Photograph by Maura Teague
Some Minnesota Litigator posts appeal to a broad readership. This is not one of them. If you are not a trial lawyer, you should probably stop reading here.
The Schwendiman v. Arkwright patent infringement lawsuit started on April Fool’s Day, 2011.
Schendiman won a $2,624,228 jury verdict on October 18, 2017.
Although this is a significant amount of money for most of us, it might have represented a devastating setback for Schwendiman if Schwendiman had to pay for over six years of lawyering, experts, and so on, to recover $2.6 million (or a hard hit to the law firm if it took the case on a pure contingent fee)(or a less-than-hard hit on lawyers and clients, alike if there was a hybrid fee arrangement (part-contingent, part-discounted hourly)).
And the trial judge, U.S. Chief Judge John R. Tunheim (D. Minn.) rejected Schwendiman’s separate effort to be awarded its attorneys’ fees.
Could Schwendiman bump up its recovery by invoking Minnesota’s rather generous “prejudgment interest statute” (which yields 10% per annum)?
Judge Tunheim answered, “Yes.” (See here at p. 50-53.)
But 10% of what, exactly, and counting from when, exactly? Judge Tunheim awarded prejudgment interest of $1,915,328.00, nearly doubling Schwendiman’s recovery. But did he miss something?
Minn. Stat. 549.09, Subd. b provides in relevant part:
(b) Except as otherwise provided by contract or allowed by law, preverdict, preaward, or prereport interest on pecuniary damages shall be computed as provided in paragraph (c) from the time of the commencement of the action or a demand for arbitration, or the time of a written notice of claim, whichever occurs first, except as provided herein. The action must be commenced within two years of a written notice of claim for interest to begin to accrue from the time of the notice of claim. If either party serves a written offer of settlement, the other party may serve a written acceptance or a written counteroffer within 30 days. After that time, interest on the judgment or award shall be calculated by the judge or arbitrator in the following manner. The prevailing party shall receive interest on any judgment or award from the time of commencement of the action or a demand for arbitration, or the time of a written notice of claim, or as to special damages from the time when special damages were incurred, if later, until the time of verdict, award, or report only if the amount of its offer is closer to the judgment or award than the amount of the opposing party’s [written] offer [of settlement]. If the amount of the losing party’s offer was closer to the judgment or award than the prevailing party’s offer, the prevailing party shall receive interest only on the amount of the settlement offer or the judgment or award, whichever is less, and only from the time of commencement of the action or a demand for arbitration, or the time of a written notice of claim, or as to special damages from when the special damages were incurred, if later, until the time the settlement offer was made. Subsequent offers and counteroffers supersede the legal effect of earlier offers and counteroffers. For the purposes of clause (2), the amount of settlement offer must be allocated between past and future damages in the same proportion as determined by the trier of fact.
According to Arkwright, the party found liable at trial, it had made a settlement offer of $675,000 in writing, which should have been considered for purposes of calculating prejudgment interest and was not considered by Judge Tunheim. This would reduce Schwendiman’s prejudgment interest recovery to $370,819.08 (a +/- 80% reduction).
It was not considered, Arkwright argues to the Court in it its request for reconsideration, because the lawyers for Schwendiman incorrectly represented to the Court that there was no such offer in writing. (Arkwright lawyers did themselves no favors by not highlighting their written settlement offer before Judge Tunheim issued his order on prejudgment interest.)
It seems to us that Arkwright’s arguments might have the advantage (see briefing here and here) though we’ll have to wait and see.
But the case is a useful reminder of the somewhat complicated analysis that comes into play in calculating prejudgment interest under Minnesota law.
(The case is also a reminder that even a multi-million dollar verdict can be a net loss for the so-called winner in our so-called civil justice system, although we cannot say for sure whether this particular lawsuit falls into this category.)