F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
MAY 19 1998
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
TENTH CIRCUIT
OKLAND OIL COMPANY,
Plaintiff - Appellee,
Cross-Appellant,
v. Nos. 97-6004 & 97-6102
CONOCO INC., a Delaware
corporation,
Defendant - Appellant,
Cross-Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF OKLAHOMA
(D.C. NO. CIV-96-83-M)
Gary W. Davis (L. Mark Walker with him on the briefs), Crowe & Dunlevy,
Oklahoma City, Oklahoma, for Appellant-Cross-Appellee.
Robert N. Barnes (Michael E. Smith and Patranell Britten Lewis with him on the
briefs), Barnes, Smith & Lewis, P.C., Oklahoma City, Oklahoma, for Appellee-
Cross-Appellant.
Before ANDERSON, LOGAN, and MURPHY, Circuit Judges.
ANDERSON, Circuit Judge.
Okland Oil Company brought this diversity action against Conoco,
Incorporated, alleging breach of contract, fraud in the inducement, deceit by false
representation, and deceit by nondisclosure or concealment with respect to
Conoco’s failure to pay Okland the full amounts owing under a series of gas
production contracts entered into between 1980 and 1987. Okland contended that
from 1985, when the price of gas was deregulated, to 1992, Conoco secretly and
improperly made certain deductions before calculating the amount due Okland
under the contracts. Conoco denied these allegations, contending, among other
things, that the deductions, amounting to ten cents per MMBTU of gas, were for
production-related costs (“PRC’s”) which the contracts authorized Conoco to
deduct. On a separate issue, Conoco conceded liability for failing to reimburse
Okland under some of the contracts for state production taxes, but it raised the
statute of limitations as a defense to most of that liability.
After a one-week jury trial, the jury found Conoco liable on every claim
asserted by Okland and awarded Okland $1,559,633.12 in actual damages and
$3,000,000 in punitive damages. After denying Conoco’s renewed motion for
judgment as a matter of law, the district court entered judgment in favor of
Okland for the amount of damages awarded by the jury and awarded Okland its
costs in prosecuting the action. On appeal, Conoco does not contest the
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sufficiency of the evidence to support the breach of contract verdict but
challenges the sufficiency of the evidence to support the tort verdicts and attacks
the damage awards, especially the punitive damage award. On these and other
points, Conoco raises numerous issues, which may be summarized as follows: (1)
the district court erred in submitting punitive damages to the jury; (2) Okland’s
tort claims cannot support the entire actual damage award, which then cannot
support the entire punitive damage award, which exceeded the limits defined by
Oklahoma law; (3) the verdicts on the fraud and deceit claims were unsupported
by the evidence; (4) the punitive damage instructions and verdict form were
inadequate; (5) the district court erred in permitting Okland to introduce certain
damage exhibits at trial; (6) the court erred in permitting Okland to argue that
Conoco’s refusal to admit fraud was a basis for awarding punitive damages; (7)
the court erred by improperly instructing the jury on fraud; (8) the court erred in
refusing to instruct the jury regarding Federal Energy Regulatory Commission
(“FERC”) Order 94; and (9) the court erred in allowing Okland’s expert to testify
as to Conoco’s intent. Conoco contends that a new trial should be granted and/or
that the punitive damage award should be reversed outright.
Okland, in a separate appeal, challenges the district court’s denial of its
request for recovery of certain costs in prosecuting the action. We address the
appeals together for convenience and affirm.
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BACKGROUND
During the period in question, Okland operated numerous wells that
produced gas, which it sold to Conoco. Conoco bought, transported, processed,
and resold the gas to Resale or “Tailgate” Purchasers. See Appellee’s
Supplemental App. at 75-76. Under its contracts with Conoco, Okland received a
percentage (typically in the range of 84% to 90%) of the price Conoco was paid
by the Tailgate Purchasers.
Until 1985, the price of gas was regulated under the Natural Gas Policy Act
through FERC. In January 1985 the price was deregulated, allowing Conoco to
charge more to its Tailgate Purchasers. In April 1985, Conoco began deducting
ten cents per MMBTU of gas from the price it received from its Tailgate
Purchasers before calculating and remitting to Okland the percentage it was due
under the contracts. The deductions allegedly represented PRC’s.
At trial, Okland contended that Conoco was not permitted under the terms
of the gas purchase contracts between them to deduct PRC’s from the resale price
before calculating the percentage due to Okland, and that it did so secretly and
deceitfully, by not accounting for the deductions and by representing the adjusted
resale price as the gross resale price. Okland argued that it relied on Conoco’s
monthly statements, which listed “0.00” in the column marked “deductions,” oral
conversations between Conoco and Okland representatives, and letters to Okland
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explaining the price calculations, none of which disclosed the deductions or
intimated that Okland was receiving less than the agreed upon percentage of the
full resale price as required under the contracts. Neither did Conoco tell Okland
of the deductions during the amendment of some of the contracts after April 1985.
Conoco, on the other hand, argued that the contracts contained clear
language giving Conoco the right to deduct the ten cents from the amount it
received from the Tailgate Purchasers. The provision upon which Conoco relied
is as follows:
If Congress, the Federal Energy Regulatory Commission . . . or
successor governmental authority having jurisdiction shall cease to
regulate the price for gas sold and delivered hereunder, [Okland]
shall receive [a percentage] of the price per MMBTU received by
[Conoco] for the subsequent sale of the gas exclusive of any
production-related costs that [Conoco] has been authorized to
receive.
Appellant’s App. Vol. I at 270 (emphasis added).
Conoco claimed that FERC Order 94, under which certain PRC’s could be
added to the maximum legal price charged to Tailgate Purchasers during
regulation, authorized it to exclude the ten cents as PRC’s, even though Conoco
was never actually paid separately for any PRC’s by its Tailgate Purchasers.
Okland countered by submitting evidence that in any case Conoco never qualified
under Order 94 to deduct PRC’s, even during regulation.
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On a separate issue, tax reimbursements, Conoco admitted it had mistakenly
failed to reimburse Okland for production taxes, but argued that the statute of
limitations prevented Okland’s recovery of all but a small amount of those taxes.
Okland quantified its actual damages by listing the amount it was underpaid
on each contract. The total revenue loss, plus interest and litigation costs,
amounted to $1,559,633.12. 1 The jury was asked to sort through the tangle of
conflicting liability claims and damage amounts and rendered its verdict on a
form which first required the jury to mark, claim by claim, involving both tort and
contract, whether it believed Conoco was liable. It found for Okland on all of the
claims. The form then asked the jury to provide a single actual damage award if
it had found Conoco liable on one or more of the claims, inclusive of both tort
and contract. 2 The jury responded with an award of $1,559,633.12 actual
1
Specifically, the breakdown of the actual damage award—as presented to the jury
by Okland and as alleged by Conoco to be the amount the jury found—is as follows:
PRC Claim $ 508,134.22
PRC Interest $ 759,679.00
Tax Claim $ 98,361.66
Tax Interest $ 140,787.48
Litigation Costs $ 52,670.75
Total $1,559,633.12
See Appellant’s App. Vol. I at 373-74, Vol. II at 660-61.
2
The verdict form provided as follows:
VERDICT
(continued...)
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(...continued)
2
ANSWER PART A:
A. We, the jury, find as follows on the claims of Okland Oil Company:
CLAIM CONOCO INC.
1. Breach of contract
(P.R.C. exclusion) not liable X liable
2. Breach of contract
(tax reimbursement) not liable X liable
3. Deceit (false rep-
resentation) not liable X liable
4. Deceit (nondisclosure
or concealment) not liable X liable
5. Fraud in the induce-
ment not liable X liable
ANSWER PART B only if you have found Conoco Inc. liable on one or more claims of
Okland Oil Company:
B. We, the jury, having found in favor of the Okland Oil Company and against
Conoco Inc. on one or more of the plaintiff’s claims, award Okland Oil
Company actual damages in the amount of $ 1,559,633.12 .
ANSWER PART C only if you have found Conoco Inc. liable on the plaintiff’s claim for
deceit (false representation), deceit (nondisclosure or concealment), and/or fraud in the
inducement and awarded actual damages:
C. We, the jury, do X do not find by clear and
convincing evidence that Conoco Inc. acted in reckless
disregard of the rights of others including Okland.
ANSWER PART D only if you have found Conoco Inc. liable on the plaintiff’s claim for
deceit (false representation), deceit (nondisclosure or concealment), and/or fraud in the
(continued...)
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damages, and an additional $3,000,000 in the second stage for punitive damages.
DISCUSSION
I. Punitive Damages
Conoco attacks the punitive damage award on numerous grounds. While
the analysis of Conoco’s contentions is intertwined, we address the issues
separately, some in this section and others elsewhere in the opinion, as Conoco
has argued them.
