Free Response to Motion - District Court of Colorado - Colorado

Case 1:01-cv-02199-MSK-MEH

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 01-cv-02199-MSK-MEH MICHAEL E. CLAWSON and JARED L. DILLON, Plaintiffs, vs. MOUNTAIN COAL COMPANY, L.L.C., ARCH WESTERN RESOURCES, L.L.C., and ARCH COAL, INC., Defendants.

DEFENDANTS' RESPONSE TO PLAINTIFFS' MOTION FOR BACK PAY AND INTEREST
Defendants Mountain Coal Company, L.L.C. ("Mountain Coal"), Arch Western Resources, L.L.C. ("Arch Western"), and Arch Coal, Inc. ("Arch Coal"), by their attorneys, Holland & Hart LLP, hereby submit this response to Plaintiffs' Motion for Back Pay and Interest (Dkt. No. 422), as amended/corrected by Plaintiffs' Notice of Error and Undisputed Motion to Amend Plaintiffs' Motion for Back Pay and Interest (Dkt. No. 429). For the reasons set forth below, Defendants oppose, in large part, Plaintiffs' motion. I. A. Back Pay In Section I of their motion, Plaintiffs argue that the jury's back pay awards are appropriate and should be adopted by the Court. Plaintiffs' Motion at 1-5. Plaintiffs further argue that Plaintiffs' back pay awards should not be reduced by monies received from any socalled "collateral sources." Id. at 5-11. These issues are addressed in detail in Defendants' INTRODUCTION

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Motion for Application of Statutory Damage Cap to Compensatory Damage Awards and for Reduction of Advisory Back Pay Awards (Dkt. No. 423), and Defendants hereby incorporate by reference the matters set forth therein. For the reasons stated in Defendants' motion, Defendants submit that such motion should be granted, and that, therefore, the relief sought by Plaintiffs in Section I of Plaintiffs' motion should be denied. B. Post-Judgment Interest Defendants concur that, following the entry of judgment by the Court, Plaintiffs are entitled to post-judgment interest in accordance with 28 U.S.C. §1961. C. Pre-Judgment Interest 1. Pre-Judgment Interest on Compensatory Damages

Plaintiffs ask the Court to award pre-judgment interest on the jury's award of noneconomic or compensatory damages (for emotional distress), in the amount of $250,000 each to Clawson and Dillon. Plaintiffs cite no cases which would support an award of pre-judgment interest on compensatory damages awarded under the Americans With Disabilities Act, 42 U.S.C. §12101, et seq., nor has Defendants' research located any Tenth Circuit or District of Colorado cases which would support an award of pre-judgment interest for such a compensatory damage award. On the other hand, such an award of pre-judgment interest was rejected by the court in Rau v. Apple-Rio Management Company, Inc., 85 F.Supp.2d 1344, 1348-49 (N.D. Ga. 1999). After noting that any award of pre-judgment interest was within its discretion, the court stated: Exercise of this court's discretion is guided by principles of common law. Under common law, prejudgment interest was generally allowed only for liquidated damages or, in some cases, for unliquidated damages that were "relatively certain and

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ascertainable by reference to established market values." [citations omitted] ... [P]rejudgment interest is generally not allowed for damages, such as those at issue here, intended to compensate for personal injuries. See 22 Am.Jur.2d Damages §§ 664, 665, 667; West, 573 F.2d at 883 (distinguishing personal-injury cases from those that are "pecuniary in nature" and involve liability "based upon the readily ascertainable value of damages to property"). Here, plaintiff seeks interest on damages intended to compensate her for personal injuries, the value of which could not have been readily ascertained prior to trial. These are precisely the type of damages for which prejudgment interest has traditionally been denied. 85 F.Supp.2d at 1349. Similarly, in this case, the value of the personal injuries suffered by Plaintiffs was not, and could not have been, determined until trial, 1 and therefore, an award of pre-judgment interest on such damages is not appropriate. Thus, Defendants respectfully submit that this Court should adopt the reasoning set forth in Rau and reject Plaintiffs' request for pre-judgment interest on the compensatory damage awards in this case. Plaintiffs also assert that any award of pre-judgment interest on compensatory damages would be outside the statutory damage cap set forth in 42 U.S.C. §1981(a)(b)(3). Plaintiffs cite no authority for this proposition, either. Assuming arguendo that the Court were to award prejudgment interest on the compensatory damage awards, there is simply no logical reason why such pre-judgment interest would not fall under the statutory cap, together with the underlying compensatory damage award upon which such interest is calculated. See Rau, 85 F.Supp.2d at 1349.

Defendants contend that the amount of compensatory damages awarded by the jury to both Plaintiffs was excessive, an issue which they intend to address in their Rule 59 motion after the Court enters judgment.

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Finally, for the reasons set forth infra, if the Court were to award pre-judgment interest on the compensatory damage awards, it should be calculated in accordance with the one-year Treasury bill rate under 28 U.S. C. §1961, as of April 21, 2006, the date of the jury's verdict, compounded annually, not at 8% as Plaintiffs contend. 2. Pre-Judgment Interest on Back Pay Damages a. Entitlement to pre-judgment interest.

