City of Milwaukee v. National Gypsum Co., 515 U.S. 189 (1995)

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Syllabus

After a ship owned by the Cement Division of National Gypsum Co. and insured by the other respondents sank in a winter storm while berthed in a slip owned by petitioner Milwaukee (City), National Gypsum brought this admiralty suit for damages, alleging that the City had negligently breached its duty as a wharfinger. The City denied fault and filed a counterclaim for damage to its dock, alleging that National Gypsum was negligent in leaving the ship virtually unmanned. During the course of the litigation, the District Court, inter alia, found that both parties were negligent and apportioned liability primarily to National Gypsum; entered a partial judgment for the stipulated amount of respondents’ damages, excluding prejudgment interest; and denied respondents’ request for such interest, holding that the fact that National Gypsum’s loss was primarily attributable to its own negligence and the existence of a genuine dispute over the City’s liability were special circumstances justifying a departure from the general rule that prejudgment interest should be awarded in maritime collision cases. The Court of Appeals disagreed and reversed the latter ruling, holding, among other things, that mutual fault cannot provide a basis for denying prejudgment interest after this Court, in United States v. Reliable Transfer Co., 421 U.S. 397, announced a rule requiring that damages be assessed on the basis of proportionate fault when such an allocation can reasonably be made.

Held: Neither a good faith dispute over liability nor the existence of mutual fault justifies the denial of prejudgment interest in an admiralty collision case. Throughout history, such cases have established a general rule that prejudgment interest should be awarded, subject to a limited exception for "peculiar" or "exceptional" circumstances. The existence of a legitimate difference of opinion on the liability issue is not such a circumstance, but is merely a characteristic of most ordinary lawsuits. Nor does the magnitude of the plaintiff’s fault qualify as a "peculiar" feature. Although it might appear somewhat inequitable to award a large sum in prejudgment interest against a relatively innocent party, any unfairness is illusory, because the relative fault of the parties has already been taken into consideration under the Reliable Transfer rule in calculating the amount of the loss for which the relatively innocent party is responsible. In light of Reliable Transfer, a denial of prejudgment interest on the basis of mutual fault would unfairly penalize a party twice for the same mistake. Pp. 194-199.

31 F.3d 581, affirmed.

STEVENS, J., delivered the opinion of the Court, in which all other Members joined, except BREYER, J., who took no part in the consideration or decision of the case.