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City of Milwaukee v. Cement Division, National Gypsum Co.

Supreme Court of the United States
1995 U.S. LEXIS 4038, 132 L. Ed. 2d 148, 515 U.S. 189 (1995)
ELI5:

Rule of Law:

In admiralty collision cases, prejudgment interest should be awarded as a general rule to ensure full compensation for the injured party. Neither a good-faith dispute over liability nor the existence of mutual fault constitutes an exceptional circumstance justifying the denial of prejudgment interest.


Facts:

  • The ship E. M. Ford, owned by National Gypsum Co., was berthed in a slip owned by the city of Milwaukee (City).
  • National Gypsum left the ship virtually unmanned during the winter Christmas holidays.
  • On Christmas Eve 1979, a severe storm struck the area.
  • During the storm, the E. M. Ford broke loose from its moorings.
  • The ship repeatedly struck the headwall of the slip, causing damage to both the vessel and the dock.
  • As a result of the damage, the ship took on water and sank in the harbor.
  • The ship was subsequently raised from the harbor and repaired.

Procedural Posture:

  • National Gypsum Co. sued the City of Milwaukee in the U.S. District Court for the Eastern District of Wisconsin, invoking admiralty jurisdiction.
  • The City filed a counterclaim against National Gypsum for damage to its dock.
  • After a bench trial on liability, the District Court found both parties negligent, allocating 96% of the fault to National Gypsum and 4% to the City.
  • National Gypsum, as appellant, took an interlocutory appeal to the U.S. Court of Appeals for the Seventh Circuit.
  • The Court of Appeals affirmed the finding of mutual fault but found the 96/4 allocation to be clearly erroneous, reapportioning liability as two-thirds to National Gypsum and one-third to the City.
  • On remand, the parties settled the damages amount, and National Gypsum moved for an award of prejudgment interest.
  • The District Court denied the motion, finding that the high degree of plaintiff's fault and the genuine dispute over liability constituted special circumstances justifying the denial.
  • National Gypsum, as appellant, appealed again to the Seventh Circuit, which reversed the District Court's decision and held that interest should be awarded.
  • The City of Milwaukee, as petitioner, was granted a writ of certiorari by the U.S. Supreme Court.

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Issue:

In an admiralty case, do a plaintiff's significant contributory negligence and a genuine dispute over liability constitute 'exceptional circumstances' that justify a court's denial of prejudgment interest?


Opinions:

Majority - Justice Stevens

No. Neither a plaintiff's significant contributory negligence nor a genuine dispute over liability justifies denying prejudgment interest in an admiralty case. The essential purpose of prejudgment interest is to provide full compensation to the injured party for the loss of use of their money, not to punish the defendant. A good-faith dispute over liability is a common feature of litigation and not an exceptional circumstance. Furthermore, under the comparative fault doctrine established in United States v. Reliable Transfer Co., the plaintiff's damages are already reduced by their percentage of fault. Denying prejudgment interest based on that same fault would unfairly penalize the plaintiff twice for the same mistake, undermining the compensatory principle of admiralty law.



Analysis:

This decision solidifies the principle that prejudgment interest is an integral part of full compensation in admiralty law and is the presumptive rule, not a discretionary bonus. It significantly narrows the trial court's discretion to deny interest by explicitly removing two common litigation features—mutual fault and good-faith liability disputes—from the category of 'exceptional circumstances.' The ruling reinforces the logic of the proportionate fault system from Reliable Transfer, ensuring that a party's fault is accounted for once in the damage calculation and not used again to deny interest. This creates a more predictable and uniform application of prejudgment interest awards in maritime cases across federal circuits.

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