Calculating the amount of prejudgment and post-judgment interest due in state court is a fairly mundane task. The same is true when calculating interest on a federal claim in federal court. What is not necessarily routine, however, is the calculation of interest on a state law diversity claim in federal court. In a diversity case under New York law, pre-verdict and prejudgment interest is calculated pursuant to the CPLR, which awards 9 percent interest, while post-judgment interest is calculated at the federal rate, which for the last few years has been 0.25 percent. Though this division appears relatively straightforward, the date of "judgment" is of paramount concern because the further in time the judgment can be extended, the more prejudgment interest a plaintiff can realize. At 9 percent, this can mount up quite rapidly. And while determining the "date of judgment" is sometimes non-controversial, there are instances when an appeals court modifies the judgment or reverses and remands, which in many instances will lead to a new (and later) date of judgment. This article will discuss the standard for calculating interest and explore some of the more unusual circumstances where ascertaining the date of judgment is not as simple as one might assume.
The purpose of prejudgment interest is simply to make the wronged party whole by compensating for the loss of use of money.1 It has two components: interest to the verdict and interest on the verdict (plus pre-verdict interest) to the date of entry of judgment. (CPLR 5001 & 5002.)2
When a federal court sits in diversity jurisdiction and applies New York state law to the claims at issue, the CPLR governs the rate of prejudgment interest.3 Despite the changes in the economy and market rates of return over the last three decades, the CPLR has maintained a 9 percent rate of interest since 1981.4 Pursuant to CPLR 5001(b), this interest will be "computed from the earliest ascertainable date the cause of action existed,"5 or "from a single reasonable intermediate date" where damages were incurred at various times.6
Prejudgment interest does not necessarily attach in every case. Under the CPLR, prejudgment interest is limited to sums "awarded because of a breach of performance of a contract, or because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property."7 That means that most tort actions are specifically excluded from the set of judgments qualifying for prejudgment interest. Further, because prejudgment interest is only intended to compensate a party for the loss of use of the money it should have received absent the wrong, prejudgment interest is never added to punitive damages, regardless of the underlying cause of action. Finally, when violations are premised on both state and federal law, it is common practice in the Second Circuit to apply the federal rate to prejudgment interest.8
Unlike prejudgment interest, post-judgment interest is a penalty imposed against the wrongful party. As the Second Circuit has stated, the purpose of post-judgment interest is "to compensate the plaintiff for the delay it suffers from the time damages are reduced to an enforceable judgment to the time the defendant pays the judgment."9 Therefore, unlike the ban associated with prejudgment interest, post-judgment interest is available on awards of punitive damages.10
In diversity actions in federal court, post-judgment interest is governed by federal statute, 28 U.S.C. §1961.11 The award of post-judgment interest is mandatory.12 Section 1961 indicates that "[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court…at a rate equal to the weekly average one-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment."13 This rate is significantly lower than the 9 percent New York rate, and for the last few years has been 0.25 percent. The Second Circuit permits parties to contract around the federal rate; however, to do so parties must state their intention to apply a different rate in "clear, unambiguous and unequivocal language."14 A general choice of law provision requiring application of New York law to contractual disputes is insufficient to circumvent application of the federal rate.15
Post-judgment interest begins to accrue on the date a judgment is meaningfully ascertained and supported by evidence,16 and it continues to accumulate until the wrongful party has paid the judgment. The next few sections discuss the difficulties associated with determining when a judgment has been meaningfully ascertained and supported by evidence.
Judgment Day: The Various Scenarios
When a court enters judgment on liability and damages in a single proceeding and the parties do not appeal, post-judgment interest begins to accrue on the date the judgment is entered. Most cases, however, are not so straightforward, and the parties must pause to evaluate exactly what has transpired in their case to ensure that they properly can determine on which date judgment was meaningfully ascertained and supported by evidence.
There is at least one scenario where the date of judgment, even without any appeals, might not be obvious, and that is when liability and damages are determined in separate verdicts, rendered on different dates. In such cases "the right to interest accrues upon the entry of 'the verdict holding the defendant liable' since that is when 'plaintiff's right to be compensated for the damages he or she sustained becomes fixed in law.'"17 The same is true for verdicts on liability to pay attorney fees and costs and second judgments on the amount of such fees and costs.18 Likewise if the court enters an amended or corrected judgment—for example to clarify which defendants are liable19 or to reflect payments already made to the plaintiff20—post-judgment interest runs from the date of entry of the original judgment.
