PER CURIAM:
Rudolf W. Gunnerman appeals the district court's award to Arete Partners, L.P. of prejudgment interest at the statutory rate of five percent to the date of its final judgment. Gunnerman argues that his deposit of Arete's damages into the registry of the district court should prevent the accrual of prejudgment interest at the statutory rate after that date. Because such a result would be inconsistent with the purpose of prejudgment interest and would undermine the rule applied to awards of prejudgment interest by the Supreme Court of Texas, we affirm the judgment of the district court.
Arete Partners, L.P. sued Rudolf Gunnerman for fraud and breach of contract in connection with the sale of securities, and the parties reached a settlement before trial. Gunnerman stopped making settlement payments to Arete, and Arete filed the instant lawsuit against Gunnerman, alleging that Gunnerman had violated the terms of the settlement agreement and asserting causes of action for breach of contract and fraud. After a bench trial, the district court found in favor of Arete on both its fraud claim and its breach of contract claim. The district court concluded that, under either the fraud or breach of contract theory, Arete's actual damages were $1,060,649.27, which was the difference between what Arete was entitled to receive under the settlement agreement and what Gunnerman had already paid Arete. In addition to Arete's actual damages, the district court concluded that Arete was entitled to $500,000 in exemplary damages on its fraud claim. On its contract claim, Arete was entitled to actual damages plus its attorney's fees. The district court required Arete to elect between the fraud and breach of contract theories of recovery before entering a final judgment, and Arete elected to recover based on its fraud claim.
Gunnerman appealed the final judgment granting recovery under the fraud theory of liability. To stay the enforcement of the judgment pending his appeal, Gunnerman asked for, and received, permission to deposit $1,113,469.61 into the registry of the court in lieu of a supersedeas bond. This amount reflected Arete's actual damages—to which it was entitled under either theory of recovery—plus one year's postjudgment interest of $52,820.34. The district court deposited the funds in an interest-bearing account. Gunnerman's appeal was successful, and this court vacated the district court's award of actual and exemplary damages for Arete's fraud claim. Gunnerman, 594 F.3d at 398. This court remanded the case to the district court to allow Arete to elect recovery under its breach of contract claim. Id. This court's mandate in Gunnerman was subsequently amended to allow the district court to award Arete "pre-judgment and post-judgment interest according to law."
On remand, Arete elected to recover on its breach of contract claim. It also
In this diversity case, Texas law governs the award of prejudgment interest. Meaux Surface Protection, Inc. v. Fogleman, 607 F.3d 161, 172 (5th Cir. 2010). To determine Texas law on the accrual and rate of prejudgment interest, this court first looks to the decisions of the Supreme Court of Texas. See Transcontinental Gas Pipe Line Corp. v. Transp. Ins. Co., 953 F.2d 985, 988 (5th Cir.1992) ("In order to determine state law, federal courts look to final decisions of the highest court of the state.").
We review the district court's award of prejudgment interest for an abuse of discretion. Int'l Turbine Servs., Inc. v. VASP Braz. Airlines, 278 F.3d 494, 499 (5th Cir.2002). A district court abuses its discretion when "its ruling is based on an erroneous view of the law or on a clearly erroneous assessment of the evidence." Chaves v. M/V Medina Star, 47 F.3d 153, 156 (5th Cir.1995) (citation omitted).
The issue in this case is whether the district court committed legal error when it awarded Arete interest at the statutory rate from the date of Gunnerman's breach of the settlement agreement to the date of its final judgment awarding Arete actual damages based on a contract theory of recovery. Gunnerman urges this court to conclude that his deposit of the full amount of Arete's actual damages into the court's registry on October 6, 2006, stopped the accrual of prejudgment interest at the statutory rate. Instead, according to Gunnerman, Arete is only entitled to the interest that actually accrued on the funds in the registry.
To address Gunnerman's arguments, we look to the decisions of the Supreme Court of Texas on the purpose of prejudgment interest and the rate at which it accrues. By way of background, the Texas Finance Code defines interest as "compensation for the use, forbearance, or detention of money." TEX. FIN.CODE ANN. § 301.002(a)(4) (West 2006). Recent Supreme Court of Texas decisions place particular emphasis on the fact that prejudgment interest is
In this case, Gunnerman claims that because he deposited funds in the amount of Arete's actual damages into the registry of the district court, there would be no justification for awarding Arete prejudgment interest at the statutory rate as compensation for Gunnerman's use of those funds after that date. This argument overlooks the fact that the interest on the funds in the registry of the court will be used to satisfy Gunnerman's obligation to pay prejudgment interest. So, in a real sense, the money is still working for him. More important, Arete's loss of use of the funds represented by the judgment has in no way been assuaged by Gunnerman's decision to deposit those funds into the registry of the district court. Arete is still unable to use the money, although Arete has security for it. Arete is entitled to be compensated for this lost use, irrespective of whether Gunnerman has the use of those funds.
