Law in Effect When a Claim is Filed Determines How to Calculate Pre-Judgment Interest
The current law governing the award of pre-judgment interest in civil suits applies to causes of action accruing before but filed on or after the 2004 effective date of the statute.
The opinion, authored by Justice Terrence O'Donnell, resolves a conflict among Ohio’s courts of appeals and reverses the Twelfth District Court of Appeals’ decision, returning this case to the trial court for further consideration.
In this case, Longbottom v. Mercy Hospital Clermont, a 9-year-old boy, Kyle Smith, struck his head on a coffee table. On the day he was injured in 2002, Kyle’s parents, Kristi Longbottom and Jesse Smith, took him to the emergency room at Mercy Hospital Clermont in Batavia. Dr. Gary Huber, who treated Kyle, told the parents he didn’t think Kyle had a serious head injury because he had remained conscious, hadn’t lost hearing, was behaving normally, and had no significant head pressure. The doctor discharged Kyle.
The next morning, when Kyle was gasping for breath, his parents called 911 and he was transported to a Cincinnati hospital. He was diagnosed with an epidural hematoma and underwent surgery, but suffered serious and permanent injuries.
In March 2003, Kyle’s parents sued the Mercy Hospital doctor for malpractice but voluntarily dismissed the action. They later re-filed their suit in March 2008. A jury found the doctor had acted negligently and awarded more than $2.4 million in damages to Kyle’s family. In tort actions, trial courts can also award “pre-judgment interest,” which is additional compensation given when the party required to pay money did not make a good faith effort to settle a case. In this case, the court ordered nearly $831,000 in pre-judgment interest (PJI), calculated by using the version of R.C. 1343.03(C) in effect when Longbottom and Smith filed their initial complaint in 2003.
Both parties appealed to the Twelfth District Court of Appeals, which affirmed the trial court’s decision and PJI award. The appeals court held that amendments made to R.C. 1343.03(C), effective in 2004, applied prospectively only, and it noted that their interpretation aligned with decisions in the First, Third, and Seventh District Courts of Appeals. The Twelfth District then certified to the Ohio Supreme Court that its ruling conflicted with an Eighth District Court of Appeals decision regarding PJI awards. The Supreme Court agreed to review the issue.
In today’s 5-2 decision, Justice O’Donnell first examined the General Assembly’s intent when it amended R.C. 1343.03 in H.B. 212 in 2004. In a 2008 Ohio Supreme Court case, Maynard v. Eaton Corp., the court considered whether a new interest rate on judgments, also enacted in H.B. 212, applied to actions still pending on appeal when the amendments went into effect. After looking at uncodified language in the bill, the court in Maynard determined that the legislature intended the new interest rate to apply on the act’s effective date to all pending actions, including those still on appeal.
In Longbottom, however, Justice O’Donnell wrote: “… H.B. 212 contains no codified or uncodified language providing that the modified procedures for calculating prejudgment interest enacted by R.C. 1343.03(C) should apply to all pending cases. … We therefore conclude that the legislature intended that the amendments to R.C. 1343.03(C) should apply only to cases filed on or after June 2, 2004, the effective date of that statute.”
The court then used a two-part test to determine whether the legislation violated the Ohio Constitution’s “retroactivity clause,” which prohibits the General Assembly from passing retroactive laws that affect substantive rights. First, Justice O’Donnell said, the court must decide whether the legislature expressly intended the law to apply retroactively. “Because this amendment is not expressly made retrospective, R.C. 1343.03(C) applies prospectively from the date of enactment,” he wrote.
Second, the court must determine whether the statute is “substantive” or “remedial.” Citing precedent, Justice O’Donnell stated that a substantive statute, which may violate the retroactivity clause, is one that “impairs vested rights, affects an accrued substantive right, or imposes new or additional burdens, duties, obligations, or liabilities as to a past transaction.”
In determining that the amendments governing PJI awards were remedial rather than substantive and, therefore, not unconstitutionally retroactive, Justice O’Donnell wrote: “The 2004 amendment to R.C. 1343.03(C) neither destroys nor eliminates the right to prejudgment interest nor relieves a party of the duty to make a good faith effort to settle a claim; rather, the amended statute affects only the method by which prejudgment interest is calculated. … Because the amended statute does not eliminate the right to prejudgment interest but only modifies the remedy available, it applies to causes of action accruing before but filed on or after June 2, 2004, the effective date of the statute.”
Justice O’Donnell concluded that the current law regarding PJI awards governs the award in this case because the complaint was refiled in 2008, after the amendment became effective.
The court’s majority opinion was joined by Chief Justice Maureen O’Connor and Justices Judith Ann Lanzinger, Sharon L. Kennedy, and Judith L. French.
Justice Paul E. Pfeifer dissented in an opinion joined by Justice William M. O’Neill.
Writing in dissent, Justice Pfeifer said: “The majority opinion requires the parents of Kyle Smith to have known in 2002 what the General Assembly would enact in 2004. … Instead, they relied on the statute that existed at the time Kyle was injured. They relied on a statute that stated that prejudgment interest would be calculated from the date that the cause of action accrued, a statute that did not require notice to insurers and tortfeasors that a cause of action had accrued.”
“Moreover, the version of R.C. 1343.03 in place at the time Kyle was injured recognized that prejudgment interest could be awarded on future damages,” Justice Pfeifer added. “That fact is something the majority opinion skims over when it states that ‘this case concerns only a change in the method of calculating the preexisting substantive right to prejudgment interest.’ No – R.C. 1343.03(C)(2) eliminates the preexisting substantive right to interest on future damages. … A statute that takes away a substantive right is not remedial.”
He concluded: “[T]he majority admits that the 2004 amendment to R.C. 1343.03(C) was not expressly made retrospective. This court should not read into the statute a retroactive application to causes of action that accrued before its enactment.”
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