviewed on appeal for an abuse of discretion). This would result

2
The SEC’s proposal employs the method for calculating interest set forth in 26 U.S.C.
§ 6621. The SEC asked the court to calculate prejudgment interest from May 1, 1993 (the first day
of the first month after the SEC filed its complaint), to January 31, 2002 (the last day of the month
preceding the hearing on damages). (R.4-165 Ex. 2 at 1.)

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in precisely the type of piecemeal appellate review that the final judgment rule seeks

to avoid. And in this case, the prospect of piecemeal appellate review is particularly

striking because the judgment amount is significant ($1.7 million), the time period for

accrual may be of great duration (the violations occurred as early as 1987 and the

SEC seeks prejudgment interest from May 1, 1993), and, as a consequence, the total

amount of prejudgment interest could be substantial and might exceed the amount of

disgorgement (as it did under the SEC’s proposal presented at the evidentiary

hearing). Accordingly, the terms upon which prejudgment interest is awarded may

prove to be just as important to the parties as the decision setting the amount of

disgorgement that initially prompted both the defendants’ appeal and the SEC’s cross-

appeal.

VI. CONCLUSION

We hold that the district court’s order of March 27, 2002, is not a final

judgment under 28 U.S.C. § 1291 because it awards prejudgment interest without

specifying the prejudgment interest rate or the date from which interest accrues.

Accordingly, we dismiss this appeal for want of appellate jurisdiction.

APPEAL DISMISSED FOR WANT OF JURISDICTION.

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