by Jorge A. López
The entitlement to prejudgment interest in tort cases has been the subject of varying and often conflicting interpretations by the courts of this state. This unsettled legal landscape has caused great uncertainty in determining the amount of prejudgment interest and the proper final monetary award in these actions. Prejudgment interest encompasses all interest due prior to the entry of a final judgment. However, an award of prejudgment interest makes no distinction between preverdict and postverdict interest, and which one of these, if any, should be included in the final judgment upon which postjudgment interest is ultimately calculated and awarded.1 This distinction is particularly important in tort cases where a jury makes no findings as to when damages were liquidated (i.e., provides no date certain). The first part of this article takes the position that in the absence of a determination by a jury of a date certain from when damages should be calculated in tort cases, interest on all tort damages (not just those for the loss of a vested property right) fixed by a verdict should begin to run from the date of the verdict, and should be referred to as postverdict interest. The second part of the article recommends that regardless of whether an award of interest is for preverdict or postverdict interest, prejudgment interest should not be included in the final judgment upon which postjudgment interest is calculated.
Purpose of Prejudgment and Postjudgment Interest
Prejudgment interest is the interest awarded from the period of time from when a sum is liquidated until the time a final judgment is entered.2 It is meant to compensate the prevailing party for the loss of use of his money from the date it is determined that he is entitled to a sum of money to the time when final judgment is entered.3 The calculation of prejudgment interest becomes increasingly important in those cases where parties file posttrial motions (i.e., motions for judgment notwithstanding the verdict, motions for costs, motions for new trial, etc.), that ordinarily take some time before they are heard and decided.
Conversely, postjudgment interest is the interest awarded for the period of time from the date of the final judgment until the money is finally collected.4 Postjudgment interest is meant to encourage parties to pay quickly the damages that are due, and to compensate the prevailing party for the inability to use the awarded money for the period of time that an appeal is pending, which in many cases can take up to several years to be decided.5
When Is a Claim Liquidated for Purposes of Prejudgment Interest?
Prejudgment interest is generally only allowed on liquidated damages.6 A claim is unliquidated if the amount due is contested; only becoming certain and therefore unliquidated when finally fixed and determined by the trier of fact.7 Therefore, once a jury renders a verdict, the sum due is liquidated, and thus the prevailing party is entitled to prejudgment interest. This would appear to apply equally in both contract and tort cases. However, the Florida Supreme Court has drawn a distinction between contract and tort cases; unequivocally allowing the award of prejudgment interest in the former while qualifying and limiting the availability of prejudgment interest in the latter.8
Contract vs. Tort Cases
It is clearly established that prejudgment interest is available in contract cases from the date performance was due under the contract since that is the date the prevailing party is entitled to the damages.9 In other words, although the damages are finally fixed and determined on the date of the verdict, they are considered liquidated as of the date of the breach. In contrast, tort claims are generally excepted from the rule allowing prejudgment interest because tort damages are generally too speculative to liquidate before final judgment.10 However, the Florida Supreme Court has provided a limited exception to the foregoing rule by allowing plaintiffs to collect prejudgment interest in tort actions when their damages represent 1) an ascertainable “actual out-of-pocket loss” 2) at a fixed date of loss prior to the entry of judgment.11 Under this exception, prejudgment interest in tort cases is apparently limited to those instances involving the loss of a vested property right (economic damages) at a date prior to judgment (a date certain).12 Accordingly, absent satisfaction of these two elements, a party cannot recover preverdict interest in a tort action seeking noneconomic damages. Whether a party can recover postverdict interest, however, is uncertain.
Argonaut and its Progeny
Chicago Ins. Co. v. Argonaut Ins. Co., 451 So. 2d 876 (Fla. 4th DCA 1984), addressed the propriety of an award of prejudgment interest in a subrogation action. There, the Fourth District reversed an award of prejudgment interest, holding that the comparative negligence factor made the award of damages uncertain and, thus, unliquidated.13 The Supreme Court quashed the Fourth District’s decision and held: “[A] claim becomes liquidated and susceptible of prejudgment interest when a verdict has the effect of fixing damages as of a prior date.”14 The court explained: “[W]hen a verdict liquidates damages on a plaintiff’s out-of-pocket, pecuniary losses, plaintiff is entitled, as a matter of law, to prejudgment interest at the statutory rate from the date of that loss.”15 In so holding, the Supreme Court expressly limited the entitlement to prejudgment interest to those instances in which a verdict has the effect of fixing damages as of a “prior date” and when the losses are an “out-of-pocket and pecuniary loss.”16 The court has consistently reinforced this limitation.
