MOBIL OIL EXPLORATION v. UNITED STATES
In 1981, Mobil Oil Exploration & Producing Southeast, Inc. and Marathon Oil Co. both paid the Federal Government over $150 million in return for the rights to explore for and develop oil off the coast of North Carolina, provided that the companies received exploration and development permissions in accordance with the Outer Continental Shelf Lands Act (OCSLA), the Coastal Zone Management Act of 1972 (CZMA), and the regulations promulgated pursuant to OCSLA and CZMA. In 1990, the companies submitted an exploration plan, as required by OCSLA and CZMA, to the Department of the Interior for approval. Thereafter, the Outer Banks Protection Act (OBPA) became effective. The OBPA prevented the Secretary of the Interior from approving the exploration plan for at least 13 months. The state of North Carolina then objected to certification of the companies' plans under the CZMA. Before the Secretary of Commerce rejected Mobil's request to override North Carolina's objection, the companies filed a breach-of-contract lawsuit. In granting summary judgement for the companies, the Court of Federal Claims found that the Federal Government had broken its contractual promise to follow OCSLA's requirement to approve an exploration plan that satisfied OCSLA's requirements within 30 days of the plan's submission, which constituted the repudiation of the contract and entitled the companies to restitution of the payments. In reversing, the Court of Appeals concluded that the Federal Government's refusal to consider the companies' final exploration plan was not the operative cause of any failure to carry out the contracts' terms, because North Carolina's objection would have prevented the companies from exploring.
Does the enactment of a new statute, which prevents the Federal Government from following a contractual promise to follow the terms of pre-existing statutes and regulations, constitute the repudiation of a contract?
Yes. In an 8-1 opinion delivered by Justice Stephen G. Breyer, the Court held that the Federal Government broke its promise, repudiated the contracts, and must give the companies their money back. "We find that the oil companies gave the United States $158 million in return for a contractual promise to follow the terms of pre-existing statutes and regulations. The new statute prevented the Government from keeping that promise," wrote Justice Breyer for the Court, "therefore the Government must give the companies their money back."
Argument of Carter G. Phillips
Chief Justice Rehnquist: We'll hear argument next in Number 99-244, Mobil Oil Exploration and Producing v. United States, Marathon Oil Company v. United States.
Mr. Phillips: Thank you, Mr. Chief Justice, and may it please the Court:
This is a contract case in which my clients have paid more than $156 million for the right, as it said in... at Pet.
App. 175a, to drill for, develop, and produce oil and gas resources off the Outer Banks of North Carolina.
Later, Congress intervened in the Outer Banks Protection Act and declared, quote, that the Secretary... and this at page 161a of the appendix to the petition... the Secretary of Interior shall not conduct a lease sale, issue any new leases, approve any exploration plan, approve any development and production plan, approve any application for permit to drill, or permit any drilling, for a period of not less than 13 months, and potentially for an indefinite period thereafter.
Congress could hardly have been any clearer in its efforts to repudiate the basic lease obligations that the United States had undertaken with respect to the Mobil and Marathon leases here.
Indeed, Congress specifically identified by name the Mobil Oil Corporation in the context of this particular statute, and said that it wanted to bring this lease to a halt.
Not surprisingly, it had exactly that effect.
Not only did the Government categorically repudiate its obligations under the lease, but at the first opportunity in August of 1990, when Mobil, on behalf of the other producers in the Manteo Unit, submitted a plan of exploration, and sought approval to go forward at the very first steps under this lease, what the United States did, and it was quite clear about this, was it said, this is approvable in all respects under the Outer Continental Shelf's Lands Act, but we cannot approve it because of the Outer Banks Protection Act.
We are prohibited from doing so, and as a consequence we suspended the lease.
And then when the Secretary addressed the question from North Carolina as to whether or not the plan should be disapproved or otherwise modified, the Department said categorically, we cannot do that because it is approvable in all respects based on the 2,000-page report that had been submitted by the United States just months before this action was taken.
Justice O'Connor: Mr. Phillips, may I ask, this is a case with some complex provisions, and is it the case that under the lease the Government had the power at least to suspend the lease?
Mr. Phillips: Well, it certainly had the power to suspend the lease under certain conditions in section 5 of the lease that said that if there is a threat of irreparable injury to the environment, irreparable and significant injury, there was certainly the opportunity to do that.
But of course there's clearly, 1) never been a finding by the Secretary of Interior or anyone at Interior along those lines and, indeed, the Outer Banks Protection Act itself cannot substitute for that finding, because the Congress in the Outer Banks Protection Act made no effort to conclude that there was a serious threat.
All it said was that there were concerns that had not been fully allayed even though this was in the face of a 2,000-page report.
Justice Breyer: I may not understand this.
I'm stopping you because I want it clarified.
I thought to suspend a lease is a technical activity.
The suspension of a lease means that the companies need not pay a series of payments.
The suspension of the lease does not mean that they suddenly do not have a time-related obligation in the Government to approve or to disapprove by a CZMA the plan of exploration.
Now, am I right about that, or not?
I mean, you are suspending the lease.
What you're complaining about is not... you're complaining about the fact that they did not within a specified time either approve or disapprove that plan, and you believe, and they don't contest it, they would have had to approve it under CZMA.
Mr. Phillips: Right, and part of that's because...
Justice Breyer: Now, is the suspension of the lease... did they have a right under this reg?
This is hitting me cold suddenly.
I mean, did they have a right under the reg to suspend the lease, not in just the sense, no payment, but in the sense that we can suspend the plan of exploration approval?
Mr. Phillips: My guess is that under the Outer Continental Shelf Lands Act, if they had made the specific kinds of findings that are provided for in section 5, they could bring all of this to a halt, including their obligation under the 30-day requirement, but of course prior to the time...
Justice Scalia: But those findings are environmental findings?
Mr. Phillips: Yes, under the...
Justice Scalia: Serious risk?
Mr. Phillips: Serious harm, yes.
Justice Souter: And contrary to that they had a 2,000-page report that said there wasn't one, isn't that...
Mr. Phillips: They said there was no significant risk created as a consequence of that, and while the Government has made the effort in this Court to suggest that there's no materiality in this context because the Outer Banks Protection Act basically supplies the findings that could have otherwise been supplied under the Outer Continental Shelf Lands Act, it is absolutely clear to me that that cannot be the case.
The Outer Continental Shelf Lands Act first of all does have a set of timing requirements and a certain specific suspension obligations that look to serious threats of harm, and also examines these things on the basis of environmental considerations.
