Williams v. Shelby County Board of Education

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

SONYA P. WILLIAMS, )

)

Plaintiff, )

) No. 2:17-cv-02050-TLP-jay

v. )

)

SHELBY COUNTY BOARD OF )

EDUCATION, )

)

Defendant. )

ORDER ON PLAINTIFF’S DAMAGES FOR HER TEACHER TENURE ACT CLAIM

The Court set a briefing schedule so the parties could address the calculation of Plaintiff

Sonya William’s damages for Defendant Shelby County Board of Education’s violation of the

Tennessee Teacher Tenure Act (the “Act”), Tennessee Code Annotated § 49-5-511(b). (See ECF

No. 238 at PageID 6949.) The Court now calculates Plaintiff’s back pay award and finds that

Plaintiff is entitled to prejudgment interest on her back pay.

BACKGROUND

Defendant excessed Plaintiff as part of a reduction of force in March of 2016. (ECF No.

46-1 at PageID 313–14.) But Defendant did not comply with the Teacher Tenure Act until

October of 2018 when it authorized Plaintiff’s termination. (ECF No. 122-3.) The parties

disputed the type of damages that Plaintiff was entitled to under her Teacher Tenure Act claim.

(ECF No. 122.) After allowing limited, supplemental discovery on the issue, the Court entered

an order on Plaintiff’s Teacher Tenure Act claim. (ECF No. 237.)

The Court made the following four findings in its order: (1) that Defendant violated the

Tennessee Teacher Tenure Act; (2) that Plaintiff has a right to back pay only; (3) that her back

pay calculation runs from Plaintiff’s termination on March 7, 2016, through October 30, 2018;

and (4) that Defendant cannot offset any earnings from employment outside Shelby County

School System’s (“SCS”) from Plaintiff’s entitlement to back pay. (Id. at PageID 6948.)

The Court then set a briefing schedule for the parties to address the calculation of

Plaintiff’s damages. (See ECF No. 238 at PageID 6949.) Plaintiff filed an opening brief on her

damages, Defendant responded, and Plaintiff replied.1 (ECF Nos. 239, 241, & 242.) The Court

now turns to the legal standard for awarding prejudgment interest under Tennessee law.

ANALYSIS

I. Legal Standard for Awarding Prejudgment Interest

When a federal court exercises supplemental jurisdiction over a state law claim, the court

awards prejudgment interest according to state law. Gentek Bldg. Prods., Inc. v. Sherwin-

Williams Co., 491 F.3d 320, 333–34 (6th Cir. 2007) (quoting Mills v. River Terminal Ry. Co.,

276 F.3d 222, 228 (6th Cir. 2002)). Here, the Court must determine Plaintiff’s damages resulting

from Defendant’s violation of the Tennessee Teacher Tenure Act—a state law claim. As a

result, the Court applies Tennessee law to the issue of prejudgment interest.

Under Tennessee law, courts may award “[p]rejudgment interest, i.e., interest as an

element of, or in the nature of, damages, as permitted by the statutory and common laws of the

state . . . in accordance with the principles of equity at any rate not in excess of a maximum

1 Both Plaintiff and Defendant spend a lot of time in their briefs arguing issues this Court already

decided in its order on Plaintiff’s Teacher Tenure Act Claim. (See ECF No. 237.) The Court

will not reconsider its earlier findings. Therefore, the Court does not consider any of the parties’

arguments addressing issues that the Court already decided in its earlier order.

effective rate of ten percent (10%) per annum.” Tenn. Code Ann. § 47-14-123. “An award of

prejudgment interest is within the sound discretion of the trial court,” and ultimately, the court

must decide whether an award of prejudgment interest “is fair, given the particular circumstances

of the case.” Myint v. Allstate Ins. Co., 970 S.W.2d 920, 927 (Tenn. 1998).

