the Matter of: Oil Spill by the Amoco Cadiz
954 F.2d 1279 (7th Cir. 1992)
The suit was brought by the government of France, as
well as private French citizens and businesses, against
the Amoco Oil Company when one of Amoco’s supertankers,
the Amoco Cadiz, ran aground in the North Sea and dumped
millions of gallons of oil on the Brittany coast in
The litigation continued for thirteen years. When the
case reached the Seventh Circuit in 1992, the court
awarded the plaintiffs $65 million in damages and $148
million in prejudgment interest. The power of compounding
interest and the sharp increase in inflation during
the late 70’s and early 80’s, along with
other factors considered by the court, combined to make
the prejudgment interest more than double the principal
Open this simple spreadsheet to see how quickly the
interest grew in the Amoco Cadiz case: Prejudgment
Interest in the Amoco Cadiz Case.
Below is an excerpted version of the Seventh Circuit
opinion. In Section VII-G the court focuses on the question
of prejudgment interest, the case's "big-ticket"
item. Consider whether the court's approach is justifiable.
For interest rates on US 12-month notes, see ARM Indexes:
Treasury Securities, 1970-1979,
spreadsheet / Class
spreadsheet - 2004.
In The Matter Of: Oil
Spill By The Amoco Cadiz Off The Coast Of France On
March 16, 1978.
United States Court of Appeals for the Seventh Circuit,
954 F.2d 1279 (1992)
Case Summary Procedural Posture: The court consolidated
appeals from the United States District Court for the
Northern District of Illinois, Eastern Division, from
a default judgment against shipbuilder defendant, the
denial of oil compnay defendant's petition asserting
a right under The Limitation of Liability Act, 46 U.S.C.S.
§ 183(a)(1851), and damages award against defendants,
jointly and severally, for damages involving the 1978
oil spill off the coast of France.
Judges: Before Bauer, Chief Judge, Easterbrook, Circuit
Judge, and Fairchild, Senior Circuit Judge.
Opinion: Per curiam.
On the morning of March 16, 1978, the supertanker
AMOCO CADIZ broke apart in a severe storm, spewing most
of its load of 220,000 tons of Iranian crude into the
seas off Brittany. The wreck resulted in one of the
largest oil spills in history, damaging approximately
180 miles of coastline in one of the most important
tourist and fishing regions in France. The clean up
took more than six months and involved equipment and
resources from all over the country. The disaster has
had lasting effects on the environment, the economy,
and the people of Brittany, and has resulted in numerous
lawsuits. Thirteen years later, the matter is before
us. In this consolidated appeal, we are asked to resolve
a myriad of issues involving jurisdiction, liability,
and damages. Before we begin, a brief history of the
litigation and its cast of characters is in order.
[The Court described the origins of the Amoco Cadiz,
born of an agreement between the shipbuilder, Asitlleros
Espanoles, S.A. ("Astilleros") and Standard
Oil Company of Indiana (now called Amoco). The ship
was designed according to the American Bureau of Shipping's
("ABS") Rules for Building and Classing Steel
Vessels. The ABS inspected the steering gear on three
occasions and pronounced it in working order.]
[The Amoco Cadiz was chartered by Shell International
Petroleum from a subsidiary of the Amoco International
Oil Company ("AIOC").]
[In February 1978, Amoco Cadiz took on a load of crude
oil from Iran and Saudi Arabia, destined for Rotterdam
around the Cape of Good Hope. As the tanker approached
western Europe, it sailed into a storm. Due to the storm,
the steering gear completely failed. The Amoco Cadiz
ran aground despite a concerted rescue effort, which
led to an oil slick eighteen miles wide and eighty miles
long. 4,400 men and 50 vessels were dispatched to aid
in the clean up operations at sea. The infusion of oil
upset the delicate ecosystem along the coastline, destroying
algae and ruining oyster and lobster beds. Especially
hard hit was the Breton economy. Brittany is France's
second most important tourist region after the Riviera.
The claimed overall cost to France was an estimated
$100,000,000 at the 1978 rate of exchange.]
