COMMERCIAL UNION INS. CO. v. WALBROOK INS. CO., 41 F.3d 764 (1st Cir. 1994)

COMMERCIAL UNION INSURANCE COMPANY, PLAINTIFF, APPELLANT, v. WALBROOK INSURANCE CO., LTD., ET AL., DEFENDANTS, APPELLEES. COMMERCIAL UNION INSURANCE COMPANY, PLAINTIFF, APPELLEE, v. NATIONAL CASUALTY CO., ET AL., DEFENDANTS, APPELLANTS.

Nos. 94-1526, 94-1561.United States Court of Appeals, First Circuit.Heard September 14, 1994.
Decided December 5, 1994.

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[EDITORS’ NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

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Richard L. Neumeier with whom Parker, Coulter, Daley White, Boston, MA, was on brief, for Commercial Union Ins. Co.

James B. Dolan with whom Erin R. Boisvert, Badger, Dolan, Parker Cohen, Boston, MA, Robert J. Brown, Mark A. DiTaranto, and Mendes Mount, New York City, were on brief, for Walbrook Ins. Co., Ltd., et al.

Appeal from the United States District Court for the District of Massachusetts.

Before SELYA, Circuit Judge, CAMPBELL, Senior Circuit Judge, and STAHL, Circuit Judge.

STAHL, Circuit Judge.

[1] For the second time, we examine issues arising out of a dispute between Commercial Union Insurance Company (“CU”) and Walbrook Insurance et al. (collectively, “Weavers”) concerning Weavers’s obligation to indemnify CU under an insurance contract. On initial appeal, we reversed the district court’s grant of summary judgment in favor of Weavers and remanded the case for further proceedings consistent with our opinion. Commercial Union Ins. Co. v. Walbrook Ins. Co., 7 F.3d 1047 (1st Cir. 1993) (“Commercial Union I“). Both parties now challenge the district court’s entry of judgment for CU and denial of cross-motions to amend or alter that judgment. Weavers has also moved to dismiss CU’s appeal. We deny the motion to dismiss and affirm the entry of judgment below.

I. [2] FACTUAL BACKGROUND AND PRIOR PROCEEDINGS
[3] Between 1973 and 1975, a CU loss-prevention inspector conducted several safety inspections of the Peterson/Puritan aerosol-packing plant in Cumberland, Rhode Island. On January 17, 1976, a gas line exploded at the plant, killing four people and injuring several others. Two years later, victims filed several suits naming CU as defendant (“Peterson claims”). CU eventually settled the Peterson claims. CU expended $2,502,874.30 for defense and in settlement of the claims. Ultimately, CU obtained primary indemnification in the amount of $1,000,000 from American Employers Insurance Company (“American Employers”), CU’s primary corporate insurer for the period July 1, 1976 through July 1, 1979.[1]

[4] At the time of the explosion, the Travelers Insurance Company had issued to CU a primary corporate liability policy (“Travelers Policy”) effective from January 1, 1976, to July 1, 1976. The Travelers Policy provided occurrence-based coverage[2] during the policy period for up to $1 million of CU liability. The main body of the Travelers Policy specifically excluded occurrences involving malpractice by CU’s engineers. This gap was partially filled by a separate Engineers Professional Liability Endorsement issued by Travelers (“Travelers EPL Endorsement”). The Travelers EPL Endorsement provided claims-based coverage.[3]

[5] As the Commercial Union I panel noted, the Travelers Policy and the Travelers EPL Endorsement left CU with a gap in its coverage with respect to occurrences resulting from engineer malpractice for which no claim was filed during the policy period. Consequently, at the time of the explosion, CU also carried an umbrella policy issued by Weavers

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(“Weavers Umbrella”).[4] Under the first section of the main body of the Weavers Umbrella, captioned “COVERAGE,” the policy expressly covered “all sums . . . imposed upon [CU] by law . . . or assumed under contract or agreement . . . for damages on account of . . . personal injuries, property damage, [or] advertising liability . . . arising out of each occurrence happening anywhere in the world.”[5]

[6] The next section of the main body of the Weavers Umbrella, captioned “LIMIT OF LIABILITY,” provided that Weavers would only be liable for the ultimate net loss in excess of either “(a) the limits of the underlying insurances as set out in the attached schedule in respect of each occurrence covered by said underlying insurances” or “(b) $25,000 ultimate net loss in respect of each occurrence not covered by said underlying insurances. . . .”