As the Sixth Circuit noted, “Tennessee courts have identified six factors to aid trial courts

in deciding whether prejudgment interest is fair and equitable: (1) promptness in commencing

the claim, (2) unreasonable delay of the proceedings, (3) abusive litigation practices, (4) certainty

of the existence of an underlying obligation, (5) certainty of the amount due, and (6) previous

payment for the lost time value of the money.” FLSmidth Inc. v. Fiber Innovation Tech., Inc.,

626 F. App’x 625, 630–31 (6th Cir. 2015). And Tennessee courts have discussed these different

factors in more detail.

First, courts must consider that “the purpose of awarding the interest is to fully

compensate a plaintiff for the loss of the use of funds to which he or she was legally entitled, not

to penalize the defendant for wrongdoing.” Myint, 970 S.W.2d at 927. Thus, prejudgment

interest may be inappropriate when (1) “the party seeking prejudgment interest has been so

inexcusably dilatory in pursuing a claim that consideration of a claim based on loss of use of the

money would have little weight,” (2) “the party seeking prejudgment interest has unreasonably

delayed the proceedings after suit was filed,” or (3) “the party seeking prejudgment interest has

already been otherwise compensated for the lost time value of its money.” Scholz v. S.B. Int’l,

Inc., 40 S.W.3d 78, 83 (Tenn. Ct. App. 2000).

Second, courts should consider the certainty of the underlying obligation and of the

plaintiff’s damages because, “the more clear the fact that the plaintiff is entitled to compensatory

damages, the more clear the fact that the plaintiff is also entitled to prejudgment interest as a part

of the compensatory damages.” Myint, 970 S.W.2d at 928. Recovery is “certain” if “the amount

of damages is ascertainable by computation or by any recognized standard of valuation.” Id.

This is true even if the parties dispute the plaintiff’s right to recovery. Id.

And third, courts should consider the plaintiff’s economic loss. The Tennessee Court of

Appeals has explained,

Parties who have been wrongfully deprived of money have been damaged in two

ways. First, they have been damaged because they have not received the money to

which they are entitled. Second, they have been damaged because they have been

deprived of the use of that money from the time they should have received it until

the date of judgment. Awards of pre-judgment interest are intended to address the

second type of damage. They are based on the recognition that a party is damaged

by being forced to forego the use of its money over time.

Scholz, 40 S.W.3d at 82.

The Court now addresses whether prejudgment interest is appropriate here.

II. Awarding Prejudgment Interest on Plaintiff’s Teacher Tenure Act Claim

A. Awarding Prejudgment Interest Is Equitable

After considering the different factors, the Court finds that awarding prejudgment interest

is fair in this case. First, Plaintiff did not unreasonably delay filing this suit. Defendant

terminated her in March of 2016, and Plaintiff sued in January of 2017. (See ECF No. 1.) And

though this case has been ongoing for three years, Plaintiff did not delay the proceedings.2 What

is more, there is no evidence that Defendant otherwise compensated Plaintiff for the loss of her

salary. These factors thus all weigh in favor of awarding prejudgment interest.

2 Events beyond Plaintiff’s control delayed this case. For example, at Defendant’s request, this

Court administratively closed the case after certifying questions of state law to the Supreme

Court of Tennessee. (See ECF Nos. 182, 193, 194.) As a result, the case remained closed for

several months.

Second, even though Defendant disputes Plaintiff’s right to recovery, the amount of

recovery is not uncertain.3 See Myint, 970 S.W.2d at 928 (finding that plaintiff’s recovery

amount was not uncertain for prejudgment interest purposes even though defendant disputed

plaintiff’s right to recovery). This is because the amount of damages here is clearly

ascertainable. Id. The parties must simply determine Plaintiff’s monthly salary when Defendant

excessed her, and how many months of back pay Defendant owes her. In fact, the parties agree

that Plaintiff’s monthly salary at the time of her termination was $6,225.42, and that Defendant

owes her thirty-one (31) months of back pay. (See ECF Nos. 293-3 at PageID 6962; 241 at

PageID 6972.) As a result, Plaintiff’s damages are certain.

