Michigan First Credit Union v. Cumis Insurance Society

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 11a0141p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

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Plaintiff-Appellee/Cross-Appellant, -

MICHIGAN FIRST CREDIT UNION,

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Nos. 09-1925/1970

v.

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Defendant-Appellant/Cross-Appellee. -

CUMIS INSURANCE SOCIETY, INC.,

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Appeal from the United States District Court

for the Eastern District of Michigan at Detroit.

No. 05-74423—George C. Steeh, District Judge.

Argued: March 9, 2011

Decided and Filed: May 24, 2011

Before: BOGGS, GRIFFIN, and KETHLEDGE, Circuit Judges.

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COUNSEL

ARGUED: Nancy G. Lischer, HINSHAW & CULBERTSON LLP, Chicago, Illinois,

for Appellant. Don W. Blevins, McALPINE & ASSOCIATES, P.C., Auburn Hills,

Michigan, for Appellee. ON BRIEF: Nancy G. Lischer, HINSHAW &

CULBERTSON LLP, Chicago, Illinois, for Appellant. Don W. Blevins, McALPINE

& ASSOCIATES, P.C., Auburn Hills, Michigan, Charles J. Holzman, Patricia D.

Corkery, HOLZMAN RITTER & CORKERY, PLLC, Southfield, Michigan, for

Appellee.

GRIFFIN, J., delivered the opinion of the court, in which BOGGS, J., joined.

KETHLEDGE, J. (p. 16), delivered a separate opinion concurring in all sections except

for Section III.B. and in the judgment of the majority opinion.

1

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 2

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OPINION

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GRIFFIN, Circuit Judge. In this action, plaintiff Michigan First Credit Union

(“MFCU”) filed suit against defendant CUMIS Insurance Society, Inc., asserting that

CUMIS wrongfully denied its fidelity bond claim. Following a seven-day trial, the jury

found in favor of MFCU, awarding $5,050,000 in damages. CUMIS moved for

judgment as a matter of law (“JMOL”) and for a new trial. Both motions were denied,

with the district court thereafter imposing an interest award of $2,730,415. Both parties

filed timely appeals. Upon review, we affirm.

I.

MFCU is a credit union that, among other things, provides loans. In July 2003,

MFCU expanded its business to provide indirect lending, which allowed applicants to

apply for loans at automobile dealerships. Once indirect loan applications were

completed, a third-party administrator compiled the applications and automatically

approved low-risk loans. Higher-risk applications were forwarded to MFCU for further

review.

Two MFCU employees, Joyce Clouthier and Kathleen Batton, were responsible

for the review of indirect loan applications. To perform this responsibility, Clouthier

and Batton were instructed to follow MFCU’s lending policy. This policy directed staff

to make lending decisions based upon eight “key factors.” These factors were: (1)

intent to pay; (2) capacity to pay; (3) total debt; (4) escalating debt; (5) job stability; (6)

assets; (7) security; and (8) any other relevant risk indicator.

According to the lending policy, “[m]anagement” was responsible for the

monitoring of the indirect-lending program to ensure policy compliance. This

responsibility was allocated primarily to Michael Lewis, the vice president of lending,

who was required to provide monthly reports to the MFCU board. However, Lewis

failed to monitor the indirect-lending program.

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 3

In October 2003, a quarterly internal audit was performed by Doeren Mayhew,

a certified public accounting and consulting firm. A small sampling of direct and

indirect loans were selected and reviewed for policy compliance. Alex Yarber, a Doeren

Mayhew auditor, discovered an indirect loan he felt violated MFCU’s lending policy,

listing the loan as an “exception” in a report that was to be submitted to MFCU’s

supervisory committee. However, upon Lewis’s insistence, the loan was removed from

the report.

During this same time period, Hilary Clemens, MFCU’s vice president of

finance, became concerned about the percentage of high-risk loans being approved by

the indirect-lending program. Clemens discussed her concerns with Michael Poulos,

MFCU’s Chief Executive Officer (“CEO”), who in turn discussed the issue with Lewis.

Lewis assured Poulos that there were no problems with the indirect-lending program.

Indeed, when reporting to the MFCU board, Lewis stated that he was monitoring the

program and that everything “looked good.”

Despite these assurances, Clemens hired Doeren Mayhew to perform another

internal audit. Soon thereafter, in January 2004, a Doeren Mayhew partner met with

Poulos and Lewis to discuss the results of the audit and the indirect-lending program.