A. Breach of Contract
Conoco argues that the district court should not have allowed the jury to
consider punitive damages because the action was solely for breach of contract,
and punitive damages do not apply in such actions. 3 Conoco adequately preserved
2
(...continued)
inducement and awarded actual damages:
D. We, the jury, do X do not find by clear and
convincing evidence that Conoco Inc. acted intentionally and
with malice towards others including Okland.
Appellant’s App. Vol. I at 184-85.
3
Remarkably and inconsistently, in a related appeal regarding the award of
attorneys fees to Okland, Conoco argued before the district court that:
“[T]he majority of [Okland’s] fees were incurred pursuing and proving its
(continued...)
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this issue for appeal, 4 Appellant’s App. Vol. III at 1139-41, Vol. IV at 1550-51,
and we review it de novo. City of Wichita v. United States Gypsum Co., 72 F.3d
1491, 1494-95 (10th Cir. 1996).
3
(...continued)
fraud claims while only modest amount of fees were incurred pursuing and
proving its breach of contract claims. The evidence supports this
contention. The majority of [Okland’s] discovery requests, including
[Okland’s] deposition questions, the evidence [Okland] presented at trial
and the questions [Okland] asked witnesses at trial focused on fraud. The
breach of contract claims were merely incidental.”
Okland Oil Co. v. Conoco Inc., No. CIV-96-0083-M (W.D. Okla. filed Sept. 29, 1997),
slip op. at 3 n.5 (quoting Conoco’s Resp. Br. at 10).
4
At trial, Conoco failed adequately to raise many of the issues it now asks us to
review. We have consistently rejected the argument that raising a related theory below is
sufficient to preserve an issue for appeal. See Lyons v. Jefferson Bank & Trust, 994 F.2d
716, 721-22 (10th Cir. 1993). Changing to a new theory on appeal that “falls under the
same general category as an argument presented at trial” or discussing a theory only in a
vague and ambiguous way below is not adequate to preserve issues for appeal. Id. at 722.
Indeed, the Court of Appeals is not a “second shot forum . . . where secondary, back-up
theories may be mounted for the first time.” Tele-Communications, Inc. v. Commissioner
of Internal Revenue, 104 F.3d 1229, 1233 (10th Cir. 1997) (quotation omitted).
Therefore, because we are concerned about, inter alia, finality of litigation and
judicial economy, we review such novel issues only for plain error, and under that
standard we only grant relief in exceptional circumstances or to prevent manifest
injustice. Smith v. Northwest Fin. Acceptance, Inc., 129 F.3d 1408, 1416 (10th Cir.
1997); Lyons, 994 F.2d at 721-22; see also Shugart v. Central Rural Elec. Co-op., 110
F.3d 1501, 1507 (10th Cir. 1997); Unit Drilling Co. v. Enron Oil & Gas Co., 108 F.3d
1186, 1190 (10th Cir. 1997); Moe v. Avions Marcel Dassault-Breguet Aviation, 727 F.2d
917, 925 (10th Cir. 1984); Fed. R. Civ. P. 51.
We make this point at the outset to avoid repetition as we address the issues,
stressing, as well, that in some instances our resolution of the issue would be the same
regardless of the standard of review employed.
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The jury found Conoco separately liable for the torts of fraud and deceit,
both of which may support an award of punitive damages under Oklahoma law.
See Zenith Drilling Corp. v. Internorth, Inc., 869 F.2d 560, 565 (10th Cir. 1989);
Burk v. K-Mart Corp., 770 P.2d 24, 28 & n.10 (Okla. 1989); Okla. Stat. tit. 23,
§ 9.1(A). This is true even where breach of contract is also alleged and where the
“parties’ relationship basically is contractual, if the breaching party’s acts
constitute ‘an independent, willful tort.’” Zenith, 869 F.2d at 565 (quoting Z.D.
Howard Co. v. Cartwright, 537 P.2d 345, 347 (Okla. 1975)); Burk, 770 P.2d at 28
& n.10; see also Woods Petroleum v. Delhi Gas Pipeline, 700 P.2d 1023, 1027
(Okla. Ct. App. 1983) (allowing punitive damages in a breach of contract action
where defendant also breached a common law duty to “perform the thing to be
done with care, skill, reasonable expediency and faithfulness”); Christian v.
American Home Assur. Co., 577 P.2d 899, 904-05 (Okla. 1977) (stating duty to
act in a manner that neither fraudulently induces a party to enter into a contract,
nor deceives another); Burton v. Juzwik, 524 P.2d 16, 19 (Okla. 1974) (“Punitive
damages were allowed because defendant breached [its] common law duty . . .
and part of plaintiff[’s] actual damages resulted from [that breach].”); Barnes v.
McKinney, 589 P.2d 698, 702-03 (Okla. Ct. App. 1978) (stating punitive damages
should have been allowed where fraud and breach of contract were alleged
because the punitive damages were based on the “noncontractual obligation on the
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part of defendant to tell the truth”). Fraud is an independent, willful tort under
Oklahoma law. FDIC v. Hamilton, 122 F.3d 854, 857 (10th Cir. 1997); FDIC v.
Hamilton, 58 F.3d 1523, 1530 (10th Cir. 1995). While it is true that “[t]he
Oklahoma Supreme Court has cautioned against allowing punitive damages in a
suit for breach of contract when the plaintiff has alleged fraud or malice merely to
support a claim for punitives,” Zenith, 869 F.2d at 565 (citing Burton, 524 P.2d at
19-20), this is not such a case. Thus, under Oklahoma law, the submission of
punitive damages to the jury was appropriate since, as indicated above, the jury
found Conoco liable for torts and not solely for breach of contract.
B. Ambiguous Contract
Conoco next argues that punitive damages are not appropriate when the
underlying dispute rests on ambiguous language in a contract. Conoco properly
preserved this issue for review, 5 and we review it de novo. City of Wichita, 72
F.3d at 1494-95. Conoco admits no Oklahoma case law directly supports its
5
Conoco moved at the close of Okland’s case for judgment as a matter of law as to
punitive damages, arguing that the contracts were subject to multiple interpretations.
Appellant’s App. Vol. III at 1139-1141. Conoco renewed that motion, moved for
judgment notwithstanding the verdict, and objected to the court’s submission of punitive
damages to the jury after the phase I verdict was entered but before the jury considered
punitive damages. Appellant’s App. Vol. IV at 1519.
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assertion, but looks to other jurisdictions for persuasive authority. 6 Appellant’s
Br. at 11-12. We need not exhaustively consider the authorities because the
argument lacks merit on its face.
As discussed above, the jury explicitly found that Conoco separately
committed the tortious acts of fraud and deceit, 7 and punitive damages may be
awarded in tort actions, even when the original relationship between the parties
arises out of a contract. Zenith, 869 F.2d at 565. The jury found Conoco liable in
tort, and the ambiguity of the contract is, therefore, irrelevant.
C. Sufficiency of the Evidence to Support the Liability Verdict for
Fraud and Deceit
Conoco also challenges the sufficiency of the evidence to support the jury’s
finding of liability on the fraud and deceit claims. Review of the adequacy of the
jury’s verdict “is limited to determining whether the record—viewed in the light
most favorable to the prevailing party—contains substantial evidence to support
the jury’s decision.” Thunder Basin Coal Co. v. Southwestern Pub. Serv. Co.,
6
Among other cases, Conoco cites an unpublished case from a panel of the
Wisconsin Court of Appeals in the early 1980's. See Appellant’s Br. at 12 & Tab C. We
do not find these cases persuasive.
7
To the extent that Conoco’s argument here attacks the sufficiency of the evidence
underlying the jury’s findings of fraud and deceit, see Appellant’s Br. at 13-18, we reject
it as discussed in Section I.C, infra.
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104 F.3d 1205, 1212 (10th Cir. 1997) (quotations omitted); see also Rainbow
Travel Serv., Inc. v. Hilton Hotels Corp., 896 F.2d 1233, 1239 (10th Cir. 1990).
After reviewing the record, we conclude that when viewed in the light most
favorable to Okland, the record contains substantial evidence upon which a
reasonable jury could have found Conoco liable in tort. Okland introduced
evidence at trial showing that the monthly statements sent to Okland by Conoco
indicated no deduction for PRC’s. Appellant’s App. Vol. I at 191-199, Vol. III at
722-29. These statements had been changed from an earlier format, allegedly to
hide the new PRC exclusions. Id. Vol. III at 722-29. David Nicks, a Conoco
representative, admitted that the statements did not reflect the PRC deduction or
the failure to pay the tax reimbursement. Id. Vol. IV at 1446-47.