For instance, in Alvarado v. Rice, 614 So. 2d 498 (Fla. 1993), the court addressed whether a plaintiff was entitled to prejudgment interest on an award of past medical expenses in a personal injury action. There, the court rejected the plaintiff’s argument, holding that Alvarado had not “suffered the loss of a vested property right,” as she had not used private funds to pay the medical bills she had incurred.17 Of particular interest, the court commented that consistent with Argonaut’s out-of-pocket pecuniary loss requirement “[t]o date, cases recognizing a right to prejudgment interest have all involved the loss of a vested property right.” Id. at 499.18 This ruling is consistent with Argonaut’s out-of-pocket pecuniary loss requirement.
Most recently, in Lumbermens Mut. Cas. Co. v. Percefull, 653 So. 2d 389 (Fla. 1995), the court reaffirmed the general rule regarding the award of prejudgment interest in breach of contract cases: “[I]f it is finally determined that the debt was due, the person to whom it was due is entitled not only to the payment of the principal of the debt, but to interest at the lawful rate from the due date thereof.”19 Significantly, in commenting on Alvarado, the court reaffirmed its stance on awards of prejudgment interest for tort claims: “[T]ort claims are generally excepted from the rule allowing prejudgment interest, primarily because tort damages are generally too speculative to liquidate before final judgment.”20
Accordingly, as can be seen from the Supreme Court’s holdings in Argonaut and its progeny, the court had been steadfast in its stance that prejudgment interest is not recoverable for noneconomic damages. Instead, the court has reaffirmed the general principle that with regard to economic damages (i.e., the loss of a vested property right) prejudgment interest is recoverable only where a verdict has fixed the amount of damages as of a date certain (i.e., the date of the breach in a contract case or the date the plaintiff suffered out-of-pocket pecuniary loss in a tort action). The question thus becomes what date, if any, should be used to calculate prejudgment interest in tort cases where the jury does not establish a date certain. Moreover, if a prevailing party is entitled to this interest, should the interest be limited to out-of-pocket pecuniary losses?
Notwithstanding the Supreme Court’s apparent unwillingness to extend the availability of prejudgment interest to the award of non-out-of-pocket pecuniary damages in tort cases, the Second and Fourth districts in personal injury cases have taken the “date of the loss” language from Argonaut and extended it to noneconomic damages in personal injury cases to mean the date of the verdict.21 For example, in Amerace Corp. v. Stallings, 753 So. 2d 592 (Fla. 2d DCA 2000), rev’ g, 779 So. 2d 269 (Fla. 2000), the Second District affirmed an award of prejudgment interest from the date of the jury verdict until the entry of the final judgment in a personal injury action. Presumably, the damage award included elements of noneconomic damage. Notwithstanding, the court explained: “Once a jury has fixed the amount of a plaintiff’s damage by its verdict, the plaintiff is entitled to interest on that amount, and the interest is to be included in the final judgment.”22 In so holding, the Second District relied in part on the Fourth District’s decision in Palm Beach County School Bd. v. Montgomery, 641 So. 2d 183 (Fla. 4th DCA 1994).
In Palm Beach County (a personal injury case), the Fourth District affirmed the award of prejudgment interest from the date of the verdict and wrote: “When a jury returns a verdict in a personal injury case that remains undisturbed throughout future proceedings in the case, the sum so fixed should be treated exactly the same as a liquidated breach of contract claim.”23 Obviously, neither the Second nor Fourth district draws a distinction between out-of-pocket pecuniary losses and noneconomic damages.
While the Third District has not directly addressed the propriety of an award for prejudgment or postverdict interest with respect to noneconomic damages in tort cases, in Okun v. Litwin Securities, Inc., 652 So. 2d 387 (Fla. 3d DCA 1995), the Third District awarded prejudgment interest to the prevailing party from the date of an arbitration award to the date the award was confirmed and reduced to judgment by the court:
An arbitration award is akin to a verdict, and once an award is confirmed by the court it becomes, like a verdict, the judgment of that court and interest on that judgment runs from date of its entry until satisfaction of same.