It was at this meeting that Lewis admitted that he had not been monitoring indirect

lending. Concerned, Poulos immediately ordered a full audit. This audit indicated that

the indirect-lending program had approved hundreds of loan applications in violation of

the lending policy, resulting in numerous defaulted loans.

Upon learning of the substantial losses stemming from the indirect-lending

program, MFCU filed its fidelity bond claim with CUMIS. CUMIS had previously

issued MFCU a fidelity bond that provided coverage for losses caused by an employee’s

“failure to faithfully perform his/her trust.” MFCU contended that it suffered financial

harm as a result of Lewis’s, Clouthier’s, and Batton’s conscious disregard of its lending

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 4

policy, entitling it to coverage. CUMIS denied the claim, resulting in the present

lawsuit.1

Following a seven-day trial, a jury determined that MFCU’s losses were covered

by the fidelity bond, rendering a verdict in the amount of $5,050,000. CUMIS thereafter

moved for JMOL and for a new trial. The district court denied these motions. CUMIS

also moved the district court to amend the judgment to impose a specific interest amount.

In response, the district court imposed a $2,730,415 interest award, holding that MFCU

was entitled to penalty interest, but that such interest must be “offset” by prejudgment

interest. CUMIS now appeals the judgment, and MFCU cross-appeals the district

court’s interest calculation.

II.

In its first claim of error, CUMIS asserts that the evidence at trial was insufficient

to demonstrate coverage under the fidelity bond’s faithful-performance clause,

mandating JMOL or, in the alternative, a new trial. We disagree.

We review the denial of JMOL de novo. Anchor v. O’Toole, 94 F.3d 1014, 1023

(6th Cir. 1996). A federal court exercising diversity jurisdiction applies the standard for

JMOL used by the courts of the state whose substantive law governs the action. Id.

“Under Michigan law, a judgment as a matter of law may not be granted unless

reasonable minds could not differ as to the conclusions to be drawn from the evidence.”

Ridgway v. Ford Dealer Computers Servs., Inc., 114 F.3d 94, 97 (6th Cir. 1997) (internal

quotation marks and citation omitted). This “requires review of the evidence and all

legitimate inferences in the light most favorable to the nonmoving party.” Orzel v. Scott

Drug Co., 537 N.W.2d 208, 212 (Mich. 1995).

We review the denial of a motion for a new trial for an abuse of discretion.

Anchor, 94 F.3d at 1021. When under diversity jurisdiction, we follow the federal

1

MFCU filed suit in Michigan state court on November 2, 2005. CUMIS thereafter removed the

action to the United States District Court for the Eastern District of Michigan based upon diversity

jurisdiction.

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 5

standard rather than state law. Id. Under the federal standard, there is no abuse of

discretion unless the court has “a definite and firm conviction that the trial court

committed a clear error of judgment.” Id. (internal quotation marks and citation

omitted). Accordingly, we must accept “the jury’s verdict if it was reasonably reached.”

Id. “[I]f the verdict is supported by some competent, credible evidence, a trial court will

be deemed not to have abused its discretion in denying the motion.” Id.

III.

This case centers on the faithful-performance clause of the fidelity bond. This

clause provides: “We will pay you for your loss of covered property resulting directly

from a named employee’s failure to faithfully perform his/her trust.” The bond further

defines this language as follows:

“Failure to faithfully perform his/her trust” means acting in conscious

disregard of your established and enforced share, deposit or lending

policies. “Failure to faithfully perform his/her trust” does not mean:

a. Negligence, mistakes or oversights; or

b. Acts or omissions resulting from inadequate training; or

c. Unintentional violation of laws or regulations; or

d. Unintentional violation of your policies or procedures; or

e. Acts or omissions known to, acquiesced in, or ratified by your

Board Of Directors; or

f. Acts of an “employee” for which you could have made claim

under Employee Or Director Dishonesty Coverage.

CUMIS contends that MFCU’s losses are not covered by the faithful-

performance clause because its lending policy was not “established,” “enforced,” or

“conscious[ly] disregard[ed].” It further asserts that the loss is not covered because

MFCU “acquiesced” to the policy violations at issue. Like the district court, we give

these unambiguous terms their plain and ordinary meaning. Heniser v. Frankenmuth

Mut. Ins. Co., 534 N.W.2d 502, 504-05 (Mich. 1995).

