Nycal Offshore Development Corp. v. United States
743 F.3d 837
Fed. Cir.2014Background
- Nycal Offshore Development Corp. held 4.25% in two offshore Southern California leases, while other owners accepted restitution; Nycal pursued lost-profits instead.
- Court of Federal Claims held foreseeability satisfied but causation failed due to independent obstacles; restitution remained unavailable to Nycal for lost profits.
- Environmental and permitting obstacles (air-pollution permits) and lack of onshore processing capacity were identified as intervening causes outside US responsibility.
- Evidence showed about 60 million barrels of recoverable oil, enough for a plausible Nycal profit scenario, but causation remained unsettled due to permitting hurdles.
- Appeal affirmed denial of lost-profits award; burden of proof on causation remained with Nycal, and alternative damages theories were not accepted.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Burden of causation in lost profits | Nycal says burden shifts due to intervening causes. | US asserts plaintiff bears causation burden regardless of intervening factors. | Burden remains on Nycal; no shift for intervening causes. |
| Foreseeability and causation proof | Foreseeability supports Nycal’s loss; government knew breach could cause profits. | Foreseeability insufficient without proven causation linking breach to profits. | Foreseeability established but causation not proved due to independent obstacles. |
| Takings argument waiver | District’s permitting would implicate regulatory taking supporting damages. | Takings issue was waived and unsupported by record evidence. | Takings argument waived; no evidentiary basis to support it. |
| Environmental permits and emissions credits as causation | Nycal could have obtained permits/credits to develop; no independent obstacles would bar profits. | District emissions regime and credit availability would block development. | Environmental permits and credits would have independently blocked development; causation not shown. |
| Damages certainty | Costs to obtain permits and build processing facilities should be recoverable as damages. | Uncertainty about costs makes damages unquantifiable. | Damages not awarded; uncertainty remains and causation lacking. |
Key Cases Cited
- Yankee Atomic Elec. Co. v. United States, 536 F.3d 1268 (Fed. Cir. 2008) (causation requires breach–nonbreach comparison; plaintiff bears burden)
- Energy Capital Corp. v. United States, 302 F.3d 1314 (Fed. Cir. 2002) (proximate-cause standard for lost profits)
- Cal. Fed. Bank, F.S.B. v. United States, 245 F.3d 1342 (Fed. Cir. 2001) (lost-profits causation and foreseeability principles)
- Rumsfeld v. Applied Co., 325 F.3d 1328 (Fed. Cir. 2003) (causation standard and burden in lost-profits contexts)
- Bigelow v. RKO Radio Pictures, 327 U.S. 251 (Supreme Court, 1946) (damages precision not fatal to recovery; burden remains with plaintiff)