Bars to the payment of prejudgment interest: The Supreme Court and the Federal Employers' Liability Act

• Pages: 113-137
• Date: 06 September 2000
• Published date: 06 September 2000
• DOI: https://doi.org/10.1016/S0193-5895(00)19004-9
• Author: David E Ault,Gilbert L Rutman

BARS TO THE PAYMENT OF

PREJUDGMENT INTEREST: THE

SUPREME COURT AND THE FEDERAL

EMPLOYERS' LIABILITY ACT

David E. Ault and Gilbert L. Rutman

In Monesson Southwestern Railway Co. v. Morgan, 1 the

U.S. Supreme Court,

hereafter referred to as the Court, stated clearly that prejudgment interest was

not permitted in cases brought under the Federal Employers' Liability Act

(FELA). The Court's opinion rests upon its interpretation of common law on

personal injury cases and Congressional intent when FELA was first enacted.

In its opinion, the Court states that common law did not permit the payment of

prejudgment interest in personal injury cases at the time that FELA became

law. Further, had Congress wished to do so, it could have done so by explicitly

permitting the payment of prejudgment interest in the legislation or in any of

the subsequent amendments to the original 1908 law. The fact that the law is

silent on this matter indicates that Congress did not wish to make the payment

of prejudgment interest possible when awarding damages in FELA cases.

The effect of the Court's refusal to permit the payment of prejudgment

interest, in effect, creates an unrequited loan that is made by the plaintiff to the

defendant. Regardless of the amount of time that lapses between the date upon

which the plaintiff's damages occurred and the date upon which judgment as

to damages is awarded, the Court does not permit the payment of interest to

compensate for the loss of the use of these funds by the plaintiff during the

prejudgment period. The Court, however, has never made it clear as to the

Research in Law and Economies, Volume 19, pages 113-137.

Copyright O 2000 by JAl/FJsevier Inc.

All Hghts of reproduction in any form reserved.

ISBN: 0-7623-0308-5

113

114 DAVID E. AULT & GILBERT L. RUTMAN

interest concept that is being considered in these cases. Is the Court referring

to nominal rates of interest or 'real' rates of interest, that is, nominal rates of

interest adjusted for expected inflation?

In this paper, we will examine the Supreme Court's arguments with respect

to the payment of prejudgment interest within the context of precedents

established in U.S. common law. FELA addresses the recovery of damages as

the result of injuries incurred while participating in interstate commerce. While

the law itself deals only with injuries incurred while working on the railroads,

the law and the body of decisions that have resulted from the interpretation of

the law have influenced the entire body of law regarding the recovery of

damages as the result of personal injury or death. 2

While FELA was enacted in 1908 and involved railroads, at that time one of

the most important, if not the most important, employer in the U.S., the law

remains one of the most important guides to the recovery of damages resulting

from most forms of personal injuries. Recent precedent decisions, for example,

have involved the calculation of damage awards when retirement benefits and

contributions are not directly tied to one another. 3

The Court's position that prejudgment interest is prohibited in FELA cases

rests on the nature of common law and an understanding of the development of

the concepts of tort, negligence, 'nominalism', and usury. The transition of the

U.S. economy from one based primarily upon agriculture to one based on its

industrial sector also appears to play a significant role in the Court's decisions

with respect to the issue of the payment of interest in damage cases. This paper

begins with a discussion of the Federal Employers' Liability Act, analyzes the

Supreme Court's position on prejudgment interest in light of common law and

the role of nominalism in personal injury cases, and concludes with some

remarks on the rationale for this exclusion.

THE FELA

The Federal Employers' Liability Act was enacted in 1908. The act repealed

the provisions of the Masters and Servants Acts and the body of common law

associated with these acts and restructured the conditions under which damages

could be awarded as the result of death or injury while working on a railroad. 4

At the time the law was enacted, Congress could, had it desired to do so, have

permitted the payment of prejudgment interest. The Court has argued that

common law prohibited the payment of prejudgment interest at the time FELA

was passed; and the fact that other aspects related to common law were

changed is an indication that Congress never intended for prejudgment interest

to be paid. The Court's position that Congress never intended for prejudgment