The Outer Banks Protection Act, in stark contrast, first of all has no timing element to it.
Once you get into the studies that are required under the Outer Banks Protection Act, there is no requirement to come back at any time within a reasonable period and, second of all, the question of environmental concerns is completely wiped away and, third of all, and I think perhaps in some ways most important, there is a socioeconomic obligation to collect information with respect to socioeconomic effects that you might engage in on the outer continental shelf lands by this exploration and production, and none of that occurs in the Outer Continental Shelf Lands Act.
That's strictly a function of the new amendments under the Outer Banks Protection Act.
Chief Justice Rehnquist: Mr. Phillips, it seems to me there are some factual issues here.
You claim repudiation.
You claim a material breach.
You seek restitution.
The Government says you may have waived by continued performance.
Are the findings of the... of a claims court judge in this case sufficient to support your view?
In other words...
Mr. Phillips: Absolutely.
Chief Justice Rehnquist: do you have to argue for some factual determination here different from that made by the claims court?
Mr. Phillips: No.
We have no... there's no dispute about what happened in this particular case.
The question is, given, 1) that Congress came in and categorically repudiated all of its obligations, given 2)... and these are undisputed facts... given, 2) that the Secretary refused to approve a POE approvable in all respects and second, again, subsequently refused to approve a POE even though it was in full compliance with the Outer Banks Protection Act, so there is substantial nonperformance in the face of a repudiation.
Hornbook law for 300 years and this Court's decision in Nash v. Towne makes clear that under those circumstances the violating party is not free to keep something for nothing.
Chief Justice Rehnquist: But the Government says you waived the acceptance of the repudiation, if that's the right phrase, by continued performance.
Now, did the claims court judge make finding... was that raised in the claims court?
Mr. Phillips: That was... one aspect of that was raised in the claims court, and the claims court I think viewed it as sufficiently insubstantial.
He didn't bother to address it specifically.
They did address the suspension, our exercise of our rights under the memorandum of understanding, not under the lease but under the memorandum of understanding, to suspend these leases during the period of time that the CZMA objections were ongoing.
They identified that in the claims court as the only basis for waiver.
But even if you give the United States the benefit of the opportunity to put waiver on the table at this stage, based on our filing of the exploration plan... based on our filing an appeal of the CZMA objection and then based on the suspensions, as a matter of law that cannot possibly represent an intentional relinquishment of our rights under this contract, particularly in the context of Court of Federal Claims litigation, where you have no right to seek specific performance.
You have no right to seek a declaration of your rights.
And in this case it's even worse than in any other case, because the United States could with all credibility argue until 1996 that they had never breached this contract because of the unmistakability doctrine and the sovereign acts doctrine that this Court had not repudiated at least until the Winstar decision.
Justice Stevens: Mr....
Mr. Phillips: We didn't even know if there was a breach of this contract...
Justice Stevens: Can I ask you one question?
The facts are a little complex here.
There's another lawsuit that's been pending and stayed, as I understand it, in which you're challenging the decision of the Secretary of Commerce not to override the State's objections.
Is that case still alive?
Mr. Phillips: That case is still alive.
Justice Stevens: Now, the thing I want you to explain to me, and I'm sure you have an answer to this, if you filed that case seeking to protect your rights under the whole program, and if that's still pending, how can you simultaneously say that the whole deal is off?
Mr. Phillips: Essentially for the reasons I was just explaining to you, Justice Stevens.
Since we didn't know, and the Government even today is saying there's been no breach of contract, and we have no mechanism by which to obtain any kind of an assessment of what our rights are.
All we've done is essentially try to maintain the status quo and act reasonably in response to the Government's repudiation of our rights.
Justice Stevens: But let me ask you this.
If... say you lost this case, just hypothetically, but yet, then you went ahead with the other case and you won that case, would you then not be able to develop the leases?
Mr. Phillips: Well, at that point we would be able to go to the plan of exploration, but we would still have... well, at this stage now the Outer Banks Protection Act has been repealed, but...
Justice Stevens: Is it not...
Mr. Phillips: assuming the Outer Banks Protection Act was still in place, we would still have the same objection.
Justice Stevens: I guess the ultimate question I'm trying to ask, is it not conceivable that you could lose this case and still develop the properties by winning that case and get your approvals later?
Mr. Phillips: I mean, in reality, and if you're asking for a practical answer as opposed to a theoretical answer, as a practical answer, no, because all of the other leases surrounding us have all been turned in because all of the other leasehold owners had caved years ago, rather than try to litigate this matter, so that the Manteo Unit no longer exists as a unit.
It's all... all of its participants have walked away from this.
Justice Stevens: But you would have the legal right to develop it if you won that case?
Mr. Phillips: Well, we would have the legal right now to have the Secretary approve our plan of exploration.
Justice Stevens: And if they approved it, then you'd have the legal right to go out and drill the wells.
Maybe you can't do it because of changed circumstances.
Mr. Phillips: Well, we would have to get... we would still have to get permits, and we would have to go through all of the approvals of the Outer Continental Shelf Lands Act, that's true.
We try to preserve the opportunity to retain our relationship with our contracting partner in this context, that is, the United States, as a consequence of this, given that there's no mechanism for specific performance and no... or declaratory relief.
All we could do is basically try to preserve as much of the status quo ante as we could, while at the same time being as clear as humanly possible that what we really wanted was to take advantage of the repudiation, seek restitution, and be out... and be done with this particular...
Justice Kennedy: So...
Justice Ginsburg: Mr. Phillips...
Justice Kennedy: is your answer, then, that by attempting to preserve your ability to perform, you do not foreclose yourself from seeking restitution when the other party has repudiated the contract?
Mr. Phillips: That is exactly our position, that in the ordinary course it's an election of remedies issue which comes much later in the process.
We didn't... and all we did was to try to preserve our ability to have an election of remedies at the appropriate time, and if we have to elect them today, I'd take the $156 million, Your Honor.
Justice Ginsburg: May I take you back to where Justice Stevens was, because you mentioned very quickly that there's a statute in this picture, the CZMA, and as far as I understand your argument, you are not in any way suggesting that the States couldn't... subject to the override of the Secretary of Commerce, the States couldn't say, even if you had every approval from Interior promptly, the State could still say, North Carolina could still say, no go, no exploration.
We think you're out of whack with our coastal management plan.
Mr. Phillips: Right.
I mean... and I mean, it's subject to that last statement, of course, that they would have... there would have to be a reasonable basis for in fact saying that there's an inconsistency with the Coastal Zone Management Act.