[7] To the Weavers Umbrella was attached an EPL Endorsement (“Weavers EPL Endorsement”). The terms of the Weavers EPL Endorsement provided that it was to “include Engineers Professional Liability as more fully described in the underlying General Liability Policy/ies” (referencing the Travelers Policy) and that such coverage “is subject to the same warranties, terms and conditions . . . as are contained in the said underlying policy/ies. . . .” The parties agree that because this language specifically incorporates the provisions of the Travelers EPL Endorsement, the Weavers EPL Endorsement provided claims-based coverage.

[8] Subsection (a) of the Weavers EPL Endorsement captioned “LIMIT OF LIABILITY,” provided that Weavers would only be liable for the ultimate net loss in excess of “[t]he limits of the underlying insurances as set out in the attached schedule in respect of each occurrence covered by said underlying insurances.” If the liability was not covered by another policy, subsection (b) of the Weavers EPL Endorsement (“Liability Amendment”) provided coverage for “the excess of . . . $25,000 ultimate nett [sic] loss in respect of each occurrence not covered by said underlying insurances but in respect of engineering services liability $250,000 ultimate nett [sic] loss [for] each occurrence not covered by said underlying insurances.” In effect, subsection (b) provides for a deductible when the Umbrella “drops down” to provide coverage not covered under the underlying policy (“$250,000 deductible”). An attachment captioned “Schedule of Underlying Insurances” lists the Travelers Policy.

[9] Initially, Travelers undertook the defense of the Peterson claims. Then, in 1982, CU determined that it had not made its claim for coverage during the Travelers Policy period. Accordingly, CU released Travelers from any further obligations in connection with the explosion. Weavers then informed CU that its Umbrella would not cover the Peterson claims. In November 1982, CU brought the present action, seeking a judicial declaration as to whether the Weavers Umbrella covered the Peterson claims.

[10] Following extensive discovery, both parties sought summary judgment. CU argued that the main body of the Weavers Umbrella covered EPL claims on an occurrence basis and that the Weavers EPL Endorsement provided additional coverage on a claims basis. Weavers argued that the Weavers EPL Endorsement was the sole source of EPL coverage and, because the EPL Endorsement was claims-based, there was, accordingly, no coverage under either the Weavers Umbrella or the Weavers EPL Endorsement. The district court largely adopted the latter reading

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and granted Weavers’s motion for summary judgment.

[11] On appeal, the Commercial Union I panel reversed. Interpreting the various policy provisions, the panel concluded that the main body of the Weavers Umbrella provided occurrence-based EPL coverage and thus covered the Peterson claims. Commercial Union I, 7 F.3d at 1049. Consequently, the panel ordered that the judgment in favor of Weavers be vacated and that judgment be entered for CU, in proceedings consistent with the panel’s opinion. Weavers’s petition for rehearing and rehearing en banc was denied.

[12] In this appeal, we are asked to review issues arising from the subsequent proceedings before the district court. CU moved that the district court enter judgment for $1,502,874.30 plus interest[6] to be calculated at 12%, the prejudgment interest rate for contractual disputes under Massachusetts law. In its response, Weavers argued that the $1,502,874.30 was subject to the $250,000 deductible and that prejudgment interest should be determined by reference to federal law. As to the prejudgment-interest issue, Weavers argued in the alternative that if state law applied, the correct Massachusetts statute set the rate at 6%. The district court, finding that the Commercial Union I panel had “rested judgment upon” the validity of the $250,000 deductible, applied the deductible, ordered entry of judgment for CU in the amount of $1,252,874.30, found state law to govern interest, and ordered that prejudgment interest be calculated at the rate of 12%. The district court entered judgment for $2,749,326.48.

[13] Pursuant to Fed.R.Civ.P. 59, both parties filed motions seeking to alter or amend the judgment. The district court denied both motions.[7] CU appealed, and Weavers cross appealed. CU requested that Weavers post a bond pursuant to Fed.R.Civ.P. 62. When Weavers refused, CU obtained an execution. CU then received payment from all defendants except Walbrook and Slater, Walker and has accepted checks totaling $2,314,758.61. CU refused to execute a satisfaction of judgment. Weavers moved to dismiss CU’s appeal. The motion to dismiss was denied without prejudice pending reconsideration by this panel.