The jury also viewed letters sent by Conoco indicating the price to be paid
to Okland, but not disclosing the PRC deductions. See, e.g., Appellee’s
Supplemental App. at 77-83. These documents implied that Okland would receive
a percentage of the full resale price when in reality, Conoco only gave Okland a
percentage of the resale price minus ten cents. Id. Richard Metz, an expert
witness for Okland, testified that a Conoco interoffice memorandum, which
indicated the PRC deduction was to be taken, along with other documents,
showed the PRC deduction was profit and not a reimbursement for Conoco. Id. at
87; Appellant’s App. Vol. III at 1029-31. Okland also presented evidence that
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Conoco’s representative fraudulently induced Okland to enter into the contracts
by concealing the fact that PRC’s had been and would in the future be deducted
from the resale price. Id. Vol. III at 713-21. Conoco also admitted deducting
PRC’s on a contract that did not permit such deductions. Id. Vol. IV at 1263,
Vol. III at 1031-32.
Furthermore, even though Conoco argued that FERC Order 94 formed the
basis of authorization under the contracts to exclude PRC’s from the price
Conoco paid to Okland, id. Vol. IV at 1156-57, 1238-39, Okland presented
testimony, including the deposition testimony of a Conoco representative, that the
order could not have authorized such an exclusion. Id. Vol. III at 980-81, 989-90;
Appellee’s Supplemental App. at 170-71. In fact, Okland’s evidence showed that
Conoco may not have complied with the requirements of FERC Order 94, which
compliance was a prerequisite to any FERC authorization of a PRC. See, e.g.,
Appellant’s App. Vol. III at 924-35, 982-84, 1037-38, Vol. IV at 1237-45.
Okland’s evidence also tended to show that the Tailgate Purchasers had not
authorized the PRC exclusions, even though Conoco had included some self-
serving language in a few of those contracts, possibly in an attempt to use such an
authorization as a defense in any subsequent litigation. See id. Vol. III at
1018-21, Vol. IV at 1246-50; Appellee’s Supplemental App. at 108-09, 223-26.
The jury, assessing the credibility of the witnesses, was entitled to draw
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inferences from all this evidence that Conoco’s conduct constituted fraud and
deceit. The fact that Conoco presented contrary evidence at trial, and urgently
reargues the evidence on appeal, cannot overcome the proposition that the jury is
the sole trier of the facts, and we cannot disturb their prerogative when there is
evidence to support the verdict. There is here.
Because the jury’s verdict as to the tort claims was based on substantial
evidence, and punitive damages are allowable in tort actions, the district court’s
submission to the jury of punitive damages based on Okland’s tort claims was not
error.
D. Presentation of Tort Damages
Next, Conoco contends that Okland submitted evidence only of contract
damages and that it did not present evidence of actual damages resulting from
Conoco’s tortious actions. Therefore, argues Conoco, the jury could not have
awarded tort damages, leaving no basis for the award of punitive damages.
Although Conoco objected generally to the submission of punitive damages, it did
not make this argument to the district court. Our review is for plain error only.
Okland presented evidence of actual damages by listing the damages
incurred under each of the contracts. See Appellant’s App. Vol. I at 370-74, Vol.
II at 390, 660-61. Conoco contends that this categorization of the damages shows
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that only damages for breach of contract were awarded. While Okland did not
specifically allocate portions of its actual damage claim to tort and to breach of
contract, it did separate out those damages that were recoverable from 1985 to
1990 and those that were recoverable beginning in December 1990. 8 Appellee’s
Supplemental App. at 104-06. The former damages were recoverable only under
a tort theory because the Oklahoma statute of limitations for recovery of a breach
of contract is five years. Okla. Stat. tit. 12, § 95, tit. 12A, § 2-725. Actions for
fraud, on the other hand, may be brought within two years after the discovery of
the fraud. Id. The court’s instructions informed the jury of these statutes.
Appellant’s App. Vol. I at 172-75. Thus, the jury could not have awarded the
amount it did under a pure breach of contract theory, but it could have and did on
the tort theories. 9
The fact that Okland organized its damages by contract does not mean that
the jury was prevented from looking to them as a measure for awarding damages
in tort. In John A. Henry & Co. v. T.G. & Y. Stores Co., 941 F.2d 1068, 1072
Okland filed its Petition on December 22, 1995. The statute of limitations for
8
breach of contract would exclude recovery for damages occurring prior to December 22,
1990.
9
We consider Conoco’s related argument that the jury instructions and verdict form
did not tell the jury to allocate the actual damage award between breach of contract and
tort causes of action in Section I.E, infra. We need not determine here the exact amount
of actual damages awarded on the contract and tort theories because the punitive damage
award can, in any event, be supported by a much smaller amount of tort damages than the
entire $1.5 million actual damage award as discussed in Section II, infra.
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(10th Cir. 1991), we rejected a similar argument because the characterization of
the damages was “properly offered as proof of damages for both claims.” Id.
(emphasis added).
The measure of damages for tort “is the amount which will compensate for
all detriment proximately caused thereby, whether it could have been anticipated
or not.” Okla. Stat. tit. 23, § 61; see also Okla. Stat. tit. 76, § 2. “Detriment” is
defined in Okla. Stat. tit. 23, § 4, as “a loss or harm suffered in person or
property.” Specifically, “Oklahoma allows one who is fraudulently induced to
enter a contract to recover up to the amount fraudulently misrepresented.”
LeFlore v. Reflections of Tulsa, Inc., 708 P.2d 1068, 1077 (Okla. 1985). This
calculation is “the difference between the actual value received and the value the
defrauded party would have had if it had been as represented.” Id.; see also
Woods Petroleum Corp. v. Delhi Gas Pipeline Corp., 700 P.2d 1023, 1026-27
(Okla. Ct. App. 1983); Barnes v. McKinney, 589 P.2d 698, 701-02 (Okla. Ct.
App. 1978). In addition, the jury may award prejudgment interest on top of the
principal amount in order to compensate for the detriment caused by the
deprivation of the money. See Okla. Stat. tit. 23, §§ 5-7, 61, tit. 52, § 570.10;
Sisney v. Smalley, 690 P.2d 1048, 1050-51 (Okla. 1984); Barnes, 589 P.2d at 701;
see also Investors Preferred Life Ins. Co. v. Abraham, 375 F.2d 291, 295-96 (10th
Cir. 1967). See generally U.S. Industries, Inc. v. Touche Ross & Co., 854 F.2d
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1223, 1256-58 (10th Cir. 1988) (“Under federal law, the rationale underlying an
award of prejudgment interest is to compensate the wronged party for being
deprived of the monetary value of his loss from the time of the loss to the
payment of judgment.”), implied overruling on other grounds recognized by,
Anixter v. Home-Stake Prod. Co., 77 F.3d 1215, 1231 (10th Cir. 1996).
Here, the fraudulent misrepresentation concerned the PRC exclusion under
the contract. We see no reason why the fraudulent inducement and deceit
damages presented by Okland cannot be calculated based on the amount Conoco
fraudulently misrepresented that Okland would receive under the contract, i.e., the
resale price with no PRC exclusion, plus the detriment suffered by Okland from
loss of use of the money.
Furthermore, as stated above, a portion of the damages here was
recoverable only in an action for tort, and Okland presented those damages to the
jury. The jury found Conoco liable for tort and awarded damages therefor.
Finally, in Instruction No. 11, Appellant’s App. Vol. I at 147, the jury was
instructed that its award for breach of contract and fraud or deceit could not
amount to a double recovery; so its damage award was necessarily tied to the loss
Okland suffered under its contracts by virtue of Conoco’s underpayment. The
jury appropriately awarded actual damages that totaled only the actual damages
Okland suffered under all theories of liability. Because the jury awarded actual
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damages for tort, it was not error for the district court to allow the jury to
consider punitive damages.
E. Adequacy of the Punitive Damages Instructions and the Verdict
Form
Related to Conoco’s argument that Okland failed to present evidence of
actual tort damages, is its contention that reversal is required because the jury
instructions were deficient in failing to tell the jury to award punitive damages
only if it found tort damages and because the general verdict form given to the
jury did not permit a determination of how much of the actual damages were for
tort and how much were for breach of contract.
1. Instructions Regarding Punitive Damages
Conoco alleges that the court’s punitive damages instructions were
deficient because they failed to accurately inform the jury that it must award
actual damages for tort before awarding punitive damages. Instruction No. 39, to
which Conoco objects, was given to the jury in the first stage of trial and
provided that the jury could award punitive damages in a later stage of trial only
“[i]f you find in Okland’s favor on either of its claims of deceit and/or on its
claim of fraud in the inducement and award Okland actual damages.” Appellant’s
App. Vol. I at 177. On appeal, Conoco attacks this first stage instruction by
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arguing that the court should have given an instruction Conoco requested in the
second stage of trial, which would have accurately told the jury that it must award
tort damages before awarding punitive damages. We do not find in the record nor
does Conoco tell us that it objected to the first or second stage punitive damages
instructions on the ground that the language it requested in its proposed
instruction was absent. In fact, only in Okland’s Supplemental Appendix do we
find Conoco’s proposed first stage instruction as to punitive damages. See
Appellee’s Supplemental App. at 8. That proposed instruction, which states that
the jury can only award punitive damages later “[i]f you find in favor of plaintiff,
and grant it actual damages,” id., propagates the same “error” Conoco now alleges
the court’s instruction contained. Having failed to adequately raise this issue
below, we review it for plain error.
