Key Decisions

January 2013 – Collecting On A Judgment With An Appeal Pending Is Risky

(filed under: Key Decisions | January 16, 2013)

Collecting On A Judgment With An Appeal Pending Is Risky

Cussler v. Crusader Entertainment, LLC
(Cal. Ct. of App., 2d Dist.), filed December 21, 2012

Clive Cussler, a renowned fiction writer, and Crusader Entertainment entered into a contract for purchase and production of motion pictures based on Cussler’s stories and characters. The parties ran into difficulties and protracted and complicated litigation ensued.

After a trial and assorted post-trial motions, the trial court entered a judgment. The judgment provided that Cussler “shall take nothing” from Crusader. It further provided that Crusader shall recover $5 million in damages, prejudgment interest and, as “the prevailing party,” costs of suit.

Both Cussler and Crusader appealed the judgment on numerous grounds.

While that appeal was pending, the trial court entered an order awarding Crusader $13,949,131 in attorney fees as the prevailing party. Cussler appealed the fee order.

Cussler was unable to raise sufficient funds to post a bond to stay enforcement of the judgment. As a result, Crusader collected $20,907,200.14 from Cussler.

The Court of Appeal reversed the trial court’s judgment with respect to the $5 million award to Crusader and the trial court’s finding that Crusader was the prevailing party. It otherwise affirmed the judgment and remanded the case so that the trial court could determine whether there was a prevailing party and, if so, whether that party was Cussler or Crusader.

The Court of Appeal also reversed the fee order as Crusader was no longer the prevailing party on its contract claim and was no longer entitled to contractual attorney’s fees.

Cussler filed a motion for an order of restitution and interest. In this motion, Cussler sought to recover the $20,907,200.14 Crusader collected, plus interest at a rate of 10%.

The trial court granted the restitution order and ordered Crusader to pay interest at the rate of 7%. Crusader appealed the interest award.

The trial court affirmed the interest award.

Where one party collects money by executing on a judgment that is later overturned on appeal, the other party may seek restitution of the collected funds upon remand. The court may, in its discretion, award interest on the amount of restitution. In general, interest is awarded unless it would be inequitable under the circumstances.

The California Constitution provides that the legal rate of prejudgment interest is 7% and the legal rate of postjudgment interest is 10%. Thus, an award of 7% was not arbitrary or capricious. While it is true that 7% was substantially more than one might have gotten by depositing the money in a bank or buying treasury bills, that did not make it excessive, particularly in view of the fact that Crusader did not provide evidence of what it did with the funds it had collected from Cussler or what interest rate it received on them.

In ruling that 7% was not excessive, the court noted that if Crusader had been the prevailing party, it would have sought interest at the statutory or constitutional rates.

In short, “[w]hen Crusader collected $20 million pending an appeal, it assumed ‘the risk that it may have to repay the award, along with interest,’ if Cussler prevailed on the appeal.”