Friday, July 25, 2014
Fridays are law days (sometimes) here at Outside Counsel. Today let's consider Cappiello v. IDC Publications. Professor Siegel featured it about a year ago, but I just now came across it, and it is the sort of nifty thing that Erie v. Tompkins makes possible.
In New York interest on post-verdict judgments is set by statute at 9%. In federal court the judgment rate is computed according to a formula that adopts Treasury yields. 9% is crazy, and a lot of appeals that might get taken don't get taken because 9% will kill you. So what's the rate to apply when a New York action is removed to federal court on the grounds of diversity? Well, that comes down to the classic Erie question: is post-verdict interest a substantive issue, or merely a procedural question? Pre-judgment interest is part of the substantive law of the state, so New York law applies, but post-judgment interest is procedural. In Cappiello the court reckoned the applicable rate at 0.25%. That's a swing that stings, cats and kittens. There is a work-around, maybe: Seigel says the federal judgment can be docketed with a New York State county clerk under CPLR 5018(b), but the Cappiello decision says nay. Another way to address it-- in commercial cases-- would be to have the contract speak to the question directly. At what point does the failure to include such a provision become a source of concern for the drafting lawyer? Isn't that an ugly question?
I'm not sure to what extent the Cappiello rule would really color my conversation with a litigation client about whether or not to remove a case. It is, however, one more item on one side of the ledger.
In New York interest on post-verdict judgments is set by statute at 9%. In federal court the judgment rate is computed according to a formula that adopts Treasury yields. 9% is crazy, and a lot of appeals that might get taken don't get taken because 9% will kill you. So what's the rate to apply when a New York action is removed to federal court on the grounds of diversity? Well, that comes down to the classic Erie question: is post-verdict interest a substantive issue, or merely a procedural question? Pre-judgment interest is part of the substantive law of the state, so New York law applies, but post-judgment interest is procedural. In Cappiello the court reckoned the applicable rate at 0.25%. That's a swing that stings, cats and kittens. There is a work-around, maybe: Seigel says the federal judgment can be docketed with a New York State county clerk under CPLR 5018(b), but the Cappiello decision says nay. Another way to address it-- in commercial cases-- would be to have the contract speak to the question directly. At what point does the failure to include such a provision become a source of concern for the drafting lawyer? Isn't that an ugly question?
I'm not sure to what extent the Cappiello rule would really color my conversation with a litigation client about whether or not to remove a case. It is, however, one more item on one side of the ledger.
// posted by Bill @ 8:01 AM 
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