DeLong Corp. v. Morrison-Knudsen Co.

• Decision Date: 17 December 1963
• Docket Number: MORRISON-KNUDSEN
• Citation: 244 N.Y.S.2d 859,20 A.D.2d 104
• Parties: DeLONG CORPORATION, Plaintiff-Respondent, v.COMPANY, Inc., Defendant-Appellant.
• Court: New York Supreme Court — Appellate Division

Page 859

244 N.Y.S.2d 859

20 A.D.2d 104

DeLONG CORPORATION, Plaintiff-Respondent, v. MORRISON-KNUDSEN COMPANY, Inc., Defendant-Appellant.

Supreme Court, Appellate Division, First Department.

Dec. 17, 1963.

Emil V. Pilz, New York City, of counsel (Robert B. Jarvis, Stanley J. Norton, J. Edward Davey, Jr., and Eugene Schaffel, New York City, with him on the brief; Nevius, Jarvis & Pilz, New York City, attorneys), for defendant-appellant.

Edward J. Ennis, New York City (Clifford Forster, New York City, John L. Ingoldsby, Jr., and Patrick J. Head, Washington, D. C., with him on the brief), attorney for plaintiff-respondent.

Before BREITEL, J. P., and RABIN, McNALLY, EAGER and STEUER, JJ.

BREITEL, Justice Presiding.

Plaintiff recovered a jury verdict for $850,000 in an action in tort for unfair competition and inducement of a breach of contract. To this award interest was added by Special Term, on motion made subsequent to the verdict, resulting in an aggregate judgment of $1,173,351. This Court is affirming the judgment in all respects (20 A.D.2d 625, 627, 245 N.Y.S.2d 953) and it is only with respect to the post-verdict addition of interest that it is desirable to comment.

The issue is whether a plaintiff victimized by a business tort of the nature pleaded and proved in this action is entitled to have interest included as a matter of right on the damages assessed, measured from the date on which the action was begun. It is concluded that it is so entitled, not because enforcement of a contract is involved or because the damages 'flow' from a breach of contract, but because, in the case of intentional tort resulting in pecuniary injury measurable by economic standards and not involving personal injuries, interest must be added if the victim of the tort is to be made whole. The computation may be from the date the action was commenced, because the evidence discloses that the lost profits may have accrued at about that time.

Defendant tortiously obtained and utilized confidential information of the plaintiff from a former employee of plaintiff in violation of a restrictive covenant made by the faithless employee. The information involved the cost and the manner of constructing and installing jacks which raise and lower large weight-bearing platforms situated over water, such as docks and off-shore 'Texas Towers' designed as oil-drilling sites or radar stations. As a result of the tort the jury found that defendant, to the exclusion of plaintiff, received a profitable $16,431,000 government defense contract to construct two off-shore radar stations. It fixed the damages to plaintiff, that is, the loss of profits, at $850,000. The verdict depended upon a finding of intentional conduct by defendant with knowledge of the significant facts. The facts are further described in the opinion at Special Term (38 Misc.2d 508, 237 N.Y.S.2d 216), and are fully detailed in the opinions in the related federal action against the former employee (De Long Corporation v. Lucas, D.C., 176 F.Supp. 104 [Bryan, J.], affd. 2 Cir., 278 F.2d 804 [per Friendly, C. J.], cert. den. 364 U.S. 833, 81 S.Ct. 71, 5 L.Ed.2d 58). ¹ The cases involve a dramatic narrative of commercial piracy.

Considerable confusion has existed in the past in this state concerning the allowability of interest, for the period before judgment, on damage awards because of distinctions laid down in the cases. The cases categorize between personal and property injuries, and between intentional and non-intentional injuries. There are also classifications dependent on whether such interest might be added as a matter of right, as a matter of discretion (by the jury or other fact-finder), or not at all. When the interest is allowed as a matter of right it must be added to the assessed damages, and this may be done after the verdict is returned. (See 1950 Report of N.Y.Law Rev.Comm., pp. 105-126; 5 Weinstein, K and M, N.Y.Civ.Prac. pp5001.01-5001.09.) To be precise the question is whether interest should be allowed from the date of the wrong to the date of judgment, there being, of course, no dispute that interest runs on the judgment award. Fortunately, the confusion, somewhat allayed in recent years, need not and should not be invoked in this case.

