MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC. v. UNITED STATES
No. 99-244
Supreme Court of the United States
Argued March 22, 2000—Decided June 26, 2000
530 U.S. 604
*Together with No. 99-253, Marathon Oil Co. v. United States, also on certiorari to the same court.
Carter G. Phillips argued the cause for petitioners in both cases. With him on the briefs for petitioner Marathon Oil Co. were Richard D. Bernstein, Griffith L. Green, Michael S. Lee, and Richard L. Horstman. E. Edward Bruce and Steven J. Rosenbaum filed briefs for petitioner Mobil Oil Exploration & Producing Southeast, Inc.
Kent L. Jones argued the cause for the United States in both cases. With him on the brief were Solicitor General Waxman, Acting Assistant Attorney General Ogden, Dep-
JUSTICE BREYER delivered the opinion of the Court.
Two oil companies, petitioners here, seek restitution of $156 million they paid the Government in return for lease contracts giving them rights to explore for and develop oil off the North Carolina coast. The rights were not absolute, but were conditioned on the companies’ obtaining a set of further governmental permissions. The companies claim that the Government repudiated the contracts when it denied them certain elements of the permission-seeking opportunities that the contracts had promised. We agree that the Government broke its promise; it repudiated the contracts; and it must give the companies their money back.
I
A
A description at the outset of the few basic contract law principles applicable to this action will help the reader understand the significance of the complex factual circumstances that follow. “When the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.” United States v. Winstar Corp., 518 U. S. 839, 895 (1996) (plurality opinion) (internal quotation marks omitted). The Restatement of Contracts reflects many of the principles of contract law that are applicable to this action. As set forth in the Restatement of Contracts, the relevant principles specify that, when one party to a contract repudiates that contract, the other party “is entitled to restitution for any benefit that he has conferred on” the repudiating party “by way of part performance or reliance.” Restatement (Second) of Contracts § 373 (1979) (hereinafter Restatement). The Restatement explains that “repudiation” is a “statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach.” Id.; § 250. And “total breach” is a breach that “so substantially impairs the value of the contrаct to the injured party at the time of the breach that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance.” Id., § 243.
As applied to this action, these principles amount to the following: If the Government said it would break, or did break, an important contractual promise, thereby “substantially impair[ing] the value of the contract[s]” to the companies, ibid., then (unless the companies waived their rights to restitution) the Government must give the companies their money back. And it must do so whether the contracts would, or would not, ultimately have proved financially beneficial to the companies. The Restatement illustrates this point as follows:
“A contracts to sell a tract of land to B for $100,000. After B has made a part payment of $20,000, A wrongfully refuses to transfer title. B can recover the $20,000 in restitution. The result is the same even if the market price of the land is only $70,000, so that performance would have been disadvantageous to B.” Id., § 373, Comment a, Illustration 1.
In 1981, in return for up-front “bonus” payments to the United States of about $156 million (plus annual rental payments), the companies received 10-year renewable lease contracts with the United States. In these contracts, the United States promised the companies, among other things, that they could explore for oil off the North Carolina coast and develop any oil that they found (subject to further royalty payments) provided that the companies received exploration and development permissions in accordance with various statutes and regulations to which the lease contracts were made “subject.” App. to Pet. for Cert. in No. 99-253, pp. 174a-185a.
The statutes and regulations, the terms of which in effect were incorporated into the contracts, made clear that obtaining the necessary permissions might not be an easy matter. In particular, the
First, a company must prepare and obtain Department of the Interior approval for a Plan of Exploration (Exploration Plan or Plan).
“would probably cause serious harm or damage to life (including fish and other aquatic life), to property, to any mineral . . . , to the national security or defense, or to the marine, coastal, or human environment.”
§ 1334(a)(2)(A)(i) .
Second, the company must obtain an exploratory well drilling permit. To do so, it must certify (under CZMA) that its Exploration Plan is consistent with the coastal zone management program of each affected State.
Third, where waste discharge into ocean waters is at issue, the company must obtain a National Pollutant Discharge Elimination System permit from the Environmental Protection Agency.
Fourth, if exploration is successful, the company must prepare, and obtain Interior approval for, a Development and Production Plan—a Plan that describes the proposed drilling and related environmental safeguards.
