# Appendix — Diamond Shamrock Corp. v. Hamilton > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_2208%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1986 - **Citation:** 479 U.S. 1007 ## Text [" S q 86-607.) | Smeets QCT 14 1986 i | JOSEPH F. SPANIOL, JR, IN THE : Supreme Court of the Bnited States OCTOBER TERM, 1986 DIAMOND SHAMROCK CORPORATION Petitioner, v. JoHN HAMILTON, MARTHA FRANCIS, Morris A. RICHARDSON, ZINKE & TrumBo, LTp., ROBERT M. ZINKE, and Davip B. TRUMBO, Respondents. APPENDICES TO PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT H. B. WATSON, JR. Counsel of Record RicHarD K. Books SHARON TAYLOR THOMAS Watson & McKENZIE 1900 Liberty Tower Oklahoma City, OK 73102 (405)232-2501 Attorneys for Diamond Shamrock Corporation October 14, 1986 PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203 Appendix ; Table of Contents Appendix A-- Opinion of the Tenth Circuit entered July 21,1986 (reported at 791 F.2d 416) ............. Appendix B-- Certified Interlocutory Order of District Court IE EE Be IE. nteesissncsonavicvescessssenesonne Appendix C-- Journal Entry of Judgment of District Court GES TNE By BU Neninentcndscaccdcescccszionsces Appendix D-- Order of District Court granting New Trial PB | EE Ree Appendix E-- Journal Entry of Judgment of District Court TOE INOUGRMIGP 16, 1GGB cccccccccccccccccccescsacesees Appendix F-- Order of Tenth Circuit denying reheari — suggestion for rehearing en banc entered July BE “0 shbbiik cheeses nies aaaciahenshaeaiaiadabeassibens Appendix G-- Order of Tenth Circuit correcting order de- nying rehearing and suggestion for rehearing en banc entered July 21, 1986 ....... Appendix H-- P Verdict returned in first trial on November 2, RES cia Neti an ae eRe Rees Oe Re Appendix I-- Diamond Shamrock’s Alternative Motion for Judgment Notwithstanding the Verdict or for New Trial filed November 14, 1983 _............. Appendix J-- Transcript of Hearing held on January 5, 1984 on Alternative Motion for Judgment Notwith- standing the Verdict or for New Trial _........ la 36a 4la 48a 50a 54a 56a 58a 60a ii Appendix K-- Diamond Shamrock’s Petition for Permission 4 7 ae filed in Appeal No. 85-1698 on April Appendix L-- Diamond Shamrock’s Docketing Statement filed in Appeal No. 85-1698 on June 14, 1984 ... Appendix M-- Petition for Permission to Appeal filed in Appeal No. 85-1803 on April 29, 1985 _........ pendix N-- Dedeine Statement filed in Appeal No. 85- BOOB Ge SURO 10, TOD cccccccccscinccssnnttiscniasnscns Appendix O-- Docketing Statement filed in Appeal No. 85- 1653 on TR, TOD ceccsssscsoscsnssnisninnisbenseans Appendix P-- Diamond Shamrock’s Docketing Statement filed in Appeal No. 85-1765 on June 3, 1985 _...... 100a 108a 117a 123a 129a - at la APPENDIX A UNITED STATES COURT OF APPEALS FOR THE TENTH CIRCUIT Nos. 85-1698 and 85-1803 DIAMOND SHAMROCK CORPORATION, a Delaware Corporation, Plaintiff-Appellant, Cross-A ppellee v. ZINKE & TRUMBO, LTD., a business association, ROBERT M. ZINKE, an individual and Davip B. TRUMBO, an individual, Defendants, Counterclaimants-A ppellees, and Morris A. RICHARDSON, JOHN HAMILTON and MARTHA FRANCIS, Counterclaimants-Cross-A ppellants [May 21, 1986] Appeal From The United States District Court For The Western District of Oklahoma (CIV-82-1754-E) Richard K. Books (H. B. Watson, Jr., and Sharon L. Thomas with him on the briefs), Watson & McKenzie, Okla- homa City, Oklahoma, for Plaintiff-Appellant/Cross-Appel- lee Richard C. Ford (Gary W. Davis, James U. White, Jr., and L. Mark Walker with him on the briefs), Crowe & — ~ 2a Dunlevy, Oklahoma City, Oklahoma, for Counterclaimants/ Cross-Appellants. Before BARRETT, McKAY and TACHA, Circuit Judges. BARRETT, Circuit Judge This appeal and cross-appeal is from a judgment con- taining an interlocutory order, duly certified pursuant to Fed. R. Civ. P. 54(b). Our jurisdiction vests pursuant thereto and by virtue of 28 U.S.C. § 1292(b). There are many issues presented in this complex diversity based case. However, only onc is dispositive. That involves a party’s failure to object to a jury’s general verdict on the ground of inconsistency prior to the discharge of the jury. I. Factual Background Appellees John Hamilton and Martha Francis own three- fourths of the mineral estate underlying a 640 acre tract situate in Ellis County, Oklahoma, described as Section 33, Township 23 N., Range 26 W. Their interest was leased to Diamond Shamrock. The remaining one-fourth interest is owned by appellee Morris Richardson, who leased his interest to Zinke and Trumbo, Ltd. The Oklahoma Cor- poration Commission established Section 33 as a 640 acre drilling and spacing unit for production from the Morrow formation. In 1981, Diamond Shamrock, as 100 percent working interest owner, drilled and completed a well producing from the Morrow formation situate in Lipscomb County, Texas, known as the Travis Well. This well is adjacent to Section 33, supra. In September of 1981, Diamond Sham- rock proposed the drilling of the Hamilton No. 1-33 at a location in the SW’/, of Section 33. Zinke and Trumbo requested that Diamond Shamrock drill the well as an 3a offset to the Travis Well in order to protect them from drainage resulting from production from the Travis Well. Diamond Shamrock agreed and obtained a location excep- tion from the Commission to drill the Hamilton No. 1-33 Well 317 feet from the south line and 367 feet from the west line in the SW’/, of Section 33. Diamond Shamrock and Zinke and Trumbo entered into a Joint Operating Agreement whereby Diamond Shamrock was designated as operator. The well was drilled by Diamond Shamrock to the Morrow formation and completed in September, 1982. It was reported by Diamond Shamrock as a shut-in gas well awaiting a pipeline connection. No gas has been produced and sold from the Hamilton 1-33 Well. In the course of completion operations, a dispute arose between Diamond Shamrock and Zinke and Trumbo rel- ative to completion procedures. This resulted in the instant litigation. On October 12, 1982, Diamond Shamrock sued Zinke and Trumbo under the terms of the Operating Agreement (breach of contract claim) for the proportionate share of costs and expenses incurred in the drilling and completion of Hamilton 1-33 Well in amount of $133,551.71, together with further accruing costs, interest thereon, costs of the action and a reasonable attorney’s fee. In addition, Diamond Shamrock sought an order of foreclosure on Zinke and Trumbo’s leasehold interests in satisfaction of the claim. Zinke and Trumbo answered and denied any liability. On June 28, 1983, Zinke and Trumbo, as defendant, joined by Morris A. Richardson, John Hamilton and Martha N. Francis filed a Counterclaim against Diamond Shamreck alleging that they had been damaged because of the neg- ligence and gross negligence of Diamond Shamrock in the completion of the well. Specifically, they alleged that Dia- mond Shamrock’s completion attempt of the Hamilton 1- 33 Well “[w]jas not done in a good and workmanlike man- ner despite suggestions, warnings, demands, protests, and objections from Zinke and Trumbo”’ and that Diamond 4a Shamrock’s “[c]ompletion attempt of the John Hamilton # 1-33 Well irreparably damaged the productive strata ... [the Morrow formation at 8862’ - 8874’] ... underlying Section 33, by fracing into the salt water bearing strata and contaminating the productive strata with salt water constituting alleged gross neglect and willful misconduct.”’ R. Vol. I, pp. 59, 60. Counterclaimants John Hamilton and Martha Francis sought actual and punitive damages for Diamond Shamrock’s alleged breach of implied covenant of their oil and gas leases to protect against drainage and to market production from the well. The Counterclaim further alleged that: due to the limited size of the reservoir and geological and economic condi- tions, a replacement weil cannot be drilled on Section 33; Hamilton 1-33 Well is noncommercial; counterclaimants own no interest in the Travis #1 Well and therefore do not share in production therefrom; Travis #1 Well has been producing from the same common reservoir as the unpro- ductive Hamilton 1-33 Well due solely to Diamond Sham- rock’s gross neglect; and Travis #1 Well will drain all of the hydrocarbons from the reservoir to the detriment of counterclaimants. Id. at 59-61. The Counterclaim alleged, based on log calculations and production in the area, that the reserves of Hamilton 1- 33 well and values to counterclaimants were: $906,100.00 to Zinke and Trumbo; $209,100.00 to Morris A. Richard- son; $522,750.00 to John Hamilton; and $104,550.00 to Martha N. Francis. Jd. at 61. A jury demand was made by the counterclaimants. In Answer to the Counterclaim, Diamond Shamrock al- leged that the Hamilton 1-33 Well “i]s capable of pro- ducing gas in paying quantities from the Morrow formation, but that said well is shut in awaiting a pipeline connection”’ and that its every action with regard to Hamilton 1-33 Well has been that of a prudent operator, including every action necessary to market production from the well but, pineaireiaits oman ™ 5a notwithstanding, no market has been located. Further, Dia- mond Shamrock denied that a replacement well cannot be drilled upon Section 33, and that production from the Travis #1 Well has or will cause drainage to Section 33. Id. at 65-67. Zinke and Trumbo filed an amendment to its Answer setting up Affirmative Defenses by virtue of an alleged oral agreement on February 16, 1982, with Diamond Shamrock “{aJs to the manner in which the subject well was to be completed and that Diamond Shamrock Cor- poration breached that agreement by completing the well in a manner different from that agreed to by Zinke & Trumbo, Ltd. and Diamond Shamrock Corporation with the result that the pay zone in the subject well was ir- reparably damaged and has subsequently been cemented off.” Id. at 76. Zinke & Trumbo also filed a Second Amend- ment to Answer which alleged two additional affirmative defenses: (1) the offer of Zinke & Trumbo to participate in the completion attempt by Diamond Shamrock was con- ditioned upon a particular manner of completion which was rejected by Diamond Shamrock, thus relieving Zinke & Trumbo from any liability for completion costs, and (2) Diamond Shamrock’s employees took bribes and kickbacks from suppliers and others concerning materials, supplies, and work, resulting in improper charges to Zinke and Trumbo. Jd. at 78. An Amended Counterclaim was there- after filed incorporating the aforesaid affirmative defenses with four additional causes of action, seeking punitive dam- ages of $10 million. Jd. at 80-92. These allegations were joined in denial by Diamond Shamrock’s Answer. Id. at 101-109. A. First Trial The case proceeded to trial on October 27, 1983. The jury returned a verdict on November 2, 1983, as follows: 6a (1) for Diamond Shamrock against Zinke & Trumbo for breach of the Joint Operating Agreement (balance owing of drilling and completion costs) in amount of $212,805.60; (2) for Diamond Shamrock and against Zinke & Trumbo upon Zinke & Trumbo’s claim for breach of a new agree- ment (no damages awarded); (3) for Zinke & Trumbo upon its claim against Diamond Shamrock for gross negligence and/or willful misconduct in the operation of the well in amount of $995,196.00; (4) for counterclaimants John Hamilton, Martha Francis and Morris Richardson against Diamond Shamrock for neg- ligence in the operation of the well in amount of $971,179.00; (5) for Diamond Shamrock and against counterclaimants John Hamilton and Martha Francis for breach of the im- plied covenant to market (no damages awarded); and (6) for counterclaimants John Hamilton and Martha Francis against Diamond Shamrock for breach of the im- plied covenant to protect against drainage in the amount of $32,499.00 and punitive damages in amount of $1,000,000.00. The parties did not object to the verdict form. (R. , Vol. X, p. 48.) The court, prior to returning the jury, addressed counsel and stated that ‘“{I] understand we have a verdict and I have sent for the jury. Due to the length of delib- eration and the somewhat complexity of the verdict form, I will want to have a bench conference before I read and record the verdict and allow you all to examine it. That will be particularly true if there appears to be any incon- sistencies in the verdict form.”’ Jd. at 45, 46. When the jury reported in, the jury’s verdict was handed to the court and counsel were then called to the bench to examine the verdict before it was read and recorded. The following colloquy then occurred: Ta THE COURT: Any reason why the Court should not read and record the verdict? MR. WATSON: (Counsel for Diamond Sham- rock): I can think of a lot of reasons, but none that are valid. Id. at 46. Thereupon, the clerk read and recorded the verdict and the jury was polled. When the court inquired whether either party had any objection or any reason why the court should not then discharge the jury, respective counsel ad- vised that there was none, Jd. at 48. The jury was then discharged. B. Posttrial Proceedings On November 14, 1983, Diamond Shamrock filed an “Alternative Motion for Judgment Notwithstanding the Verdict or for New Trial.” (R., Vol. II, pp. 274-281.) In its Motion for New Trial, Diamond Shamrock relied upon the ground of inconsistent verdicts. Following hearing on the motion, the trial court, after Journal Entry of Judg- ment, entered its ‘Order Granting New Trial and Vacating Judgment” on January 11, 1984 based upon Diamond Shamrock’s Motion for New Tria\. Jd. at 286. C. Second Trial The second jury trial began on February 11, 1985, and on February i9, 1985, the jury returned a verdict in favor of Diamond Shamrock only on its claim against Zinke & Trumbo for breach of the Joint Operating Agreement in amount of $220,830.34. Thereafter, Zinke and Trumbo and the appellees filed a motion to reinstate the verdict in the first trial or, in the alternative, for new trial on the ground that the second verdict was defective in that the jury did not fill in any of the blanks pertaining to any of the counterclaims. On March 19, 1985, the trial court denied 8a the motion to reinstate the first verdict or for new trial. However, thereafter, by order of April 18, 1985, the trial court made its Journal Entry of Judgment and, on its finding that the jury did not return a verdict on the coun- terclaims of John Hamilton and Martha Francis for breaches of the implied covenants to market and to protect against drainage, the court, on its own motion, ordered that a new trial be granted to John Hamilton and Martha Francis on their counterclaims for breach of the implied covenant to market and to protect against drainage. Jd. at 493. In that Order, the trial court noted that its oral instructions to the jury may have been erroneous, leading the jury to fail to return a verdict either for or against John Hamilton and Martha Francis on their counterclaims for breaches of the implied covenants to protect against drainage and to market. Jd. At the hearing on the adequery of the second jury ver- dict ordered by the trial court, Diamond Shamrock urged the court to stand by the general verdict. The trial court stated that, as between Diamond Shamrock and Zinke and Trumbo he had no difficulty because, by the jury verdict, “{YJou won the case ... and by so doing, the jury found that you drilled the well in a prudent way. You were not negligent, either grossly or otherwise” but “{I] do have serious reservations about the—you could be the most pru- dent operator in the world . .. in drilling the well ... but still failed to market as the operator should do.” (R., Vol. XVIII, p. 6.) The court concluded that it had erred in its oral instructions to the jury when “{I] told the jury if they found for the plaintiff [Diamond Shamrock] on the first item in the verdict, that ended it. And I just shouldn’t have done it. Now, there’s no way to cure my mistake. But I’m a little bit disappointed in you [counsel for coun- terclaimants] not jumping up and telling me that I was making a mistake, and I could have cured it in a moment.” Id. at 15. 