There are lots of elements to obtaining full compensation in a commercial breach of contract case. Once you have established that you suffered damages and that the other side is liable, there is still more to your case. Part of the recovery in your case may be pre-judgment interest. A recent case from the Second District Court of Appeal serves as an important reminder regarding the awarding of pre-judgment interest, since the decision reiterated that, when an injured party proves that it “sustained out-of-pocket loss, prejudgment interest must be awarded” and accrues starting with the date of the loss.
In 2009, a company named H.I.G. Middle Markets, LLC decided to buy from a Tampa doctor a collection of medical care facilities, including a pain relief center, a surgery center, an anesthesiology service, and a dozen ambulatory surgery centers. The deal called for the buyer to pay the doctor a $10 million sum as an earnout payment.
The earnout payment was conditional and based upon the sold entities’ performance. The companies hit their targets and triggered the doctor’s qualification for the $10 million payment. But a roadblock emerged along the way. The companies’ accounts receivable statements were discovered to be overstated by $14 million. The buyer asserted that it was entitled to offset the full $14 million against the earnout and pay the doctor nothing.
The doctor and his related entities sued for a breach of contract, which they said occurred when the buyer refused to make the $10 million payment. The buyer then countersued for a breach of contract based upon the overstated accounts receivable reports. Ultimately, the trial court sided with the buyer and awarded it $11.2 million in damages.
At the end of the case, though, the trial court awarded the buyer no pre-judgment interest. The case went up on appeal regarding various issues, with one of those being the lack of a pre-judgment interest award.
Florida law follows what’s called the “loss theory” of pre-judgment interest. That rule says that “the loss itself is a wrongful deprivation” of the successful party’s property. Once the trial court determines that the prevailing party has suffered harm (and the amount of those damages) and that the opposing side is liable for that harm, the prevailing party is “to be made whole from the date of the loss.” This award is mandatory. “The trial court has no discretion with regard to awarding prejudgment interest and must do so applying the statutory rate of interest in effect at the time the interest accrues.” Awarding this buyer no pre-judgment interest was improper and required sending the case back to the trial court.
In a commercial litigation case, there are many “balls in the air” at any given time. You need skilled Florida counsel who have the resources and experience to deal with cases like yours. The Florida business litigation attorneys at Stok Folk + Kon have been handling cases like these for many years and have the knowledge and determination it takes to protect your interests.
Contact us online or by calling (305) 935-4440 to schedule your consultation.
More blog posts:
Florida Bankruptcy Judge Denies Creditor’s Accrued Interest, Attorneys’ Fees Claims in Storage Facility Owner’s Chapter 11 Case, Florida Business Lawyers Blog, May 11, 2016
South Florida Hotel Owner Forced to Pay Default Interest Rate for $31.5M Loan, Florida Business Lawyers Blog, Feb. 11, 2016