Judgment interest

It’s sexier than you think

By L. Steven Emmert, The Journal – Vol. 21 No. 1 2009

Every plaintiff’s trial lawyer is looking for ways to beef up the size of judgments. Lawyers study time-honored techniques of evidence presentation, measured by jurors’ likely reactions, to make damage claims stick and to produce the largest number possible to the right of the dollar sign.

In studying these techniques, many trial lawyers pay little attention to the relatively mundane subject of judgment interest. Oh, they know it’s there, and they know that any judgments they recover will start cranking out interest at the less-than-munif­icent rate of 6 percent per annum. But it seems to them that interest is little more than what the Gulf Coast Creoles call a lagniappe – a little something extra thrown in by a merchant, usually as a gesture of goodwill. Face it – virtually no one focuses on judgment interest as he’s preparing for trial.

But this is an area where minimal effort can enhance the value of your judgment by 10, 15, even 20 percent or more, depending on the amount of time between the accrual of the cause of action and the date you collect. If you’ve got a significant tort case, then you need to devote a little more attention to this underappreciated tool.

Pre-judgment and post-judgment interest
The foundation for imposition of interest on judgments is ancient: “[I]t is natural justice that he who has the use of another’s money should pay interest for it.” Jones v. Williams, 6 Va. (2 Call) 102, 106 (1799). Much more recently, the Supreme Court has explained one key difference between pre-judgment and post-judgment interest:

The terms “pre-judgment interest” and “post-judgment interest” are not defined in
the Code or in our case law. Nonethe­less, the principal distinction between [the
two] is that the decision whether to award pre-judgment interest is discretionary
with the trier of fact, while the application of post-judgment interest for all money
judgments is mandatory. Code §8.01-382 . . ..
Upper Occoquan Sewage Auth. v. Blake Constr. Co., 275 Va. 41, 63 (2008).

The interest statute
Here’s the statute (in pertinent part) cited by the court:

§8.01-382. Verdict, judgment or decree to fix period at which interest begins;
judgment or decree for interest. In any . . . action at law or suit in equity, the
verdict of the jury, or if no jury the judgment or decree of the court, may provide for
interest on any principal sum awarded, or any part thereof, and fix the period at
which the interest shall commence. … If a final order, judgment or decree be
rendered which does not provide for interest, the final order, judgment or
decree awarded or jury verdict shall bear interest at the judgment rate of interest
[currently 6%] from its date of entry or from the date that the jury verdict was
rendered. …

The second sentence quoted above is the mandatory imposition of post-judgment interest. (Note that if a jury decides your case and the judge enters judgment months later, you get interest from the date of the verdict.) The first sentence authorizes the finder of fact to start the running of interest at a dif­ferent time, which logically cannot be later than the date of verdict or judgment. It is this first sentence that gives the practitioner the opportunity to enlarge his or her recovery.

A sample timeline
Plaintiff is seriously injured in a collision on July 1, 2006. She hires an attorney who prepares the case and files suit on June 1, 2008, a month before the statute of limitation expires. The lawyer sends a courtesy copy of the suit to defendant’s insurance adjuster, but doesn’t serve defendant, preferring instead to see if the case can be settled.

It can’t. Plaintiff’s lawyer then gets good service of process on defendant on December 1, 2008, well within the time allowed for service of process under Rule 3:5(e). Two weeks later, he gets a phone call from an insurance defense lawyer who just got the file and is about to go on vacation; he asks for some extra time to file responsive pleadings. Plaintiff’s lawyer agrees, and the defense lawyer timely files a dilatory plea (motion for bill of particulars, demurrer, special plea, etc.) on January 10, 2009.

On March 1, 2009, the trial court conducts a hearing on the dilatory plea and overrules it. Plaintiff’s lawyer prepares an order giving defendant 21 days to file an answer (Rule 3:8(b)). After some minor changes in wording, the order gets entered on March 20. Defendant timely files an answer on April 10, 2009.

The parties agree on a trial date of March 1, 2010. But a problem, or a medical emergency, or a scheduling conflict, arises and the trial is continued to September 1. Trial commences that day and concludes on September 3, with a verdict of $1 million for the plaintiff. Defendant asks for leave to file post-verdict motions after reviewing a transcript. This motion is granted, and the motions are timely filed on October 15, 2010. Plaintiff files a brief in response on November 1. The trial court convenes a hearing on December 1, overrules the motion, and enters judgment that day in accordance with the verdict. The order says nothing about interest.

