SACRAMENTO — The Civil Justice Association of California (CJAC) urges legislators working for the state’s economic recovery to support a bill that will make the appeals process more fair for all Californians.
By supporting Senate Bill 393, legislators will send a message that the state is eliminating — at no cost to taxpayers — an unfair and costly irritant that has signaled an anti-business attitude for years.
The bill, authored by Senator Tom Harman (R-Huntington Beach) and sponsored by CJAC, will bring California’s judicial interest rate up to date and ensure that defendants during legal appeals are paying interest at a rate comparable to market rates.
California’s current outdated interest rate rules can result in huge windfalls to plaintiffs and discourage defendants from exercising their fundamental right to appeal.
The bill will set the judicial interest rate at the prime rate plus 2%. The prime rate is the interest rate at which banks lend money to their most creditworthy business customers.
Since 1982, the interest rate in California for prejudgment and postjudgment interest has been fixed at the rate of 10% per year. Most key interest rates today fluctuate between 4% and 7% — far below California’s fixed rate.
“Nowhere in the private sector can anyone find a 10% return on his money. Why reward plaintiffs’ lawyers, who can game the system and receive a windfall in return?” said CJAC President John H. Sullivan. “The current system is unfair — and in these difficult economic times, makes no sense to continue.”
In contemporary litigation, many years can pass from the time a case is filed to the time it goes to trial, and appealing a case can take an additional two or three years. If a California defendant pursues a case to appeal, interest may accrue on the judgment during the entire trial and appeals process. The end result is a staggering payment — in interest alone.
For example, if the appeal of a $1 million judgment took two years to complete and was unsuccessful, a California defendant’s total obligation would be $1.2 million — an increase equal to one-fifth of the original judgment.
Sullivan said the proposal, if approved, will be recognized nationally by business decision-makers. These are the people who, in preparing for economic recovery, will decide how many personnel and facilities to add or retain in California, if any, and how much to develop in a different state.
At least eight states have recognized that stagnant judicial interest rates — especially those that are far higher than current interest rates — are not fair to defendants and don’t make economic sense. Those states, including Alaska, Florida, Illinois, Michigan, New Jersey, Ohio, Texas, and Washington, have adopted legislation basing the judicial interest rate on rates set by the Federal Reserve or the United States Treasury, plus a certain number of percentage points.
Contact: John H. Sullivan
(916) 443-4900