C
The events at issue here concern the first two steps of the process just described—Interior’s consideration of a submitted Exploration Plan and the companies’ submission of the CZMA “consistency certification” necessary to obtain an exploratory well drilling permit. The relevant circumstances are the following:
In 1981, the companies and the Government entered into the lease contracts. The companies paid the Government $156 million in up-front cash “bonus” payments. - In 1989, the companies, Interior, and North Carolina entered into a memorandum of understanding. In that memorandum, the companies promised that they would submit an initial draft Exploration Plan to North Carolina before they submitted their final Exploration Plan to Interior. Interior promised that it would prepare an environmental report on the initial draft. It also agreed to suspend the companies’ annual lease payments (about $250,000 per year) while the companies prepared the initial draft and while any state objections to the companies’ CZMA consistency certifications were being worked out, with the life of each lease being extended accordingly.
- In September 1989, the companies submitted their initial draft Exploration Plan to North Carolina. Ten months later, Interior issued the promised (“informal” presubmission) environmental report, after a review which all parties concede was “extensive and intensive.” App. 179 (deposition of David Courtland O’Neal, former Assistant Secretary of the Interior) (agreeing that the review was “the most extensive and intensive” ever “afforded an exploration well in the outer continental shelf (OCS) program”). Interior concluded that the proposed exploration would not “significantly affec[t]” the marine environment or “the quality of the human environment.” Id., at 138-140 (U. S. Dept. of Interior Minerals Management Service, Environmental Assessment of Exploration Plan for Manteo Area Block 467 (Sept. 1990)).
- On August 20, 1990, the companies submitted both their final Exploration Plan and their CZMA “consistency certification” to Interior.
- Just two days earlier, on August 18, 1990, a new law, the Outer Banks Protection Act (OBPA), § 6003, 104 Stat. 555, had come into effect. That law prohibited the Secre-
tary of the Interior from approving any Exploration Plan or Development and Production Plan or to award any drilling permit until (a) a new OBPA-created Environmental Sciences Review Panel had reported to the Secretary, (b) the Secretary had certified to Congress that he had sufficient information to make these OCSLA-required apprоval decisions, and (c) Congress had been in session an additional 45 days, but (d) in no event could he issue an approval or permit for the next 13 months (until October 1991). OBPA § 6003(c)(3). OBPA also required the Secretary, in his certification, to explain and justify in detail any differences between his own certified conclusions and the new Panel’s recommendations. § 6003(c)(3)(A)(ii)(II). - About five weeks later, and in light of the new statute, Interior wrote a letter to the Governor of North Carolina with a copy to petitioner Mobil. It said that the final submitted Exploration Plan “is deemed to be approvable in all respects.” It added:
But, it noted, the new law, the “Outer Banks Protection Act (OBPA) of 1990 . . . prohibits the approval of any Exploration Plan at this time.” It concluded, “because we are currently prohibited from approving it, the Plan will remаin on file until the requirements of the OBPA are met.” In the meantime a “suspension has been granted to all leases offshore“[W]e are required to approve an Exploration Plan unless it is inconsistent with applicable law or because it would result in serious harm to the environment. Because we have found that Mobil’s Plan fully complies with the law and will have only negligible effect on the environment, we are not authorized to disapprove the Plan or require its modification.” App. to Pet. for Cert. in No. 99-253, p. 194a (letter from Regional Director Bruce Weetman to the Honorable James G. Martin, Governor of North Carolina, dated Sept. 28, 1990).
the State of North Carolina.” Ibid. See also App. 129-131 (letter from Lawrence H. Ake, Minerals Management Service, to William C. Whittemore, Mobil Exploration & Producing U. S. Inc., dated Sept. 21, 1990 (notice of suspension of leases, citing 30 CFR § 250.10(b)(7) (1990) as the basis for the suspensions)).About 18 months later, the Secretary of the Interior, after receiving the new Panel’s report, certified to Congress that he had enough information to consider the companies’ Exploration Plan. He added, however, that he would not consider the Plan until he received certain further studies that the new Panel had recommended.
