The Colorado Supreme Court heard oral arguments on Apr. 5 about how much interest is owed when a defendant appeals a judgment against it and loses again at retrial. The court’s decision could mean a difference of nearly $2 million in how much Ford Motor Company must pay a plaintiff who was injured in a car accident more than a decade ago.
Forrest Walker was rear-ended at a stoplight in 2009 while driving a Ford Explorer. He suffered whiplash and sued Ford, alleging the design of the driver’s seat contributed to his injuries. The jury found in Walker’s favor and awarded him more than $2.8 million in compensatory damages.
Ford appealed, arguing that the trial court gave the jury erroneous instructions. The Colorado Court of Appeals agreed and remanded for a new trial with correct instructions. The case was retried in 2019 — six years after the original verdict and almost 10 years after the crash. This time, the jury awarded Walker more than $2.9 million.
Walker requested 9% prejudgment interest from the date of filing to the date the judgment was entered. The district court agreed and added more than $3.6 million in prejudgment interest to Walker’s judgment. Ford appealed that decision too, arguing that under the interest on damages statute, the court must apply a market-based postjudgment interest rate when the judgment is appealed by the judgment debtor. But the Court of Appeals affirmed, concluding that the plain language of the statute requires 9% prejudgment interest to be applied during the pendency of the appeal.
In its appeal to the Colorado Supreme Court, Ford argues that a market-rate interest rate is what the legislature intended. While the first section of the interest on damages statute says interest must accrue at 9% from the filing of the action until satisfaction of the judgment, another section says that a market-based postjudgment rate applies when a judgment is affirmed, modified or reversed with a direction for a judgment to be entered by the trial court. The statute doesn’t specify what should happen if the judgment is reversed and remanded for a new trial, as in Ford’s case, which makes the law ambiguous, according to the automaker.
According to Ford, the General Assembly wanted to eliminate financial incentives or disincentives of an appeal, and a market-based postjudgment interest rate is consistent with this intent. “The Court of Appeals ignored that intent and, when faced with an ambiguous statute, failed to grapple with the statute’s history, goals, consequences — none of which would have supported the interpretation it chose,” Wheeler Trigg O’Donnell partner Theresa Wardon Benz said during arguments on Tuesday. She added that the intermediate court’s opinion “penalizes Ford with millions of dollars of additional interest” — the disputed amount is about $1.87 million — for successfully appealing and getting a fair trial.
But Walker argues that the statute is unambiguous and requires the 9% prejudgment interest rate. “There is only one judgment, one marker in time, from which to calculate prejudgment and appellate interest,” said Evan Banker of Chalat Hatten & Banker, referring to the 2019 verdict. When Ford successfully appealed the 2013 verdict, that judgment ceased to exist, Banker said, so the 9% prejudgment interest must be applied starting from the date the complaint was first filed more than a decade ago.
“How doesn’t your argument create a great disincentive for Ford to appeal in this situation?” Justice Richard Gabriel asked Banker, noting that the company “ran a big risk” and could have been incentivized to settle despite having a good appeal.
“The incentive to appeal is and always should be victory. Ford got exactly what it asked for,” Banker said, including having the judgment vacated and getting an order for $83,000 in costs against Walker. “They got everything that they had asked for. Mr. Walker is now left with all the risk of the cost of a retrial, the possibility that he gets nothing, that he owes Ford’s costs … The risks of litigation are well known to litigants throughout, and strategy decisions are made based on those risks and rewards by litigants all the time.”
Banker had a different take on the history of the judgment interest statute and the legislature’s intent. Interest rates were higher than 9% when the law was amended to require market-rate postjudgment interest when a judgment debtor appeals, according to Banker. “What was happening was the appellate courts were becoming flooded with frivolous and meritless appeals,” Banker said, adding that defendants at that time could buy bonds at 12% while owing 9% on the judgment and make money while delaying payment during a meritless appeal. “In order to disincentivize these meritless appeals, [the legislature] said, ‘Alright. If this judgment is ultimately to be paid, it’s to be paid at a market rate and you’re not going to make any money on it,’” Banker said.
The case has attracted attention from several groups, including the Colorado Trial Lawyers Association, the American Tort Reform Association, the Colorado Civil Justice League and the Colorado Defense Lawyers Association.
In an amicus brief in support of Walker, the CTLA argues that Ford’s argument is contrary to public policy and penalizes injured people who cannot afford medical care. “When plaintiffs do not receive compensation for their damages from the date they were wronged, they cannot earn a return on such damages and suffer losses due to inflation between the time the damages are calculated and the time of the judgment,” the brief states. “Personal injury plaintiffs often require ongoing medical care that continues long after lawsuits are filed. Delaying injured parties’ compensation can have devastating consequences for Coloradans struggling to afford medical care.”
The CCJL and CDLA argue in an amicus brief that the Court of Appeals’ decision improperly burdens a judgment debtor’s right to appeal and discouraging meritorious appeals will “stunt the development of Colorado law.” In Colorado, one district court’s decision doesn’t bind another, nor do decisions of one division of the Court of Appeals bind other divisions. “The appellate process, and ultimately this Court’s review, is thus the means by which Colorado law is developed and clarified,” the brief states.
The CCJL and CDLA also note that personal injury suits “are not brought exclusively against so-called deep-pocket defendants,” and affirming the Court of Appeals’ decision “has grave potential to impact financially vulnerable litigants.”
Justice Maria Berkenkotter did not participate in Tuesday’s arguments in Ford Motor Company v. Forrest Walker. Berkenkotter served as the judge in the 2013 trial in Boulder County District Court.