The opinion of the court was delivered by: JOHN SPRIZZO, District Judge
MEMORANDUM OPINION AND ORDER
At issue before the Court are the questions of timing and rate
of prejudgment interest to be awarded to plaintiff, Atlantic
Mutual Insurance Company ("plaintiff" or "subrogee"), in its
judgment against defendant, Napa Transportation, Inc., for the
latter's liability under the Carmack Amendment,
49 U.S.C. § 14706. For the reasons set forth below, the Court finds that
plaintiff is entitled to prejudgment interest from the expected
date of delivery at the rate provided by 28 U.S.C. § 1961.
On December 12, 2001, bound for Woonsocket, Rhode Island for
delivery the next day,*fn1 defendant's trailer, laden with
Johnson & Johnson pharmaceuticals, bandages, and toiletries,
caught fire near Easton, Pennsylvania. See Agreed Statement of
Facts ("Facts") ¶¶ 9-11; Tr., dated July 18, 2005, at 9, 12.
After examining the trailer, Johnson & Johnson determined that
the contents were unsalvageable, and therefore ordered the entire
shipment to be destroyed. See Pl.'s Trial Br. at 4; Facts ¶ 12.
The value of the lost merchandise was $87,245.33, Facts ¶ 14, and
on April 15, 2002 that amount was paid to Johnson & Johnson by
plaintiff pursuant to a subrogation agreement, see Pl.'s Supplemental Mem. at 1 n. 1,
After making a demand of payment from defendant, Facts ¶ 15;
Compl. ¶ 13, plaintiff brought the instant action seeking
compensation pursuant to the Carmack Amendment, Compl. ¶ 1. The
parties agreed to a Trial on Stipulated Facts, see Order, dated
Feb. 15, 2005, and, after the matter was fully briefed, this
Court heard Summations on July 18, 2005. At that time the Court
made oral findings of fact and conclusions of law and determined
that plaintiff was entitled to judgment in the full amount of its
claim plus interest. See Tr. at 15-19. The Court ordered the
parties to submit a judgment. See id. at 19.
By letter dated September 8, 2005 the parties informed the
Court that they were unable to agree on the appropriate amount of
prejudgment interest to be included in the judgment. The Court
ordered the parties to submit memoranda of law on the issue of
prejudgment interest, see Order, dated Sept. 13, 2005, and the
parties thereafter submitted simultaneous briefs, see Pl.'s
Supplemental Mem., dated Oct. 14, 2005; Def.'s Mem. in Opp'n,
dated Oct. 12, 2005.
Unlike in cases before this Court solely on the basis of
diversity jurisdiction, wherein the Court's ruling in Erie R.R.
v. Tompkins, 304 U.S. 64 (1938), dictates that the issue of
prejudgment interest be determined with reference to various
state laws, see Schwimmer v. Allstate Ins. Co., 176 F.3d 648,
650 (2d Cir. 1999); St. Clair v. E. Air Lines, Inc.,
302 F.2d 477, 480 (2d Cir. 1962), the present action is before the Court
on a federal question and therefore federal law governs the
issues of appropriateness, timing, and rate of prejudgment
interest, see Endico Potatoes, Inc. v. CIT Group/Factoring,
Inc., 67 F.3d 1063, 1071-72 (2d Cir. 1995); Mitsui & Co. v. Am.
Exp. Lines, Inc., 636 F.2d 807, 823 (2d Cir. 1981). Despite the
applicability of federal law, Congress has seen fit to address
none of these issues, and thus all are left to the broad
discretion of the district court. See Sec. & Exch. Comm'n v.
First Jersey Sec., Inc., 101 F.3d 1450, 1476-77 (2d Cir. 1996);
see also City of Milwaukee v. Cement Div., Nat'l Gypsum
Co., 515 U.S. 189, 194 (1995).
The first issue the Court must address is the appropriateness
of awarding prejudgment interest in this case. To that end the
Second Circuit has advised district courts to "take into
consideration `(i) the need to fully compensate the wronged party
for actual damages suffered, (ii) considerations of fairness and
the relative equities of the award, (iii) the remedial purpose of
the statute involved, and/or (iv) such other general principles
as are deemed relevant by the court.'" Jones v. Unum Life Ins.
