What is the correct post-judgment interest rate in Texas?

Posted by Scott Stolley, Thompson & Knight

As with many legal questions, the answer depends. The Texas Supreme Court recently reinforced this in Hooks v. Samson Lone Star, L.P., No. 12-0920, 2015 WL 3933380 (Tex. Jan. 30, 2015).

The oil-and-gas leases at issue state that interest will accrue on past due royalties "at the maximum rate allowed by law." The Supreme Court ruled that this falls under Texas Finance Code section 304.002, which says that when a contract provides for interest, a judgment on that contract will accrue post-judgment interest at the lesser of 18% or the rate specified in the contract. The Court held that the post-judgment interest rate on the past due royalties in that case was 18%, since that was the "maximum rate allowed by law."

But the Court also addressed other contract damages for which the leases did not state an interest rate. Those damages fall under Texas Finance Code section 304.003, which is the catch-all provision for almost all other judgments. Section 304.003 sets the rate at the prime rate published by the Federal Reserve, not to fall below 5% or exceed 15%.

So in drafting a judgment award of post-judgment interest, it is important to distinguish between (a) contract damages for which the contract sets an interest rate, and (b) all other types of damages, including contract damages for which the contract does not set an interest rate.