But yes, subject to that, the only ability to go forward under those circumstances would be to go to the Secretary of Interior, or of Commerce, excuse me, and seek to have the objection overridden and, indeed, in the dozen cases between 1984 and 1994 in which that course has been followed, the Secretary in fact did overturn State objections under the CZMA.
Justice Ginsburg: Here he didn't, at least in the first round.
The Secretary of Commerce did not...
Mr. Phillips: Did not in 1994, however.
Justice Ginsburg: And there's one peculiar feature of this case that follows on to your answer that yes, North Carolina could do this subject to the override of the Secretary of Commerce.
It's almost as though the Outer Banks act has given you a way out that you never would have had without that Outer Banks act.
In other words, if there were only the outer continental shelf act...
Mr. Phillips: Right.
Justice Ginsburg: you could get everything you wanted from Interior and North Carolina could still say no.
It's only because there is this other act that looks like it's stopping you in your tracks that enables you to repudiate, that enables you to seek...
Mr. Phillips: No, seek restitution.
Justice Ginsburg: restitution.
Mr. Phillips: There are two answers to that.
First of all, that may be true, because that is exactly what restitution seeks to accomplish, which is to acknowledge or recognize that in certain circumstances events may work to the fortuity of the innocent party in a way that allows them to seek restitution where... even though it's a losing contract.
I mean, that is the basis of the Restatement 373 illustration.
One says that if you pay $20,000 to buy land, and the land's value drops to nothing, and the other side still doesn't, for whatever reason, give you the property, you are still entitled to the $20,000.
The other side doesn't get something for nothing under those circumstances, so you can classify it as a fortuity, but it is right at the core of what 300 years of restitution law is designed to allow us to do.
The second part of this, though is, you know, the expectations of the party at that point in time, in 1982, was that this was going to go through quite cleanly, and the evidence of that is pretty clear.
First of all, the first two requests for exploration plans were both approved by the Secretary and by the State of North Carolina with no objection at that point in time, and what... of course, it took us a while to develop the kind of environmental evidence we would need in order to put together this kind of a novel arrangement in this particular setting, and so time certainly ran through, but our expectations all along were that we would be in fact able to drill.
I mean, that's what my clients are in the business of doing.
They're not in the business of generating litigation.
They're in the business of generating oil and natural gas, while at this stage I think they're quite content to walk away and try to get back the money the Government took for doing nothing...
Justice Kennedy: Is it part of...
Mr. Phillips: they would have preferred to be able to drill.
Justice Kennedy: Is it part of your submission that had the POE been approved, you then would have been in a stronger legal position to insist upon obtaining permits, or of overruling the North... North Carolina's objections in a subsequent court action?
Is that part of your submission, or...
Mr. Phillips: I'm not sure if it...
Justice Kennedy: I didn't see that in the briefs, and I...
Mr. Phillips: I'm not sure it's so much in the subsequent court action.
I think if the POE had been approved and the State had objected to the plan of development at that point in time, I think we would have had a very substantial argument for going to the Secretary of Interior and asking the Secretary to set it aside as overbalanced, instead of getting into the Outer Banks Protection Act problem of saying, well, what we don't have is enough information, and we don't have enough information about the environment, we don't have enough information about bottom blowers...
Justice Kennedy: Well, at least your legal position with the Secretary would have been enhanced but for what you allege to be the repudiation.
Mr. Phillips: Yes.
I think there's no question that we would have had an opportunity... our working assuming in 1982, when we entered into this agreement, was, we would get our approvals... remember, in 1982 the Outer Continental Shelf Lands Act had been in effect for almost 30 years.
The Secretary had never disapproved a plan of exploration, and I think it's important to recognize that.
That was the basis, that's the essence of the bargain.
It's not, were we ever going to ultimately get oil in this case.
The essence of the bargain was, were we going to get performance by the United States Government?
That is, was it going to apply the Outer Continental Shelf Lands Act and the legal standards embodied in there and allow us to move forward under those circumstances?
If they had followed that course, we would be now drilling hopefully for 6 trillion cubic foot of natural gas.
They didn't follow that course.
They repudiated, they materially breached, and the appropriate course of action for the Court to follow at this stage is restitution.
If there are no questions, I'd waive the balance... I'd reserve the balance of my time.
Argument of Kent L. Jones
Chief Justice Rehnquist: Very well, Mr. Phillips.
Mr. Jones: Mr. Chief Justice, and may it please the Court:
At page 118 of the joint appendix, Mobil tells us that the leases involved in this case encompass what may be the largest hydrocarbon deposit discovered in the United States since the Prudhoe Bay field in Alaska in the 1960's.
At the same time, the tract of land on which these leases are located, the point of the Outer Banks off of North Carolina, is unquestionably one of the most unique and important environmental resources on the Eastern Seaboard.
In this context, it is perfectly understandable that it is a matter of high importance to North Carolina and to the United States to determine whether this enormous hydrocarbon resource could be developed without causing undue harm to the environment, and the statutes under which the leases are issued and to which they are subject is highly protective of these important environmental interests.
Justice Scalia: That's okay.
They just want their money back.
I mean, they're perfectly willing to protect the environment and call the deal off.
Mr. Jones: Well...
Justice Scalia: But the issue before us is whether they get their money back.
Mr. Jones: Well, that is an issue before us, and under the leases, under the terms of the leases that are applicable to us as well as to the lessee, the United States has the absolute right to suspend all operations on the lease, including consideration of these kinds of exploration plans, whenever the United States determines that there is a threatened harm to the environment, or that economic... I'm sorry, environmental studies...
Justice Souter: Right, but his argument is that you've never determined it.
Chief Justice Rehnquist: You never made that determination.
Mr. Jones: Well, no... I'm sorry, but I disagree with both of those.
In 1990, when Congress enacted the OBPA, Congress determined that there were threats of environmental harm...
Justice Breyer: I don't have that in your brief.
Chief Justice Rehnquist: No...
Justice Breyer: That is, what I have in my... in the statute is that it says, regulation... and here I gather there was no regulation.
The regulation prescribed by the Secretary allows the suspension...
Mr. Jones: Yes.
Justice Breyer: if there is, and these are the key words, a threat of serious, irreparable, or immediate harm to the environment, among other things.
Then I looked at the best finding that you can find as a substitute, and you cannot find a regulation because there is no such regulation.
Mr. Jones: I'm sorry...
Justice Breyer: I take it there is no regulation by the Secretary that says that, or that provides for... that makes that finding.
Mr. Jones: You mean a finding by the Secretary.
Justice Breyer: No.
Mr. Jones: There is a regulation.
