UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SECURITY INSURANCE COMPANY OF 

HARTFORD,

Plaintiff-Appellee,

v.

ARCADE TEXTILES, INCORPORATED;

YORK COUNTY INDUSTRIES, LIMITED,

Defendants-Appellants,

and

NATIONSBANK, N.A.; ABSOLUTELY

TERRY COMPANY, INCORPORATED;

AMERICAN SPIRIT INDUSTRIES,

INCORPORATED; AMERICAN SPIRIT

FASHIONS, LIMITED; BARAS JERSEY,

INCORPORATED; BEATE REALTY  No. 01-2101 CORPORATION; BLOCK’S FASHION

FABRICS, INCORPORATED; BRASKINGS

INCORPORATED; BRITANNIA MILLS,

INCORPORATED; BROOKS TEXTILES,

INCORPORATED; C&L OF NEW YORK

CORPORATION; CHARLENE FABRICS

CORPORATION; CONTEMPORA FABRICS,

INCORPORATED; CREATIVE FABRIC

SERVICES, LLC; CYBER KNITS,

INCORPORATED; DYNASTY USA,

INCORPORATED; ESSEX FABRICS,

INCORPORATED; ETHNIX NEW YORK,

INCORPORATED; FABRIC AND FABRIC,

INCORPORATED; FAVRILE FABRICS OF

FLORIDA, INCORPORATED; KARMAR

FABRICS, INCORPORATED; KNIT IDEAS, 
INCORPORATED; KUTTNER PRINTS, 

INCORPORATED; LA CENTURY

TEXTILES, INCORPORATED; LEAMARK,

INCORPORATED; LIBA FABRICS

CORPORATION; PLAN B TEXTILES,

LLC; PAUL GOTTLIEB & COMPANY,

INCORPORATED; PLAZA TEXTILE

CORPORATION; RG TEXTILE COMPANY,

INCORPORATED; RPJ SPORTSWEAR,

INCORPORATED; ROSS SPORTS WEAR,

INCORPORATED; SPANTECH FABRICS

CORPORATION; SPORTSWEAR,

INCORPORATED; STARENSIER,

INCORPORATED; STYLETEX,

INCORPORATED; SUMMIT KNITTING

MILLS, INCORPORATED; SWINGTIME,

INCORPORATED; SYMPHONY FABRICS

CORPORATION; TODD KNITTING 

CORPORATION; TRIPLE TEX FABRICS;

UNIVERSAL MFG CORPORATION;

VERATEX, INCORPORATED; FABRIC

ZONE, INCORPORATED; AQUATIC KNITS,

INCORPORATED; D. FOXX & COMPANY,

INCORPORATED; EPIC TEXTILES

INTERNATIONAL, LLC; HAMPTON

TRANSFER PRINTS, INCORPORATED;

HLC INDUSTRIES; LJJ INCORPORATED;

MARKBILT INCORPORATED; PICADILLY

FASHIONS; RUBYS COSTUME COMPANY;

RUSSELL A. ROBERTS AND COMPANY;

VOGUE TEXTILES, INCORPORATED;

EUROPEAN AMERICAN BANK;

BASSIRAT, INCORPORATED, d/b/a

Styletex, Incorporated,

Defendants, 

2 SECURITY INSURANCE v. ARCADE TEXTILES
ATLANTIC MUTUAL INSURANCE 

COMPANY; COMMERCIAL UNION

INSURANCE COMPANY; FEDERAL

INSURANCE COMPANY; LIBERTY

MUTUAL INSURANCE COMPANY;

GENERAL ACCIDENT INSURANCE

COMPANY OF AMERICA; HARTFORD

FIRE INSURANCE COMPANY; VIGILANT 

INSURANCE COMPANY; ZURICH

INSURANCE COMPANY; GREAT

NORTHERN INSURANCE COMPANY;

TRAVELERS INDEMNITY COMPANY OF

AMERICA; ADJUSTERS INTERNATIONAL,

Intervenors-Defendants. 

Appeal from the United States District Court

for the District of South Carolina, at Rock Hill.

Joseph F. Anderson, Jr., Chief District Judge.

(CA-98-2545-0-17)

Argued: February 25, 2002

Decided: July 10, 2002

Before WILKINS, NIEMEYER, and KING, Circuit Judges.

Affirmed by unpublished per curiam opinion. 

COUNSEL

ARGUED: David J. Gundling, GUNDLING LAW FIRM, P.A., Pawleys Island, South Carolina, for Appellants. George Terrell Davis,

ROBINS, KAPLAN, MILLER & CIRESI, L.L.P., Atlanta, Georgia,

SECURITY INSURANCE v. ARCADE TEXTILES 3
for Appellee. ON BRIEF: R. Dennis Withers, ROBINS, KAPLAN,

MILLER & CIRESI, L.L.P., Atlanta, Georgia; John T. Lay, ELLIS,

LAWHORNE & SIMS, P.A., Columbia, South Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c). 

OPINION

PER CURIAM: 

Appellants Arcade Textiles, Incorporated (Arcade) and York

County Industries, Limited (York), appeal the resolution of a dispute

over the amount of prejudgment interest owed in this statutory interpleader action, see 28 U.S.C.A. § 1335 (West 1993). We affirm. 

I.

Arcade owned and operated a textile mill in Rock Hill, South Carolina. Located within the mill were equipment and machinery owned

by York and a large quantity of customer goods. On November 3,

1997, a fire destroyed the mill and its contents. 

In connection with its operation of the mill, Arcade had obtained

insurance from Security Insurance Company of Hartford (Security).