9a II. This Appeal and Cross-Appeal This appeal and cross-appeal is from a judgment entered April 18, 1985, following the second trial to jury and re- turn of a general jury verdict with findings, which ren- dered all claims final except those at issue here. In that respect, the judgment certified the entry of final judgment for plaintiff-appellant Diamond Shamrock Corporation (Dia- mond Shamrock) and against all defendants except coun- terclaimants-defendants John Hamilton and Martha Francis. The court found that the jury failed to return a verdict on the counterclaims of John Hamilton and Martha Francis for breaches of the implied covenants to market gas and to protect against drainage. The judgment was certified as final pursuant to Fed. R. Civ. P. 54(b). III. Our Disposition It is our view that the dispositive issue for our resolution is whether Diamond Shamrock ’s failure to object to the first trial jury’s general verdict on the ground of incon- sistency before the jury was discharged constituted a waiver of that challenge. We will hold that it did. This holding necessarily impacts upon the appeal in No. 85-1653 and the cross-appeal in No. 85-1765 docketed in this court, both of which arise from the final judgment of April 18, 1985, awarding Diamond Shamrock $220,830.34 on its breach of contract claim against Zinke and Trumbo, Ltd. (Zinke and Trumbo) and the adjudication that the defendant, Zinke and Trumbo, recover nothing on its coun- terclaim against Diamond Shamrock for gross negligence and that the counterclaimants, John Hamilton, Martha Francis and Morris Richardson recover nothing on their claim of negligence against Diamond Shamrock. It is interesting to note that both parties urge that we hold that the verdict of a jury be upheld in those cases where a party does not object to the verdict form after the verdict is returned and before the jury is discharged. the jury and after the verdict was returned and the jury polled. (Brief of Appellant, Diamond Shamrock, pp. 13-15). Diamond Shamrock relies on Klapmeier v. Telecheck In- ternational, Inc., 482 F.2d 247 (8th Cir. 1973) for the rule that (a) a jury’s failure to find either for or against coun- terclaimants on their counterclaim constitutes an adverse finding against counterclaimants, and (b) that counterclai- mants waived any objection to the form of the verdict by failing to object to the verdict form or the verdict as Cross-appellants and appellees, Morris A. Richardson, John Hamilton and Martha Francis in during the first trial, before the jury verdict was read entered, it was shown to counsel for all parties, who were invited by the court to object to inconsistencies, and none was lodged. Notwithstanding, the trial court granted Dia- mond Shamrock’s Motion for New Trial on the basis of inconsistent verdicts. Thus, they assert that failure to ob- Appellants and Appellees, pp. 8-10.) Fed. Rules Civ. Proc. rule 59a) and (d) , 28 U.S.C.A. provides, in relevant part: (a) Grounds A new trial may be granted to all or any of the parties and on all cr part of the issues (1) in an action in which there has been a trial by jury, for any of the reasons for which new trials (d) On initiative of court Not later than 10 days after entry of judgment the court of its own initiative may order a new trial for any reason for which it might have granted a new trial on motion of a party. After giving the parties notice and an opportunity to be matter, the court may grant a motion for a new trial, timely served, for a rea- son not stated in the motion. In either case, the court shall specify in the order the grounds there- for. Fed. Rules Civ. Proc. rule 49(b), 28 U.S.C.A. provides: (b) General Verdict Accompanied by Answer to Interrogatories. The court may submit to the jury, together with appropriate forms for a gen- eral verdict, written interrogatories upon one or more issues of fact the decision of which is nec- essary to a verdict. The court shall give such explanation or instruction as may be necessary to enable the jury both to make answers to the interrogatories and to render a general verdict, and the court shall di the jury both to make written answers and to render a general verdict. When the general verdict and the answers are harmonious, the appropriate judgment upon the verdict and answers shall be entered pursuant to 58. When the answers are consistent with one or more is inconsistent with q : court may return the jury for further consider- 12a ation of its answers and verdict or may order a new trial. When the answers are inconsistent with each other and one or more is likewise incon- sistent with the general verdict, judgment shall not be entered, but the court shall return the jury for further consideration of its answers and verdict or shall order a new trial. The above rules, and others, must be read and construed together and harmonized whenever possible. We have observed that both parties, at the first trial, were called to the bench after the jury returned its verdict. The trial court had previously informed counsel that the jury’s general verdict should be carefully examined and any objections thereto lodged. This procedure was fol- lowed. Diamond Shamrock’s counsel did not object to the jury’s verdict. The first contention raised by Diamond Shamrock as to alleged inconsistency in the jury verdict came only after the jury had been discharged. This chal- lenge was posited in Diamond Shamrock’s ‘Alternative Motion for Judgment Notwithstanding the Verdict or for New Trial,” predicated upon the contention that the ver- dicts are inconsistent on their faces. In Stancil v. McKenzie Tank Lines, Inc., 497 F.2d 529 (5th Cir. 1974), the court, dealing with an alleged incon- sistency in a general verdict observed: Rule 49(b) does endorse a new trial as one option open to a trial court when an actual in- consistency does occur. But in determining whether Rule 49(b) requires a new trial in this case, a number of serious questions arise ... *_* * By failing to object to the form of the verdict and answers at the time they were announced by the jury, both parties waived any objection to inconsistencies under Rule 49 (b) ... the trial 13a judge was careful to solicit objections from both counsel after the verdict was rendered and the interrogatories answered.... Had an objection been raised as to the inconsistency of the answers at that time, the district court could have elected to “return the jury for further consideration of its answers and verdict... .” 497 F.2d at pp. 533-35. We agree with the reasoning of the Stancil court. In an analogous setting, we held in Kirkendoll v. Neustrom, 379 F.2d 694, 699 (10th Cir. 1967), that appellant waived his objection to special interrogatories: The record reflects that after the special an- swers and verdict were read, the court asked if there was any reason why the jury should not be discharged. Both appellant and appellee an- swered in the negative. The jury was discharged. Under this rule, [49(b) Fed. R. Civ. P.], as well as by acquiescence of counsel in the action of the court, no reversible error occurred... . Cundiff v. Washburn, 393 F.2d 505 (7th Cir. 1968) , dealt with the question whether a party who is disen- chanted with the gene.al verdict but who did not move for resubmission pursuant to Rule 4%b) before the jury was discharged waives the right to have alleged incon- sistencies in the general verdict remedied by a new trial. The Cundiff court observed that our Kirkendoll v. Neus- trom, supra, was “closely analogous,” and held: Consistent with the rationale of these cases, we hold that appellant waived any objection to the verdict on the ground of inconsistency with the special finding by failing to move the resub- mission of the verdict and finding to the jury. Any other decision would hamper the just and efficient operation of the federal courts. It would l4a encourage jury-shopping by litigants, permitting them to decide whether to take their chances on resubmitting the verdict and findings to the jury sitting or remain silent thereby allowing the en- try of judgment and moving for a new trial be- fore a new jury .... ... [t]he rule that objection on the ground of inconsistency is waived by failure to move for resubmission promotes the fair and expeditious correction of error. It requires the error be cor- rected in the proceeding in which it is made, by the jury which made it unless the trial court de- termines in the exercise of its discretion under Rule 49(b) to enter judgment on the special find- ings or to order a new trial. Our interpretation of Rule 49(b) , in the ab- sence of objection by counsel, leaves to the trial court alone the discretion to choose the means of correcting inconsistency, subject to review by this Court on appeal. 393 F.2d at 506, 507. Accord: Itel Capital Corp. v. Cups Coal Co., Inc., 707 F.2d 1253 (llth Cir. 1983) (appellants waived objection to alleged inconsistencies in verdict by failure to object at the time the verdict was rendered); Fernandez v. Chardon, 681 F.2d 42 (ist Cir. 1982), af- firmed, 462 U.S. 650 (1983) (counsel waited until after the jury was excused before raising the inconsistency claim; defendants therefore held to have waived their right to have the general verdict set aside on this ground); Rowe International, Inc. v. J-B Enterprises, Inc., 647 F.2d 830 (8th Cir. 1981) (trial court did not err in returning jury to correct a mistake in the verdict before accepting the verdict and discharging the jury on basis of inconsistent verdict); Skillin v. Kimball, 643 F.2d 19 (ist Cir. 1981) (party cannot implant ground for appeal by failure to ob- ject to jury verdict under Rule 49 before jury is dis- 15a charged); Ludwig v. Marion Laboratories, Inc., 465 F.2d 114 (8th Cir. 1972); Barnes v. Brown, 430 F.2d 578 (7th Cir. 1970) (failure of appellant to move to resubmit verdicts to jury for reconciliation and permitting judge to discharge the jury with inconsistent verdict standing constituted waiver of any objection to the inconsistency of verdict); Tennessee Consolidated Coal Co. v. United Mine Workers, 416 F.2d 1192 (6th Cir. 1969), cert. denied, 397 U.S. 964 (1970). In Bass v. Dehner, 103 F.2d 28 (Oth Cir.), cert. denied, 308 U.S. 580 (1939) we held that before declaring a conflict between special findings and a general verdict, an effort should be made to reconcile any apparent in- consistency. With respect to answers inconsistent with the general verdict, it is recognized that the trial court has three courses of action available under Rule 49(b). The court may order the jury to deliberate further, order a new trial, or disregard the general verdict and order judgment on the basis of answers to interrogatories. Wright and Miller, Federal Practice & Procedure: Civil § 2513. The first op- tion was clearly available in the instant case. During the first trial, the court specifically invited counsel to carefully examine the jury’s verdict before it was announced and entered and to voice any objections thereto prior to dis- charge of the jury. Diamond Shamrock’s counsel did not object to the jury verdict until after the jury had been discharged, notwithstanding the trial court’s caveat that any objections to the jury verdict should be lodged before the verdict was formally returned and entered. Supra, pp. 7, 8. We hold that failure on the part of Diamond Sham- rock’s counsel to object to the jury verdict on the alleged ground of inconsistency constituted a waiver of such con- tention on appeal. Diamond Shamrock’s failure to so object was, apparently, a measured, calculated trial tactic. We are aware that the trial court could have, sua sponte, granted Diamond Shamrock a new trial pursuant to Rule 50(b). Kain v. Winslow Mfg., Inc., 736 F.2d 606 (10th Cir. 16a 1984), cert. denied, ___ U.S. ___ (1985). Such action is re- quired if a verdict reflects inconsistencies on its face in- dicating either that the jury was in a state of confusion or abused its power. Under such circumstances, not pres- ent here, a new trial must be granted. Global Van Lines, Inc. v. Nebeker, 541 F.2d 865 (10th Cir. 1978); Hopkins v. Coen, 431 F.2d 1055 (6th Cir. 1970); Cheney v. Moler, 285 F.2d 116 (0th Cir. 1960) (verdict returned with “no dam- ages’’ even though plaintiff lost ear as result of fight with defendant was nullity under the circumstances requiring retrial on all issues notwithstanding failure of plaintiff to object to the verdict). Unlike the determination in Cheney, the instant case is a proper case to invoke the harsh impact of the waiver rule. In our view the trial court erred in setting aside the verdict of the jury returned at the first trial. The general verdict was not objected to prior to the jury’s discharge. Contrary to Diamond Shamrock’s contention, the verdict is not inconsistent on its face. The claimed inconsistency rests upon the jury’s finding for Diamond Shamrock on its breach of contract claim against Zinke and Trumbo (balance owing for drilling and completion costs) and the express finding of negligence against Diamond Shamrock in the operation of the well in favor of Zinke and Trumbo and the royalty owners, Hamilton, Francis and Richardson. A verdict which resolves separate and distinct causes of action in favor of both parties to a lawsuit is not incon- sistent on its face. We hold that a party’s failure to object to a verdict on the ground of inconsistency prior to the jury’s discharge waives his right to raise the issue in a posttrial motion or on appeal unless the verdict is incon- sistent on its face