And finally, the Court considers Plaintiff’s economic loss. “Fairness will, in almost all

cases, require that a successful plaintiff be fully compensated by the defendant for all losses

caused by the defendant, including the loss of use of money the plaintiff should have received.”

Scholz, 40 S.W.3d at 83. In this case, “fairness” requires that the Court consider Plaintiff’s “loss

of use of the money” that she should have received. Id. Four years have passed since Defendant

excessed Plaintiff. And, it took Defendant more than two years to authorize Plaintiff’s

termination as required by the Act. (See ECF No. 122-3.) During that time, Plaintiff was not

able to use the money she should have received before the Board complied with Tennessee law

and ratified her termination.4 With that in mind, the Court finds that the remaining factors also

3 Defendant seems to argue that, because “the Teacher Tenure Act does not actually provide a

damages remedy for the violation for which Plaintiff sues,” Plaintiff’s damages are uncertain.

(ECF No. 2241 at PageID 6969–70.) This Court, however, already found that Plaintiff can

recover damages under the Teacher Tenure Act. (ECF No. 237.) So Defendant’s argument is

not persuasive.

4 Defendants argues that “[w]hether the Board ratified the excess in the appropriate manner or

timeline has no bearing on whether Plaintiff suffered any lost funds, for which she was otherwise

entitled.” (ECF No. 241 at PageID 6968.) According to Defendant, this means that, “unlike a

teacher who is returned to service due to a material flaw in the decision to terminate or suspend,

weigh in favor of awarding prejudgment interest here. The Court, therefore, awards Plaintiff

prejudgment interest in this matter.

The Court next discusses the calculation of Plaintiff’s total recovery for her Teacher

Tenure Act claim.

B. Calculating Plaintiff’s Damages

i. Amount of Back Pay

Both parties agree that, at the time of her termination, Plaintiff’s monthly salary was

$6,225.42. (See ECF Nos. 293-3 at PageID 6962; 241 at PageID 6972.) Plaintiff “guesses” that

she would have received a 3% salary increase every school year during the relevant time

frame—so, a 3% increase in 2016–2017, a 3% increase in 2017–2018, and a 3% 2018–2019.

(ECF Nos. 239 at PageID 6952; 239-3 at PageID 6962.) But this is speculation.

Plaintiff attaches a copy of a memo prepared by the Shelby County Schools Finance

Office about the district budget for the 2016–2017 fiscal year. (ECF No. 239-2.) The memo

says that “the budget includes strategic investments such as 3% salary raises” for certain

teachers. (Id. at PageID 6960.) But there is no evidence that Defendant actually implemented

this salary increase or that the increase would have applied to Plaintiff. What is more, Plaintiff

presents no evidence that the school district implemented a 3% salary increase in any other fiscal

year. So, the Court rejects Plaintiff’s request that it consider annual salary increases in its

calculations.

Plaintiff has not lost any funds that she is otherwise entitled to, and should not recover back pay

under the principles stated in Tennessee law.” (Id.) But, again, this Court already decided in its

previous order that Plaintiff suffered lost funds, and that she is entitled to back pay. (See ECF

No. 237.)

This means that Plaintiff is entitled only to back pay based on her monthly salary when

Defendant excessed her. At the time of her termination, Plaintiff’s monthly salary was

$6,225.42. (See ECF Nos. 293-3 at PageID 6962; 241 at PageID 6972.) And Defendant owes

her thirty-one (31) months of back pay. (See id.) As a result, Defendant owes Plaintiff

$192,988.025 in back pay, along with prejudgment interest.

ii. Prejudgment Interest

Tennessee’s prejudgment interest rate is a maximum of 10% per annum.6 Tenn. Code

Ann. § 47-14-123. This means the Court can award only a prejudgment interest rate that is equal

to or below 10%. Plaintiff argues that the Court should compound the interest rate. (ECF No.

