The Statute of Limitations is Tolled. What About interest?

Bryan T. Schwartz, Esq. and Jeremy M. Weg, Esq.

The legal community in the New York Metro area is facing unprecedented times due to the Coronavirus pandemic. Drastic measures were introduced by New York’s Governor Andrew M. Cuomo, including the issuance of multiple Executive Orders tolling statutes of limitations pertaining to civil matters in this State, as well as a directive to largely stay all non-essential litigation in State Courts. One remaining issue not yet decided by the Courts is whether the Governor’s broad toll on time limits set forth in the CPLR is applicable to pre-judgment and post-judgment interest at the presumptively reasonable statutory rate of 9% prescribed by CPLR §5004.

On March 13, 2020, the Chief Judge of the State of New York issued an unprecedented directive limiting court operations to essential matters effective March 16, 2020. In accordance with this directive, Governor Cuomo signed Executive Order 202.8 on March 20, 2020 which issued a broad, sweeping toll on “any specific time limit for the commencement, filing, or service of any legal action, notice, motion, or other process or proceeding.” Then, by Administrative Order 78/20, Chief Administrative Judge Lawrence Marks substantially stayed all litigation in this State by directing that “effective immediately and until further order, no papers shall be accepted for filing by a county clerk or a court in any matter of a type not included on the list of essential matters . . . This directive applies to both papers and electronic filings.”

The Unified Court System slowly acclimated to our new reality of virtual court appearances and litigation has partially resumed. Beginning May 25, 2020, new nonessential matters were finally permitted to be electronically filed with the Courts. Nevertheless, litigation in New York has not returned to pre-pandemic levels, and matters continue to crawl through the litigation process. The Coronavirus pandemic has caused extensive delays in litigation which we anticipate will take years to get back on track.

With that said, despite court closures, litigation slow down and extensive delays, prejudgment and post-judgment interest continues to accrue at the presumptively reasonable statutory rate of 9% resulting in a windfall for plaintiffs, through no fault of the defendants. To this end, in every dispositive motion our firm has opposed since March, 2020, we include the argument that to the extent the motion is granted, interest should not accrue through at least the expiration of the tolling periods set forth in the Governor’s Executive Order.

We recognize the Court’s typical rationale that the imposition of interest is not a penalty but instead represents the cost of having the use of another person’s money for a specified period. However, we also recognize that the presumptively reasonable statutory 9% interest rate was developed to incentivize parties to enter into reasonable negotiations. We believe it is inequitable for defendants to be prejudiced by this seemingly unlimited accrual of interest incurred during these highly volatile and ever-changing times. This is especially true when the court closures and slowdowns can result in cases being delayed for years beyond the typical Standards and Goals date, civil trials are not anticipated to resume regularly until the second half of 2021 and likely resulting in significant interest accrual.

As of today, we have yet to receive an order from the Court accepting or rejecting our argument with respect to interest accrual. We will provide a further update once this issue is decided by the Court.

For more information, please contact Bryan Schwartz at Bschwartz@gvlaw.com or Jeremy Weg at Jweg@gvlaw.com or by phone at the firm’s New York office at 212-683-7100.