With California’s crowded court calendars, there can be a substantial time lag between the filing of a lawsuit in a business dispute and the eventual ruling by a court on that dispute.
Not surprisingly, plaintiffs who win their cases want to collect not only the original amount due them, but interest on that amount for the months or years the case was in court – what lawyers call “prejudgment interest.”
A case just decided by the California Court of Appeal affirms the right of a victorious plaintiff to collect prejudgment interest, even though a lower court had denied its request for the money. Since California mandates a fixed 10% interest rate, the added payout can be substantial. (In the federal court system the interest rate fluctuates, and is currently under 1%.)
The ruling, by the Fifth Appellate District in Fresno, came in an otherwise unremarkable lawsuit between a construction company that built a highway overpass for Caltrans and one of its suppliers. The supplier provided “joint seal assemblies,” devices that safely accommodate slight movements in the concrete slabs of the highway caused by changes in temperature and load.
The construction company ordered 146 of the assemblies, specifying a model for which the supplier bid a total of about $207,000. But the supplier said it believed Caltrans would require a more robust model for this project, at a cost of nearly $606,000. The builder insisted on the lower-cost units. Caltrans then required that the pricier devices be used. The supplier provided a revised quote, delivered the seals, and the builder installed them.
The construction company told the supplier that it would pay only the $207,000 called for in its contract. In June of 2011 the supplier sued, and in June of 2014 a jury said the company was entitled to collect the full $606,000, minus some advance payments it had already received.
The supplier also asked the trial judge to award it prejudgment interest at 10% per year on the unpaid portion of the $606,000, starting from the time this amount should have been paid by the supplier. The trial judge denied the request, saying the supplier had asked too late and in the wrong manner.
Both sides appealed. The construction company wanted the jury’s award overturned, and the supplier wanted the pre-judgment interest.
The appellate court agreed with the jury. Despite some ambiguity in the wording of the contract between the supplier and the construction company, it was clear that the supplier was owed the $606,000.
Then, 30 pages into the 47-page ruling, the court said the supplier should receive the prejudgment interest on the unpaid balance over the five years since it had filed suit.
The lower court had erred in deciding that the supplier had made its request for prejudgment interest too late. In fact, it was filed only eight days after the judgment was entered, the appellate court noted, and “no statutes specify the timing or mechanism for seeking prejudgment interest,” nor does any court rule.
The supplier clearly identified the relief it requested, the appellate court noted – that is, 10% interest on the unpaid balance – and it gave the construction company ample time to oppose its request. That satisfied the requirements of the relevant section of California’s Code of Civil Procedure, so the supplier could collect the prejudgment interest.
M. Laurie Murphy