Special Term relied on section 480 of the Civil Practice Act then applicable (succeeded by CPLR § 5001[a] in modified form). ² The statute, as amended in 1927, directed the award of interest in any action 'for the enforcement of or based upon breach of performance of a contract.' Special Term brought the action within the statute by concluding that the damages in this tort action for unfair competition and inducement to breach contract flowed from the breach of the contract by the former employee and that the tort action was 'based upon breach of performance of a contract'. Resort need not be had to such an 'extremely expansive reading' (5 Weinstein, K and M, N.Y.Civ.Prac. p5001.04, supra). But, apart from the statute, plaintiff is entitled to interest as a matter of decisional law. This permits allowance of interest on the damage award in the case of intentional torts affecting external economic interests and not involving personal injuries. The fact is that section 480 never purported to cover the field of interest allowance, and the 1927 amendment was intended only to remove difficulties in allowing interest upon unliquidated damages (Flamm v. Noble, 296 N.Y. 262, 266, 72 N.E.2d 886, 887, 171 A.L.R. 812).

It has been the settled rule that interest must be allowed as a matter of right on recoveries for intentional tort with respect to property and property rights (Flamm v. Noble, supra, 296 N.Y. at 268, 72 N.E.2d at 888). With respect to injuries to property resulting from negligence, New York for a long time has had a peculiar rule. The allowance of interest in that case, up until the effective date of CPLR, was left to a discretionary finding by the jury or other fact-finder (Wilson v. City of Troy, 135 N.Y. 96, 104-105, 32 N.E. 44, 46, 18 L.R.A. 449). In all personal injury actions, whether resulting from intentional tort or not, the plaintiff has not been entitled in any circumstance to recover interest on the assessed damages (see 1950 Report of New York Law Rev. Comm., pp. 105-126, supra, containing an exhaustive analysis and collection of cases to date covering the right to interest in all categories of damage recovery).

Defendant correctly points out that the Court of Appeals in Purcell v. Long Is. Daily Press Pub. Co., 9 N.Y.2d 255, 213 N.Y.S.2d 425, 173 N.E.2d 865, made clear that its prior holding and dicta in the Flamm case, supra, were not to be construed as abolishing the distinction between non-intentional and intentional torts. While this is true, it makes no difference in this case, because neither the Flamm nor the Purcell case detracts from the rule, if only the modern cases be properly analyzed and classified, that with respect to intentional torts (in other than personal injury cases) the injured plaintiff is entitled to interest as a matter of right. Indeed, even after CPLR the rule in this respect was not changed. As a matter of fact the New York rule, before CPLR, except for the distinction with respect to non-intentional injury to property, was similar to the rules which obtain generally in common law jurisdictions. Thus, Restatement, Torts, § 913, states the rule with respect to interest as follows:

'913. INTEREST

'(1) Except where the plaintiff can and does elect the restitutional measure of recovery, he is entitled to interest upon the amount found due

'(a) for the taking or detention of land, chattels or other subjects of property, or the destruction of any legally protected interest therein, where the valuation can be ascertained from established market prices, from the time adopted for their valuation to the time of trial, or

'(b) except as stated in Subsection (2), for other harms to pecuniary interests from the time of the accrual of the cause of action to the time of trial, if the payment of interest is required to avoid an injustice.

'(2) Interest is not granted upon an amount found due for bodily harm, for emotional distress, or for injury to reputation, but the time which has elapsed between the harm and the trial can be considered in determining the amount of damages.'

(Compare 13 N.Y.Jur., Damages, §§ 135-138; 7 Carmody-Wait, Cyc. of N.Y.Prac., Judgments, § 37; 25 C.J.S. Damages § 92[c]; Anno. Interest on Amount of Damage,...