Opinion
No. 1:02-1030-T
October 1, 2003
ORDER DISMISSING PLAINTIFF'S CLAIM FOR PREJUDGMENT INTEREST
Plaintiff filed this wrongful death and personal injury diversity action against defendants pursuant to 28 U.S.C. § 1332. The case arises from an accident that resulted in the death of Michael Holliday, and caused bodily injury to Donna Holliday on August 31, 2001, in Hardin County, Tennessee. In her second amended complaint, Plaintiff asserted a claim for prejudgment interest. Defendant William C. Mann, Inc., filed a motion to dismiss the prejudgment interest claim, arguing that Tennessee law does not permit a personal injury plaintiff to recover prejudgment interest. Plaintiff filed a response to that motion, and Defendant replied to that response.
"In a diversity action, a federal court is bound by state law on the question of prejudgment interest." Sterling v. Velsicol Chem. Corp., 855 F.2d 1188, 1213 (6th Cir. 1988) (citations omitted). Tennessee state law is the applicable state law in this case because Tennessee has the most significant relationship to the occurrence and the parties. See Hatawav v. McKinly, 830 S.W.2d 53, 59 (Tenn. 1992). Therefore, whether Plaintiff may recover prejudgment interest depends upon whether Tennessee state law authorizes a plaintiff to recover prejudgment interest in a personal injury action.
"It is a longstanding principle of Tennessee common law that prejudgment interest cannot be awarded on personal injury claims,"Velsicol, 855 F.2d at 1215. The Tennessee Code provides that a court is authorized to award prejudgment interest where the statutory and common law of Tennessee, as it existed on April 1, 1979, allows such interest. Tenn. Code Ann. § 47-14-123 (2002). On April 1, 1979, "no statutory or common law in Tennessee provide[d] for prejudgment interest on compensatory awards for physical or emotional damages." Velsicol, 855 F.2d at 1214.
The statutory text provides:
Pre-judgment interest, i.e., interest as an element of, or in the nature of, damages, as permitted by the statutory and common laws as of April 1, 1979 may be awarded by courts or juries in accordance with the principles of equity at any rate not in excess of the maximum effective rate of ten percent (10%) per annum. . . .
Tenn. Code Ann. § 47-14-123 (2002).
In concluding that Tennessee law does not permit prejudgment interest, the Sixth Circuit explained:
In Louisville Nashville Railroad v. Wallace, 91 Tenn. 35, 17 S.W. 882 (1891), the Supreme Court of Tennessee refused to affirm a prejudgment interest award, finding that personal injury damages are defined as and are limited to "pain, suffering, and disability to date of judgment and prospectively beyond, it is intended to be and is the full measure of recovery and cannot be supplemented by the new element of damages for detention of this sum from the date of the injury." Id. at 37, 17 S.W. at 883. The Tennessee Supreme Court held that personal injury cases are not governed by the same rule as that involving the destruction, conversion, or misappropriation of property where prejudgment interest may be awarded in the court's discretion. . . . The Wallace decision has not been overruled nor has its result been changed by statute.Id. at 1215 (internal quotations omitted).
The Tennessee Court of Appeals has applied this same reasoning in two recent decisions. In McKinley v. Simha, the plaintiff brought a medical malpractice suit alleging personal injuries and obtained a jury verdict of $300,000.00. No. W2001-02647-COA-R3-CV, 2002 WL 31895715 at *2, *4 (Tenn.Ct.App. Dec. 31, 2002). The trial court granted plaintiff s motion for prejudgment interest, but the Court of Appeals reversed the trial court. Id. at *4. The Tennessee Court of Appeals, like the Sixth Circuit, reasoned that Wallace had not been overruled and was the rule at common law on April 1, 1979. Id. at *23. The Court held that "an award of prejudgment interest in [a personal injury] case is not authorized by statute." Id. The Court of Appeals has also reached the same conclusion for wrongful death actions. See Hollis v. Doerflinger, No. M2002-00220COA-R3-CV, 2003 WL 21266788 at *4 (Tenn.Ct.App. June 3, 2003) (application for permission to appeal filed July 25, 2003).
