TIG INSURANCE COMPANY v. NEWMONT MINING CORPORATION

SHIRA SCHEINDLIN, District Judge

I. INTRODUCTION

Newmont Mining Corporation ("Newmont") moves in limine to (1) preclude TIG Insurance Company ("TIG") from claiming that it is entitled to interest as damages for untimely payments ("Interest Motion") and (2) limit or preclude the testimony of Dennis Neier, TIG's proposed expert witness on interest ("Expert Motion"). For the following reasons, the Interest Motion is denied, and the Expert Motion is granted in part and denied in part.

See Motion of Newmont Mining Corporation on Interest Issues.

See Expert Report of Dennis S. Neier, CPA ("Neier Report"), Ex. A to Affidavit of Robert L. Tofel in Support of Newmont Mining Corporation's Motion for an Order Limiting or Precluding the Testimony of Plaintiff's Proposed Expert Witness, Dennis Neier.

See Motion of Newmont Mining Corporation to Preclude Expert Testimony.

II. BACKGROUND

Newmont and TIG are parties to a Settlement Agreement which required Newmont to remit certain payments to TIG on a set timetable. The Agreement settled prior litigation between Newmont and TIG's predecessor in interest, International Insurance Company ("International"), related to International's liability to Newmont for costs of clean-up of environmental contamination at Newmont's Idarado and Resurrection mining sites in Colorado. The Agreement required Newmont to "periodically" deliver to TIG copies of documents filed in other actions by Newmont against third party insurers. In the event that Newmont reached settlements with third parties, Newmont was to remit twenty percent of the net recovery to TIG. The Agreement also required Newmont to make any payments due to TIG by a fixed date every six months. Newmont was to provide an affirmation certifying the amounts of any settlements and expenses. The Agreement was silent on the question of interest on late payments.

See Settlement Agreement between Newmont Mining Corporation and International Insurance Company ("Agreement") ¶ 10, Ex. A to Complaint.

Id. ¶ 8.

See id. ¶¶ 4, 10.

See id. ¶ 10. The Agreement required payments on February 1, 1996, December 31, 1996, and each June 30 and December 31 thereafter. See id.

See id.

In this action, TIG claims that Newmont failed to make payments according to the timetable set by the Agreement, and that TIG suffered damages as a result. TIG's alleged damages are twofold: first, interest on the principal amount of each late payment accruing from the time it was due until the time it was paid (the "Late Payment Damages"), and second, interest on the Late Payment Damages, calculated from the time the payment of principal was made until the date a judgment is rendered by this Court.

TIG also alleges other damages, including that Newmont breached the Agreement by failing to pay $967,622 to TIG in connection with Newmont's settlements with Lloyds of London and North River Insurance Company. These other disputes are not the subject of the Interest Motion or the Expert Motion.

In its Interest Motion, Newmont argues that (1) New York law does not allow a party to recover interest for delays in payment where the principal was eventually paid, (2) TIG may not recover interest because it did not demand the principal until after this litigation commenced, and (3) certain of TIG's claims are time barred. In its Expert Motion, Newmont argues that Neier's testimony should be precluded because the Late Payment Damages are not recoverable and interest is a question of law.

The Agreement is governed by New York law. See id. ¶ 21.

III. APPLICABLE LAW

A. Legal Standard

1. Summary Judgment

The issues raised in the Interest Motion are not evidentiary questions, but rather legal issues which should have been raised in a motion for summary judgment. This Court will therefore apply the standard for a motion for summary judgment to the Interest Motion. Summary judgment is appropriate if the evidence of record "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." "An issue of fact is genuine `if the evidence is such that a jury could return a verdict for the nonmoving party.'" "A fact is material for these purposes if it `might affect the outcome of the suit under the governing law.'"

However, this Court will not deny the motion in limine on procedural grounds. See ESPN, Inc. v. Office of Com'r of Baseball, 76 F.Supp. 2d 383, 395 (S.D.N.Y. 1999) (declining to deny motion in limine because it should have been brought at summary judgment stage).

Fed.R.Civ.P. 56(c).

Overton v. New York State Div. of Military and Naval Affairs, 373 F.3d 83, 89 (2d Cir. 2004) (quoting Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986)).

Id. (quoting Anderson, 477 U.S. at 248).

The movant has the burden of demonstrating that no genuine issue of material fact exists. In turn, to defeat a motion for summary judgment, the non-moving party must raise a genuine issue of material fact. To do so, it "must do more than simply show that there is some metaphysical doubt as to the material facts," and it must "come forward with `specific facts showing that there is a genuine issue for trial.'" In determining whether a genuine issue of material fact exists, the court must construe the evidence in the light most favorable to the non-moving party and draw all inferences in that party's favor.

