PART 7: IF YOU'RE LISTENING, GET RID OF STATUTORY INTEREST NEXT

Over the last few weeks the SDL has offered inspired proposals and reforms that aim to attack the anticipated massive backlog and institutional problems that we will face in the court system. These ideas are partially based on the SDL’s over twenty-five years’ experience with the practice of law in several different states. But more importantly, the SDL’s offerings have been based on conversations with colleagues, judges, claims professionals and industry authorities.

The SDL is very gratified that thousands of people have reviewed and considered these ideas on different online platforms. However, at the writing of this next edition, it appears that exactly none of these proposals have been put in to place. Given this state of affairs, does the SDL get discouraged? Not a bit. Given all the terrible national news that seems to be unending, the SDL will continue to be a force for good in litigation. Because right now any form of good is good.

So, what’s next? We know that many states have arcane, and frankly, insane post-judgment statutory interest rates. For example, Massachusetts and Rhode Island have a post-judgment interest of a shocking 12%. New York has a rate of 9%. California has an interest rate of 10% which can start early based on certain factors. The state of New Mexico has a whopping 15% interest rate based on certain tortious and bad-faith conduct.

Common sense (if that actually applies) dictates that high interest rates (pre and post-judgement) were implemented to “scare” defendants into settling cases to avoid crippling interest charges. In theory, the courts wanted a financial hammer to encourage disposal of cases and free the trial system.

This was not a bad theory. But, over the decades it has had a bad outcome in practice for the parties on both sides, or the “players” so-to-speak. In high interest states, defendants will refrain from admitting liability early in litigation, due to the fear of creating an annuity for the plaintiff. Due to concerns of reversal, many judges shy away from granting summary judgment on cases and choose to rely on juries (especially in cases with the heavy use of experts). The reality is that high interest rates do not resolve cases and the purpose of these rates now has been completely frustrated.

If the court, or the “House” in this anecdote, is going to win its bet here, it needs to put out a bit of prop bet to get the players interested again. The SDL suggests that if a defendant admits liability, in any case and in any state, there is no post-judgment interest (or pre-judgment interest) if the case is settled in the next twelve months (of admitting liability). The SDL considered applying no interest to cases that were eventually tried. However, the uncertainty of the pandemic makes this unrealistic unless there is a vaccine. Any certainty and path to resolution of cases the court “House” can give to the players in these difficult times would be most welcome.

As Ace Rothstein commented in Casino, everything Vegas does from the bright lights to the comped trips and all the champagne is arranged to get to your money. Here, the outdated system of post-judgment interest isn’t working and not getting to anyone’s money to resolve cases. It’s time to reload the deck.