Having established that Gunnerman's deposit of Arete's actual damages into the registry of the district court did not alter Arete's entitlement to prejudgment interest on those funds, we next turn to the question of the applicable rate of prejudgment interest. Our decision regarding the proper rate of interest is informed by several decisions by the Supreme Court of Texas, some of which have been discussed above.
In Johnson & Higgins, the Supreme Court of Texas addressed whether the calculation of prejudgment interest for a contract claim was governed by statute or by general principles of equity developed at common law. 962 S.W.2d at 528. Before
After Cavnar was decided, the Texas Legislature, as part of a larger tort reform scheme, partially codified the Cavnar rule under Section 6 of the prejudgment interest statute, which read: "Judgments in wrongful death, personal injury, and property damage cases must include prejudgment interest." TEX.REV.CIV. STAT. ANN. art. 5069-1.05, § 6(a) (West 1996) (current version at TEX. FIN.CODE ANN. § 304.102 (West 2006)). Similar to Cavnar, Section 6 provided that the rate of prejudgment interest would be the same as postjudgment interest. Id. § 6(g) (current version at TEX. FIN.CODE ANN. § 304.103). Unlike Cavnar, however, the accrual period under Section 6 provided that prejudgment interest would accrue on the earlier of "(1) 180 days after the date the defendant receives written notice of the claim or (2) the day the suit is filed," and interest was to be calculated as "simple interest." Id. § 6(a), (g) (current version at TEX. FIN.CODE ANN. § 304.104).
In Johnson & Higgins, the court concluded that the plaintiff's contract claim did not fall under any of the categories of injury enumerated in Section 6, so "any award of prejudgment interest [was] governed by the common law." 962 S.W.2d at 530. Nevertheless, the Johnson & Higgins court decided to "adopt the Legislature's approach to prejudgment interest" and held that "prejudgment interest [on the contract claim] begins to accrue on the earlier of (1) 180 days after the date a defendant receives written notice of a claim or (2) the date the suit is filed." Id. at 531. Johnson & Higgins also adopted the language that the Legislature used to calculate prejudgment interest, stating that "prejudgment interest accrues at the rate for postjudgment interest and it shall be computed as simple interest." Id. at 532. The Johnson & Higgins court reasoned that adoption of the Legislature's approach for all common law claims would ensure symmetry in the accrual period for prejudgment interest and the calculation of prejudgment interest. Id. at 533.
Although, as the foregoing demonstrates, Johnson & Higgins was not primarily occupied with the rate of prejudgment interest—which was traditionally calculated at the statutory or "legal rate," see Miner-Dederick Constr. Corp. v. Mid-County Rental Serv., Inc., 603 S.W.2d 193, 200 (Tex.1980) (awarding interest at statutory rate on a contract claim with specified damages); Close v. Fields, 13 Tex. 623, 623 (Tex.1855) ("[T]he legal rate of interest is the safest criterion or standard of damages....")—Johnson & Higgins created a unified system for the calculation of both statutory prejudgment interest and common law prejudgment interest, a necessary component of which was the reaffirmation that prejudgment interest accrued at the statutory rate for common law claims. Indeed, shortly after Johnson
Thus, under Texas law, whether entitlement to prejudgment interest is derived from statute or, as in this case, equity, "prejudgment interest accrues at the rate for postjudgment interest and [is] computed as simple interest." Johnson & Higgins, 962 S.W.2d at 532. In relevant part, the applicable statute sets postjudgment interest at either "the prime rate as published by the Board of Governors of the Federal Reserve System on the date of computation" or "five percent a year if the prime rate as published by the Board of Governors ... is less than five percent." TEX. FIN.CODE ANN. § 304.003(c)(1)-(2).
If this court were to accept Gunnerman's position that the rate earned by the funds in the registry of the district court should control, it would have the effect of undercutting the floor rate of interest established by statute. There is no dispute that if Gunnerman had posted a supersedeas bond rather than depositing the amount of Arete's actual damages into the registry of the district court, Gunnerman would have been liable for prejudgment interest at the statutory rate through the date of the second judgment. Gunnerman was entitled to elect this means of suspending the judgment to pursue his first appeal, and those funds have accrued some interest. But his election does not affect the rules settled on by the Supreme Court of Texas and the Texas Legislature governing the rate at which Arete is compensated for its continued inability to use those funds.
We note that, in certain contexts not applicable to the facts of this case, the Supreme Court of Texas has recognized that depositing funds into the registry of the district court may prevent the accrual of prejudgment interest. For instance, the Supreme Court of Texas has consistently held that prejudgment interest does not accrue on funds to which the plaintiff has access prior to the final judgment.