Accordingly, to the extent the Third District’s language in Okun has application outside the arbitration context, it appears that the Third District, as well as the Second and Fourth districts, have held that interest is proper from the date of a verdict until the entry of final judgment with respect to awards of noneconomic damages.
However, any certainty that Okun offers with respect to the Third District’s stance on the issue is tenuous at best. In Lipsig v. Ramlawi, 760 So. 2d 170, 192 (Fla. 3d DCA 2000), the Third District echoed the out-of-pocket loss language from Argonaut and its progeny in holding that a plaintiff was not entitled to an award of prejudgment interest for noneconomic damages flowing from a slander claim. The court explained: “prejudgment interest . . . is [only] available for actual out-of-pocket losses, and the claim for such losses becomes liquidated at the time the verdict fixes the date and amount of the loss.”25
Extension of Argonaut Makes Common Sense
Although application of the analysis of Argonaut to noneconomic damages in personal injury cases appears to be unsupported, the determination that interest is due from the date the verdict is rendered appears reasonable since at that point, damages are liquidated and therefore certain for purposes of prejudgment interest, as they would otherwise be in a contract case. In fact, such a conclusion is consistent with the Supreme Court’s pronouncement in Argonaut that the purpose of prejudgment interest is to make a plaintiff “whole from the date of the loss once a finder of fact has determined the amount of damages.”26 This is exactly the intended purpose and effect of a verdict. Accordingly, Argonaut’s limitation on the award of prejudgment interest to “out-of-pocket, pecuniary losses,” should be removed and replaced by the more common sense analysis of Amerace and Palm Beach County.
Inclusion of Prejudgment Interest in Final Judgments
Irrespective of the above analysis, if an award of prejudgment interest is obtained in either a contract or tort case, the question becomes whether this prejudgment interest should be included in the final judgment upon which postjudgment interest is calculated. The Florida Supreme Court has apparently ruled that it should.27
In Quality Engineered Installation, Inc. v. Higley South, Inc., 670 So. 2d 929 (Fla. 1996), addressing whether prejudgment interest is available for attorneys’ fees, the Supreme Court broadly ruled: “[T]hat prejudgment interest becomes part of a single total sum adjudged to be due and owing. The amount of the award for prejudgment interest, like all other components of the ‘judgment,’ automatically bears interest.”28 This view of postjudgment interest, however, was the subject of sharp criticism on the grounds that such a rule invariably overcompensates prevailing parties by allowing interest to be compounded.29 Not surprisingly, the principle of compounding interest is noticeably absent from any Florida rule or statute. In fact, in 1992, the Florida Supreme Court amended Form 1.988(b) and wrote: “Subdivision (b) of form 1.988, Judgment After Default, is amended to clarify that postjudgment interest only applies to the total of the principal, court costs, and attorneys’ fees, if applicable.”30
Because the purpose of prejudgment interest is simply to compensate a prevailing party for the loss of use of his money and to put him in the same position he would have been in had he not suffered the damages, it is improper to compound interest and as a result put the party in a better position than he would have been in the absence of the damages. In other words, including prejudgment interest in the sum upon which postjudgment interest is calculated would in essence be using prejudgment interest as retribution rather than restitution. Such a theory has been uniformly rejected.31
Fla. R. App. P. 9.340(c) provides some further guidance. It states: “Entry of Money Judgment. If a judgment of reversal is entered that requires the entry of a money judgment on a verdict, the mandate shall be deemed to require such money judgment to be entered as of the date of the verdict.”
Cases interpreting this rule hold that upon reversal of a trial court’s decision, interest should be awarded from the date of the verdict rather than from the date when the judgment was initially entered, until the time the judgment is satisfied.32 These cases, like Amerace, make no distinction between contract and tort cases; therefore, they support the conclusion that there should be no distinction drawn between contract and tort cases for purposes of awarding postverdict interest.
More importantly, most cases interpreting this rule hold that even though interest should be awarded from the date of the verdict, the interest should not be included in the final judgment upon which postjudgment interest is calculated. For instance, in Brown, the court held it was error to include the award of “postverdict interest” at the statutory rate from the date of the verdict to the date of the judgment in the sum that was to bear postjudgment interest at the statutory rate until paid.33 It reasoned that the effect of such a judgment would be to award and pay “interest on interest.”34 Awarding interest on interest (compounding interest), would result in an unfair windfall to the prevailing party.35 The larger the initial award and the longer the time from when it is actually collected, the greater the windfall.
