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alternative method, it is presumed that actual damages would be
paid before prejudgment interest, postjudgment interest, or
punitive damages, and that prejudgment interest would be paid
before punitive damages.
Under this methodology, the combined $3,100,000 payment made
by Continental and Harte-Hanks, which was the amount agreed upon
to settle Harte-Hanks' liability for the first $7 million of
damages, is allocated to settle $7 million of the $11,500,000 of
actual damages provided by the judgment. Accordingly,
petitioners would exclude $3,100,000 under section 104(a)(2) as
the settlement amount they received for $7 million worth of the
actual damages.
Harte-Hanks paid $2,400,000, to settle the principal amount
of the judgment between $7 million and $12 million, and to the
extent necessary, to settle all postjudgment interest on the
first $22 million of the judgment. This amount is allocated to
actual damages of $4,500,000,10 prejudgment interest of $500,000,
and postjudgment interest of $1,826,301.11 Accordingly,
$1,582,116 of the $2,400,000 payment is allocated to actual
10 This figure equals the $11,500,000 total actual damages
minus the $7 million actual damages which were settled for
$3,100,000.
11 Respondent calculated postjudgment interest on the first
$22 million of the judgment assuming a period of 303 days, from
May 15, 1990 (the judgment date), to Mar. 14, 1991 (the date of
the partial settlement agreement), a 365-day calendar year, and a
rate of 10 percent per annum.
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