February 11, 2017
Authored by: Jacob Maskovich and Bob Miller
Post-judgment interest is not something most lenders consider when making a loan. In fact, it is not ordinarily the subject of significant analysis even when litigation becomes necessary. Where the United States District Court is the preferred venue, however, parties easily can fall into the quandary of being stuck with the federal statutory post-judgment interest rate, which is currently less than 1% per annum.
Pre-judgment, a lender often has solid rights to contract interest and potentially very high default interest rates, which often approach double-digits, added to a recovery when a solvent obligor is on the other side. But a final judgment may be a game-changer on the rate of interest a lender is able to receive. Recent circuit court decisions are developing the law on post-judgment interest in a way contrary to the economic recovery of contracting parties, and lenders in particular. It may be possible, however, to draft around this problem.
Current State of the Law
In cases pending before the United States District Court, “post-judgment interest is governed by federal law,” even where jurisdiction is based upon diversity, because post-judgment interest is viewed as a procedural issue. Citicorp Real Estate Inc. v. Smith, 155 F.3d 1097,