Affirmance After Appeal. Perhaps the easiest scenario involves affirmance by the appellate court of the underlying judgment. Pursuant to Federal Rule of Appellate Procedure 37(a), "if a money judgment in a civil case is affirmed, whatever interest is allowed by law is payable from the date when the district court's judgment was entered."
Judgment on Remand After First Vacated or After First Modified. Another scenario involves appeal of a judgment followed by a remand. For purposes of determining the date of judgment for calculating interest, the reason for remand is important. When a judgment is vacated on appeal "because it lacks a legal basis or requires further factual development, the vacated award should be treated as a nullity and post-judgment interest therefore accrues from the entry of judgment on remand."21 When, however, "the original judgment is basically sound but is modified on remand, post-judgment interest accrues from the date of the first judgment,"22 running on the modified amount, not the original amount.23 Determining which scenario applies is not always as easy as it would seem.
Judgment on Remand When Original Judgment Is Reinstated. Consider that a judgment is entered after a jury trial and a party moves for judgment as a matter of law, which is granted; then, the other party appeals and the original jury award is reinstated. Because reversal of the motion for judgment as a matter of law does not change the fact that "the judgment was ascertained in a meaningful sense [and sufficiently substantiated by the evidence] on…the date on which the original judgment was entered following the jury verdict," post-judgment interest begins to accrue from the date of entry of the original judgment.24
Judgment After Remittitur or Retrial Is Offered. A court may only offer remittitur if the underlying proceeding was free from fundamental or prejudicial error.25 For example, if a jury award is excessive or if the jury mistakenly applied the wrong metric but the award is otherwise free from error, remittitur is proper.26 As such, when a court offers remittitur, it is generally doing so in an amount that was otherwise substantiated by sufficient evidence in the district court. Thus, if remittitur is accepted, post-judgment interest will accrue from the date of entry of the original judgment.27
If, however, the aggrieved party rejects the remittitur and opts for a new trial, determining the date on which prejudgment interest stops and post-judgment interest starts is based on whether the new trial is on all issues (i.e., liability and damages) or whether the new trial is on damages alone (if separable from a liability determination). Presumably, if the new trial is only on damages, post-judgment interest will accrue from the date of entry of the first judgment in which liability was determined and supported by sufficient evidence.
In some instances, only part of the damages award is remitted. In that case, the portion of the award that was not remitted will accrue post-judgment interest from the date of the original judgment.28
Paying the Judgment Into Court. The court may order payment of the judgment plus interest into court to stop the running of interest when, for example, multiple plaintiffs are fighting over who is entitled to the money, because such a dispute is not of the defendant's making, especially when he stands ready and willing to pay the judgment.29
Requirement That the Appellate Court Order Interest. Federal Rule of Appellate Procedure 37(b) requires that "[i]f the court modifies or reverses a judgment with a direction that a money judgment be entered in the district court," as opposed to remanding for further proceedings, "the mandate must contain instructions about the allowance of interest." If the appellate court orders the entry of a money judgment and the "mandate does not contain such instructions, the district court is powerless to award interest during the period between its original judgment and the judgment it enters on remand, since doing so would deviate from the mandate it has been given."30 When such a mistake is made in an appellate court mandate, the only resort the parties have is to petition for rehearing or for recall and re-issuance of the mandate on the basis of non-compliance with Rule 37.
Parties looking to evaluate their exposure to prejudgment and post-judgment interest must carefully consider what has transpired in their case to determine when judgment was meaningfully ascertained and supported by evidence.
Anthony Viola is a partner and Andre Cizmarik is counsel at Edwards Wildman Palmer in New York. Kara Cormier, an associate, assisted in the preparation of this article.
1. J. D'Addario & Co. v. Embassy Industries, 20 N.Y.3d 113, 117-18 (2012).
2. A defendant in a contract action can halt the accumulation of prejudgment interest by following the procedures set forth in CPLR 3219 and depositing with the clerk of court a sufficient sum of money to settle the disputed claim. Aristocrat Leisure v. Deutsche Bank Trust Ams., 618 F. Supp. 2d 280, 310 (S.D.N.Y. 2009). Courts generally require compliance with CPLR 3219 to halt prejudgment interest, though some courts allow other forms of tender to halt it so long as it is an absolute offer, not conditioned on settlement of the dispute. See, e.g., Cafferty v. Scotti Bros. Records, 969 F. Supp. 193, 205 (S.D.N.Y. 1997); Cincinnati. Rivera v. Cincinnati, 1998 U.S. Dist. LEXIS 19926, *12 (S.D.N.Y. Dec. 22, 1998).
