Nycal Offshore Development Corp. v. United States
106 Fed. Cl. 222
Fed. Cl.2012Background
- Nycal Offshore Development Corporation held a 4.25% interest in two offshore leases; government actions allegedly breached the lease terms.
- Nycal pursued expectancy damages (lost profits) after a breach, while other plaintiffs took restitution; Nycal elected to seek profits.
- Trial occurred Nov 30–Dec 16, 2011; court ultimately held Nycal failed to prove entitlement to expectancy damages.
- Liability for breach was established, but causation and foreseeability issues prevented recovery of profits; restitution was abandoned.
- The court concluded that environmental permitting and processing facility constraints would have forestalled development, breaking the chain of causation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Foreseeability of damages at contract formation | Nycal argues profits were foreseeable given lease context | Government contends profits were not foreseeable given initial reserves | Foreseeability supported; damages potentially foreseeable. |
| Causation: but-for or substantial factor | Nycal claims breach caused expected profits from development | Development would have faced environmental and logistical obstacles regardless | Causation not proven due to intervening permitting and processing constraints. |
| Reasonable certainty of damages | Damages can be reasonably approximated via Monte Carlo and analogs | Uncertainty from reserves and future costs defeats certainty | Damages not proven with reasonable certainty. |
| Impact of regulatory/permitting barriers | Permitting could have been obtained with offsets or technology | Offsets and permits unlikely; barriers insurmountable | Environmental permits and processing constraints independently precluded recovery. |
Key Cases Cited
- Cal. Fed. Bank v. United States, 395 F.3d 1263 (Fed.Cir. 2005) (Foreseeability; loss need not be sole cause)
- Anchor Savings Bank, FSB v. United States, 597 F.3d 1356 (Fed.Cir. 2010) (Foreseeability limits for special damages; but not sole factor)
- Old Stone Corp. v. United States, 450 F.3d 1360 (Fed.Cir. 2006) (Proximate causation in loss damages)
- Indiana Mich. Power Co. v. United States, 422 F.3d 1369 (Fed.Cir. 2005) (Damages causation standards (substantial factor))
- Glendale Fed. Bank, FSB v. United States, 378 F.3d 1308 (Fed.Cir. 2004) (Reasonable certainty in lost profits)
- Bluebonnet Sav. Bank, FSB v. United States, 266 F.3d 1348 (Fed.Cir. 2001) (Uncertainty not bar to recovery if approximate methods exist)
- Citizens Fed. Bank v. United States, 474 F.3d 1314 (Fed.Cir. 2007) (Causation and foreseeability considerations)
- Landmark Land Co. v. United States, 256 F.3d 1365 (Fed.Cir. 2001) (Foreseeability and proximate cause framework)
- First Fed. S. & L. Ass’n of Rochester v. United States, 290 Fed.Appx. 349 (Fed.Cir. 2008) (Application of damages standards; uncertainty considerations)