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Cotton Court Confers Constitutionality to Prejudgment Interest in Illinois First District Appeal

ABSTRACT: In what will likely be the first of multiple challenges to the constitutionality of Illinois’ newly codified Prejudgment Interest Amendment to 735 ILCS 5/2-1303, the Illinois First District Appellate Court in Cotton v. Coccaro, 2023 IL App (1st) 220788, held the Amendment was constitutional. We break down the rationale behind the decision, discuss what this ruling means for the future of opposition to this new Amendment, and provide guidance as to the continuing impact prejudgment interest will have on businesses sued in Illinois.

Less than 24 months after it was enacted, the Illinois Prejudgment Interest Amendment to 735 ILCS 5/2-1303 was challenged on appeal in the Illinois First District Appellate Court in the Cotton v. Coccaro case, with the Court ultimately siding with the plaintiffs’ arguments as to the constitutionality of the Amendment, upholding the prejudgment interest award against the trial defendants.

The Amendment went into effect on July 1, 2021, providing for statutory 6% per year pre-judgment interest to be recovered by a plaintiff on all judgment damages including future damages, with the exception of punitive damages, sanctions, statutory attorney’s fees, and statutory costs. The total prejudgment interest is then added to the judgment amount to be paid by the judgment defendant(s).

While Illinois had historically permitted post-judgment interest to be accrued on unpaid judgment debt, the Amendment created a wholly separate prejudgment interest to be paid to plaintiffs upon receiving a judgment against the trial defendants.

The Court held the Amendment did not infringe on defendants’ right to a jury trial, that prejudgment interest does not circumvent due process or amount to double recovery over the jury verdict for a single injury, and that the Amendment does not constitute special legislation as the it bears a rational relationship to the legitimate governmental interest of promoting expeditious settlement of tort claims to ease the burden on the court system. The Court also brushed aside a challenge to the Amendment under separation of powers analysis and arguments as to technical violations by the General Assembly’s procedure in enacting the bill. Finally, the retroactive application of the Amendment to the active cases that filed prior to the enactment of the Amendment was upheld and similarly found to be constitutional.

The appealing defendants challenged the Amendment’s constitutionality on multiple grounds, including that it invades the jury’s exclusive province to determine damages awarded at trial, that the prejudgment interest constitutes double recovery for a single injury in violation of due process, that the Amendment excludes certain tort plaintiffs or discriminates against defendants joined after the expiration of the one-year deadline under the Amendment, as well as challenging the retroactive application of the law and raising other technical violations by the General Assembly. The Cotton Court ruled against the appealing defendants, finding none of the issues raised made the Amendment unconstitutional.

One issue that was not raised by the appeal in the Cotton case was the lack of clarity of the practical application of how prejudgment interest is to be divided under joint and several liability, with regard to insolvent or non-paying defendants, setoffs of prior settlements by former defendants or nonparties, or other circumstances where it is murky as to who will be ultimately responsible for payment of prejudgment interest under joint and several liability. Also not addressed was how the Amendment allows plaintiffs to delay progress of their case to recover higher amounts of prejudgment interest as no provision addresses tolling for delays in the case caused by the plaintiff. Equally the appeal did not address how the plain language of the Amendment continues to provide an imbalance between the parties, with plaintiffs permitted to make time limited demands, but defendants being forced to leave open offers for 90 days or until explicit rejection. As these issues were not raised in the Cotton case, those questions would not be at issue to any further appeal by the Cotton defendants. Given the lack of clarity on these issues however, it will likely only be a matter of time until guidance is sought on appeal in another case.

Given the constitutional challenges to this Amendment, it seems likely that eventually these issues will be ultimately ruled on by the Illinois Supreme Court to create clarity in all Appellate Districts, whether by the Cotton defendants or another defendant impacted by the Amendment.

Businesses sued in Illinois, particularly within the First District, will continue to face difficulties created by the Amendment, including that the short timeframe required by the Amendment for compliance means that many claims are not fully investigated by the expiration of the statutory deadline, encouraging settlements without fully developing the evidence. As the Amendment will continue to be in effect in Illinois, businesses sued in Illinois will face a challenging path to navigate compliance with the statutory language to avoid or reduce application of the Amendment against a judgment.