3. Schipani v. McLeod, 541 F.3d 158, 164-65 (2d Cir. 2008).
4. CPLR 5004.
5. Determining the earliest ascertainable date is, at times, complicated. Generally prejudgment interest begins to accrue in a bad faith refusal to settle action (where the underlying action is, for example, medical malpractice), at the entry of judgment in the underlying action because that is when liability in excess of policy limits is imposed on the insured. But consider what would happen when the underlying case settles before a judgment is rendered. In such a scenario, at least one district has decided that prejudgment interest accrues from the date the settlement is entered. New Eng. Ins. v. Healthcare Underwriters Mut. Ins., 333 F. Supp. 2d 87 (E.D.N.Y. 2004).
6. CPLR 5001.
7. CPLR 5001(a).
8. See, e.g., Collins v. Suffolk County Police Department, 349 F. Supp. 2d 559 (E.D.N.Y. 2004), vacated in part on other grounds; Greenway v. Buffalo Hilton Hotel, 951 F. Supp. 1039, 1062-63 (W.D.N.Y. 1997) (applying §1961(a) to interest on back pay award for violations under the Americans with Disabilities Act and the New York State Human Rights Law (NYSHRL)); McIntosh v. Irving Trust, 873 F. Supp. 872, 883 (S.D.N.Y. 1995) (calculating prejudgment interest for back pay award for unlawful retaliation under Title VII and NYSHRL in accordance with §1961(a)).
9. Greenway v. Buffalo Hilton Hotel, 143 F.3d 47, 55 (2d Cir. 1998) (quoting Andrulonis v. United States, 26 F.3d 1224, 1230 (2d Cir. 1994)).
10. Id. (Awarding post-judgment interest on punitive damages award).
11. Schipani v. McLeod, 541 F.3d 158, 164-65 (2d Cir. 2008); 28 USC 1961.
12. Id. (Citing Westinghouse Credit v. D'Urso, 371 F.3d 96, 100 (2d Cir. 2004)).
13. 28 U.S.C. 1961.
14. FCS Advisors v. Fair Fin., 605 F.3d 144, 145-46 (2d Cir. 2010).
16. Kaiser Alum. v. Bonjorno, 494 U.S. 827 (1990); Adrian v. Yorktown, 620 F.3d 104 (2d Cir. 2010).
17. Schipani v. McLeod, 541 F.3d 158, 164-65 (2d Cir. 2008) (quoting Love v. State, 78 N.Y.2d 540, 544 (1991)).
18. Natural Organics v. Nutraceutical, 2009 U.S. Dist. LEXIS 71077 (S.D.N.Y. 2009) (post-judgment interest runs from date of liability, not from the date amounts are determined; party has use of the money between first and second judgment, so it is not prejudiced by such a holding).
19. Kazazian v. Bartlett & Bartlett, 2007 U.S. Dist. LEXIS 94243, *3 (S.D.N.Y. Dec. 17, 2007).
20. Global Reinsurance of Am. v. Argonaut Ins., 634 F. Supp. 2d 342, 351 (S.D.N.Y. 2009).
21. Lewis v. Whelan, 99 F.3d 542, 545-46 (2d Cir. 1996); Fresh Meadow Food Servs. v. Rb 175 Corp., 2013 U.S. Dist. LEXIS 18363, *34-36 (E.D.N.Y. Feb. 11, 2013); Natural Organics, 2009 U.S. Dist. LEXIS 71077.
22. Lewis, 99 F.3d at 545-46.
23. Greenway v. Buffalo Hilton Hotel, 143 F.3d 47, 55 (2d Cir. 1998).
24. Indu Craft v. Bank of Baroda, 87 F.3d 614, 620 (2d Cir. 1996).
25. Ramirez v. New York City Off-Track Betting, 112 F.3d 38, 40 (2d Cir. 1997).
26. Id. When, however, the underlying verdict is "infected by fundamental error, remittitur is improper…and the judgment of the district court should be vacated and the cause remanded for a new trial on damages." Id.
27. NML Capital v. Republic of Arg., 435 Fed. Appx. 41, 43-44 (2d Cir. 2011).
28. Chisolm v. Mem'l Sloan-Kettering Cancer Ctr., 824 F. Supp. 2d 573 (S.D.N.Y. 2011).
29. United States Overseas Airlines v. Compania Aerea Viajes Expresos de Venezuela, S.A., 161 F. Supp. 513, 516 (S.D.N.Y. 1958).
30. Westinghouse Credit v. D'Urso, 371 F.3d 96, 103 (2d Cir. 2004) (citing Briggs v. Pennsylvania Railroad, 334 U.S. 304, 306 (1948) and Fed. R. App. P. 37 advisory committee's note).