The Minnesota Supreme Court recently issued a new decision that affects the ability to obtain pre-judgment interest, except as otherwise provided by contract (such as loan documents), and cuts off the ability to obtain that interest (at a rate of 10% per annum in most cases) if a non-contractual claim is not commenced promptly. Creditors and businesses generally should take notice, as this may affect the ability to obtain prejudgment interest on tort claims ranging from fraudulent transfer to preference claims.
In Scheurer v. Shrewsbury, 24 N.W.3d 670 (Minn. 2025), the Supreme Court held that a party must commence a lawsuit no later than within two years after service of a written notice of its claim in order for prejudgment interest to begin accruing from the date of that notice. This holding has significant implications for all businesses, including banks involved in litigation outside of loan enforcement—especially involving situations in which these financial institutions have made notice of a claim but are delaying the commencement of litigation.
Case Background
The Scheurer case arose from a personal injury lawsuit following a car accident. After the plaintiff served a notice of his personal injury claim on the defendant in 2017, he did not commence his case until more than three years later. At trial, the jury awarded him damages, but the district court limited prejudgment interest to the date the lawsuit was filed rather than the earlier notice-of-claim date, citing the two-year requirement in Minn. Stat. § 549.09. On review, the Supreme Court affirmed that prejudgment interest did not begin to accrue until the action was commenced, because the plaintiff waited to do so more than two years after giving notice.
Key Legal Holdings
In its decision, the Supreme Court first confirmed that the statute has a firm two-year commencement requirement. Except as otherwise provided by contract or allowed by law, prejudgment interest accrues from the date of the written notice of claim only if the plaintiff files a lawsuit within two years of the notice. If the plaintiff delays beyond that period, the interest clock does not begin until the lawsuit is actually commenced. Importantly, the Court held that this rule applies even when the parties have exchanged written offers of settlement; such offers do not suspend or override the statutory requirement. The Court then also held that prejudgment interest accrues only on the judgment after deduction of collateral sources from the jury verdict.
Practical Implications
The decision highlights the importance of acting promptly after a written demand has been issued. The plaintiff must then commence a legal action within two years if it wishes to recover prejudgment interest from the date of the notice, except as otherwise provided by contract or allowed by law. Delaying beyond that period will result in interest accruing only from the commencement of the lawsuit, which may significantly reduce the amount recoverable. Indeed, in a recent large case, Kelley v. BMO Harris Bank, the prejudgment interest exceeded $500 million!
The Court’s decision also makes clear that settlement negotiations will not rescue a party who fails to meet the two-year deadline. Even when the parties are actively exchanging offers, the statutory limit remains strict, and interest cannot accrue from the earlier notice unless the action is timely filed. The decision also means that when a lender recovers amounts from insurance or other collateral sources, the lender may not charge interest on those amounts already recovered.
Takeaways
The Minnesota Supreme Court’s decision is a reminder to act promptly once demand letters or notices of claim are issued and expect interest to be calculated only on net recoverable amounts after payments from collateral sources are deducted. Delaying the filing of an action beyond two years can result in a substantial loss of prejudgment interest, which may significantly affect overall damages. All businesses should ensure their internal litigation protocols provide for tracking of demand dates, early involvement of counsel, and careful monitoring of settlement negotiations in light of these clarified restrictions.
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