Fourth Circuit Holds That Plaintiffs Should Have Submitted Prejudgment Interest Claim to Jury, Vacating $36 Million Interest Award Entered Post-Trial by District Court

In Gilliam v. Allen, No. 21-2313 (4th Cir. Mar. 8, 2023), while substantially affirming a $62 million compensatory damage verdict (and $13 million in punitive damages) for two plaintiffs who improperly served 31 years in prison, the Fourth Circuit tosses an extra $36 million post-judgment award of prejudgment interest by the district court, holding that the interest issue should have been submitted to the jury.

Plaintiffs, “two intellectually disabled teenage half-brothers from Red Springs, North Carolina, were, as a jury later found, coerced into signing fabricated confessions [in 1983], leading to their convictions for the rape and murder of an 11-year-old girl. McCollum, the older brother, was sentenced to death, while Brown, the younger brother, was sentenced to life imprisonment.” They were exonerated in 2014 by DNA testing and each was granted a “Pardon of Innocence” by the state governor.

The plaintiffs filed this 42 U.S.C. § 1983 case against a variety of defendants, most of whom settled, though “two law enforcement officers went to verdict. The jury awarded the plaintiffs a total of $62 million in compensatory damages and $13 million in punitive damages . . . . Following entry of the judgment, the court granted the plaintiffs’ motion for prejudgment interest, which added another $36 million to the judgment, and denied the defendants’ motion to reduce the judgment by the amounts that the plaintiffs had received in settlements with other defendants and from the State of North Carolina as a statutory award. Finally, the court awarded the plaintiffs’ counsel $6.25 million in attorneys fees and costs.”

On appeal, the Fourth Circuit substantially upholds the verdict, affirming denial of a new trial over a variety of claimed trial errors. The panel did, though, remand the case to setoff at least $10 million in damages already paid by the other defendants.

The panel also tosses the $36 million prejudgment interest award by the district court. “After the jury returned its compensatory award of $62 million in favor of the plaintiffs and the district court entered judgment on the verdict, the plaintiffs filed a motion under Rule 59(e) to have the court award prejudgment interest. The court granted the motion and calculated prejudgment interest at the rate of 8% of the total compensatory damages, beginning from September 3, 2014, when the plaintiffs were released from prison. It thus increased the jury’s compensatory judgment by approximately $36 million — from $62 million to $98 million.”

Although the district court granted the relief as allowed under Fed. R. Civ. P. 59(e) to prevent manifest injustice, the panel holds that prejudgment interest is typically only awarded “when the plaintiff has been deprived of the use of a determinate sum of money.” And here, where the jury had already been “instructed to compensate the plaintiffs fully for all injuries, it must be assumed that the jury did so, providing ‘complete compensation.’ To be sure, one cannot know for certain whether the jury considered as an element of complete compensation any delay in payment when it entered its general compensatory damages verdict. Yet, it is a fair assumption that the jurors understood themselves to be determining damages at the then-present time, thus implicitly or explicitly taking into account the fact that the plaintiffs had not had the benefit of their damages award for some years since their injuries were sustained.”

“In any event,” the panel continues, “it was the role of the jury to determine whether to award prejudgment interest . . . . Therefore, given these considerations and absent any indication to the contrary, we must assume that the jury awarded fully compensating damages.”

The panel observes that there may be occasions where it is appropriate for the court to award prejudgment interest on a post-judgment motion. “For instance, when damages consist of the failure to satisfy a contractual obligation to pay money, the courts have, in their discretion, added prejudgment interest.” But here, “it was impossible for the court to calculate prejudgment interest, and any such award could only be the product of speculation, amounting to a double recovery for the plaintiffs or punishment of the defendants. The plaintiffs’ claims sounded in tort, as the plaintiffs claimed damages for their wrongful arrest, prosecution, and incarceration, and they presented evidence that they suffered permanent injury from the wrongs, beginning with their wrongful arrests and continuing through their incarceration, and into the future. They did not explicitly allege nor raise in substance any claim nor provide any proof for loss of use of money.”

If anything, the award appeared punitive rather than purely compensatory in nature. “[I]t is striking, in light of the jury’s large verdict, which the court observed was unprecedented in size, that the court found it to be a ‘manifest injustice’ that the plaintiffs were not awarded another 50% and therefore increased the $62 million compensatory award to $98 million.” Thus the panel holds the award to be both legally erroneous and an abuse of discretion, and vacates it.

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