so that entry of judgment upon the verdict is plain error. We therefore hold that the trial court erred in setting aside the jury’s verdict upon a ground waived by Diamond Shamrock. The trial court also erred in finding that the jury’ s verdict was inconsistent in fact. The claim of inconsistency 17a advanced by Diamond Shamrock, adopted by the trial court, was that the jury, by finding for Diamond Shamrock on its contract claim impliedly found that Diamond Shamrock, as the operator under the Joint Operating Agreement, had performed the drilling and completion work in a good and workmanlike manner and, accordingly, could not have been liable on the tort claims advanced against it. Diamond Shamrock contended as follows: The verdicts entered by the jury are inconsistent on their faces and indicate that.the jury was either in a state of confusion or that the jury abused its power. Specifically, it is impossible for the jury to find that DIAMOND SHAMROCK performed conditions in a good and workmanlike manner and at the same time find that DIA- MOND SHAMROCK had been negligent and grossly negligent. The verdict awarding DIA- MOND SHAMROCK $212,805.60 under the Joint Operating Agreement is irreconcilably inconsist- ent with the verdict awarding ZINKE & TKUMBO, LTD. $995,196.00 for gross negligence or willful misconduct and verdict awarding John Hamilton, Martha Francis and Morris Richard- son, $971,179.00 for negligence. (R., Vol. II, pp. 274-75.) The defect in this argument is that Diamond Shamrock’s claim of inconsistency rests upon its contention that the jury, by its finding for Diamond Shamrock on its contract claim, impliedly found that Diamond Shamrock had per- formed its drilling and completion operations on Hamilton No. 1-33 well in a good and workmanlike manner. Such is not the case. Diamond Shamrock’s theory of the case was that under the terms of the Joint Operating Agree- ment non-operators were unconditionally obligated to pay their proportionate share of the costs of drilling and com- pletion. This was clearly evidenced by Diamond Shamrock’s 18a cross-examination of Mr. Robert M. Zinke, who, after stat- ing that Zinke and Trumbo were obligated under the Joint Operating Agreement to pay their share of the costs of work done by Diamond Shamrock in a “good workmanlike manner’’ without “gross negligence or wilful misconduct” was asked: Q. And does the operating agreement provide that if the work is not in a workmanlike manner or gross negligence occurs, that you’re not ob- ligated to pay? A. I’m not Marvin Wiggly. I’m not an expert on operating agreements. I don’t know. Possibly it does. I don’t know. Q. Well, let’s look at it then. Now, on Page 1 of the accounting procedure, you're required to pay your invoices within fifteen days. If you have any questions, you can audit the account; isn’t that right? A. Yes, sir, that’s correct. Q. So payment is not excused because you de- cide on your own that the operator’s been neg- ligent. A. That’s true. (R., Vol. VII, pp. 322-22.) And during closing argument, counsel for Diamond Shamrock argued that the terms of the Joint Operating Agreement Diamond ~ smrock, as op- erator, had sole decision making authority in the drilling of the well and that Zinke and Trumbo’s claim that Dia- mond Shamrock was negligent was not “an element of Diamond Shamrock’s proof’? and that Diamond Shamrock was obligated only to “show you that they complied with the contract.” (R., Vol. X, pp. 8-11.) The trial court accepted Diamond Shamrock’s contention that if it had substantially complied with the Joint Oper- dani toaind! UA 19a ating Agreement as operator, Diamond Shamrock was con- tractually entitled to recover for the work done in the drilling of the well. The jury was so instructed. (R., Vol. II, pp. 430-31.) The court clearly instructed separately, without objection, on Diamond Shamrock’s breach of con- tract claim and the counterclaims for gross negligence and negligence, and the general verdict contained findings on each. Thus, although each claim arose out of Diamond Shamrock’s operation of the well, the parties, under their respective theories of the case, elected to permit the jury to treat the breach of contract claim of Diamond Shamrock against Zinke and Trumbo separate and distinct from the counterclaims. (See jury instructions 4, 5, 6, 7, 8 and 9, Vol. II, pp. 430-39.) Thus, we conclude that there were no inconsistencies in fact in the jury’s general verdict. The jury, as instructed, returned an award of damages for Diamond Shamrock and against Zinke & Trumbo on its breach of contract claim under the Joint Operating Agreement. By doing so, the jury adopted Diamond Shamrock’ s theory of the case on this claim, i.e., that as operator it was entitled to receive payment from Zinke and Trumbo for all costs and expenses not challenged under the audit provision of the Joint Op- erating Agreement. By the same token, the jury, in accord with the court’ s instructions, found for the defendant and counterclaimants on their claim of negligent and gross neg- ligent operations of Diamond Shamrock and Diamond Shamrock’s breach of implied covenant to protect against drainage and to market. In effect, then, the jury’s verdict “tracked” the theory- of-the-case exactly as Diamond Shamrock invited it to be considered by the jury. The record, largely due to Diamond Shamrock’s direct and cross-examination, reflects that the contractual obligation of Zinke and Trumbo to Diamond Shamrock for proportionate share of drilling and comple- tion costs was treated and considered by the jury inde- pendent of the negligence claims and the failure to market 20a and to prevent drainage claims. With regard to the latter, a cause of action for breach of an implied covenant to prevent drainage does not require proof of negligent op- erations. Spaeth v. Union Oil Co. of California, 710 F.2d 1455 (lOth Cir. 1983); Dixon v. Anadarko Production Com- pany, 505 P.2d 1394 (Okl. 1972). Thus, the claimed inconsistency is between verdicts re- solving entirely separate and distinct causes of action. The verdicts on the counterclaims were not required to be con- sistent with the verdict on Diamond Shamrock’s breach of contract claim because the parties and the court submitted the respective claims to the jury for separate, distinct con- sideration. Thus, there was no inconsistency on the face of the general verdict. The verdicts are not repugnant or in irreconcilable conflict. This trial involved separate causes of action and the relationship of the parties was not legally identical with regard to each cause of action. Where several distinct causes of action, such as here, are tried together, verdicts awarding recovery to some of the parties on one theory or cause of action and to other parties on another theory or cause of action are not nec- essarily inconsistent. In those cases where the several causes of action are identical and defended on the same ground, a verdict for the plaintiff on one cause of action and for the defendant on another is inconsistent. Further, if two causes of action are of such a nature that recovery can be had only as to one, verdicts in favor of a plaintiff and against the defendants on both causes of action are inconsistent. Notwithstanding the consistency among the parts of the verdict, we hold, in accord with Stancil v. McKenzie Tank Lines, Inc., supra, and the mandates of Rule 49(b) , that under the facts and circumstances of this case, Diamond Shamrock’s failure to object to the jury’s general verdict with findings returned at the first trial prior to the jury’s 2la discharge constituted a waiver of any alleged inconsist- encies in the damages awarded. We REVERSE and REMAND with instruction that the district court reinstate the general verdict of the jury re- turned at the first trial and enter judgment thereon. 22a Nos. 85-1698, 85-1803- DIAMOND SHAMROCK COR- PORATION vy. ZINKE & TRUMBO, LTD., «° al. McKAY, Circuit Judge, concurring in part and dissenting in part: I concur in the result reached by the majority and in the court’s conclusion that it is possible to reconcile the apparent inconsistencies in the verdicts returned at the first trial. I have serious misgivings, however, about the majority’s reliance on Rule 49%(b) of the Federal Rules of Civil Procedure. In my view, Rule 49 does not apply in this case. I therefore dissent from the court’s holding that Diamond Shamrock waived its right to object to incon- sistencies in the verdicts by failing to object or move for resubmission before the jury was dismissed. The facts which gave rise to this action are set out in the majority’s opinion and to repeat them here would ex- tend this opinion to unwarranted length. I think it is nec- essary, however, to set out in the margin the verdict form that was submitted to the jury in the first trial.’ Verdict [Place either ‘plaintiff’, ‘“‘defendants”, or “‘counterclaimants” in the first blank.) We, the Jury, find as follows: 1. for the Plaintiff upon the claim by the plaintiff, Diamond Shamrock Corporation, for breach of the operating agreement and fix damages in the amount of $212,805.60; 2. for the Plaintiff upon the claim by the defendant, Zinke & Trumbo, Ltd., for breach of a new agreement and fix damages in the amount of $0.00; ' 8. for the Defendant upon_the claim by the defendant, Zinke & Trumbo, Ltd., for gross negligence and/or willful misconduct in the operation of the well and fix damages in the amount of 23a Throughout the majority opinion, the court refers to the jury’s verdict in the first trial as a “general verdict.” Although nothing in the court’s opinion suggests that this “general verdict’’ was accompanied by responses to “‘writ- ten interrogatories,’”’ the court relies on Rule 49%b) of the Federal Rules of Civil Procedure to reach the conclusion that ‘‘the instant case is a proper case to invoke the harsh impact of the waiver rule.”” Majority Opinion at 17. What the majority fails to recognize is that Rule 49b) governs only when the jury returns a general verdict accompanied by responses to “written interrogatories upon one or more issues of fact.”” Where, as here, the jury returns general verdicts on separate claims and counterclaims and makes no written findings on issues of fact, Rule 49(b) does not apply. Rule 49* grants the trial court the discretion to use one of two different procedures as an alternative to submitting $995,196.00; 4. for the Counterclaimants upon the claim by the counterclai- mants, John Hamilton, Martha Frances and Morris Richardson, for negligence in the operation of the well and fix damages in the amount of $971,179.00; 5. for the Plaintiff upon the claim by the counterclaimants, John Hamilton and Martha Frances, for breach of the implied covenant to market and fix damages in the amount of $0.00; and 6. for the Counterclaimants upon the claim by the counterclai- mants, John Hamilton and Martha Frances for breach of the im- plied covenant to protect against drainage, and fix actual damages in the amount of $32,499.00 and punitive damages in the amount of $1,000,000.00 (one million dollars). (a) Special Verdicts. The court may require a jury to return only verdict in the form of a special written finding upon each issue of fact. In that event the court may submit to the jury written Nei- ther Courts nor Judges are immune.” Brown, Federal Spe- a civil case to the jury for a general verdict. In his oft- cial Verdicts: The Doubt Eliminator, 44 F.R.D. 338, 339 cited article on the use of special verdicts in federal court, former Chief Judge John R. Brown of the Fifth Circuit & n.5 (1967) (footnotes omitted) . The majority’s opinion has observed: “The distinction between F.R.Civ.P. 4%a) and 4%b) must be—but sometimes is not—made. ... Pe 4 hs. iiats: ay hs stu | il ir if ssi brief or it requiring court the make i issue Go ny fails to do judgment with upon one or a verdict. The pe ie np Ny ag bao rated Rule 58. more is Eacidests: fig? its STF lait fy lig! THEE EE A lt 25a demonstrates that the same can be said for the distinction between separate verdicts and the alternative ver- dicts that are authorized by Rule 49. order to understand why I think Rule 49 does not in the instant case, it is necessary to understand the Rule does apply. Rule 4%a) , entitled ‘Special ‘to dispense with the general verdict altogether, and to submit the various fact issues in the case to the jury in the form of individual fact ques- j jury is to return a special Miller, Federal Practice and (1971). Judge Brown, who has ‘the strongest advocate of Rule 49a) the bench,” id. at § 2505, at 495, explains the distinc- tion between Rule 49%a) and Rule 49(b): Rule 4%b) offers, so far as I can see, nothing g : : i recognizes that in an appropriate form and way the Judge gives a firm, detailed explanation of controlling principles specifically related to the case, almost as he would for a general verdict. The difference is that under the 49a) technique the jury, applying these instructions, records its conclusions with precision, not in the conglom- erate ambiguity of “for the plaintiff,”’ “for the defendant,”’ or the like. Brown, 44 F.R.D. at 339-40 (footnote omitted). Rule 4%a) speaks in terms of a “‘special verdict in the form of a special writter finding upon each issue of fact.” Thus, “{t}he rule contemplates that only factual questions 26a will be submitted to the jury to which the judge will then apply the law, supplementing, if necessary, any factual determinations not submitted to the jury.” Quaker City Gear Works, Inc. v. Skil Corp., 747 F.2d 1446, 1453 (Fed. Cir. 1984), cert. denied, 105 S. Ct. 2676 (1985) (citing 5A Moore’s Federal Practice, { 46.02, at 49-8 (2d ed. 1984).* Similarly, Rule 49(b) , entitled “General Verdict Accom- panied by Answer to Interrogatories,’’ permits the trial court to request the jury to return a general verdict ac- companied by responses to “wriiten interrogatories upon one or more issues of fact.” My objection to the majority’s application of Rule 49 in this case is that the verdict returned by the jury in the first trial did not resolve specific issues of fact or even mixed questions of law and fact. Rather, the jury merely found “for the plaintiff,” ‘for the defendant,” or “‘for the counterclaimants” on six separate claims and counter- claims. Thus, the verdict in this case does not fit com- fortably within the framework of either Rule 49(a) or Rule 49%(b). Rule 49(a) is ruled out for two reasons: (1) the jury did not make written findings of fact; and (2) the jury’s findings “‘for the plaintiff,’ ‘for the defendant,” or ‘‘for the counterclaimants” on each claim and counterclaim can only be described as a general verdict. See Brown, 44 F.R.D. at 340. And, although Rule 49(b) refers to a “‘gen- eral verdict,” that subdivision cannot apply either because the jury did not respond to “written interrogatories upon one or more issues of fact.’ * Under a precise reading of Rule 49a), a “special verdict’ seeks resolution of only factual issues. Some courts, however, have approved the use of Rule 49 (a) to resolve mixed questions of law and fact. Quaker City Gear Works, 747 F.2d at 1453. See also Landy v. Federal Aviation Administration, 635 F.2d 143, 147 (2d Cir. 1980), aff'd., 705 F.2d 624, cert. denied, 104 S. Ct. 243 (1983); Sperberg v. Goodyear Tire & Rubber Co., 519 F.2d 708, 715 (6th Cir.), cert. denied, 423 U.S. 987 (1975). 27a Other courts have declined to apply Rule 49 where the jury’s verdict did not resolve specific “issues of fact.” For example, in Railroad Dynamics, Inc. v. A. Stucki Co., 727 F.2d 1506 (Fed. Cir.), cert. denied, 105 S. Ct. 220 (1984), the court said: The challenged “‘interrogatory”’ is inartfully la- beled as such by the parties. It sets forth a stand- ard of proof (“proved by clear and convincing evidence’) in relation to a legal conclusion (“‘in- valid on the ground of obviousness’’). Yet legal conclusions are not proved; facts are. Interro- gatories, as such, are best employed in seeking answers to factual questions, the answers to which lead to or require a legal conclusion. Though labeled as “‘interrogatories’’, the ten questions put to the jury were designed to elicit, and were treated by all concerned as having elic- ited , a ten-part verdict. ... The jury’s responses were not special verdicts, because they were not simply ‘written finding{[s] upon each issue of fact’. Rule 49a), Fed. R. Civ. P. Nor was there a single general verdict, per se, accompanied by “written answers” to “‘one or more issues of fact, the decision of which is necessary vo a verdict’. Rule 49(b) Fed. R.Civ. P. Nonetheless, as above indicated , the parties have correctly viewed the jury’s tem responses as the equal of a general verdict for Stucki. Id. at 1515-16. Similarly, in Merchant v. Ruhle, 740 F.2d 86 (Ist Cir. 1984) , in considering an alleged inconsistency in two verdicts, the court said: [W]e first must determine whether we are deal- ing with two general verdicts or a general verdict and answers to interrogatories under Fed. R. Civ. 28a P. Rule 4%b). If the latter applies, we must scru- tinize the negligence and seaworthiness findings for irreconcilable inconsistency. If we are dealing with general verdicts, we do not have the com- pulsion of a procedural rule to determine such inconsistency. We would be reluctant to interpret Rule 49(b) as applicable. First, there is no “general verdict” even if the jury’s response qualify [sic] as an- swers to “interrogatories upon one or more is- sues of fact”. Second, the first and second questions and answers are in such comprehensive and conclusory terms as to constitute essentially general verdicts on the two counts of the com- plaint in all respects but damages. Id. at 88-89 (footnotes and citations omitted). See also- Cunningham v. M-G Transport Services, Inc., 527 F.2d 760 (4th Cir. 1975) (per curiam) (instructing district courts to put special interrogatories in the form of questions rather than affirmative statements). In Miller v. Premier Corp., 608 F.2d 973 (4th Cir. 1979), the trial court instructed the jury to return one of four alternative verdict forms. The Fourth Circuit explained the procedure as follows: In an effort to aid the jury in its resolution of the many issues presented in this multi-claim, multi-party action, the district court decided to give the jury a choice of four alternative general verdict forms to return. Only one was to be re- turned and the court’s instructions were designed to present the issues in a way related to the different verdicts so that the one proper choice could be dictated by the jury’s resolution of the issues. One verdict was to be returned if the jury found for the plaintiffs on the securities fraud claims. Another was to be returned if the jury aces OWL en sal Ei 1 a 2 29a found for the plaintiffs against Premier on the common law fraud claim. A third was to be re- turned if the jury found for the defendant Pre- mier on its counterclaim. The fourth was to be returned if the jury found against plaintiffs on all their claims, and against defendant Premier on its counterclaim. (a general “for the defendant” verdict). Id. at 982-83 (footnote omitted) . The court in Miller noted that this procedure “was not the special verdict submission authorized by Fed. R. Civ. P. 49(a) , but a general verdict submission in which various discrete general verdict choices were given as alternatives.”’ Jd. at 982 n.10. Though I am convinced that these cases correctly drew the distinction between separate general verdicts and ver- dicts governed by Rule 49, Judge Brown’s opinion in Mer- cer v. Long Manufacturing N.C., Inc., 665 F.2d 61 (5th Cir.), reh’g denied, 671 F.2d 946 (1982) (per curiam), sug- gests that the distinction is not as clear as one might think. In Mercer, the jury was instructed to find for the plaintiff or the defendant on three separate theories of liability: breach of warranty, deceptive trade practices, and strict liability. The jury found for the plaintiff on two theories of liability and assessed damages against the defendant. On appeal, the plaintiff asserted that the ver- dict was not governed by Rule 49(a) because it was not a special verdict, but rather three separate general ver- dicts, one for each of three separate theories of liability. In his opinion for the court, Judge Brown rejected this argument, describing the submission to the jury as a “‘spe- cial verdict consisting of four interrogatories under F. R. Civ. P. 49(a) .”” Mercer, 665 F.2d at 64 (footnote omitted). Judge Brown explained: Although the interrogatories included three bases for liability, we find that the submission was pur- suant to Fed. R. Civ. P. 49(a). No general verdict 30a was rendered by the jury, and the District Court entered judgment only after applying the treble damage provisions of the DTPA, both factors pointing against finding a submission under F. R. Civ. P. 49(b). Mercer, 665 F.2d at 65. Although Judge Brown may well be the leading scholar on the use of special verdicis in federal court, his application of Rule 49(a) in Mercer ap- pears to be inconsistent with his description of Rule 49(a) as a technique whereby the jury, applying the court’s in- structions, ‘‘ records its conclusions with precision, not in the conglomerate ambiguity of ’for the plaintiff,’ ’for the defendant,’ or the like.”’ Brown, 44 F.R.D. at 340. Al- though Mercer is distinguishable from the instant case,‘ I must concede that Judge Brown’s opinion in Mercer sup- ports the majority’s application of Rule 49. But even if I am wrong in believing that Rule 49 should not apply here, Mercer makes clear that the majority is also wrong in analyzing this case under Rule 49(b) instead of Rule 49(a). Here, the jury did not return a single general verdict but instead returned separate verdicts on each claim or coun- terciaim. The distinction between Rule 49(a) and Rule 49(b) is important in this case because of the majority’s adoption of a “waiver rule” where counsel fails to raise the issue of inconsistent verdicts before the jury is discharged. I would not hesitate to apply a ‘waiver rule” in a case governed by Rule 49(b).° The cases cited by the majority ‘In Mercer, the jury was asked to return separate verdicts on dif- ferent theories of liability and to assess the total damages, if any, for the plaintiff. Here, in contrast, the jury was asked to return separate verdicts on each claim and counterclaim and to assess damages with respect to each. * This is not to say, however, that I would join the majority in holding that, because Diamond Shamrock waived its objection to inconsistencies in the verdicts, the trial court does not have the discretion under Rule 3la provide ample support for such a rule. But I am not aware of any case where the ‘“‘waiver rule’ has been applied in the context of Rule 49(a).* Indeed, the Fifth Circuit . con- 59 of the Federal Rules of Civil Procedure to order a new trial on that same ground. In every case cited in the majority opinion, the ‘“‘waiver rule’ was invoked by the appellate court to affirm the trial court’s denial of a motion for new trial. I am not aware of any case where the ‘waiver rule” has been applied to reverse the trial court’s grant of a new trial on the grounds of inconsistent verdicts. The ma- jority’s application of the “waiver rule’ in this context impinges on j the trial court’s broad discretion under Rule 59(d) to grant a new trial sua sponte. In commenting on the breadth of the trial court’s discretion, this court has explained: ; Rule 59 F.R.Civ.P., 28 U.S.C.A., provides that a new trial may be granted in jury trials “for any of the reasons for which new trials have heretofore been granted in actions at law in the courts of the United States.’”’ The rule makers did not attempt to delin- eate all of the reasons, but obviously had reference to grounds for granting new trial as at common law. Indeed, the Seventh Amend- ment to the Constitution provides that ‘“‘no fact tried by a jury, shall be otherwise reexamined in any Court of the United States, than according to the rules of the common law.” And, Professor Moore says that the Seventh Amendment is the only present lim- itation upon the reexamination of facts found by a jury. See Moo- re’s Federal Practice, Vol. 6, p. 3733, § 59.05(2). Long before the adoption of the Seventh Amendment, common law courts were granting motions for new trial upon any grounds which, in the sound judgment of the trial court, were in the interest of the proper administration of justice. Aetna Casualty & Surety Co. v. Yeatts, 4 Cir., 122 F.2d 350. ... ... [T]he granting of a new trial involves an element of dis- cretion which goes further than the mere sufficiency of the evi- dence. It embraces all the reasons which inhere in the integrity of the jury system itself. Felton v. Spiro, 6 Cir., 78 F. 576; Aetna Cas. & Surety Co., v. Yeatts, supra. Tidewater Oil Co. v. Waller, 302 F.2d 638, 642-43 (10th Cir. 1962). *The First Circuit applied the “waiver rule” in Skillin v. Kimball, 643 F.2d 19, 19-20 (ist Cir. 1981) . It is not clear from the court’s opinion whether the submission in that case was pursuant to Rule 49(a) or Rule 49(b) . However, the cases cited by the court involved sub- mission under Rule 49(b). Other courts have interpreted Skillin as a ben 32a sidered this issue on petition for rehearing in Mercer, and concluded that, in cases involving submission pursuant to Rule 49(a) . objections to inconsistencies in the verdicts are not waived by failure to present them before the jury is discharged. Mercer, 671 F.2d 946, 947-48 (5th Cir. 1982) (per curiam on petition for reh’g). The court explained: Rule 49(b) specifically states that when the “an- swers are inconsistent with each other and one or more is likewise inconsistent with the general verdict, judgment shall not be entered, but the court shall return the jury for further consider- ation of its answers and verdict or shall order a new trial.’”’ There is no such specific direction encompassed within Rule 49(a). Id. at 948 n.]. See also Ladner v. Murray, 769 F.2d 195, 198 n.5 (4th Cir. 1985); Alverez v. J. Ray McDermott & Co., Ine., 674 F.2d 1037, 1040-41 (5th Cir. 1982) . Though I would have considerable difficulty in applying Rule 49 to this case, I am persuaded by Mercer that if this case can be made to fit within the framework of Rule 49, it must be under subdivision (a) rather than subdivision (b). Accordingly, I would not hold, as does the majority, that by failing to move for resubmission to the jury on the Rule 49a) case but have declined to follow it. See Ladnier v. Murray, 769 F.2d 195, 198 n.5 (4th Cir. 1985) (refusing to follow Skiilin); Bates v. Jean, 745 F.2d 1146, 1150 (7th Cir. 1984) (not reaching the qucstion whether the “‘waiver rule” applies to Rule 49(a)); Mercer v. Long Mfg. NC., Inc., 671 F.2d 946, 948 n.] (5th Cir. 1982) (per curiam on petition for reh’g) (refusing to follow Skillin). Our decision “> Bell v. Mickelsen, 710 F.2d 611 (10th Cir. 1983), is not to the contiary. Although we cited Skillin with approval in that case, we did not characterize Skillin as a Rule 49(a) case. Jd. at 616. Moreover, we did not decide in Bell whether counsel’s failure to object to inconsistencies in the special verdicts precluded appellant from rais- ing that issue on appeal. We held only that ambiguities in the jury instructions and the special verdict questions were waived by counsel’s failure to object at trial. Jd. at 616. 33a basis of inconsistencies in the verdicts, Diainond Shamrock has waived that issue on appeal. I fully concur, however, with the majority’s viev that } it is possible to reconcile the apparent inconsistencies in the verdicts. “In reviewing a verdict for inconsistency, a court has a duty under the seventh amendment to reconcile the answers and uphold the verdict if that is at all pos- | sible.” Crossland v. Canteen Corp., 711 F.2d 714, 725 (5th Cir. 1983); see also Atlantic & Gulf Stevedores, Inc. v. : Ellerman Lines, 369 U.S. 355, 364 (1962); Burger King Corp. v. Mason, 710 F.2d 1480, 1489 (llth Cir. 1983); Mer- cer v. Long Manufacturing, N.C., Inc., 665 F.2d 61, 65- 66 (5th Cir.), reh’g denied, 671 F.2d 946 (5th Cir. 1982). “{i]f there is a view of the case which makes the jury’s answers consistent, the court must adopt that view and enter judgment accordingly.”’ Griffin v. Matherne, 471 F.2d 911, 915 (5th Cir. 1973). Not only the trial court, but this court as well, has a constitutional duty to reconcile apparent inconsistencies in the jury’s verdicts, if at all possible, before we are free to disregard those verdicts and affirm the trial court’s grant of a new trial. Gallick v. B & 0 Railroad Co., 372 U.S. 108, 119 (1963); Gross v. Black and Decker, Inc., 695 F.2d 858, 867 (5th Cir. 1983) . Although the jury’s verdicts could easily be construed as inconsistent, ‘“‘a search for one possible view of the case which will make the jury’s finding inconsistent results in a collision with the Seventh Amendment.” Atlantic & Gulf Stevedores, Inc. v. Ellerman Lines, 369 U.S. 355, 364 (1962) . Because the trial court could have harmonized the apparently conflicting findings of the jury but failed to do so, I would hold that the trial - court abused its discretion when it set aside the jury ver- dict and ordered a new trial. Although I disagree with the rationale adopted by the majority for its holding, I fully concur in the court’s judg- a eT 34a ment reinstating the jury verdict returned at the first trial and entering judgment thereon. 