Illinois Prejudgment Interest Update: Prejudgment Interest Statute Held Unconstitutional
Last year, we reported extensively on the passage of Illinois’s prejudgment statute, 735 ILCS 5/2-1303(c). See “Illinois Legislature Passes Bill Amending Judgment Interest Statute to Impose Prejudgment Interest in Tort Actions,” January 2021; “Illinois Prejudgment Interest Legislation – UPDATE,” March 2021; “Illinois Prejudgment Interest – June Update,” June 2021.
To recap, the statute imposes prejudgment interest in all actions brought to recover damages for personal injury or wrongful death as follows:
Prejudgment interest will accrue “on all damages, except punitive damages, sanctions, statutory attorney’s fees and statutory costs.”
Prejudgment interest will begin to accrue “on the date the action is filed.” However, if the plaintiff voluntarily dismisses the action and refiles, “the accrual of prejudgment interest shall be tolled from the date the action is voluntarily dismissed to the date the action is refiled.”
Prejudgment interest will be imposed at the rate of 6 percent per year and will not accrue “for longer than 5 years.”
“[N]either the State, a unit of local government, a school district, community college district, nor any other governmental entity is liable to pay prejudgment interest in an action brought directly or vicariously against it by the injured party.”
“For any personal injury or wrongful death occurring before the effective date of this amendatory Act” – July 1, 2021 – “the prejudgment interest shall begin to accrue on the later of the date the action is filed or the effective date of this amendatory Act.”
Finally, the statute includes provisions for capping prejudgment interest within the context of settlement offers:
Where the judgment is greater than the defendant’s highest written settlement offer made within 12 months after the filing of the action or the effective date of the bill (July 1, 2021), whichever is later, and that settlement offer is either not accepted or is rejected by the plaintiff within 90 days after the date of issuance, prejudgment interest shall accrue only on the difference between the amount of the judgment (minus punitive damages, sanctions, statutory attorney’s fees and statutory costs) and the amount of the settlement offer.
Where the judgment is equal to or less than the defendant’s highest written settlement offer made within 12 months after the filing of the action or the effective date of the bill (July 1, 2021), whichever is later, and that settlement offer is either not accepted or is rejected by the plaintiff within 90 days after the date of issuance, no prejudgment interest shall be added to the judgment.
Since the prejudgment interest statute took effect on July 1, 2021, numerous constitutional challenges were raised in cases pending in the Circuit Court of Cook County. These challenges were consolidated for decision by Judge Marcia Maras and on May 27, 2022, Judge Maras held in Hyland v. Advocate Health and Hospitals Corp., et al., No. 17 L 003541, that the prejudgment interest statute is unconstitutional. Judge Maras reasoned as follows:
The prejudgment interest statute violates defendants’ rights to trial by jury as protected by Article I, §13 of the Illinois Constitution of 1970.
Article I, §13 of the Illinois Constitution of 1970 provides that “the right of trial by jury as heretofore enjoyed shall remain inviolate.” Judge Maras observed that the Illinois Supreme Court has interpreted this language to indicate that the drafters of the Illinois Constitution of 1970 intended that certain characteristics of a jury trial are to be maintained, “[one] of those characteristics being the right of the jury to determine damages.” (Order, p. 4) Accordingly, Judge Maras concluded that the statute “violates the fundamental right to jury trial as it improperly strips the function and role of the jury in assessing all issues, including damages, and instead requires an award of prejudgment interest after a verdict that exceeds the defense’s time-limited [settlement] offer” (Order, p. 4):
The [statute] was enacted to purportedly permit an injured party to be made whole for their injury from the time of the injury until judgment is entered. The requirement that prejudgment interest be added to a jury’s award removes the jury from determining questions of fact as to what is reasonable and just compensation for a party’s injuries and conditions a defendant’s right to a jury trial on the payment of a penalty. This purpose cannot be construed to advance any compelling State interest.