Justice Breyer: But not that has a finding.
Mr. Jones: There is a regulation that says we can suspend whenever... to do an environmental study, or to investigate threatened environmental harms.
Justice Breyer: That... I'm sorry.
Mr. Jones: That's what the regulation says.
Justice Breyer: That...
Mr. Jones: What the OBPA, what Congress found in enacting the OBPA was that there were both threatened environmental harms...
Justice Breyer: Why don't you say... let me pose a question, though I may not do it perfectly, then you'll see what... I thought the statute says there has to be a regulation, and it says if there is a threat of serious, irreparable or immediate harm.
Then I look to what you say in your brief about that, and it seems to me the best you can do is a finding by the conference committee of the Congress which says that, quote, it is a reasonable action to prevent a public harm that could result from lack of such information, and it...
Mr. Jones: There's...
Justice Breyer: My question is, it doesn't sound to me like a finding that it would be a reasonable thing to do to have the suspension.
There is a finding that there is a serious threat, a threat of serious, irreparable or immediate harm.
Mr. Jones: If you...
Justice Breyer: Now, that's my question.
Mr. Jones: Okay.
If you look at pages 159 and 160 of the petition appendix in the Marathon petition, where the OBPA findings are set out, one of those findings is item number...
Chief Justice Rehnquist: These were in the statute?
Mr. Jones: They're part of the Outer Banks Protection Act.
These are the findings that were part of that act, and the third finding under (a), 6003(a)(3) is that a major...
Chief Justice Rehnquist: Where are you... what page are you reading from, Mr....
Mr. Jones: 159a of the Marathon petition.
Chief Justice Rehnquist: Yes.
Mr. Jones: 159a.
Chief Justice Rehnquist: 15... thank you.
Mr. Jones: The petition number is 99-253.
It's the Marathon petition.
In any event, the third finding of Congress was that a major industry in coastal North Carolina is subject to potentially serious... significant disruption by off-shore gas development.
Now, this really goes to the heart...
Chief Justice Rehnquist: That isn't the same finding as the statute calls for.
Mr. Jones: It is, because what the statute... and that's the confusion that I need to clear up.
This is very important.
The statute says that if there is a threat of a harm to the marine coastal or human environment, then... then the lease may be suspended.
The statute in 1334(i), which is also in the same appendix at page 102a, defines the term, human environment for the purposes of this statute to include... and I'll paraphrase... adverse effects on the local economy.
This is an unusual...
Chief Justice Rehnquist: Where... where...
Mr. Jones: environmental determination.
Chief Justice Rehnquist: Where are you reading from?
What are you...
Mr. Jones: Page 102a of the Marathon petition...
Chief Justice Rehnquist: Yes.
Mr. Jones: appendix, at the bottom, item...
Chief Justice Rehnquist: Human environment?
Mr. Jones: Human environment.
In enacting the OCSLA Congress did something a little different than it has in normal environmental statutes.
It has put into the statute a requirement that the Secretary review and analyze threatened harms to the... if you'll allow me to paraphrase, the local economy, and how that affects people who live in the coastal environment, and that gets us to one of the hearts of what Congress was concerned about in the OBPA, because the National Research Council had told Congress that the MMS had failed to look at this issue.
The environmental study panel that Congress put together under the OBPA concluded that the MMS had failed to look at this issue.
It needed to be addressed.
And Secretary Lujan 2 years into his... after... on completion of his review that Congress required also concluded that the MMS needed to make further investigation of this issue by ordering the two studies that Mobil wants to dismiss as socioeconomic studies.
These are studies...
Justice Scalia: But the need to make further investigation does not equate with a finding of immediate or serious danger.
Mr. Jones: Well, there was a...
Justice Scalia: That's what you have to get to, and I keep listening for...
Mr. Jones: Immediate or serious.
Justice Scalia: where that finding is.
Mr. Jones: Yes, immediate or serious, and one of... and what I quoted to you from the findings of the OBPA says that a major industry is subject to potentially significant disruption.
Justice Breyer: You tell me where you discuss that in your brief, because I didn't... I didn't really have that one.
When I looked at the brief what I had is on page 32, where you discuss the finding of the conference report, and now I'm...
Mr. Jones: Well, we only...
Justice Breyer: totally not up to speed...
Mr. Jones: Right.
Justice Breyer: on what you just read me.
Can you just tell me where in your brief you discuss that finding?
Mr. Jones: I can't... I'm not sure that we discussed that finding in the brief.
Justice Breyer: Well, if that... if that finding is so obvious, then why didn't you discuss it in your brief?
I mean, if that's the...
Mr. Jones: Well, I'm not sure that we had enough pages to discuss every possible issue in this case.
Justice Breyer: No, no, just give... all right, but...
Mr. Jones: I mean, that's an honest answer, because I can tell you from working on this brief, there were a lot of issues that had to be narrowly dealt with in an abbreviated fashion, and perhaps unfortunately this was one, but the point is that in...
Justice Breyer: cite.
Let me just write it down, because I want to be sure that I read it.
Mr. Jones: Cite to which?
Justice Breyer: To the finding of Congress that you think was equivalent to...
Mr. Jones: I think there's...
Justice Breyer: the threat of serious, irreparable or immediate harm.
Mr. Jones: It was... again, I quoted from it at page 159a of the...
Chief Justice Rehnquist: That just says potentially.
Mr. Jones: Yes.
It's a threatened harm.
That's all that's required, and that's also important.
All that's required for a suspension is that there be a threat of harm, and then we're supposed to investigate, and if we...
Justice Scalia: Is subject to.
What is subject to?
Does that mean an immediate threat?
It says, is subject to potentially significant...
Chief Justice Rehnquist: It's... that's vague, typical congressional language...
Mr. Jones: I... well...
Chief Justice Rehnquist: you know, backing back and forth.
Mr. Jones: from my perspective, Chief Justice Rehnquist, this is authoritative congressional language that directs the Secretary of Interior to conduct a review to determine whether he is capable...
Chief Justice Rehnquist: Okay.
I agree with the... but you're saying it's not only directs the Secretary, but it suffices for the finding required under the other law, and I'm saying I don't think it does.
Now, we can disagree on that.
Mr. Jones: The other law that applies is simply a regulation that says we can conduct... we can suspend a lease whenever we need to perform an environmental study.
That's what the applicable law is.
We can suspend the lease to perform an environmental study.
Justice Souter: No, but isn't... isn't it...
Mr. Jones: That's what Congress directed the Secretary to do.