35a Nos. 85-1698, 85-1803—Diamond Shamrock Corporation v. Zinke and Trumbo. TACHA, Circuit Judge, concurring. I concur only in the portion of the court’s opinion that finds that the verdicts in the first trial were not incon- sistent and therefore should be reinstated. I think it is unnecessary to reach the Rule 49 question and therefore decline to express an opinion on that issue. 36a APPENDIX B IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA No. CIV-82-1754-E DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff vs. ZINKE & TruMBO, LTD., a business association; RoBEeRT M. ZINKE, an individual; and, Davin B. TRUMBO, an individual, Defendants, and Morris A. RICHARDSON, JOHN HAMILTON, and MARTHA FRANCIS, Counterclaimants. [FILED April 18, 1985] CERTIFIED INTERLOCUTORY ORDER | On this 28th day of March, 1985, Plaintiff's Motion for Judgment in Accordance with Motion for Directed Verdict came on for hearing before the Court, all parties being represented by their attorneys of record herein, and the parties having presented their authorities and arguments and based upon the record in this case, the Court hereby finds as follows: 1. That Plaintiff's Motion for Judgment in Accordance with Motion for Directed Verdict should be denied. 37a 2. That on February 11, 1985, the above cause counterclaims permitted by the Court to be heard jury came on for trial before the Court and jury on February 19, 1985, the jury returned its against Counterclaimants on their claim of negligence. 3. The Court’s oral instructions to the jury, explaining the verdict forms, may be erroneous and the jury failed to return a verdict either for or against Counterclaimants JOHN HAMILTON and MARTHA FRANCIS on their counterclaims for breaches of the implied covenants to protect against drainage and to market. 4. The Court finds, on its own Motion and pursuant to its letter to counsel for all parties in this case dated Feb- ruary 20, 1985, which is on file in this case, that a new trial should be granted on Counterclaimants JOHN HAM- ILTON and MARTHA FRANCIS’ counterclaims for breach of the implied covenant to market and to protect against drainage. 5. Two jury trials have been held in this case, the Court having previously granted Plaintiff's Motion for New Trial filed after the first jury trial by its Order entered on January 11, 1984. 6. The denial of Plaintiffs’ Motion for Judgment in Ac- cordance with Motion for Directed Verdict, the granting of a new trial upon the Court’s own Motion and the grant- ing of Plaintiff's Motion for New Trial on January 11, 1984 involve controlling questions of law as to which there are substantial grounds for differences of opinion. 7. An immediate appeal from the rulings specified in Paragraph 6 above may materially advance the ultimate determination of the litigation. til Rea nie fe i + ULE sity yee E Geat aRE hiift iy Hi ili fi TEE ia f ipa tt Bi: ae “2 Hit Hie : HIT 4 faae iL: aH _ IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that Plaintiff DIAMOND SHAMROCK COR- PORATION’s Motion for Judgment in Accordance with Motion for Directed Verdict is denied. IT IS FURTHER ORDERED, ADJUDGED AND DE- IT IS FURTHER ORDERED, ADJUDGED AND DE- CREED that the new trial hereby granted is stayed until the Court of Appeals disposes of the interlocutory appeal brought from these rulings or until the time for interlo- cutory appeal has passed without the parties having filed cok ts ieee CERTIFICATION I hereby certify that the issues disposed of by this Order aenying Plaintiff's Motion for Judgment in Accordance with Motion for Directed Verdict and granting a new trial upon of Counterclaimants JOHN HAMILTON and MARTHA FRANCIS for breaches of the implied covenants to protect against drainage and to market, and by the aaah @ Jaunary 11, 1984 granting Plaintiff's iiatien fer Have toteh, tation quatediiin eundiions of tow as to which there are substantial grounds for differences of opinion and that an immediate appeal from these Orders Dated this 18 day of April, 1985. ‘s/ LutHer B. EUBANKS The Honorable Luther B. Eubanks, Chief Judge United States District Court, Western District of Oklahoma Entered In Judgment Docket 4-18-85 40a Approved as to forin: /s/ JAMES U. WHITE Jr. James U. White, Jr. Gary Davis CROWE & DUNLEVY, P.C. 1800 Mid-America Tower 20 North Broadway Oklahoma City, Oklahoma 73102 Telephone: (405)235-7700 Attorneys for Defendant and Counterclaimants /s/ H. B. Watson, Jr. H.B. Watson, Jr. Richard K. Books WATSON & McKENZIE 1900 Liberty Tower Oklahoma City, Oklahoma 73102 Telephone: (405)232-2501 Attorneys for Plaintiff SLT/25/sp 4la APPENDIX C IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA No. CIV-82-1754-E DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff, vs. ZINKE & TRUMBO, LTD., a business association; RoBERT M. ZINKE, an individual; and, Davip B. TruMBo, an individual, Defendants, and Morris A. RICHARDSON, JOHN HAMILTON, and MARTHA FRANCIS, Counterclaimants. [FILED April 18, 1985] JOURNAL ENTRY OF JUDGMENT On February 11, 1985, the above cause and all coun- terclaims permitted by the Court to be heard by the jury came on for trial bef re the Court and jury, all parties being represented by their attorneys of record herein, and the parties having presented their evidence and authorities, and arguments to the Court and jury, and having close? all of the evidence on February 15, 1985, the jury, based upon the instructions given by the Court, returned its verdict on February 19, 1985 and made the findings as reflected on the Verdict Form, a true and correct copy of which is attached hereto as Exhibit “A”. Based upon the jury’s verdict and upon the law, 42a IT IS ORDERED, ADJUDGED AND DECREED that Plaintiff DAMOND SHAMROCK CORPORATION recover on its Complaint from the Defendants the sum of $220,830.34. Based upon the jury’s verdict and upon the law, THE COURT FINDS AND IT IS FURTHER OR- DERED, ADJUDGED AND DECREED that Defendant ZINKE & TRUMBO, LTD. recover nothing on its coun- terclaim against DIAMOND SHAMROCK CORPORATION for gross negligence and that the Counterclaimants JOHN HAMILTON, MARTHA FRANCIS and MORRIS RICH- ARDSON recover nothing on their claim for negligence against DIAMOND SHAMROCK CORPORATION. THE COURT FINDS AND IT IS FURTHER OR- DERED, ADJUDGED AND DECREED as follows: 1. DIAMOND SHAMROCK CORPORATION is entitled to judgment, pursuant to this Court’s previous rulings in- cluding its February 8, 1985 rulings, against ZINKE & TRUMBO, LTD. on ZINKE & TRUMBO, LTD.’s claim for breach of an oral agreement and on ZINKE & TRUMBO, LTD.’s claim for actual and punitive damages for kick- backs. 2. DIAMOND SHAMROCK CORPORATION is further awarded, pursuant to this Court’s ruling on April 11, 1985, attorney fees in the amount of $140,000.00 against Defendants and Counterclaimants. 3. Costs will be determined by separate application pur- suant to the agreement of the parties. 4. DIAMOND SHAMROCK CORPORATION is entitled to post-judgment interest on the amount awarded by the jury and the amount awarded as attorney fees at the rate of 9.17% per annum from the date hereof. 5. DIAMOND SHAMROCK CORPORATION is allowed all writs and processes provided by law for the enforce- ment of this judgment. ———— a 43a CERTIFICATION This Court has found that the jury did not return a verdict on Counterclaimants JOHN HAMILTON and MAR- THA FRANCIS’ claims for breaches of the implied cov- enants to market and to protect against drainage. The Court finds that, as to the claims which the Court has entered judgment by its Journal Entry of Judgment, fi- nality should be ordered to advance the interests of sound judicial administration and justice to the litigants, based upon a balancing of competing factors, including the fol- lowing: 1. The claims upon which the Court has entered judg- ment by its Journal Entry of Judgment were finally ad- judicated and they are separate, distinct and independent from Counterclaimants HAMILTON and FRANCIS’ claims for breaches of the implied covenant to market and to protect against drainage. 2. Certification of these claims will not result in un- necessary appellate review nor will the questions raised in such appeal have to be decided more than once in the event of a subsequent appeal because the above claims are separate and unrelated to Counterclaimants HAMILTON and FRANCIS’ claims for breaches of the implied covenant to market and to protect against drainage. 3. An immediate review of the claims finally adjudicated would not be mooted by any future developments in this lawsuit. 4. Due to the length of time that this lawsuit has been pending and because two lengthy jury trials have already been held in this case, any further delay in the entry of judgment would be unjust to the parties. Judgment should also be entered so that it will bear interest. IT IS THEREFORE CERTIFIED that, with respect to the claims finally determined by the jury’s verdict and the Journal Entry of Judgment to which this certificate is 44a appended, in accordance with Rule 54(b), Fed. R. Civ. P., (1) the Court has directed the entry of final judgment for the Plaintiff on its Complaint in the amount of $220,830.34, and against Defendants on their counterclaims for gross negligence, breach of oral contract and kickbacks, includ- ing punitive damages, and against all Counterclaimants on their counterclaim for negligence; and (2) the Court has determined there is no just reason for delay. Dated this 18 day of April, 1985. /s/ LUTHER B. EUBANKS The Honorable Luther B. Eubanks, Chief Judge United States District Court, Western District of Oklahoma Entered In Judgment Docket 4-18-85 Approved as to form: /s/ JAMES U. WHITE, JR. James U. White, Jr. Gary Davis CROWE & DUNLEVY, P.C. 1800 Mid-America Tower 20 North Broadway Oklahoma City, Oklahoma 73102 Telephone: (405)235-7700 Attorneys for Defendant and Counterclaimants 45a /s/ H.B. WATSON, JR. H.B. Watson, Jr. Richard K. Books WATSON & McKENZIE 1900 Liberty Tower Oklahoma City, Oklahoma 73102 Telephone: (405)232-2501 Attorneys for Plaintiff SLT/24/sp 46a IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA CIV-82-1754-E DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintzff, Vv. \ ZINKE & TRUMBO, LTD., a business association; ROBERT M. ZINKE, an individual; and Davip B. TRuMBO, an individual, Defendant. VERDICT [Place either “plaintiff,” ‘defendants,’ or ‘‘counterclai- mants’”’ in the first blank.] We, the Jury, being duly empaneled and sworn upon our oath, find as follows: 1. for the plaintiff upon the claim by the plaintiff, Dia- mond Shamrock Corporation, for breach of the operating agreement and fix damages'in the amount of $220,830.34; 2. for the upon the claim by the defendant, Zinke & Trumbo, Ltd., for gross negligence and/or willful misconduct in the operation of the well and fix actual damages in the amount of $ ; and punitive damages, if any, in the amount of $ 3. for the upon the claim by the counter- claimants, Morris A. Richardson, John Hamilton, and Mar- tha Francis, for negligence in the operation of the well and fix damages in the amount of $ ; and pu- nitive damages, if any, in the amount of $ EXHIBIT A-PAGE 1 OF 2 PAGES Gre 2 ath Vane leu, S22 a Be Ps le SAAT lee oy ea Ie” ote Fs. wae tide —- 47a 4. for the upon the claim by the counter- claimants, John Hamilton and Martha Francis for breach of the implied covenant to protect against drainage, and fix actual damages in the amount of $ - and punitive damages, if any, in the amount of $ ‘ 5. for the upon the claim by the counter- claimants, John Hamilton and Martha Francis, for breach of the implied covenant to market and fix actual damages in the amount of $ ; and punitive damages, if any, in the amount of $ 2-29-85 Louis MCCLURE Date Foreman EXHIBIT A-PAGE 2 OF 2 PAGES 48a APPENDIX D IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA No. CIV-82-1754-E DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff, ¥. ZINKE & TRUMBO, LTD, a business association; ROBERT M. ZINKE, an individual; and, Davin B. TRuMBo, an individual. Defendants. [FILED January 11, 1984] ORDER GRANTING NEW TRIAL AND VACATING JUDGMENT NOW on this 5th day of January, 1984, came on for hearing the Motion for Judgment Notwithstanding the Verdict or, in the Alternative, New Trial filed herein by DIAMOND SHAMROCK CORPORATION, with the Plaintiff DIAMOND SHAMROCK CORPORATION ap- pearing by and through its attorneys H. B. Watson, Jr. and Richard K. Books, and the Defendants ROBERT M. ZINKE and DAVID B. TRUMBO appearing personnally and through their counsel Gary Davis and James U. White, and the Defendant ZINKE & TRUMBO, LTD. and the Counterclaimants Hamilton, Richardson and Francis ap- pearing by and through the same counsel. The Court, after hearing the authorities presented in the argument of counsel, finds that the Motion for Judg- ment Notwithstanding the Verdict should be denied and that the Motion for New Trial should be granted in all respects. 