United States: Failure to Instruct on Interest Calculation an "Appellate Lapse"

The U.S. Court of Appeals for the Federal Circuit has held that post-judgment interest on a $20 million punitive damages award should be calculated from the date of the district court’s amended judgment after appeal and not from its original judgment in Tronzo v. Biomet, Case No. 01-1585 (Feb. 12, 2003).

The plaintiff sued Biomet, Inc. for patent infringement, fraud and breach of confidential relationship. In 1996, a jury awarded the plaintiff almost $4 million in compensatory damages, which the district court enhanced by almost $2 million based on the jury finding of willful infringement. The plaintiff was also awarded punitive damages of $20 million. On appeal, the Federal Circuit ruled that the plaintiff's patent was invalid and remanded for recomputation of compensatory damages on the tort claims. On remand, the district court reduced the compensatory damages as instructed, despite the fact that the award of punitive damages was never appealed. The district court also reduced the punitive damages award to $52,000 on the grounds that the original award was excessive in light of the reduction in compensatory damages. The plaintiff appealed and the Federal Circuit reversed the reduction in punitive damages, holding that the district court exceeded its mandate on remand by disturbing the unappealed punitive damages award. However, in the resulting mandate, the Federal Circuit did not instruct the trial court on the calculation of post-judgment interest. The district court entered yet another amended final judgment and awarded the plaintiff post-judgment interest from August 6, 1996, the date of the original judgment on the punitive damages award.

Biomet appealed, arguing that the calculation of interest on the punitive damages award should run from July 27, 2002, not from August 6, 1996. The Federal Circuit, recognizing that it erred in not instructing the district court on the interest calculation (as it was required to do by Federal Rule of Appellate Procedure 37(b)), looked to the advisory committee notes that "a party who conceives himself entitled to interest from a date other than the date of entry of judgment in accordance with the mandate should be entitled to seek recall of the mandate for determination of the question." Despite the plaintiff’s failure to seek such a recall, the Court called its prior decision an appellate lapse and gave the interest issue plenary review. Applying the law of the regional circuit, the Court used a "meaningful ascertainment" test for determining when post-judgment interest should begin to run and held that because the plaintiff’s initial compensatory and punitive damages award was modified when the plaintiff’s patent was held invalid and because the full punitive damages award was not reinstated until after the Federal Circuit’s mandate, post-judgment interest should run from the district court’s July 2001 judgment.