APPLYING ERIE PRINCIPLES TO CASE THAT WAS REMOVED UNDER 28 U.S.C.S. § 1441(B), COURT HELD THAT PREJUDGMENT INTEREST, WHICH WAS A SUBSTANTIVE ISSUE, WAS GOVERNED BY STATE LAW; THERE WAS NO FEDERAL PREEMPTION AS NO ACT OF CONGRESS PROHIBITED RECOVERY FOR E
In re: THE EXXON VALDEZ, SEA HAWK SEAFOODS, INC., Plaintiff-Appellant, v. EXXON CORPORATION and EXXON SHIPPING COMPANY, Defendants-Appellees, and UNITED STATES OF AMERICA, Intervenor-Appellee.
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT
2007 U.S. App. LEXIS 8621
April 16, 2007, Filed
PROCEDURAL POSTURE:Plaintiff corporation filed suit against defendant companies, seeking to recover under Alaska state law for business losses resulting from an oil spill. The parties settled all issues except for that of a prejudgment interest rate. The U.S. District Court for the District of Alaska determined prejudgment interest rates under federal law, and plaintiff appealed.
OVERVIEW: The case had been removed to the court by virtue of 28 U.S.C.S. § 1441(b). The district court used the Treasury rate prescribed by 28 U.S.C.S. § 1961(a). Consequently, the district court determined the prejudgment interest rates to be 4.11% and 3.54% for losses occurring in 1992 and 1993, respectively. On appeal, the court held that Erie principles applied when federal courts exercised jurisdiction over state law claims pursuant to 28 U.S.C.S. § 1441(c). Under that doctrine, a court was to apply state law to substantive issues. Prejudgment interest was a substantive, rather than procedural, issue. Thus, absent federal preemption, state law applied to the issue of prejudgment interest. In reversing, the court held that the Alaska prejudgment interest rate set forth in Alaska Stat. § 09.30.070 applied because no act of Congress prohibited recovery for purely economic loss and Alaska had a strong interest in regulating oil pollution and in providing remedies for damages caused by oil spills. Consequently, as an aspect of the Alaska claims for economic harm, plaintiff's claims for prejudgment interest were not preempted by federal law.
OUTCOME: The court reversed the district court's judgment and remanded the case with instructions to calculate prejudgment interest under Alaska law using a rate of 10.5 percent.