II. [14] DISCUSSION
[15] Where, as here, the issues on appeal involve pure questions of law, our review is de novo.[8] See, e.g., Villafane-Neriz v. Federal Deposit Ins. Corp., 20 F.3d 35, 39 (1st Cir. 1994). On appeal, CU makes two principal arguments: (1) that the district court erred in stacking the $250,000 deductible on top of the payment received from American Employers; and (2) that Weavers waived its right to argue for alternate relief in application of the deductible. In its cross appeal, Weavers argues: (1) that the district court erred in applying state law to award prejudgment interest; and, in the alternative, (2) that, if state law applies, the district court applied the incorrect law. On its motion to dismiss CU’s appeal, Weavers argues that, in executing the district court’s judgment, CU waived its right to appeal. We first address Weavers’s motion to dismiss, then CU’s appeal and, finally, Weavers’s cross appeal.

[16] A. Weavers’s Motion to Dismiss
[17] In its motion to dismiss, Weavers argues that, because CU executed judgment

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against all defendants except Walbrook and Slater, Walker, CU has “accept[ed] the substantial benefits of a judgment, voluntarily and intentionally, and with knowledge of the facts,” Fidelcor Mortgage Corp. v. Insurance Co. of N. Am., 820 F.2d 367, 370
(11th Cir. 1987) (citations omitted), and therefore waived its right to appeal. CU argues that Fidelcor, on which Weavers principally relies, should be distinguished because in that case Fidelcor executed a satisfaction of judgment, whereas CU has refused to do so.

[18] Our analysis must start with United States v. Hougham, 364 U.S. 310, 312, 81 S.Ct. 13, 15-16, 5 L.Ed.2d 8 (1960), in which the Supreme Court held that “where a judgment is appealed on the ground that the damages awarded are inadequate, acceptance of payment of the amount of the unsatisfactory judgment does not, standing alone, amount to an accord and satisfaction of the entire claim.” Commentary has noted that the dimensions of the Court’s holding are vague and courts of appeals have subsequently developed disparate “acceptance of benefits” doctrines. See, e.g., 9 James W. Moore et al., Moore’s Federal Practice ¶ 203.06 (2d ed. 1994) (hereinafter, Moore’s Federal Practice); Benson K. Friedman, Note, An Intent-Based Approach to the Acceptance of Benefits Doctrine in the Federal Courts, 92 Mich.L.Rev. 742 (1993); Annotation, Right to Appeal From Judgment As Affected By Acceptance of Benefit Thereunder —Federal Cases, 5 L.Ed.2d 889 (1960). This Circuit has not explicitly addressed this issue since Hougham. Notably, i Fidelcor, the Eleventh Circuit does not discuss Hougham.
Instead, Fidelcor relies on pre-Hougham common law that strictly applied the bar to appeal after acceptances of benefits, subject to only limited exceptions. We decline to follow this approach.

[19] While the use of the phrase “standing alone” by the Hougham
Court does lead to some uncertainty, we think that the unique circumstances presented here fit comfortably within the rule of that case. As discussed fully below, CU’s appeal focuses on the district court’s application of the $250,000 deductible. Weavers argued for the application of the deductible before the district court and, except for its challenge to the rate of prejudgment interest raised in its cross appeal, Weavers does not otherwise dispute the entry of judgment. Under these circumstances, we do not think that CU should be foreclosed from appealing the deductible issue simply because it collected payment on what was essentially an undisputed amount. Indeed, this case bears out the wisdom of the relative flexibility incorporated in the Hougham
rule.[9] Accordingly, we deny Weavers’s motion to dismiss.

[20] B. Commercial Union’s Appeal
[21] CU challenges the district court’s interpretation o Commercial Union I and argues that the language of the Weavers Umbrella prohibits stacking the $250,000 deductible on top of the amount received from American Employers. Characterizing the deductible as “alternative relief,” CU further argues that, because Weavers raised the application of the deductible only after Commercial Union I, the issue is waived. We address each argument in turn.

