Opinion ID: 6986485
Heading Depth: 2
Heading Rank: 4

Heading: Choice of Law: Prejudgment Interest

Text: Rhode Island law provides that a tort-feasor held liable for damages must pay prejudgment interest annually at the rate of 12% from the time the cause of action accrues. See R.I. Gen. Laws 1956, § 9-21-10; Merrill v. Trenn, 706 A.2d 1305, 1310-11 (R.I.1998). When calculating plaintiffs’ judgment, however, the district court applied New York law, which provides for prejudgment interest only from verdict to judgment. See N.Y. C.P.L.R. 5002; Love v. New York, 78 N.Y.2d 540, 577 N.Y.S.2d 359, 359-60, 583 N.E.2d 1296 (1991). The district court erred in applying New York law instead of the law of Rhode Island. The district court concluded that plaintiffs’ case was controlled by an exception to the second Neumeier rule, relying on this Court’s statement in Entron, Inc. v. Affiliated FM Insurance Co., 749 F.2d 127 (2d Cir.1984), that, under New York law, the allowance of prejudgment interest is controlled by the state “whose law determined liability on the main claim.” Id. at 131. Subsequent to Entron, however, the New York Court of Appeals drew a relevant distinction between rules in conflict that are “loss-allocating” and those that are “conduct-regulating.” See Schultz v. Boy Scouts of Am., Inc., 65 N.Y.2d 189, 491 N.Y.S.2d 90, 97-98, 480 N.E.2d 679 (1985). Prejudgment interest, like other damages issues, is an aspect of loss-allocation. See id.; Cooney, 595 N.Y.S.2d at 922-24, 612 N.E.2d 277. Accordingly, the district court, which properly applied Rhode Island law to the loss-allocating issue of joint and several liability, should have applied Rhode Island law for the same reason to the loss-allocating issue of prejudgment interest. Crane argues that this Court’s decision in Schwimmer v. Allstate Insurance Co., 176 F.3d 648 (2d Cir.1999), is to the contrary. However, although Schwimmer cites Entrón with favor and states that “[u]nder New York choice of law rules, the law of the jurisdiction that determines liability governs the award of prejudgment interest,” Schwimmer’s holding turned on: (i) the defendant’s consent to the application of New York law to the determination of liability; and (ii) the defendant’s “fail[ure] to bring to the attention of the district court the potential applicability of Florida law to the issue of prejudgment interest.” Schwimmer, 176 F.3d at 650. Given the defendant’s waiver, the court in Schwimmer had no opportunity to consider whether, under New York law, prejudgment interest should be treated like all other loss-allocating damages issues. We address that issue today and hold that New York law, as articulated in Schultz, requires that the same analysis applicable to joint and several liability, and other loss-allocating issues, also be applied to the issue of pre-judgment interest. Accordingly, the district court erred when it applied New York law instead of Rhode Island law to calculate the pre-judgment interest to be awarded to plaintiffs.