Continental Indemnity Company v. IPFS of New York ( 2021 )

United States Court of Appeals
For the Eighth Circuit
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No. 20-2282
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Continental Indemnity Company, an Iowa Corporation
lllllllllllllllllllllPlaintiff - Appellant
v.
IPFS of New York, LLC, a Limited Liability Company; IPFS Corporation
lllllllllllllllllllllDefendants - Appellees
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Appeal from United States District Court
for the District of Nebraska - Omaha
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Submitted: April 13, 2021
Filed: August 3, 2021
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Before SMITH, Chief Judge, COLLOTON and ERICKSON, Circuit Judges.
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SMITH, Chief Judge.
Continental Indemnity Company (CNI) owed IPFS Corporation (IPFS) the
unearned premium1 from an insurance policy that was cancelled prematurely, but the
1
An unearned premium is premium that is paid in advance for insurance
coverage and is returned if an insurance policy is cancelled before the end of the
policy term.
parties disputed the value of the unearned premium. The district court2 granted partial
summary judgment to IPFS; it agreed with IPFS that CNI owed $479,512.95 in
unearned premium, but it denied IPFS’s request for prejudgment interest. IPFS
subsequently filed a motion to amend under Federal Rule of Civil Procedure 59(e),
requesting prejudgment interest. The district court granted the motion and amended
the judgment to include $42,880.80 in prejudgment interest. CNI appeals, arguing
that the district court erred by granting IPFS’s Rule 59(e) motion for prejudgment
interest. Alternatively, it argues that the district court miscalculated the amount of
prejudgment interest. We affirm.
I. Background
CNI is an insurance carrier that provides workers’ compensation insurance
policies. CNI issued a workers’ compensation insurance policy to AGL Industries,
Inc. (AGL) on February 14, 2016. The policy was renewed annually. On February 14,
2019, CNI renewed the policy through February 14, 2020. The annual premium for
the policy was $913,358.
In order to finance the premium, AGL executed a premium finance agreement
(PFA) with IPFS, a premium financing company. Under the PFA, AGL would pay
CNI $274,007.40 of the premium, and IPFS agreed to advance the remaining
$639,350.60 of the premium to CNI on AGL’s behalf. AGL agreed to repay the
premium to IPFS on a monthly basis. Also under the PFA, AGL assigned to IPFS the
rights to any gross unearned premium in the event that the underlying insurance
policy was cancelled prematurely.
CNI cancelled the insurance policy on April 19, 2019, because AGL did not
pay as promised. IPFS asserted its right, pursuant to the PFA, to any unearned
2
The Honorable Laurie Smith Camp, United States District Judge for the
District of Nebraska, now deceased.
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premium resulting from the policy’s premature cancellation. CNI refused to pay,
however. CNI agreed that it owed IPFS a refund of the unearned premium but
disagreed as to the amount. CNI brought a declaratory judgment action in Nebraska
state court, which IPFS removed to federal district court on diversity grounds.3 IPFS
filed counterclaims for unjust enrichment and conversion and moved for summary
judgment. IPFS argued that the value of the unearned premium was $479,512.95,
while CNI maintained that the value was $300,435.81. In its reply brief in support of
summary judgment, IPFS argued that it was also entitled to prejudgment interest.
On March 16, 2020, the district court granted summary judgment to IPFS on
its claims of unjust enrichment and conversion. The court determined that CNI owed
IPFS $479,512.95 in unearned premium, which it calculated by subtracting the earned
premium due to CNI from the amount IPFS advanced under the PFA.4 However, the
court denied IPFS’s claim for prejudgment interest because “[t]he [c]ourt [would] not
entertain arguments raised for the first time in a reply brief.” Cont’l Indem. Co. v.
IPFS of N.Y., LLC, No. 8:19-cv-485, 2020 WL 2910003, at *1 n.1 (D. Neb. June 3,
2020) (first alteration in original) (quotation omitted).
3
CNI is incorporated in Iowa and has its principal place of business in
Nebraska. IPFS is incorporated in Missouri and has its principal place of business in
Missouri.
