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dates, such as the date of notice of an amount due (for example, filing of a complaint or a demand let-
ter). Some of these dates are detailed in the AICPA's prejudgment interest matrix website.

In an effort to "make a plaintiff whole," including the use of money from the date on which it would
have been earned or received and the judgment date, courts frequently award prejudgment interest as a
matter of equity, with it beginning to accrue from the date on which the monies would have been re-
ceived by the plaintiff in the but-for world. However, it is common for experts to employ simplistic as-
sumptions regarding the timing of income streams and cash flows, such as the mid-year or mid-period
convention, which assumes that the damages amounts would have been equally distributed during the
period (for example, quarter or year). This assumption normally does not take into account any lag be-
tween when revenue is earned, when it would be reflected on an income statement, and when the cash
would be collected. This approach also does not take into account when cash may be received as a pre-
payment on sales recorded at a later date.

Prejudgment Interest Rates in Federal and State Courts

Federal courts have accepted and used rates such as the statutorily defined rates, the prime rate, corpo-
rate bond rates, corporate borrowing rates, rates of return that plaintiffs have earned on their invest-
ments, and rates provided in contracts. fn 12

As referenced previously, the AICPA's prejudgment interest matrix lists prejudgment interest rates used
in state court disputes. These rates and structures can vary by the nature of the dispute (for example,
breach of contract vs. tort) as well as by venue.

Matters in federal court frequently use the applicable state court prejudgment interest construct. For ex-
ample, when the case is in federal court because of diversity, state law defines the availability and meas-
urement of prejudgment and post-judgment interest. fn 13 In contrast, federal law on prejudgment and
post-judgment interest applies if it is a federal matter.

Typically, a federal statute (for example, the Patent Act or the Lanham Act) and its progeny define if
and what type of prejudgment interest may be available or what is relevant to such a determination. For
example, in Kansas v. Colorado (533 U.S. 1 (2001)), a case going back approximately 50 years, the
state of Kansas sought $9 million in damages plus $53 million in prejudgment interest. In its ruling, the
U.S. Supreme Court explained that counsel and experts have latitude in arguing how much prejudgment
interest should be paid to make a plaintiff whole.

In this situation, practitioners can assist the court in identifying factors relevant to the selection of the
prejudgment interest rate. Such considerations may include whether a plaintiff has debt that could have
been repaid, the plaintiff's history of paying off debt with available funds, whether the plaintiff had to
take out a loan because of the lack of available funds, or if the defendant has borrowings that it would
have had to take out to have paid the damages amounts at an earlier date.

fn 12 Baden Sports, Inc. v. Kabushiki Kaisha Molten, 2007 WL 2790777, at *7–8 (W.D. Wash. 2007).

fn 13 Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938); www.cacb.uscourts.gov/post-judgment-interest-rates.

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