UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CONSTANCE MCCLUNG,

Plaintiff-Appellee,

v.

No. 95-1106

WILLIAM MASSIE SMITH, JR.; GILLIAM,

SCOTT & KRONER, P.C.,

Defendants-Appellants.

CONSTANCE MCCLUNG,

Plaintiff-Appellant,

v.

No. 95-1187

WILLIAM MASSIE SMITH, JR.; GILLIAM,

SCOTT & KRONER, P.C.,

Defendants-Appellees.

Appeals from the United States District Court

for the Eastern District of Virginia, at Richmond.

Robert E. Payne, District Judge.

(CA-93-549)

Argued: March 4, 1996

Decided: June 19, 1996

Before MURNAGHAN and ERVIN, Circuit Judges, and YOUNG,

Senior United States District Judge for the District of Maryland,

sitting by designation.

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Affirmed in part and remanded in part by unpublished per curiam

opinion.
COUNSEL

ARGUED: William DeLaney Bayliss, WILLIAMS, MULLEN,

CHRISTIAN & DOBBINS, Richmond, Virginia, for Appellants.

Thomas E. Albro, TREMBLAY & SMITH, L.L.P., Charlottesville,

Virginia, for Appellee. ON BRIEF: Robert Temple Mayo, WILLIAMS, MULLEN, CHRISTIAN & DOBBINS, Richmond, Virginia,

for Appellants. John K. Taggart, III, Patricia D. McGraw, TREMBLAY & SMITH, L.L.P., Charlottesville, Virginia, for Appellee.

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Unpublished opinions are not binding precedent in this circuit. See

Local Rule 36(c).

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OPINION

PER CURIAM:

The instant appeal concerns an attorney malpractice action brought

in federal district court under diversity jurisdiction by Constance

McClung, a client, against William Massie Smith, Jr., her attorney,

and his law firm, Paxson, Smith, Gilliam, & Scott P.C. (collectively

"the defendants").1 McClung first retained the services of Smith to

conduct an accounting of alleged misuse of her separate assets by her

then husband, John Lowe, and subsequently, to represent her in a

divorce from Lowe.

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1 Only days before oral argument, the court was informed that Smith

had died since the district court trial. As of oral argument before this

court, no one had been appointed to represent his interests. The court has

received no filing indicating that a personal representative has been

appointed in order that he or she could be substituted for Smith pursuant

to Rule 43 of the Rules of Appellate Procedure. The parties represented

to the court at oral argument, however, that Smith's personal estate

would not be subject to any judgment. Hence, Smith's estate will not be

affected by this opinion.

 2
McClung filed a lawsuit against Smith and his law firm alleging

malpractice for failing to obtain an accounting and negligent misrepresentation in her divorce. After a non-jury trial, the district court in

a thorough and well-reasoned opinion ruled that the defendants had

committed malpractice in both the accounting matter and divorce proceeding. The district court awarded damages of $211,677.43 for the

failure to obtain an accounting and $257,520 for malpractice in the

divorce proceeding. The district court also awarded McClung

$129,171.64 in prejudgment interest calculated with the average

prime interest rates from January 1, 1991 to the date of judgment,

December 20, 1994, and postjudgment interest at the statutory rate

from the date of judgment until it is paid. The defendants have

appealed. McClung has cross-appealed arguing that the district court

erred in calculating her prejudgment interest when it applied the average prime interest rate instead of the Virginia statutory rate of interest.

The defendants contend that they did not commit malpractice as to

the accounting because McClung had no legal entitlement to an

accounting from Lowe. They further argue that the district court committed multiple errors in calculating damages for malpractice in the

divorce proceeding. Based on our extensive review of the record and

our consideration of the parties' arguments, we find no error in and,

therefore, adopt the district court's conclusions, with the exception of

the interest rate applied to the award of prejudgment interest.2

State law governs the award of prejudgment interest in diversity

cases. United States v. Dollar-Rent-A-Car Systems, Inc., 712 F.2d

938, 940 (4th Cir. 1983). The Virginia Code allows a jury or a court

sitting without a jury to award prejudgment interest in an action at law

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2 We wish to clarify one matter. The defendants place a great deal of

reliance on the argument that no accounting was due because the funds

Lowe spent were marital and were used to pay off marital debts. We find

that regardless of whether the funds he spent became marital funds

through commingling or remained separate and regardless of whether the

funds were used to pay off marital or separate debt, that argument misses

the point that Lowe also misused his wife's separate funds, which were

entrusted to him under a fiduciary relationship. He did not use the separate funds for the limited purposes for which McClung entrusted them to

him and, as a result, McClung's separate funds were diminished.

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or a suit in equity. Va. Code Ann. § 8.01-382 (Michie 1992).

McClung requested prejudgment interest at the statutory rate of 8%

from March 1, 1989 to July 31, 1991, and 9% thereafter. The district

judge, however, determined that interest should start only as of the

date any judgment from the divorce proceedings would have become

final, approximately January 1, 1991.3 He further determined that the

actual interest rate was entrusted to the discretion of the court,

although circumscribed at its upper limit by the statutory rate. He,

therefore, applied the average prime interest rate, which for most of

the relevant time period was less than the Virginia statutory rate

applicable to prejudgment interest.

In applying the average prime interest rate, the district judge relied

on the Fourth Circuit's holding in Dollar Rent-A-Car that where federal law applies, the determination of the rate of interest is a matter

left to the discretion of the trial court and not determined by state law.

712 F.2d at 941. In Dollar Rent-A-Car, however, the court was not

applying state law because it was not sitting with diversity jurisdiction. Id. Here, jurisdiction is based on diversity of citizenship. Thus,

Virginia state law clearly applies. Indeed, the district judge awarded

prejudgment interest pursuant to the Virginia Code§ 8.01-382. But,

he failed to apply the statutory rate of interest provided for in the Virginia Code at § 6.1-330.54 of 8% per annum through July 31, 1991,

and 9% per annum thereafter. Va. Code Ann. § 6.1-330.54 (Michie

1993). Instead, the district judge applied the average prime interest

rate, which, as previously stated, was less than the statutory rate for

most of the relevant time period. The district court erred, as a matter

of law, by not applying the statutory rate of interest. On remand, the

district court should recalculate the prejudgment interest using the

Virginia statutory rate of interest.

Accordingly, we

AFFIRM IN PART AND REMAND IN PART.

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3 McClung has not raised the date the judge chose as a grounds for

appeal. Thus, we adopt January 1, 1991 as the date from which prejudgment interest should begin to run.

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