4
The district court used the following chart to show its calculations:
A B C D E
Total Policy Percent of Amount Earned Unearned
Amount Contract Financed Premium Premium
Term (A * B) (C – D)
$913,358.00 17.5% $639,350.60 $159,837.65 $479,512.95
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After entry of final judgment, IPFS filed a Rule 59(e) motion to amend, arguing
that it was entitled to prejudgment interest. The district court granted the motion,
explaining that Rule 59(e) is the proper vehicle for a post-judgment motion for
prejudgment interest and that “[a] district court has broad discretion to alter or amend
a judgment under Rule 59(e).” Id. at *1 (quoting SFH, Inc. v. Millard Refrigerated
Servs., Inc., 339 F.3d 738, 746 (8th Cir. 2003)). The district court acknowledged that
it “did not address the merits of prejudgment interest before entering judgment,” but
it determined that “[w]hile arguments presented for the first time in a Rule 59(e)
motion are deemed forfeited, the grant or denial of prejudgment interest is an
exception to this general rule.” Id. (alteration in original) (quoting In re Redondo
Constr. Corp., 678 F.3d 115, 122 (1st Cir. 2012)). The court noted that IPFS did in
fact “request prejudgment interest before entry of judgment in its Reply Brief in
Support of Summary Judgment” but that “[t]he [c]ourt did not reach the merits on this
request” because IPFS raised it for the first time in its reply brief. Id. at *1 n.1.
After determining that Nebraska law applies to the issue of prejudgment
interest, the district court applied Nebraska’s 12-percent interest rate5 to the final
judgment of $479,512.95. Interest thus accrued at $157.65 per day. Multiplying that
by the number of days between the date the cause of action arose and the entry of
judgment (272 days), the court determined that IPFS was entitled to prejudgment
interest in the amount of $42,880.80. CNI timely appealed.
II. Discussion
CNI makes two arguments on appeal. First, it argues that the district court erred
by granting IPFS’s Rule 59(e) motion because the motion was improper. Second, it
argues that even if IPFS’s Rule 59(e) motion was proper, the district court erred by
5
Nebraska law provides that “[u]nless otherwise agreed, interest shall be
allowed at the rate of twelve percent per annum.” Neb. Rev. Stat. § 45-104.
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incorrectly calculating the amount of prejudgment interest. We address each
contention in turn.
A. Rule 59(e) Motion
CNI argues that the district court should not have granted IPFS’s Rule 59(e)
motion because IPFS was not entitled to request prejudgment interest for the first time
in such a motion. We review rulings on Rule 59(e) motions for abuse of discretion:
“District courts have ‘broad discretion in determining whether to alter or amend
judgment’ under Rule 59(e); we ‘will not reverse absent a clear abuse of discretion.’”
Ryan v. Ryan, 889 F.3d 499, 507–08 (8th Cir. 2018) (quoting Briehl v. Gen. Motors
Corp., 172 F.3d 623, 629 (8th Cir. 1999)).
“Motions under Rule 59(e) ‘serve the limited function of correcting manifest
errors of law or fact or to present newly discovered evidence’ and ‘cannot be used to
introduce new evidence, tender new legal theories, or raise arguments which could
have been offered or raised prior to entry of judgment.’” Id. at 507 (quoting United
States v. Metro. St. Louis Sewer Dist., 440 F.3d 930, 933 (8th Cir. 2006)). However,
the Supreme Court held in Osterneck v. Ernst & Whinney “that a postjudgment
motion for discretionary prejudgment interest constitutes a motion to alter or amend
the judgment under Rule 59(e).” 489 U.S. 169, 175 (1989). The Supreme Court
reasoned that “prejudgment interest is subject to Rule 59(e) because it ‘is an element
of plaintiff’s complete compensation’ and it ‘does not raise issues wholly collateral
to the judgment in the main cause of action.’” Reyher v. Champion Int’l Corp., 975
F.2d 483, 488 (8th Cir. 1992) (quoting Osterneck, 489 U.S. at 175).
CNI acknowledges that, under Osterneck, a Rule 59(e) motion is a proper
procedural vehicle to make an argument regarding prejudgment interest. It argues,
however, that a party cannot make such an argument for the first time in a Rule 59(e)
motion, and it seeks to distinguish Osterneck from this case on that ground. CNI
relies primarily on two cases that each affirmed a district court’s denial of a Rule
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59(e) motion because prejudgment interest was requested for the first time in that
motion: First State Bank of Monticello v. Ohio Casualty Insurance Co., 555 F.3d 564(7th Cir. 2009), and United States v. Great American Insurance Co. of New York, 738
F.3d 1320 (Fed. Cir. 2013).
