It can take years for a case to proceed from a complaint to a judgment. In Massachusetts, however, the injustice of a delayed judgment is remedied somewhat by an award of pre and post-judgment interest on money damages. This blog focuses on prejudgment interest, which is intended to compensate plaintiffs wrongfully deprived of the use of money to make them whole for that loss. Unless a claim is brought pursuant to a specific statute that provides a different interest rate, prejudgment interest accrues at the high rate of 12% under Massachusetts law.
Prejudgment interest on all money damages, except contract damages, is calculated from the date the claim is commenced to the date of verdict or finding. In contract cases, Mass. Gen. Laws ch. 231, §C provides that prejudgment interest accrues on any damages awarded as of the date of the breach or demand. If the date of breach or demand cannot be established, prejudgment interest is calculated from the date of the claim. Bank v. Thermo Elemental Inc., 451 Mass. 638, 622-23 (D. Mass. 2008). Determination of the date of breach or demand is a question of fact to be decided by the fact finder. If a trial is before a jury, the judge therefore cannot make a determination of the date of breach or demand. Aimtek, Inc. v. Norton Co., 69 Mass. App. Ct. 660, 667-68, 870 N.E.2d 1114, 1121 (2007). Thus, litigants involved in a breach of contract claim should gather and present evidence to determine the period during which prejudgment interest accrues depending on which of the different possible dates are more advantageous.
In business disputes, claims for damages often include future losses. Whether prejudgment interest at 12% should be applied to the portion of a judgment that represents future losses is a complicated issue that depends largely on how the damages are characterized. Where a jury awards the present value of a plaintiff's future damages, prejudgment interest is unlikely to be granted because it would amount to a windfall. Interstate Brands Corp. v. Lily Transp. Corp., 256 F. Supp. 2d 58, 62-63 (D. Mass. 2003)(denying request for prejudgment interest because jury's award of future damages already reflected the "time value" of the money owed to plaintiff).
The formula for computing prejudgment interest is performed by the clerk by taking the amount of single damages and multiplying them by the daily interest rate (annual rate ÷ 365 days) multiplied by the number of days from the date interest began to run to entry of judgment.
To learn more about our business litigation practice, click here.
To learn more about the author or to contact him, click here.