Facts: Mother and Father divorced in 2020. Their marital dissolution agreement required Father to pay Mother one-half of his 2019 work bonus and one-eighth of his 2020 work bonus, net of taxes. Father also had to provide documentary proof of the gross 2020 bonus and applicable taxes. His employer paid 85% of each annual bonus in December and deferred the remaining 15%, generally paying it over the next three years as a retention incentive.
Mother later petitioned for civil contempt, alleging that Father failed to pay her required share of the 2020 bonus and failed to provide adequate documentation. Father sent Mother a redacted pay stub along with his own calculation of the amount due, but his calculation excluded deferred compensation and applied a tax rate the trial court found inapplicable. Father maintained that he attempted to pay Mother and that she refused payment.
The trial court interpreted the parties’ reference to Father’s total bonus to include both the fiscal year bonus and any deferred compensation paid during the relevant year, but not compensation or stock that vested after 2020.
Finding that Father’s attempted payment was not made in good faith, the trial court held him in civil contempt for willfully failing to pay Mother her share of the 2020 bonus. The trial court ordered Father to pay the remaining amount due, denied Mother’s request for prejudgment interest because she offered no proof of actual damages, and awarded her $5,000 in attorney’s fees as compensatory damages for the contempt.
On Appeal: The Court of Appeals vacated the denial of prejudgment interest.
In Tennessee, prejudgment interest is discretionary, but that discretion must be exercised in accordance with equitable principles. A claimant need not prove actual harm from being deprived of disputed money. The loss of use of unpaid funds naturally follows from the failure to pay an obligation according to its terms, and prejudgment interest ordinarily compensates for that loss.
Although a reasonable dispute over entitlement or amount is relevant, such a dispute does not require denial. The ultimate question is whether an award is fair under the case’s particular circumstances.
A civil-contempt attorney’s fee award is reviewed for abuse of discretion, and the trial court may determine a reasonable fee without expert testimony or a fixed formula. But the record must show that the court evaluated reasonableness under the circumstances, guided by Tennessee Supreme Court Rule 8, RPC 1.5. When the trial court makes no reasonableness finding, cites no governing factor, and offers no explanation for the amount, meaningful appellate review is impossible.
The Court of Appeals held that the trial court applied the wrong legal premise to prejudgment interest and failed to show any reasonableness analysis supporting the fee amount:
The [trial] court denied the request because Mother failed to offer proof that she sustained any actual damages from her inability to invest the unpaid funds. Simply put, Mother was not required to offer such proof. Loss of use of unpaid funds is the natural consequence of a “failure to pay an obligation according to its terms.” Prejudgment interest is the usual means of compensation for this loss. Whether an award of prejudgment interest is appropriate in a particular case depends on equitable principles, not proof of actual damages.
Despite this error, Father insists that we should affirm the denial because the amount owed was reasonably disputed. Reasonable or not, this fact alone “does not mandate a denial of prejudgment interest.” Besides, the court made its decision without considering any of the equitable factors that customarily guide this decision. Because the court failed to consider equitable principles, we vacate the denial of prejudgment interest and remand for reconsideration. On remand, the court should decide “whether the award of prejudgment interest is fair, given the particular circumstances of the case.”
Thus, the trial court’s denial of prejudgment interest was vacated, and the case was remanded for reconsideration.
K.O.’s Comment: Lawyers requesting prejudgment interest should focus their proof and argument on fairness, not on whether the client can document a lost investment opportunity. Actual harm need not be proven. Prejudgment interest remains discretionary, so counsel should identify the case-specific equities and ask the trial court to make findings addressing them.
Source: Veith v. Veith (Tennessee Court of Appeals, Middle Section, August 27, 2026).
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