The opinion of the court was delivered by: LEONARD B. SAND
In an action before this Court brought in 1991, plaintiff insurance companies sought a declaratory judgment that they were relieved from any obligation to indemnify defendants for defendants' losses in a certain products liability litigation. Defendants counterclaimed, alleging that plaintiffs had breached the terms of the insurance policy held by defendants by disclaiming coverage groundlessly. In their request for relief, defendants asked the Court to dismiss plaintiffs' complaint and award them compensatory and punitive damages on their counterclaim, reasonable attorney's fees, costs and disbursements, and "such other and further relief as this court may deem just and proper." Answer P 52. Defendants did not make any request in their answer, or in their motion papers, for pre-judgment interest on any award of damages they might receive. Nor did the Court ever consider or address the issue of pre-judgment interest sua sponte.
In a decision dated December 19, 1994 (the "December decision"), the Court granted summary judgment on defendants' counterclaim. Employers Mutual Casualty Co. v. Key Pharmaceuticals, Inc., 871 F. Supp. 657, 674 (S.D.N.Y. 1994). The Court directed the parties to submit an order setting forth the terms of defendants' recovery. See id. The order and judgment that was submitted provided for recovery by defendants of $ 1,175,000.00, which sum represented plaintiffs' share of the losses covered by the insurance policy, plus the statutory rate of interest from the date of entry of the order and judgment. The order and judgment did not include an award of, or make reference to, pre-judgment interest.
Both sides have filed appeals from the December decision. Plaintiffs challenge the Court's award of summary judgment; defendants challenge the Court's denial of their claim for attorney's fees. In addition, defendants advise us that they have sought and received permission from the Court of Appeals to return to this Court to file a motion, pursuant to Rule 60, Fed. R. Civ. P., to correct the original judgment to include an award of prejudgment interest.
The question presented by defendants' Rule 60 motion is not whether defendants are entitled to an award of pre-judgment interest had timely request been made. They are. New York law, which the Court found in the December decision to apply to the parties' various contract claims, see 871 F. Supp. at 664, is unmistakably clear on the issue:
Interest shall be recovered upon a sum awarded because of a breach of performance of a contract . . . . Interest shall be computed from the earliest ascertainable date the cause of action existed, except that interest upon damages incurred thereafter shall be computed from the date incurred.
Interest shall be recovered upon the total sum awarded, including interest to verdict, report or decision, in any action, from the date the verdict was rendered or the report or decision was made to the date of entry of final judgment. The amount of interest shall be computed by the clerk of the court and included in the judgment.
N.Y. Civ. Prac. L. & R. §§ 5001(a),(b), 5002 (McKinney 1992) (emphases added).
An award of interest is mandatory under these provisions, such that a court applying New York law has no discretion to decide not to award pre-judgment interest to a litigant who has successfully claimed a breach of contract. Cantelmo v. Knaust, 206 A.D.2d 743, 615 N.Y.S.2d 88, 90 (A.D. 1994); Pioneer Food Cooperative, Inc. v. Brokerage Surplus Corp., 70 A.D.2d 542, 416 N.Y.S.2d 274, 275 (A.D. 1979).
Rather, the question presented by defendants' motion is whether this Court has the authority, at this point in the litigation, to award defendants the interest payments to which they would indisputably be entitled if timely request had been made. Defendants urge that we have such authority under either Rule 60(a) or (b)(1). We disagree, for the following reasons.