Justice Souter: Isn't it the case, though, that the lease, which in effect is the contract between you, was referring to what the... was referring to contingencies that could occur under the law and under the regulations as they stood at the time the lease was passed, and quite apart from the Chief Justice's objection, if I understand your argument, your argument is that this issue was raised by subsequent congressional action, and if it was raised by subsequent congressional action, it's irrelevant, as a point in your favor, in construing the lease.
Mr. Jones: This issue, the effect of development on the human environment, was in the statute, OCSLA.
It's in section 1334(i) of the OCSLA, and I'm quoting a statutory provision that preceded the adoption... the enactment... I'm sorry, any of this.
I mean, this goes back to the 1970's.
Justice Souter: But all of the studies and the further inquiries were being made under the Outer Banks Act, and the two oil companies have gotten in the record the letter, as I recall, addressed to the Governor of the State saying everything's fine with respect to the law except, I may not give an approval as a result of the Outer Banks act.
Mr. Jones: The letter to which you're referring was not written to Mobil.
It was written to a Governor of North Carolina.
It was written by a regional supervisor.
At the time that that letter was written, the Secretary of the Interior had the responsibility to make these determinations, not the regional supervisor.
Justice Souter: So you're saying that does not bind the Government...
Mr. Jones: I'm saying it...
Justice Souter: because it was unauthorized?
Mr. Jones: Well, it's not binding.
It's certainly not binding, because...
Justice Souter: But it was not... in other words, the Government...
Mr. Jones: Congress had already...
Justice Souter: It was not the Government's position, in other words.
Mr. Jones: Certainly not.
Congress had already enacted the OBPA and determined that additional environmental analyses needed to be performed because of threatened harms, not only the one that we have already discussed...
Justice Souter: But we may not consider that letter even for the purpose of determining whether, under the law and regs as they stood at the time of the lease, there was any basis for the Government to refuse to approve the POE.
We cannot consider it even for that purpose, you're saying?
Mr. Jones: I frankly don't understand exactly what your question is, but I will...
Justice Souter: Let me start again.
My basic premise is that what the Government is authorized to do under the lease depends on the terms of the lease and, to the extent that there is reference to statutes or regs, it refers to statutes or regs at the time the lease was signed.
The letter that we're referring to appears to be a statement on behalf of the Government that so far as the lease, statutes, and regs at the time of the lease are concerned, there is no basis for the Government not to approve the POE.
It is nonetheless not approving the POE because of obligations upon it under the Outer Banks act which was subsequently passed.
My question is, may we consider the letter for the purpose of understanding that that was the Government's position when the letter was sent?
Mr. Jones: That was not the Government's position.
That was a... again, that was not a formal communication to Mobil.
That was a piece of correspondence from a regional supervisor to another interested party.
Justice Souter: And you're saying it may not be considered as evidence for any purpose.
I guess that's what you're saying.
Mr. Jones: Certainly not... it is certainly incorrect.
Let me put it that way.
The document... the exploration plan was not approvable because Congress, and, we believe, within its authority, had directed the Secretary of Interior to conduct an appropriate environmental investigation to analyze the environmental harms that the MMS had not sufficiently evaluated.
I mean, frankly, one of the things that we have going on here is a question of who's in charge.
Can Congress tell the Secretary of the Interior how to perform his responsibilities under this statute?
Justice Souter: Sure it can, but it can't amend the terms of the lease.
Mr. Jones: No, it can't, and it didn't purport to.
What Congress did in this case is exactly like what happened in 1898 in this Court's opinion in the North American Commercial Company case.
Now, in that case there was also a Federal lease.
The Federal lease allowed the lessee to take 60,000 seals a year in Alaska, or such lesser number as the Secretary of the Treasury determined was appropriate to protect the species.
The United States, 2 years into that treaty, after having allowed 60,000 seals a year to be taken, made a treaty, which to protect the species limited the number of seals taken to 7,500.
The lessee sued saying that the United States can't tell the Secretary of the Treasury... I'm sorry.
I may have said that wrong.
It was the Secretary of Treasury who was supposed to make the decision there... can't tell him how to exercise his discretion, and this Court said that... it rejected that claim and found there was no breach, and the reason applies directly here.
The Court said, the United States is the lessee, is the lessor.
The United States is the party to this contract, not the Secretary of the Interior, or the Secretary of the Treasury.
The Secretary is merely the agent of the United States, and the United States, as the real party at interest under these leases, can direct its agent, the Secretary of the Treasury or Interior, to perform an act that is within the rights of the Government under the lease.
Now, it was plainly within the rights of the Government under the lease to suspend the lease performance to conduct these environmental investigations.
It should be common ground that the Secretary of the Interior had that authority, and because the Secretary had that authority under the lease, the United States, as the real party at interest, could direct him to do so, which is what happened here.
Justice Breyer: I wouldn't say that was a... just one of a thousand issues.
I'd say that's your basic point...
Mr. Jones: That's...
Justice Breyer: and I take it that it's also... yes.
Mr. Jones: That is our basic point on the question of breach, the first issue.
Justice Breyer: in the brief.
Mr. Jones: We did.
We have relied completely on that...
Justice Breyer: Yes, you did, but...
Mr. Jones: in our brief.
Justice Breyer: the key point I think, if I'm right, is that was there a finding of a threat of serious, irreparable, or immediate harm, and now we're back where we started, is that right?
Mr. Jones: I hope not, because I hope that it is as apparent on your further review of this material as it was to me that that's exactly what Congress said it was concerned about.
That was exactly what Congress wanted the Secretary to address, and that's why it took the actions that it did to compel him to exercise the rights of the United States under these leases.
Now, I want to address briefly the suggestion...
Justice Kennedy: Before we leave this point, is it your position that, had Congress made this finding at the... as you call it, at the time the lease was negotiated, that it's quite likely the oil companies still would have entered the lease?
Mr. Jones: I have... I... the only... yes, because all that Congress said is, make a realistic review of these environmental issues.
That should have been...
Justice Kennedy: No, but you earlier said that it's a finding that absolutely forecloses...
Mr. Jones: No, no, no.
This... I need to get clear about this.
What is needed in order to conduct the review is a threat of harm.
Now, if the investigation of that threatened harm results in a finding that there's a probable harm, then the Secretary may cancel the leases, and the leases... the moneys would be returned.
But if, investigating the threatened harm, there is no resulting finding of a probable harm, then the lease suspension is terminated, operations recommence and, under the regulations throughout this entire period the substantial rights of the lessee are protected by an automatic, rent-free extension of the lease for the period that the investigation is occurring.