Moreover, calculating and subsequently excluding this prejudgment interest from the final judgment upon which postjudgment interest is calculated should not present any problems or difficulties. The Supreme Court itself has stated:
Once a verdict has liquidated the damages as of a date certain, computation of prejudgment interest is merely a mathematical computation. There is no “finding of fact” needed. Thus, it is a purely mathematical duty of the trial judge or clerk of the court to add the appropriate amount of interest to the principal amount of damages awarded in the verdict.36
In the same way that computing prejudgment interest is a matter of simple arithmetic, so too should be the calculation of postjudgment interest since under the theory proposed in this article, the calculation of both is based on the same amount and is therefore identical. As with the entitlement to postverdict interest, such a calculation is more equitable for both parties. Accordingly, I would urge the court to revisit its pronouncement in Higley South on this issue.
Even with what appears to be an improper extension and application of Argonaut, the implicit holding of the Second District and the explicit holdings of the Fourth District, as well as the Third District’s language in Okun, lead to the conclusion that in the absence of a date-certain determination by a jury in tort cases, interest should be awarded from the date of the verdict regardless of whether the award concerns a vested or nonvested property right. Moreover, this appears to be a more fair solution. As a practical matter, redefining the “date of the loss” to mean the date of the verdict in tort cases as has apparently been done by the Second and Fourth districts, is entirely reasonable. Once the verdict is rendered, the damages have in essence been liquidated or fixed, thus removing any guesswork from the award of prejudgment interest. This is especially true if the court enters final judgment in favor of the party who received the verdict.37 However, consistent with the interpretation of Rule 9.340(c), prejudgment interest should not be included as part of the final judgment upon which postjudgment interest is awarded. Failure to do so would transform prejudgment interest from a mechanism of restitution to one of retribution.
1 Neither “preverdict interest” nor “postverdict interest” are recognized terms of art. However, I have labeled as “postverdict interest” the interest due in tort cases covering the period of time from the pronouncement of the verdict to the entry of final judgment in order to distinguish this interest from the more regularly awarded prejudgment interest that accrues in contract cases and some tort cases from a date prior to the verdict.
2 See., e.g., Brecker Holding Corp. v. Becker, 78 F.3d 514, 516–17 (11th Cir. 1996); Argonaut Ins. Co. v. Mary Plumbing Co., 474 So. 2d 212 (Fla. 1985).
3 See Kissimmee Util. Auth. v. Better Plastics, Inc., 526 So. 2d 46 (Fla. 1988).
4 See, e.g., Brecker, 78 F.3d at 516.
5 See id.
6 See, e.g., Cioffe v. Morris, 676 F.2d 539 (11th Cir. 1982); Burkhart v. Kroeger Concrete Products, Inc., 468 So. 2d 469 (Fla. 4th D.C.A. 1985).
7 See Hurley v. Slingerland, 480 So. 2d 104 (Fla. 4th D.C.A. 1985).
8 See Argonaut, 474 So. 2d 212; Alvarado v. Rice, 614 So. 2d 498 (Fla. 1993); Lumbermens Mut. Cas. Co. v. Percefull, 653 So. 2d 389 (Fla. 1995).
9 See, e.g., Lumbermens, 653 So. 2d at 390.
10 See id. Of course, a jury could always provide a date certain indicating when the damages are due. To avoid the complication of whether prejudgment interest is proper or from when it should be calculated, it is recommended that parties (especially plaintiffs) always include a provision in the verdict form for the jury to provide a date from when the prevailing party was entitled to the award.
11 See Alvarado, 614 So. 2d at 499.
12 See In re Air Crash, No. 96-MDL-1125, 1998 WL 1770591, *4 (S.D. Fla. Feb. 25, 1998). (“Florida courts would not apply the Alvarado exception to the aforementioned damages [lost earnings and lost prospective net accumulations of the estate] because they are by their very nature unliquidated”).
13 Chicago Ins. Co. v. Argonaut Ins. Co., 451 So. 2d 876 (Fla. 4th D.C.A. 1984).
14 Argonaut, 474 So. 2d at 214 (quoting Bergen Brunswig Corp. v. State Dep’t of Health and Rehabilitative Servs., 415 So. 2d 765, 767 (Fla. 1st D.C.A. 1982)).