49a IT IS THEREFORE ORDERED, ADJUDGED AND DECREED that the verdict entered in this case on No- vember 2, 1988, should be and is hereby vacated, set aside and held for naught. : _ IT IS FURTHER ORDERED, ADJUDGED AND DE- : CREED that the judgment entered herein on November 10, 1988, should be and is hereby vacated, set aside and held for naught. Dated this 11 day of January, 1984. BY: /s/ LUTHER E. EUBANKS Honoraole Luther E. Eubanks . ENTERED IN JUDGMENT DOCKET ON 1-11-84 APPROVED AS TO FORM: i BY: /s/_H.B. WaTSON, IR. i H.B. Watson, Jr. | Richard K. Books Watson & McKenzie 1900 Liberty Tower Oklahoma City, OK 73102 405/232-2501 BY: Mr. Gary Davis Mr. James U. White, Jr. Crowe & Dunlevy 1800 Mid-America Tower Twenty Broadway Oklahoma City, OK 73102 405/235-7700 50a APPENDIX E IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA No. CIV-82-1754-E DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff, Ve ZINKE & TRUMBO, LTD., a business association; RoBERT M. ZINKE, an individual; and Davin B. TRUMBO, an individual, Defendants. [FILED November 16, 1983] JOURNAL ENTRY OF JUDGMENT On October 27, 1983, the above cause and all counter- claims therein, came on for trial before the Court and Jury, all parties being represented by their attorneys of record herein, and the parties having presented their evi- dence and authorities, and arguments to the Court and Jury, and having closed all of the evidence on October 31, 1983, the Jury made its Verdict based upon the instruc- tions given by the Court, finding for the plaintiff on its complaint, and for the counterclaimants on their counter- claims in the respective amounts indicated in the Jury’s Verdict dated November 2, 1983. Based upon the Jury’s Verdict and upon the law, IT IS ORDERED, ADJUDGED AND DECREED that plaintiff, Diamond Chemicals Company, recover on its com- plaint from the defendants the sum of $212,805.60. ee ee eo Na a " Bla IT IS FURTHER ORDERED, ADJUDGED AND DE- CREED that counterclaimant Zinke & Trumbo, Ltd., re- cover on its counterclaim the sum of $995,196.00 from Diamond Chemicals Company and that counterclaimants John Hamilton, Martha Frances and Morris Richardson jointly recover on their counterclaims the sum of $971,179.00 from Diamond Chemicals Company and that counterclaimants John Hamilton and Martha Frances jointly recover on their counterclaims the sum of $1,032,499.00 from Diamond Chemicals Company: Based upon the Jury’s Verdict and upon the law, IT IS FURTHER ORDERED, ADJUDGED AND DE- CREED as follows: (1) That defendants breached the parties’ written joint operating agreement by their failure to pay their propor- tionate share of completion costs, for which Diamond Chemicals Company is entitled to recover on its complaint the damages awarded by the jury as above-indicated. (2) That Diamond Chemicals Company performed op- erations on the Hamilton Well in a grossly negligent man- ner, for which counterclaimant Zinke & Trumbo, Ltd., is entitled to recover on its counterclaim the damages awarded by the jury as above-indicated. (3) That Diamond Chemicals Company performed op- erations on the Hamilton Well in a negligent manner, for which counterclaimants John Hamilton, Martha Frances and Morris Richardson, are entitled to jointly recover on their counterclaims the damages awarded by the jury as above-indicated. (4) That Diamond Chemicals Company breached its duty to counterclaimants John Hamilton and Martha Frances to protect against drainage as implied under the parties’ re- spective leases, for which counterclaimants John Hamilton and Martha Frances are jointly entitled to actual damages as awarded by the jury in the amount of $32,499.00. Be- cause of the nature of plaintiff's breach of this implied 52a duty to protect against drainage, counterclaimants John Hamilton and Martha Frances are further entitled to jointly recover punitive damages as awarded by the jury in the amount of $1,000,000.00. (5) All parties are entitled to post-judgment interest on their respective recoveries as awarded by the jury at the rate of nine and eighty-six one hundredths percent (9.86%) per annum from the date hereof. (6) The awarding of attorney’s fees and costs shall be determined by separate application of the parties. IT IS FURTHER ORDERED, ADJUDGED AND DE- CREED that all parties are allowed all writs and processes provided by law for the enforcement of this judgment. DATED this 16 day of November, 1983. /s/ LUTHER B. EUBANKS LUTHER B. EUBANKS Chief Judge - U.S. District Court Western District of Oklahoma ENTERED IN JUDGMENT DOCKET ON 11-16-83 Approved as to form: /s/ JAMES U. WHITE, JR. Gary W. Davis James U. White CROWE & DUNLEVY A Professional Corporation 1800 Mid-America Tower 20 North Broadway Oklahoma City, Oklahoma 73102 Telephone: (405) 235-7700 ATTORNEYS FOR DEFENDANTS AND COUNTERCLAIMANTS Approved as to form: /s/ H. B. Watson, Jr. 53a H. B. Watson, Jr. Richard K. Books WATSON & McKENZIE 1900 Liberty Tower Oklahoma City, Oklahoma 73102 Telephone: (405) 232-2501 ATTORNEYS FOR PLAINTIFF Gee ll —__ ie i 54a APPENDIX F MAY TERM - July 16, 1986 Before Honorable William J. Holloway, Jr., Honorable James E. Barrett, Honorable Monroe G. McKay, Honorable James K. Logan, Honorable Stephanie K. Seymour, Hon- orable John P. Moore, Honorable Stephen H. Anderson, Honorable Deanell R. Tacha and Honorable Bobby R. Bal- dock, Circuit Judges Nos. 85-1698 85-1803 DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff-Appellant, Cross-Appellee, vs. ZINKE & TRUMBO, LTD., a business association, ROBERT M. ZINKE, an individual, and Davin B. TRUMBO, an individual, Defendants, Counterclaimants-A ppellees, : and Morris A. RICHARDSON, JOHN HAMILTON and — MARTHA FRANCIS, Counterclaimants-Cross Appellants. [FILED July 16, 1986, U.S. Court of Appeals for the Tenth Circuit] This matter comes on for consideration of appellant’s petition for rehearing and suggestion for rehearing en banc in the captioned cause. Upon consideration whereof, the petition for rehearing is denied by the panel that rendered the decision sought 55a to be reheard. It is the view of this panel that Oklahoma law does not require demand for payment as a prerequisite to filing a suit for damages. The petition for rehearing having been denied by the panel to whom the case was argued and submitted, an no member of the panel nor judge in regular active service on the Court having requested that the Court be polled on rehearing en banc, Rule 35, Federal Rules of Appellate Procedure, the suggestion for rehearing en banc is denied. ROBERT L. HOECKER, Clerk By /s/ PATRICK FISHER Patrick Fisher Chief Deputy Clerk 56a APPENDIX G MAY TERM - July 21, 1986 Before Honorable James E. Barrett, Honorable Monroe G. McKay, Honorable James K. Logan, Honorable Stephanie K. Seymour, Honorable John P. Moore, Honorable Stephen H. Anderson, Honorable Deanell R. Tacha and Honorable Bobby R. Baldock, Circuit Judges Nos. 85-1698 85-1803 DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff-Appellant, Cross-A ppellee, vs. ZINKE & TRuMBO, LTD., a business association, ROBERT M. ZINKE, an individual, and Davin B. TRUMBO, an individual Defendants, Counterclaimants-A ppellees, and Morris A. RICHARDSON, JOHN HAMILTON and MARTHA FRANCIS, Counterclaimants-Cross Appellants. [FILED JULY 21, 1986-U.S. Court of Appeals For The 10th Circuit] The Court in order to correct a clerical error in the issuance of this order on July 16, 1986, hereby reissues it in order to reflect that Judge William J. Holloway, Jr. did not participate in the issuance of this order. The order reissued nunc pro tunc and is to read as follows: SF ne ea Ca a RF Nel leks ae DIAM IE ale ABSl Aaah oat ak Sint ee POEs 15m, lle eg EN ae Waste Soke Darin haw ms bined CPAs 57a This matter comes on for consideration of appellant’s petition for rehearing and suggestion for rehearing en banc in the captioned cause. Upon consideration whereof, the petition for rehearing is denied by the panel that rendered the decision sought to be reheard. It is the view of this panel that Oklahoma law does not require demand for payment as a prerequisite to filing a suit for damages. The petition for rehearing having been denied by the panel to whom the case was argued and submitted, and no member of the panel nor judge in regular active service on the Court having requested that the Court be polled on rehearing en banc, Ruie 35, Federal Rules of Appellate Procedure, the suggestion for rehearing en banc is denied. Chief Judge Hollceway did not participate in the consid- eration or disposition of the petition for rehearing and suggestion for rehearing en banc. ROBERT L. HOECKER, Clerk By /s/ PATRICK FISHER Patrick Fisher Chief Deputy Cierk ' : N i 58a APPENDIX H IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA No. CIV-82-1754-W DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff, V. ZINKE & TRUMBO, LTD., a business association; ROBERT M. ZINKE, an individual; and, Davin B. TRUMBO, an individual, Defendants. [FILED November 2, 1983] VERDICT [Place either “plaintiff”, ‘defendants’, or “counterclai- mants” in the first blank.] We, the Jury, find as follows: 1. for the Plaintiff upon the claim by the plaintiff, Dia- mond Shamrock Corporation, for breach of the operating agreement and fix damages in the amount of $212,805.60; 2. for the Plaintiff upon the claim by the defendant, Zinke & Trumbo, Ltd., for breack of a new agreement and fix damages in the amount of $0.00; 3. for the Defendant upon the claim by the defendant, Zinke & Trumbo, Ltd., for gross negligence and/or willful misconduct in the operation of the well and fix damages in the amount of $995,196.00: 59a 4. for the Counterclaimants upon the claim by the coun- terclaimants, John Hamilton, Martha Frances and Morris Richardson, for negligence in the operation of the well and fix damages in the amount of $971,179.00; 5. for the Plaintiff upon the claim by the counterclai- mants, John Hamilton and Martha Frances, for breach of the implied covenant to market and fix damages in the amount of $0.00; and 6. for the Counterclaimants upon the claim by the coun- terclaimants, John Hamilton and Martha Frances for breach of the implied covenant to protect against drainage, and fix actual damages in the amount of $32,499.00 and punitive damages in the amount of $1,000,000.00 (one mil- lion dollars). November 2, 1983 /s/ LARRY MULLINAX Date Foreman 60a APPENDIX I IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA No. CIV-82-1754-W DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff, vs. ZINKE & TRUMBO, LTD, a business association; ROBERT M. ZINKE, an individual: and, Davip B. TRUMBO, an individual. Defendants. [FILED November 14, 1983] ALTERNATIVE MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT OR FOR NEW TRIAL Motion for Judgment Notwithstanding the Verdict COMES NOW DIAMOND SHAMROCK CORPORA- TION, Plaintiff herein, and moves this Honorable Court to set aside the verdict rendered in the above-entitled ac- | tion on November 2, 1983, in favor of Counterclaimants, and to enter judgment in favor of Plaintiff for $212,805.60 on the grounds that: 1. The verdicts entered by the jury are inconsistent on heir faces and indicate that the jury was either in a state »f confusion or that the jury abused its power. Specifically, t was impossible for the jury to find that DIAMOND SHAMROCK performed operations in a good and work- nanlike manner and at the same time find that DIAMOND SHAMROCK had been negligent and grossly negligent. 6la The verdict awarding DIAMOND SHAMROCK $212,805.60 under the Joint Operating Agreement is irreconcilably in- consistent with the verdict awarding ZINKE & TRUMBO, LTD. $995,196.00 for gross negligence or willful miscon- duct and the verdict awarding John Hamilton, Martha Francis and Morris Richardson, $971,179.00 for negli- gence. 2. Judgment should be entered in favor of DIAMOND SHAMROCK on both the prayer for actual damages and the prayer for punitive damages regarding the drainage issue because absolutely no evidence was placed before the court or jury to indicate the terms of the oil and gas leases in question, and it is therefore impossible for the jury or the court to determine whether DIAMOND SHAMROCK breached any express or implied obligation under the oil and gas leases. Judgment should also be entered in favor of DIAMOND SHAMROCK on the drainage issue because there was no evidence from which the jury could find that Counterclaimants made demand upon DIAMOND SHAM- ROCK to protect against drainage. 3 DIAMOND SHAMROCK should have judgment upon the claim of John Hamilton and Martha Francis for drain- age because there was no evidence to show that drainage has occurred to Section 33 and the undisputed evidence was that DIAMOND SHAMROCK satisfied any covenant to protect against drainage by the drilling of the John Hamilton 1-33 well, which well is shut in awaiting a pipe- line. 4. DIAMOND SHAMROCK should have judgment with regard to ZINKE & TRUMBO, LTD.’s claim of gross neg- ligence because there exists no evidence from which the jury could infer that DIAMOND SHAMROCK was guilty of either gross negligence or willful misconduct. 5. DIAMOND SHAMROCK should have judgment on the claim of John Hamilton, Martha Francis and Morris Richardson for negligence because there is no evidence 62a from which the jury could infer that DIAMOND SHAM- ROCK was negligent. 6. Judgment should be entered in favor of DIAMOND SHAMROCK as to both actual and punitive damages for drainage because the award of damages to Counterclai- mants Hamilton and Francis for drainage after first award- ing Counterclaimants full recovery for alleged destruction of the reservoir would constitute an unwarranted double recovery and would constitute an unjust enrichment of Counterclaimants Hamilton and Francis. 7. Plaintiff DIAMOND SHAMROCK should have judg- ment in its favor as to the exemplary or punitive damage issue for the reason that there was no evidence of any oppression, fraud, or malice as is required by 23 O.S 1971 Section 9 for an award of exemplary damages; that the necessary threshold of evidence as a basis for submission of the issue of exemplary damages to the jury was never established by the Counterclaimants; that the issue should not have been submitted to the jury. - 8. Judgment should be entered in favor of DIAMOND SHAMROCK on each of Counterclaimants’ causes of action for the reason that there was no evidence of the value of either oil or gas during the period in which drainage or destruction was alleged to have occurred, and no evidence of the amount of gas or oil allegedly drained from Section 33. WHEREFORE, DIAMOND SHAMROCK prays that the Court set aside the verdicts entered herein in favor of Counterclaimants and enter judgment in favor of DIA- MOND SHAMROCK in the amount of $212,805.60, in ac- cordance with the Motion for Directed Verdict made by DIAMOND SHAMROCK at the close of all the evidence. Motion for New Trial In the alternative to the foregoing Motion for Judgment Notwithstanding the Verdict, DIAMOND SHAMROCK 63a moves the Court to set aside the jury’s verdict of Novem- ber 2, 1983, in its entirety and to grant a new trial for each of the following reasons: 9. The jury’s verdicts are so inconsistent on their face as to indicate that the jury was either in a state of con- fusion or that the jury abused its power. Specifically, the jury’s finding for DIAMOND SHAMROCK under its claim for breach of the Joint Operating Agreement is irrecon- cilably inconsistent with the jury’s finding in favor of ZINKE & TRUMBO, LTD. on its claim for gross negli- gence or willful misconduct and inconsistent with the find- ing in favor of John Hamilton, Martha Francis and Morris Richardson on their claim for negligence. 10. It was impossible for the jury to find that DIAMOND SHAMROCK had breached the oil and gas leases in ques- tion since the leases were not introduced into evidence, nor was any evidence introduced regarding the terms of the oil and gas leases in question. 11. As to punitive damages, there is a total absence of any proof of any act or omission on the part of DIAMOND SHAMROCK which could be classified as malicious, frad- ulent or oppressive. 12. The exemplary or punitive damages awarded to Counterclaimants John Hamilton and Martha Francis bear no reasonable relationship to the injury inflicted, if any, upon the Counterclaimants due to the alleged drainage, and said punitive damages are excessive in emount even if punitive damages were otherwise allowable. The award of $1 million in punitive damages was necessarily the result of passion and prejudice on the part of the jury. 13. It was error for this Court to overrule DIAMOND SHAMROCK’s motion for continuance filed on October 19, 1983, in light of the fact that on October 7, 1983, the Court allowed Counterclaimants to file an Amended Coun- 64a terclaim containing three new causes of action and which Amended Counterclaim for the first time sought the im- position of punitive damages. 