NOT RECOMMENDED F OR F ULL-TEXT PUBLICATION F ile Nam e: 12a0076n.06 No. 10-5927 UNITED STAT ES COURT OF AP P EALS F OR THE S IXTH CIRCUIT

L-S INDUSTRIES , INC., P laintif f/ Counter-D efendan t/Appellee

v. J. CHRISTOPHER MATLACK , Defendan t/Counter- P laintif f/ Appellan t

v. WILLIAM HUGHES Counter-D efendan t/Appellee ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ON AP P EAL FR OM THE UNITED STAT ES DIS TRICT COURT F OR THE E ASTERN DISTRICT OF TENNESS EE

O P I N I O N

BEFORE: MOORE and GRIF F IN, Circ uit Jud ges; and QUIST , Senior District Judge. * Quis t, Distr ict Judge. I. B A C K G R O U N D After a four- day jury trial, the jury found that Def endant Matlack had brea ched his fiduciar y duty of loy alty to his former employ er, Plaintiff L -S I ndustries (“L SI ”), and awa rded L SI $131,500. The jury also found that L SI and Counter-De fenda nt Wil liam Hu gh es , President of L SI , had brea ched t h e contra ct acc ording to which Matlack rec eived his bonus compensation. The jury

Honora ble Gordon J

. Quist, United States Senior District J udg e for the Western District of * Michig an, sitting by

desig nation.awarded Matlack $130,500 for his brea ch of contra ct counter -cla im. The district court d en i ed

Matlack’ s motion for prejudg ment interest on his $130,500 jury awa rd. (R. 123.) The sole issue on appea l is whether the district court abused its discretion in denying Matlack prejudg ment interest on his breac h of contra ct awa rd. II. A N A L Y S I S The district court had subject matter jurisdiction in this diversity case pursuant to 28 U.S.C. § 1332. “The re is no dispute that in a diversity action the question of prejudg ment interest must be deter mined under state law.” Daily v. Gusto Rec ords, Inc. , 14 F. Ap p’x 579, 591 (6th Cir. 2001) (citing Mass. Bene

fit Ass’n v. Miles , 137 U.S. 689 (1891)). The award of prejudg ment interest is within the sound discretion of the tria l court, and the decision will not be disturbed upon appellate revie w unless the rec ord reve als a manifest and palpable abuse of discretion. Engert v. Pee rless Ins. Co. , 382 S.W .2d 541, 550-51 (Tenn. Ct. App. 1964); see also Gentek Bldg. Prods., Inc. v. Sherwin-W illiams Co. , 491 F.3d 320, 333 (6th Cir. 2007) and Sparton Tech. Inc. v. Util-Link, LLC , 248 F. App’x 684, 693 (6th Cir. 2007) (apply ing Tenne ssee law). “Ge nera lly stated, the abuse of discret ion standard does not authorize an appellate court to

mere ly substitut e its judgme nt for that of the trial court.” In re Estate of Ladd , 247 S.W .3d 628, 645 (Tenn. Ct. App. 2007) (citing Myint v. Allstate Ins. Co. , 970 S.W .2d 920, 927 (Tenn. 1998)). “A trial court acts within its discretion when it applies the corr ect leg al standard and rea ches a decision that is not clearly

unrea sonable.” Bogan v. Bogan , 60 S.W .3d 721, 733 (Tenn. 2001)

. First, the district court identified the corr ect leg al standard. The Tenne ssee Supreme Court in Myint articulated the following standard r eg ardingthe awa rd of pr ejudg ment interest: Severa l principles guide trial courts in exerci s i n g t h eir discretion to awa rd or deny

2prejudg ment interest. For emost are the principles of equity

. Tenn. Code Ann. § 47-

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- 123. Simply state d, the court m ust decide wh ether the award of prejudgm en t intere st is fai r, given the particular circ um stances o f th e case . I n rea ching an equi t able decision, a court must keep in mind that the purpose of awa rding the interest is to fully compensa te a plaintiff for the loss of the use of funds to which he or she wa s leg ally

entitled, not to penalize a def endant f or wrong doing. Myint , 970 S.W .2d at 927 (citations omitted) (empha sis added) ; see also Tenn. Code. Ann. § 47-14- 123 (authorizing trial courts to award p re j u d g ment interest “in acc ordanc e with principles of equity ”). Moreove r, “[t] rial courts are aff orded a g reat deal of discretion and are entitled to defe renc e reg arding the deter mination of whether to awa rd prejudg ment interest.” Int’l Flight Ctr. v. City of Murfreesboro , 45 S.W .3d 565, 573 (Tenn. Ct. App. 2000) ( citations omitt ed). Second, the district court applied this principle in a rea sonable manner ; the rec ord cer tainly does not reve al a manifest and palpable abuse of discretion. I n acc ord with Myint , the district court said that under the “par

ticular circ umstances” of this case it would be “unfa ir” to awa rd prejudg ment interest t o M at l ack beca use, g iven the jury awa rd, Matlack did not need to be more “fully compensated.” Moreove r, under the circ umstances, awa rding Matlack prejudg ment interest would “pena liz e” L SI , rathe r than more fully compensate Matlack. These are entirely rea sonable asser tions g iven the jury ’s finding s and overa ll decision to awa rd L SI more money than Matlack. I n sum, the district court exercised its discretion by weig hing the equities of the case to decide that prejudg ment interest would be unf

air in this instance. M a tl a c k ’ s a r g u me n ts th a t th e d is tr ict court applied the incorre ct leg al standard are unavailin g . First, in Scholz v. S.B. International, Inc. , 40 S.W .3d 78 (Tenn. Ct. App. 2000), the court g ave three examples where prejudg ment interest may be inappropriate, but it did not lim it a court’s a bility to deny prejudg ement interest in only those three circ umstances. Id. at 83 (“Pre judgme nt interest may

3at times be inappropriate such as . . . .” (empha sis added) ). I ndeed, the three circ umstances in Myint

do “not repr esent an all inclusive list of the rea sons that could justify a court’s denial of prejudg ment interest.” Story v. Lanier , 166 S.W .3d 167, 182 (Tenn. Ct. App. 2004). Second, Matlack’ s argument that the district court applied a Tenne ssee Rule of Civil Procedur e simply beca use the district court used the words “pre vailing parties” is conjec ture. As discus s ed , the district court applied Myint , which is still t he contr olling substantive law in Te nnessee on this matter. III. C O N C L U S I O N The distri ct co u rt did not abuse its discretion by denying Matlack prejudg ment interest. There fore , the district court is AF F IRMED

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