Further, the legislature could have used the more restrictive means of permitting the jury discretion to consider and award prejudgment interest. By requiring a court to automatically add prejudgment interest when the verdict exceeds defendants’ time-limited offer, the legislature removed a litigant’s right to have damages decided by the jury.
The [statute] does not pass strict scrutiny and is unconstitutional. (Order, p. 7)
The statute violates the prohibition against special legislation set out in Article IV, §13 of the Illinois Constitution of 1970.
The prohibition against special legislation set out in Article IV, §13 of the Illinois Constitution of 1970 provides that “[the] General Assembly shall pass no special or local law when a general law is or can be made applicable. Whether a general law is or can be made applicable shall be a matter for judicial determination.” Judge Maras noted that the Illinois Supreme Court has established that this clause prohibits the General Assembly from conferring a special benefit or privilege upon one person or group and excluding others that are similarly situated. Here, Judge Maras concluded that the prejudgment interest statute impermissibly benefits and penalizes similarly situated parties to tort litigation and thus violates the special legislation clause.
As to plaintiffs, the prejudgment interest statute awards prejudgment interest only to personal injury and wrongful death plaintiffs as opposed to all tort plaintiffs. “The [statute] divides tort parties into two groups: parties to personal injury and wrongful death actions who are subject to prejudgment interest, and all other tort parties who are not,” Judge Maras wrote. “It clearly and arbitrarily favors personal injury and wrongful death plaintiffs and is not rationally related to any State interest.” (Order, p. 9) On this point, Judge Maras rejected the plaintiff’s argument that the prejudgment interest statute “is an antidote to the litigation strategy of many defendants and their insurers who refuse to engage in meaningful settlement negotiations until every possible attempt to avoid the inevitable has been made,” such that “when trials are long delayed, inflation erodes the real value of a plaintiff’s award” (Order, p. 6):
In Best, the Supreme Court wrote “the fact that a problem exists does not permit the adoption of an arbitrary or unrelated means of addressing a problem.” 179 Ill. 2d at 398. Here, the [statute] discriminates in favor of personal injury and wrongful death plaintiffs alone by granting a substantial benefit upon them while excluding all similarly situated tort plaintiffs. As defendants contend, this classification of personal injury and wrongful death plaintiffs as being the only ones to receive prejudgment interest is not sufficiently related to the “evil” to be obviated because other tort plaintiffs – those with privacy, emotional distress, fraud, conversion, attorney malpractice, etc., actions – also desire to be fully compensated for the injuries that they themselves sustained. (Order, p. 8)
Judge Maras found that the prejudgment interest statute also creates impermissible classifications of defendants. “[The] classification of personal injury and wrongful death defendants as the only defendants paying prejudgment interest, as against all other tort defendants, corrects nothing as these other tort defendants also enjoy the funds that are purportedly being deprived from the other tort plaintiffs. Additionally … all tort cases cause congestion of courts and using an arbitrary classification of only personal injury plaintiffs to receive prejudgment interest would not encourage early settlements or relieve congestion for all other tort actions.” (Order, p. 8; italics in original) Judge Maras found further that the prejudgment interest statute also discriminates among defendants to the same personal injury or wrongful death action:
Pursuant to the [statute], a defendant must extend an offer to settle within one year of the filing of the action. Defendants who are served more than a year after the case is filed are arbitrarily penalized and deprived of any potential benefit afforded by the settlement offer. Instances of delays in service of defendants, the filing of the required healthcare professional’s report (735 ILCS 5/2-622(a)(2-3)) or entry of a HIPAA order to name a few, will act to prevent even a diligent defendant named in the original action from developing knowledge about the case necessary to evaluate a fair settlement offer. This Amendment penalizes defendants regardless of whether they contributed to any delay and may allow a not so diligent plaintiff to reap the advantage of prejudgment interest even where that plaintiff has dragged their feet in the litigation. Unlike some prejudgment interest statutes from other states, the [statute] provides no vehicle in which to measure which party may be at fault for any delay that may have occurred. (Order, p. 9; italics in original)