See Powell v. Nat'l Bd. of Med. Exam'rs, 364 F.3d 79, 84 (2d Cir. 2004).

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

Powell, 364 F.3d at 84 (quoting Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1072 (2d Cir. 1993)).

See Williams v. R.H. Donnelley Corp., 368 F.3d 123, 126 (2d Cir. 2004).

2. Admission of Expert Testimony

Rule 702 of the Federal Rules of Evidence states the following requirements for the admission of expert testimony into evidence:

If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

Under Rule 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., the trial judge must determine whether the proposed testimony "both rests on a reliable foundation and is relevant to the task at hand."

509 U.S. 579 (1993).

Id. at 597. See also Kumho Tire Co. v. Carmichael, 526 U.S. 137, 141 (1999) (extending Daubert's general holding setting forth the trial judge's gatekeeping obligation in regard to expert testimony based on scientific knowledge to testimony based on "technical" and "other specialized" knowledge).

Expert testimony may not usurp the role of the court in determining the applicable law. While an expert "may opine on an issue of fact," an expert "may not give testimony stating ultimate legal conclusions based on those facts." Expert testimony is inadmissible when it addresses "lay matters which [the trier of fact] is capable of understanding and deciding without the expert's help."

See United States v. Lumpkin, 192 F.3d 280, 289 (2d Cir. 1999).

United States v. Bilzerian, 926 F.2d 1285, 1294 (2d Cir. 1991). Accord Hygh v. Jacobs, 961 F.2d 359, 363 (2d Cir. 1992) ("This circuit is in accord with other circuits in requiring exclusion of expert testimony that expresses a legal conclusion.").

Andrews v. Metro N. Commuter R.R. Co., 882 F.2d 705, 708 (2d Cir. 1989) (citing cases).

B. Interest

TIG has two legal bases for claiming interest: the common law and New York's prejudgment interest statute.

The Second Circuit has held that the "right to interest is `purely statutory and in derogation of the common law." North River Ins. v. Ace American Reinsurance, 361 F.3d 134, 144 (2d Cir. 2004) (citing Melony v. Goord, 700 N.Y.S.2d, 311, 311 (4th Dep't 1999). However, this statement does not apply in the context of contracts. As discussed below, the right to interest is firmly rooted in the common law on breach of contract.

1. Common Law

Under New York common law, if one party to a contract breaches an obligation to make payment upon a fixed date, the other party is entitled to interest as damages for that breach.

[A]ll damages for delay in the payment of money owing upon contract are provided for in the allowance of interest, which is in the nature of damages for withholding money that is due. The law assumes that interest is the measure of all such damages.

See, e.g., Parkway Windows, Inc. v. River Tower Assoc., 485 N.Y.S.2d 755, 759 (1st Dep't 1985) ("[t]he proper measure of damages for money withheld is lost interest"). See also Restatement (Second) of Contracts § 354, cmt. c (1979) ("Unless otherwise agreed, interest is always recoverable for the nonpayment of money once payment has become due and there has been a breach.").

New York common law does not allow recovery of consequential or incidental damages for a breach of a contractual obligation to make payment. Where the contract does not provide a rate of interest, New York common law requires that the Court use the statutory rate of nine percent per annum.

See Eternity Global Master Fund Ltd., 2002 WL 31426310, at *8 (dismissing claim for consequential damages resulting from delayed payment); Parkway Windows, Inc., 485 N.Y.S.2d at 759 (where defendant withheld payment until plaintiff performed extra construction work, plaintiff could only claim interest on withheld amounts, and not damages for the cost of the extra work).
Under section 2-710 of the New York Uniform Commercial Code ("U.C.C."), a seller is entitled to recover commercially reasonable finance and interest charges as incidental damages for a breach of contract. See Ernst Steel Corp. v. Horn Constr. Div., 481 N.Y.S.2d 833, 839 (4th Dep't 1984). However, the U.C.C. does not apply to this Agreement.

See Eternity Global Master Fund Ltd., 2002 WL 31426310, at *8 (citing Meinrath, 87 F.R.D. at 426 (damages for late payment are limited to "interest at the prevailing legal rate")); Avalon Constr. Corp., 175 N.E. at 652 (a party may receive "an award of no greater or other sum than legal interest" as damages for delayed payment). The "legal rate" refers to the statutory rate of interest. See Restatement (Second) of Contracts § 354, cmt. a.

If the principal was ultimately paid, the plaintiff must show that the defendant's delay was a material breach. Additionally, in cases where the plaintiff accepted a late payment, knowing it was late, and without reserving its right to collect interest, New York courts have held that the plaintiff loses its claim to interest.