CNI’s reliance on these cases is misplaced. These cases do not stand for the
principle that a party cannot raise the issue for the first time in a Rule 59(e) motion;
rather, they stand for the principle that the district court has the discretion to deny a
motion on that ground. For example, in First State Bank, the Seventh Circuit
explained that “[t]he district court was entitled to conclude that raising the issue of
prejudgment interest for the first time in a Rule 59(e) motion, after summary
judgment was entered, was too late.” 555 F.3d at 572 (emphasis added). Accordingly,
the district court had not abused its discretion by denying the plaintiff’s Rule 59(e)
motion for prejudgment interest. Id. And in Great American Insurance, where the
district court had also denied a request for prejudgment interest that was raised for the
first time in a Rule 59(e) motion, the Federal Circuit explained that because “[a] Rule
59(e) motion cannot be used to raise arguments which could, and should, have been
made before the judgment issued. . . ., the [district] court acted within its discretion
in concluding that the government’s arguments in support of prejudgment interest,
briefed for the first time in its motion to amend, came too late.” 738 F.3d at 1328
(emphasis added) (quotation omitted). Contrary to CNI’s suggested interpretation, we
do not read these cases as prohibiting district courts from considering such motions.
Notably, CNI could not provide this court with any case in which a district court was
reversed for granting a Rule 59(e) motion requesting prejudgment interest after entry
of judgment.
Moreover, other courts have concluded that arguments related to prejudgment
interest can be properly raised for the first time in a Rule 59(e) motion. In Redondo,
for example, one party filed a Rule 59(e) motion contesting the district court’s award
of prejudgment interest to the other party. 678 F.3d at 120. On appeal, the party that
had been assigned prejudgment interest argued that the opposing party’s challenge
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to prejudgment interest was not preserved because it was raised for the first time in
a Rule 59(e) motion. Id. The First Circuit disagreed, finding that the appellant
“preserved this issue [of prejudgment interest] by spelling out its position in its
motion to alter or amend the judgment.” Id. at 122. The court explained that
[w]hile arguments presented for the first time in a Rule 59(e) motion
ordinarily are deemed forfeited, the grant or denial of prejudgment
interest is an exception to this general rule. Indeed, we regularly have
recognized that Rule 59(e) is an appropriate vehicle for the resolution
of disputes about prejudgment interest.
Id. (citation omitted).
In sum, we decline to impose the bright-line rule that CNI urges. The fact that
IPFS did not request prejudgment interest in its initial summary judgment briefing
does not mean that the district court was prohibited from considering the request in
a post-judgment Rule 59(e) motion.6 Whether to grant the motion was within the
district court’s discretion, and it did not abuse that discretion in doing so.
6
Several district courts have concluded similarly to the First Circuit and
exercised their discretion in granting such a motion. See, e.g., Jacobson Warehouse
Co. v. Schnuck Markets, Inc., No. 4:17-cv-00764-JAR, 2020 WL 833606, at *3 (E.D.
Mo. Feb. 20, 2020) (addressing a claim for prejudgment interest that was raised for
the first time in a Rule 59(e) motion because “prejudgment interest . . . ‘is an element
of plaintiff’s complete compensation’ and ‘does not raise issues wholly collateral to
the judgment in the main cause of action.’” (quoting Reyher, 975 F.2d at 488)); Fin.
Cas. & Surety Co. v. Zouvelos, No. 12-cv-3476-AMD-RLM, 2018 WL 3950634,
at *2 n.4 (E.D.N.Y. May 3, 2018) (rejecting the argument that a Rule 59(e) motion
for prejudgment interest was untimely because it was raised for the first time after
entry of judgment and stating that “[t]he Supreme Court has made clear that Rule 59
post-judgment motions are the typical mechanism for seeking prejudgment interest”);
Chiulli v. Newbury Fine Dining, Inc., No. 10-10488-JLT, 2013 WL 5494723, at *2
(D. Mass. Sept. 30, 2013) (“If a post judgment motion includes a request for
prejudgment interest, Rule 59(e) provides the appropriate avenue for relief.” (citing
Redondo, 678 F.3d at 122; Crowe v. Bolduc, 365 F.3d 86, 92–93 (1st Cir. 2004))).
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B. Calculating Prejudgment Interest
Next, CNI argues that even if IPFS’s Rule 59(e) motion was proper, the district
court miscalculated the amount of prejudgment interest owed by CNI under Nebraska
law.7 Specifically, CNI contends that the district court erred when it concluded that
IPFS’s entire claim was liquidated and thus subject to prejudgment interest.
In Nebraska, “[prejudgment] interest . . . shall accrue on the unpaid balance of
liquidated claims from the date the cause of action arose until the entry of judgment.”