[22] 1. The $250,000 Deductible
[23] The doctrine of the law of the case directs that a decision of an appellate court on an issue of law, unless vacated or set aside, governs the issue during all subsequent stages of litigation in the nisi prius court and thereafter on any further appeal. United States v. Rivera-Martinez, 931 F.2d 148
(1st Cir.), cert. denied, ___ U.S. ___, 112 S.Ct. 184, 116 L.Ed.2d 145 (1991). When a case is appealed and remanded:

“the decision of the appellate court establishes the law of the case and it must be followed by the trial court on remand. If there is an appeal from the judgment entered

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after remand, the decision of the first appeal establishes the law of the case to be followed on the second.”

[24] Id. (quoting 1B Moore’s Federal Practice ¶ 0.404[1] (2d ed. 1991)). When the reviewing court, in its mandate, prescribes that a court shall proceed in accordance with the opinion of the reviewing court, it incorporates its opinion into its mandate Jones v. Lewis, 957 F.2d 260, 262 (6th Cir.), cert. denied,
___ U.S. ___, 113 S.Ct. 125, 121 L.Ed.2d 80 (1992). Cf. Elias v. Ford Motor Co., 734 F.2d 463, 465 (1st Cir. 1984) (“A mandate is completely controlling as to all matters before the appellate court and disposed of by its decree.”); accord Rivera-Martinez, 931 F.2d at 150; Federal Deposit Ins. Corp. v. Ramirez-Rivera, 869 F.2d 624, 627 (1st Cir. 1989). The mandate constitutes the law of the case on such issues of law as were actually considered and decided by the appellate court, or as were necessarily inferred from the disposition on appeal. 1B Moore’s Federal Practice ¶ 0.404[10] (2d ed. 1993).

[25] In Commercial Union I, the mandate directed the district court to conduct further proceedings “in accordance” with the panel’s opinion. The legal issue in Commercial Union I was whether the Weavers Umbrella provided occurrence-based coverage for the Peterson claims; resolution of that issue required the panel to interpret the Weavers contract. As noted above, the panel determined that the main body of the Weavers Umbrella provided coverage and that the Peterson claims resulted from an “occurrence” within the meaning of the policy’s definition of that term. Commercial Union I, 7 F.3d at 1051. Importantly, the panel stated:

Our integrated reading of the Weavers Umbrella policy as a whole is corroborated by the specific terms of the Liability Amendment, which contemplate “engineering services liability” subject to a $250,000 deductible, in circumstances where, as here, the Weavers Umbrella “drops down” to provide primary coverage of risks not covered by the underlying [Travelers] insurance policy. Thus, the Liability Amendment clearly replaces corresponding language in the “LIMIT OF LIABILITY” section of the main body of the Weavers Umbrella. We find untenable an interpretation which would provide a $250,000 EPL “deductible” for a risk not covered in the first place.

[26] Id. at 1053 (emphasis added). As the panel stated, its reading gave “full effect” to all terms in the main body of the Weavers Umbrella and the Weavers EPL Endorsement, thus satisfying the obligation to give reasonable effect to all contractual terms whenever possible. Id. at 1052 (citing Jimenez v. Peninsular Oriental Steam Nav. Co., 974 F.2d 221, 223 (1st Cir. 1992) Feinberg v. Insurance Co. of N. Am., 260 F.2d 523, 527 (1st Cir. 1958) (applying Massachusetts law)).

[27] CU argues, in essence, that the panel’s references to the $250,000 deductible are dicta and thus cannot constitute law of the case. See, e.g., Dedham Water Co. v. Cumberland Farms Dairy, Inc., 972 F.2d 453, 459 (1st Cir. 1992) (“Dictum contained in an appellate court’s opinion has no preclusive effect in subsequent proceedings in the same, or any other, case.”). We do not agree with CU’s argument. To resolve the legal issue presented in Commercial Union I, it was essential that the panel, to the extent possible, give reasonable effect to all contractual terms. As the language from the opinion quoted above suggests, giving full effect to the $250,000 deductible was an especially critical element in resolving the case. Simply stated, it was the key piece of the puzzle. The availability of the deductible lay at the heart of the integrated interpretation of the Weavers Umbrella and the Weavers EPL Endorsement. Moreover, the panel concluded that, because the Travelers Policy did not provide coverage for the Peterson claims, the Weavers Umbrella “dropped down” to provide coverage and, consequently, the $250,000 deductible applied. Therefore, the district court correctly interpreted the law of the case and we hold that the entry of judgment was in accordance with Commercial Union I‘s mandate.