As the Tenth Circuit held in Daniel v. Loveridge, 32 F.3d 1472 (10th Cir. 1994): Under Title VII, a district court is authorized to grant prejudgment interest on a back pay award. Loeffler v. Frank, 486 U.S. 549, 557-58, 100 L.Ed. 2d 549, 108 S.Ct. 1965 (1988). Otherwise, the employer would have an `interest free' loan on wages due, but unpaid. Clarke v. Frank, 960 F.2d 1146, 1153-54 (2d Cir. 1992). 32 F.3d at 1478. See also Buonanno v. AT&T Broadband, LLC, 313 F.Supp.2d 1069, 1083 (D. Colo. 2004). Pre-judgment interest is an element of "complete compensation" in back pay awards and helps to make victims of discrimination whole. Reed v. Mineta, 438 F.3d 1063, 1066 (10th Cir. 2006). An award of pre-judgment interest on back pay is within the trial court's discretion. Id. at 1066. See also Suiter v. Mitchell Motor Coach Sales, Inc., 151 F.3d 1275, 1288-89 (10th Cir. 1998) (pre-judgment interest is ordinarily awarded, absent some justification for withholding it, but is not recoverable as a matter of right; district court must determine that an award of pre-judgment interest would serve to compensate the wronged party and that the equities of the case do not preclude such an award).

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b.

Proper interest rate and method of calculation.

In seeking pre-judgment interest on their back pay awards, Plaintiffs argue for use of the Colorado general statutory interest rate of 8% per annum. Plaintiffs contend that such a rate has been used by this District Court in at least two cases without comment from the Tenth Circuit, citing EEOC v. Safeway Stores, Inc., 634 F.2d 1273, 1279 (10th Cir. 1980), and Reed v. Mineta, supra, 438 F.3d at 1065-66. Plaintiffs' Motion at 13. Plaintiffs also cite to three cases from other federal district courts where an 8% interest rate was used. Id. In their motion, Plaintiffs purport to adopt the methodology for calculating interest on back pay as set forth in Reed v. Mineta, supra, footnote 4, with one adjustment, spreading the back pay damages evenly over the relevant periods of time. However, in their original motion, Plaintiffs made a substantial error in calculating pre-judgment interest, grossly overstating the amount of pre-judgment interest for both Clawson and Dillon. Plaintiffs eventually recognized their error and sought to correct it by submitting revised interest calculations in their Notice of Error and Undisputed Motion to Amend Plaintiffs' Motion for Back Pay and Interest (Dkt. No. 429). Thus, Plaintiffs now seek pre-judgment interest for Clawson in the amount of $110,576, calculated at 8% per year, compounded annually, through the date of verdict, April 21, 2006. Plaintiffs assert that interest for Clawson continues to accrue at $75.96 per day until the date of judgment. For Dillon, Plaintiffs calculate pre-judgment interest on back pay at $31,900.37, calculated at 8% per year, compounded annually, through the date of verdict, April 21, 2006.

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Plaintiffs assert that interest for Dillon continues to accrue at the rate of $30.66 per day after the date of verdict until the date of judgment.2 Contrary to Plaintiffs' suggestion, the Tenth Circuit has not determined what interest rate is proper. The two Tenth Circuit cases cited by Plaintiffs are not dispositive on this point. In EEOC v. Safeway Stores, Inc., supra, the special master used an 8% pre-judgment interest rate, but the appropriateness of such rate was not at issue in the appeal. Similarly, in Reed v. Mineta, supra, a 9% pre-judgment interest rate was used by the District Court but, as the Tenth Circuit's opinion notes, on appeal, the defendant did not take issue with the District Court's decision to use such rate. 438 F.2d at 1065-66. In fact, judges within this District have used a variety of interest rates and methodologies in calculating back pay awards in employment cases. See, e.g., Buonanno, supra (8% annual interest rate, simple interest used); Carr v. Fort Morgan School District, 4 F.Supp.2d 989, 99697 (D. Colo. 1998) (collecting cases using variety of different approaches; relying on Kansas district court case, court awards pre-judgment interest at 10% per year, simple interest); Davoll v. Webb, 968 F.Supp. 549, 558-59 (D. Colo. 1997), affirmed in part and reversed in part on other grounds, 194 F.3d 1116 (10th Cir. 1999) (noting that "in determining prejudgment interest in

2

In calculating the back pay interest for Dillon, Plaintiffs took the amount of the award, $108,000, and spread it over the period November 18, 1999 to April 21, 2006. As Defendants showed in their Motion for Application of Statutory Damage Cap to Compensatory Damage Awards and for Reduction of Advisory Back Pay Awards (Dkt. No. 423), at p. 13, fn. 13, the logical explanation for the jury's back pay award to Dillon was that they cut off his damages at the end of 2001, on the theory that he had fully mitigated by obtaining employment at Oxbow Mining. Thus, Defendants believe that Dillon's back pay award should be allocated only through such date and the pre-judgment interest calculated accordingly. While this results in a somewhat larger interest award, it is the more accurate method of calculation, considering the jury's determination.

