May 21, 2008
Oh, About Computation of Prejudgment Interest. . .
The introductory contracts course glosses over topics like the calculation of prejudgment interest (at least, my course does). Here is an excerpt from a recent case from New York's intermediate appellate court (3d Department) that demonstrates the potential complexity of computing interest. (This was a contract for "coal fly ash.").
On July 1, 2000, the parties entered into a contract under which defendant agreed to provide plaintiff with coal fly ash produced at its steam generating station in the Village of Johnson City, Broome County through December 31, 2004. Defendant provided plaintiff with coal fly ash on various dates between September 27, 2000 and November 20, 2000, but failed to do so thereafter. Plaintiff commenced this breach of contract action as a result. Following a trial, the jury rendered a verdict in favor of plaintiff and awarded damages in the amount of $184,456.94. Thereafter, plaintiff moved to fix the date of interest on the verdict as of July 1, 2000, the contract date, or alternatively, as of April 1, 2001, the date the summons and complaint were filed. Defendant, in turn, cross-moved to set aside the verdict or, alternatively, to have interest on the verdict computed in a different manner. Specifically, defendant sought to have interest computed on a monthly basis between December 2000 and December 2004 or from January 1, 2003, the intermediate date of the contract. Supreme Court declined to set aside the verdict and chose January 1, 2003 as the date from which to compute interest.
Plaintiff's sole challenge on appeal is to the date that Supreme Court utilized in computing preverdict interest. CPLR 5001 (b) provides that in a case like this where damages are incurred at various points in time, preverdict interest "shall be computed upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date" (see e.g. Danka Off. Imaging Co. v General Bus. Supply, 303 AD2d 883, 886 ). The statute vests the court with broad discretion in determining a reasonable date from which to award interest (see Conway v Ichan & Co., Inc., 16 F3d 504, 512 ). In the case at hand, January 1, 2003 is the approximate halfway point between the time that plaintiff initially began to incur damages due to defendant's breach of the contract and the time that plaintiff ceased to incur damages due to the expiration of the contract. Supreme Court's selection of this date makes logical sense under the facts of this case. Accordingly, we find that Supreme Court chose a reasonable date from which to compute interest and did not abuse its discretion.
Pozament Corp. v AES Westover, LLC, -- N.Y.S.2d ----, 2008 WL 1901938 (N.Y.A.D. 3 Dept. May 1, 2008).
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