This article, like most others covering a topic as dull as pre-judgment interest, doesn’t make for the most exciting reading. That excitement usually occurs after a business trial, during the conversation between a client and his lawyer who failed to properly consider how to handle a potential award of pre-judgment interest – the interest that accrues on an alleged obligation from a time prior to trial to the date of entry of judgment.
In a business case, it is not unusual for the disputed events to occur at least a year, if not several years, before trial. Pre-judgment interest may therefore constitute a significant portion of the award sought at trial. Whether pre-judgment interest may be awarded, and who decides the award, will turn on whether the claim is for a “liquidated” or “unliquidated” sum of money, and whether the claim is a contract or tort claim.
A liquidated sum is one “certain or capable of being made certain by calculation, and the right to recover which is vested in the person on a particular day.” Cal. Civ. Code § 3287(a). Common examples include a contract to pay money, or loss of use of property, at a specific time. The test for whether a claim is “liquidated” is whether the defendant knows or could have computed the amount due from available information. Pre-judgment interest must be awarded on liquidated sums by either the court or the jury. Cal. Civ. Code § 3287(a); North Oakland Medical Clinic v. Rogers, 65 Cal.App.4th 824, 828, 76 Cal.Rptr.2d 743, 746 (1998).
If the amount due is not certain or capable of being made certain by calculation, in other words, cannot be determined until the trier of fact decides the amount due after considering competing evidence, the claim is for an “unliquidated” sum. Pre-judgment interest may be awarded on unliquidated contract claims in the court’s discretion, from a date the court determines. Cal. Civ. Code § 3287(b). A jury may award pre-judgment interest on unliquidated tort claims. Cal. Civ. Code § 3288.
There are few hard and fast rules for seeking pre-judgment interest, other than that it must be requested prior to trial, if only in the prayer of a complaint, and the amount of interest sought must be requested prior to entry of judgment.
In a jury case, if the trial court is willing to rule on whether the sums claimed are liquidated or unliquidated, this could determine whether pre-judgment interest will be decided by the court or could potentially go to the jury.
If the question of pre-judgment interest is submitted to the jury, the jury instructions must be carefully considered. In a contract case, the jury would require an instruction concerning how to determine whether a sum is liquidated, if the judge has not already done so, as only the court may award pre-judgment interest on unliquidated contract claims. In any case, the jury should be instructed concerning the applicable rate of pre-judgment interest.
If pre-judgment interest goes to the jury, do not submit only a general or special verdict limited to California’s civil (CACI) contract verdict form. In that case, a verdict with a compromise or rounded award won’t disclose whether pre-judgment interest was included, and the court would rightly be reluctant to grant motions for new trial or JNOV on grounds that pre-judgment interest was not added or considered. If the question of pre-judgment interest goes to the jury, submit an additional special verdict form asking the jury to find whether the sum was liquidated or unliquidated and the amount awarded.
In the case of liquidated sums, strongly consider not submitting the question to the jury. Since an award of pre-judgment interest on liquidated sums is mandatory, don’t give the jury the option of becoming confused on the subject, rendering a compromise number or deciding not to award pre-judgment interest. In this way, when the jury renders an award on the principal sum, the judge would be duty-bound to award pre-judgment interest in response to a motion filed prior to entry of judgment.
Understanding a topic as technical as pre-judgment interest means you won’t be leaving money on the table.