How is prejudgment interest calculated in the United States?
Prejudgment interest is governed by state statute and varies widely. It is generally simple interest on the principal from the date the claim accrued (or the date of the demand) to judgment. New York uses 9% simple (CPLR 5004); California uses 10% for contract and 7% constitutional default; Texas ties to prime with a 5% floor. Some states allow it only on liquidated claims.
What is the federal postjudgment interest rate?
Under 28 U.S.C. 1961, postjudgment interest on federal judgments is calculated at a rate equal to the weekly average 1-year constant maturity Treasury yield for the week preceding judgment, compounded annually. This is usually far lower than state prejudgment rates.
Is prejudgment interest simple or compound?
Most states impose simple prejudgment interest, but a minority allow compounding. Federal postjudgment interest under 1961 is compounded annually. Always check the controlling statute; using the wrong method materially changes the figure on multi-year cases.
Can I always recover prejudgment interest?
No. Many states allow prejudgment interest only on liquidated or reasonably ascertainable sums (contract, unpaid invoices) and deny it on unliquidated tort damages like pain and suffering. The date interest begins to accrue is frequently litigated.