Opinion ID: 900919
Heading Depth: 1
Heading Rank: 10

Heading: The Bass IV Model

Text: [¶ 45.] The decision in Bass IV is persuasive for several reasons. There, as in our case, [t]he parties agree[d] that initial investment costs would reduce any profits to a negative number. 48 Fed.Cl. at 625. Where Bass IV involve[d] the taking of a right to develop and drill for natural resources, our case involves the taking of a right to fill empty volume. Id. at 624. In both situations, [t]he resources will remain [on site] until plaintiffs are permitted to develop them. Id. Bass has not lost any of the oil or gas; similarly, SDDS did not lose any of the empty volume. Id. Both Bass [and SDDS] lost time. Id. Like the Bass IV court, we recognize, as noted above, that, in general, the measure of compensation for a temporary taking is fair rental value. Id. at 624. However, as shown above, fair rental value is an unworkable measure for SDDS's damages. Recognizing the same difficulty, the Bass IV court determined that [f]air rental value in this case [is] approximate[d][by] the difference in interest on the cash flows.... Bass's loss is limited to the difference between the interest on the present value of the cash flows with and without the delay. Id. at 625. [¶ 46.] To arrive at this result, the Bass IV court sought a damage model that would focus on compensating plaintiffs for what they actually lost. Plaintiffs were delayed in their development efforts. A hypothetical lessee would have rented this property to develop, just as Bass did. But if the property had been developed, less oil and gas would have been available for plaintiffs if the property were returned. So the question is, what would Bass have charged to delay development for four years[?] Id. at 622. We recognize that there is one significant difference between Bass and SDDS at the point of deciding on the appropriate measure of damages: Bass was a going concern at the time Bass IV issued, whereas SDDS now exists as a legal entity only. However, in view of the substantial similarities between Bass and SDDS, similarities that we have detailed at length, we hold that SDDS's damages are to be measured by the difference between the interest on the present value of SDDS's cash flows, as they would have been with and without the forty-three-month delay. [15] Equity requires that we devise a measure of damages that is fair both to SDDS and to South Dakota. Under the vexing circumstances of the present case, we conclude that the Bass IV model best approximates what equity requires. [¶ 47.] Affirmed and remanded for trial in accordance with these instructions. [¶ 48.] GILBERTSON, Chief Justice, AMUNDSON, Justice, MILLER, Retired Chief Justice, and ANDERSON, Lee, Circuit Judge, concur. [¶ 49.] ANDERSON, Lee, Circuit Judge, sitting for SABERS, Justice, disqualified. [¶ 50.] ZINTER, Justice, not having been a member of the Court at the time this action was submitted to the Court, did not participate.