Smith v. American International Life Assurance Co. of New York
1995 U.S. App. LEXIS 9443 · 1995 WL 152680 · 50 F.3d 956
April 24, 1995 · Docket 93-8981
Headnotes
Generated summaries- Headnote 1
The Eleventh Circuit holds that the determination of the appropriate prejudgment‑interest rate in an ERISA case is committed to the trial court’s sound discretion, not dictated by a mandatory federal rate.
- Headnote 2
The court reviews the trial court’s interest‑rate award for abuse of discretion; an award within the court’s discretion is affirmed.
- Headnote 3
In the absence of a federal statute prescribing a prejudgment‑interest rate, a federal court may look to state statutory or other interest rates for guidance.
The district court noted that although the issue is governed by federal law, courts frequently consult state law to fill the gap in ERISA cases.
- Headnote 4
The statute sets the rate for interest after entry of judgment; it contains no provision for interest that accrues before judgment.
- Headnote 5
The Eleventh Circuit held that discretion permits the court to adopt a different rate than the federal post‑judgment rate.
- Headnote 6
The court used Georgia’s post‑judgment rate (O.C.G.A. § 7‑4‑12) as guidance for the prejudgment rate awarded to the plaintiff.
- Headnote 749.2.3 Labor and Employment Law > Employee Pension and Benefits Law > Benefit Claims and Appeals Law
The Eleventh Circuit has repeatedly held that determining an appropriate pre‑judgment interest rate in ERISA cases is committed to the trial court’s discretion, not a mandatory statutory formula.
- Headnote 849.2.3 Labor and Employment Law > Employee Pension and Benefits Law > Benefit Claims and Appeals Law
Because pre‑judgment interest is discretionary, an appellate court may only reverse the trial court’s rate if it is arbitrary, capricious, or unsupported by the record.
- Headnote 949.2.3 Labor and Employment Law > Employee Pension and Benefits Law > Benefit Claims and Appeals Law
The district court in this case consulted Georgia’s post‑judgment interest statute and the Eleventh Circuit has approved similar reliance on state rates to fill gaps in ERISA.
- Headnote 1049.2.3 Labor and Employment Law > Employee Pension and Benefits Law > Benefit Claims and Appeals Law
The court looked to Georgia’s post‑judgment rate under O.C.G.A. § 7‑4‑12 for guidance, a practice endorsed by the Eleventh Circuit in analogous cases.
- Headnote 1149.2.3 Labor and Employment Law > Employee Pension and Benefits Law > Benefit Claims and Appeals Law
Although ERISA seeks uniform rights, the Supreme Court in Pilot Life recognized that courts may retain discretion in applying federal law where no uniform rule exists.
- Headnote 1249.2.3 Labor and Employment Law > Employee Pension and Benefits Law > Benefit Claims and Appeals Law
The Eleventh Circuit affirmed the 12% rate because it was based on a recognized state rate and was not arbitrary or capricious.
- Headnote 1346.12.4 Insurance Law > Insurance Litigation, Arbitration, and Procedure Law > Insurance Appeals Law
The Eleventh Circuit has held that determining an appropriate pre‑judgment interest rate in ERISA cases is within the district court’s discretionary authority, not a mandated statutory requirement.
- Headnote 1446.12.4 Insurance Law > Insurance Litigation, Arbitration, and Procedure Law > Insurance Appeals Law
Because the trial court’s interest‑rate determination is discretionary, appellate review is limited to checking whether the district court’s decision was arbitrary, capricious, or unsupported by the record.
- Headnote 1546.12.4 Insurance Law > Insurance Litigation, Arbitration, and Procedure Law > Insurance Appeals Law
The Eleventh Circuit permits district courts to consult state post‑judgment rates or analogous statutes to fill the gap in ERISA law, as recognized in Nightingale and other circuits.
- Headnote 1646.12.4 Insurance Law > Insurance Litigation, Arbitration, and Procedure Law > Insurance Appeals Law
The court in this case used Georgia’s post‑judgment rate (O.C.G.A. § 7‑4‑12) to guide its 12% pre‑judgment rate, following the approach approved in Nightingale and other precedent.
- Headnote 17
The Eleventh Circuit noted that, like other statutory claims, ERISA does not prescribe a specific prejudgment interest rate, leaving the district court to decide the appropriate rate based on sound discretion.
- Headnote 18
The court explained that appellate courts will not reverse a prejudgment‑interest determination unless it is arbitrary, capricious, or unsupported by the record, applying the same standard used for other discretionary rulings.
- Headnote 19
The Eleventh Circuit relied on Nightingale and other circuit precedent, allowing courts to fill the gap in ERISA by consulting state law, such as Georgia’s post‑judgment rate, or analogous state statutes.
- Headnote 20
The district court in Smith used Georgia’s post‑judgment rate under O.C.G.A. § 7‑4‑12 to set a 12 percent prejudgment rate, a practice endorsed by Nightingale and by the Eleventh Circuit’s guidance in Kilpatrick Marine.
- Headnote 21
The court affirmed the district court’s 12% pre‑judgment interest rate, holding that such awards are committed to the trial judge’s discretion under ERISA.
- Headnote 22
The appellate court examined whether the trial court’s rate was arbitrary or capricious and concluded it was not, thus affirming the award.
- Headnote 23
The district court consulted Georgia’s post‑judgment interest statute to set the pre‑judgment rate, following precedent that permits looking to state law in the absence of a federal directive.
- Headnote 24
Guidance from Georgia’s O.C.G.A. § 7‑4‑12 was used to set the 12% pre‑judgment rate, consistent with case law allowing state rates to fill gaps in ERISA’s interest‑rate framework.
- Headnote 25
Although uniformity is a primary goal of ERISA, the court noted that discretion has been permitted in other contexts, such as admiralty cases, and therefore does not preclude variable interest‑rate determinations.
Opinion
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 AI-LACNY seeking to recover the accidental death benefits. After a bench trial, the district court awarded Smith judgment for the benefits, 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 point ing 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 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 prejudgment 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 prejudgment 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.
. . 29 U.S.C. §§ 1001-1461 (1993).
. . We find that AILACNY's other arguments are meritless and affirm without opinion. See 11th Cir.R. 36-1.