“Prejudgment interest is a measure that serves to compensate for the loss of use of money due as damages from the time the claim accrues until judgment is entered, thereby achieving full compensation for the injury those damages are intended to redress.” Schneider v. County of San Diego, 285 F.3d 784, 789 (9th Cir. 2002) (internal quotation and citation omitted); Caldwell v. Life Ins. Co. of N. Am., 287 F.3d 1276, 1286 (10th Cir. 2002) (prejudgment interest compensates “for being deprived of the monetary value of his loss from the time of the loss to payment of the judgment”).

Federal

Under federal law, prejudgment interest is not awarded as a matter of right, but it is ordinarily awarded “absent some justification for withholding it.” U.S. Indus., Inc. v. Touche Ross & Co., 854 F.2d 1223, 1256 (10th Cir. 1988); FDIC v. UMIC, Inc., 136 F.3d 1375, 1388 (10th Cir. 1998); see also United Phosphorus, Ltd. v. Midland Fumigant, Inc., 205 F.3d 1219, 1236 (10th Cir. 2000) (holding that “in the federal context, this Court has adopted a preference, if not a presumption, for pre-judgment interest.”).

The Tenth Circuit has upheld awards of prejudgment interest on default judgment. See Olcott v. Delaware Flood Co., 327 F.3d 1115, 1126 (10th Cir. 2003).

A court “must determine whether an award of prejudgment interest would serve to compensate the injured party,” and then consider “whether the equities would preclude the award of prejudgment interest.” U.S. Indus., 854 F.2d at 1257.

“[T]he ultimate decision whether to award prejudgment interest lies within the court's sound discretion, to be answered by balancing the equities.” Barnard v. Theobald, 721 F.3d 1069, 1078 (9th Cir. 2013) (internal quotation and citation omitted).

Colorado

Under Colorado law, the purpose of prejudgment interest is to recognize the time value of money. Shannon v. Colorado School of Mines, 847 P.2d 210, 213 (Colo. App. 1992). Under C.R.S. § 5-12-102, interest is applied “after [moneys] are wrongfully withheld or after they become due to the date of payment or to the date judgment is entered, whichever first occurs.”

Section 5-12-102 specifically awards interest on money which was due and owed prior to the date of payment or prior to the date judgment is entered. See Riva Ridge Apartments v. Robert G. Fisher Co., 745 P.2d 1034 (Colo. App. 1987) (until payment for services is “expected or demanded,” payment is not due and nonpayment is not a wrongful withholding); see also W.H. Woolley Co. v. Bear Creek Manors, 735 P.2d 910 (Colo. App. 1986).

This statute “represents a legislative determination that persons suffer a loss when they are deprived of [money or] property to which they are legally entitled.” See Mesa Sand Gravel Co. v. Landfill, Inc., 364, 776 P.2d 362 (Colo. 1989).

Prejudgment interest, however, is not applied to a lump sum of damages in an action for breach of contract. Shannon v. Colorado School of Mines, 847 P.2d 210 (Colo. App. 1992). Nor should prejudgment interest be applied to the loss of future income because future lost earnings are not “due” as contemplated by C.R.S. § 5-12-102.

California

Similarly, under California state law, the purpose of prejudgment interest in general is “to provide just compensation to the injured party for loss of use of the award during the prejudgment period – in other words, to make the plaintiff whole as of the date of the injury.” Lakin v. Watkins Assoc. Indus., 6 Cal. 4th 644, 663 (1993).

Where the awarded damages do not correspond to any actual loss incurred by the plaintiff, it would not be the type of award for which prejudgment interest ordinarily is appropriate. Id. (noting awards for “actual loss,” such as “economic damages” or “pain and suffering,” are awards for which “prejudgment interest is in order”) (internal quotation and citation omitted); see also Softkeepers, Inc. v. Regal West Corp., 2023 WL 2024701, at *6 (C.D. Cal. Feb. 7, 2023) (declining to award prejudgment interest under state law, where jury found plaintiff entitled to “disgorgement of [defendant's] profits”; noting such award does “not involve the restoration of anything [plaintiff] previously possessed”) (internal quotation and citation omitted).

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