A successful civil lawsuit generally results in a judgment for some amount of money. Interest accumulates on that judgment, either at the rate lawfully specified in the contract or at Virginia’s standard “judgment rate” of six percent. (See Va. Code § 6.2-302). Money judgments can consist of many different types of damages awarded to the plaintiff, such as compensatory damages, punitive damages, costs and expenses, liquidated damages, trebled damages, and other damages authorized by statute. For years, many successful plaintiffs have garnished wages, seized assets, and taken other action to collect their judgments on the assumption that they were entitled to add 6% interest to the total amount of the judgment, regardless of how that judgment amount was reached. On March 24, 2022, the Supreme Court of Virginia held that post-judgment interest should only run on the portion of the judgment representing compensatory damages. Things like punitive damages and trebled damages do not fit within this category.
Yacoub Sidya v. World Telecom Exchange Communications, LLC, was a business dispute between a telecommunications company, its former CEO, and the owner of Y-Telecom, a vendor to World Telecom. World Telecom sued Sidya on various counts and was successful on its claims for misappropriation of trade secrets, tortious interference with business expectancy, and business conspiracy. The jury awarded $1.332 million, trebled to $3.996 million, punitive damages of $350,000, attorneys fees, and post-judgment interest of 6% applied to the judgment as a whole. Sidya had a problem with the trial court awarding 6% interest on the entire judgment of roughly $6.5M rather than applying interest only to the $1.332M attributable to compensatory damages. On appeal, the Virginia Supreme Court didn’t agree with all of Sidya’s arguments, but it agreed that post-judgment interest should be restricted to awards that are compensatory, rather than punitive, in nature.
The court based its reasoning on Virginia Code § 8.01-382, which provides in pertinent part:
[T]he final order, verdict of the jury, or if no jury the judgment or decree of the court, may provide for interest on any principal sum awarded, or any part thereof, and fix the period at which the interest shall commence. The final order, judgment or decree entered shall provide for such interest until such principal sum be paid. If a final order, judgment or decree be rendered which does not provide for interest, the final order, judgment or decree awarded or jury verdict shall bear interest at the judgment rate of interest as provided for in § 6.2-302 from its date of entry or from the date that the jury verdict was rendered.
The court interpreted the phrase “principal sum awarded” to mean the “element of the plaintiff’s damages that compensates the plaintiff for the actual harm sustained.” The court didn’t elaborate much on how it reached this conclusion but referred the reader to RGR, LLC v. Settle, 288 Va. 260, 295 (2014) and Upper Occoquan Sewage Auth. v. Black Constr. Co., 275 Va. 41, 67 (2008) as relevant authorities. “This understanding necessarily excludes recoveries that are noncompensatory in nature and those that, while compensating a litigant in the broadest sense, do not remedy an actual harm sustained by the litigant,” wrote the court. In other words, the court held that punitive damages and treble damages are not included within 8.01-382 because such awards are intended to punish or penalize the wrongdoer, not compensate the plaintiff.
Sidya also argued that interest should run from the date of the judgment rather than the date of the jury verdict. (Usually, these dates are very close together, but in this particular case they were five years apart). The court dispensed with this argument quickly, holding that post-judgment interest runs from the date of the jury verdict, regardless of when judgment is entered on that verdict. The court had already held in a prior opinion that “post-judgment interest will accrue from the date of the verdict until the judgment is paid.” (See Upper Occoquan Sewage Auth. v. Black Constr. Co., 275 Va. at 67).
Note that the Sidya decision only applies to state-court proceedings. Things are different in federal court. See 28 U.S.C. § 1961(a) (2000) (mandating post-judgment interest “on any money judgment in a civil case”); Air Separation, Inc. v. Underwriters at Lloyd’s of London, 45 F.3d 288, 290 (9th Cir. 1995) (noting that “postjudgment interest has been applied to attorneys’ fees; costs; punitive damages; exemplary damages; and fraud penalties.”). In Virginia state court, however, punitive damages and treble damages do not accumulate interest.