[Various parties brought lawsuits against Amoco and
Astilleros, such as the Republic of France, French administrative
departments of Cotes du Nord and finistere ("the
Cotes du No parties"), numerous municipalities,
individuals, businesses and associations. In addition,
Petroleum Insurance Limited ("PIL"), Royal
Dutch Shell's subrogee, sought to recover from Amoco
for loss of the oil cargo. The various federal actions
were bifurcated and resulted in the court finding Amoco
Corporation, Astilleros, and Amoco Production Company
jointly and severally liable to France, the Cotes du
Nord parties, the French claimants, and to PIL.
As for the consolidated damages issues, the district
court awarded PIL 11,212,349.50 pounds sterling for
the loss of Shell's oil cargo. The lower court also
awarded PIL prejudgment interest, but denied its request
for compounded interest. Subsequently, the court amended
its opinion by awarding PIL statutory costs and by setting
the annual prejudgment interest rate at 7.22 percent.
The final award to PIL was 21,215,954.68 pounds sterling.
With regard to the other plaintiffs' damages, the district
court applied French law and ordered an award to cover
costs of clean up and restoration incurred by France,
the Cotes du Nord parties, and the French claimants.
The court awarded statutory costs as well as compound
prejudgment interest at an annual rate of 7.22 percent
for a total of nearly 600 million French francs. Soon
after, these consolidated appeals followed.]
[The Court of Appeals reviewed Astilleros' argument
that each case against it should have been dismissed
for lack of personal jurisdiction. However, the Court
held that the doctrine of law of the case established
on interlocutory appeal from a default judgment on the
issue of liability precluded Astillero from contesting
in personam jurisdiction on appeal from final judgment.]
IV and V.
[The Court then turned to the question of liability,
asking "[w]hat caused the steering system to fail
and whose fault was it?" The Court eventually determined
that there was sufficient evidence in the record to
support a finding that the oil spill was the result
of negligence, inter alia, on the part of the shipowner
and related entities that rendered the Amoco Cadiz unseaworthy
and caused its gounding.]
[The Court also addressed the district court's denial
of the Amoco parties' petition asserting a right to
limited liability in the event that they were found
to be legally responsible for the grounding of the Amoco
Cadiz. The Court of Appeals held that neither the shipowner
nor related entities were entitled to limitation of
liability under the Limitation of Liability Act of 1851.]
A - F
[The Court held that French entities were entitled
to an award that covered the costs incurred by the French
navy in assisting the the oil spill cleanup. In addition,
the Court stated that the claim reduction rule for dealing
with contribution claims would not be adopted. French
syndicates had standing to assert claims on behalf of
private businesses, but French trade associations had
no such standing. French communes could not recover
damages separate and apart from private businesses who
recovered lost profits, such as reputational damage
in the absence of proof of specific loss to the communes
themselves. The shipowner could also provide arguments
based on foreign law regarding the computation of damages
for loss of cargo. The Court also held that the value
of the cargo should be determined by its value at the
intended destination, including an appropriate market
price for the costs of transporting the cargo. The value
of the cargo should not have been reduced for any "shrinkage"
that occurred during shipment. Finally, the damage award
for the shipper's subrogee should have been denominated
in dollars, which was the method used by all parties
to the transaction.]
The district court awarded the French plaintiffs a
principal amount of roughly 340 million francs, or about
$61 million at the current rate of exchange, and the
owners of the cargo approximately Lire 11.2 million,
or $ 19.8 million at the current exchange rate. Because
the accident occurred so long ago, the largest issue
in the case is prejudgment interest. This could be anywhere
from nothing (Amoco's preferred position) to compound
interest at the U.S. prime rate (the plaintiffs' preferred
position), which implies a multiplier of more than 3.3.
The district court first rejected Amoco's argument
that "inequitable" conduct by the plaintiffs should
lead to a denial of all interest. Next it briefly stated
that an award of compound interest was appropriate under
the law of the forum. Finally it explained the choice
of a rate:
This court notes recent legislation on the
subject of post-judgment interest applicable in federal
courts, and has utilized the same rule both for pre-judgment
interest and post-judgment interest.
