Written by George C. Swarts, CPA and Kimberly McCall, CPA
Nevada Revised Statutes NRS 17.130 and NRS 99.040 govern the calculation of legal interest in the State of Nevada. Lawyers and financial experts should consider recovering both pre-judgment and post-judgment interest when calculating damages and amounts due to their clients.
Parties to contract disputes or other litigation can wait years between the actual event that triggered their claim for damages, the resolution of their court case establishing their right to payment and the actual payment of monies due for damages. Legal interest provides a mechanism to allow the damaged party to recover losses associated with this time delay.
In the matter of Kerala Properties, Inc. vs. Familian, the Supreme Court of the State of Nevada summarized that “three items must be determined to enable the trial court to make an appropriate award of interest: (1) the rate of interest; (2) the time it commences to run; and (3) the amount of money to which the rate must be applied.” Careful attention must be paid to selecting the proper interest rate and the appropriate time period.
In Nevada, if the contract between the parties includes provisions for interest and its calculation, these terms prevail over the statutory conditions. If the agreement between the parties is silent or no written contract exists, interest is calculated at the Nevada statutory rate. This rate is defined in NRS 99.040 as ‘the prime rate the largest bank in Nevada, as ascertained by the Commissioner of Financial Institutions, on January 1, or July 1, as the case may be, immediately preceding the date of the transaction, plus 2 percent.” The prime rate is posted on the Nevada Division of Financial Institutions website.
In the Kerala Case, the Supreme Court concluded that under NRS 99.040, the rate adjustments on January 1 and July 1 apply only to post-judgment awards. In this same matter, they held that when calculating pre-judgment interest, the interest is fixed at the rate in effect on the date of transaction. Also, the date of transaction, defined as the date the contract was signed not the date expenses were paid, was found to be the appropriate starting date in Kerala because “that was the date when the breaching party incurred obligations to the non-breaching party.”
The inclusion of only post-judgment interest and, accordingly, the omission of pre-judgment interest, could deprive clients of monies rightfully due to them. Then, if the financial expert or attorney were to err in selecting the appropriate interest rate or time period when calculating interest, these mistakes can potentially cost their clients thousands of dollars. Attorneys and financial experts should review case facts and components of the interest calculation thoroughly when determining amounts due.
