Arizona Court of Appeals Division Two Holds That Prejudgment Interest under Rule 68(g) Is Calculated from the Date of the Offer of Judgment Until the Date of the Final Judgment Entered in the Case After Any Motion for New Trial or Appeal.

Metzler sued BCI Coca-Cola Bottling Company of Los Angeles, Inc. (“BCI”) for personal injuries she suffered as a result of a fall in a grocery store.  On May 10, 2007, Metzler made an offer of judgment for $150,000.  On September 2, 2009, the trial court entered judgment in favor of Metzler in the amount of $1,855,398.86.  The trial court then granted BCI’s motion for a new trial on the issue of liability, but denied its motion on the issue of damages.  BCI appealed the denial of a new trial on damages, and Metzler cross-appealed on the grant of a new trial on liability.  In a memorandum decision, the Court of Appeals reversed the grant of a new trial on liability, affirmed the denial of a new trial on damages, and remanded for the entry of a final judgment.

In April 2011, BCI paid Metzler the damages awarded, plus Rule 68 sanctions from the date of the offer of judgment to September 2, 2009, post-judgment interest from September 3, 2009 through December 8, 2009, and costs on appeal.  BCI filed a motion for judgment on the mandate, arguing that prejudgment interest terminated on September 2, 2009.  Metzler argued in response that interest should accrue from the date of the offer of judgment until the final judgment on the mandate.  The trial court agreed with BCI.  Metzler filed a motion for reconsideration, which was denied, and then appealed.

The Court of Appeals reversed.  The Court’s opinion focused on the interpretation of the word “judgment” in Rule 68(g) – that is, whether it refers to the judgment entered immediately following trial or to the judgment eventually obtained following an appeal.  The Court concluded that the September 2, 2009 judgment immediately following trial was not the “judgment” for purposes of calculating prejudgment interest under Rule 68(g) because that judgment was vacated, and thus lost all force and effect, when the trial court granted BCI’s motion for a new trial on liability.  The Court noted that its conclusion is “consistent with the settlement-promoting purpose of Rule 68.”  That is, when a party rejects a Rule 68 offer of judgment, that party takes the risk of protracted litigation, including the possibility of a new trial or an appeal.  Imposing sanctions for the period throughout extended litigation only increases the incentive to settle early.

Finally, the Court noted that it was vacating the judgment on the mandate entered before the appeal.  Thus, on remand, Metzler would be entitled to prejudgment interest from the date of the offer of judgment through the date of the judgment eventually entered after this appeal.

Judge Brammer authored the opinion; Judges Howard and Espinosa concurred.