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 6

A.

CUMIS asserts that the evidence does not support the jury’s finding that MFCU’s

lending policy was “established.” This argument is wholly without merit. The

uncontradicted evidence presented at trial established that the lending policy was

adopted by the MFCU board on February 20, 2001, and was still in effect at the time the

relevant policy violations occurred. Nevertheless, CUMIS contends that because the

lending policy’s “key factors” were mere optional “guidelines,” MFCU’s lending policy

was not “established.” We disagree.

Significant evidence in the record demonstrates that MFCU’s employees were

required to apply the “key factors” in making all lending decisions. Indeed, the language

of the policy itself indicates that consideration of the “key factors” was mandatory.

Moreover, the testimony elicited at trial similarly indicates that consideration of the “key

factors” was required. Accordingly, there is sufficient evidence in the record to support

the jury’s finding that MFCU’s lending policy was “established.”

B.

CUMIS next contends that the evidence admitted at trial does not support the

jury’s finding that MFCU’s lending policy was “enforced.” Once again, we disagree.

The record demonstrates that the lending policy was not an unenforced document

sitting on the proverbial shelf. Indeed, Lewis was specifically tasked with monitoring

the indirect-lending program to ensure lending policy compliance, and Clouthier was

similarly required to ensure that indirect loans were made “in accordance with

established policies and procedures[.]”2 In addition, MFCU enforced its lending policy

through training. The record establishes that Lewis, Clouthier, and Batton were all

trained on the application of the lending policy and its “key factors.”

2

CUMIS asserts that Lewis’s failure to monitor the indirect-lending program establishes that

MFCU was not enforcing its lending policy. However, Lewis’s failure to monitor is itself covered under

the faithful-performance clause because he consciously disregarded the lending policy’s requirement that

he monitor the program. Testimony presented at trial indicated that Lewis was the “management” referred

to by the policy as required to monitor indirect lending.

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 7

MFCU also enforced its lending policy through quarterly audits. During such

audits, Doeren Mayhew associates would review a sample of loans to ensure continued

policy compliance and discover non-compliant loans. In October 2003, a quarterly audit

was performed that identified a non-conforming indirect loan. However, Lewis

instructed the auditor to remove this loan from his report, preventing the information

from being communicated to MFCU’s supervisory committee. While this quarterly audit

failed to uncover the policy violations at issue, the fact that this audit was performed

demonstrates that MFCU actively enforced the lending policy in the indirect-lending

program.

Nevertheless, despite the implementation of these enforcement mechanisms,

CUMIS asserts that the lending policy was not “enforced” because such mechanisms

were not effective in preventing the policy violations at issue. However, the language

of the faithful-performance clause does not require a certain level of enforcement, or

perfect enforcement, for MFCU to be entitled to coverage. Indeed, if MFCU were

required to have perfect enforcement mechanisms, no covered losses would ever occur.

Moreover, the lending policy was successfully enforced in the direct-lending

program. For example, quarterly internal audits had proven successful in discovering

policy-violating direct loans. Upon learning of such violations, MFCU’s standard

practice was to perform a “deeper review” of the loans at issue and provide additional

training. In addition, employee training had proven effective in ensuring policy

compliance in direct lending. Indeed, Batton and Clouthier had received training on the

lending policy, applied the policy in direct lending, and thereafter received favorable

employment reviews regarding their lending decisions. Accordingly, the jury’s finding

that MFCU “enforced” its lending policy is supported by substantial evidence and is not

unreasonable.3

3

CUMIS also asserts that the lending policy was not enforced because it was “unenforceable.”

Once again, CUMIS relies on its contention that the lending policy was a set of mere optional “guidelines.”

However, as described above, this argument is without merit.

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 8

C.

Next, CUMIS contends that there is insufficient evidence in the record to support

the jury’s finding that Lewis, Clouthier, and Batton “conscious[ly] disregard[ed]” the

lending policy. This argument is without merit.