Plaintiff argues that the Tennessee Supreme Court would rule that there is no per se prohibition against prejudgment interest in wrongful death and personal injury cases. Plaintiff submits that the Tennessee Supreme Court has abandoned the logic of Wallace and "laid the foundation for plaintiffs in personal injury and wrongful death cases to recover prejudgment interest." (Pl.'s Resp. at 3-4.). Plaintiff points to two Tennessee Supreme Court decisions, Spencer v. A-1 Crane Services. Inc., 880 S.W.2d 938 (Tenn. 1994) and Myint v. Allstate Ins. Co., 970 S.W.2d 920 (Tenn. 1998), to support her position. In these cases, the Tennessee Supreme Court has construed Tennessee Code Annotated § 47-14-123 to give trial courts greater discretion in awarding prejudgment interest. See Spencer, 880 S.W.2d at 944; Myint, 970 S.W.2d at 927-28. Plaintiff maintains that Tennessee law permits a court to award prejudgment interest if the court is persuaded that the award is justified by equitable considerations.
Plaintiff correctly states the law; however, the greater discretion afforded to trial courts in granting awards of prejudgment interest does not overrule the statutory prohibition of prejudgment interest in personal injury and wrongful death cases. Myint only permits courts greater discretion in awarding prejudgment interest in cases in which the courts already have statutory or common law authority to award prejudgment interest.
Plaintiff also submits that the Tennessee Court of Appeals has rendered conflicting decisions on this issue. In Brough v. Adcroft, No. W2001-00786-COA-R3CV, 2002 WL 256739 (Tenn.Ct.App. Jan. 17, 2002), the Tennessee Court of Appeals permitted prejudgment interest on an arbitration award in a personal injury case involving claims under an uninsured motorist policy that went through two arbitration proceedings. Id. at *1-*4. The plaintiffs were awarded $140,000 in the first arbitration proceeding. Id. at *1. On plaintiffs' motion, the initial arbitration award was vacated due to an appearance of impropriety in the arbitration proceedings. Id. The plaintiffs were then awarded $245,000 at the second arbitration. Id. The trial court and the Court of Appeals determined that "[t]hese circumstances clearly place equity on the Broughs' side and support their claim for prejudgment interest." Id. at *4.
Defendant William C. Mann, Inc. submits two explanations for why the Court of Appeals permitted prejudgment for the Brough's personal injury arbitration award. First, the Defendant asserts that Brough involved an arbitration award and never went to trial. While this is a significant difference between Brough and McKinley and Hollis, this difference does little to explain why the prejudgment interest was appropriate for the Broughs. The Defendant also offers as an explanation that the Tennessee Court of Appeals simply made an error in the Brough decision. While this explanation is not entirely satisfying, it appears to be reasonable. The Court of Appeals rendered the McKinley and Hollis decisions after theBrough decision. It is noteworthy that Brough, a case involving prejudgment interest on a personal injury claim, was not cited by the Court of Appeals in either McKinley or Hollis, cases which also involved prejudgment interest on personal injury claims.
Any conflict between these unreported decisions, however, does not weigh heavily in the court's decision. While a federal court should attribute "some weight" to the decisions of intermediate state courts, a federal court is not bound by those decisions when convinced by other "persuasive data" that the state's highest court would hold otherwise. Commissioner of Internal Revenue v. Estate of Bosch, 387 U.S. 456.464-65 (1967). Based upon the Tennessee General Assembly's prohibition of prejudgment interest for personal injury claims as provided in Tennessee Code Annotated § 47-14-123 and the Sixth Circuit's holding in Velsicol the court is convinced that the Tennessee Supreme Court would hold that a plaintiff cannot recover prejudgment interest in a personal injury or wrongful death case. Accordingly, Defendant William C. Mann, Inc.'s motion to dismiss Plaintiff's prejudgment interest claim is GRANTED.
IT IS SO ORDERED.