prejudgment interest

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The interest that a creditor, usually a plaintiff in the case, is entitled to collect, derived from the amount of a judgment, which compensates the creditor for an injury which occurred before the judgment. The rate applied to calculate prejudgment interest varies by state, and some states may apply a fixed amount, while others may tie the rate to an established index. ABA, Calculation of Prejudgment Interest on Past Losses in Business Litigation. For example, the California Constitution applies a general the rate of interest at 7% per annum, and in Palomar Grading & Paving, Inc. v. Wells Fargo Bank, N.A., the California Court of Appeals found that this 7% applies to prejudgment interest, at least on a mechanic’s lien. An example of a court awarding prejudgment interest is in In re Oil Spill by the Amoco Cadiz Off the Coast of France, where the Seventh Circuit awarded French plaintiffs $65 million in damages and $148 million in prejudgment interest in a suit arising out of the grounding of an oil tanker which resulted in a massive oil spill along the coast of Brittany. Another example is Short v. U.S., where the Federal Circuit awarded the Yurok Indians prejudgment interest on their damages to recover revenue generated from timber harvesting from which they were wrongly excluded.

[Last updated in August of 2020 by the Wex Definitions Team]