The evidence establishes that Batton and Clouthier were trained on the lending

policy and able to conform to its requirements. Moreover, MFCU presented evidence

that numerous indirect loans were approved by Batton and Clouthier that were patently

counter to policy. According to one expert, the loans were so “clearly outside of [policy]

. . . [that they] would never be approved probably in any credit union.” Therefore, the

evidence supports the inference that such flagrant lending errors could not have been

made without consciously disregarding the lending policy. See McCombs v. Meijer,

Inc., 395 F.3d 346, 356 (6th Cir. 2005) (noting that reasonable juries may infer conscious

disregard); First Nat’l Bank of Louisville v. Lustig, 961 F.2d 1162, 1166 (5th Cir. 1992)

(holding that reckless conduct may appropriately lead to an inference of intent).

Accordingly, the jury’s finding that MFCU employees “conscious[ly] disregard[ed]” the

lending policy is supported by substantial evidence and is not unreasonable.

D.

Finally, CUMIS argues that the evidence does not support the jury’s finding that

MFCU did not “acquiesce[]” to the underlying policy violations. However, CUMIS put

forth no evidence indicating that the MFCU board knew the violations at issue were

occurring. Therefore, the record supports the jury’s finding that MFCU did not

acquiesce to the violations that ultimately caused its losses.

In sum, there is sufficient evidence in the record to support the jury’s finding that

MFCU’s lending policy was “established,” “enforced,” and “conscious[ly]

disregard[ed].” Moreover, the record evidence is sufficient to support the jury’s finding

that MFCU did not “acquiesce[]” to the policy violations at issue. Such findings are not

unreasonable or against the clear weight of the evidence. Accordingly, we affirm the

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 9

district court’s denial of CUMIS’s motions for JMOL and for a new trial based upon the

sufficiency of the evidence.

IV.

In the alternative, CUMIS asserts that a new trial is required as a result of several

alleged trial errors. Under Federal Rule of Civil Procedure 59, a new trial is required

when the original “trial [was] unfair to the moving party in some fashion[.]” Mike’s

Train House, Inc. v. Lionel, L.L.C., 472 F.3d 398, 405 (6th Cir. 2006) (internal quotation

marks and citation omitted). Here, CUMIS argues that a new trial is required because

(1) MFCU made an improper “golden rule” argument during closing statements;

(2) MFCU impermissibly shifted the burden of proof; (3) MFCU set forth facts during

its opening statement that were not later entered into evidence; and (4) the district court

wrongfully admitted two hearsay statements. We address each alleged error below.

A.

First, CUMIS asserts that MFCU made an inappropriate “golden rule” argument.

During its closing statement, counsel for MFCU stated:

There are analogies that you can bring to this case. You don’t have to go

very far to think of your own insurance claim.

***

I’m sure that many of you have insurance coverage or have had insurance

coverage in the past, maybe homeowner’s insurance or something, and

sometimes there might be an occasion where somebody breaks into your

house and steals something, and when that happens, you might have

occasion to look at your insurance policy and say, hey was I covered?

This was theft, and you might come to the conclusion yes, I think I’m

covered. It says right there theft. Well, it might surprise you in response

the insurance company would come out and say well, yeah, somebody

stole this money from you, but on the other hand, if you had better locks

on your house, they would not have been able to steal it.

***

So actually that’s a cause of your loss because you didn’t have good

enough locks, and they might have said, well, we hired an expert, and he

has come in and he said, you could have had floodlights, and that would

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 10

identified anybody coming into the house. That’s a cause of your loss,

and they might have said, well also, if you had not invited so many

people into your house all the time, you know, asked for this. You

invited people in the house all the time, and that’s uncommon. So that’s

a cause of your loss, and they could have come up with all sorts of things

that you might have done to protect yourself and your home better, and

they might have employed an expert, paid him $175,000 to come up with

all of these things to present to a jury and convince them psychologically

that all of a sudden this is part of your insurance policy. So you should

not get money back for the people that stole from the insurance company

for theft of your home. That’s what we have here. You have seen all of

the things throughout the course the trial that Cumis has tried to suggest

that [MFCU] could have done better.

CUMIS asserts that this portion of MFCU’s closing statement constitutes an

inappropriate “golden rule” argument because it requested the jury to put themselves in

MFCU’s place. We agree. See Johnson v. Howard, 24 F. App’x 480, 487 (6th Cir.