See Graham Constr. Maint. Corp. v. Village of Gouverneur, 646 N.Y.S.2d 720, 723 (3d Dep't 1996) (finding no material breach where "delay [in payment] was brief (three weeks)" and "plaintiff[ ] failed to establish that it was prejudiced or damaged by the delay").

See Shepard v. City of New York, 216 N.Y. 251, 256-57 (1915) (right to interest lost where "acceptance [of principal] was unconditional or without any suggestion of a future claim to interest"); Cutter v. Mayor, 92 N.Y. 166, 171 (1883) (right to interest lost where plaintiff "knowingly accepted the award without interest, at the same time acknowledging payment in full").

2. Statutory Prejudgment Interest

Additionally, a party may recover interest under New York's prejudgment interest statute, "upon a sum awarded because of a breach of performance of a contract." Even if no sum is awarded, for example, because the defendant paid the principal amount prior to trial, a plaintiff may still claim prejudgment interest if it reserved its right to interest.

N.Y.C.P.L.R. §§ 5001(a), 5002.

See North River Ins., 361 F.3d at 144 ("New York authority suggests that prejudgment interest under § 5001(a) applies only to partial payments if the claimant reserves its right to the interest upon receiving the payment.") (citing Employers Ins. of Wausau v. American Centennial Ins., No. 87 Civ. 8576, 1989 WL 6631, at *3 (S.D.N.Y. Jan. 24, 1989); Matter of Hoffman, 712 N.Y.S.2d 165, 166 (2d Dep't 2000)).

If "damages were incurred at various times, interest shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date." The court, upon motion, specifies the date or dates from which interest is computed. The calculation of prejudgment interest is a question of law, not a question of fact. Prejudgment interest is calculated at the rate of nine percent per annum and is not compounded. The total amount is "computed by the clerk of the court, to the date the verdict was rendered."

N.Y.C.P.L.R. § 5001(b).

See N.Y.C.P.L.R. § 5001(c).

See Binghamton Precast Supply v. A. Servidone Inc./B. Anthony Constr. Corp., 682 N.Y.S.2d 719, 720 (3d Dep't 1999) ("The appropriate method by which to calculate interest is a legal argument."); Grobe v. Kramer, 178 Misc. 247, 248 (Sup. Ct. N.Y. Co. 1942) ("[I]f interest is to be a concomitant of damages it should be an incident of the liability which flows as a matter of law and not a factual controversy to be determined by a jury.").

See Frontier Commc'ns of the West, Inc. v. North Am. Long Distance Corp., No. 99 Civ. 0868, 2001 WL 1397856, at *4 (W.D.N.Y. Oct. 24, 2001) (citing Long Playing Sessions, Inc. v. Deluxe Labs., Inc., 514 N.Y.S.2d 737, 738 (1st Dep't 1987)).

N.Y.C.P.L.R. § 5001(c).

A party is entitled to prejudgment interest on any "sum awarded," including awards of interest as damages for breach of contract. However, a party may not recover interest as damages for late payments, as well as prejudgment interest, accruing on the same principal amount over the same time period.

Bulk Oil, Inc. v. Sun Oil Trading Co., 697 F.2d 481, 485-86 (2d Cir. 1983) (plaintiff claiming monthly interest charges as incidental damages for defendant's failure to make a timely payment may also recover statutory prejudgment interest on the amount of each monthly interest charge).

See id. See also Advanced Retail Mktg., Inc. v. News Am. Mktg. FSI, Inc., 758 N.Y.S.2d 8, 9 (1st Dep't 2003) (refusing to award one percent interest charge in addition to prejudgment interest accruing over the same time period); Goldman v. Rosen, ___ N.Y.S.2d ___, 2005 WL 2094962, at *2-3 (Civ.Ct. N.Y. Co. Aug. 29, 2005) (awarding prejudgment interest on the principal amount of the judgment, which included a "one-time late charge," because the late charge was not "interest").

C. Statute of Limitations for Breach of Contract

New York has a six-year statute of limitations for an action to recover damages for breach of contract. "[A] cause of action accrues and the statute of limitations begins to run in contract actions from the time of the breach . . . when the plaintiff possesses a legal right to demand payment." A defendant is estopped from asserting the statute of limitations defense if the defendant actively concealed or misrepresented facts which prevented the plaintiff from filing a timely action.

See N.Y.C.P.L.R. § 213(2).