239 at PageID 6953.) But the Tennessee Supreme Court has found that prejudgment interest

cannot be compounded under § 47-14-123. Otis v. Cambridge Mut. Fire. Ins. Co., 850 S.W.2d

439, 447 (Tenn. 1992) (holding that, “[t]o interpret the statute to mean compound interest is

authorized constitutes a forced construction that impermissibly extends the intent of the

legislature,” and so prejudgment interest “should be calculated at simple interest with a 10% per

annum cap”). Plaintiff is therefore entitled only to an award of simple interest.

In determining the prejudgment interest rate, the Court must consider what rate “is fair,

given the particular circumstances of the case.” Myint, 970 S.W.2d at 927. And though

Tennessee statute allows a 10% prejudgment interest rate, applying that rate here “would be ‘a

windfall, particularly in the light of the current economic climate.’” MAKS, Inc. Gen. Trading &

Contracting Co. v. Sterling Operations, Inc., No. 3:10-CV-443, 2014 WL 297291, at *2 (E.D.

5 The Court multiplied $6.225.42 by 31 to find Plaintiff’s total back pay award.

6 Neither party argues that the prejudgment interest rate here falls within Tennessee Code

Annotated § 47-14-103. As a result, the Court considers Tennessee’s maximum 10%

prejudgment interest rate under § 47-14-123. The parties may file a motion with the Court if a

different interest rate applies under § 47-14-103(2).

Tenn. Jan. 27, 2014) (quoting Krystal Co. v. Caldwell, 2012 WL 876794, at *11 (E.D. Tenn.

Mar. 13, 2012)). Based on the economic environment of the past decade, federal courts have

instead applied a 5% interest rate instead of Tennessee’s 10% maximum rate. See, e.g., MAKS,

Inc. Gen. Trading & Contracting Co., 2014 WL 297291, at *3; Nat’l Fitness Ctr., Inc. v. Atlanta

Fitness, No. 3:09-cv-133, 2013 WL 6231774, at *3 (E.D. Tenn. Dec. 2, 2013). And in Bennett v.

Highland Graphics, the district court awarded a 5% prejudgment interest rate instead of 10%

“[i]n light of low prevailing interest rates during the relevant time frame.” No. 3:14-cv-02408,

2017 WL 4512470, at *6 (M.D. Tenn. Oct. 10, 2017).

The Court finds that a 5% prejudgment interest rate is appropriate here. Though Plaintiff

is entitled to back pay without offset for the time Defendant illegally excessed her, she was also

able to secure other employment during that time period. (See ECF No. 241-1.) What is more,

“in light of low prevailing interest rates,” a 10% prejudgment interest award “would be a

windfall.” See Bennett, 2017 WL 4512470, at *6; MAKS, Inc. Gen. Trading & Contracting Co.,

2014 WL 297291, at *2. With that in mind, the Court finds that a 5% prejudgment interest rate

better reflects the equities of this case. See Estate of Fetterman v. King, 206 S.W.3d 436, 447

(Tenn. Ct. App. 2006) (finding that 10% prejudgment interest rate was excessive given the

circumstances of the case and that 5% interest rate was appropriate).

The Court thus finds that Plaintiff is entitled to prejudgment interest at a rate of 5%. The

Court DIRECTS the parties to submit proposed calculations of prejudgment interest to the Court

within ten (10) days of the entry of this order.

CONCLUSION

The Court finds that Defendant owes Plaintiff $192,988.02 in back pay. And, she is

entitled prejudgment interest on her damages under the Teacher Tenure Act. The Court therefore

ORDERS Defendant to pay Plaintiff $192,988.02, plus prejudgment interest, in compensatory

damages.

SO ORDERED, this 2nd day of December, 2020.

s/Thomas L. Parker

THOMAS L. PARKER

UNITED STATES DISTRICT JUDGE