14. The verdict is contrary to the manifest weight of the evidence in the following particulars: a. There was no evidence regarding the obligations, either express or implied, imposed by the oil and gas lease in question and there is no evidence that Counterclaimants ever made demand upon DIAMOND SHAMROCK to pro- tect against drainage. b. There is no evidence from which the jury could conclude that DIAMOND SHAMROCK has breached the oil and gas lease in question, since there is no evidence whatsoever of the terms of the oil and gas lease. c. There is no evidence of oppression, fraud or malice on the part of DIAMOND SHAMROCK, as is required by 23 0. S., Section 9, to support a basis of determination by the jury that exemplary damages should be awarded. d. The manifest weight of the evidence shows no ac- tion or inaction on the part of DIAMOND SHAMROCK which would not have been taken by a reasonably prudent operator in the same circumstances. e. The manifest weight of the evidence shows that there was no unreasonable delay in drilling a well in Sec- tion 33 under the circumstances of the instant case. 15. The Court committed error in its charge to the jury in the following respects, over the objection of DIAMOND SHAMROCK: a. By instructing the jury that, if the Counterclai- mants Hamilton and Francis established the essential ele- ments of their case and if DIAMOND SHAMROCK had superior knowledge of the facts at the time of demand to protect against drainage, then the burden of proof shifted to DIAMOND SHAMROCK. 65a b. By instructing the jury that the instant action was one in which punitive damages might be awarded. c. By instructing the jury that they could use rules of construction in interpreting the contract between the parties when the contract in question was plain and un- ambiguous. d. By failing to instruct the jury that, in determining whether or not DIAMOND SHAMROCK acted as a rea- sonably prudent operator to protect against drainage, the jury could only consider those facts known to DIAMOND SHAMROCK at the time of DIAMOND SHAMROCK'’s al- leged improper actions. e. By failing to instruct the jury to find for DIAMOND SHAMROCK on each of Counterclaimants’ causes of ac- tion. 16. The Court committed error in its ruling on numerous evidentiary matters during the course of the trial, all of which affected the substantial rights of DIAMOND SHAM- ROCK, including the following: a. In the admission, over the continuing objection of DIAMOND SHAMROCK, of evidence regarding the al- leged improper drilling, completion, or operation of the George Travis 1 “A” well. b. In the admission of all other evidence shown by the record to have been admitted by the Court over the objection of DIAMOND SHAMROCK, or as to which the record shows that the Court failed to sustain DIAMOND SHAMROCK’s objections. 17. The Court committed error in failing to dismiss juror Susan Drake for cause, or in the alternative, in failing to substitute the alternate juror for juror Susan Drake when it was discovered that Ms. Drake was personally ac- quainted with one of Counterclaimants’ expert witnesses. 66a 18. This motion is based upon the record and proceed- ings in this action, and upon the brief filed in support of this motion; however, DIAMOND SHAMROCK reserves the right to supplement and amplify the foregoing reasons for judgment notwithstanding the verdict or new trial fol- lowing receipt of a transcript of the record. WHEREFORE, premises considered, DIAMOND SHAMROCK CORPORATION respectfully requests that this Court enter its judgment in favor of DIAMOND SHAMROCK for $212,805.60, and against Counterclai- mants on each of their counterclaims or in the alternative, that this Court set aside the jury’s verdict of November 2, 1983, in all respects and that this Court grant a new trial. BY: /s/ H. B. Watson, Jr. H. B. Watson, Jr. BY: /s/ RicHarp K. Books Richard K. Books Watson & McKenzie 1900 Liberty Tower Oklahoma City, Oklahoma 73102 405/232-2501 CERTIFICATE OF SERVICE This will certify that a true and correct copy of the foregoing ALTERNATIVE MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT OR FOR NEW TRIAL was duly mailed with postage fully prepaid thereon, this 14th day of November, 1983, to James U. White, Jr. and Gary Davis, Crowe & Dunlevy, 1800 Mid-America Tower, 20 North Broadway, Oklahoma City, Oklahoma, 73102. BY: /s/ RicHarp K. Booxs Richard K. Books ————————— 67a APPENDIX J IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF OKLAHOMA No. CIV-82-1754-E DIAMOND SHAMROCK CORPORATION, a Delaware corporation, Plaintiff, vs. ZINKE AND TRUMBO, LTD., a business association; ROBERT M. ZINKE, an individual; and DAVID B. TRUMBO, an individual, Defendants, Morris A. RICHARDSON, JOHN HAMILTON AND MARTHA FRANCIS, Counterclaimants. *-* * OFFICIAL COURT REPORTER’S TRANSCRIPT OF PROCEEDINGS HAD ON JANUARY 5, 1984 BEFORE THE HONORABLE LUTHER B. EUBANKS IN OKLAHOMA CITY, OKLAHOMA APPEARANCES For the Plaintiff: Mr. H. B. Watson, Jr., and Mr. Richard K. Books Watson & McKenzie 1900 Liberty Tower Oklahoma City, Oklahoma 73102 68a For the Defendants and Mr. Gary W. Davis and Counterclaimants: Mr. James White Crowe & Dunlevy 1800 Mid-America Tower Oklahoma City, Oklahoma 73102 Reported by: Vicki Dilbeck, CSR, CM Room 3011-A, U. S. Courthouse Oklahoma City, Oklahoma 73102 (405) 232-2804 THE COURT: All right. I guess we'll hear from you first, Mr. Davis. Wait a minute. Let me get my papers all straightened up here. MR. DAVIS: Your Honor, would you prefer to hear from Mr. Watson? THE COURT: No, no. I’m sorry. I do have you back- wards. We’ll hear from Mr. Watson first. Pardon me. MR. WATSON: If the Court please, Your Honor, you'll recall I’m sure that this was a rather lengthy trial in- volving the plaintiff’s claim. We represented the plaintiff, Diamond Shamrock and their claim for monies due under a joint operating agree- ment for the drilling of an oil and gas well. And the defendants and counterclaimants had several causes of ac- tion, and the Court submitted to the jury each cause of action raised in the pleadings by either party. The jury in its verdict on the first cause of action, being that of the plaintiff, found for the plaintiff under the Court’s instructions that if the plaintiff had substantially complied with the contract, he was entitled and had done the work, paid for the work, and he was entitled to recover or it was entitled to recover. The jury so found rendering judgment or verdict for the plaintiff for the total sum claimed by Diamond Shamrock for the drilling of the well. 69a The second cause of action was that raised by the cross- claimant, Zinke, Trumbo, in that the joint operating agree- ment had been modified or amended and changed. The jury found that such was not the case; that the parties were bound by the contract, the joint operating agreement. The next cause of action—pardon me was by the defendant Zinke and Trumbo for gross negligence and will- ful misconduct in the operation of the well. Now, as you no doubt recall, Your Honor, we didn’t— we finished the evidence in the case late on a Friday and the Court did not entertain arguments on the motion for directed verdict. And so it is our position on this particular cause of action that the evidence—the record is void of evidence to support this cause of action they relied upon a expert witness by the name of Berry to establish the amount of their damages. If you will recali, Mr. Berry was a petroleum engineer, and he testified that he had determined that the value of the property prior to the drilling of the well in question, he had calculated what he estimated the reserves to be prior to drilling of the well. He sponsored Defendant’s Exhibits 53 through 60. If the Court please, I would like to hand up a copy of those exhibits. THE COURT: All right. MR. WATSON: And looking at his testimony, and the evidence of the defendants in the most favorable light to the defendants, he testified that they should recover the value of the property. He stated that over the life of the property, there on paying one, he was asked to circle and a number $995,196 which you'll see there, if the Court please, is what he would estimate the income to be over the next six years. 70a And he also testified that obviously in fixing the value of the property, you could not give people what they would receive over the next six years. You had to discount it. And on the next page, he states his opinion. The reason- able discount factor is five percent which would be $536,708. Now, they rendered judgment for the $995,000 figure identical to Exhibit 53. It has to be where they got it. And they awarded the defendants and crossclaimants the amount that this witness—and this is the only evidence as to the value that this witness said they would receive over the life of the property, and he had calculated this prior to to the drilling of the well. They were all hopeful of getting a good well prior to drilling of it. But now we know what is down there. And we know that Mother Nature has not put the reserves under this property that the people thought beforehand. So, there’s no evidence in this record, I submit, Your Honor, that would support a judgment for damages based on the theory adopted by the crossclaimant that they’re entitled to the value of this property as if they were selling it. . You may recall I asked the witness on cross-examina- tion, if we pay you the value, the current value of the property which would be this five hundred and some odd thousand dollars, do we get a deed to it, and he said no. Now, the measure of damages, if any, here would be value before and after. If we have damaged the property, we submit that the evidence doesn’t show that we have damaged the property. But clearly, Your Honor, we submit that there is no evidence upon which the jury could assess damages under this cause of action. He said that he had no evidence as to the net revenue interest of the defendants, Zinke and Trumbo. He shows net revenue interest here up there at the top of this ex- Tla hibit. And I asked him how he arrived at that, and he said he assumed what royalties and overrides might be against this property. The net revenue interest is .23125. I understand both— THE COURT: I don’t find it. Yes, I do now. I’m sorry. Yeah. Yeah, I do. MR. WATSON: And he had assumed their net revenue interest. Well, of course, they’re entitled to no more than the necessary revenue interest in the property would en- title them to, and of course, that cannot be assumed either by the witness or by the jury. So we respectfully submit as to this particular cause of action, that there is no evidence upon which the plaintiff can prevail, and respectfully submit that it should not have been submitted to the jury; that they failed to prove a cause of action; and that we would be entitled to judgment notwithstanding the verdict. However, if the Court should hold otherwise, we, never- theless, state that clearly, we would be entitled to a new trial because under the evidence submitted -- THE COURT: Well, that’s the thing that, Mr. Watson, still runs through my mind. I think that verdict, insofar as your claim and the main crossclaim, was just about as inconsistent as you can make it. First of all, the jury awarded you compensation for the pro rata share of the cost of completion, and et cetera. Under the Instructions, it’s said they could do so if they found that you completed it in a good, substantial and workmanlike manner. And then at the same time, awarded the other side damages for your failure to do so. That is, they said you did it, therefore, you're entitled to compen- sation. But in the same breath, same verdict, said you were grossly negligent. And you didn’t complete it as pro- vided for in the operation agreement which should have 72a relieved the payment. See. I1 addition, to relieve payment authorized damages, but when they do both, I just cannot see any way in the world that it’s not an inconsistent verdict that must be set aside. I do want to hear Mr. Davis, because I have got so much confidence in him. He may even convince me that the original thinking is wrong. It seems that maybe the drainage thing can stand because there is no inconsistency in the claim there as I tentatively view it. Now, go ahead. MR. WATSON: May I speak, if the Court please, and I'll try to be brief on the question of judgment notwith- standing the verdict on several of these causes of action. THE COURT: Go ahead. MR. WATSON: If I may, I’ll go to the drainage question since you’ve raised that. We feel that we’re entitled to judgment notwithstanding the verdict on the question of drainage for several reasons. One, this is an action for breach of an implied covenant to protect against drainage. The parties entered into a contract obligating it to an oil and gas lease; oligates the lessee to perform certain acts. Now, neither the Court nor the jury has that lease be- fore them. There is no evidence in this record as to what the terms and provision of that lease are. There is a stip- ulation whereby we acknowledge a valid and existing oil and gas lease dated a certain date and filed in book and page, but certainly these people are free to contract and to agree on the provisions of that contract. And how can this Court or any jury say that we hav violated the provision of the contract if they don’t even know what the provisions are. And the position that we take, even if the Court should disagree with us and say they can sue us for breach of 73a contract and not introduce the contract and not prove the terms of it, even if the Court should hold against us on that point, I respectfully submit that there is no, not one scintilla of evidence in this record whereby you can arrive at damages for drainage. They didn’t prove when the drainage occurred. They didn’t prove the amount of hydrocarbons drained, nor did they prove the value of those hydrocarbons. Now, how else can a jury arrive at a figure—where in the world they got this $32,499.00, I don’t know. Furthermore, there is no evidence of demand for us to protect against drainage. The jury was instructed that the lessors had to—in Instruction Number 2, that the lessors had to make demand on us. This is a gas well. We elected to shut it in. If the lessors are dissatisfied with the shut- _ ting in of that well and waiting on a local pressure line, we say that a cause of action has not arisen when the parties are in agreement. And no lessor took that stand. There was not one scin- tilla of evidence that they disagreed with the fact that that the well should be shut-in. So if they agree that the well should be shut-in, how can they say that they have been fraudulently drained. Is the Court going to presume fraud when the parties that allege the cause of action don’t even take the stand. They don’t even say we asked them to turn it on the line. They don’t say we disagreed with the operators’ decision to shut-in the well and await a low pressure line. Our testimony was, and the jury found that we had not failed to market the gas. That’s a separate cause of action. Said we should have marketed the gas. The jury found that we acted as a prudent operator in awaiting the mar- ket. So no question; there is no consistency in those. 