Appellate court only allows simple interest

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When a defendant rejects a settlement offer, and the jury returns a higher verdict, simple interest is calculated, without compounding it from the time of the offer to the time of payment.

On Sept. 16, the Wisconsin Court of Appeals rejected an argument that, post-judgment, interest should be calculated based on the entire amount due at the date of judgment.

Elizabeth Morrison brought a medical malpractice action against Dr. Thomas V. Rankin and other defendants. While the action was pending, the defendants rejected a $1,000,000 settlement offer from Morrison.

After trial, the jury awarded $2,065,326. Because it had rejected the lower offer, the defendants were liable for interest and double costs, pursuant to sec. 807.01(4).

After an unsuccessful appeal, the defendants tendered payment of $2,127,818 to Morrison. This amount was calculated based on its $1,000,000 policy limit, double taxable costs, and interest on the $2,065,326 verdict from the date of the settlement offer to the date payment was tendered.

Morrison refused to sign a satisfaction of judgment, and the defendants moved for satisfaction of judgment with the circuit court.

Eau Claire County Circuit Court Judge Benjamin D. Proctor granted the motion, and Morrison appealed.

The Court of Appeals affirmed, in a decision by Judge Edward R. Brunner.

In Morrison’s view, the total payment due should be calculated as follows:

• 12 percent interest from the time of the settlement offer to the $2,065,326 judgment (same as defendants);
• plus 12 percent interest from the time of judgment to payment, calculated on the amount due on the date of judgment.

According to Morrison, this calculation entitled her to an extra $161,444 in interest. But the court disagreed. When a defendant rejects a settlement offer, and the jury returns a higher verdict, sec. 807.01(4) provides that the plaintiff is entitled to 12 percent interest “on the amount recovered from the date of the offer of settlement until the amount is paid. Interest under this section is in lieu of interest computed under ss. 814.04(4) and 815.05(8).” The court concluded that Morrison’s calculation of interest is inconsistent with the plain language of the statute.

The court wrote, “That statute makes no distinction between pre- and post-judgment interest. It specifies that interest is calculated on a single amount, ‘the amount recovered,’ over one period of time, ‘from the date of the offer of settlement until the amount is paid.’ Wis. Stat. § 807.01(4). Morrison’s two-stage calculation of interest, utilizing two time periods and two amounts recovered, cannot be reconciled with the language of sec. 807.01(4).”

In a footnote, the court added that, although the parties made no arguments on the issue, double taxable costs are not part of “the amount recovered” when calculating interest, either.

The court further concluded that Morrison’s method of calculating interest would be inconsistent with its opinion in Upthegrove Hardware Inc. v. Pennsylvania Lumbermans Ins. Co. 152 Wis.2d 7, 447 N.W.2d 367 (Ct.App.1989).

In Upthegrove, the court stated that sec. 807.01(4) provides for simple, not compound, interest.

The effect of Morrison’s method, however, would be to permit post-judgment interest to be calculated based on pre-judgment interest — effectively resulting in compounding the interest, contrary to the dictate of Upthegrove.