899 F.2d 1514 (6th Cir. 1990), 89-3118, Portage II v. Bryant Petroleum Corp.

Docket Nº:89-3118.
Citation:899 F.2d 1514
Party Name:PORTAGE II and Portage IV, Plaintiffs-Appellants, v. BRYANT PETROLEUM CORP., et al., Defendants, Dr. Clarke N. Simm, Defendant-Appellee.
Case Date:April 06, 1990
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 1514

899 F.2d 1514 (6th Cir. 1990)

PORTAGE II and Portage IV, Plaintiffs-Appellants,

v.

BRYANT PETROLEUM CORP., et al., Defendants,

Dr. Clarke N. Simm, Defendant-Appellee.

No. 89-3118.

United States Court of Appeals, Sixth Circuit

April 6, 1990

Argued Oct. 2, 1989.

Rehearing and Rehearing En Banc Denied June 7, 1990.

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E. Joel Wesp (argued), Kevin J. Osterkamp, West & Osterkamp, Columbus, Ohio, for plaintiffs-appellants.

Joseph C. Winner (argued), Casey, McFadden & Winner, Columbus, Ohio, for defendant-appellee.

Before KEITH, JONES and GUY, Circuit Judges.

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KEITH, Circuit Judge.

Plaintiffs Portage II and Portage IV, Illinois limited partnerships, appeal from the district court's January 3, 1989 post-trial judgment which dismissed all claims asserted against defendant Dr. Clarke N. Simm ("Simm"). 1 Portage II argues that as a matter of law, the district court erred in finding for Simm on the claim of negligent misrepresentation particularly since the jury returned a verdict which the court had accepted. Furthermore, Portage II alleges that the district court abused its discretion in alternatively granting a new trial on that issue. For the foregoing reasons, we REVERSE and order the district court to reinstate the jury verdict of July 27, 1988.

I.

Portage II and Portage IV were formed for the sole purpose of drilling oil and gas wells in Portage County, Ohio. 2 The co-partners of each limited partnership, Gerald Mandel ("Mandel") and Ronald Tausend ("Tausend"), are financial consultants who organized the partnerships and sold limited partnership interests to investors. Bryant Petroleum Corporation ("Bryant"), a Nevada Corporation, sold oil and gas leases to Portage II and Portage IV. James Lindquist ("Lindquist") is the president and sole shareholder of Bryant.

Simm is a petroleum engineer who was employed by Bryant as a consultant at the time the oil leases were sold to Portage II. 3 Wray Petroleum Corporation ("Wray"), an Ohio corporation, subcontracted with Bryant to drill, complete and operate the Portage II wells. J. Robert Wray and Jack R. Torongo ("Torongo") were affiliated with Wray. Portage IV also contracted with Wray for the drilling and operation of its wells. During 1980 and 1981, James W. Greene ("Greene"), a geologist, prepared reports regarding the expected recoverable reserves from the oil wells drilled in Portage County.

In 1980, Bryant provided Mandel and Tausend with Simm's evaluation of Portage County. The evaluation was supplied to Mandel and Tausend in return for their consideration of syndicating a venture to drill oil and gas. Simm prepared various written reports and projections on the commercial amount of gas and oil recoverable from the Portage County wells. Each document, as well as written and oral communications to Mandel and Tausend, were made to induce them to invest in the oil leases offered for sale by Bryant and to maintain investment in the field.

On December 26, 1980, while Simm was still employed by Bryant, Portage II entered into contracts with Bryant. Portage II purchased ten leases from Bryant and entered into an agreement to drill and operate wells in Portage County. The agreement executed between Portage II and Bryant, gave Portage II the option to terminate its involvement in the project after three wells had been drilled. Portage II alleged that its decision to purchase and invest in the leases offered by Bryant was based solely on the information provided by Bryant and Simm. 4

In 1981, Portage II proceeded to drill seven wells. Relying on the information provided by Simm concerning the potential for commercial oil and gas development in Portage County, Portage II did not exercise

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its opt out provision. 5 Simm also encouraged Mandel and Tausend to invest in oil and gas leases in Nelson township. Simm provided written material to both men hoping that they would invest in the project. Portage IV's decision to invest also was made in reliance upon the representations made by Simm.