74a THE COURT: Can they not, though, have said that the drainage will be a necessary consequence of ruining this well. There is no—the evidence was if the jury believed it, and I guess they did, on this one lease, so whatever is fraudulently drained is going to be drained by your surrounding leases. MR. WATSON: Are we saying then that they can re- cover for what might happen in the future? I didn’t know that that was their theory of the case. THE COURT: Well, there is evidence to that effect. MR. WATSON: Right. That is so, Your Honor. I don’t think the evidence supports the fact that any amount of hydrocarbons will ever be drained from this tract, and what the value of them would be. Obviously, how long before this drainage takes place— THE COURT: Well, your position was that the defendants’ theory is incorrect, that a new well can be drilled right exactly alongside or where the other one was. MR. WATSON: That’s correct. If anybody would drill it. THE COURT: Yeah. MR. WATSON: But unfortunately, we found that there is not much reservoir in there. THE COURT: I see. MR. WATSON: And no one wants to drill it. They, Zinke, Trumbo, said they wouldn’t drill one there. Al] the witnesses said they wouldn’t drill another one. So if it would not be commercial to drill another well, we would not have an obligation to protect it. THE COURT: I may have misconstrued the position of the defendants in that regard, and we’ll let Mr. Davis talk 75a to it. But that was my memory of some of the evidence in the case. MR. WATSON: I think the lawsuit imposes upon it only a duty to drill wells to protect against drainage if it would be economic to do so. THE COURT: Well, I suppose that’s the law. It should be. MR. WATSON: Yes, sir. And I don’t think there’s any question about it. I believe it’s— THE COURT: Well, wasn’t it, though, Mr. Watson— this is a problem when there’s a long lapse between the trial and the ruling on the motion. Many, many cases in between, and wasn’t it a part of the theory that you could not, if you wanted to drill another well, that there’s no other location on that lease that could be approved by the Corporation Commission. So the jury could have said well, it would have been a commercial producer and a good one if it had been drilled, done right. And now we believe their case; that there is no way to drill another well. So for that reason, they have lost—royalty owners have lost— | MR. WATSON: Yes, sir. They took the position that another well could not be drilled there. THE COURT: And you disagree. You think he could get a permit easily from the Corporation Commission, but it just wouldn’t be economically feasible to do it. MR. WATSON: That’s right. And I don’t think there was any evidence to contradict the economics of another well. I don’t think anybody wants another well drilled there; would put up the money to drill another well there. Even their own witnesses, their experts— THE COURT: Let’s hear from Mr. Davis. Then I’ll hear you further, of course, unless—did you have any other features you wanted to touch before— 76a MR. WATSON: There’s one other, Your Honor. THE COURT: Go ahead. I’m sorry. MR. WATSON: If you don’t mind. THE COURT: Sure, certainly don’t. MR. WATSON: That is on the question of damages arising accruing to the lessors. The jury awarded them $971,179.00 for damages to the well: that they damaged the well. Now, how could that figure be arrived at. And if you will refer starting on Page 3, Exhibit 55. That’s the third page. I have clipped those exhibits together. THE COURT: I see. 55 is the third page of this. MR. WATSON: Now, the way you arrive at this figure of $971,179.00 is to take— THE COURT: Wait a minute. Go ahead. MR. WATSON: We are talking about the defendant, Francis, on this page. You’ll see the top. It says Martha N. Francis. THE COURT: Right. MR. WATSON: One of the lessors. Now, if you will look at the net income and cumlative, this would be the same column that was used that I called your attention to on the prior exhibit. This is the amount of money that Mrs. Francis would receive according to this witness after a period of six years from now if that would be produced. THE COURT: Explain that. You used that term with reference to the first part of it. Six years. Where is this exhibit? Runs through 30 years. MR. WATSON: Yes, sir. But if you will note, the money stops at six. THE COURT: Oh. I follow you, yeah. Same identical, yes. The figures are identical thereafter. I see now. 77a MR. WATSON: I didn’t explain that. THE COURT: Well, I guess I didn’t look at the exhibit. MR. WATSON: Now, the computer is set up on a 30 year period, but the well only lasts six. THE COURT: I see. I see. MR. WATSON: So, according to this figure as to what she would receive, if the reserves were there that he cal- culated before the well was drilled, it would be $102,258.00 Now, if you take that figure from each one, I don’t want to go through this for you, but you take—go through those pages and take that same figure of what each royalty owner would receive over the next six years according to this reserve estimate prior to to the drilling of the well. It comes up to the identical figure, $971,179.00 which is what the jury awarded. That figure for Hamilton is $626,140.00. And for Richardson, is $242,781.00. And you add them up and that’s what they would total, what the jury awarded them. There again, I know this witness testified that under no circumstances would the property be worth that. You would have to wait six years to get it. And so one other point if the Court— THE COURT: It doesn’t reduce it to present value at all. The jury didn’t— MR. WATSON: On the next page— THE COURT: But I mean the jury didn’t. MR. WATSON: That’s correct. THE COURT: I see that. MR. WATSON: And one other point here I’d like to raise if I may, Your Honor, the defendants in the cross- complaint, Hamiiton and Francis are our lessors. We have 78a a contract, an oil and gas lease with these people. Rich- ardson, the crossclaimant, Richardson, is Zinke and Trum- bo’s lessor. Now, we have no privity of contract with this man. He contracted with Zinke and Trumbo to develop this prop- erty. And they voluntarily entered into this joint operating agreement making Diamond Shamrock their agent in this operation. Now, did they convey to us the liability under their oil and gas lease? Under this verdict, the man we didn’t even contract with is being awarded a judgment against us for the way we operated under the oil and gas lease that Zinke and Trumbo had entered into. You see. They all ganged up on Diamond Shamrock. First just Zinke and Trumbo was in this case because we are suing them for what they owed. Then they went out and got our lessors and their lessors to sue us. What obligation do we owe their lessors? Are they ob- ligated to him under their contract to properly operate the premises; and by delegating the operation to another, can they relieve that responsibility and that liability to their lessors? We certainly have assumed no liability to their lessor. And under this theory, their lessor— THE COURT: Undivided lease, Mr. Watson. You owe that where you’re the operator of the entire unit, don’t you, the same duty to all irrespective of who they origi- nally leased to. I would have thought so. MR. WATSON: Well, I think not. This is a voluntary joint operating agreement. And in which the owners of the lease hold interest in there. Say, we are going to go together and we are going to appoint one of us as op- erator. And I submit to the Court that that does not relieve Zinke and Trumbo for their obligation to their lessor. I 79a think they can sue us under the joint operating agreement. Say we didn’t perform it, but nevertheless, their lessor has to look to them. If he wants to send a bumpkin out there, they have breached their oil and gas lease with their lessor. But yet we have Richardson coming in here and suing us through the same lawyers for breach of this duty that is owed from Zinke and Trumbo to Richardson. So we submit that clearly under this particular cause of action that if the Court should find that there’s evidence to indicate that we’re’liable to our lessor. Certainly we’re not liable to the lessor of Zinke and Trumbo. One other point if I may, and that is the question of punitive damages. They rendered against us for a million dollars for punitive damages. And I’m sure the Court will recall that that was injected into the case a few days prior to the trial, and we asked for time to defend and get ready for that, and so now we are stuck with a million dollars in punitive damages. And we take the position and the Court so instructed the jury in Instruction Number 9 that if they found that we had allowed this fradulent drain- age to occur; fraudently being because we are over here and own a hundred percent of the draining well, and we are stealing their—stealing their gas is what it amounts to, that the jury could award punitive damages. Well, number one, if they have not proved actual dam- ages, the 32,000 in actual damages, they wouldn’t possibly be entitled to punitive damages, that there can be no will- ful, malicious conduct on our part in shutting-in that well in this instance, and that that would be the basis of the fraudulent drainage. We shut in the well where we own three quarters of the production. Well, where we own a hundred percent, there could be no willful and malicious conduct on our part unless our lessors had not agreed with our actions. And here, again, I don’t mean to be repetitive, but there’s not one scintilla of evidence that this lessor said that we had 80a acted in a willful, malicious manner: that they had not agreed with everything we did. So to allow— THE COURT: Well, Zinke and Trumbo argued there, though, that the agreement was modified, we’ll go in and participate in the completion if you will do it this way rather than what you proposed. The evidence was before the jury that you ignored them. Your company did what it agreed to do, but if that’s the case, the question I have would punitive damages not be disallowed under the theory of it arising out of a contract. MR. WATSON: Well, I think if your actions are tortious, if you commit a tort in the performance— THE COURT: Tortious breach of contract. MR. WATSON: Yes, sir. But the thing that the Court must remember, Your Honor, is that don’t be separating the amounts. Don’t be mixing apples and oranges. We are talking about a cause of action by our lessor. Zinke and Trumbo doesn’t have anything to do with it. The lessors are saying that we committed fraudulent drainage. We have to look at this cause of action separate from the other. THE COURT: Punitive award, though, to Zinke and Trumbo— MR. WATSON: No, sir. It went to the lessors. THE COURT: I’m sorry. MR. WATSON: It went to the lessors. THE COURT: I thought it went to Zinke and Trumbo. Then I do stand corrected. I didn’t—I’m getting it. All right. MR. WATSON: You see. The punitive damages was di- rected to this theory which is relatively new. And if you'll recall, the Tenth Circuit case, the Space case, in which the Tenth Circuit set out some pretty firm guidelines as Sila to what constitutes fraudulent drainage. And it was not until then really that we had much law on this question of fraudulent drainage. That Hall Jones case in the state court, but clearly there you have to prove that the thieving well was designed to steal the oil or gas from over here, from the well being drained. You see. You have a bigger interest. The facts here would fit Space. You have a bigger in- terest over here. So you don’t care what happens over here. Let these lessors—just let them be robbed. They have their hands tied. They cannot develop the property. You have both leases. And it’s better for you to take the hy- drocarbons out of this well. Well, such was not the case here, I submit, Your Honor. And that was the theory and the basis upon which they claimed punitive damages and the basis, the only basis upon which the jury could have awarded punitive damages. And clearly, one, they didn’t show drainage, and two, they didn’t show that the shutting-in of the well was a willful, wanton and malicious act. To the contrary, there is no evidence that both parties to the contract, lessors and lessee were not in agreement on shutting it in. THE COURT: All right. Thank you. I may want to hear from you again after Mr. Davis presents his arguments. Go ahead, Mr. Davis. MR. DAVIS: If the Court please, what I’d like to do, if it’s all right with Your Honor, would be to simply dis- pose of these things that I regard as inconsequential or sort of minor issues that Mr. Watson has been arguing. THE COURT: Whichever way you want. MR. DAVIS: I'll start from the rear and work my way backwards. THE COURT: That’s fine. 82a MR. DAVIS: Mr. Watson mentioned the thieving well. Well, that’s what it was. It was a thieving well, and that’s what the Space case was based on, Your Honor. Your Honor will recall that this Travis Well, which is sitting over in Texas, as opposed to the Hamilton Well in Oklahoma that we are trying this lawsuit about, had been operating, was operating full blast, and there at least, according to our neue witness, it was draining gas from these three lower zones that were completed successfully. And it was a stealing well. The Diamond Shamrock witness got on this witness stand and testified that the only reason—this came out in his deposition that Mr. White read in evidence—that the reason that they blocked up these three zones, these three lower zones of this well, was because they didn’t want to cross state lines. Of course, that’s no excuse. Mr. Zinke testified that he had demanded that if these three zones, in fact, would produce, start producing. But they never produced, and they haven’t produced to this date. I can’t imagine a worse case or a better case for reckless conduct. And just the hell with you. This well, we own a hundred percent. We are going to produce it. This well, that we own only seventy-five percent of it, just tough on you. And the jury believed that, and that frankly was the almost unrebutted evidence. \ Now, with regard to the this question of demand and the lease, we had two pages, Your Honor, first two pages of the pretrial order that covered a [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385011_2208%3A2. Public record. Not legal advice.