Every Penny Counts: Remember Prejudgment Interest When Pursuing Pre-Petition Causes of Action

Unsurprisingly, one meaningful factor influencing whether pre-petition claims are pursued as part of a debtor’s bankruptcy case (or as part of a confirmed plan) is the amount of recoverable damages. In order for a bankruptcy estate to expend resources or attract contingency counsel to prosecute a meritorious claim, the potential recovery must be worth the effort and time. When assessing recoverable damages, numerous questions generally come to mind: (i) what are the damages; (ii) what evidence is needed to prove the damages; (iii) are the damages collectible; (iv) who is liable for the damages; and (v) is there a material choice-of-law issue. Another possible component of damages is prejudgment interest. While prejudgment interest is commonly included in the standard damage recital for a pleading, it may not get much substantive attention before a judgment is on the horizon. Prejudgment interest should not be overlooked as an important component of claims held by a bankruptcy estate.