Albany Specialties v. Shenendehowa Cent. Sch. Dist., 763 N.Y.S.2d 128 (2003). See also Simcuski v. Saeli, 377 N.E.2d 713, 716 (N.Y. 1978) ("It is the rule that a defendant may be estopped to plead the Statute of Limitations where plaintiff was induced by fraud, misrepresentations or deception to refrain from filing a timely action.").

See Teneriello v. Travelers Cos., 641 N.Y.S.2d 482, 483 (4th Dep't 1996).

IV. DISCUSSION

A. Interest Motion

1. Late Payment Damages

TIG may claim Late Payment Damages in the amount of nine percent per annum, on the principal amounts of any late payments by Newmont, calculated from the date each payment was due through the date it was paid. Newmont argues that because Newmont ultimately paid the principal, there is no "sum awarded" here on which interest accrues pursuant to section 5001. However, New York common law provides a basis for the Late Payment Damages, independent of section 5001.

Whether the legal basis for these damages is the common law or New York's prejudgment interest statute is immaterial. See North Am. Foreign Trading Corp. v. Direct Mail Specialist, 697 F. Supp. 163, 166 n. 2 (S.D.N.Y. 1988) ("Whether these time value of money losses are labeled as `incidental' damages or as statutory interest under C.P.L.R. § 5001 is somewhat of an academic question since both provisions are designed to make the aggrieved party whole.").
Nonetheless, TIG's damages for late payments may be recoverable under the C.P.L.R. Although the "plain language of § 5001 only gives the court authority to award prejudgment interest on the `sum awarded' . . . of course, a party can also reserve the right to receive prejudgment interest on a payment at the time it is made." North River Ins., 361 F.3d at 144.

Alternatively, TIG may collect the Late Payment Damages under section 5001. Courts have held that even if there is no "sum awarded," a plaintiff can claim damages under section 5001 if it demonstrates that it reserved its right to those damages. See, e.g., North River Ins., 361 F.3d at 144.
However, it is better to categorize the Late Payment Damages as breach of contract damages under the common law. Cf. North Am. Foreign Trading Corp., 697 F. Supp. at 166 n. 2 ("since CPLR § 5001 limits itself to interest on a "sum awarded", it is better to consider the losses as `incidental'").

Additionally, Newmont claims that TIG lost its claim to interest when it accepted the payment of principal. But the cases cited by Newmont only apply to situations in which a plaintiff was aware that it was receiving a late payment and failed to reserve its rights. Here, TIG alleges it had no reason to know that any payment was late because Newmont did not disclose the dates of its settlements with third parties until discovery in this litigation. TIG alleges that upon acceptance of payment, it expressly reserved "all of its rights in connection with the Agreement." These fact issues preclude summary judgment.

See, e.g., Forschirm v. Mechanics Traders Bank, 122 N.Y.S. 168, 170 (1st Dep't 1910) (plaintiff knowingly accepted late payment of principal and there was no evidence of "special agreement reserving the right to recover interest").

See TIG's Opposition to Newmont's Motion in Limine Regarding Statute of Limitations and Interest Issues at 8.

6/16/98 Letter from Jim Riddle, Counsel to International Insurance Co., to Robert L. Tofel, Counsel to Newmont, Ex. G to Affidavit of Robert L. Tofel ("Tofel Aff.") ("International must continue to reserve all of its rights in connection with the Agreement and [ ] International's acceptance of the check . . . should not be construed as a waiver or release of any such rights."). See also 3/20/03 Letter from William C. Rogers, Counsel to International Insurance Co., to Robert L. Tofel, Ex. I to Tofel Aff. (requesting interest on any late payment).

Newmont argues that TIG cannot now claim Late Payment Damages because TIG never made a demand for payment. But the cases cited by Newmont in support of this argument involve agreements in which payment was only due upon demand. Here, the Agreement obligated Newmont to make payment only if Newmont had recovered net settlement proceeds by certain dates. Newmont had direct access to information regarding its settlements and expenses; TIG did not. A demand by TIG was not a condition precedent to Newmont's payment obligation under the Agreement.

See Moody v. Continental Cas. Co., 368 N.Y.S.2d 918, 920 (4th Dep't 1975) (payment only due upon receipt of written proof of loss); City Bank Farmers Trust Co. v. Kaimie, 32 N.Y.S.2d 181, 182 (Sup.Ct. Kings Co. 1941) (promissory note "payable on demand").

See Agreement ¶ 10.

In its reply memorandum, Newmont argues that because TIG did not object to Newmont's failure to make payments on schedule or provide required documents, it acquiesced to a waiver of the contractual provisions fixing dates for payment. TIG has asserted facts which dispute this argument. Because "the question whether the parties' conduct expresses an intention to modify an existing agreement" is another disputed question of fact, this issue is inappropriate for summary judgment.