2001) (“Those circuits that have considered use of ‘Golden Rule’ arguments have

‘universally condemned’ them as improper because they invite decision based on bias

and prejudice rather than consideration of facts.”); Whitehead v. Food Max of Miss., Inc.,

163 F.3d 265, 278 (5th Cir. 1998) (internal quotation marks and citation omitted) (“This

court has forbidden plaintiff’s counsel to explicitly request a jury to place themselves in

the plaintiff’s position[.]”).

However, despite MFCU’s inappropriate argument, a new trial is not required.

We “may only set aside the verdict if there is a reasonable probability that the verdict

was influenced by [the improper] argument[].” Bridgeport Music, Inc. v. Justin Combs

Pub., 507 F.3d 470, 478 (6th Cir. 2007) (internal quotation marks and citation omitted).

In making this assessment, we look at

the totality of the circumstances, including the nature of the comments,

their frequency, their possible relevancy to the real issues before the jury,

the manner in which the parties and the court treated the comments, the

strength of the case (e.g. whether it is a close case), and the verdict itself.

City of Cleveland v. Peter Kiewit Sons’ Co., 624 F.2d 749, 756 (6th Cir. 1980).

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 11

In this case, MFCU’s “golden rule” argument was isolated and not repeated.

Moreover, there is no evidence indicating that the improper statement was made with the

purpose of inflaming jury prejudice. See United States v. Shalash, 108 F. App’x 269,

281 (6th Cir. 2004) (holding that improper arguments made during closing statement did

not require reversal when isolated and not made with deliberate intent to inflame jury

prejudice).

In addition, the jury was instructed that the arguments of counsel are not

evidence. Thus, any minimal amount of prejudice created by the improper argument was

cured. See Gleason v. Noyes, 125 F.3d 855, 1997 WL 539679, at *2 (6th Cir. Aug. 29,

1997) (unpublished table opinion) (noting that improper statements made during closing

statement did not warrant reversal in part because a jury instruction provided that

statements of counsel are not evidence); United States v. Smith, 918 F.2d 1551, 1562

(11th Cir. 1990) (“Because statements and arguments of counsel are not evidence,

improper statements can be rectified by the district court’s instruction to the jury that

only the evidence in the case be considered.”). Accordingly, because there was no

reversible error, a new trial is not required.

B.

Second, CUMIS asserts that the trial court erred in allowing MFCU to admit

evidence regarding CUMIS’s authority under the bond to inspect MFCU’s policies.

CUMIS contends that such references impermissibly shifted the burden of proof and

misstated the evidence. This argument is without merit.

MFCU did not misstate the evidence in the record. The bond expressly provides

that CUMIS “may examine and audit [MFCU’s] books, records and ‘premises’ . . . as

they relate to [the] Bond at any time.” With regard to burden shifting, CUMIS asserts

that references to its ability to inspect MFCU’s policies impermissibly shifted the burden

of proof by “suggesting that CUMIS had the obligation to govern MFCU and prevent

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 12

this situation.”4 However, while MFCU did put forth evidence that CUMIS had the

ability to inspect its policies, it never stated that CUMIS was required to do so.

CUMIS further argues that testimony regarding its ability to inspect MFCU’s

policies violated Motion in Limine Number 13. However, CUMIS’s reliance upon this

limine order is misplaced, as it merely provides that MFCU could not assert that

employees other than Lewis, Clouthier, and Batton had violated the lending policy. This

order does not limit MFCU’s ability to establish that CUMIS had the ability to inspect

MFCU’s lending policy. Accordingly, no error occurred in allowing this testimony.

C.

Third, CUMIS asserts that prejudicial error occurred when MFCU referenced

certain “checklists” during its opening statement that were not later entered into

evidence. Specifically, counsel for MFCU stated:

In fact, when Cumis was deciding to give insurance to [MFCU], its own

people had a checklist of the certain types of protections that [MFCU]

had in place in determining whether to give the insurance . . . . And after

Cumis completed the review and checklist, it decided to give [MFCU]

the insurance that it is now seeking not to pay under.[5]

Evidence regarding these checklists was ultimately excluded.

We hold that no error requiring reversal resulted from MFCU’s opening

comments relating to the checklists. Indeed, the statements at issue were made with the

good-faith belief that evidence regarding the checklists would be admitted. See King v.

