Opinion ID: 458929
Heading Depth: 1
Heading Rank: 2

Heading: prejudgment interest on refco's counterclaim.

Text: 11 Bone does not challenge the jury's verdict awarding Refco $816,064.53 on the debit account balances. His sole contention with respect to Refco's award is that the magistrate erred by allowing Refco to recover prejudgment interest on its counterclaim. 12 State law governs awards of prejudgment interest in diversity actions. Kinsella v. Leonard, 415 F.2d 574, 578 (10th Cir.1969); see Red Lobster Inns v. Lawyers Title Insurance Corp., 656 F.2d 381, 386 (8th Cir.1981). The Arkansas Supreme Court has held that prejudgment interest must be allowed when the measure of damages is capable of exact determination in amount at the time of the injury. See, e.g., Hopper v. Denham, 281 Ark. 84, 661 S.W.2d 379, 383 (1983); Wooten v. McClendon, 272 Ark. 61, 612 S.W.2d 105, 106 (1981); Lovell v. Marianna Federal Savings & Loan Association, 267 Ark. 164, 589 S.W.2d 577, 578 (1979). 13 At trial, Bone admitted liability for several of the accounts with debit balances totalling some $400,000, but denied liability for the remaining debit account balances Refco sought to recover. He contends that because his ultimate liability to Refco was not established until the conclusion of the trial, the magistrate erred, under Arkansas law, in allowing Refco to recover prejudgment interest on its claims. 1 14 We disagree. The debit balances here were for a sum certain fixed at the time of injury or loss. Indeed, these debit balances are a paradigmatic example of the type of damages which are capable of an exact determination both in time and as to amount. 15 Bone's contention that his liability to Refco was not established until the conclusion of the trial is true, but that does not preclude Refco from recovering prejudgment interest. Bone's argument misperceives the nature of the requirement under Arkansas law that damages be capable of exact determination at the time of injury. The requirement is not that ultimate liability be established at the time of the injury, but rather that the damages be essentially liquidated at that time. Lovell presented an analogous situation that is instructive in this regard. 16 In Lovell, the issue was whether prejudgment interest should have been awarded on three certificates of deposit. Litigation was required to determine who owned the CD's, but the CD's had an exact determinable value. Consequently, the court held that prejudgment interest should have been awarded to the owner of the CD's, even though litigation was required to determine ownership. Similarly, even though the ultimate determination of Bone's liability for each of the accounts Refco alleged he was liable for was a question of fact for the jury, the amount of the debit balance in each account was capable of exact determination at the time it was incurred. Accordingly, Bone's argument on this ground must fail. 2 17 Alternatively, Bone contends that even if Refco is entitled to prejudgment interest, the magistrate erred in allowing Refco to recover interest on its entire claim. He asserts that the magistrate should have applied the interest on the balance rule under which prejudgment interest would be awarded only on the net difference between his claim and Refco's counterclaim after disallowing their separate claims for prejudgment interest. Bone relies on Ralston Purina Co. v. Parsons Feed & Farm Supply, Inc., 416 F.2d 207 (8th Cir.1969) (affirming trial court's application of interest on the balance rule), and argues that equity and fairness require that the interest on the balance rule apply here. 18 We disagree. The trial court in Ralston Purina applied the interest on the balance rule rather than the interest on the entire claim rule solely as an equitable measure necessitated by the plaintiff's bad faith in refusing to recognize its obligations to the defendant. In this case, however, Refco has not acted in bad faith, nor are any of the extraordinary factors justifying application of the interest on the balance rule in Ralston Purina present. We note that Refco's counterclaim was liquidated in nature while Bone's claim was essentially unliquidated. Moreover, Refco's claim for the debit balances in customer accounts was independent of and unrelated to Bone's claim for interest on commissions, attorneys' fees, and lost profits on feeder cattle. These facts call for application of the interest on the entire claim rule, see Ralston Purina, 416 F.2d at 212; Socony Mobil Oil Co. v. Klapal, 205 F.Supp. 388, 392-93 (D.Neb.1962), and the magistrate correctly applied this standard. The mere fact that Bone had also asserted a claim against Refco does not require mutual set-off and thereby defeat Refco's right to prejudgment interest on its claim. Ray E. Friedman & Co. v. Jenkins, 738 F.2d 251, 254 (8th Cir.1984); Socony Mobil Oil Co., 205 F.Supp. at 393. Accordingly, we affirm the award of prejudgment interest to Refco on its counterclaim. 3 19