As is relevant here, Security insured the business personal property

of Arcade, York, and various other persons and companies for $4.42

million. The policy provided that "[a]n insured loss will be payable

30 days after a satisfactory proof of loss is received, and the amount

of the loss has been established either by written agreement with

‘you’ or the filing of an appraisal award with ‘us’." J.A. 115.

Although the parties dispute the exact date, by some time in the

spring of 1998 it was clear to all concerned that claims would exceed

the policy amount. However, a proof of loss was not filed until July

7, 1998. 

4 SECURITY INSURANCE v. ARCADE TEXTILES
On September 1, 1998, Security filed this statutory interpleader

action naming Arcade; York; NationsBank, N.A. (NationsBank); and

43 other companies as defendants. As was its option, see 28 U.S.C.A.

§ 1335(a)(2), Security provided the district court with a non-interest

bearing bond in the amount of the policy limit. 

In January 2001, NationsBank moved for an order requiring Security to pay interest on the policy proceeds pending resolution of the

interpleader action. Following negotiations between NationsBank and

Security, Security deposited $5,107,849.12 with the court on March

19, 2001. This amount comprised the policy limit, plus $642,849.12

in interest, plus an additional $45,000. The interest amount was calculated by applying to the policy limit an annual rate of six percent,

compounded monthly, from September 1, 1998 to March 1, 2001.

NationsBank and Security agreed on a rate of six percent because it

closely approximated the rate at which interest would have accrued

on the policy proceeds had they been deposited with the district court

at the outset of the interpleader action. 

At a subsequent hearing, NationsBank and Security expressed their

satisfaction with this agreement, but Appellants protested. Appellants

maintained that interest should be calculated using the South Carolina

statutory rate of 8.75 percent and should run from mid-January 1998,

when (according to Appellants) Security knew that claims would

exceed the policy limit. The district court rejected these assertions.

The interpleader action was settled and the policy proceeds were distributed to the various claimants, subject to Appellants’ appeal of the

ruling regarding interest. 

II.

Interpleader is a procedural device that allows a disinterested stakeholder to bring a single action joining two or more adverse claimants

to a single fund. See Chase Manhattan Bank v. Mandalay Shores

Coop. Housing Ass’n (In re Mandalay Shores Coop. Housing Ass’n),

21 F.3d 380, 383 (11th Cir. 1994); White v. FDIC, 19 F.3d 249, 251

(5th Cir. 1994). Interpleader is an equitable remedy designed to protect the stakeholder from multiple, inconsistent judgments and to

relieve it of the obligation of determining which claimant is entitled

SECURITY INSURANCE v. ARCADE TEXTILES 5
to the fund. See 4 James Wm. Moore et al., Moore’s Federal Practice

§ 22.02[1], at 22-8 to 22-9 (3d ed. 2001). 

Statutory interpleader—the type involved here—rests on diversity

of citizenship. See 28 U.S.C.A. § 1335(a)(1); Whirlpool Corp. v. Ritter, 929 F.2d 1318, 1320-21 (8th Cir. 1991) (characterizing statutory

interpleader as "a special brand of diversity jurisdiction"). Accordingly, state substantive law applies under Erie R.R. Co. v. Tompkins,

304 U.S. 64 (1938). See Atlin v. Sec.-Conn. Life Ins. Co., 788 F.2d

139, 142 (3d Cir. 1986) ("Although federal interpleader is rooted in

equitable grounds, use of that procedure does not justify a diversity

court’s rejection of controlling state substantive law."). And, because

prejudgment interest is a matter of state substantive law, see Hitachi

Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 633 (4th Cir. 1999),

South Carolina law governs the award of prejudgment interest here,1

see, e.g., Hartford Accident & Indem. Co. v. Sharp, 87 F.3d 89, 92-

93 (3d Cir. 1996) (concluding that claimant to interpleaded fund was

entitled to prejudgment interest under territorial law); Murphy v.

Travelers Ins. Co., 534 F.2d 1155, 1164-65 (5th Cir. 1976) (looking

to Texas law to determine if prejudgment interest was owed in diversity interpleader action). 

Under South Carolina law, prejudgment interest on an obligation

to pay money accrues at the rate of 8.75 percent per annum "from the

time when, either by agreement or by operation of law, the payment

is demandable, if the sum is certain or capable of being reduced to

certainty, even if the parties do not agree on the amount of the obligation." Brooklyn Bridge, Inc. v. S.C. Ins. Co., 420 S.E.2d 511, 513

(S.C. Ct. App. 1992); see S.C. Code Ann. § 34-31-20(A) (Law. Coop. 1987). The decision whether to award prejudgment interest lies in

the discretion of the court. See Jacobs v. Am. Mut. Fire Ins. Co. of

Charleston, 340 S.E.2d 142, 143 (S.C. 1986). 

Here, Security agreed to pay interest of six percent per annum from

the date it filed the interpleader action until the date it deposited the

policy proceeds with the court. The question presented to the district

court was whether Security should have been required to deposit an

additional sum to equal the amount that would have been earned if

1The parties agree that the substantive law of South Carolina applies.

6 SECURITY INSURANCE v. ARCADE TEXTILES
interest had been calculated at a rate of 8.75 percent. However,

although the dispute of the parties concerned only the rate of interest,

their arguments were posed in terms of the broader question of

whether Security should be obligated to pay prejudgment interest at

all. Having considered the lengthy arguments of the parties, the district court denied Appellants’ request. We cannot say that this ruling

was an abuse of discretion.2

III.

For the reasons set forth above, we affirm the district court.

AFFIRMED

2Thus, the six percent interest paid by Security pursuant to its agreement with NationsBank was more than Appellants were entitled to, not

less. 

SECURITY INSURANCE v. ARCADE TEXTILES 7