DISPOSITION: [*1] Plaintiffs' post-judgment motion for amendment of the judgment to determine the rate of prejudgment interest and for an award of statutory attorneys fees in favor of the class granted in part, and denied in part. Plaintiffs' request for an award of statutory attorneys' fees and for establishment of a procedural framework denied, without prejudice.

COUNSEL: For RICHARD J RYBARCZYK, plaintiff (95-CV-2800): Thomas R. Theado, Esq., Robert D. Gary, Esq., Thomas A. Downie, Esq., Gary, Naegele & Theado, Lorain, OH.

For RICHARD J RYBARCZYK, plaintiff (95-CV-2800): Eric H. Zagrans, Esq., Zagrans Law Firm, Elyria, OH.

For RICHARD J RYBARCZYK, plaintiff (95-CV-2800): Paul E. Slater, Esq., Bruce Sperling, Esq., Sperling, Slater & Spitz, Chicago, IL.

For TRW, INC., TRW SALARIED PENSION PLAN, defendants (95-CV-2800): John Winship Read, Esq., Vorys, Sater, Seymour & Pease, Columbus, OH.

For TRW, INC., TRW SALARIED PENSION PLAN, defendants (95-CV-2800): Deborah P. Warner, Esq., T.R.W., Inc., Cleveland, OH.

For TRW, INC., TRW SALARIED PENSION PLAN, defendants (95-CV-2800): Ronald J. Cooke, Esq., J. Kevin Lilly, Esq., Littler, Mendelson, Fastiff, Tichy & Mathiason, Los Angeles, CA.

JUDGES: [*2] ANN ALDRICH, UNITED STATES DISTRICT JUDGE.

OPINIONBY: ANN ALDRICH

OPINION: MEMORANDUM AND ORDER

JUDGE ANN ALDRICH

In these consolidated class actions against TRW and the TRW Salaried Pension Plan, plaintiffs alleged that TRW unlawfully used an interest rate higher than that allowed under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., to calculate their lump sum retirement benefits under the plan. On March 14, 1997, this Court granted summary judgment in favor of plaintiffs, holding that after Costantino v. TRW, Inc., 13 F.3d 969 (6th Cir. 1994), TRW was estopped from relitigating the issue of whether it must apply the § 1139 interest rate in calculating plaintiffs' lump sum subsidized early retirement benefits under the plan. Rybarczyk v. TRW, Inc., 1997 U.S. Dist. LEXIS 3186, 1997 WL 129296 (N.D. Ohio, March 14, 1997). At that time, TRW was ordered to "re-calculate the class members' lump sum distributions of subsidized early retirement benefits in accordance with this opinion, and to provide them with any cumulative underpayment, with interest, that may result." Plaintiffs now move this Court for an amendment of the March 14 judgment to determine the rate of prejudgment [*3] interest, pursuant to Fed. R. Civ. P. 59(e), and for an award of statutory attorneys' fees, pursuant to Fed. R. Civ. P. 54(d)(2) and ERISA § 502(g), 29 U.S.C. § 1132(g). They also request the Court to establish a procedure for the calculation of judgment proceeds and for the determination of related issues. For the reasons stated below, the Court grants in part and denies in part plaintiffs' motion.

I. Rate of prejudgment interest

It is clear that an award of prejudgment interest under ERISA is within the sound discretion of the district court. Tiemeyer v. Community Mut. Ins. Co., 8 F.3d 1094, 1102 (6th Cir.), cert. denied, 511 U.S. 1005, 128 L. Ed. 2d 48, 114 S. Ct. 1371 (1993); Bricklayers' Pension Trust Fund v. Taiariol, 671 F.2d 988, 990 (6th Cir. 1982). Because this Court has already granted plaintiffs prejudgment interest, the sole issue to be decided here is the rate at which that interest is to be calculated.

Neither ERISA nor any other federal statute provides an interest rate for computing prejudgment interest. Rather, an award of prejudgment interest for violation of federal law is governed by federal common law. Rivera v. Benefit Trust Life Ins. [*4] Co., 921 F.2d 692, 696 (7th Cir. 1991). Courts retain broad discretion to choose the rate by which to calculate prejudgment interest under ERISA. See Wells v. U.S. Steel, 76 F.3d 731, 737 (6th Cir. 1996); Tiemeyer, 8 F.3d at 1102.

