Opinion
Case No. 00-2402-JAR
August 12, 2002.
ORDER DENYING MOTION FOR PARTIAL SUMMARY JUDGMENT
This matter comes before the Court pursuant to Defendant Foster Wheeler Energy Corporation's First Motion For Partial Summary Judgment (Doc. 123). Black Veatch seeks recovery of prejudgment interest on its various claims against Foster Wheeler in connection with its Contract for the design, procurement, fabrication and delivery of structural steel for a power plant in Handan City, Peoples Republic of China. Foster Wheeler denies that it is liable to Black Veatch on any of Black Veatch's alleged claims, and asserts counterclaims against Black Veatch.
Pursuant to its motion for partial summary judgment, Foster Wheeler argues that Black Veatch's claim for prejudgment interest must fail as a matter of law. In support of this claim, Foster Wheeler first argues that because there are disputed facts regarding Black Veatch's underlying claims, those claims are unliquidated and Black Veatch is not entitled to prejudgment interest as a matter of law. Despite its acknowledgment of the factual disputes with regard to Black Veatch's claims, Foster Wheeler next argues that there are no factual disputes with regard to its right under the Contract to withhold payments, and thus Black Veatch is not entitled to prejudgment interest on such amounts. Both arguments must fail.
Foster Wheeler first argues that Black Veatch's claims are unliquidated. Foster Wheeler acknowledges in its reply brief that "it is beyond legitimate question that a jury will be required to decide numerous genuine issues of material fact regarding both liability and damages in connection with Black Veatch's alleged claims for damages." Foster Wheeler then points to these disputed issues in arguing that under Kansas law, a party may recover prejudgment interest only on a liquidated claim for damages; and a claim is not liquidated until "both the amount due and the date on which it is due are fixed and certain, or when the same become definitely ascertainable by mathematical computation." The Court must first determine what law applies. The parties disagree as to whether New Jersey or Kansas law applies to the issue of prejudgment interest. Both parties agree that disputes arising from the parties' Contract are to be governed in accordance with New Jersey law. The Contract provides:
Defendant Foster Wheeler Energy Corporation's Reply Brief in Support of Foster Wheeler's First Motion for Partial Summary Judgment (Doc. 158), p. 5.
Id. at p. 4, citing Contract Lodging Corp. v. Union Pacific R.R., 1991 WL 278482 (D.Kan. 1991).
Article 28. Governing law: This Contract shall be governed by and construed in accordance with the laws of the state of New Jersey.
A federal court exercising diversity jurisdiction applies the choice of law rules from the state in which the court sits. Although the parties agree that New Jersey law applies to the Contract, a choice of law determination is made on an issue-by-issue, and not case-by-case, basis. Thus, the fact that New Jersey substantive law applies to the Contract does not in itself resolve the choice of law issue concerning prejudgment interest.
Klaxon Co. v. Standard Elec. Mfg. Co., 313 U.S. 487, 496 (1941).
Contract Lodging Corp. v. Union Pacific R.R., 1991 WL 278482, *3 (D.Kan. 1991).
Id.
If the question of liability for prejudgment interest is a procedural issue, the law of the forum state applies and the Court would apply Kansas law. If the issue is substantive, New Jersey law, which governs the substantive legal issues, also governs the question of prejudgment interest. Although under Kansas choice of law rules it is not clear whether Kansas considers prejudgment interest to be a matter of substantive or procedural law, the majority rule is that "prejudgment interest, like the issue of damages, is substantive, and the state whose laws govern the substantive legal questions also govern[s] the question of prejudgment interest." However, since New Jersey law considers prejudgment interest to be a matter of procedural law and the New Jersey courts apply the law of the forum, Kansas law will decide the issue regardless.
Id.
Id. (citations omitted).
See id.; North Bergen Rex Transport, Inc. v. Trailer Leasing Co., 158 N.J. 561, 569, 730 A.2d 843, 848 (1999); DePuy, Inc. v. Biomedical Engineering Trust, 2001 WL 1683021, *20 (D.N.J. 2001).
Although Foster Wheeler correctly sets forth the general rule in Kansas that a party may recover prejudgment interest only on a liquidated claim, it fails to acknowledge the exception to this general rule. Kansas courts have held that the court has discretion to award prejudgment interest under certain circumstances when necessary to provide full compensation, even if the primary damages are unliquidated.