[28] Of course, the law of the case is a prudential doctrine and does not serve as an absolute bar to our reconsideration of an issue. Rivera-Martinez, 931 F.2d at 150-51. We do not reconsider a decision, however,

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“`unless the evidence on a subsequent trial was substantially different, controlling authority has since made a contrary decision of law applicable to such issues, or the decision was clearly erroneous and would work a manifest injustice.'” Id.
(quoting White v. Murtha, 377 F.2d 428, 432 (5th Cir. 1967)). On this appeal, CU essentially argues that the third condition obtains; that is, the Weavers contract cannot be interpreted to permit application of the deductible to the American Employers indemnification obligation.

[29] According to CU, the $250,000 deductible should not be stacked upon the American Employers indemnification because Travelers, and not American Employers, is listed on the “Schedule of Underlying Insurance” and the Weavers EPL Endorsement did not contain a reference to “other insurance not scheduled which may have been collectible by CU” to which the deductible would apply.

[30] Any confusion on the reader’s part is to be excused. After years of pointing to the deductible as prima facie evidence of Weavers’s liability,[10] CU now argues that the $250,000 deductible should not apply. Based on the plain language of the Weavers contract, we cannot agree with CU’s new argument. The Liability Amendment provides coverage for “each occurrence not covered by said underlying insurances [referencing the attached schedule]” subject, in the case of engineering services, to a $250,000 deductible. Both parties agree that the “attached schedule” refers only to the Travelers Policy. The Liability Amendment must be read to provide primary coverage, subject to the deductible, when the Travelers Policy does not provide coverage. As CU repeatedly argued, that is exactly what occurred in this case: the Weavers Umbrella “drops down” to provide coverage not covered by the Travelers Policy, and thus the $250,000 deductible must apply. In short, the language of the contract requires application of the deductible. That Weavers may have included additional language in the insurance contract has no bearing on the outcome.

[31] In Commercial Union I, CU offered a somewhat different explanation of the amount it is entitled to recover. Rather than arguing that the deductible did not apply because of the contractual language, CU expressly stated that it only sought to recover that amount for which it was “out of pocket,” or $1,502,874.30 plus interest. Under CU’s view, because its “out of pocket” figure already affords Weavers a $750,000 “savings” (ignoring interest) from its total potential exposure (amount of Peterson claims less deductible less “out of pocket” amount), they should not be entitled to the benefit of an additional $250,000 in “savings”. Critically, however, there was never an agreement amount the parties that the deductible would not still apply to whatever amount CU sought to recover. We can discern no basis in the contractual language to effect what would essentially be a “waiver” of the deductible. The fact that CU sought judgment for an amount less than it might otherwise be owed cannot obviate the plain language of a valid contractual provision. Indeed, given the course of this litigation, we find that the invitation to ignore the $250,000 deductible is, to say the least, ironic.

[32] In sum, we find no error in the prior panel’s interpretation of the contractual provisions or their application in this case. Accordingly, as to the deductibility issue, we hold that entry of judgment by the district court is unassailably proper.

[33] 2. Waiver of the Deductibility Issue
[34] CU argues that, because Weavers failed to raise the application of the deductible

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until after the mandate had issued in Commercial Union I, the argument should be rejected as untimely. We do not agree. As the foregoing discussion indicates, there can hardly be any dispute that the deductible was a central focus of this lengthy case. It was the subject of intense review before the Commercial Union I
panel. Given the pages of record devoted to the deductible, it would simply be untenable to find waiver had occurred with respect to that issue. We decline to do so and hold that there was no such waiver.

[35] C. Weavers’s Cross Appeal
[36] On its cross appeal, Weavers makes two alternative arguments: (1) that in diversity actions brought under the federal Declaratory Judgment Act, the determination of prejudgment interest is governed by federal law; and (2) that, if state law is to apply, the district court applied the wrong law. We address each argument in turn.