Elo, 36 F. App’x 805, 812-13 (6th Cir. 2002) (holding that good-faith reference to

4

The cases cited by CUMIS in this regard are inapposite. In United States v. Smith, we held that

informing a jury that a criminal defendant is required to provide a reasonable explanation for incriminating

evidence abrogates the presumption of innocence and impermissibly shifts the burden of proof. 500 F.2d

293, 294 (6th Cir. 1974). In People v. Fowler, the Michigan Supreme Court similarly addressed the burden

of proof in a criminal case. 62 N.W. 572, 574 (Mich. 1895). Neither Smith nor Fowler is applicable to

this civil matter.

5

During its opening statement, MFCU also noted that CUMIS offered to provide continued

insurance coverage to MFCU even after it denied coverage in this case. CUMIS asserts that this statement

violated Limine Order Number 7. However, this order merely precludes the admission of evidence

regarding CUMIS’s “conduct in decisioning the claim.”

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 13

evidence not later admitted did not deny appellant a fair trial). Moreover, any minimal

prejudice caused by the opening statement was cured by the district court’s jury

instructions. See United States v. Campbell, 317 F.3d 597, 606-07 (6th Cir. 2003)

(holding that reference to facts not later admitted into evidence did not deny appellant

a fair trial when a curative instruction was given). Accordingly, a new trial is not

warranted.

D.

Fourth, CUMIS claims that the admission of two alleged hearsay statements

requires a new trial. Once again, we disagree, as neither of the challenged statements

constitutes hearsay.6

The first challenged statement was made by Yarber, who testified that Lewis

instructed him to remove a particular indirect loan from the “exceptions” section of his

October 2003 audit report. This statement is not hearsay because it is a command, a

verbal act without truth value. See United States v. Rodriguez-Lopez, 565 F.3d 312, 314-

15 (6th Cir. 2009) (holding that “commands” are not hearsay because they are not

“assertive speech”); Preferred Props., Inc. v. Indian River Estates, Inc., 276 F.3d 790,

798 n.5 (6th Cir. 2002) (noting that “verbal acts” are not hearsay). Accordingly, the

district court did not err in admitting this statement.

The second statement challenged by CUMIS was made by Poulos, who testified

that Lewis did not inform him until January 2004 that he had not been monitoring

indirect lending. This statement is not hearsay because it was not offered to prove the

truth of the matter asserted, but to demonstrate MFCU’s knowledge, or lack thereof. See

United States v. Johnson, 71 F.3d 539, 543 (6th Cir. 1995) (holding that statements

offered to prove knowledge are not hearsay). Accordingly, this statement was relevant

and properly admitted.

6

Hearsay is defined as a “statement, other than one made by the declarant while testifying at the

trial or hearing, offered in evidence to prove the truth of the matter asserted.” Fed. R. Evid. 801(c).

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 14

E.

Finally, CUMIS asserts that the cumulative prejudice caused by the alleged trial

errors requires a new trial. It is true that “[e]rrors that might not be so prejudicial as to

amount to a deprivation of due process when considered alone, may cumulatively

produce a trial setting that is fundamentally unfair.” Walker v. Engle, 703 F.2d 959, 963

(6th Cir. 1983). However, most of the purported errors identified by CUMIS do not

constitute error in the first instance, and the relatively minor errors that did occur do not

warrant reversal, even when considered cumulatively. While the trial in this case “may

not have been perfect, . . . it was fair.” United States v. Ashworth, 836 F.2d 260, 268

(6th Cir. 1988). Accordingly, the district court’s denial of CUMIS’s motion for a new

trial based upon trial error is affirmed.

V.

On cross-appeal, MFCU asserts that the district court erred in holding that

penalty interest, provided pursuant to Michigan Compiled Laws (“M.C.L.”) § 500.2006,

is to be “offset” by the prejudgment interest provided in M.C.L. § 600.6013. We

disagree.

“When deciding a diversity case under state law, a federal court must apply the

law of the state’s highest court.” Garden City Osteopathic Hosp. v. HBE Corp., 55 F.3d

1126, 1130 (6th Cir. 1995) (citing Erie R.R. v. Tompkins, 304 U.S. 64 (1938)). “If,

however, the state’s highest court has not decided the applicable law, then the federal

court must ascertain the state law from all relevant data.” Id. (internal quotation marks

and citation omitted). “[A]n intermediate appellate court’s judgment that announces a

rule of law is a datum for ascertaining state law which is not to be disregarded by a

federal court unless it is convinced by other persuasive data that the highest court of the

state would decide otherwise.” FL Aerospace v. Aetna Cas. & Sur. Co., 897 F.2d 214,

218-19 (6th Cir. 1990) (internal quotation marks and citation omitted).