Now, one of the things that Mobil says is, but there's a 30-day approval period in the statute for exploration plans.
Well, that, I... I think they may have backed away from that here, because it's quite clear in the legislative history and, indeed, in the text of the statute that that 30-day approval period, like any other period that applies under this statute, may be extended and suspended whenever the Government concludes that a suspension is warranted and that, of course, is exactly the reason that these leases were suspended by the United States.
But even if Mobil could find a basis for saying that we'd breached the lease, they still would not be entitled to rescission unless they established that there was a material breach, one that, in the words of the Second Circuit in the Frank Felix case, goes to the root of the agreement and destroys its essential object and, plainly, Mobil can't satisfy that requirement for two separate reasons.
The first is that time of performance is not the sort of thing that routinely in the eyes of the law is of the essence and, plainly, it was not of the essence here because the document itself authorizes suspensions for environmental studies to be conducted and protects the rights of the lessee while those are occurring by giving him rent-free extensions of the lease provisions.
Justice Scalia: Well, I mean, you know, true, time is normally not of the essence, but that phrase means, you know, if you're 1-minute late it's no big deal.
It doesn't mean that you can perform at an unreasonably late time and it's okay, unless you've said you have to perform within a reasonable time.
Mr. Jones: I...
Justice Scalia: Reasonable time is of the essence, and if you have not approved these operations within the reasonable time that the contract envisioned, it seems to me you're in breach of the contract.
Mr. Jones: Like all other issues of materiality, ultimately you're looking at a question that requires you to look at all the facts and circumstances, and my point is simply that the facts and circumstances of this lease are plainly that these kinds of suspensions are contemplated.
They are understood.
It's known it's going to happen.
Indeed, as this Court says...
Justice O'Connor: Well, it was...
Justice Scalia: Known that Congress is going to pass a new statute making a finding that under the contract is supposed to be made by an executive official which could be reviewed by a court, as I assume a congressional finding cannot be?
Mr. Jones: I don't understand that... Congress in the OBPA didn't usurp authority from the Secretary of the Interior.
They directed him to carefully exercise his authority to conduct investigations that he had failed to do and which, after Congress directed him to, on further reflection he decided yes, I should do those additional studies.
Chief Justice Rehnquist: Well, the claims court judge... I'm reading from 71a... it said, clearly the old... he said, clearly the OBPA imposed severe, burdensome new conditions upon the Department of Interior's obligations under OCSLA to approve POE's offshore North Carolina.
Now, I take it you disagree with that.
Mr. Jones: Yes.
The OBPA did not alter by one wit or jot the substantive standards by which the Secretary of Interior ultimately was... is to determine whether to approve the plan of exploration.
The OBPA simply said, exercise the rights of the United States under this lease to investigate these important environmental issues in a manner that you have so far failed to do.
Justice Ginsburg: Are you saying that...
Mr. Jones: supervisory.
Justice Ginsburg: if we had nothing but the outer continental shelf, that the Secretary, who was on the verge of giving approval to beginning exploration, on the verge of that when the second act passed, that the Secretary was out of compliance with the Outer Continental Shelf Act at the time the next act intervened?
Is that what you're saying?
Mr. Jones: Well, I'm saying that Congress had a justifiable concern about the inadequacy of the environmental, including human environmental analyses that had been conducted thus far.
It had received information from the National Research Council advising it of the inadequacies of these investigations that had been conducted to that date, and it directed the Secretary to conduct a thorough, realistic review.
Justice Breyer: What did it buy?
What was Mobile buying if they weren't at least buying a promise from the Government that they'd get an exploration permit?
They might not ever be able to drill, but at least we get our exploration permit if we comply with OCSLA, or CZMA, or whatever they are.
Mr. Jones: Well, that's the question.
Justice Breyer: Yes.
Well now, what else could they have been buying, because in these things I'd imagine they think they're never going to be able to drill...
Mr. Jones: I mean, that's...
Justice Breyer: but we'll take a risk.
Mr. Jones: That's the question.
Had they complied with OCSLA...
Justice Breyer: No... oh, well...
Mr. Jones: and the answer is no...
Justice Breyer: I...
Mr. Jones: because the Secretary had not yet been in the position to make the determination that he was required to make.
Justice Breyer: Obviously, if that's so you're going to win on those grounds, et cetera, if all that's relevant.
I'm addressing only the point of materiality.
Mr. Jones: Okay.
Justice Breyer: I'd say on that question, what are they buying if they're not at least buying a promise that, look at this law.
It says we give you your permission within 30 days.
You might never drill exploratory wells, et cetera, but at least you get a certificate from us within 30 days if you comply and... you know, et cetera.
And now, assuming that they complied with that act, that preexisting act, didn't they at least buy that promise?
Mr. Jones: Well, that, of course, is an assumption that I can't follow along on your hypothetical with, because plainly there was no compliance with the OCSLA ultimately, and I think, however, the answer...
Justice Breyer: Did they buy the promise?
You could follow this far.
Did they buy the promise that, if you comply with the preexisting, whatever those were there, you get the POE?
Mr. Jones: I think that what they probably bought was a right to pursue the procedures that are established in order for them to obtain this and that, of course, is where we are.
We're in the middle of those procedures.
We haven't repudiated them.
In fact, we're fully ready to go forward.
And that leads me to the second reason why the alleged breach isn't material which is that, as the court of appeals correctly explained, at all times, before the OBPA was enacted, while it was in effect, and even to this very minute, Mobil is conclusively barred from taking any actions to drill or develop these leases by the entirely separate provisions of the Coastal Zone Management Act.
That was a statute that Congress enacted to give the States a voice in the development of these leases and, as this Court said in 1984 in the Secretary of Interior case, lessees need to be well aware of these restrictions, because they are significant, and they can cause substantial delays in any development of Federal leases, and one of...
Justice Scalia: Mr. Jones, you're essentially saying that these savvy businessmen bought a commitment from the Government that was dependent upon not just a finding by some expert board, or by some Secretary, but that was ultimately dependent upon whatever finding Congress... that, you know...
Mr. Jones: No, I'm not saying that.
Justice Scalia: that scientifically precise body...
Mr. Jones: Again...
Justice Scalia: was likely to make in the future?
Mr. Jones: Again, what we're deciding is that what...
Justice Scalia: This is a crazy contract...
Mr. Jones: No, it's not...
Justice Scalia: if they really said, so long as Congress thinks further study should be done, further studies will be done, and that's what we're buying.
Mr. Jones: Congress simply said that there's enough information for it to conclude that further studies need to be done.