We initially question whether, in any event, Conoco’s proposed second
stage instruction would have been enough to cure the error Conoco is alleging.
The instruction was to be given only after the jury had already completed the first
stage of trial, where the jury either did or did not award actual damages for tort.
Moreover, Conoco’s proposed second stage instruction did not accurately
state the law. The proposed instruction provided as follows:
Ladies and Gentlemen of the jury, you have found in favor of
the plaintiff and granted him/her actual damages for fraud, and you
have also found by a separate verdict that the defendant was guilty of
reckless disregard of the rights of others.
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You may now, in addition to actual damages, grant the
plaintiff punitive damages in such sum as you reasonably believe will
punish defendant and be an example to others.
....
In no event should the punitive damages exceed the greater of:
$100,000 or the amount of actual damages you have previously
awarded.
Proposed Instruction No. 30, Appellant’s App. Vol. I at 15-16. Unfortunately for
Conoco, the jury in the first stage of trial found not only that Conoco had acted
recklessly, but also that it had acted intentionally and with malice. Appellant’s
App. Vol. I at 185. Giving Conoco’s proposed instruction on recklessness would
have been error because Conoco’s conduct fit into the “intentional and malicious”
category of Oklahoma’s punitive damages statute, not the recklessness category.
See Okla. Stat. tit. 23, § 9.1(B), (C). Conoco does not tell us here whether it
requested an instruction within the correct category, and not finding one in the
Appellant’s Appendix, we assume it did not. The court therefore properly refused
to give Conoco’s tendered instruction.
In addition, looking at the instructions as a whole, we find that they
properly informed the jury of its responsibility to find tort damages prior to
awarding punitive damages. Each of the instructions on the three tort theories
clearly advised the jury that to find Conoco liable on those claims, it must find as
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one element that Okland had suffered damages as a result of Conoco’s actions. 10
Appellant’s App. Vol. I at 160, 162, 166. We are to presume that the jury
followed those instructions, Mason v. Oklahoma Turnpike Auth., 115 F.3d 1442,
1456 (10th Cir. 1997); United States v. Cooley, 1 F.3d 985, 997 (10th Cir. 1993),
and found damages.
Taken as a whole, the instructions, including the second stage instruction
and the verdict form, which contained the same type of language as the first stage
instruction, see Appellant’s App. Vol. I at 182, 184-85, properly informed the jury
that it must award actual damages on at least one tort theory before awarding
punitive damages.
2. The Verdict Form
Conoco also challenges the verdict form given by the court because it does
not sufficiently inform the jury that it must have awarded actual tort damages
prior to turning to punitive damages and because it does not ask the jury to
allocate damages between tort and contract. Although Conoco requested its own
verdict form, that form did not do either of these things. See Appellee’s
10
Conoco’s Brief also refers us, without argument, to pages 17-20 of its appendix,
where it requested special interrogatories to be given to the jury. Appellant’s Br. at 21.
The interrogatories essentially ask the jury to indicate that it found each element of fraud,
including that Okland suffered injury. For the same reasons discussed above, the district
court’s refusal of these interrogatories was not error.
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Supplemental App. at 1-6. Failure to request the verdict form it now seeks limits
our review to plain error. Kloepfer v. Honda Motor Co., 898 F.2d 1452, 1456
(10th Cir. 1990). 11
The verdict form 12 instructed the jury to answer Parts C and D, which ask
the jury to determine the recklessness or maliciousness of Conoco’s actions, only
if “you have found Conoco Inc. liable on the plaintiff’s claim for deceit (false
representation), deceit (nondisclosure or concealment), and/or fraud in the
inducement and awarded actual damages.” Appellant’s App. Vol. I at 184-85
(emphasis added). Conoco did not object to this language at trial and the
language it proffered was even less specific. 13 The verdict form tracks the
language of the jury instructions and is sufficient to inform the jury of its
responsibility.
The verdict form also provided only one space for the jury to award actual
damages, which Conoco now argues creates ambiguity as to the nature of those
damages. In Mason, 115 F.3d at 1458, we held that where the jury instructions
11
In addition, even if Conoco’s proposed verdict form had contained the language
it now requests, it still should have objected to the form given by the district court for the
reasons it now asserts. See United States v. Voss, 82 F.3d 1521, 1530-31 (10th Cir.),
cert. denied, 117 S. Ct. 226 (1996).
The entire verdict form is reproduced at note 2, supra.
12
Conoco’s proposed verdict form asks the jury to proceed to its reckless disregard
13
and intentional/malice determinations “only if you found in favor of the Plaintiff on its
claim for fraud or its claim of conversion.” Appellee’s Supplemental App. at 2.
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explained the nature and availability of both pecuniary and non-pecuniary
compensation, a verdict form requesting only one compensatory damages sum was
not error. As discussed above, the instructions given were adequate to inform the
jury of its responsibilities here.
In addition, Conoco itself opted to request only one space for actual
damages and opted not to ask the jury to divide damages between tort and
contract on its proposed form, see Appellee’s Supplemental App. at 2, possibly
because it decided that giving the jury more than one blank to fill in might
encourage a higher actual damage award. Conoco also did not object to the
verdict form on this basis immediately after it was rendered, nor did it seek a
clarification of the allegedly ambiguous verdict before the jury was dismissed.
“A party who fails to bring to the trial court's attention [such] ambiguities . . .
may not seek to take advantage of such ambiguities on appeal.” Kenworthy v.
Conoco, Inc., 979 F.2d 1462, 1468 (10th Cir. 1992); see Unit Drilling Co. v.
Enron Oil & Gas Co., 108 F.3d 1186, 1193 (10th Cir. 1997) (holding failure to
request clarification of ambiguous verdict before the jury is discharged limits
review to plain error). Having chosen the path it did and in light of our
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conclusion above that the jury awarded actual damages for tort, 14 we do not find
plain error in the form of the verdict.
F. Punitive Damages as an Impermissible Double Penalty
Okla. Stat. tit. 52, § 570.10(D)(1) (1998 Supp.), 15 provides that:
Except as otherwise provided in paragraph 2 of this subsection,
where proceeds from the sale of oil or gas production or some
portion of such proceeds are not paid prior to the end of the
applicable time periods provided in this section, that portion not
timely paid shall earn interest at the rate of twelve percent (12%) per
annum to be compounded annually, calculated from the end of the
month in which such production is sold until the day paid.
Okland invoked this statute and added a 12% interest figure to the underpayment
amount it claimed for each contract. 16 Conoco now contends for the first time
that this award of statutory prejudgment interest constitutes a penalty, and,
accordingly, that an award of punitive damages on top of this statutory interest
14
Although we have reversed and remanded cases where we were uncertain if the
jury based its verdict on an improper theory, see, e.g., Brown v. Wal-Mart Stores, Inc., 11
F.3d 1559, 1566-67 (10th Cir. 1993), we need not do so here because the same
uncertainty is not present. See generally Anixter v. Home-Stake Prod. Co., 77 F.3d 1215,
1229 (10th Cir. 1996).
The predecessor statute, Okla. Stat. tit. 52, § 540 (1991), contained essentially the
15
same language.
See supra note 1, for Conoco’s theory of how the actual damage award was
16
itemized by the jury.
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constitutes an impermissible double penalty under Oklahoma law. 17 We are
unpersuaded for three reasons.
First, we are unpersuaded that the 12% interest provided under Okla. Stat.
tit. 52, § 570.10(D)(1) constitutes a penalty in the sense asserted by Conoco—that
it cannot coexist under Oklahoma law with a separate award of punitive damages.
Although the Oklahoma courts have not squarely addressed whether the
combination of punitive damages and § 570.10 prejudgment interest is
permissible, an examination of Oklahoma law convinces us that it is. “[T]he
common law remains in full force in [Oklahoma], unless a statute explicitly
provides to the contrary.” Tate v. Browning-Ferris, Inc., 833 P.2d 1218, 1225
(Okla. 1992). Here the relevant statute does not exclude punitive damages. In
fact, Okla. Stat. tit. 52, § 570.14(B) makes it clear that § 570.10 “shall neither
preclude nor impair the right of any owner to obtain through the district courts
remedies available under existing law or additional remedies herein granted.”
Furthermore, a comparison of § 570.10 and Oklahoma’s punitive damage
statute, Okla. Stat. tit. 23, § 9.1 (1998 Supp.), shows that different elements
separate these awards. Exemplary damages may be awarded under § 9.1 only if
the jury finds by clear and convincing evidence that the defendant has acted with
17
This theory was not raised below. As indicated above, we review the issue only
for plain error.
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reckless disregard for the rights of others or has acted intentionally and with
malice toward others. Id. § 9.1(B), (C). Prejudgment interest under § 570.10, on
the other hand, may be awarded to a plaintiff even without a showing of
recklessness, intent, or malice.