In this case, we hold that the district court correctly applied M.C.L. § 500.2006

in calculating the interest award. First, the plain language of § 500.2006 requires that

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 15

penalty interest be “offset” by any other interest award: “Interest paid pursuant to this

section shall be offset by any award of interest that is payable by the insurer pursuant to

the award.” § 500.2006(4) (emphasis added). Because this language “is clear and

unambiguous, judicial construction is neither required nor permitted[.]” Angott v. Chubb

Group Ins., 717 N.W.2d 341, 348 (Mich. Ct. App. 2006) (internal quotation marks and

citation omitted). Moreover, two Michigan Court of Appeals cases hold that a penalty

interest award under § 500.2006 must be offset by prejudgment interest. Id. at 355 n.12;

McCahill v. Commercial Union Ins. Co., 446 N.W.2d 579, 587-88 (Mich. Ct. App.

1989). In the absence of a Michigan Supreme Court case addressing this issue, these

cases are highly persuasive authority. See FL Aerospace, 897 F.2d at 218-19.

In asserting that an offset is not required, MFCU relies upon dicta in Wood v.

Detroit Automobile Inter-Insurance Exchange, 321 N.W.2d 653 (Mich. 1982), a

Michigan Supreme Court case addressing Michigan’s No-Fault Automobile Insurance

Act. However, this case is inapposite because Michigan’s No-Fault Act does not have

an offset provision. See M.C.L. § 500.3142. While Wood does refer to § 500.2006, it

does not address the issue of offsetting. Id. at 662 n.17.7 Accordingly, in light of the

plain language of § 500.2006, and the highly persuasive authority provided in Angott and

McCahill, we affirm the district court’s interest calculation.8

VI.

For the reasons described above, we hold that the district court correctly denied

CUMIS’s motions for JMOL and for a new trial. We further conclude that the district

court was correct in its interest calculation. Accordingly, we affirm the judgment of the

district court in all respects.

7

MFCU also relies upon Mathis v. Encompass Insurance Co., No 06-CV-13837, 2008 WL

919934, at *4 (E.D. Mich. Apr. 3, 2008) (unpublished), to support its claim that penalty interest should

not be offset by prejudgment interest. However, this case does not directly address the issue of offsetting.

Moreover, Mathis possesses no precedential value in this court. Nafziger v. McDermott Int’l, Inc., 467

F.3d 514, 522 (6th Cir. 2006).

8

MFCU makes two evidentiary arguments on appeal that are relevant only if we remand for a new

trial. Because a new trial will not be granted, these arguments will not be addressed.

Nos. 09-1925/1970 Mich. First Credit Union v. CUMIS Ins. Soc’y Page 16

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CONCURRING IN PART AND CONCURRING IN THE JUDGMENT

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KETHLEDGE, Circuit Judge, concurring in part and concurring in the judgment

in part. In the law, to attempt a thing is generally distinct from actually doing it. In

order for Michigan First to recover under the contract here, it had to show that its

relevant lending policy was “enforced.” The majority cites various “enforcement

mechanisms” as proof of such enforcement. Maj. Op. at 7. The problem with that

analysis is that the cited mechanisms were totally ineffective, as least as to Michigan

First’s indirect-lending program. As to that program, therefore, Michigan First has

shown only that it (ineffectually) attempted to enforce the policy, not that it actually

enforced it.

The parties here could have written a contract that conditioned coverage on

attempted rather than actual enforcement. They did not do so, and in my view neither

should we. But in this case that principle cuts both ways, since another aspect of the

contract’s language ultimately sinks the insurance company’s position. Namely, the

provision containing the “enforced” language applies not only to the indirect-lending

program (where it was disregarded), but also to the direct-lending one, which is

governed by the same lending policy. Per the contract’s terms, then, we measure

“enforce[ment]” looking at both programs, rather than at the indirect-lending program

in isolation. The relevant policy undisputedly was enforced in the direct-lending

program, which comprised the bulk of Michigan First’s lending business. So measured,

therefore, the policy was substantially enforced; and in my view that is all that the

contract requires.

For these reasons, I concur in the judgment and otherwise concur in all but

section III.B of the majority’s opinion.