That's all... that's really what the OBPA said.
Justice O'Connor: Well, but Congress...
Mr. Jones: All...
Justice O'Connor: in the act also suspended everything for an indefinite period of time.
That's hardly a reasonable time, is it?
Mr. Jones: It is... I think it might be a reasonable time, because what Congress actually suspended... it was until the Secretary could certify that he had the information required to make the findings that he needed to make under the OCSLA.
The Secretary certified that he would do that in 1992, but he found that in order to make the findings required by the OCSLA he had to go out and do the additional studies that MMS hadn't yet done.
When he completed those studies in 1994, Mobil didn't ask him to review the exploration plan.
Mobil asked him to continue the lease suspensions in effect that had been in effect since before the OBPA was enacted so that Mobil could continue its challenge to the State's CZMA objections, and so the court of appeals said, well, how can Mobil say that these leases that were materially breached by these... by the delay for Federal review when the alleged delay for Federal review actually had no consequence whatever on the ultimate performance of protection of Mobil's rights.
The OBPA was just a little sliver of time in the larger spectrum of things.
Before it happened, the leases had been suspended at Mobil's request because of the CZMA objection of North Carolina, and that suspension extends to today, so the Court, it seems to us, correctly found there is no material breach now.
The last point I need to make very briefly, and that is that even if there had been a material breach, Mobil would not be entitled to rescission because they did not make a prompt demand for it.
Mobil says that the leases were breached in August of 1990, when the OBPA was enacted.
Mobil took no steps to obtain rescission until October of 1992, more than 2 years later, and during that interim period Mobil submitted an exploration plan, challenged the State's CZMA objections, and obtained... 2 weeks before it filed this lawsuit obtained a perpetual extension from the United States of these leases rent-free so that Mobil could challenge the State's CZMA objection.
Justice Souter: That I... no, please.
Justice Scalia: I'm just not aware of the principle of contract law you're appealing to.
If I have a contract with someone that requires performance over a long period of time, and he does not perform, I cannot press that person to perform...
Mr. Jones: You can press the...
Justice Scalia: for a period of a year, for a period of 2 years, and finally say, look, this is just useless, I want out of the contract?
Mr. Jones: The key difference is that they didn't just press.
They obtained performance, even if, in their view, it was imperfect performance.
Justice Scalia: What performance...
Mr. Jones: They...
Justice Scalia: from the Government?
Mr. Jones: They obtained... the United States spent 2 years doing the environmental reviews that were needed to put it in the position to determine whether to approve the exploration plans.
Justice Scalia: That was the quid pro quo?
Mr. Jones: That was additional performance.
Justice Scalia: I'll pay you money, in exchange for which you will do an environmental review?
Mr. Jones: No, that wasn't the quid pro...
Justice Scalia: That's not the performance under the contract.
Mr. Jones: That was the additional performance by the United States.
Also, the United States and 16 agencies...
Justice Scalia: The performance by the United States is giving them permission to drill.
That was the quid pro quo...
Mr. Jones: Perform...
Justice Scalia: ultimately, that they were seeking, certainly not...
Mr. Jones: That may have been what they ultimately wanted, but in order to get there the United States had to perform many tasks, one of which was to put themselves in a position to do this environmental determination, which it was... and when the United States finally got itself in the position to make that environmental determination, Mobil didn't ask it to do it.
Mobil said, we want additional lease suspensions to challenge the CZMA.
Now, what this Court said in the Smoot's case and what the Ninth Circuit more recently said in Far West is that a party seeking rescission can't seek and obtain some kind of imperfect performance from the other party and then...
Justice Souter: Well, what you're describing as...
Mr. Jones: come back and say the contract is at an end.
Justice Souter: imperfect performance as I understand it is the suspension of the lease payment.
As I... Mobil says, please stop charging me money for giving me nothing, and that's what you're characterizing as performance of the contract.
Mr. Jones: I... well, Mobil did get a change in position by getting the rent-free extensions, but that's not really...
Justice Souter: It got a rent-free extension for nothing.
It got nothing out of it.
Mr. Jones: Mobil also got 16 agencies to conduct a review of its lease request...
Justice Souter: To do what it had to do...
Mr. Jones: To do what it...
Justice Souter: presumably to perform its side of the contract.
Mr. Jones: That's my...
Justice Souter: Which it never did.
Mr. Jones: point.
We had to take those actions to perform our side of the contract.
Now, rescission, the purpose of rescission is to restore you to the status quo ante.
You can't restore a party to the status quo ante when you propel them into further performance, even if it's imperfect, and then say, oh, but really, let's treat the contract like an end.
This Court so held...
Justice Souter: Well, in every frustration case it's going to be an answer to rescission to say, gee, I tried.
I can't give you a thing.
I can't perform one iota of what I agreed to, but I tried.
Mr. Jones: I...
Justice Souter: And that's a benefit to...
Mr. Jones: It's not that they're losing a remedy, Justice Souter.
It's that they have a different remedy.
Their remedy is to seek damages if they had any, which they don't contend they do, and they obviously didn't, because they were barred...
Chief Justice Rehnquist: Well, but you can get rescission lots of times when you can't get damages, just when there's an early repudiation.
Mr. Jones: Yes.
You can get rescission sometime when you can't get damages, but you can't get rescission when you propel the other party into additional performance and then, 2 years later, say, oh, well, let's undo it after all.
Now, Mobil plainly knew what they were doing.
They plainly sought to perfect their rights under the leases, rather than to abrogate them, and it was that 2 years of efforts to perfect their rights that limits them so they can't get rescission.
Now, the other remedy they get is the one that they're entitled to under these leases, which is a rent-free lease extension which leaves them in the same... they have the same rights today that they had even before the OBPA was enacted, because they have requested and obtained 10 years, now, worth of rent-free extensions of their lease rights.
Now, through this period they say the United States hasn't performed as well as it should have, but they can't honestly say that the United States has not, at their insistence and sometimes on its own, decided to take steps to perform its obligations under the lease.
Rebuttal of Carter G. Phillips
Chief Justice Rehnquist: Thank you, Mr. Jones.
Mr. Phillips, you have 13 minutes remaining.
Mr. Phillips: Mr. Chief Justice, I'll try not to use all of those 13 minutes.
The Government's position here is a fairly astonishing one in now suggesting that we have not complied with the Outer Continental Shelf Lands Act prior to the time of the Outer Banks Protection Act.
The reason that's astonishing is, first of all, the officials involved at the time said we were in full compliance with the Outer Continental Shelf Lands Act.
