Hexion Specialty Chemicals Inc. v. Oak-Bark Corp.

Decision Date26 June 2012
Docket NumberNo. 7:09-CV-105-D,7:09-CV-105-D
CourtU.S. District Court — Eastern District of North Carolina

On July 1, 2009, Hexion Speciality Chemicals, Inc., ("plaintiff' or "Hexion") sued Oak-Bark Corporation ("defendant" or "Oak-Bark") alleging breach of warranty concerning a 2006 asset purchase agreement ("APA") in which Hexion purchased most of the assets and operations of Oak-Bark's chemical manufacturing plant in Columbus County, North Carolina. Oak-Bark denied breaching the APA. On September 28, 2011, the court granted Oak-Bark's motion for summary judgment and denied Hexion's motion for partial summary judgment [D.E. 82]. On October 12, 2011, Oak-Bark filed a motion for bill of costs and a motion to alter the court's judgment for an award of prejudgment and postjudgment interest, costs, and attorney's fees [D.E. 84-85]. On October 26, 2011, Hexion filed a motion requesting disallowance of Oak-Bark's bill of costs (including attorney's fees) [D.E. 87] and a motion for reconsideration of the summary judgment order [D.E. 90]. As explained below, the court grants in part Oak-Bark's motion for bill of costs, denies Oak-Bark's motion to alter the judgment, grants in part Hexion's motion for disallowance, and denies Hexion's motion for reconsideration.


Oak-Bark's request for prejudgment interest and postjudgment interest is properly classified as a request to amend the court's judgment, and is governed by Rule 59(e) of the Federal Rules of Civil Procedure. See Kosnoski v. Howley, 33 F.3d 376,378 (4th Cir. 1994); see also Osterneck v.Ernst & Whinney, 489 U.S. 169,175 (1989) ("[U]nlike attorney's fees, which at common law were regarded as an element of costs and therefore not part of the merits judgment, . . . interest traditionally has been considered part of the compensation due plaintiff."). A party must file a motion to alter or amend a judgment "no later than 28 days after the entry of the judgment." Fed. R. Civ. P. 59(e). A court may then grant a Rule 59(e) motion "(1) to accommodate an intervening change in the controlling law[,] (2) to account for new evidence not available at trial[,] or (3) to correct a clear error of law or prevent manifest injustice." EEOC v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir. 1997) (quotation omitted); Hutchinson v. Staton, 994 F.2d 1076,1081 (4th Or. 1993). A party's mere disagreement with a court's ruling does not warrant the court's granting a Rule 59(e) motion. See Hutchinson, 994 F.2d at 1081.

Awarding prejudgment interest is a "matter within the district court's discretion." Maksymchuk v. Frank, 987 F.2dl072,1077 (4th Cir. 1993^: see United States v. Gregory, 818 F.2d 1114, 1118 (4th Cir. 1987). A court should award prejudgment interest when doing so "serves the legitimate goals of making a party whole, or compensating the injured party for the loss of the use of money he would otherwise have had." Marten C. Robb & Son Boatyard & Marina. Inc. v. Vessel Bristol, 893 F. Supp. 526,540 (E.D.N.C. 1994); see EEOC v. Liggett & Myers. Inc., 690 F.2d 1072, 1074 (4th Cir. 1982). "[State] law governs the award of prejudgment interest in a diversity case." Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 633 (4th Cir. 1999). Because the parties in this diversity case agree that North Carolina law governs the dispute, the court looks to North Carolina law to determine whether to award prejudgment interest to Oak-Bark.

Section 24-5 of the North Carolina General Statutes provides that "[i]n an action for breach of contract... the amount awarded on the contract bears interest from the date of breach." N.C. Gen. Stat. § 24-5(a). Unless the contract provides otherwise, "interest on an award in a contract action... shall be at the legal rate." Id. "The legal rate of interest [is] eight percent (8%) per annum for such time as interest may accrue, and no more." N.C. Gen. Stat. § 24-1; see Thomas M. McInnis& Assocs.. Inc. v. Hall, 318 N.C. 421, 431, 349 S.E.2d 552, 558 (1986); Barrett Kays & Assocs., P.A. v. Colonial Bide. Co.. Inc. of Raleigh, 129 N.C. App. 525,529,500 S.E.2d 108,111-12(1998). A party is "entitled to interest from the date of the breach as a matter of law" only after "breach is established." Cap Care Grp., Inc. v. McDonald, 149 N.C. App. 817, 824, 561 S.E.2d 578, 583 (2002).

Oak-Bark bases its request for prejudgment interest on the premise that this court held in its summary judgment order that Hexion breached the APA. In its summary judgment order, however, the court did not hold that Hexion breached the APA, and did not enter a judgment to that effect. Rather, the court held that no rational jury could find that Oak-Bark breached the APA. See Sept. 28, 2011 Order [D.E. 82] 7-27. Accordingly, Oak-Bark is not entitled to prejudgment interest.

Alternatively, even if the court has discretion to award prejudgment interest to Oak-Bark, it declines to do so due to the unique facts of this case. Notably, Oak-Bark has been receiving interest payments on the escrowed funds "since the date they were first deposited upon execution of the APA." Pl.'s Mem. Opp'n Mot. Amend [D.E. 89] 6; cf. Escrow Agreement [D.E. 86-1] §§ 3(b), 5(a).

