Quantum Meruit Claims: Is Interest Mandatory or Discretionary? by Joseph H. Einstein and Jonathan Gardner provides a well written analysis of whether pre-judgment interest is available to attorneys who prevail in a quantum meruit claim for fees. The cases are all over the board, with differences between the Appellate Divisions and even within each individual Appellate Division.
From the article : "Quantum meruit claims are based on a hybrid of law and equity. There is no express contract between the parties, but one is implied because of the course of dealings between them. The cases are in conflict as to whether interest is mandatory or discretionary and the Court of Appeals has yet to weigh in on the issue. In this era, where cases may be pending for years, substantial dollars are at stake."
"Not only is there no consistent jurisprudence resolving this issue to be found in either the state or federal courts, but different panels within the same department have reached different conclusions. Thus, in Ogletree, Deakins, Nash, Smoak & Stewart P.C. v. Albany Steel Inc.,3 the plaintiff law firm sued to recover fees, alleging breach of contract, quantum meruit, and account stated. The causes of action based on contract and account stated were dismissed, but a recovery was obtained on the quantum meruit claim. On the issue of interest, the Third Department stated:
Turning to the issue of interest, we reject defendant’s categorization that plaintiff’s claim is "equitable" and, therefore, any award of interest was discretionary (see, CPLR 5001[a]). Plaintiff’s quantum meruit action is essentially an action at law, inasmuch as it seeks money damages in the nature of a breach of contract, "notwithstanding that the rationale underlying such causes of action is fairness and equitable principles in a general rather than legal, sense" (Hudson View II Assocs. v. Gooden, 222 A.D.2d 163, 168, 644 N.Y.S.2d 512). Thus, Supreme Court correctly determined that it was required to award interest (see, CPLR 5001[a]).
Notwithstanding, seven years later in Precision Foundations v. Ives,4 the plaintiff obtained a recovery in quantum meruit for certain work performed on the defendant’s premises. On the issue of interest, without mentioning its prior decision in Ogletree, Deakins, the Third Department stated:
Turning to the Supreme Court’s award of preverdict interest to plaintiff, we note that such awards are discretionary for a quantum meruit claim (see CPLR 5001[a]). Here, as already indicated, plaintiff waited almost four years after having rendered its services to bring this litigation. Under the particular circumstances herein, we do not find a sufficient basis for a discretionary award of preverdict interest on plaintiff’s quantum meruit claim and, accordingly, reverse that award.
No explanation is offered as to why or how the "required" award in the first instance became "discretionary" in the second.
First Department cases also are at odds. In Ash & Miller v. Freedman,5 the court held that "an award of interest would be mandated in an action by an attorney to recover under a retainer agreement or in quantum meruit for the reasonable value of legal services rendered." However, in Hugh O’Kane Elec. Co., LLC v. Master North America Inc.,6 in affirming an award of interest, the court stated: "This is an action for breach of contract and not, as defendant asserts, an action sounding in quantum meruit." This clearly implies that interest on a quantum meruit claim should not be awarded as a matter of right. And in Leroy Callender, P.C. v. Fieldman,7 the court awarded prejudgment interest on a quantum meruit claim from the date payment was demanded, noting that "we find that plaintiff has established its entitlement" thereto, again suggesting a discretionary, not mandatory, approach."