The 12% prejudgment interest acts to compel compliance with the statute’s
requirement that proceeds be paid to those entitled thereto. See McClain v. Ricks
Exploration Co., 894 P.2d 422, 431-32 (Okla. Ct. App. 1994). Punitive damages,
on the other hand, are intended to provide a “‘punishment for the benefit of
society as a restraint upon the transgressor, and a warning and example serving as
a deterrent to commission of like offenses in the future.’” Maxwell v. Samson
Resources Co., 848 P.2d 1166, 1172 (Okla. 1993) (quoting Oller v. Hicks, 441
P.2d 356, 360 (Okla. 1967)). Therefore, “‘[w]hen a defendant’s conduct is such
as to amount to fraud, oppression or malice, or the act is wilfully and wantonly
done with criminal indifference to the plaintiff’s rights, exemplary damages are
allowable.’” Id.
Consistent with this reasoning, the Oklahoma Supreme Court in an
analogous setting has required the addition of prejudgment interest under Okla.
Stat. tit. 12, § 727 even when punitive damages were also awarded. See, e.g.,
Timmons v. Royal Globe Ins. Co., 713 P.2d 589, 593-94 & n.14 (Okla. 1985).
See generally Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d
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11, 23 (Fed. Cir. 1984) (“[The purpose of prejudgment interest] is to compensate
for the delay a patentee experiences in obtaining money he would have received
sooner if no infringement had occurred . . . . On the other hand, damages are
trebled as punishment. There is no conflict in the award of both.”). And, in
Wagoner v. Bennett, 814 P.2d 476 (Okla. 1991), the Oklahoma Supreme Court
held that a tenant could pursue a common law action for conversion of property in
addition to the statutory remedy for wrongful eviction because the elements of the
two causes of action are different. Id. at 481. Accordingly, the Court held that
punitive damages could be awarded on the conversion claim. Id.
The cases cited by Conoco in support of its argument are distinguishable.
Thus, for example, Maxwell, 848 P.2d at 1172-73, and Culbertson v. McCann,
664 P.2d 388, 393-94 & n.31 (Okla. 1983), are cases involving other Oklahoma
statutes, and stand only for the proposition that where wrongful intent is proven
and damages are doubled or trebled, the addition of punitive damages is
inappropriate because both constitute exemplary damages. See Maxwell, 848
P.2d at 1173. Here, a showing of intent is not necessary for awarding the
§ 570.10 interest, and the damages were not double or trebled before the award of
punitive damages.
Cases such as Fleet v. Sanguine, Ltd., 854 P.2d 892, 897-98, 899-900
(Okla. 1993), and McClain, 894 P.2d at 431-32, cited by Conoco because they
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referred to § 570.10 interest as a penalty, are best understood in their particular
settings. They stand only for the general rule that prejudgment interest gives way
to a limited exception to ensure a fair result. Cf. City of Milwaukee v. Cement
Div., Nat’l Gypsum Co., 515 U.S. 189, 195 (1995); General Motors Corp. v.
Devex Corp., 461 U.S. 648, 655-57 & 655 n.10 (1983). In Fleet that circumstance
was defendant’s offer of judgment which “must be treated as implicitly
comprising its entire obligation in suit--inclusive of prejudgment interest.” 854
P.2d at 900. In McClain the unusual circumstance was plaintiffs’ refusal of
royalties tendered by defendant. 894 P.2d at 432. In those situations,
prejudgment interest could very well have been penal in nature. They do not
suggest that willfulness, recklessness, or malice is required to award the statutory
interest. The only requirement is that the proceeds were wrongfully withheld.
See Fleet, 854 P.2d at 900. Wrongful intent is not required.
Second and in any event, as indicated above, the jury’s damage award
figure was not broken down into its constituent elements on the verdict form, thus
it is impossible at the outset to accept Conoco’s basic assumption that the
statutory 12% interest figure was even awarded. Given the generality of the
damages figure on the verdict form, we are unpersuaded that Conoco can
demonstrate plain error on this issue beginning with its basic premise.
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Finally, the damage award by the jury related to its finding of liability
against Conoco on both tort and contract claims. Any award based on fraud,
which we necessarily presume occurred, would support a separate award for
punitive damages since, under Oklahoma law, different elements are required.
Accordingly, we remain unconvinced that Oklahoma courts would forbid
punitive damages in addition to the statutory interest awarded by § 570.10 as an
impermissible double penalty, 18 especially where, as here, the jury found the
defendant liable on both breach of contract and several tort claims.
II. Did the Punitive Damages Exceed the Limit Defined by Oklahoma
Law?
Conoco next asserts that the punitive damage award exceeds the limits
imposed under Oklahoma law. Our review is limited to plain error because
Conoco did not present this argument to the district court.
Okla. Stat. tit. 23, § 9.1(C) provides as follows:
Category II. Where the jury finds by clear and convincing evidence
that:
18
We note that Conoco’s categorization of the statutory interest as a “penalty” does
not exactly fit the circumstances of this case. Okland presented evidence at the punitive
damages phase of trial regarding Conoco’s use of the withheld funds. Okland’s expert
witness, Richard Metz, testified that Conoco’s return on the wrongfully withheld PRC
funds was between 16% and 22%. Appellant’s App. Vol. IV at 1548-49. Thus, at least
as to companies earning as high a rate of return as Conoco, the § 570.10 prejudgment
interest does not penalize their wrongful withholding of funds.
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1. The defendant has acted intentionally and with malice
towards others;
....
the jury, in a separate proceeding conducted after the jury has made
such finding and awarded actual damages, may award exemplary
damages in an amount not to exceed the greatest of:
a. Five Hundred Thousand Dollars ($500,000.00),
b. twice the amount of actual damages awarded, or
c. the increased financial benefit derived by the
defendant or insurer as a direct result of the conduct
causing the injury to the plaintiff and other persons or
entities.
The trial court shall reduce any award for punitive damages awarded
pursuant to the provisions of subparagraph c of this paragraph by the
amount it finds the defendant or insurer has previously paid as a
result of all punitive damage verdicts entered in any court of the
State of Oklahoma for the same conduct by the defendant or insurer.
Id.
The instruction given to the jury in the punitive damages phase included the
following:
In no event should the punitive damages you award exceed the
greater of $500,000.00, or twice the amount of actual damages you
have previously awarded, or the increased financial benefit derived
by Conoco as a direct result of the conduct causing the damage to
Okland and other persons.
Appellant’s App. Vol. I at 183. For purposes of awarding punitive damages, the
jury had already found during the first stage of trial there was clear and
convincing evidence that Conoco “acted intentionally and with malice towards
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others including Okland.” See supra note 2. This finding put the case in
Category II under Okla. Stat. tit. 23, § 9.1(C), which limits punitive damages just
as the instruction given to the jury indicated.
Conoco asserts that the jury should have been instructed that only
subsections (a) and (b) of § 9.1(C) applied to the award of punitive damages and
that it could not award punitives exceeding twice the amount of actual damages
awarded. Directing us to no authority, it contends that Category II’s third
limitation on damages—the increased financial benefit derived by the defendant
as a result of the conduct causing the injury to the plaintiff and other persons—is
restricted to the increased benefit from a single act, not from multiple acts
committed against multiple parties, and is, therefore, inapplicable in this case.
Section 9.1 is a relatively new Oklahoma statute and neither the federal nor state
courts have yet interpreted this new part of the statute.
We believe a plain reading of the statute manifests the legislature’s intent
that the “conduct causing the injury to the plaintiff and other persons” would
include conduct committed during the same time period pursuant to a uniform
policy. We do not think the language requires that the conduct be a single
isolated event, nor that it is so restrictive as to preclude ongoing fraudulent
conduct. One of the factors to be considered in awarding punitive damages, is in
fact, the “duration of the misconduct and any concealment of it.” Id. § 9.1(A).
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The last paragraph of § 9.1(C) requires the trial court to reduce the punitive
damage award “by the amount it finds the defendant or insurer has previously
paid as a result of all punitive damage verdicts entered in any court of the State of
Oklahoma for the same conduct by the defendant or insurer.” This, too, indicates
that the statute was intended to allow punitive damages as a penalty for a general
policy or decision that harmed many persons.
Okland presented evidence that Conoco had defrauded others as well as
Okland in adopting a policy by which it would enrich itself by surreptitiously
excluding ten cents from the resale price of each unit of gas. See, e.g.,
Appellant’s App. Vol. III at 924-33, 939-45, 982-84, 1027-33; Appellee’s
Supplemental App. at 74, 87, 90, 91, 223-26. Okland also presented evidence,
without objection, that Conoco reaped between $41.7 and $73 million from this
decision. Appellant’s App. Vol. IV at 1546-50. We therefore conclude that the
jury could have awarded the $3 million in punitive damages even if, as Conoco
argues, the actual damage award for tort was substantially less than the
$1,559,633.12 awarded as actual damages.
