No Prejudgment Interest if Plaintiff Cannot Show When Damages Were Incurred

Plaintiffs in breach of contract actions may not be entitled to prejudgment interest according to a recent NYS Appellate Division, Second Department decision. In Kachkovskiy v. Khlebopros, 164 A.D.3d 568 (2d Dep't 2018), the Second Department affirmed the denial of a plaintiff's motion for prejudgment interest in a breach of contract action because the plaintiff failed to establish when he incurred the damages. The court confirmed the lower court's ruling determining that damages were therefore deemed not to be incurred until the jury rendered the verdict.

In Kachkovskiy, the plaintiff sold his shares of stock in three corporations to the defendant, entering into a separate agreement for each corporation. The plaintiff sued the defendant for breach of contract, fraud, unjust enrichment, and conversion, alleging the defendant refused to satisfy his obligations under the three agreements. After a jury trial, a verdict was returned against the defendant for the breach of contract cause of action. Following the verdict, the plaintiff moved for entry of a judgment awarding him prejudgment interest. The lower court denied his motion, and the plaintiff appealed.

The Second Department's analysis focused on the application of CPLR 5001 to the specific facts of the case. CPLR 5001 provides for interest on an award for a breach of contract action beginning from the "earliest ascertainable date the cause of action existed." The party seeking the prejudgment interest bears the burden of establishing the date when the interest should be computed. Here, however, the plaintiff failed to demonstrate when he incurred damages. As a result, the lower court determined that damages were not incurred until the jury rendered its verdict, and the Second Department agreed.

This decision serves as a warning to plaintiffs that they have to do more than assert entitlement to prejudgment interest. It also serves as a reminder to defendants that prejudgment interest is defensible if they are able to prove the plaintiff cannot establish when damages incurred, resulting in a potentially reduced monetary award.