[37] 1. Prejudgment Interest Under the Declaratory Judgment Act
[38] In determining the rate of prejudgment interest, the district court held that, because jurisdiction was based on diversity, Massachusetts law governed. Weavers argues that federal law should govern. Reduced to its essence, Weavers’s theory is that the “procedural” nature of the Declaratory Judgment Act (“DJA”), 28 U.S.C. §§ 2201 and 2202,[11] displaces a “contrary state provision” under the rule of Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny. Thus, Weavers argues that if the district court grants “[f]urther necessary or proper relief’ under the DJA by awarding prejudgment interest, it should apply the federal rule governing prejudgment interest under which, Weavers says, prejudgment interest is calculated at the “market” rate of interest. We find Weavers’s analysis to be flawed.

[39] Where, as in this case, jurisdiction is based on diversity, familiar principles control. “[F]ederal courts sitting in diversity jurisdiction are obligated to apply state law unless applicable federal procedural rules are sufficiently broad to control a particular issue before the court.” Daigle v. Maine Medical Ctr., Inc., 14 F.3d 684, 689 (1st Cir. 1994) (citin Walker v. Armco Steel Corp, 446 U.S. 740, 749, 100 S.Ct. 1978, 1984-85, 64 L.Ed.2d 659 (1980); Hanna v. Plumer, 380 U.S. 460, 470-71, 85 S.Ct. 1136, 1143-44, 14 L.Ed.2d 8 (1965)); see also Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 26, 108 S.Ct. 2239, 2242, 101 L.Ed.2d 22 (1988) (where federal procedural statute is involved, a court must determine if it is “sufficiently broad to control the issue”).

[40] The DJA creates a particular remedy where a federal district court already has jurisdiction to entertain a suit. See, e.g., Nashoba Communications v. Town of Danvers, 893 F.2d 435, 437
(1st Cir. 1990). Issues that would be governed by state law in a coercive action are equally governed by state law when declaratory relief is sought. 10A Charles A. Wright, Arthur R. Miller Mary Kay Kane, Federal Practice and Procedure, § 2771 (2d ed. 1983) (hereinafter, “Wright, Miller, Kane”). Indeed, as one commentator has noted:

Since the declaratory remedy is not intended to affect substantive rights, federal substantive rights will, of course, rule the adjudication of federal rights. Similarly, just as in any other type of civil action where the substantive issues are non-federal, Erie R.R. v. Tompkins requires a

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careful and loyal application of state substantive law. . . .

[41] 6A Moore’s Federal Practice ¶ 57.02[5] (2d ed. 1994).

[42] Notwithstanding these well-established principles governing both federal-state choice of law and declaratory judgment actions, Weavers argues, as summarized above, that federal law should govern prejudgment interest. In circumstances such as this where a federal court is confronted with a claim that a state law conflicts with a federal procedural rule or statute, the court must first ask whether the dispute falls within the scope of the federal statute. If a conflict exists, then the court must then ask whether the statute is a valid exercise of Congress’s authority. See, e.g., Stewart, 487 U.S. at 26-27, 108 S.Ct. at 2242-43. If no federal statute or procedural rule covers the point in dispute, a court must then proceed to evaluate “whether application of federal judge-made law would disserve the so-called `twin aims of the Erie rule: discouragement of forum shopping and inequitable administration of the laws.'” Id. at 27 n. 6, 108 S.Ct. at 2243 n. 6 (quoting Hanna, 380 U.S. at 468, 85 S.Ct. at 1142). If application of federal law would disserve these two policies, state law applies. Id.

[43] We find that Weavers’s theory fails on the first inquiry: no conflict exists between the “procedural” DJA[12] and state prejudgment interest law. Weavers reads the DJA broadly: under Weavers’s interpretation, a federal court entertaining a declaratory judgment action may, in effect, apply a rule of decision[13] that would fashion “further relief” in a more restrictive manner than would apply in a non-declaratory diversity case. Thus, according to Weavers, a conflict with state law arises.[14]