Plaintiffs request the Court to order TRW to pay the greater of:

(a) interest at the rate of ten percent (10%) per annum, n1 compounded quarterly, or

(b) interest equal to the rate of return actually earned on class members' underpayments during the period in which such benefits were withheld by the Plan.

Thus, plaintiffs request a base rate borrowed from state law, or, whenever it is higher than the base rate, the actual rate of return enjoyed by TRW.

TRW, on the other hand, argues that this Court should award prejudgment interest at the same rate held applicable to the calculation of plaintiffs' lump sum benefits under the plan (the § 1139 rate). In the alternative, [*5] TRW argues that prejudgment interest should be calculated in accordance with 28 U.S.C. § 1961, which provides a uniform federal rate for postjudgment interest, and should not incorporate any reference to TRW's actual rate of return on the withheld benefits.

TRW cites no binding authority and offers no convincing reason for applying the § 1139 rate to calculate prejudgment interest. Nor does this Court find any valid reason to do so. Therefore, the Court declines to use the § 1139 rate. In determining whether to use the two-prong formula suggested by plaintiffs, then, two issues remain: (1) whether the base rate should be derived from the federal rate for postjudgment interest or from the general state rate; and (2) whether plaintiffs are entitled to interest calculated at TRW's actual rate of return, whenever that rate is higher than the base rate. These issues are addressed in turn.

A. First prong; Federal vs. state rate

Plaintiffs argue that the Court should borrow the general Ohio statutory interest rate of 10% per annum. TRW contends that the Court should use the postjudgment interest rate established in 28 U.S.C. § 1961, which calculates interest through the use of [*6] Treasury bill rates. n2

Although § 1961 by its terms applies only to postjudgment interest, there is considerable support for using the § 1961 rate to calculate prejudgment interest. The Eighth Circuit has held that this is the proper method for determining the rate of prejudgment interest, Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1331 (8th Cir. 1995) (citing Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208, 1219 (8th Cir.), cert. denied, 454 U.S. 968, 70 L. Ed. 2d 384, 102 S. Ct. 512 (1981)), and the Ninth Circuit [*7] has held that the § 1961 rate should be applied unless the trial court finds that the equities of a particular case justify use of a different rate. Blanton v. Anzalone, 760 F.2d 989, 993 (9th Cir. 1985). Numerous other courts, including the Sixth Circuit, have used or permitted use of the § 1961 rate. See, e.g., Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100 F.3d 220, 225 (1st Cir. 1996); Sweet v. Consolidated Aluminum Corp., 913 F.2d 268, 270 (6th Cir. 1990); Kay v. Thrift & Profit Sharing Plan for Employees of Boyertown Casket Co., 780 F. Supp. 1447, 1462 (E.D. Pa. 1991); Reid v. Prudential Ins. Co. of Am., 755 F. Supp. 372, 377 (M.D. Fla. 1990); Rosenbaum v. Davis Iron Works, Inc., 669 F. Supp. 813, 821 (E.D. Mich. 1987), modified on other grounds, 871 F.2d 1088 (6th Cir. 1989).

On the other hand, many courts have held that a federal court may look to state law for guidance in determining the rate of prejudgment interest. See, e.g., Smith v. American Int'l Life Assurance Co. of New York, 50 F.3d 956, 958 (11th Cir. 1995); Colon Velez v. Puerto Rico Marine Management, Inc., 957 F.2d 933, 941 (1st Cir. 1992); Hansen v. Continental Ins. [*8] Co., 940 F.2d 971, 984 (5th Cir. 1991); Jansen v. Greyhound Corp., 692 F. Supp. 1029, 1044 n.2 (N.D. Iowa 1987); Pierce v. American Waterworks Co., Inc., 683 F. Supp. 996, 1001 (W.D. Pa. 1988); Brown v. Consolidated Rail Corp., 614 F. Supp. 289, 291 n.2 (N.D. Ohio 1985).

On balance, this Court finds that a base rate derived from the federal § 1961 rate is better suited to this case. First, although the Sixth Circuit does not require use of the § 1961 rate, see EEOC v. Wooster Brush Co. Employees Relief Ass'n, 727 F.2d 566, 579 (6th Cir. 1984), the case law as a whole favors its use. The Eighth and Ninth Circuits strongly favor use of the § 1961 rate, Mansker, 54 F.3d at 1331; Blanton, 760 F.2d at 993, and the Sixth Circuit has remarked on the wisdom of using it. See Wooster Brush, 727 F.2d at 579 ("Undoubtedly in the future, district courts may be influenced by the congressional wisdom expressed in the amendment of 28 U.S.C. § 1961 [linking interest to Treasury bill rates], but we do not think that they are invariably compelled to adopt the statutory postjudgment rate in determining prejudgment interest.").

