Recent Decision Illustrates Rules for Computation of Pre-Judgment Interest

On March 6, 2014, Justice Friedman of the New York County Commercial Division issued a decision in New York City Housing Authority v. Spectrum Contracting Group, Inc., 2014 NY Slip Op. 30568(U), illustrating the application of CPLR 5001 in computing pre-judgment interest.

CPLR 5001(b) provides the rule for determining the date from which pre-judgment interrest is computed:

(b) Date from which computed. Interest shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred. Where such damages were incurred at various times, 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.

The decision in New York City Housing Authority illustrates the application of CPLR 5001(b):

[The plaintiff] also seeks an award of pre-judgment interest on the damages incurred as a result of [the defendant's] breaches. An award of prejudgment interest upon a sum awarded because of a breach of performance of a contract is not discretionary. Prejudgment interest at the statutory rate of 9% shall be computed from the earliest ascertainable date the cause of action existed or upon each item from the date it was incurred or upon all of the damages from a single reasonable intermediate date when damages were incurred at various times. The earliest ascertainable date in contract actions arises when the breach occurred and the claim accrued, not from the finding of liability.

Here, the Special Referee made no finding as to when the breaches occurred, and [the plaintiff] concedes that it is unclear as to what the first ascertainable date is. As a result, [the plaintiff] seeks an award of pre-judgment interest on damages arising from [the defendant's] breach of the construction contract (first cause of action) as of the date that each payment was made to remediate those damages. Alternatively, [the plaintiff] seeks an award as of July 9, 2011, the midway date of [the plaintiff's] first and last payments as a reasonable intermediate date. [The plaintiff] admits that it cannot determine when it sustained its damages from [the defendant's] breach of the change order release agreement (second cause of action) and requests that the court award pre-judgment interest from the date of commencement of the action.

The court declines to order interest from each remediation payment for the breach of the construction contract and finds that the July 9, 2011 is a reasonable intermediate date, especially as the damages continued to be incurred after the instant action was commenced on July 30, 2010. [The plaintiff] should be awarded pre-judgment interest on the damages for the first cause of action in the amount of $1, 145,981.92 from July 9, 2011. With respect to the damages from the second cause of action, [the plaintiff] offers no possible intermediate date, and, therefore, the date of commencement is an appropriate date for calculation of interest. [The plaintiff] should be awarded pre-judgment interest on the damages for the second cause of action in the amount of $841,500 from July 30, 2010.

(Internal quotations and citations omitted) (emphasis added).