The federal statute on the subject of post-judgment
interest, that is, 28 U.S.C., Section 1961, provides
that interest shall be calculated from the date of the
entry of the judgment at a rate equal to the coupon
issue yield equivalent as determined by the Secretary
of the Treasury of the average accepted auction price
for the last auction of 52 week United States Treasury
bills settled immediately prior to the date of the judgment.
The Director of the Administrative Office of the United
States Courts is charged with distributing notice of
that rate and any changes in it to all federal judges.
That notice has been distributed and the current interest
rate is 7.22 percent. While this amount is not binding
on the federal courts in the area of pre-judgment interest,
it does serve as a guide or benchmark suitable to the
circumstances of this case and is adopted by the court
as the pre-judgment interest rate. When making recommendations
on the motions for reconsideration, Special Master McGarr
rejected a claim that inflation (in France or the United
States) justified a higher rate. We reproduce his discussion
of this question:
France argues also that inflation in France has
been great since the date of the oil spill and that
the court should give consideration to the decline in
the value of the franc. It is the function of the court
to hear claims, in this case stated in francs, to adjudicate
their validity and to fix judgment amounts based on
the evidence. The external circumstances affecting the
value of a currency are not relevant to the judgment
amount. Had France experienced deflation and increased
value of the franc, plaintiffs would have benefitted.
Either way, it is a circumstance outside the control
of the court and the parties, and outside the pale of
relevance to the court's determinations.
Another aspect of this issue is whether inflation,
although not recognized to vary [*1331] the amount of
the judgment, should be recognized to affect the court's
judgment as to the pre-judgment interest rate. France
argues that high interest rates are a result of inflation
and that inflation therefore justified a higher interest
rate than the 7.22 percent the court allowed.
The court, having rejected the argument that
inflation is a factor to be considered by the court,
must reject this argument also, based as it is on an
effect of inflation. With respect to PIL's request for
interest, the court said the following -- and again
we reproduce the full discussion:
35. PIL is entitled to prejudgment interest.
36. English courts do not award compound interest
except in cases of fraud and other exceptional circumstances
which are of no relevance to this action. Applying
English law, as contemplated by the Charter Party
and bills of lading, PIL would have no reasonable
expectation [**159] of recovering compound interest
on any judgment that would be entered. The court ultimately
applied the same 7.22% rate, but without compounding,
to PIL's award. It allowed the 7.22% rate to stand
with respect to all plaintiffs even though by the
time of judgment the postjudgment rate exceeded 8%.
We start with a discussion of principles. Part
VII.G.2 addresses arguments peculiar to the French parties,
and Part VII.G.3 all arguments concerning PIL.
"Prejudgment interest is an element of complete compensation".
West Virginia v. United States, 479 U.S. 305, 310, 93
L. Ed. 2d 639, 107 S. Ct. 702 (1987). See also, e.g.,
General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-56,
76 L. Ed. 2d 211, 103 S. Ct. 2058, 217 U.S.P.Q. (BNA)
1185 (1983); Gorenstein Enterprises, Inc. v. Quality
Care-USA, Inc., 874 F.2d 431, 436-37, 10 U.S.P.Q.2D
(BNA) 1762 (7th Cir. 1989); Williamson v. Handy Button
Machine Co., 817 F.2d 1290, 1297-98 (7th Cir. 1987).
Money today is not a full substitute for the same sum
that should have been paid years ago. Prejudgment interest
therefore is an ordinary part of any award under federal
By committing a tort, the wrongdoer creates an involuntary
creditor. It may take time for the victim to obtain
an enforceable judgment, but once there is a judgment
the obligation is dated as of the time of the injury.
In voluntary credit transactions, the borrower must
pay the market rate for money. (The market rate is the
minimum appropriate rate for prejudgment interest, because
the involuntary creditor might have charged more to
make a loan.) Prejudgment interest at the market rate
puts both parties in the position they would have occupied
had compensation been paid promptly.
To see this, consider what would have happened
if the French parties had borrowed $ 60 million to finance
the cleanup in April 1978, and Amoco had put that sum
in trust to fund an award of damages (just as Amoco
actually put 77 million francs in trust in France).