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discrimination cases, many courts have applied the Internal Revenue Code's underpayment rate, codified in 26 U.S.C. §6621, because `[p]rejudgment interest at the §6621 rate is more consonant with the make `whole' purpose of Title VII'"). Defendants would urge the Court to adopt the well-reasoned approach of Mennen v. Easter Stores, 951 F.Supp 838 (N. D. Iowa 1997). There, after a thorough review of the panoply of interest rates and methodologies used for determining pre-judgment interest in employment cases, Judge Bennett determined to use the current Treasury bill rate, compounded annually, as reflected in 28 U.S.C. §1961 (as it existed at that time). 951 F.Supp at 863, fn. 28. See also Poindexter v. Atchison, Topeka & Santa Fe Railway Company, 1996 WL 507303 at *6 (D. Kan. 1996)(copy attached hereto as Exhibit A), reversed on other grounds, 168 F.3d 1228 (10th Cir. 1999) (using post-judgment interest rate per 28 U.S.C. §1961, compounded annually); ReederBaker v. Lincoln National Corporation, 649 F.Supp 647, 661-62 (N. D. Ind. 1986) (using postjudgment interest rate per 28 U.S.C. §1961). See also cases collected in 138 ALR Fed. 1, "Allowance and Rates of Interest on Back Pay Award Under Title VII of Civil Rights Act of 1964 (42 U.S.C.A. §§2000e, et seq.)," §§15-16. On the other hand, using an 8% interest rate, as Plaintiffs contend, would represent a windfall to them. It is not realistic to assume, nor have Plaintiffs presented any evidence, that they could have obtained a risk-free 8% rate of return. As can be seen from the monthly history of the one-year constant maturity Treasury yield, see 28 U.S.C. §1961, the relevant period in this case, from 1999 to 2006, has been a period of predominately low interest rates, ranging from a low of 1.01% (June 2003) to a high of 6.33% (May 2000). See Exhibit B attached hereto. As the

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cases indicate, a successful plaintiff should be made whole, Reed v. Mineta, supra, not receive a windfall. Defendants do not tender a calculation of pre-judgment interest herewith. Such would be premature at this time because there are a number of issues for the Court to determine concerning back pay, as reflected in Defendants' Motion for Application of Statutory Damage Cap to Compensatory Damage Awards and for Reduction of Advisory Back Pay Awards (Dkt. No. 423), as well as Plaintiffs' motion. Once the Court determines the proper award of back pay for Clawson and Dillon, then pre-judgment interest can be readily calculated. Defendants submit that, if the Court, in its discretion, determines to award pre-judgment interest, it should follow the approach of the court in Mennen and use the interest rate as reflected in 28 U.S.C. §1961 as of the date of the verdict, April 21, 2006, which was 4.90%. See www.federalreserve.gov/releases/h15/data/Weekly_Friday_/H15_TCMNOM_Y1.txt. Reed v. Mineta provides, but does not require, one methodology of calculating pre-judgment interest. There, the Tenth Circuit noted that there had been testimony that the plaintiff had been paid biweekly, and calculated pre-judgment interest accordingly. Here, however, the situation is not as simple. Plaintiffs' expert witness, Ron Brennan, calculated both Plaintiffs' back pay damages on a year-by-year basis, projecting what they would have made had they remained employed with Mountain Coal and subtracting amounts actually received. Thus, Defendants submit that it is simpler, and more appropriate, to calculate pre-judgment interest on the back pay awards on an annual basis, with annual compounding. 3

Calculating the interest on a more frequent basis, such as bi-weekly, would require a more detailed calculation, but would have little, if any, monetary effect.

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Thus, once Plaintiffs' economic (back pay) damages are determined by the Court, if the Court determines that an award of pre-judgment interest is appropriate, it should be calculated at 4.90%, the interest rate under 28 U.S.C. §1961 as of April 21, 2006, the date of the jury's verdict, compounded annually. II. CONCLUSION

For all the foregoing reasons, Defendants respectfully submit that Plaintiffs' Motion for Back Pay and Interest, as amended/corrected, should be denied. Dated: June 12, 2006.

Respectfully submitted,

s/ Jeffrey T. Johnson Jeffrey T. Johnson Monique A. Tuttle HOLLAND & HART LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, Colorado 80201-8749 Phone: (303) 295-8019 Fax: (303) 713-6202 [email protected] [email protected] ATTORNEYS FOR DEFENDANT

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CERTIFICATE OF SERVICE

I hereby certify that on June 12, 2006, I have caused to be electronically filed the foregoing with the Clerk of Court using CM/ECF system which will send notification of such filing to the following e-mail addresses: [email protected] [email protected] I am not aware of any non CM/ECF participants in this matter requiring service by other means.

s/ Jeffrey T. Johnson Jeffrey T. Johnson Monique A. Tuttle HOLLAND & HART LLP 555 Seventeenth Street, Suite 3200 Post Office Box 8749 Denver, Colorado 80201-8749 Phone: (303) 295-8019 Fax: (303) 713-6202 [email protected] [email protected] ATTORNEYS FOR DEFENDANT

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