Second, the federal rate is more appropriate [*9] for reasons of uniformity. Uniformity is a primary goal of federal law under ERISA. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56, 95 L. Ed. 2d 39, 107 S. Ct. 1549 (1987). Application of the federal postjudgment rate promotes uniformity, see Cottrill, 100 F.3d at 225 ("Utilizing [the federal] rate promotes uniformity in ERISA cases"), and discourages forum shopping in ERISA cases. Indeed, in the context of postjudgment interest, Congress has clearly determined that courts should not look to state law for the proper rate. Before 1982, § 1961(a) provided for postjudgment interest "at the rate allowed by state law." In 1982, however, Congress amended § 1961 to require use of the Treasury bill rate, thus creating a uniform federal rate. The same concern about uniformity applies to prejudgment interest. That concern is especially strong here, in light of the fact that the Mizuba case was transferred from California.

Finally, "the federal rate is an objective measure of the value of money over time." Cottrill, 100 F.3d at 225. See also Hizer v. General Motors Corp., 888 F. Supp. 1453, 1463 (S.D. Ind. 1995) ("a static method, like a fixed nominal interest rate in [*10] a statute, does not well serve the federal policy of compensating a prevailing party accurately"). There is no equitable reason for using the state rate rather than the federal rate here. See Cottrill, 100 F.3d at 225. Therefore, this Court finds that the federal rate found in § 1961 is more appropriate than the Ohio statutory rate.

B. Second prong; Actual rate of return

The next issue to be decided is whether plaintiffs should receive interest calculated at the actual rate of return to TRW, whenever that rate is higher than the federal rate. Plaintiffs argue the alternative use of TRW's actual rate of return is necessary to prevent unjust enrichment. TRW, on the other hand, argues that using the actual rate of return would result in punishment rather than compensation.

It is true that awards of prejudgment interest are designed to compensate, not to punish. Drennan v. General Motors Corp., 977 F.2d 246, 253 (6th Cir. 1992), cert. denied, 508 U.S. 940, 124 L. Ed. 2d 639, 113 S. Ct. 2416 (1993). TRW's argument that using its actual rate of return on the money withheld from plaintiffs would be punitive is not well-taken, however. Use of the actual rate of return [*11] would not punish TRW, because it would not require TRW to pay any more than what it earned on illegally withheld benefits. See Hizer, 888 F. Supp. at 1463 (noting that overpayment occurs when "benefit plan will be forced to pay more than it might reasonably have earned through investment while it held the benefit") (emphasis added).

Rather, awarding interest at the actual rate of return, whenever that rate was higher than the § 1961 rate, would ensure that TRW was not unjustly enriched. An award of prejudgment interest under ERISA is designed in part to prevent unjust enrichment on the part of a defendant who reaps the benefit of funds to which it is not entitled. See, e.g., Wells, 76 F.3d at 737; Tiemeyer, 8 F.3d at 1102-03; Sweet, 913 F.2d at 270; Lorenzen v. Employees Retirement Plan of Sperry & Hutchinson Co., Inc., 896 F.2d 228, 236-37 (7th Cir. 1990). In Sweet, the Sixth Circuit noted the importance of preventing unjust enrichment, stating that:

To allow the Fund to retain the interest it earned on funds wrongfully withheld from a beneficiary would be to approve of an unjust enrichment.

Sweet, 913 F.2d at 270. Similarly, the Seventh [*12] Circuit has cautioned that a plan must not be allowed to retain the "fruits" of illegally withheld funds:

The award of prejudgment interest is necessary for full compensation of the victims of wrongdoing. . . . Moreover, the award of prejudgment interest has an independent ground in this case: the principle of unjust enrichment. The retirement plan held money that belonged to Mrs. Lorenzen -- held it on her account, as it were. Now that the collateral dispute is over, the plan must return it to her together with the fruits it has gleaned by holding on to it.

