Tuesday, March 3, 2026
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Court of Appeal:
Rate of Prejudgment Interest in Quantum Meruit Cases Is 7%
By a MetNews Staff Writer
Prejudgment interest was improperly set at 10% in an action founded on quantum meruit, Div. Two of this district’s Court of Appeal has held, declaring that the state constitutional rate of seven percent applies.
Presiding Justice Elwood Lui authored the unpublished opinion, filed Friday. It says that Los Angeles Superior Court Judge Lynette Gridiron Winston erred in deviating from the default interest provision in Art, XV, §1 of the California Constitution, which provides:
“[T]he rate of interest on any judgment rendered in any court of the State shall be 7 percent per annum.”
Lui wrote:
“Because this action was in quantum meruit, not one for breach of contract, the trial court could only award prejudgment interest at a rate of 7 percent.”
Trial Judge’s Reasoning
In awarding prejudgment interest to Pomona Valley Hospital Medical Center in an action against the healthcare giant Kaiser, Winston ruled on Nov, 15, 2023:
“The Court will apply the prejudgment interest rate of 10% set forth in Civil Code section 3289 to this action for quantum meruit. The Court finds this action to be considered an action on the contract.”
She quoted Court of Appeal Presiding Justice Vaino Spencer of this district’s Div. One (now deceased) as saying in her 1984 opinion in George v. Double-D Foods, Inc.:
“[F]or most purposes, an action to recover the reasonable value of services is considered an action on the contract.
Sec. 3289(b) provides:
“If a contract entered into after January 1, 1986, does not stipulate a legal rate of interest, the obligation shall bear interest at a rate of 10 percent per annum after a breach.”
Winston also pointed out that “Plaintiff clearly brought this motion under subdivision (b) of Civil Code section 3287, which gives the Court the discretion to award prejudgment interest based on a cause of action in contract where the claim was unliquidated.”
Appellant’s View
Kaiser argued on appeal, in a brief prepared by Amir Shlesinger, Kasey J. Curtis, and Michelle L. Cheng of the downtown Los Angeles firm of Reed Smith LLP, that §3287(b) “gave rise to Pomona’s right to (as opposed to rate of) prejudgment interest,” adding that the provision “says nothing about the prejudgment interest rate that applies in such a cause of action.”
The brief remarks that Spencer’s opinion “found a right to prejudgment interest on a quantum meruit claim, but said nothing about the rate.”
The Reed Smith lawyers wrote:
“In this case, that error of 3% in prejudgment interest caused Kaiser to owe $2,306,952.75 more in interest as of the date of the amended judgment, and $4,756.61 more per day thereafter.”
Lui’s Opinion
A 2004 contract between Pomona and Kaiser Foundation Health Plan, Inc. relating to the rate of payment for emergency services rendered to Kaiser subscribers had been terminated by the defendant in 2017; Kaiser began issuing checks in such amounts as it seemed warranted; and Pomona sued for what it considered to be the reasonable value of its services—about $66 million more than the roughly $40 million that had been paid. Lui said that the fact that the express contract had been extinguished rendered §3289(b) inapplicable.
He acknowledged that under Spencer’s opinion in George, “[q]uantum meruit is considered an action in contract” under §3287(b), but continued:
“It does not follow, however, that, simply because this matter meets the definition of an action in contract. Pomona Valley Hospital is entitled to 10 percent prejudgment interest.”
He said that §3287(b) applies only to actual breach-of-contract actions, setting forth:
“It is evident that the instant action in quantum meruit, although an action in contract, is not an action for breach of contract. The proper rate of prejudgment interest is therefore 7 percent.”
Jury’s Verdict Reinstated
Aside from ordering that, on remand, the prejudgment interest be lowered, the Court of Appeal—of far more significance to the parties—held that Winston erred in paring the damages assessed by a jury.
Jurors found that Kaiser had underpaid Pomona in the amount of $66,091,712. However, Wilson—who came into the case after that verdict came in—determined that the judge who had resided at the trial, Michael I. Levanas (now retired), had erred in allowing into evidence the 2004 contract.
Wilson said she would grant a retrial unless Kaiser consented to a reduction in damages to $58,030,564.08; it agreed, but cross-appealed.
Pomona asserted in its cross-appellant’s reply brief, prepared by Daron L. Tooch, Paul R. Johnson, Amanda L. Hayes-Kibreab, Ariana E. Fuller, and David J. Tassa of the downtown Los Angeles firm of King & Spalding LLP:
“Kaiser cannot dispute that the 2004-2017 Agreement was relevant….It was highly relevant. It set Kaiser’s payment rate for emergency services to Kaiser’s members who presented at the hospital until the effective date that Kaiser terminated it; the period at issue started the next day.”
Lui agreed, saying that “the 2004 Contract was properly considered by the jury” in determining what the reasonable value of Pomona’s services were.
The case is Pomona Valley Hospital Medical Center v. Kaiser Foundation Health Plan, Inc., B337963.
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