The informative article by Thomas F. Gleason (“Pre-Judgment Interest and Stipulations of Liability Under CPLR 5002,” NYLJ, 9/18/17) understandably triggered calls from readers regarding the status of the Court of Appeals decision in Mahoney v. Brockbank, 142 A.D.3d 200 (2nd Dept., 2016), lv granted, 29 N.Y.3d 904 (2017). Some of Mr. Gleason’s thoughts how to address the ramifications of Mahoney also warrant further comment.
Whether a plaintiff is entitled to prejudgment interest from the moment a defendant concedes liability will not be decided by the Court of Appeals. Immediately after the Court granted plaintiff leave, the defendant, who previously argued that interest ran from the date of the jury’s damages verdict, suddenly agreed to pay every cent of interest owed from the date of the stipulation conceding liability to the date judgment was entered (CPLR 5002) and until it was paid in May 2017 (CPLR 5003). By offering the full $115,000 of interest, which the plaintiff had no choice but to accept, the defendant successfully silenced the Court of Appeals on this important issue and prevented a reversal of the Appellate Division’s order.
Based on the Court of Appeals’ repeated holdings that a defendant owes prejudgment interest from the moment liability was established to make the plaintiff whole (see, e.g., Love v. State of New York, 78 N.Y.2d 540 ), and that an arbitrator’s “award” entitles a successful party to prejudgment interest despite the absence of the word “award” in CPLR 5002 (Matter of Kavares v. MVAIC, 29 A.D.2d 68 [1st Dept., 1967], affd. sub nom., Matter of McEntee v. MVAIC, 28 N.Y.2d 939 ), plaintiff argued, inter alia, that a binding stipulation that determined liability entitles the plaintiff to prejudgment interest as a matter of right. After acknowledging that plaintiff’s argument was “well-founded,” the Appellate Division, Second Department, nevertheless, noted that the word “stipulation” is not included in CPLR 5002, and held that a plaintiff is only entitled to prejudgment interest if liability is adjudicated by a third party and not when the defendant admits total fault.
Mr. Gleason questioned whether having a stipulation “so ordered” would satisfy CPLR 5002. This issue was presented to, but implicitly rejected by, the Appellate Division. Simply adding a Court’s signature to an already final, definite and binding stipulation does not satisfy the Appellate Division’s new requirement (i.e., liability must be determined not by the parties, but by an actual decision or adjudication by a third party).
Moreover, amending CPLR 2104, as Mr. Gleason suggests, to serve as a reminder to address prejudgment interest would most likely not accomplish its intended goal. The specific terms of the stipulation will remain the fatal stumbling block. Post-Mahoney, when plaintiffs refuse defendants’ demands that prejudgment interest be waived in exchange for liability concessions, the Courts will inevitably receive a continuous stream of motions for summary judgment, strike the defendant’s answer, default judgment, etc., and/or need to preside over full trials so that a court or jury (i.e., third party) determines liability. The colossal amount of unnecessary work for an already overburdened judiciary was likely one reason why the Court of Appeals granted leave.
Now that the Court of Appeals is unable to rectify the Appellate Division decision, and to properly reflect the legislative intent and the Court of Appeals’ previous decisions, the legislature should amend CPLR 5002 so that it reads “a party is entitled to prejudgment interest from the moment liability is determined by a verdict, report, decision, stipulation, or any other final and definite determination…”
Steven J. Seiden
Seiden & Kaufman
Carle Place, New York