Nor are we persuaded to adopt Gunnerman's position by the general rule in the Texas courts that a stakeholder who interpleads contested funds into the registry of the court is not liable for prejudgment interest after the date of the interpleader. See State Farm Life Ins. Co. v. Martinez, 216 S.W.3d 799, 808 (Tex.2007) (stating rule);
Finally, we acknowledge that some intermediate courts of appeals in Texas have stated that the deposit of funds into the registry of the trial court prevents the accrual of prejudgment interest on those funds. Because these cases could be read as support for the proposition that common law prejudgment interest does not accrue on funds deposited into the registry of the court in a contract case, which is an issue the Supreme Court of Texas has not squarely addressed, we must make an "Erie guess" as to whether the Supreme Court would apply Johnson & Higgins or these intermediate appellate decisions to this case. See, e.g., Howe ex rel. Howe v.
These intermediate appellate court decisions fall into two categories: (1) those decided before Johnson & Higgins; and (2) those decided after Johnson & Higgins but which have dubious applicability to the facts of this case. With respect to the first category of cases, we are not persuaded that the Supreme Court of Texas would undermine the general rule that common law prejudgment interest on a contract claim accrues at the statutory rate for postjudgment interest, see Johnson & Higgins, 962 S.W.2d at 532, by applying a rule announced in older intermediate appellate court decisions.
Nor do we believe that the Supreme Court of Texas would follow post-Johnson & Higgins decisions by two intermediate appellate courts, which hold that prejudgment interest did not accrue on funds placed in the registry of the district court. In Pegasus Energy Group, Inc. v. Cheyenne Petroleum Co., 3 S.W.3d 112 (Tex. App.—Corpus Christi 1999, pet. denied), the court made the flat statement that the plaintiff "should not be entitled to prejudgment interest on money that [the defendant] had already paid into the registry of the court." Id. at 125. But, in its next breath, the Pegasus court affirmed the trial court's application of the funds in the registry in a seemingly contrary manner: the plaintiff was "entitled to all monies held in the Registry of the Court to satisfy the judgment with any interest earned on such monies in the registry credited against the interest awarded" and the "total amount" in the court's registry was "credited against any judgment amount owed by [the defendant]."
Following Pegasus, the Corpus Christi court and one other Texas intermediate appellate court applied the Pegasus court's statement that prejudgment interest does not accrue on funds deposited in the registry of the court. But those decisions are better understood as interpleader-type cases where the funds in the registry of the court could have been subject to multiple claims. See Hoeffner, Bilek & Eidman, L.L.P. v. Guerra, 2004 WL 1171044, at *10-11 (Tex.App.—Corpus Christi, May 27, 2004, pet. denied) (mem. op.) (applying Pegasus in a case involving dispute between several attorneys to contingency fees earned in a mass tort litigation where attorney seeking funds had requested funds be deposited in registry); Browning Oil Co. v. Luecke, 38 S.W.3d 625, 646, 648 (Tex. App.—Austin 2000, pet. denied) (applying Pegasus in a case involving dispute over amount of royalties owed under pooling agreement for "horizontal wells that contain multiple drillsites on tracts owned by multiple landowners"). As discussed above, the rule that prejudgment interest does not accrue on interpleaded funds is inapplicable in this case.
In this case, there has already been a judicial determination that Gunnerman owed Arete its actual damages on two distinct theories of recovery. Arete's theory of recovery for its actual damages was relevant only to whether it received exemplary damages (fraud) or attorney's fees (breach of contract). Gunnerman's deposit of funds into the registry of the court allowed Gunnerman to suspend enforcement of the judgment during its challenge to one of the two independent bases for Arete's actual damages. We are not persuaded that, under these particular circumstances, the Supreme Court of Texas would rely on a rule discussed in factually distinguishable intermediate appellate court decisions and conclude that prejudgment interest does not accrue at the statutory rate on the funds Gunnerman placed into the registry of the court in lieu of a supersedeas bond. See Howe, 204 F.3d at 627 (stating that, when making an Erie guess, this court is not bound by decisions of intermediate appellate courts if "convinced by other persuasive data that the highest court of the state would decide otherwise"). Instead, it is our Erie guess that the Supreme Court of Texas would hew to the general rule announced in Johnson & Higgins and award Arete prejudgment interest at the statutory rate from the date of the breach of the settlement agreement to the date of the second judgment. See Johnson & Higgins, 962 S.W.2d at 532.
Our conclusion is buttressed by Texas courts' treatment of similar deposits on the rate of postjudgment interest.
For the foregoing reasons, the judgment of the district court is
AFFIRMED.