Lorenzen, 896 F.2d at 236-37 (emphasis added). Here, allowing TRW and the plan to retain interest earned on funds illegally withheld from plaintiffs would result in unjust enrichment. n3

[*13]

TRW argues that awarding plaintiffs interest at the actual rate of return goes beyond compensation and may result in a "windfall" to those retirees who would not have earned interest at that rate themselves. This argument fails for two reasons. First, it proves too much, for the same "problem" would arise no matter which rate of interest were used. For example, if this Court awarded prejudgment interest solely at the federal rate, without an alternative prong using the actual rate of return, every plaintiff who would have earned no interest on his or her benefits would be "overcompensated" by any award of prejudgment interest.

Second, TRW's singular focus on compensation would require this Court to ignore the principle of preventing unjust enrichment. Although the principles of compensation and unjust enrichment will often be in conflict, in fashioning awards of prejudgment interest, courts must look to both. See, e.g., Sweet, 913 F.2d at 270; Lorenzen, 896 F.2d at 236. Here, the Court finds that the only way to provide compensation and prevent unjust enrichment is to use the actual rate of return earned by TRW whenever it is higher than the federal § 1961 rate. [*14] To do otherwise would be to allow TRW to profit from its unlawful conduct whenever it actually earned interest at a rate higher than the objective rate in § 1961.

II. Attorneys' fees and procedural framework

Plaintiffs also move this Court to determine TRW's liability for statutory attorneys' fees, and to establish a procedural framework governing "future matters" such as calculation of the underpayment and interest payable to plaintiffs; determination of the amount of statutory attorneys' fees; determination of the amount of compensation to class counsel; and final approval of the above distributions.

This Court finds that these collateral issues are better decided after a final resolution on the merits of this case. Therefore, plaintiffs' motion is denied without prejudice to refiling insofar as it requests an award of attorneys' fees and the establishment of a procedural framework for future matters. Plaintiffs may refile their motion as to these matters within thirty days of the resolution of the appeal or if there is no appeal, within thirty days of the expiration of the time period for filing a notice of appeal. n4

[*15]

III.

In sum, this Court grants in part and denies in part plaintiffs' post-judgment motion. Plaintiffs' requests for an award of statutory attorneys' fees and for establishment of a procedural framework are denied without prejudice to refiling within the time period noted above. Plaintiffs' request for determination of the rate of prejudgment interest is granted in part and denied in part.

The March 14, 1997 order is hereby amended to add the following three sentences:

"On the principal amount of the underpayment, if any, TRW shall pay interest calculated as follows. For the period beginning on the date of the initial lump sum distribution to the class member and ending on March 14, 1997 ("the prejudgment period"), TRW shall pay the greater of (a) interest at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately prior to the date of the initial lump sum distribution to the class member, compounded annually, or (b) interest equal to the rate of return actually earned on the principal amount of the underpayment [*16] during the prejudgment period. For the period subsequent to March 14, 1997 ("the postjudgment period"), TRW shall pay interest at the rate prescribed by 28 U.S.C. § 1961."

This order is final and appealable.

IT IS SO ORDERED.

ANN ALDRICH

UNITED STATES DISTRICT JUDGE

ORDER

JUDGE ANN ALDRICH

The Court has filed its memorandum and order granting in part, and denying in part, plaintiffs' post-judgment motion for amendment of the judgment to determine the rate of prejudgment interest and for an award of statutory attorneys fees in favor of the class. Therefore,

IT IS ORDERED that this Court's March 14, 1997 Order is amended by adding the following three sentences:

On the principal amount of the underpayment, if any, TRW shall pay interest calculated as follows. For the period beginning on the date of the initial lump sum distribution to the class member and ending on March 14, 1997 ("the prejudgment period"), TRW shall pay the greater of (a) interest at a rate equal to the coupon issue yield equivalent (as determined by the Secretary of the Treasury) of the average accepted auction price for the last auction of fifty-two week United States Treasury bills settled immediately [*17] prior to the date of the initial lump sum distribution to the class member, compounded annually, or (b) interest equal to the rate of return actually earned on the principal amount of the underpayment during the prejudgment period. For the period subsequent to March 14, 1997 ("the postjudgment period"), TRW shall pay interest at the rate prescribed by 28 U.S.C. § 1961.

IT IS FURTHER ORDERED that plaintiffs' request for an award of statutory attorneys' fees and for establishment of a procedural framework are denied, without prejudice, to refiling within 30 days of the resolution of the appeal, or if there is no appeal, within 30 days of the date of the filing of this Order.

IT IS FURTHER ORDERED that this judgment is final and appealable.

ANN ALDRICH