SJ Quinney College of Law, University of Utah
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Home > OnLaw > Vol. 2013

 

Utah OnLaw: The Utah Law Review Online Supplement

Abstract

Legal rules are often designed to provide different incentives to plaintiffs and defendants. With regard to prejudgment interest, however, it is not clear why there should be a bias in either direction. Absent a convincing argument for leaning toward one party or the other, we conclude that as a normative matter, the ideal rule for prejudgment interest should be neutral with regard to delay: plaintiffs are compensated fully for delay and defendants pay the market rate for the benefits they implicitly derive from holding money that belongs to the plaintiff. This simple “neutrality rule” implies, of course, that all claims should be treated equally with regard to applying prejudgment interest; that there should not be a legislatively-set prejudgment rate or legislative mandating of simple, rather than compound, interest; and that prospective damages should be discounted to the date of injury and not the date of trial.

We conclude this Article with another admonition from the Eleventh Circuit: “Symmetrical treatment should be given to the estimated lost earnings both before and after trial so that neither party can benefit by delaying the final judgment.”161 Utah could substantially reduce the problems and inconsistencies that derive from the current legal treatment of prejudgment interest if it were to adopt a simple principle: other than adding prejudgment interest, if a change in the trial date increases or decreases estimated damages, the methodology being used embeds an inconsistency concerning the treatment of time.

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