Page 55 - Calculating Lost Profits

Chapter 8

Prejudgment Interest

Overview

Prejudgment interest is an interest-based award that is sometimes made to compensate an injured party
for the lost opportunity to use and make money on amounts, including lost profits, that would have been
received prior to the judgment date "but for" the wrongful acts. In contrast, post-judgment interest com-
pensates for the use of the money from the judgment date to the date on which the judgment is paid.
This chapter primarily addresses prejudgment interest. There is a brief section at the end of this chapter
on post-judgment interest. Given that post-judgment interest is almost always provided to a plaintiff, and
expert testimony is rarely needed for these calculations, experts often make and provide calculations of
prejudgment interest, as well as provide information relevant to such an award.

Prejudgment interest awards are made as part of the effort to "make a plaintiff whole." fn 1 The U.S. Su-
preme Court opinion in the intellectual property case General Motors v. Devex illustrates the broader
concept that prejudgment interest "merely serves to make the patent owner whole because his damages
consist not only of the value of the royalty payments but also the foregone use of the money between the
time of infringement and the date of the judgment." fn 2 An award of prejudgment interest can also incen-
tivize defendants to avoid delay in the litigation process. fn 3

Although awarding prejudgment interest may, in an economic sense, be required to make a plaintiff
whole, the determination and calculation of prejudgment interest can be affected by case facts and legal
issues, including the following:

 What a plaintiff would have done with the monies in question

 What a defendant has done with the monies in question

 Delays in the litigation process (especially if caused by the defendant’s actions)

 Interest terms contained in a contract between the parties

 Whether the amounts in question were known and quantifiable (and as of when)

 Whether there was a good-faith dispute or, alternatively, abusive conduct by one or more of the
parties fn 4

fn 1 General Motors Corp. v. Devex Corp., 461 U.S. 655–56 U.S. 648 (1982).

fn 2 See footnote 1.

fn 3 In re Pago Pago Aircrash of Jan. 30, 1974, 525 F. Supp. 1007 (C.D. Cal. 1981).

fn 4 This is sometimes referred to as the closeness of the dispute. Wickham Contracting Co. v. Local Union No. 3, 955 F.2d 831, 833–
34 (2d Cir. 1992); St. Louis & O'Fallon Ry. Co. v. United States, 279 U.S. 461, 478, 483, 49 S.Ct. 384, 385, 387, 73 L.Ed. 798 (1929).

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