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Metzler v. BCI Coca-Cola Bottling Company of Los Angeles, Inc. - 8/28/2013

Arizona Court of Appeals Division Two Holds that Prejudgment Interest Imposed as a Sanction Pursuant to Rule 68(g) Constitutes an “Obligation” Under § 44-1201(A).

In August 2009, a jury found BCI liable for injuries sustained by Metzler in a fall at a grocery store and awarded her $1.5 million in damages.  On September 2, 2009, the trial court entered judgment in favor of Metzler in the amount of $1,855,398.86, which included prejudgment interest under Rule 68(g) as a sanction against BCI for rejecting a prior, more favorable offer of judgment.  On December 8, 2009, the court granted BCI’s motion for a new trial on liability.  Metzler appealed the grant of a new trial and the court of appeals reversed the grant of a new trial, remanding the matter for entry of final judgment.

On remand, Metzler lodged a form of judgment with the trial court calculating prejudgment interest pursuant to Rule 68(g) at the rate of ten percent per annum.  BCI objected, asserting that under the recently amended version of A.R.S. § 44-1201, the interest rate should have been calculated at the rate of one percent per annum plus the prime rate or 4.25 percent.  After finding the proper interest rate was ten percent, the court entered judgment. 

BCI appealed and the Arizona Court of Appeals affirmed the judgment.  Ariz. R. Civ. P. 68(a) provides that at any time more than thirty days before trial, “any party may serve upon any other party an offer to allow judgment to be entered in the action.”  “If the offeree rejects an offer and does not later obtain a more favorable judgment . . . , the offeree must pay, as a sanction . . . , prejudgment interest on unliquidated claims to accrue from the date of the offer.”  Ariz. R. Civ. P. 68(g).  A.R.S. § 44-1201, which governs interest on civil judgment, establishes two different prejudgment interest rates.  It provides that “[i]nterest on any loan, indebtedness or other obligation shall be at the rate of ten percent per annum” and “interest on any judgment shall be . . . one per cent plus the prime rate as published by the board of governs of the federal reserve system.”  Because Rule 68(g) provides that an offeree “must pay” sanctions if the offeree rejects the offer and fails to obtain a more favorable judgment, the Court determined that the obligation created by the imposition of Rule 68(g) sanctions should be treated as an “obligation” under § 44-1201.  Metzler was thus entitled to Rule 68(g) prejudgment interest calculated at ten percent per annum through entry of the final judgment.

Judge Vasquez authored the opinion; Judges Howard and Johnson concurred.

Posted by: Brandon Hale

Posted On: 9/5/2013