June 23, 2011

Gunderson v. Wall: defendant who paid punitive damages not entitled to interest after award reversed on appeal

In 2009, the defendant in this case persuaded the California Court of Appeal (Second Appellate District, Division Seven) to reverse a $800,000 punitive damages award.  (We described the reversal in a prior post.)  While the appeal was pending, however, the plaintiff had forced the defendant to pay the $800,000.  Apparently the defendant was unable to post an appeal bond or otherwise obtain a stay of enforcement pending appeal.

After the appeal, the defendant sought restitution of its $800,000, with interest.  Ordinarily, when a defendant is forced to pay a money judgment that is reversed on appeal, the defendant is entitled to get the money back with interest.  But the trial court here ruled that the defendant was not entitled to interest because it engaged in "inequitable" conduct by resisting the plaintiff's enforcement efforts; specifically, the defendant avoided attempts to serve writs of execution and ignored a subsequent court order.

The California Court of Appeal (Second Appellate District, Division Seven) affirmed in this published opinion, holding that the trial court acted within its discretion when it weighed the equities and declined to award interest.  The Court of Appeal noted that the plaintiff had expended $100,000 in attorney's fees to collect the judgment, and concluded that letting the plaintiff keep the interest on the $800,000 would properly return the plaintiff to the position he would have been in if he hadn't enforced the judgment.  The defendant, however, ends up in a worse position, losing out on the interest on the $800,000 that rightfully belonged to the defendant all along. 

Related posts:

Gunderson v. Wall: inconsistencies in defendant's testimony are not alone sufficient to support punitive damages