North Carolina law precludes an award of prejudgment interest when the party seeking the award has already received or been awarded interest on the amount owed. See, e.g., United Cmty. Bank v. McCarthy, No. 1; 10-CV-10-RJC-DLH, 2010 WL 2723726, at *2 (W.D.N.C. July 8, 2010) (unpublished); Int'l Harvester Credit Corp. v. Ricks, 16 N.C. App. 491, 496-97,192 S.E.2d 707, 710 (1972). Thus, an award of prejudgment interest to Oak-Bark is not appropriate.

In opposition to this conclusion, Oak-Bark argues that prejudgment interest calculated at the statutory rate of eight percent is more appropriate than the lower rate provided for in the Escrow Agreement because the purpose of the interest paid pursuant to the Escrow Agreement "was not to make Oak-Bark 'whole' for the lost use of the [escrowed [f]unds . . . ." Def.'s Reply [D.E. 94] 6. Essentially, Oak-Bark contends that the interest that it has received on the escrowed funds to this point has not made it whole. See id.

Although the interest that Oak-Bark has received pursuant to the Escrow Agreement is not as much as Oak-Bark now seeks pursuant to the statutory rate, it is interest nonetheless. If Oak-Bark desired to receive the benefit of a higher interest rate on the escrowed funds, it should have bargained for such a higher rate in the APA and the Escrow Agreement. It did not. Accordingly, the court declines to award Oak-Bark prejudgment interest

Oak-Bark also seeks postjudgment interest. "Federal law, rather than state law, governs the calculation of post[]judgment interest in diversity cases." Hitachi, 166 F.3d at 633. Under federal law, "[i]nterest shall be allowed on any money judgment in a civil case recovered in a district court." 28 U.S.C. § 1961(a). Section 1961 sets forth the method for calculating the relevant interest rate. See id.

Oak-Bark states that it "is entitled to postjudgment interest in accordance with section 1961(a) beginning from the date of the [c]ourt's []judgment, as amended, and continuing until the [j]udgment is fully paid and satisfied." Def.'s Mem. Supp. Mot. Amend [D.E. 86] 8. However, the court has not awarded Oak-Bark a "money judgment in a civil case." See 28 U.S.C. § 1961(a). Accordingly, section 1961 does not entitle Oak-Bark to postjudgment interest.


Oak-Bark seeks $47,481.03 in costs. See Def.'s Mot. Bill of Costs [D.E. 84] 1. Postjudgment motions for costs raise "legal issues collateral to the main cause of action" and are therefore not governed by Rule 59(e). Kosnoski, 33 F.3d at 378 (quotation omitted); see Buchanan v.Stanships, Inc, 485 U.S. 265, 268-69 (1988) (per curiam); see also White v. N.H. Dep't of Emp't Sec., 455 U.S. 445,451-52 (1982). Rather, Rule 54(d)(1) of the Federal Rules of Civil Procedure governs a postjudgment motion for an award of costs. See Fed. R. Civ. P. 54(d)(1). Rule 54(d)(1) provides that "costs—other than attorney's fees—should be allowed to the prevailing party." Id. A "prevailing party" is "a party in whose favor judgment is rendered" or "one who has been awarded some relief by the court...." Buckhannon Bd. & Care Home. Inc. v. W. Va. Dep't of Health &Human Servs., 532 U.S. 598, 602 (2001) (alteration and quotations omitted); see Hanrahan v. Hampton, 446 U.S. 754,758 (1987) (per curiam). "[T]he rule gives rise to a presumption in favor of an award of costs to the prevailing party." Teague v. Bakker, 35 F.3d 978,996 (4th Cir. 1994); see Delta Air Lines. Inc. v. August, 450 U.S. 346,352 (1981). However, a "court has discretion to award or deny costs to the prevailing party." Couram v. S.C. Dep't of Motor Vehicles, 3:10-00001-MBS, 2011 WL 6115509, at *2 (D.S.C. Dec. 8, 2011) (unpublished); see Crawford Fitting Co. v. J.T. Gibbons. Inc., 482 U.S. 437,441^*2 (19871 superseded by statute on other grounds, 42 U.S.C. § 1988; Farmer v. Arabian Am. Oil Co.. 379 U.S. 227, 233-34 (1964), overruled on other grounds by Crawford, 482 U.S. 437. A court "must justify its decision to deny costs by articulating some good reason for doing so." Cherry v. Champion Int'l Corp., 186 F.3d 442, 446 (4th Cir. 1996) (alteration and quotation omitted); see Teague, 35 F.3d at 996. A court may deny an award of costs when "there would be an element of injustice in a presumptive cost award." Cherry, 186 F.3d at 446; see Delta Air Lines, 450 U.S. at 355 n.14.

When an award of costs to the prevailing party is appropriate, the court looks to federal law to determine the scope of the award. See Crawford, 482 U.S. 441-43. Section 1920 of Title 28 of the United States Code lists the costs which may be taxed in a bill of costs in favor of a prevailing party. See 28 U.S.C. § 1920; see also Crawford, 482 U.S. at 441 ("[Section] 1920 defines the...

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