Timely Requests for Prejudgment Interest on Arbitration Awards

Alternative dispute resolution, like arbitration, is becoming ever more popular as the costs to litigate a lawsuit in court increase. However, different procedural rules and deadlines apply in arbitrations, and attorneys and their clients must proceed with caution or else risk giving up significant rights. That was made clear in a recent decision from the Washington Supreme Court.

In Elcon Construction, Inc. v. Eastern Washington University, No. 83690.6, 2012 Wash. LEXIS 242 (March 29, 2012), the court made clear that if a party seeks prejudgment interest on an arbitration award the party must make the request to the arbitrator. In that case the parties submitted their breach of contract claims to arbitration. The arbitrator issued an award for the plaintiff for $1,837,000. However, rather than requesting prejudgment interest at arbitration, the plaintiff filed a motion for prejudgment interest with the arbitrator after the arbitration award had been entered. The arbitrator denied the motion, ruling that he lacked jurisdiction after he issued the arbitration award. The plaintiff then went to the trial court seeking to add on prejudgment interest to the award. However, the trial court also determined it did not have jurisdiction to award interest on the arbitrator’s award.

The Washington Supreme Court agreed with both the arbitrator and the trial court. Citing previous appellate court cases in Washington, the court stated a trial court has no basis for adding prejudgment interest to an arbitration award because that interest was part of the merits of the controversy in the arbitration, and therefore forbidden territory for a court. The court also noted a majority of courts have found that adding prejudgment interest is an inappropriate modification of the arbitrator’s award for the trial court. Thus, the plaintiff was unable to collect prejudgment interest on the principal award of $1,837,000.

This was a costly mistake for the plaintiff that lawyers can learn from. The moral of the story is in arbitrations, always make a request for prejudgment interest to the arbitrator before the arbitrator has issued the arbitration award. Any request after that will be too late.