The victims would have had to pay the market rate of
interest, which at times during this case has exceeded
20% per annum. If they arranged to repay the debt in
a single balloon payment at the end (when they recouped
from Amoco), and if the rate of interest averaged 12%,
then by April 1991 the victims would owe their creditors
$ 262 million. Meanwhile the trust fund, lending out
its assets at the market rate of 12%, would have grown
to $ 262 million. Scores would be fully settled if Amoco
tendered its interest in the fund: it would thus "pay"
$ 60 million as of 1978, and the victims would receive
$ 60 million as of 1978; the lenders who financed the
cleanup would receive full payment for the use of their
money. (We use these dates and rate only as illustrations;
the periods and rates actually used in this case differ.
We also disregard taxes.)
Victims who finance their own cleanup lend to
themselves; forced to devote money to a project not
of their own choosing (money they otherwise could have
lent out at the market rate of interest), they are entitled
to compensation for the "hire" of this capital. See
Fishman v. Wirtz, 807 F.2d 520, 555-60 (7th Cir. 1986);
id. at 580-82 (separate opinion). Tortfeasors who choose
to reinvest their money in their business (as Amoco
has done) rather than create a trust fund must believe
that the returns in their enterprise exceed the market
rate. Having earned this higher rate of return for the
duration of the litigation, they are in no position
to complain when called on to pay prejudgment interest.
An injurer allowed to keep the return on this money
has profited by the wrong. So we reiterate the holding
of Gorenstein -- one almost compelled by Devex and West
Virginia -- that compound prejudgment interest is the
norm in federal litigation.
Interest at what rate? Surely the market rate.
That is what the victim must pay -- either explicitly
if it borrows money or implicitly if it finances things
out of cash on hand -- and the rate the wrongdoer has
available to it. To return to the trust fund example,
if the market rate were 12% it would be unthinkable
to set a prejudgment rate of interest at 7.5%, order
Amoco to turn over $ 154 million to the victims (the
value of $ 60 million invested at 7.5% compound interest
for 13 years), and authorize Amoco to retain the other
$ 108 million. The victims would owe their creditors
$ 108 million, and the tortfeasor would be the wealthier.
Yet that would be the upshot of computing pre-judgment
interest at less than the market rate -- an effect that
does not depend on the existence of an express trust
but is as powerful if the victims and the tortfeasor
both use internal financing. All of this is just the
flip side of discounting to present value in a tort
case for future loss. See Jones & Laughlin Steel
Corp. v. Pfeifer, 462 U.S. 523, 533-53, 76 L. Ed. 2d
768, 103 S. Ct. 2541 (1983); O'Shea v. Riverway Towing
Co., 677 F.2d 1194, 1199-1201 (7th Cir. 1982). As prepaid
damages must be reduced at a market rate that takes
account of inflation, so postpaid damages must be increased.
What, then, is the market rate? Some of the district
judge's discussion, coupled with his use of the rate
on Treasury securities as of the date of his opinion,
implies that the court thought that the market rate
is the rate for safe securities at the end of the case.
Yet as we pointed out in Gorenstein, when expressly
disapproving use of the postjudgment rate for prejudgment
interest, 874 F.2d at 4356-37, an involuntary tort creditor
is not safe. The defendant may go out of business (or
encounter less serious reverses), or hide assets, during
the litigation. Any market interest rate reflects three
things: the social return on investment (that is, the
amount necessary to bid money away from other productive
uses), the expected change in the value of money during
the term of the loan (i.e., anticipated inflation),
and the risk of nonpayment. The best estimate of these
three variables is the amount the defendant must pay
for money, which reflects variables specific to that
entity. Amoco has publicly traded notes and debentures;
a court could draw an interest rate directly from them.
As we suggested in Gorenstein, 874 F.2d at 437, unless
it engages in such refined rate-setting, a court should
use the "prime rate" -- that is, the rate banks charge
for short-term unsecured loans to credit-worthy customers.
This rate may miss the mark for any particular party,
but it is a market-based estimate.
Although Gorenstein did not elaborate on this,
it should be plain that the market rate in question
is the one during the litigation -- when the defendant
had the use of money that the court has decided belongs
to the plaintiff -- not the going rate at the end of
the case. See Ohio River Co. v. Peavey Co., 731 F.2d
547, 549-50 (8th Cir. 1984); SCNO Barge Lines, Inc.
v. Sun Transportation Co., 775 F.2d 221, 226 (8th Cir.
