Kaiser Aluminum Warrick, LLC v. US Magnesium LLC

Background

Kaiser sought entry of a proposed judgment against US Magnesium based on a stipulated cover-damages award of $54,983,670. The opinion does not provide the full underlying contract dispute, but it states that the award arose from a breach-of-contract claim and that US Magnesium had asserted a pass-through defense.

The court had previously granted summary judgment striking the pass-through defense, concluding that New York law precluded it. The parties’ stipulation preserved US Magnesium’s right to appeal that decision.

US Magnesium’s Arguments

US Magnesium raised two objections to the proposed judgment. First, it asked the court to reargue its decision rejecting the pass-through defense. The court found that the motion was untimely under the Southern District of New York’s rule requiring reconsideration motions within 14 days after entry of the challenged order. It also found that US Magnesium had not shown a reason to reconsider the earlier decision.

Second, US Magnesium argued that Kaiser was not entitled to nine-percent prejudgment interest. It contended that the remedy was equitable in nature, partly because of its pass-through-defense argument. US Magnesium also argued that, if interest were awarded, it should be calculated using $29,429,066 rather than the stipulated cover-damages amount.

Court’s Reasoning

Because the case was based on diversity jurisdiction and the right to interest was treated as substantive, the court applied New York law. New York law generally requires nine-percent prejudgment interest for a breach-of-contract judgment, while allowing discretion in actions seeking equitable remedies.

The court concluded that the $54,983,670 cover-damages award was a legal remedy for breach of contract, not an equitable remedy. It therefore held that nine-percent prejudgment interest was mandatory. The court added that, even if it considered the equities, they would favor nine-percent interest based on the stipulated cover-damages amount.

Ruling

Judge John G. Koeltl denied US Magnesium’s untimely motion for reconsideration. The court also rejected US Magnesium’s arguments concerning the interest rate and the amount on which interest should be based, concluding that nine-percent prejudgment interest applied to the stipulated $54,983,670 cover-damages award. The court ordered entry of Kaiser’s proposed judgment.