Prejudgment Interest Denied Where Stipulation on Liability is Silent on Interest

New York Civil Practice Law & Rules (CPLR) §5002 provides that, in a personal injury action, a plaintiff is entitled to recover prejudgment interest running from "from the date the verdict was rendered or the report or decision made" which establishes the defendant's liability. In the recent case of Mahoney v. Brockbank, 35 NYS3d 459 (2nd Dep't 2016), the court was confronted with the question of whether prejudgment interest runs from the date of a stipulation entered into between the plaintiff and the defendant in a personal injury action in which the defendant admits liability.

In that case, the parties entered into a stipulation whereby the defendant conceded liability, the plaintiff discontinued the punitive damages claim and the parties agreed that there would be a damages-only trial with the recovery to be capped at a certain amount. The stipulation did not address the issue of prejudgment interest. A damages trial was held two and a half years later and the jury awarded approximately $400,000. The trial court awarded interest only from the date of the verdict and the plaintiff appealed, arguing that interest should instead run from the date of the stipulation.

The Appellate Division noted that the difference between interest running from the date of the stipulation rather than running from the date of the verdict would be approximately $90,000 based on the statutory rate of 9% per year. In unanimously affirming the trial court and denying prejudgment interest to the plaintiff, the Appellate Division differentiated between a stipulation and a "verdict, report or decision" which is identified in CPLR §5002 as the point at which prejudgment interest begins to run. The court pointed out that a verdict, a report, such as a report of a referee, or a decision are all adjudications made by a third party, whereas stipulations are "voluntary agreements, or contracts, by which the opposing parties themselves chart their own course in a way that makes sense for them." The court further noted that, had the Legislature wished to include stipulations in CPLR §5002, it could have done so as it has in other statutes.

Additionally, the court found it significant that the stipulation also withdrew the punitive damages claim and provided for a cap on the plaintiff's recovery, and could have included prejudgment interest had the parties chosen to do so. The obvious lesson from this case is that if a party wants prejudgment interest to run from the date of the stipulation on liability, that party needs ensure that the stipulation makes that clear.