See, e.g., 4/3/98 Letter from Jim Riddle, Counsel to International, to Robert L. Tofel, Counsel to Newmont, Ex. B to Affidavit of James Riddle in Support of TIG's Opposition to Motion in Limine (stating that "[s]ince your February 2, 1998 letter, my curiosity regarding the status of the Newmont settlements has been high" and requesting a statement pursuant to paragraph 10 of the Agreement).

Deutsche Asset Mgmt. v. Callaghan, No. 01 Civ. 4426, 2004 WL 758303, at *16 (S.D.N.Y. Apr. 7, 2004) (citations omitted).

2. Prejudgment Interest

In the event that a judgment is rendered against Newmont, TIG is entitled to prejudgment interest on the "sum awarded." The sum awarded may include the Late Payment Damages. This is not akin to compounding of interest, rather, it is essential to put TIG in the position it would have been in had Newmont performed according to the Agreement. TIG may not collect both Late Payment Damages and prejudgment interest accruing on the same principal amounts over the same time period.

N.Y.C.P.L.R. § 5001(a).

See Bulk Oil, Inc., 697 F.2d at 485-86.

See id. at 486. Furthermore, because principal amounts were paid in full before judgment, it would be a windfall to TIG to allow TIG to collect interest on full principal amounts from the time payment was due until the date of judgment. See id.; Advanced Retail Mktg., Inc., 758 N.Y.S.2d at 9.

3. Statute of Limitations

TIG commenced this action on June 1, 2004. As a result, Newmont insists that TIG cannot bring any claims which accrued prior to June 1, 1998, such as TIG's claim for Late Payment Damages based on a payment due December 31, 1997. TIG, in turn, argues that the statute of limitations should be equitably tolled because Newmont concealed the fact that payment was due on December 31, 1997. The parties dispute whether TIG was aware that payment was due. TIG alleges that due to misrepresentations by Newmont, it was not aware that any payment was late until discovery in this litgation revealed the actual dates of Newmont's settlements with third parties.

See TIG's Opposition to Newmont's Motion in Limine Regarding Statute of Limitations and Interest Issues at 8.

Because there are factual disputes, Newmont's motion for summary judgment with respect to interest is denied.

B. Expert Motion

With regard to TIG's claim for Late Payment Damages, the facts at issue are (1) when each payment was due, (2) when each payment was made, and (3) the amount of damages. Neier's testimony is only relevant for the purpose of determining the amount of Late Payment Damages.

Because Neier lacks any personal knowledge of when payments were due and when they were made, his testimony is not admissible to prove the truth of these matters. See Neier Report §§ ID, II, IIIB. However, he must testify about the factual assumptions he used in order to compute interest, including his assumptions about the relevant dates. See Fed.R.Evid. 703.

Neier may not testify regarding the correct rate and mode of computing interest. This is a legal argument, and Neier's opinion on these subjects is inadmissible. Neier's report computes interest using three alternative interest rates. As previously discussed, TIG is limited to the statutory rate of interest. Therefore, only computations using the rate of nine percent per annum and not compounded are relevant.

Neier uses (1) the statutory historical rates of return on average surplus for the property and casualty insurance industry, (2) TIG's borrowing rate, and (3) New York's statutory prejudgment rate of nine percent. He compounds interest for all but the New York statutory prejudgment rate. See Neier Report § IIID.

Neier is also precluded from testifying on any prejudgment interest on payments that were allegedly due but were never paid. Neier's report calculates both Late Payment Damages, which he refers to as "damage during the initial period" excluding "the Lloyd's of London Differential," and prejudgment interest, which he refers to as "interest during the subsequent period." Prejudgment interest cannot be computed until a judgment is rendered and an end date for the computation is fixed.

Id. The parties agree that Newmont never paid the principal amount of the "Lloyd's of London Differential," as defined by Neier. See id. § IIIC.

Id. § IIIE1.

Finally, Neier's testimony describing the theory behind interest is precluded because it is wholly irrelevant — as previously discussed, if TIG proves its claim, it is entitled to interest as a matter of law.

See id. § IIIA.

In sum, Neier's testimony is limited to computing TIG's Late Payment Damages, which consist of interest at the rate of nine percent per annum from the time each payment was allegedly due until the time it was made.

The Court is capable of making this rather simple calculation, but will accept Neier's assistance.

V. CONCLUSION

For the foregoing reasons, defendant's Interest Motion is denied, and defendant's Expert Motion is granted in part and denied in part. The Clerk of the Court is directed to close these motions.

SO ORDERED.