See, e.g., Lightcap v. Mobil Oil Corp., 221 Kan. 448, 468-69, 562 P.2d 1, 16 (1977), cert. denied 434 U.S. 876 (1977); Whittenburg v. L.J. Holding Co., 838 F. Supp. 519, 520 (D.Kan. 1993); United Cities Gas Co. v. Brock Exploration Co., 995 F. Supp. 1284, 1295 (D.Kan. 1998); Beck v. Northern Natural Gas Co., 170 F.3d 1018, 1025 (10th Cir. 1999); Farmers State Bank v. Production Credit Ass'n of St. Cloud, 243 Kan. 87, 102- 03755 P.2d 518, 528-29 (1988); United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1236 (10th Cir. 2000).
The Court cannot determine whether the exception should apply and whether prejudgment interest will be necessary to provide full compensation until the underlying claims are determined on the merits. Thus, summary judgment is inappropriate. Foster Wheeler next relies on its right to withhold payment under the Contract. Article 18, Terms of Payment of Attachment 1 (General Conditions) of the Contract provides, in part, as follows:
The Purchaser may withhold payment to secure itself against loss in the event any claims are filed against the Purchaser or its Customer relating to the Seller's performance of this Contract or if reasonable evidence indicates the probability of filing of any such claims, or the Seller has violated any provision of this Contract.
Foster Wheeler then alleges that:
Without legitimate dispute, reasonable evidence indicates: (a) that the Owner has filed claims against Foster Wheeler relating to Black Veatch's performance of the Contract; and (b) that Black Veatch has violated numerous provisions of the Contract. . . . Consequently, Foster Wheeler was entitled to withhold payment from Black Veatch to secure itself against losses from such claims and Contract violations and Black Veatch is not entitled to pre-judgment interest on such amounts.
Foster Wheeler also presents as an undisputed fact its contention that:
Black Veatch is indebted to Foster Wheeler on its counterclaim due to breaches of the Contract by Black Veatch for amounts substantially in excess of the amounts claimed by Black Veatch against Foster Wheeler . . .
Defendant Foster Wheeler Energy Corporation's Memorandum in Support of Foster Wheeler Energy Corporation's First Motion for Partial Summary Judgment (Doc. 124), p. 29.
Id. at p. 14-15, ~ 22.
However, this allegation and this fact/conclusion are disputed and resolution of these disputes would require a determination on the merits of all the other claims and counterclaims in this action. There are no pending motions for summary judgment on those claims. Who breached the contract and whether Foster Wheeler could appropriately withhold payment under the contract are at issue in this case. Thus, Foster Wheeler's motion concerning prejudgment interest is premature.
See, e.g., Fashion House, Inc. v. KMart Corp., 892 F.2d 1076, 1095 (1st Cir. 1989) (finding that the issue of prejudgment interest may or may not arise, and federal courts should not render advisory opinions, and declining to "deal with a covey of birds which may never come home to roost"; AMCEC, Inc. v. United States Filter Corp., 1999 WL 33885, *6 (N.D.Ill. 1999) (holding that because the court made no determination on amounts owed between the parties, it was premature to address the issue of prejudgment interest); Electric Mobility Corp. v. Bourns Sensors/Controls, Inc., 87 F. Supp.2d 394, 404 (D.N.J. 2000) (denying summary judgment without prejudice where motion regarding prejudgment interest was premature, and stating that if prejudgment interest becomes an issue after the trial, the court would hold an evidentiary hearing to determine whether the case qualified as "exceptional" under New Jersey law); The Society of St. Vincent De Paul in the Archdiocese of Detroit v. Mt. Hawley Ins. Co., 49 F. Supp.2d 1011, 1013 (E.D.Mich. 1999); Solow v. Wellner, 205 A.D.2d 339, 340-41, 613 N.Y.S.2d 163, 165-66 (1994), aff'd 658 N.E.2d 1005 (1995); Cooper Distr. Co., Inc. v. Amana Refrigeration, Inc., 180 F.3d 542, 552-53 (3rd Cir. 1999).
IT IS THEREFORE ORDERED BY THE COURT that Defendant Foster Wheeler Energy Corporation's First Motion For Partial Summary Judgment (Doc. 123) shall be DENIED.
IT IS FURTHER ORDERED BY THE COURT THAT Plaintiff's Second Objections and Motion to Strike (Doc. 135) is DENIED as MOOT.
IT IS SO ORDERED.
Dated the 12th day of August 2002.