                                  COURT OF CHANCERY
                                        OF THE
                                  STATE OF DELAWARE

J. TRAVIS LASTER                                                 New Castle County Courthouse
VICE CHANCELLOR                                                  500 N. King Street, Suite 11400
                                                                Wilmington, Delaware 19801-3734

                            Date Submitted: August 27, 2014
                             Date Decided: August 29, 2014


Collin J. Seitz, Jr.                         James S. Green, Sr.
Bradley R. Aronstam                          Jared T. Green
Eric D. Selden                               Seitz, Van Ogtrop & Green, P.A.
David E. Ross                                222 Delaware Avenue, Suite 1500
Seitz, Ross, Aronstam & Moritz, LLP          P.O. Box 68
100 S. West Street, Suite 400                Wilmington, DE 19899
Wilmington, DE 19801

RE:    Levey v. Browstone Asset Management, LP, et al.,
       Consolidated C.A. No. 5714-VCL

Dear Counsel:

       The post-trial opinion in this case awarded the plaintiff $35,042.67, plus pre- and

post-judgment interest at the legal rate, compounded quarterly, from January 26, 2006,

until the date of payment. The parties could not agree on how to apply the legal rate.

The plaintiff maintained that the interest rate should remain constant at the rate in effect

on January 26, 2006 (10.25%). The defendants contended that the interest rate should

float, changing whenever the Federal Reserve discount rate changed. The defendants are

correct. The rate should float.

       This court “has broad discretion, subject to principles of fairness, in fixing the

[interest] rate to be applied.” Valeant Pharm. Int’l v. Jerney, 921 A.2d 732, 756 (Del. Ch.

2007) (alteration in original) (quoting Summa Corp. v. Trans World Airlines, Inc., 540
August 29, 2014
Page 2 of 3


A.2d 403, 409 (Del. 1988)). “An award of interest serves two purposes. It compensates

the [judgment creditor] for the loss of use of its capital during the pendency of the

[proceeding] and causes the disgorgement of the benefit [the judgment debtor] has

enjoyed during the same period.” Gholl v. eMachines, Inc., 2004 WL 2847865, at *18

(Del. Ch. Nov. 24, 2004). A court should avoid awarding excessive interest because

doing so “would constitute an inequitable windfall.” Gentile v. Rossette, 2010 WL

3582453, at *1 (Del. Ch. Sept. 10, 2010).

       Awarding interest using a fluctuating rate serves the twin purposes identified in

Gholl. A fluctuating interest rate adequately reimburses a plaintiff “for the loss of use of

its capital” by replicating the economic circumstances that existed during the litigation.

Gholl, 2004 WL 2847865, at *18. It also forces the defendant to disgorge the benefits

“enjoyed during the same period.”       Id.   A fixed interest rate risks over- or under-

compensating the plaintiff, and either benefitting or penalizing the defendant, depending

on how the interest rate varied during the period covered by the award. In this case, the

plaintiff has offered no evidence to suggest that he could have received a 10.25% interest

rate during the pendency of the litigation, creating a potential windfall for the plaintiff

and penalty for the defendants. See Gentile, 2010 WL 3582453, at *2 (declining to award

a fixed interest rate where “it [was] so unlikely that the hypothetical prudent investor

would have achieved a 10.5% rate of return over the past decade, during which the

Discount Rate frequently stood near all-time lows and the equity markets encountered

turbulence”).
August 29, 2014
Page 3 of 3


       The parties shall submit a form of Order and Final Judgment that uses a

fluctuating rate of interest to calculate the amount of pre- and post-judgment interest.

                                          Sincerely,

                                          /s/ J. Travis Laster

                                          J. Travis Laster
                                          Vice Chancellor
