Shortly after receipt of the opinion, counsel for DialAmerica queried whether the reference to the use of R. 4:42-11(a)(ii) constituted a typographical error, since “[s]ubsection (a)(ii) states that it is applicable to judgments not exceeding the monetary limit of the Special Civil Part. Subpart (a)(iii) of that rule is applicable to judgments exceeding the monetary limit of the Special Civil Part.” Judge Walsh concurred, and the parties thereafter submitted a judgment calculating compensatory damages to be $10,779,914 and prejudgment interest to be $2,685,292 pursuant to R. 4:42-11(a)(iii).
Subsection (a)(ii) provides for interest to be calculated in accordance with the New Jersey Cash Management Fund rate; subsection (a)(iii) adds 2 percent per annum to that rate.
The judgment was signed by Judge Walsh immediately on its receipt on Dec. 6, 2001. However, because “the amount surprised the court” the judge sought to review the interest calculations and, on determining that they had been based on the higher rate of interest authorized by subsection (a)(iii), he requested that prejudgment interest be recalculated using the New Jersey Cash Management Fund and the short-term federal government lending rates. Interest recalculated in accordance with the New Jersey Cash Management Fund rate was determined to be $1,956,097. Following receipt of the revised figures, on March 1, 2002, Judge Walsh entered an amended judgment incorporating the $1,956,097 amount.
The Appellate Division confirmed the compensatory damage award substantially for the reasons articulated by Judge Walsh. DialAmerica Marketing Inc. v. KeySpan Energy Corp., Docket Nos. A-2401-01T3 and A-2404-01T3 (App. Div. May 20, 2003). However it vacated the prejudgment interest award and remanded the matter for consideration of the equities involved.
On remand, Judge Walsh adhered to his determination to award prejudgment interest of $1,956,097 in accordance with R. 4:42-11(a)(ii). He stated:
In Benevenga v. DiGregorio, 325 N.J. Super. 27, 29-30 (App. Div.), certif. denied, 163 N.J. 79 (1999), the Appellate Division concluded that in a commercial dispute involving allegations of breach of contract that an award of prejudgment interest based on “the rate of return earned by the State Treasurer contemplated by R. 4:42-11(a)(ii)” is the appropriate one “lacking unusual circumstances.” … [N]o “unusual circumstances” exist here which favor awarding a higher prejudgment interest rate to DialAmerica. … This is a cost plus overhead contract thereby making the calculation of damages a more simple task than in most cases.
I. On appeal, both parties argue that Judge Walsh’s task on remand was essentially a ministerial one of complying with R. 4:42-11(a), while providing his rationale for doing so. However, DialAmerica argues that compliance with subsection (a)(iii) was required, whereas KeySpan contends that subsection (a)(ii) was the appropriate reference. In contract actions, prejudgment interest is assessed on a discretionary basis as the result of the application of equitable principles. The strictures of R. 4:42-11 apply by their literal terms only to tort actions.
R. 4:42-11(b) provides in a tort context for payment of prejudgment interest commencing at a specified time, and it states that “[p]rejudgment interest shall be calculated in the same amount and manner provided for by paragraph (a) of this rule.” Paragraph (a) establishes the New Jersey Cash Management Fund rate as the measure for prejudgment interest “[f]or judgments not exceeding the monetary limit of the Special Civil Part,” R. 4:42-11(a)(ii), and adds 2 percent per annum to the rate specified for prejudgment interest on “judgments exceeding the monetary limit of the Special Civil Part.” R. 4:42-11(a)(iii). The latter provision was adopted in 1996 because, according to Judge Pressler’s comments,
the low rate of interest provided a disincentive for judgment debtors to satisfy judgments. Clearly an interest rate of 3.5% as provided for 1995 represents a cost of money far below commercial rates making appeals more economically viable for many categories of judgment debts than prompt payment of the judgment. The two percent add-on produces a more commercially reasonable rate. Pressler, Current N.J. Court Rules, comment 1 on R. 4:42-11(a) (2005).