The United States Government, in the court of... in the Federal Circuit at page 39 of their brief said, if there had never been an OBPA in 1990, plaintiffs ostensibly would have received approval of their exploration plan within 30 days.
To come here today and say, well, in order to save this case we've got to take the findings of the OBPA and... take those round findings and stuff them into the square pegs of the Outer Continental Shelf Lands Act suggests to me just a sense of desperation.
The truth is, the Government has never made... the right party has never made the right findings that would justify not going forward with respect to the lease.
Justice Breyer: Well, but I take it his argument, which I really didn't understand till I heard it... now I think his argument... I don't blame him for this, but I think his argument...
Mr. Phillips: I might, but...
Justice Breyer: is the following.
He says, look at that finding.
That finding 3 is, the major industry in North Carolina, tourism, is subject to potentially significant disruption, all right, by oil and gas development.
Mr. Phillips: Right.
Justice Breyer: Now look at the reg.
Mr. Phillips: Right.
Justice Breyer: And what the reg says is that there shall be... the regulations shall provide for suspension if there is a threat of serious harm to the environment.
So he says, how can you look at that finding without seeing it as a finding of a threat, and a serious one, and really what you have to look at OBPA as is telling the Secretary, suspend the leases and use whatever regulatory authority you have to do it.
So that, I think, is basically his argument.
Mr. Phillips: Right, and I think that...
Justice Breyer: That is not a... that's... I grant you that reg wasn't quoted in the brief, I don't think, but...
Mr. Phillips: Right.
No, it wasn't quoted in the brief.
Justice Breyer: But anyway, that's his argument.
Mr. Phillips: And it's subject essentially, I think, to three answers.
First of all, under the lease we didn't buy into the idea that the Outer Banks Protection Act or Congress or any other action by Congress could come in and substitute for the Secretary, and this case is fundamentally different from the North American case that they rely on, because that case said specifically that the question of how many seals you could kill is completely subject...
Justice Breyer: Well, whatever about the case...
Mr. Phillips: to future statutory change and regulation change.
Justice Breyer: Whatever about the case... whatever the case said, why isn't this a finding... maybe it was in the brief, too.
I don't know... a finding that there is a threat of serious harm to the North Carolina environment?
Mr. Phillips: Well, in part because the definition... and we, of course, have not had an opportunity to brief what it means to be in the human environment, but recall finding number 3 is tourism.
It's not an environmental provision at all.
It talks about injury to tourism, which they now try to tie in oral argument on the fly to the notion that somehow there's an environmental impact here.
I think it actually makes my point, which is that the Outer Banks Protection Act takes you out of the kinds of environmental concerns that were the core of what we entered into with the Outer Continental Shelf Lands Act, and has added this entire socioeconomic set of analyses that never had to exist before, and I think that finding is specifically embraced within it and completely beyond anything that the Outer Continental Shelf Lands Act would have provided for.
So it's the wrong... again, it's the wrong entity making the wrong findings, under circumstances that completely violate our agreement.
With respect to the question of the timing of this and the notion of whether time was of the essence, I would simply note that in our memorandum of understanding that was entered into as part of the process in 1989, all three of the parties, the State, the Secretary, and the producers, specifically found at joint appendix 84 that time was of the essence by that point in this process, so that, frankly, is not an argument, even though I do think, Justice Scalia, you're right, is that time is the essence.
There's got to be at least some reasonableness requirement that gets imposed.
At the end of the day, again, it seems to me what we're talking about here is the simple question of when are you entitled to restitution to get something for nothing.
Justice Souter made it as plain as possible.
There was no performance by the United States.
To the extent that there were studies that were done, they were done to comply with its obligations under the Outer Banks Protection Act.
The need to get clear on this is today, and I ask the Court to reverse the judgment below.
Justice Ginsburg: May I ask you just a question perhaps I should have asked Mr. Jones.
It's odd that the Interior is doing everything, and at the end of the line of the CZMA we get another Secretary from another Department into the picture.
Do you know why there was that split between Interior and Commerce?
Mr. Phillips: Well, I think it's not uncommon in some of these cases to have Interior and Commerce disagree about the right way to proceed.
I mean, they are answering slightly different questions.
Justice Ginsburg: But why would Congress assign the supervising role, the control role to Interior under the Outer Continental Shelf Act, and then under the CZMA give the control to the Commerce Department?
Mr. Phillips: Justice Ginsburg, I think the theory there is that there may be instances in which the Secretary of Interior might be too wedded to environmental concerns, and that there are other commercial issues that are of greater importance, and in the appropriate balance... which is what he's supposed to do, because he's supposed to analyze it independently...
Chief Justice Rehnquist: Thank you, Mr. Phillips.
Argument of Speaker
Mr. Phillips: The opinion of the Court in No. 99-244, Mobil Oil Exploration & Producing Southeast versus United States and a companion case will be announced by the Justice Breyer.
Argument of Justice Breyer
Mr. Breyer: In 1981, two oil companies paid the government $156 million upfront for lease contracts that gave them the right to explore for offshore oil, but only if various government departments following certain standards and deadlines that were all referenced in the contract only if those government departments approve the exploration and drilling plans.
Then Congress, later passed specific legislation that changed those referenced deadlines and standards making it more difficult for the companies to obtain the necessary approvals that the contract said were required.
So the companies then asked for their money back.
They sued for restitution.
The Court of Claims said that the crossed referenced deadlines and standards were essential parts of the contract; they asked but what else did the companies buy for $156 million and the United States, it added, by changing those deadlines and standards in a significant way repudiated the contracts and it had to give the companies their money back.
The Court of Appeals reversed, it thought that the deadline changes didn’t hurt the companies because they would not have gotten the necessary approval anyway.
Well, we now reverse the Court of Appeals.
We think that whether the companies would or would not have gotten the necessary approvals anyways beside the point, the companies aren’t asking for damages, they just want their money back.
If a lottery operator fails to give you a ticket that you buy, you get your money back even though you never would have won the lottery.
The operator didn’t give you your chance of winning that you paid for and that’s true irrespective of whether that chance would eventually have led to a win.
The same is true here, the statutory changes in the deadlines were important to the companies.
They amounted to years of the additional delay and in those circumstances the government is insisting upon the contrary to contract changes, however justified that statute may have been as a matter of policy, amounted to a repudiation of the government’s basic contract with the companies.
They didn’t waive their rights in our view and elementary principles of the Contract Law and Restitution Law therefore say that the Government has to give them the money back that they put upfront.
We all explained this at greater length in our opinion.
Justice Stevens has filed a dissenting opinion.