California Appellate Court Holds that Defense in Class Action Gave Up Control of Funds for Payment of Damages Satisfying Payment of Judgment and Ending Obligation to Pay Postjudgment Interest
Employees filed an overtime pay class action against Farmers Insurance Exchange, ultimately resulting in a jury verdict against the defense totaling nearly $90,000,000 for unpaid time-and-a-half and double-time. The trial court awarded prejudgment interest in the class action, and approved a plan for distribution of the funds to the class members. The trial court eventually issued an order establishing the unpaid balance owing as of August 16, 2004, to be approximately $158,000,000 plus post-judgment interest accruing daily. Farmers paid $120,000,000 into an interest-bearing account “held in the names of class counsel and a court-appointed claims administrator”; the balance was due by March 10, 2005, and interest continued to accrue on the unpaid balance. Bell v. Farmers Ins. Exch., 137 Cal.App.4th 835, 837 (Cal.App. 2006).
Just before the first distribution payment was made to class members, Farmers asked the court to amend the distribution method in order to avoid certain unanticipated tax issues. Bell, at 838. Plaintiffs’ lawyer objected to the proposal, and requested that Farmers be ordered to pay additional post-judgment interest; the trial court denied plaintiffs’ request and plaintiffs appealed. Id. “[Farmers] argues that the judgment was satisfied when it deposited funds into the trust account held in the name of class counsel and the claims administrator; plaintiffs maintain that the judgment was satisfied when actual payment was made to the class members.” Id., at 839. The appellate court agreed with the defense: “[W]e note that the damages fund was held in an account in the name of the claims administrator and class counsel. By placing funds in such an account, [Farmers] clearly relinquished control over the damages fund and entrusted it to payment of the judgment.” Id., at 840 (italics in original). The court found, contrary to plaintiffs’ claim, that “there was ‘no string attached by which the money [could] be yanked back.’” Id., at 841. Accordingly, the trial court order was affirmed.