Quantum Meruit Claims

by Joseph H. Einstein, Jonathan Gardner

November 09, 2011

Is Interest Mandatory or Discretionary?

Pursuant to CPLR 5004, the prevailing party in a civil action is entitled to interest at the munificent rate of 9 percent per annum. And, CPLR 5001(b) provides that interest at that rate runs "from the earliest ascertainable date the cause of action existed." Where the claim falls within the parameters of CPLR 5001, interest at 9 percent is mandatory and there is no discretion to withhold an award of interest at the statutory 9 percent rate.(1) For example, in a breach of contract action a litigant with a S I million claim who successfully recovers judgment five years after the date of the breach, would be entitled to interest amounting to $450,000 since interest would run from the date of the breach. After entry, CPLR 5003 provides for 9 percent interest on every judgment, regardless of the nature of the underlying claim. In a federal court action, the CPLR provisions as to pre-judgment interest are applicable only in diversity cases; post judgment interest in the federal system, even in diversity cases, is at the more modest federal rate tied to the Treasury Yield.(2) 

In today's economy it is difficult to conceive of an investment with a better rate of return than a long-running litigation in which pre-judgment interest is awarded. However, a litigant is not entitled to interest in every civil action. CPLR 5001(a) provides that "[i]nterest shall be recovered upon a sum awarded because of a breach of performance of a contract or because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property...." The statute goes on to specifically except "an action of an equitable nature." In equitable actions, whether to award interest, from what date, and at what rate are all discretionary. 

Quantum meruit claims are based on a hybrid of law and equity. There is no express contract between the parties, but one is implied because of the course of dealings between them. The cases are in conflict as to whether interest is mandatory or discretionary and the Court of Appeals has yet to weigh in on the issue. In this era, where cases may be pending for years, substantial dollars are at stake. 

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