1985). It is 13 1/2 years since the AMOCO CADIZ ran
aground. Market rates have been above 20% and below
10% for different portions of the period. As it would
be inappropriate to award prejudgment interest at a
20% rate if that happened to prevail in the last week
of a case (and the rate had been 5% for the preceding
decade), so it is inappropriate to use a low rate such
as 7% for which money may be rented at the conclusion,
when higher rates persisted during the bulk of the case.
The district court's remark (when denying the French
parties' motion for reconsideration) that inflation
is irrelevant to the choice of a rate of interest reflects
a misunderstanding of the relation between inflation
and interest rates. The market rate includes a prediction
of inflation -- which is why it is necessary to use
the rates in force during the case and not whatever
rate prevails at the end.
The district court resolved the French plaintiffs'
claims under the law of France. Prejudgment interest
is an element of damages -- it is used to make the victim
whole. Rules for prejudgment interest therefore usually
come from the law defining the elements of damages.
In diversity cases governed by Erie, federal courts
look to state law to determine the availability of (and
rules for computing) prejudgment interest. E.g., Residential
Marketing Group, Inc. v. Granite Investment Group, 933
F.2d 546, 549-50 (7th Cir. 1991); Art Press, Ltd. v.
Western Printing Machinery Co., 852 F.2d 276, 278-80
(7th Cir. 1988). In cases governed by federal law, courts
look first to the statutes, devising federal common
law only if they have been authorized to do so. One
would think, therefore, that prejudgment interest on
the French plaintiffs' claims depends on French law
-- just as the district judge held that prejudgment
interest on PIL's claims depends on British law. Nonetheless,
the district court applied American law to the French
plaintiffs' request for prejudgment interest. Amoco
has not challenged that decision, and the French plaintiffs
say (without contradiction) that Amoco agreed in the
district court to the use of American law on this subject.
On appeal Amoco says only that French law is an "equitable"
consideration affecting the district court's choice
of a rate of interest. We decide the case on the parties'
assumption that our law applies -- while reserving for
decision in another case whether this assumption is
Amoco does not try to defend Judge McGarr's conclusion
that the statutory postjudgment rate should be used
as the prejudgment rate. It maintains, instead, that
the French plaintiffs should count themselves lucky.
Because the district court could (and in Amoco's view
should) have declined to award any prejudgment interest,
Amoco insists that the French plaintiffs are not entitled
to an increase. Although the French parties reply that
Amoco has not preserved this argument because it did
not take a cross-appeal on this question, Amoco is free
to defend its judgment by invoking arguments that failed
to persuade the district court. Massachusetts Mutual
Life Insurance Co. v. Ludwig, 426 U.S. 479, 48 L. Ed.
2d 784, 96 S. Ct. 2158 (1976); Jordan v. Duff &
Phelps, Inc., 815 F.2d 429, 439 (7th Cir. 1987). It
cannot obtain a favorable alteration in the judgment
without a cross-appeal, United States v. American Railway
Express Co., 265 U.S. 425, 435, 68 L. Ed. 1087, 44 S.
Ct. 560 (1924), but it may urge in defense of the judgment
any argument preserved below -- even an argument the
logical implications of which would call for a different
judgment. United States v. New York Telephone Co., 434
U.S. 159, 166, 54 L. Ed. 2d 376, 98 S. Ct. 364 n.8 (1977);
Robert L. Stern, When to Cross-Appeal or Cross-Petition
-- Certainty or Confusion?, 87 Harv. L. Rev. 763 (1974).
According to Amoco, three equitable considerations
support a denial of all interest -- and perforce a limitation
of interest to 7.22%. First, this has been a lengthy
case, so that interest has mounted dramatically. Much
of that delay is attributable to the French plaintiffs,
Amoco submits. Second, the French plaintiffs (especially
the Cotes du Nord parties) submitted inflated, even
fraudulent, claims. Third, French courts do not award
compound prejudgment interest.