15 Id. at 215 (emphasis added).
17 See Alvarado, 614 So. 2d at 500–01.
18 Id. at 499.
19 Lumbermens, 652 So. 2d at 390 (emphasis in original).
21 The Argonaut court specifically acknowledged and confirmed its prior ruling that prejudgment interest was not recoverable on awards for personal injury not involving property loss or out-of-pocket pecuniary losses. See Argonaut, 474 So. 2d at 214 n.1.
22 Amerace Corp. v. Stallings, 753 So. 2d 592, 593 (Fla. 2d D.C.A. 2000), rev’ g, 779 So. 2d 269 (Fla. 2000).
23 See also Budget Rent-A-Car Syst., Inc. v. Castellano, 764 So. 2d 889, 890 (Fla. 4th D.C.A. 2000) (affirming award of prejudgment interest in personal injury action from time of verdict, where the verdict fixed and therefore liquidated the plaintiff’s noneconomic damages).
24 Okun, 652 So. 2d at 389 (emphasis added) (citations omitted). It is unclear whether the arbitration award encompassed noneconomic damages. Moreover, the facts before the court seemingly compelled the result it reached. The Okuns were awarded damages in arbitration in October 1992. Before they filed a motion to confirm the award, the losing party filed a motion to vacate the award which the trial court granted. On appeal, the order vacating the award was reversed. Before confirmation of the arbitration award could be had by the Okuns, the losing party moved to vacate the arbitration award again in July 1993. That motion was denied as was a subsequent appeal. Finally, in May 1994, roughly a year and a half after the arbitration award, the Okuns had the award confirmed.
In sum, given the delay between the award and its confirmation, it is not surprising that the Third District held that the Okuns were entitled not only to postjudgment interest, but interest from the date of the award until the order of confirmation.
25 See also Alarm Syst. of Florida, Inc. v. Singer, 380 So. 2d 1162, 1163 (Fla. 3d D.C.A. 1980) (reversing award of prejudgment interest because the losses were not fixed until the determination was made by the trier of fact, but failing to remand for entry of an award of postverdict interest).
26 Argonaut, 474 So. 2d at 215.
27 See Quality Engineered Installation, Inc. v. Higley South, Inc., 670 So. 2d 929, 931 (Fla. 1996).
29 See Becker Holding Corp. v. Becker, 78 F.3d 514, 516, 517 (11th Cir. 1996); City of Tampa v. Janke Construction, Inc., 626 So. 2d 239, 240 (Fla. 2d D.C.A. 1993).
30 In re Amendments to the Florida Bar Rules of Civil Procedure, 604 So. 2d 1110, 1111 (Fla. 1992).
31 See, e.g., Gilliard v. Wright, 667 So. 2d 815, 816 (Fla. 2d D.C.A. 1995) (prejudgment interest should be used to compensate a plaintiff for the loss of use of money, not as a means to punish the losing party).
32 See Green v. Rety, 616 So. 2d 433, 435 (Fla. 1993); Brown v. Estate of Stuckey, 710 So. 2d 679, 680 (Fla. 1st D.C.A. 1998).
33 See Brown, 710 So. 2d at 680.
34 See id.
35 See, e.g., Joseph S. Arrigo Motor Co., Inc. v. Lasserre, 678 So. 2d 396, 397 (Fla. 1st D.C.A. 1996); Aetna Casualty & Surety Co. v. Protective National Ins. Co. of Omaha, 631 So. 2d 305, 310 (Fla. 3d D.C.A. 1993) (“As a matter of logic, and therefore law, it is irrefutable that an award of prejudgment interest cannot itself bear interest”).
36 Argonaut, 474 So. 2d at 215.
37 Clearly, if a jury verdict award is subsequently reversed by the trial court or on appeal, a party would not be entitled to this interest in the same way he would not be entitled to the amount awarded by the jury.
Jorge A. López is a magna cum laude graduate of the University of Miami School of Law. He is currently a fourth year associate at the law firm of Akerman Senterfitt & Eidson, P.A., Miami, and serves on the Civil Procedure Rules Committee of The Florida Bar. Previously, Mr. López was a law clerk to Justice Harry Lee Anstead at the Florida Supreme Court.