Co. of Am., 223 F.3d 130, 139 (2d Cir. 2000) (quoting First
Jersey Sec., Inc., 101 F.3d at 1476).
This Court is aware of no reason why prejudgment interest would
be inappropriate in this action. The awarding of prejudgment
interest "ensure[s] that an injured party is fully compensated
for its loss," City of Milwaukee, 515 U.S. at 195, by requiring
that "[o]ne who has had the use of money owing to another . . .
pay interest from the time payment should have been made,"
Miller v. Robertson, 266 U.S. 243, 257-58 (1924). Here, the
Court has determined that defendant has had use of over $87,000
which rightfully was owed to plaintiff's subrogor as of December
13, 2001. Although the Court is aware that liability under the
Carmack Amendment attaches even absent wrongful conduct on the
part of defendant, see Project Hope v. M/V Ibn Sina,
250 F.3d 67, 73 n. 6 (2d Cir. 2001); Def.'s Mem. in Opp'n at 2-3, it is
nonetheless the case that this lack of wrongdoing does not
obviate the inequity of having defendant profit from monies which
the law has determined rightfully belong to plaintiff, see
City of Milwaukee, 515 U.S. at 196-99. Therefore the awarding
of prejudgment interest in this case is appropriate.
The next issue to be resolved is the correct date on which
prejudgment interest should begin to accrue. The Court has broad
discretion in making this determination, see Indep. Bulk
Transp., Inc. v. The Vessel "Morania Abaco", 676 F.2d 23, 25 (2d
Cir. 1982); Mitsui & Co., 636 F.2d at 823-24, and the parties
have suggested two different dates for the Court's consideration.
Plaintiff contends that the only relevant date is the date of
loss, Pl.'s Supplemental Mem. at 7-9, while defendant argues that
use of any date other than that on which plaintiff paid Johnson &
Johnson would result in a windfall to plaintiff, Def.'s Mem. in Opp'n at 4.*fn2
The Court finds that the most appropriate date for commencement
of prejudgment interest in this case is the date of expected
delivery.*fn3 First, the Second Circuit has made clear that
the date of loss is generally not an appropriate date on which to
begin the calculation since "the plaintiff has not suffered any
loss until the time when the goods should have been, but were
not, delivered." Mitsui & Co., 636 F.2d at 824. Second,
although defendant's argument has a degree of appeal, and some
courts have found that the date of the subrogation payment is the
proper date to commence prejudgment interest, see Sprague &
Rhodes Commodity Corp. v. S.S. Toronto, 1977 AMC 758 (S.D.N.Y.);
see also Am. Nat'l Fire Ins. Co. v. Yellow Freight Sys.,
Inc., 325 F.3d 924, 935-37 (7th Cir. 2003), this Court thinks
that it improperly benefits defendant and unwisely undermines the
status of a subrogee, see, e.g., Mitsui & Co.,
636 F.2d at 823-24; Royal Ins. Co. of Am. v. S/S Robert E. Lee,
756 F. Supp. 757, 759, 770 (S.D.N.Y. 1991).
As subrogee, plaintiff "stands in the shoes of" Johnson &
Johnson and therefore can collect fully from defendant the amount
that was owed to Johnson & Johnson under the subrogation
agreement. Allstate Ins. Co. v. Mazzola, 175 F.3d 255, 258, 260
(2d Cir. 1999); Gibbs v. Hawaiian Eugenia Corp., 966 F.2d 101,
106 (2d Cir. 1992). Since Johnson & Johnson would no doubt be
entitled to prejudgment interest from the date of expected
delivery, it stands to reason that plaintiff should have the same
rights as to the full amount of that payment. To find otherwise
would be to limit the rights of subrogation that plaintiff
inherited upon payment to Johnson & Johnson, and, possibly, to limit any rights that the subrogor
might retain in those funds. See supra note 2. In addition,
if the Court set a later date for the commencement of prejudgment
interest, defendant would reap the benefits of over four months
of undeserved profits based on the mere fortuity that plaintiff
decided to pay Johnson & Johnson's claim and undertake the
prosecution of this cause of action. Such a result undermines the
policy underlying the awarding of prejudgment interest.
Finally, this Court must decide the applicable rate of
prejudgment interest. As with the other issues discussed herein,
the appropriate rate of interest is left to the discretion of the
district court. See N.Y. Marine & Gen. Ins. Co. ...