Although Amoco submits that Judge McGarr took
these things into account when setting the 7.22% rate
and did not mechanically follow the statutory postjudgment
rate, we have a different view. The district court referred
to the statutory rate -- and not at all to these equitable
considerations -- when selecting the rate. Moreover,
the district court used the same statutory postjudgment
rate for PIL, to which none of these three considerations
applies. Thus to the extent Amoco is arguing for a favorable
exercise of discretion, it has had its day and lost.
Whatever discretion the district judge possesses to
act on these equitable grounds has not been exercised
in Amoco's favor.
Many cases say that district courts have discretion
to adjust the rate of interest or deny interest altogether.
E.g., Heiar v. Crawford County, 746 F.2d 1190, 1201
(7th Cir. 1984). Discretion is not unbridled; it is
exercised under law. "Discretionary choices are not
left to a court's 'inclination, but to its judgment;
and its judgment is to be guided by sound legal principles.'"
Albemarle Paper Co. v. Moody, 422 U.S. 405, 416, 45
L. Ed. 2d 280, 95 S. Ct. 2362 (1975), quoting from United
States v. Burr, 25 F. Cas. 30, 35 (No. 14,692d) (CC
Va. 1807) (Marshall, C.J.). What reasons would justify
an exercise of discretion against the prevailing plaintiff?
We remarked in Williamson that "substantial, unexplained
delay in filing suit might be such a reason, because
delay shifts the investment risk to the defendant, allowing
the plaintiff to recover interest without bearing the
corresponding risk." 817 F.2d at 1298. The Supreme Court
reinforced this in West Virginia by stating that laches
could justify a denial of interest. 479 U.S. at 311
n.3. A court also may deny interest when it is too difficult
to determine which parts of an award are eligible. Daniels
v. Pipefitters' Ass'n Local 597, 945 F.2d 906, 925 (7th
Cir. 1991). Beyond these hints, courts have done little
to sketch the limits of acceptable discretion. Limits
there must be -- for what is the point of computing
the principal amount of damages in intricate detail
if the judge may turn around and increase (or reduce)
the value of that award by a factor of three on the
basis of vague equitable concerns? "We must not invite
the exercise of judicial impressionism. Discretion there
may be, but 'methodized by analogy, disciplined by system.'
Cardozo, The Nature of the Judicial Process, 139, 141
(1921). Discretion without a criterion for its exercise
is authorization of arbitrariness." Brown v. Allen,
344 U.S. 443, 496, 97 L. Ed. 469, 73 S. Ct. 397 (1953)
None of the three considerations Amoco offers
could support a denial of interest even had the district
court been inclined to exercise its discretion in Amoco's
favor. Start with the passage of time: this is a reason
to award interest, not to deny it. Amoco does not contend
that the plaintiffs delayed in filing suit, and although
13 years is a regrettably long time to reach final decision,
it is not uncommon for a case of this magnitude. As
for exaggerated and fraudulent claims: these may be
a basis of sanctions under Fed. R. Civ. P. 11 and 37,
but sanctions must be proportioned to the wrong. No
one would suppose that the appropriate sanction for
filing even a bushel basket full of bogus claims is
a $ 100 million fine. Yet that is Amoco's position.
Return to the trust fund example: Amoco ponies up $
60 million in April 1978, and by April 1991 the fund
contains $ 262 million. The district court must apportion
this fund between the parties. Could a court even think
of saying: "Complete redress of the plaintiffs' injuries
calls for an award of the entire $ 262 million, but
because many of the claims during the course of the
litigation were inflated, I shall award the plaintiffs
$ 149 million and return the other $ 113 million to
the defendant."? Not a chance. This is, however, the
consequence of interest at the rate of 7.22% rather
than 12% -- and Amoco's preferred position (no interest)
implies a penalty of $ 202 million for exaggeration.
We explained in Frantz v. United States Powerlifting
Federation, 836 F.2d 1063 (7th Cir. 1987), that in choosing
a sanction for misconduct a judge should not simply
toss out a legitimate claim by the offending party.
"The method of getting to a sanction should be characterized
by intellectual discipline". Id. at 1066. See also In
re Central Ice Cream Co., 836 F.2d 1068 (7th Cir. 1987).