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III. Fraud Claims Based on Communications with Mr. Faulkner and Gas
Purchase Statements
Conoco next argues that because its representative, Tom Faulkner, was not
involved in the formation of all of the contracts, Okland’s allegation that Mr.
Faulkner fraudulently induced Okland’s acceptance of the contracts cannot
support the full amount of actual damages. It also argues that the gas purchase
statements cannot support the entire actual damage award insofar as tax
reimbursement amounts were included because Conoco’s statements to Okland
listed “0.00” as the amount of tax reimbursement paid, and, therefore, Okland
could not have reasonably relied on the statements even if they were fraudulent.
As for the first argument, we note that Mr. Faulkner’s involvement with the
contracts included not only the formation of some of them, but also the later
amendment of others. See, e.g., Appellant’s App. Vol. I at 240, 346-67;
Appellee’s Supplemental App. at 77-79, 82, 84-86. More to the point, Mr.
Faulkner’s involvement was only part of the evidence that Okland presented to
support its fraudulent inducement and deceit claims. As explained above, the
jury’s verdict as to those claims was based on substantial evidence. The same
evidence supporting the finding of liability also supports the actual damage
award, and we need not recite that evidence again.
As for the tax reimbursement statement claims, we note that even during
part of the time Conoco was paying the tax reimbursements in full, the statements
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listed “0.00” as the amount of reimbursements paid, and Okland continued to rely
on Conoco to pay the full tax reimbursement because there had been no change in
the statements. Appellant’s App. Vol. I at 191-98, Vol. III at 1006-11; Appellee’s
Supplemental App. at 72. Again, other evidence referred to previously in
combination with this evidence supports the actual damage award.
Whether we decide these contentions under the strict plain error standard,
which is appropriate because they were not raised below, or the conventional
clearly erroneous or lack of evidence standard, see Brown v. Presbyterian
Healthcare Servs., 101 F.3d 1324, 1330 (10th Cir. 1996), cert. denied, 117 S. Ct.
1461 (1997), Conoco’s arguments on these points are unavailing. The entire
actual damages claim need not be based on tort to support the punitive damage
award. In addition, any one tort theory need not support the entire portion of the
actual damages claim attributable to tort. The jury found for Okland on all of the
tort and contract claims presented to it. Therefore, the actual damages claim may
be supported by any of the alternative tort theories or by a combination of them,
and the evidence supports the award.
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IV. Jury Instructions on Silence and Duty to Disclose
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Conoco alleges that the court erred in giving Jury Instructions 28 and 32 on
Duty to Disclose 19 and Silence, 20 respectively. It also argues that the jury’s
finding against Conoco based on these instructions cannot support the tort
damages. Conoco properly objected to these Instructions. Appellant’s App. Vol.
III at 1128-32, Vol. IV at 1458.
The determination of the substance of a jury instruction in a
diversity case is a matter of state law, but the grant or denial of
19
Instruction No. 28, Appellant’s App. Vol. I at 164, is as follows:
DUTY TO DISCLOSE
When dealing with another, a party has a duty to disclose a material
fact if it is known to that party and the party knows the fact is peculiarly
with its knowledge and the other party is not in a position to discover the
fact for itself.
A party also has a duty to disclose a material fact if it is known to
that party and when the party states other facts which are true but which the
party knows will create a false impression of the actual facts in the mind of
the other party if the material fact is not disclosed.
20
Instruction No. 32, Appellant’s App. Vol. I at 167, is as follows:
SILENCE
You are instructed that silence as to a material fact is not necessarily
equivalent to a false representation or misrepresentation. It only becomes
so if under the circumstances there is an affirmative duty on one party to a
contract to speak, and that party remains silent to his benefit and to the
detriment of the other party to the contract.
In determining whether there is a duty to speak, you may consider
the situation of the parties and the subject of the matters with which they are
dealing.
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tendered instructions is governed by federal law and rules. The
admission or exclusion of a particular jury instruction is within the
sound discretion of the trial court. We review the trial court's
conclusions on legal issues de novo, however, and need not defer to
its decisions on questions of law.
City of Wichita v. United States Gypsum Co., 72 F.3d 1491, 1494-95 (10th Cir.
1996) (citations omitted).
In addition, in reviewing jury instructions we consider them as a whole and
ask whether they accurately stated the governing law and provided the jury with
an ample understanding of the issues and the applicable standards. Brown v.
Wal-Mart Stores, Inc., 11 F.3d 1559, 1564 (10th Cir. 1993). The paramount
questions are whether the jury was misled and whether the instructions provided
an understanding of the issues and explained the jury's duty to determine those
issues. Estate of Korf v. A.O. Smith Harvestore Prods., Inc., 917 F.2d 480, 484
(10th Cir. 1990). Therefore, we will reverse the district court only if an
erroneous instruction is prejudicial in light of the record as a whole. Mason v.
Texaco, Inc., 862 F.2d 242, 246 (10th Cir. 1988).
Conoco argues that even though the district court did not state its reason for
refusing to submit Okland’s constructive fraud claim to the jury, it did so because
it did not believe there was a fiduciary relationship between Okland and Conoco.
Consequently, contends Conoco, the court should not have instructed the jury as
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to silence and misstated the duty to disclose because silence by one party does not
permit a finding of fraud or deceit in the absence of a fiduciary relationship.
Under Oklahoma law, “‘[i]n determining whether there is a duty to speak,
consideration must be given to the situation of the parties and matters with which
they are dealing.’” Thrifty Rent-A-Car Sys., Inc. v. Brown Flight Rental One
Corp., 24 F.3d 1190, 1195 (10th Cir. 1994) (quoting Silk v. Phillips Petroleum
Co., 760 P.2d 174, 179 (Okla. 1988)). Those considerations may require either
(1) an absolute positive duty to speak based on a fiduciary or similar duty, or (2) a
duty to speak arising from a partial disclosure. See Thrifty Rent-A-Car Sys., 24
F.3d at 1195. The second duty is imposed because the speaker is “‘under a duty
to say nothing or to tell the whole truth. One conveying a false impression by the
disclosure of some facts and the concealment of others is guilty of fraud, even
though his statement is true as far as it goes, since such concealment is in effect a
false representation that what is disclosed is the whole truth.’” 21 Id. (quoting
Deardorf v. Rosenbusch, 206 P.2d 996, 998 (Okla. 1949)); see also Varn v.
Maloney, 516 P.2d 1328, 1332 (Okla. 1973); Ragland v. Shattuck Nat’l Bank, 36
F.3d 983, 991-92 (10th Cir. 1994); Okla. Stat. tit. 76, § 3 (Deceit may be found,
inter alia, by the “suppression of a fact by one who is bound to disclose it, or who
21
It is important to note that Okland presented evidence and the jury found Conoco
liable as to deceit by false representation and fraud in the inducement, based on Conoco’s
overt misrepresentations, not simply based on silence.
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gives information of other facts which are likely to mislead for want of
communication of that fact.”). So even in the absence of a fiduciary or similar
relationship, the duty to speak often arises. See Ragland, 36 F.3d at 991-92;
Uptegraft v. Dome Petroleum Corp., 764 P.2d 1350, 1353-54 (Okla. 1988).
Considering the evidence presented in this case, the district court properly
instructed the jury that it could consider the situation of the parties and the
subject of the matters with which they are dealing and find that Conoco breached
its duty to disclose under those circumstances. Submission of Instructions 28 and
32 was therefore not error.
Substantial evidence also supported the jury’s finding of deceit by
concealment or nondisclosure and the damages it awarded thereon. The jury
clearly heard evidence of the circumstances of the parties, of the subject matter of
the contracts, and of Conoco’s intent to deceive and to commit fraud. The district
court’s denial of Conoco’s motion for judgment as a matter of law was not error.
V. Admission of Damage Exhibits
Conoco sought to introduce Exhibit 182 and to inquire about it during its
cross-examination of Steven Wetwiska, the President of Okland. Okland objected
to the exhibit based on relevance because it said the well and its associated
contract (No. 3536) were not involved in the case. Appellant’s App. Vol. III at
-40-
801. The court sustained the objection. Later in the trial, Okland offered several
damage summaries as exhibits that included Contract No. 3536 in the damage
calculations. Id. Vol. I at 370-73, Vol. II at 660-61, Vol. III at 1039-48. Conoco
objected, arguing that because Okland previously had contended the contract was
not involved in the case, Okland’s exhibits should not be admitted. Id. Vol. III at
1039-40. Okland’s expert, Richard Metz, testified that the well was included in
the calculations because Conoco had included it in its own calculations, and Mr.
Metz had then used the Conoco figures as to the amount of the damages on that
well. Id. at 1040. The court overruled the objections and allowed the exhibits
into evidence.
On appeal, Conoco contends that once Okland argued the contract was not
relevant, it should have been precluded from taking an inconsistent position later
by introducing exhibits containing that contract. Conoco does not claim that
Contract No. 3536 was irrelevant or that it was not at issue in this case. Nor did
Conoco seek at trial to reexamine Mr. Wetwiska as to that particular contract. In
addition, exhibits introduced by Conoco later in the trial included Contract No.
