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ReCor Medical, Inc. v. Warnking

Court of Chancery of Delaware

January 30, 2015

ReCor Medical, Inc.
v.
Warnking

Submitted: November 3, 2014

Daniel B. Rath, Esquire Landis Rath & Cobb LLP

Thomas M. Horan, Esquire Womble Carlyle Sandridge & Rice, LLP

Dear Counsel:

The Court awarded Plaintiff ReCor Medical, Inc. ("ReCor") its attorneys' fees and expenses incurred in this action and in defending the appeal taken by Defendants Reinhard Warnking and Sound Interventions, Inc. (the "Defendants").[1]The parties have been unable to agree upon an implementing form of order because of their dispute about whether post-judgment interest should be simple or compound.

The Court "has broad discretion, subject to principles of fairness" in awarding interest.[2] That discretion includes the authority to award compound interest.[3] An award of simple interest allows the obligor to gain something of a cumulative advantage by delaying payment of its obligation.[4] Because of this, simple interest may generally be viewed as "ha[ving] nothing to commend it."[5] In Seaport Village Limited, for example, the Court awarded interest, compounded quarterly, on a fee award.[6]

Defendants assert that a compound interest rate would be unfair. They focus on their expenditures promoting the technology that ReCor now controls. Although the amount expended is not clear, some benefit did, in fact, accrue to ReCor. As a matter of equity, this undoubtedly favors the Defendants, but the Defendants' own inequitable conduct played an integral role in the Court's resolution of the merits of this action.

In addition, with interest rates at low levels, the legal rate of interest of the discount rate plus five percent[7] may overstate the value accruing to Defendants from possessing the funds owed to ReCor.

There is no clear-cut exit from the conundrum posed by the parties. Compound interest is not a default answer because the question is committed to the Court's discretion. Yet, on balance, the reasons cited for simple interest do not outweigh the reality that compound interest is a more accurate means of measuring the time value of money owed by Defendants to ReCor. Accordingly, interest on the fee and expense award will be compounded quarterly.

An implementing order will be entered.

Very truly yours,

John W. Noble Vice Chancellor


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