Grynberg v. Citation Oil & Gas Corp.

SABERS, Justice

(concurring in part & dissenting in part).

[¶ 55.] I join Judge Tucker’s dissent.

[¶ 56.] I write separately to point out the inconsistency between the majority opinion and the majority writer’s prior opinion in Schaffer II regarding punitive damages.

[¶ 57.] The majority opinion relies excessively on Grynberg’s sophistication as an oil well operator. He is only one of eleven plaintiffs. Is his sophistication to be imputed to the others? Were they all so experienced and sophisticated? More importantly, what possible relevance does that have to this case? This case differs from Schaffer II because Citation repeatedly and deliberately lied, falsified records, and overcharged the well owners. “Schaffer was an unsophisticated investor in limited partnerships” and the defendant “owed Schaffer a duty of properly informing Schaffer of the risks [defendant] knew to be involved with this investment.” 1996 SD at 94 ¶ 31, 552 N.W.2d at 811. If Grynberg were a novice in the oil business, would Citation owe a duty to disclose its practiced deception? Of course not. Does Grynberg’s sophistication reduce damages resulting from Citation’s duplicitous and deceitful behavior? Of course not. The majority opinion is rewarding Citation because its victims were sophisticated. This is a $3.8 million dollar windfall to Citation. A plaintiff’s sophistication should not be a mitigating factor in a ease of fraud and deceit such as this.

[¶ 58.] The majority opinion pays lip service to the punishment and deterrence aspect of punitive damages. See supra ¶ 47. SDCL 21-3-2 provides:

In any action for the breach of an obligation not arising from contract, where the defendant has been guilty of oppression, fraud, or malice, actual or presumed, or in any ease of wrongful injury to animals, being subjects of property, committed intentionally or by willful and wanton misconduct, in disregard of humanity, the jury, in addition to the actual damage, may give damages for the sake of example, and by way of punishing the defendant.

(Emphasis added); see also Schaffer II, 1996 SD at 94 ¶ 25, 552 N.W.2d at 809:

*509 SDCL 21-3-2 describes the nature of the award to be “for the sake of example, and by way of punishing the defendant.” This has been our consistent approach in examination of these types of awards since Richardson v. Huston, 10 S.D. 484 , 74 N.W. 234 (1898). Punitive damage awards extend not only to act as punishment for the individual defendant for past tortious acts and deter the defendant from repetition, Bogue v. Gunderson, 30 S.D. 1 , 137 N.W. 595, 596 (1912), but also to serve notice to others who would be tempted to repeat such actions in the future, that they do so at their substantial peril. Hulstein v. Meilman Food Industries, 293 N.W.2d 889, 892 (S.D.1980). To accomplish these purposes, the punitive damages must be “relatively large.” Id.

(Emphasis added) (footnote omitted). Citation engaged in a pattern of fraudulent and deceitful conduct over a period of approximately seven years. Surely that merits a “substantial” and “relatively large” punitive damages award. Accord BMW of North America, Inc. v. Gore, 517 U.S. 559 , -, 116 S.Ct. 1589, 1599-1600 , 134 L.Ed.2d 809, 827 (1996):

Certainly, evidence that a defendant has repeatedly engaged in prohibited conduct while knowing or suspecting that it was unlawful would provide relevant support for an argument that strong medicine is required to cure the defendant’s disrespect for the law. Our holdings that a recidivist may be punished more severely than a first offender recognize that repeated misconduct is more reprehensible than an individual instance of malfeasance.

(Citations omitted).

[¶ 59.] The trial court properly instructed the jury on the law of punitive damages by setting forth the five factors we consider when reviewing a punitive damages award. “Juries are presumed to follow the instructions of the trial court.” State v. Eagle Star, 1996 SD 143, ¶ 22 , 558 N.W.2d 70, 75 (citation omitted); see also First Nat’l Bank of Minneapolis v. Kehn Ranch, Inc., 394 N.W.2d 709, 720 (S.D.1986) (“It is, of course, presumed that the jury understood and abid-ed by these instructions.”). This punitive damage award was arrived at fairly and legally. It is “substantial” and “relatively large,” as it must be to achieve the desired goals of punishment and deterrence. Schaf-fer II, supra. That fact does not constitute grounds for remittitur. Nor does it “permanently cripple or destroy” Citation as the majority opinion implies (supra ¶49). Accordingly, we should affirm rather than reverse the jury’s award. 16

. While a bright-line mathematical formula is not determinative of punitive damages, the ratio may be even closer in this case than stated. The majority opinion points out that if Citation’s deceit had gone undetected, the maximum amount of loss the plaintiffs could have sustained was $825,000. Supra ¶ 41. The relationship between the punitive damage award of $4.8 million and that figure is 5.8 to 1 rather than 13.5 to 1. See BMW, 517 U.S. at -, 116 S.Ct. at 1602 , 134 L.Ed.2d at 830 (discussing with approval the comparison of punitive damages with “the harm likely to result from the defendant’s conduct as well as the harm that actually has occurred.”) (emphasis in original) (citation omitted).