In Re: RFC and RESCAP Liquidating Trust Litigation

Background

Residential Funding Company, LLC brought claims against Home Loan Center, Inc. under Minnesota law based on losses and liabilities connected to residential mortgage loans. After bankruptcy proceedings, ResCap Liquidating Trust succeeded to RFC’s rights and became the plaintiff. ResCap ultimately proceeded to trial only on an indemnification claim under the parties’ Client Guide.

A jury found Home Loan Center liable on November 8, 2018, and awarded ResCap $28.7 million. ResCap then moved for prejudgment interest. It sought $14,066,931.50 in interest from the start of the case through the verdict, interest on any attorney’s-fee and cost award, and postverdict interest through entry of final judgment.

Preverdict interest on damages

The court held that Minnesota Statute § 549.09 governed the request because the indemnification claim arose under state law. Under that law, prejudgment interest compensates a party for the lost use of money and generally applies when damages are not readily ascertainable.

The court found that ResCap’s damages were not readily ascertainable because the case involved multiple damages methods, allocation issues, a strongly disputed valuation, and a jury determination. The court rejected Home Loan Center’s argument that the award represented “future damages” because ResCap had not yet paid the underlying liabilities. The court concluded that the liabilities were incurred when the bankruptcy court approved the underlying settlements in December 2013, not at some future time.

The court therefore awarded ResCap $14,066,931.50 in preverdict prejudgment interest on the $28.7 million jury award. The interest ran from December 16, 2013, when the action was commenced through service of process, through November 8, 2018, when the jury returned its verdict, at the statutory rate of 10 percent per year.

Interest on attorney’s fees and costs

ResCap also sought prejudgment interest on attorney’s fees and costs incurred in this litigation. The court distinguished fees and costs that are themselves the subject of a lawsuit from fees and costs that a court adds after deciding the underlying dispute. It concluded that ResCap’s indemnification claim—not the attorney’s fees and costs incurred in prosecuting that claim—was the subject matter of this lawsuit.

The court held that the fees and costs incurred in this case fell within Minnesota Statute § 549.09’s exception for attorney’s fees and costs added by the court. It therefore declined to award prejudgment interest on any attorney’s-fee award. The separate petition for attorney’s fees and costs remained under advisement.

Reduction and postverdict interest

Home Loan Center asked the court to reduce the preverdict interest because of alleged delays in ResCap’s discovery concerning its damages-allocation theory. The court declined to reduce or eliminate the award. It found that delays resulted from both sides and from the complexity and breadth of the litigation, and that there was no allegation of bad faith by ResCap.

The court also held that ResCap was entitled to postverdict prejudgment interest on the damages award, including the $14,066,931.50 in preverdict interest. The order did not award prejudgment interest on any attorney’s-fee or cost award.

Disposition

Judge Susan Richard Nelson ordered that ResCap’s Motion for Prejudgment Interest was GRANTED IN PART and DENIED IN PART. ResCap received $14,066,931.50 in preverdict interest on the jury’s damages award and postverdict interest on the total damages award including that preverdict interest. ResCap was denied prejudgment interest on any award of attorney’s fees and costs.