If the French plaintiffs have offended at all, even
$ 5 million would be an excessive sanction; yet Amoco
demands a sanction in the hundreds of millions. Indeed,
we doubt that any adjustment of interest rates on this
account could be sustained after West Virginia. The
district court in that case declined to award interest
on "equitable" grounds, including excessive delay (Amoco's
first point) and the difference between federal and
state law (a cousin to Amoco's third). The Supreme Court's
treatment was curt: "The District Court held that whether
interest had to be paid depended on a balancing of equities
between the parties; the Court of Appeals rejected such
an approach, as do we." 479 U.S. at 311 n.3.
The right way to deal with exaggerated claims
is to cut down on those claims, not to deny interest
on proven entitlements. One has only to return to the
discussion of Plougrescant in Part VII.A of this Opinion
to see how severely the district court cut back many
of the claims. Fiddling with the rate of interest would
be double counting after these exclusions. The right
way to deal with fraudulent claims is to impose explicit,
reasoned, and measured sanctions on those who present
such claims. (On the view we take of the case, it is
not necessary to decide whether any of the claims was
"fraudulent"; we note, however, that the French plaintiffs
provide at least superficially plausible explanations
for the claims to which Amoco attaches that label.)
The right way to deal with French law on prejudgment
interest is to decide whether it governs. If it does,
apply it; if it does not, then apply American law (as
the district judge did) rather than attempt some compromise
between the bodies of law. (The parties strenuously
dispute what French law provides by way of prejudgment
interest; our approach allows us to be agnostic on the
We hold that the French plaintiffs are entitled
to prejudgment interest at the market rates that prevailed
during the 1980s. The district court started the interest
period at the end of 1979; the French have not contested
this delay on appeal. The French parties say that the
average prime rate during the 1980s was 11.9%. Amoco
does not contest this and does not suggest that it paid
a lower rate on its own debt. Because Amoco has not
challenged the proposed rate of 11.9%, we adopt it.
Because Amoco has not challenged the computation that
leads the French plaintiffs to conclude that the interest
factor through the date of judgment creates a multiplier
of 3.3162, we adopt that figure also. On remand the
district court shall apply this multiplier to the judgment
recomputed according to the decisions made elsewhere
in this opinion.
Amoco has little reason to shed crocodile tears.
Exxon reportedly spent $ 2 billion to clean up the oil
the EXXON VALDEZ spilled off Alaska; it has agreed to
pay another $ 1 billion as damages and to pay a criminal
fine of $ 125 million. Amoco will be called on to pay
only $ 61 million plus interest to redress a spill that
not only was larger but also occurred in a more densely
populated area. Calling the $ 61 million the result
of inflated or fraudulent claims taxes credulity.
The district court awarded PIL the same 7.22%
rate of interest as it had the French plaintiffs but
without compounding. It held that British law does not
allow compounding; the court did not explain the choice
of 7.22% as the rate.
Amoco does not contend that the United Kingdom
prescribes any rate of interest other than the market
rate. For reasons we have already given, 7.22% is not
the market rate and is not justifiable on any other
ground. Even the "equitable" arguments Amoco asserts
against the French plaintiffs are unavailable against
PIL. We therefore hold that PIL is entitled to prejudgment
interest at the prime rate. PIL contends that the average
rate between the catastrophe and judgment is 12.31%
per annum. (This exceeds the rate the French plaintiffs
have calculated, because it includes the high-interest
period between March 1978 and the end of 1979, which
was excluded from the French plaintiffs' claim.) Again
Amoco does not contest this calculation. On remand the
district court shall increase the rate of prejudgment
interest in PIL's case to 12.31%.
The parties agree that courts of the United Kingdom
award simple rather than compound prejudgment interest.
The La Pintada,  2 Lloyd's Rep. 9, 17. Relying
on Miliangos v. George Frank (Textiles) Ltd., 
1 Q.B. 489, 497, PIL insists that England treats interest
as a procedural rather than substantive matter, so that
the law of the forum governs. What is the law of the
forum? Now looms the spectre of renvoi, for American
courts treat prejudgment interest as a substantive question,
which by the charter party and bills of lading is to
be decided under British law. There are several ways
to escape from this predicament -- an infinite loop
being excluded by the terror of having a case under
advisement forever, and other sufficient reasons. See
University of Chicago v. Dater, 277 Mich. 658, 270 N.W.
