Prejudgment and postjudgment interest: what's in a name?

• Author: Lopez, Jorge A.
• Position: Florida

The entitlement to prejudgment interest in tort cases has been the subject of varying and often conflicting interpretations by the courts of this state. This unsettled legal landscape has caused great uncertainty in determining the amount of prejudgment interest and the proper final monetary award in these actions. Prejudgment interest encompasses all interest due prior to the entry of a final judgment. However, an award of prejudgment interest makes no distinction between preverdict and postverdict interest, and which one of these, if any, should be included in the final judgment upon which postjudgment interest is ultimately calculated and awarded. (1) This distinction is particularly important in tort cases where a jury makes no findings as to when damages were liquidated (i.e., provides no date certain). The first part of this article takes the position that in the absence of a determination by a jury of a date certain from when damages should be calculated in tort cases, interest on all tort damages (not just those for the loss of a vested property right) fixed by a verdict should begin to run from the date of the verdict, and should be referred to as postverdict interest. The second part of the article recommends that regardless of whether an award of interest is for preverdict or postverdict interest, prejudgment interest should not be included in the final judgment upon which postjudgment interest is calculated.

Purpose of Prejudgment and Postjudgment Interest

Prejudgment interest is the interest awarded from the period of time from when a sum is liquidated until the time a final judgment is entered. (2) It is meant to compensate the prevailing party for the loss of use of his money from the date it is determined that he is entitled to a sum of money to the time when final judgment is entered. (3) The calculation of prejudgment interest becomes increasingly important in those cases where parties file posttrial motions (i.e., motions for judgment notwithstanding the verdict, motions for costs, motions for new trial, etc.), that ordinarily take some time before they are heard and decided.

Conversely, postjudgment interest is the interest awarded for the period of time from the date of the final judgment until the money is finally collected. (4) Postjudgment interest is meant to encourage parties to pay quickly the damages that are due, and to compensate the prevailing party for the inability to use the awarded money for the period of time that an appeal is pending, which in many cases can take up to several years to be decided. (5)

When Is a Claim Liquidated for Purposes of Prejudgment Interest?

Prejudgment interest is generally only allowed on liquidated damages. (6) A claim is unliquidated if the amount due is contested; only becoming certain and therefore unliquidated when finally fixed and determined by the trier of fact. (7) Therefore, once a jury renders a verdict, the sum due is liquidated, and thus the prevailing party is entitled to prejudgment interest. This would appear to apply equally in both contract and tort cases. However, the Florida Supreme Court has drawn a distinction between contract and tort cases; unequivocally allowing the award of prejudgment interest in the former while qualifying and limiting the availability of prejudgment interest in the latter. (8)

Contract vs. Tort Cases

It is clearly established that prejudgment interest is available in contract cases from the date performance was due under the contract since that is the date the prevailing party is entitled to the damages. (9) In other words, although the damages are finally fixed and determined on the date of the verdict, they are considered liquidated as of the date of the breach. In contrast, tort claims are generally excepted from the rule allowing prejudgment interest because tort damages are generally too speculative to liquidate before final judgment. (10) However, the Florida Supreme Court has provided a limited exception to the foregoing rule by allowing plaintiffs to collect prejudgment interest in tort actions when their damages represent 1) an ascertainable "actual out-of-pocket loss" 2) at a fixed date of loss prior to the entry of judgment. (11) Under this exception, prejudgment interest in tort cases is apparently limited to those instances involving the loss of a vested property right (economic damages) at a date prior to judgment (a date certain). (12) Accordingly, absent satisfaction of these two elements, a party cannot recover preverdict interest in a tort action seeking noneconomic damages. Whether a party can recover postverdict interest, however, is uncertain.

Argonaut and its Progeny

Chicago Ins. Co. v. Argonaut Ins. Co., 451 So. 2d 876 (Fla. 4th DCA 1984), addressed the propriety of an award of prejudgment interest in a subrogation action. There, the Fourth District reversed an award of prejudgment interest, holding that the comparative negligence factor made the award of damages uncertain and, thus, unliquidated. (13) The Supreme Court quashed the Fourth District's decision and held: "[A] claim becomes liquidated and susceptible of prejudgment interest when a verdict has the effect of fixing damages as of a prior date." (14) The court explained: "[W]hen a verdict liquidates damages on a plaintiffs out-of-pocket, pecuniary losses, plaintiff is entitled, as a matter of law, to prejudgment interest at the statutory rate from the date of that loss." (15) In so holding, the Supreme Court expressly limited the entitlement to prejudgment interest...