Grobman v. Chernoff, 15 N.Y.3d 525 (2010)
When a plaintiff obtains a jury verdict on liability and subsequently arbitrates damages, prejudgment interest accrues from the date of the liability verdict unless the arbitration agreement explicitly addresses or waives that right.
Summary
Lindsay Grobman was injured in a car accident and obtained a jury verdict finding the defendant 100% liable. After an appeal and remand regarding damages, the parties agreed to arbitrate damages. The arbitration resulted in an award for Grobman. The question arose as to whether interest on the award should be calculated from the date of the initial liability verdict or the date of the arbitration award. The New York Court of Appeals held that, absent a specific agreement to the contrary, prejudgment interest should be calculated from the date of the liability verdict, as the right to such interest vested at that time.
Facts
Lindsay Grobman was injured in a car accident while a passenger in a car driven by Adam Chernoff. Grobman sued Chernoff and the car’s owner, Rhonda Globman. A bifurcated trial resulted in a jury finding Chernoff 100% at fault for the accident. A subsequent jury found that Grobman suffered a serious injury under New York’s no-fault law. Damages for future medical expenses were awarded, but not for future pain and suffering.
Procedural History
The plaintiff appealed the initial damages award. The Appellate Division reversed and remanded for a new trial solely on the issue of damages because the jury’s failure to award damages for future pain and suffering was inconsistent with the finding of permanent injury. On remand, the trial court ordered arbitration on all issues, including the “serious injury” threshold. The Appellate Division reversed, holding that the jury’s “serious injury” determination was binding. The case proceeded to arbitration solely on damages. After arbitration, the plaintiff moved to confirm the award and the defendant cross-moved. Supreme Court confirmed the award, calculating interest from the date of the arbitration award. The Appellate Division reversed, holding that interest should accrue from the date of the initial liability verdict. The New York Court of Appeals granted leave to appeal.
Issue(s)
Whether prejudgment interest on a damages award, following arbitration to determine the amount of damages after a jury verdict establishing liability, accrues from the date of the liability verdict or the date of the arbitration award, absent a specific agreement addressing prejudgment interest.
Holding
Yes, prejudgment interest accrues from the date of the liability verdict because the right to interest vested at that time and the arbitration agreement did not explicitly waive or address that right.
Court’s Reasoning
The Court of Appeals reasoned that while parties are free to submit the issue of prejudgment interest to arbitration, the arbitration agreement in this case did not do so. The agreement only stated “AT ISSUE: Damages.” The court relied on its prior decision in Love v. State of New York, stating that damages and prejudgment interest are distinct concepts. Damages compensate for losses, while prejudgment interest compensates for the cost of having the use of another person’s money. As the court noted, quoting Love, prejudgment interest “is simply the cost of having the use of another person’s money for a specified period” (Love, 78 NY2d at 544). Since the plaintiff had already established the right to interest as a matter of law on the date of the liability verdict, there was no need to negotiate it during arbitration. The court found no indication that the plaintiff waived her right to prejudgment interest by agreeing to arbitrate damages. Therefore, the general rule that interest accrues from the date liability is established applies. The court distinguished Rice v. Valentine, noting no circumstances indicated that the plaintiff gave up the right to interest when agreeing to arbitrate damages. The court concluded that absent explicit waiver or agreement, prejudgment interest runs from the date of the liability verdict.