Neb. Rev. Stat. § 45-103.02(2). “Prejudgment interest is available only when a claim
is liquidated, that is, when there is no reasonable controversy either as to the
plaintiff’s right to recover or as to the amount of such recovery.” Davis v. Davis, 660
N.W.2d 162, 167 (Neb. 2003); see also Albrecht v. Fettig, 932 N.W.2d 331, 342
(Neb. Ct. App. 2019). “This [reasonableness] inquiry requires an exercise of
discretion by the district court.” Lincoln Benefit, 243 F.3d at 462–63. Thus, while we
review a district court’s application of state law de novo, “we review the district
court’s decision to award interest under [§] 45-103.02(2) for abuse of discretion.” Id.
at 463.
“The amount of a claim is liquidated when the evidence furnishes a basis to
compute an exact amount determinable without opinion or discretion inherent in the
factfinding process.” Pugh v. Great Plains Ins. Co., 474 N.W.2d 677, 682 (Neb.
1991). For example, a claim is liquidated when the amount “can be readily
determined” by an agreed-upon formula. RSUI Indem. Co. v. Bacon, 810 N.W.2d 666,
676 (Neb. 2011). That is the case here. The parties agreed that, based on the PFA,
IPFS was entitled to a refund of unearned premium on a pro rata basis. This involved
a simple calculation by which the district court determined the earned and unearned
7
“State law governs whether a diversity litigant may recover pre-judgment
interest.” Lincoln Benefit Life Co. v. Edwards, 243 F.3d 457, 462 (8th Cir. 2001) (per
curiam). The parties do not dispute on appeal that Nebraska law applies.
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premium in proportion to the time the contract operated (17.5 percent of its term).
IPFS was entitled to a return of the amount it financed ($639,350.60) minus the
percentage of the total premium earned during the policy’s operation ($913,358.00
x 17.5 percent = $159,837.65). This equals $479,512.95.
CNI contends, however, that $479,512.95 was not liquidated because CNI
contested IPFS’s right to that amount. But “[t]he mere contesting of the amount of or
right to recovery does not alone create a reasonable controversy. Rather, the challenge
asserted must be reasonable.” Lincoln Benefit, 243 F.3d at 462 (citations omitted).
CNI’s asserted challenge is “that IPFS, as an assignee, may only recover the unearned
premiums to the same extent as the assignor, AGL.” Appellant’s Br. at 13–14.
According to CNI, the uncontested amount is $300,435.81 because “[t]he unearned
premium due CNI from AGL’s Workers’ Compensation Insurance Policy . . . was a
total of $338,914.79” and “[d]educting this amount from the amount financed by
IPFS equals $300,435.81.” Id. at 14.
We agree with the district court that CNI’s challenge is not reasonable. CNI has
consistently acknowledged that IPFS is entitled to the unearned premium on a pro rata
basis.8 Yet CNI urges that the district court should have offset that amount by an
unrelated amount that AGL owes CNI. We reject this argument because we have
explained that under Nebraska law, “[a]n asserted right to an offset does not render
an amount unliquidated.” Lincoln Benefit, 243 F.3d at 463 (citing Wiebe Constr. Co.
8
See Compl., Ex. A, at 3, Cont’l Indem. Co. v. IPFS of N.Y., LLC, No.
8:19-cv-00485-LSC-CRZ (D. Neb. 2020), ECF No. 1-1 (“IPFS was entitled to a
return of unearned premium pursuant to and in accordance with the PFA.”); Pl.’s Br.
in Opp’n to Summ. J. at 7, Cont’l Indem. Co. v. IPFS of N.Y., LLC, No.
8:19-cv-00485-LSC-CRZ (D. Neb. 2020), ECF No. 26 (“As a result of the
cancellation of the 2019 Policy, I[P]FS was entitled to a refund of unearned premium
on a pro-rata basis.”).
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v. Sch. Dist. of Millard, 255 N.W.2d 413, 417 (Neb. 1977) (explaining “that if the
trier of fact finds against the [opposing party] on the offset, prejudgment interest
should be awarded on the [entire] claim”)).
Because the district court could readily determine the amount based on the PFA
and no reasonable controversy existed as to the amount, the district court did not
abuse its discretion by concluding that the entire claim was liquidated and subject to
prejudgment interest. Based on that liquidated amount, the district court correctly
concluded that CNI owed prejudgment interest in the amount of $42,880.80.
III. Conclusion
For the foregoing reasons, we affirm the district court’s judgment.
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