Does this timeline sound familiar? We have all seen cases, especially significant and complex ones, that take four years to get to judgment, like this hypothetical one. Unfortunately, plaintiff’s lawyer has left a quarter million dollars on the table by neglecting to seek pre-judgment interest. The bigger your case, and the more time that passes between accrual and verdict, the more you need to press for pre-judgment interest.

How to get it
First and foremost, you need to include a request for prejudgment interest in your complaint. That’s as simple as including the following sentence in your ad damnum clause: “Plaintiff also moves for an award of pre-judgment and post-judgment interest.”

Second, you need to craft a jury instruction that tells the jury that it has the right to fix the date from which interest begins to run. You won’t find one in Virginia Model Jury Instructions, but you emphati­cally have a statutory basis for doing so. Based on the Code section, I recommend something like this:

If you find your verdict in favor of the plaintiff, and award damages in her favor,
then you may provide for the running of interest on those damages, and you may
fix the date from which that interest will begin to run.

Third, bring a jury verdict form that includes a provision for interest on the damages, and include a blank for the date, which can be filled in by the foreman.

Finally, ask the jury for interest starting with the date of the injury! Most jurors will understand the reason why interest should be allowed. The plaintiff in our hypothetical started suffering in mid-2006, but probably won’t get any money until at least 2011 – and that assumes the defendant doesn’t appeal. Obviously, you shouldn’t spend a great deal of time on this issue in closing. In fact, your argument will be stronger if you keep it short and confident.
For example:

You’ll also notice, ladies and gentlemen, that the verdict form permits you to fix the
date from which interest will run on your award. Logically, that should be the
date of Ms. Plaintiff’s injury – July 1, 2006 – and I simply ask that you insert
that date right here on the verdict form.

The Holy Grail – compound interest
Most of you recognize that judgment interest is at a simple rate of 6 percent, with no compounding. The Upper Occoquan decision in early 2008 confirmed that this means that you can’t collect post-judgment interest on an award of pre-judgment interest.

And yet there is one carefully hidden provision that allows a prevailing plaintiff to collect compound interest, albeit for a limited time. Code §8.01-682 provides that if a judgment is affirmed by the Supreme Court, then the appellee is entitled to damages. It then includes this statutory bon mot:

Such damages, when the judgment is for the payment of money, shall be the interest to which the parties are legally entitled, from the time the appeal took effect, until the affirmance. Such interest shall be computed upon the whole amount of the recovery, including interest and costs, and such damages shall be in satisfaction of all interest during such period of time.

This statute doesn’t specify what date is intended by the phrase, “the time the appeal took effect,” but the most plausible date for that is when the notice of appeal is filed. From that date until the date of issuance of the Supreme Court’s mandate (the formal order implementing the Supreme Court’s ruling) can easily be as much as 18 months. That’s a year and a half of compounding, which is far more valuable if you have a fair amount of pre-judgment interest already awarded. (Note that this provision only applies when the Supreme Court grants the defendant a writ, and then affirms. It doesn’t apply where the appellate court refuses a petition for appeal.)

Let’s see how these numbers play out in our hypothetical. If the plaintiff’s lawyer eschews the pursuit of maximum interest, then Plaintiff is entitled to simple interest at 6 percent from September 3, 2010 until, say, July 1, 2012 when the defendant pays after losing the appeal. That interest comes to about $110,000. But if he follows all of the advice in this essay, and gets interest from the date of the injury, then the interest recovery is around $390,000. And the difference between these two figures, my friends, is quite sexy indeed.

The total amount of time required to complete all of the four steps I recommended above, is on the order of five minutes, tops. If you aren’t pressing for interest on your judgments, then you’re taking money out of your client’s pocket, and out of your own.

L. Steven Emmert’s practice focuses exclusively on appellate advocacy in the state and federal courts. He is with the Virginia Beach firm of Sykes, Bourdon, Ahern & Levy. Prior to entering private practice, he worked in the Virginia Beach City Attorney’s Office for nine years litigating major tort cases, challenges to municipal authority, eminent domain, tax challenges, civil rights, public sector employment cases. Mr. Emmert received his B.A. in Economics from Richmond College and his J.D. from the University of Virginia. He is currently chairman of the Appellate Practice Committee of Virginia State Bar’s Litigation Section.