Firm Prevails on Issue of First Impression in the Federal Sixth Circuit
Attorneys Sidney L. Frank and Louis C. Szura recently prevailed on an issue of first impression in the federal Sixth Circuit regarding the post-judgment interest rate that applies to federal money judgments involving loan documents that provide for an agreed upon default rate. The firm's clients' lender, Comerica Bank, filed a complaint in Michigan state court seeking to seize a vessel under a ship mortgage and recover any deficiency from the clients.
The firm removed the case to the U.S. District Court for the Eastern District of Michigan under the exclusive federal jurisdiction of the Ship Mortgage Act. While the parties agreed to a “short sale” of the vessel to a third party, a deficiency would remain against the clients. The only remaining issue was the interest rate that would apply to the deficiency judgment. Comerica argued that the default interest rate in the loan documents, 8.25 percent, should apply.
The firm, on behalf of the clients, argued that the federal statutory rate on monetary judgments, approximately .29 percent, should apply. The issue of whether parties could agree to an interest rate other than the federal statutory rate had not previously been decided in the Sixth Circuit. Judge Gerald Rosen held a default rate in loan documents does is not evidence that there was an agreement to a post-judgment interest rate. Therefore, the much-lower federal statutory rate applied to the judgment.
The firm removed the case to the U.S. District Court for the Eastern District of Michigan under the exclusive federal jurisdiction of the Ship Mortgage Act. While the parties agreed to a “short sale” of the vessel to a third party, a deficiency would remain against the clients. The only remaining issue was the interest rate that would apply to the deficiency judgment. Comerica argued that the default interest rate in the loan documents, 8.25 percent, should apply.
The firm, on behalf of the clients, argued that the federal statutory rate on monetary judgments, approximately .29 percent, should apply. The issue of whether parties could agree to an interest rate other than the federal statutory rate had not previously been decided in the Sixth Circuit. Judge Gerald Rosen held a default rate in loan documents does is not evidence that there was an agreement to a post-judgment interest rate. Therefore, the much-lower federal statutory rate applied to the judgment.