On December 11, 1985, Portage II and Portage IV commenced this action against several defendants 6 asserting claims of negligence, common law fraud and securities fraud under Rule 10(b)5 and Section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. Sec. 78j(b) (1982). Prior to trial, Portage II and Portage IV settled with all defendants except Simm.

A jury trial was held from July 14 through July 27, 1988. This appeal centers on the events that occurred after the close of the evidence.

On the afternoon of July 25, 1988, a charging conference was held between counsel and the court to arrive at the proper jury instructions. The next morning, the jury was instructed on the law and received specific instructions as to each cause of action. The jury was instructed at length regarding the law applicable to negligent misrepresentation and comparative negligence. In fact, on the issue of negligent misrepresentation, the court provided the jury with two sets of written questions referenced throughout the proceeding as interrogatories. In instructing the jury on the issue of comparative negligence the court stated:

This brings us to a discussion of the Ohio rule of comparative negligence. The plaintiffs, Portage II and Portage IV, may have been negligent and would nevertheless still recover damages from the defendant.

However, a plaintiff's negligence, if any, may not exceed on a percentage basis the defendant's negligence. This rule of law is known as comparative negligence.

It is comparative in the sense that the plaintiffs' negligence, if any, must be compared to the defendant's negligence, if any.

Thus, if you find by a preponderance of the evidence in the case that either of the plaintiffs was negligent and that such negligence proximately caused or contributed to its injury, then you would further determine to what extent that plaintiffs' [sic] injury resulted from its own negligence compared with [sic] the negligence, if any, of the defendant.

Now, I am going to give you two sets of written questions, which are called interrogatories, which you will answer if you do deliberate on this issue of negligent misrepresentation.

Using these interrogatories, you will decide by the greater weight of the evidence the percentage of the plaintiffs' negligence, if any, that directly and proximately caused its own damages and the percentage of negligence, if any, of the defendant which directly and proximately caused any damage to the plaintiffs. You will express this decision in the form of percentages.

Trial Transcript, Proceedings ("Tr.") at 29-30 (emphasis added). Neither the court nor the parties ever referred to these written questions as special verdicts. 7

That afternoon, the jury returned its verdict finding Simm guilty of negligent misrepresentation and Portage II contributorily

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negligent. In reviewing the jury's conclusions, specifically its conclusions on the negligence issue, the court commented:

You have then proceeded on to consider the claims of negligent misrepresentation. And in the case of the claims of Portage IV, you have answered the interrogatories indicating that you did find that the defendant was guilty of negligent misrepresentation and that the plaintiff, Portage IV, was also guilty of contributory negligence.

And you have assessed the negligence and allocated the negligence between the parties assessing 59 percent of the negligence to plaintiff Portage IV and 41 percent against the Defendant Clarke Simm and, accordingly, in accordance with my instructions have not determined any damages in that case because with those findings the plaintiff would be barred from recovery.

Now, however, in the case of Portage II, you have likewise indicated that the defendant was guilty of negligent misrepresentation and that the plaintiff was also guilty of contributory negligence.

However, your answer to question three in allocating a percentage of negligence allocated 18 percent to the plaintiff and 82 percent to the defendant although I see that originally you had reversed those findings, and they were crossed out. But you have not assessed any damages.

Now, if your answers to the interrogatories are really what you intended to find, then under the Court's instructions, you would have to determine damages in the case of Portage II because under that allocation of negligence the plaintiffs' negligence would be less than 50 percent, and the plaintiff would be entitled to recover damages.

So I think that I should send you back for further consideration.

Tr. at 55-58 (emphasis added).

On the morning of July 27, 1988, the court expressed concern about the jury's alleged "confusion" in its assessment of negligence with respect to Portage II:

They had originally written down, I forget their percentage, 82. They had attributed 82 percent of the negligence to the plaintiff and 18 to the defendant, crossed that out and reversed the figures and then, of course, they did not fill in the amount of damages so we have a completely ambiguous result.

Did they intend to find that plaintiff's negligence was less than defendant's or did they intend to find that plaintiff's negligence was more than defendant's?

Tr. 64. During this discussion, Simm's counsel raised the point that neither counsel had had an opportunity to review the interrogatories before they were presented to the jury. The court agreed that counsel had not reviewed the interrogatories and added that a verdict form had not been given to the jury. At no point, however, were the interrogatories reviewed by counsel before they were presented to the jury. The court concluded...

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