175 (1936); Restatement (2d) of Conflict of Laws §
8. The easiest trap door, and the one appropriate here,
is to deny that the foreign jurisdiction refers back
to the forum's law.
Miliangos is an ambiguous case. Justice Bristow
says that British courts treat prejudgment interest
as a question of forum law. But he also says that a
British court should use the discretion it possesses
under its domestic law to produce an award that tracks
the one the court supplying the substantive rule would
think appropriate. Switzerland supplied the substantive
rule in Miliangos, and the court applied simple interest
at the Swiss rate. There are two ways to understand
this outcome. One, which Amoco favors, is that Miliangos
does not "really" treat interest as a question of forum
law but instead flexibly matches the award to the substantive
rule -- an approach that, Amoco insists, means simple
interest. The other understanding, which PIL favors,
is that the United Kingdom has no rule at all: although
it believes that simple interest provides adequate compensation,
it will go with the flow, and if some other jurisdiction
has a different view, that is fine with Her Majesty's
courts. In modern American argot, the argument is that
the United Kingdom has no "interest" in the method of
computing interest. England does not point to forum
law (inviting the forum to point back); it simply does
not care, and then the forum naturally applies its own
Of only one thing can we be sure: had this case
been filed in the United Kingdom, it would have been
decided under British substantive law, and PIL would
have received simple prejudgment interest. Is there
any reason why the location of the forum should call
for a different result? Perhaps it would be Amoco's
comeuppance if the filing in the United States (to take
advantage of the Limitation of Liability Act) should
ricochet and generate compound interest. The only argument
we can see for changing the rule of law with the forum
-- given our strong preference for enforcing the rules
the parties chose -- would be that litigation in the
United States takes longer than litigation in the United
Kingdom. Could it be that the English approach reflects
the fact that when cases end quickly, there is not much
difference between simple and compound interest? Would
an English court switch to compounding when the case
drags on for more than 13 years? Britain's dominant
principle of damages is restitutio in integrum -- that
is, restoration of the injured party to the position
it occupied before the wrong. Although England believes
that simple interest accomplishes this end, it might
have a different view in long-running litigation. Compound
prejudgment interest will give PIL 100% of the value
of the cargo; simple interest, after 13 years, produces
Although it is tempting to follow this reasoning
to the conclusion that PIL is entitled to compound interest,
no data available to us suggest that large-stakes commercial
litigation in the United Kingdom comes to judgment faster
than in the United States. Too, PIL has not cited any
case suggesting that in the United Kingdom compounding
would be allowed in drawn-out contests. That leaves
us with two dominant considerations: If the suit had
gone to judgment in England, PIL would have had simple
interest; and courts of the United States treat prejudgment
interest [*1337] as a question of substantive law, pointing
us to the English rule. Both potential forums thus can
produce the same result, without violence to the law
of either. Parties may provide for compound interest
by contract; by incorporating the law of the United
Kingdom without a separate provision on this question,
the parties assented to simple interest. Commerce depends
on honoring contracts rather than finding creative ways
to get 'round them after the fact, and we honor the
parties' bargain by affirming the district court's conclusion
that PIL's prejudgment interest should not be compounded.
To sum up: all decisions on jurisdiction and
liability are affirmed. The computation of damages is
affirmed with the following exceptions:
1. France is entitled to an additional 3.5 million
francs (before interest) for the expense of the cleanup.
2. L'Union des Commercants et Artisans de Tregastel
and L'Union Pleumeuroise Pour la Defense des Interets
des Commercants et Artisans lack standing, and the
awards in their favor are vacated.
3. The award in favor of PIL shall be made in dollars,
and the 0.5% deduction for shrinkage shall be eliminated.
4. The French plaintiffs are entitled to compound
prejudgment interest at a rate of 11.9% per annum
from January 1, 1980, implying a multiplier of 3.3162.
5. PIL is entitled to simple prejudgment interest
at the rate of 12.31% per annum from March 16, 1978.
The case is remanded for the entry of judgment in
accordance with this opinion.