[44] The plain language of 28 U.S.C. §§ 2201 and 2202 does not support Weavers’s broad reading. Section 2201 authorizes a judicial declaration “whether or not further relief is or could be sought,” thus “indicat[ing] that declaratory relief is alternative or cumulative and not exclusive or extraordinary.” Fed.R.Civ.P. 57 Committee Notes. Section 2202 gives effect to the cumulative nature of the declaratory device[15] by authorizing a district court to grant additional relief consistent with the underlying declaration even though the right to the relief may arise long after the court has entered its declaratory judgment. See, e.g., Gant v. Grand Lodge, 12 F.3d 998, 1002 (10th Cir. 1993) (citing Wright, Miller, Kane § 2771) cert. denied, ___ U.S. ___, 114 S.Ct. 1834, 128 L.Ed.2d 462
(1994). The fact that a declaratory action was brought in lieu of an action seeking coercive relief “`does not merge a claim in the judgment or bar it.'” Gant,

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12 F.3d at 1002 (quoting 10A Wright, Miller, Kane § 2771).

[45] Simply stated, the DJA complements, but does not displace, relief available under applicable law. Accordingly, we do not share Weavers’s view that the provision for district courts to grant “further necessary or proper relief” is an authorization to formulate a rule of decision granting less relief than would otherwise have been available had a coercive action been brought instead.[16]

[46] Because no conflict exists between a specific federal rule or statute and state law, we then must determine whether application of a federal-judge made rule governing the calculation of prejudgment interest would disserve the twin aims of Erie.
Assuming for the moment that a federal court would, as Weavers argues, calculate prejudgment interest according to the “market” rate, the difference between the application and nonapplication of a state law under which interest is calculated at 12% could make a substantial difference in terms of the plaintiff’s ultimate monetary recover. Moreover, if the state law were not to apply, the incentives for forum shopping are plain. A plaintiff would likely bring his action in state court to take advantage of the more favorable prejudgment interest law; similarly, a non-Massachusetts defendant would seek to remove the action to avoid substantial additional damages. Because the twin aims o Erie would not be served by the application of judge-made federal law, state law must apply. Stated another way, prejudgment interest is substantive law and, therefore, state law must be applied in diversity-based proceedings. This conclusion comports with our repeated statements that when jurisdiction is diversity-based, a district court should look to the law which a state court sitting in that jurisdiction would apply in awarding prejudgment interest. See, e.g., Aubin v. Fudala, 782 F.2d 287, 289 (1st Cir. 1986); Roy v. Star Chopper, Inc., 584 F.2d 1124, 1135 (1st Cir. 1978), cert. denied, 440 U.S. 916, 99 S.Ct. 1234, 59 L.Ed.2d 466 (1979).

[47] In sum, a district court sitting in diversity when it awards prejudgment interest pursuant to a declaratory judgment action must apply the law of the state in which the court sits, including that state’s conflict-of-law principles. See Klaxon v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). Here, the parties agree that Massachusetts law governs the substance of the underlying transaction. Under these circumstances, Massachusetts law directs that a court should apply Massachusetts law in calculating prejudgment interest See, e.g., Morris v. Watsco, Inc., 385 Mass. 672, 674-75, 433 N.E.2d 886 (1982). Thus, we hold that the district court properly calculated prejudgment interest using Massachusetts law.

[48] 2. The Applicable Rate of Interest Under Massachusetts Law
[49] Weavers next argues that even if Massachusetts law is to govern the award of prejudgment interest, the district court erred in awarding prejudgment interest pursuant to Mass.Gen.L. ch. 231, § 6C[17] rather than under Mass.Gen.L. ch. 107, § 3.[18]
Weavers

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reasons that, because the Massachusetts declaratory judgment act, Mass.Gen.L. ch. 231A, does not specify the rate of interest to be awarded, there is no applicable “provision of law for a different rate” and, thus, chapter 107, section 3 is not supplanted. In essence, Weavers seeks to avoid application of section 6C by recharacterizing this case as a “declaratory judgment action.” We decline to do so.[19]

[50] As explained in detail above, the declaratory device is a remedy by which parties may seek a declaration as to their substantive rights. A declaratory judgment is not a theory of recovery. It is clear that, in this case, the underlying substantive theory is contractual. The plain language of chapter 231, section 6C establishes conclusively that it is to govern the award of prejudgment interest in contractual disputes. Accordingly, Weavers’s reasoning must be rejected. The district court properly awarded interest under chapter 231A, section 6C.

III. [51] CONCLUSION
[52] For the foregoing reasons, the motion to dismiss is denied and the decision of the district court is

[53] Affirmed. Each party shall bear its own costs.