3536 in them. See, e.g., Appellee’s Supplemental App. at 238.
We review the district court’s evidentiary rulings for abuse of discretion.
Cartier v. Jackson, 59 F.3d 1046, 1048 (10th Cir. 1995). Conoco alleges that the
court abused its discretion by failing to employ the doctrines of judicial estoppel
-41-
and preclusion against inconsistent positions in judicial proceedings to exclude
Okland’s damage exhibits.
In a diversity case, we look to state law to determine whether and how to
apply these doctrines. Tri-State Generation & Transmission Ass’n v. Shoshone
River Power, Inc., 874 F.2d 1346, 1363 (10th Cir. 1989); Ellis v. Arkansas
Louisiana Gas Co., 609 F.2d 436, 440 (10th Cir. 1979) (applying Oklahoma law).
Under Oklahoma law, “a party who knowingly and deliberately assumes a
particular position is estopped from assuming an inconsistent position to the
prejudice of the adverse party. Judicial estoppel applies only to prevent the
advancement of inconsistent positions vis-a-vis matters of fact.” Parker v. Elam,
829 P.2d 677, 680 (Okla. 1992) (footnote omitted).
We find no evidence in the record to suggest that Okland knowingly and
deliberately assumed contradictory positions as to the relevance of Contract No.
3536. More important, we find no evidence of prejudice to Conoco. When
Okland objected to Conoco’s exhibit based on relevance, Conoco’s counsel
responded: “This is simply one of the series of instruments signed by the parties,
and we’re just trying to establish the sequence of events.” Appellant’s App. Vol.
III at 801. Conoco does not show us how the exclusion of Contract No. 3536 has
harmed it, nor did it ever seek to recall Mr. Wetwiska or ask the district court to
admit the exhibit after the court allowed Okland’s exhibits into evidence.
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Accordingly, this is not a case in which the doctrines should apply, and the
district court did not abuse its discretion in admitting Okland’s damage exhibits.
VI. Propriety of Okland’s Questioning of Conoco’s Representative
Conoco also claims that the district court erred by permitting Okland to ask
Conoco’s representative, Bill Boone, in the punitive damage phase, whether he
would admit Conoco’s conduct was fraudulent and deceitful. See Appellant’s
App. Vol. IV at 1525-28. Conoco argues that allowing this type of questioning is
repugnant to the legal system because it puts Conoco in the Catch-22 situation of
either waiving its rights on appeal and in other pending cases or subjecting itself
to punitive damages by not accepting liability. This questioning was improper
and constitutes misconduct, argues Conoco, because it incited, inflamed, and
prejudiced the jury against Conoco, causing it to render a larger punitive damage
award based on irrelevant issues. Because Conoco did not object to this line of
questioning in the district court, we review it only for plain error. Thus, we must
be convinced that the error “almost surely affected the outcome of the case”
because the prejudice is such that the fairness of the trial is threatened. Angelo v.
Armstrong World Indus., Inc., 11 F.3d 957, 960-61 (10th Cir. 1993) (quotation
omitted).
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Financial status is not the only proper subject of evidence at the punitive
damage phase of trial, as Conoco asserts. Under Oklahoma law, the jury may
“give damages for the sake of example and by way of punishing the defendant
based upon the following factors:”
the seriousness of the hazard to the public arising from the
defendant’s misconduct; the profitability of the misconduct to the
defendant; the duration of the misconduct and any concealment of it;
the degree of the defendant’s awareness of the hazard and of its
excessiveness; the attitude and conduct of the defendant upon
discovery of the misconduct or hazard; in the case of a defendant
which is a corporation or other entity, the number and level of
employees involved in causing or concealing the misconduct; and
the financial condition of the defendant.
Okla. Stat. tit. 23, § 9.1(A), (E) (emphasis added). Although the inquiries made
by Okland touched on Conoco’s post-verdict attitude upon the jury’s
determination of the misconduct, we do not think the exchange so detrimental as
to require a retrial as to punitive damages. Moreover, at the time of the alleged
misconduct, the jury had already found that Conoco acted maliciously and
intentionally in defrauding and deceiving Okland and had awarded substantial
actual damages. See generally Davis v. Mutual Life Ins. Co., 6 F.3d 367, 387
(6th Cir. 1993). Although the district court may have properly forbidden the line
of questioning had there been an objection, Conoco has not met the heavy burden
of proving plain error.
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VII. Jury Instruction on Fraud
Conoco claims that the district court’s Instruction No. 29 on fraud was
improper because it did not advise the jury of the presumptions and contract
interpretations to which Conoco was entitled as a matter of law. This issue was
properly raised at trial, Appellant’s App. Vol. IV at 1458, 1469, so we review the
denial of the specific instruction for abuse of discretion, but we review de novo
the correctness of the legal standards in the instructions as a whole. Harrison v.
Eddy Potash, Inc., 112 F.3d 1437, 1442 (10th Cir. 1997), petition for cert. filed,
66 U.S.L.W. 3137 (U.S. Aug. 6, 1997) (No. 97-232).
The district court’s Instruction No. 29 informed the jury: “You are
instructed that deceit as well as fraud is never presumed.” Appellant’s App. Vol.
I at 165. Conoco’s requested Instruction No. 17 went further by adding the
following language: “You should assume that people are fair and honest in their
dealings until the contrary appears from the evidence. If a transaction which is
called into question is equally capable of two interpretations, one honest and the
other fraudulent, it should be found to be honest.” Id. at 14.
Although the proposed instruction may not have been inappropriate if
given, see James v. State Farm Mut. Auto. Ins. Co., 810 P.2d 365, 372 (Okla.
1991), the language essentially restates the burden of proof in a fraud or deceit
case and the accompanying elements of those claims. The court gave the jury
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those instructions, Appellant’s App. Vol. I at 148, 150, 160, 162, 166, and we see
no abuse in denying this particular instruction.
VIII. Jury Instruction Regarding FERC Order 94
At trial, Conoco contended that FERC Order 94—which prior to
deregulation in 1985, authorized sellers, under certain conditions, to recover
PRC’s in addition to the gas sale price fixed by law—authorized Conoco to
exclude PRC’s after deregulation under the language of the gas contracts.
Conoco introduced exhibits and testimony explaining Order 94, its compliance
with the order, and its belief that the order permitted it to deduct the ten cents per
unit it deducted here. See Appellant’s App. Vol. IV at 1156-57, 1237-45;
Appellee’s Supplemental App. at 290-93. Okland disputed Conoco’s compliance
with the order and argued that the order could not have authorized the exclusions
after deregulation. See Appellant’s App. Vol. III at 924-35, 980-84, 989-90,
1037-38; Appellee’s Supplemental App. at 170-71.
At the jury instruction conference, Conoco asked the court to give proposed
Instruction No. 10, which explains Order 94 as follows:
FEDERAL REGULATION
At the time plaintiff and defendants first entered into their
contracts, they were both subject to regulation by the Federal Energy
Regulatory Commission (“FERC”). The rules adopted by FERC
authorized defendant to recover production related costs of up to
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$0.15 per thousand cubic feet (MCF) of gas from defendant’s
purchasers retroactive to July, 1980.
Appellant’s App. Vol. I at 13. The district court did not err in refusing to give
the instruction. The instruction is correct in stating that the parties were subject
to regulation at the time of the initial contract formation. However, the rest of the
instruction would have misled the jury because it implies both that Conoco
actually met the requirements of the order and also that the order did, in fact,
authorize Conoco to recover PRC’s under the contracts after deregulation. The
instruction would not have aided the jury in evaluating the impact of Order 94 on
the case but would have merely confused the issues.
IX. Expert Testimony as to Conoco’s Intent
Finally, Conoco argues that the district court erred in allowing Okland’s
expert, Taylor Yoakam, to testify as to Conoco’s intent in entering into the
contracts because only the testimony of a person with direct and personal
knowledge of the facts in controversy is competent to so testify. 22 Apparently, the
22
Some of the testimony Conoco complains of is as follows:
Q: (By Mr. Barnes) Could you please explain to us, sir, what the facts
have shown you concerning what Conoco was doing?
A: Well—
Q: Please stay away from any pejorative terms.
A: Alright. I have been in this business for 25 years, and I’ve seen a lot
(continued...)
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district court partially granted Conoco’s motion in limine to prohibit Okland’s
expert witness from testifying as to the parties’ interpretation of the contracts, but
ruled that it would allow the witness to discuss the meaning of the contracts’
(...continued)
22
of things happen between producers and pipeline companies, and I
spend my life and living trying to protect independent producers
from things that pipeline companies do.
We seem to have a situation here where the pipeline company
had lost $4 million and they wanted to find out some way that they
could get it back.
MR. NELON: Objection, Your Honor. He’s speculating as to what
Conoco thought and intended.
