Opinion ID: 156355
Heading Depth: 3
Heading Rank: 6

Heading: Punitive Damages as an Impermissible Double Penalty

Text: 49 Okla. Stat. tit. 52, § 570.10(D)(1) (1998 Supp.), 15 provides that: 50 Except as otherwise provided in paragraph 2 of this subsection, where proceeds from the sale of oil or gas production or some portion of such proceeds are not paid prior to the end of the applicable time periods provided in this section, that portion not timely paid shall earn interest at the rate of twelve percent (12%) per annum to be compounded annually, calculated from the end of the month in which such production is sold until the day paid. 51 Okland invoked this statute and added a 12% interest figure to the underpayment amount it claimed for each contract. 16 Conoco now contends for the first time that this award of statutory prejudgment interest constitutes a penalty, and, accordingly, that an award of punitive damages on top of this statutory interest constitutes an impermissible double penalty under Oklahoma law. 17 We are unpersuaded for three reasons. 52 First, we are unpersuaded that the 12% interest provided under Okla. Stat. tit. 52, § 570.10(D)(1) constitutes a penalty in the sense asserted by Conoco--that it cannot coexist under Oklahoma law with a separate award of punitive damages. 53 Although the Oklahoma courts have not squarely addressed whether the combination of punitive damages and § 570.10 prejudgment interest is permissible, an examination of Oklahoma law convinces us that it is. [T]he common law remains in full force in [Oklahoma], unless a statute explicitly provides to the contrary. Tate v. Browning-Ferris, Inc., 833 P.2d 1218, 1225 (Okla.1992). Here the relevant statute does not exclude punitive damages. In fact, Okla. Stat. tit. 52, § 570.14(B) makes it clear that § 570.10 shall neither preclude nor impair the right of any owner to obtain through the district courts remedies available under existing law or additional remedies herein granted. 54 Furthermore, a comparison of § 570.10 and Oklahoma's punitive damage statute, Okla. Stat. tit. 23, § 9.1 (1998 Supp.), shows that different elements separate these awards. Exemplary damages may be awarded under § 9.1 only if the jury finds by clear and convincing evidence that the defendant has acted with reckless disregard for the rights of others or has acted intentionally and with malice toward others. Id. § 9.1(B), (C). Prejudgment interest under § 570.10, on the other hand, may be awarded to a plaintiff even without a showing of recklessness, intent, or malice. 55 The 12% prejudgment interest acts to compel compliance with the statute's requirement that proceeds be paid to those entitled thereto. See McClain v. Ricks Exploration Co., 894 P.2d 422, 431-32 (Okla.Ct.App.1994). Punitive damages, on the other hand, are intended to provide a  'punishment for the benefit of society as a restraint upon the transgressor, and a warning and example serving as a deterrent to commission of like offenses in the future.'  Maxwell v. Samson Resources Co., 848 P.2d 1166, 1172 (Okla.1993) (quoting Oller v. Hicks, 441 P.2d 356, 360 (Okla.1967)). Therefore,  '[w]hen a defendant's conduct is such as to amount to fraud, oppression or malice, or the act is wilfully and wantonly done with criminal indifference to the plaintiff's rights, exemplary damages are allowable.'  Id. 56 Consistent with this reasoning, the Oklahoma Supreme Court in an analogous setting has required the addition of prejudgment interest under Okla. Stat. tit. 12, § 727 even when punitive damages were also awarded. See, e.g., Timmons v. Royal Globe Ins. Co., 713 P.2d 589, 593-94 & n. 14 (Okla.1985). See generally Paper Converting Mach. Co. v. Magna-Graphics Corp., 745 F.2d 11, 23 (Fed.Cir.1984) ([The purpose of prejudgment interest] is to compensate for the delay a patentee experiences in obtaining money he would have received sooner if no infringement had occurred.... On the other hand, damages are trebled as punishment. There is no conflict in the award of both.). And, in Wagoner v. Bennett, 814 P.2d 476 (Okla.1991), the Oklahoma Supreme Court held that a tenant could pursue a common law action for conversion of property in addition to the statutory remedy for wrongful eviction because the elements of the two causes of action are different. Id. at 481. Accordingly, the Court held that punitive damages could be awarded on the conversion claim. Id. 57 The cases cited by Conoco in support of its argument are distinguishable. Thus, for example, Maxwell, 848 P.2d at 1172-73, and Culbertson v. McCann, 664 P.2d 388, 393-94 & n. 31 (Okla.1983), are cases involving other Oklahoma statutes, and stand only for the proposition that where wrongful intent is proven and damages are doubled or trebled, the addition of punitive damages is inappropriate because both constitute exemplary damages. See Maxwell, 848 P.2d at 1173. Here, a showing of intent is not necessary for awarding the § 570.10 interest, and the damages were not double or trebled before the award of punitive damages. 58 Cases such as Fleet v. Sanguine, Ltd., 854 P.2d 892, 897-98, 899-900 (Okla.1993), and McClain, 894 P.2d at 431-32, cited by Conoco because they referred to § 570.10 interest as a penalty, are best understood in their particular settings. They stand only for the general rule that prejudgment interest gives way to a limited exception to ensure a fair result. Cf. City of Milwaukee v. Cement Div., Nat'l Gypsum Co., 515 U.S. 189, 195, 115 S.Ct. 2091, 132 L.Ed.2d 148 (1995); General Motors Corp. v. Devex Corp., 461 U.S. 648, 655-57 & 655 n. 10, 103 S.Ct. 2058, 76 L.Ed.2d 211 (1983). In Fleet that circumstance was defendant's offer of judgment which must be treated as implicitly comprising its entire obligation in suit--inclusive of prejudgment interest. 854 P.2d at 900. In McClain the unusual circumstance was plaintiffs' refusal of royalties tendered by defendant. 894 P.2d at 432. In those situations, prejudgment interest could very well have been penal in nature. They do not suggest that willfulness, recklessness, or malice is required to award the statutory interest. The only requirement is that the proceeds were wrongfully withheld. See Fleet, 854 P.2d at 900. Wrongful intent is not required. 59 Second and in any event, as indicated above, the jury's damage award figure was not broken down into its constituent elements on the verdict form, thus it is impossible at the outset to accept Conoco's basic assumption that the statutory 12% interest figure was even awarded. Given the generality of the damages figure on the verdict form, we are unpersuaded that Conoco can demonstrate plain error on this issue beginning with its basic premise. 60 Finally, the damage award by the jury related to its finding of liability against Conoco on both tort and contract claims. Any award based on fraud, which we necessarily presume occurred, would support a separate award for punitive damages since, under Oklahoma law, different elements are required. 61 Accordingly, we remain unconvinced that Oklahoma courts would forbid punitive damages in addition to the statutory interest awarded by § 570.10 as an impermissible double penalty, 18 especially where, as here, the jury found the defendant liable on both breach of contract and several tort claims. 62