THE COURT: Overruled.
....
Q: (By Mr. Barnes) Sir, what is the element of — well, let me rephrase
that. How is the element of trust important in the gas marketing
business?
A: Well, as I said in my deposition, it has to do with honesty and
integrity in the industry. If we don’t have some trust and honesty
and integrity, we’re going to be in bad, bad shape.
Unfortunately, I think we’ve reached that a great deal over the
last ten years, that everybody was losing money in the oil and gas
business in the late—beginning in the late 80s—or the early 80s, and
I lived through that, I was with a company that lived through it and
so everybody was pinching their pennies, everybody was trying to
figure out a way to stay alive.
So in doing so, it seems like that they may have gotten a little
bit over—Conoco just maybe went a little bit overboard in figuring
out a way to make their plant profitable, and they elected to do so out
of the producer’s pocket.
MR. NELON: I object. Move to strike all of this witness’ testimony.
THE COURT: Overruled.
Appellant’s App. Vol. III at 939-41.
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terms. Appellant’s Br. at 48 & n.25; Appellee’s Br. at 48-49. At trial, the court
sustained several objections as to Conoco’s intent in the formation of the contract,
but ultimately allowed the disputed testimony to come in.
We review a district court’s admission of expert testimony for abuse of
discretion, and “we will not reverse the district court without a ‘definite and firm
conviction that [it] made a clear error of judgment or exceeded the bounds of
permissible choice in the circumstances.’” United States v. Messner, 107 F.3d
1448, 1454 (10th Cir. 1997) (citations omitted). Moreover, “[a] defendant bears
the burden of demonstrating that the court’s erroneous admission of evidence
‘affected [his or her] substantial rights.’” Messner, 107 F.3d at 1054-55 (quoting
K-B Trucking Co. v. Riss Int’l Corp., 763 F.2d 1148, 1155-56 (10th Cir. 1985)).
Under both federal law and Oklahoma law, expert witnesses in civil cases
may testify in the form of an opinion or inference as to ultimate issues to be
decided by the trier of fact if the testimony is not otherwise objectionable. Fed.
R. Evid. 702, 704; Okla. Stat. tit. 12, §§ 2702, 2704; Williams Natural Gas Co. v.
Perkins, 952 P.2d 483, 490 (Okla. 1998); Gabus v. Harvey, 678 P.2d 253, 255-56
(Okla. 1984). The testimony must assist the trier of fact in understanding the
evidence or in determining a factual issue. Werth v. Makita Elec. Works, Ltd.,
950 F.2d 643, 647-48 (10th Cir. 1991); Gabus, 678 P.2d at 255-56. Generally, an
expert may not state his or her opinion as to legal standards nor may he or she
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state legal conclusions drawn by applying the law to the facts. A.E. ex rel. Evans
v. Independent Sch. Dist. No. 25, 936 F.2d 472, 476 (10th Cir. 1991); Gabus, 678
P.2d at 255-56 & n.2.
The portions of Mr. Yoakam’s testimony Conoco challenges concern
Conoco’s fraudulent actions in deciding to covertly keep a portion of the resale
price from Okland. The testimony does not merely seek to explain Conoco’s
intent in forming the contract. Mr. Yoakam testified about what he thought
Conoco was doing in light of his experience in the specialized field of oil and gas.
He did not simply tell the jury that the conduct was fraudulent; he did not state
any legal conclusions; and he did not testify as to the legal elements necessary to
establish fraud. See United States v. Oles, 994 F.2d 1519, 1523 & n.2 (10th Cir.
1993). In numerous cases we have held that the admission of similar testimony
was not an abuse of discretion. See, e.g., United States v. Orr, 68 F.3d 1247,
1252 (10th Cir. 1995) (testimony that defendant’s fraud scheme would only work
if it continued to find “a bank sucker”); Oles, 994 F.2d at 1522-23 (testimony that
defendant’s actions constituted “check kiting”); Wheeler v. John Deere Co., 935
F.2d 1090, 1100-01 (10th Cir. 1991) (testimony that machinery was more
dangerous than anticipated by ordinary consumers); Ponder v. Warren Tool Corp.,
834 F.2d 1553, 1557 (10th Cir. 1987) (testimony as to cause of accident).
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We do not believe that the jury was “prevailed upon to abdicate its function
or responsibility for reaching an independent judgment on the ultimate issues in
the case.” Karns v. Emerson Elec. Co., 817 F.2d 1452, 1459 (10th Cir. 1987)
(quotation omitted). Mr. Yoakam explained the basis for his opinions in
sufficient detail to permit the jury to independently evaluate his conclusions. See
McEwen v. City of Norman, 926 F.2d 1539, 1545 (10th Cir. 1991). Moreover,
the jury was instructed that it could disregard the expert opinion entirely.
Appellant’s App. Vol. I at 143. We, therefore, conclude that the court did not
abuse its discretion in permitting Mr. Yoakam’s testimony.
X. Okland’s Costs
In its related appeal, Okland seeks to recover $41,529.59 for costs
associated with its successful lawsuit against Conoco. Okland filed in the district
court a bill of costs, which the court clerk granted and denied as follows:
Costs Requested Awarded Seeking on Appeal
Expert Witness Fees $23,380.19 $ 0.00 $23,380.19
Court Reporter Transcript Fees $ 9,253.06 $ 4,588.45 $ 4,664.61
Photocopies $21,343.70 $12,543.38 $ 8,800.32
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Costs Requested Awarded Seeking on Appeal
Other Miscellaneous Costs 23 $ 3,597.11 $ 0.00 $ 3,597.11
Fees of the Clerk $ 79.00 $ 79.00 $ 0.00
Fees for Witnesses $ 50.00 $ 50.00 $ 0.00
Total $57,703.06 $ 17,260.83 $ 40,442.23
See Appellant’s App. at 79-80, 199. The district court reviewed the briefs filed in
conjunction with Okland’s motion to review taxation of costs by the clerk and
concluded that the clerk’s assessment of costs should not be disturbed. Okland
appeals that decision and seeks an additional $1,087.36, which it claims it
incurred subsequent to its filing of the bill of costs.
During the trial, Okland elected to submit $52,670.75 in expert witness fees
and expenses as damages, not as costs, relying on Okla. Stat. tit. 52, § 570.14.
Conoco did not object to that election, failing to argue as it does here that federal,
not state law applies. Rather, Conoco objected on the basis that the evidence
should not be admitted until liability had been established. Appellant’s App. at
318-19.
These costs include travel, postage, telephone, faxes, Westlaw, and mileage.
23
Nearly all of these costs were incurred by Okland’s expert witness. Appellant’s App. at
79-80, 182-199.
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Given the opportunity to present the fees to the jury and having chosen that
route, Okland is precluded from seeking additional expert witness fees as costs.
It had the opportunity to submit all of its expert witness fees at trial as damages,
and in failing to do so, it has lost the opportunity to recover additional fees in the
form of costs. The district court’s judgment entered on November 25, 1996, at
the close of the case awarding Okland its costs was only for those costs provided
by 28 U.S.C. § 1920. Therefore, the district court did not err in denying an award
for expert witness fees.
The district court did not explain its partial denial of internal photocopies,
video depositions, 24 and other miscellaneous costs. Although we have stated that
we will remand if the court does not provide an adequate explanation of its denial
of costs, see Serna v. Manzano, 616 F.2d 1165, 1168 (10th Cir. 1980) (“Unless an
appellate court knows why a trial court refused to award costs to the prevailing
party, it has no real basis upon which to judge whether the trial court acted within
the proper confines of its discretion.”); see also Cantrell v. International Broth. of
Elec. Workers, 69 F.3d 456, 459 (10th Cir. 1995) (citing with approval In re Two
Appeals Arising Out of the San Juan Dupont Plaza Hotel Fire Litig., 994 F.2d
24
We recognize our decision in Tilton v. Capital Cities/ABC, Inc., 115 F.3d 1471
(10th Cir. 1997), which holds that district courts have discretion to award as costs
videotaped depositions. However, our review of the record indicates that the court did
not abuse that discretion in denying such costs.
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956, 963 (1st Cir. 1993) (applying the rule to a partial denial of costs)), the record
here is developed enough for us to conclude that such a remand would be an
unfruitful expenditure of judicial resources. After reviewing the record, we
conclude that the district court did not abuse its discretion in partially denying the
costs. We also refuse to entertain a review of Okland’s tardy application for
additional costs.
Okland asks for attorneys fees and costs incurred on appeal. We grant
Okland’s motion for costs and fees as to Appeal No. 97-6004 only. Pursuant to
statute and this court’s rules, Okland should submit its costs to the clerk of this
court. We remand to the district court for a determination of the attorneys fees to
be allowed on this appeal.
CONCLUSION
For the foregoing reasons, we AFFIRM the district court in all respects on
both appeals and REMAND to the district court for a determination of attorneys
fees to be awarded on this appeal.
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