- In November 1990, North Carolina objected to the companies’ CZMA consistency certification on the ground that Mobil had not provided sufficient information about possible environmental impact. A month later, the companies asked the Secretary of Commerce to override North Carolina’s objection.
- In 1994, the Secretary of Commerce rejected the companies’ override request, relying in large part on the fact that the new Panel had found a lack of adequate information in respect to certain environmental issues.
- In 1996, Congress repealed OBPA. § 109, 110 Stat. 1321-177.
D
In October 1992, after all but the two last-mentioned events had taken place, petitioners joined а breach-of-contract lawsuit brought in the Court of Federal Claims. On motions for summary judgment, the court found that the United States had broken its contractual promise to follow OCSLA’s provisions, in particular the provision requiring Interior to approve an Exploration Plan that satisfied OCSLA’s requirements within 30 days of its submission to Interior. The United States thereby repudiated the contracts. And that repudiation entitled the companies to restitution of the
A panel of the Court of Appeals for the Federal Circuit reversed, one judge dissenting. The panel held that the 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 the State’s objection to the companies’ CZMA “consistency statement” would have prevented the companies from exploring regardless. 177 F. 3d 1331 (1999).
We granted certiorari to review the Federal Circuit’s decision.
II
The record makes clear (1) that OCSLA required Interior to approve “within thirty days” a submitted Exploration Plan that satisfies OCSLA’s requirements, (2) that Interior told Mobil the companies’ submitted Plan met those requirements, (3) that Interior told Mobil it would not approve the companies’ submitted Plan for at least 13 months, and likely longer, and (4) that Interior did not approve (or disapprove) the Plan, ever. The Government does not deny that the contracts, made “pursuant to” and “subject to” OCSLA, incorporated OCSLA provisions as promises. The Government further concedes, as it must, that relevant contract law entitles a contracting party to restitution if the other party “substantially” breached a contract or communicated its intent to do so. See Restatement § 373(1); 11 W. Jaeger, Williston on Contracts § 1312, p. 109 (3d ed. 1968) (hereinafter Williston); 5 A. Corbin, Contracts § 1104, p. 560 (1964); see also Ankeny v. Clark, 148 U. S. 345, 353 (1893). Yet the Government denies that it must refund the companies’ money.
This is because, in the Government’s view, it did not breach the contracts or communicate its intent to do so; any breach was not “substantial”; and the companies waived their rights to restitution regardless. We shall consider each of these arguments in turn.
The Government’s “no breach” arguments depend upon the contract provisions that “subject” the contracts to various statutes and regulations. Those provisions state that the contracts are “subject to” (1) OCSLA, (2) “Sections 302 and 303 of the Department of Energy Organization Act,” (3) “all regulations issued pursuant to such statutes and in existence upon the effective date of” the contracts, (4) “all regulations issued pursuant to such statutes in the future which provide for the prevention of waste and the conservation” of Outer Continental Shelf resources, and (5) “all other applicable statutes and regulations.” App. to Pet. for Cert. in No. 99-253, at 175a. The Government says that these provisions incorporate into the contracts, not only the OCSLA provisions we have mentioned, but also certain other statutory provisions and regulations that, in the Government’s view, granted Interior the legal authority to refuse to approve the submitted Exploration Plan, while suspending the leases instead.
First, the Government refers to
Second, the Government refers to
The “environmental analysis” referred to, however, is an analysis the need for which was created by OBPA, a later enacted statute. The lease contracts say that they are subject to then-existing regulations and to certain future regulations, those issued pursuant to OCSLA and §§ 302 and 303 of the Department of Energy Organization Act. This explicit reference to future regulations makes it clear that the catchall provision that references “all other applicable . . . regulations,” supra, at 615, must include only statutes and regulations already existing at the time of the contract, see 35 Fed. Cl., at 322-323, a conclusion not questioned here by the Government. Hence, these provisions mean that the contracts are not subject to future regulations promulgated under other statutes, such as new statutes like OBPA. Without some such contractual provision limiting the Government’s power to impose new and different requirements, the companies would have spent $156 million to buy next to nothing. In any event, the Court of Claims so interpreted the lease; the Federal Circuit did not disagree with that interpretation; nor does the Government here dispute it.
Instead, the Government points out that the regulatiоn in question—the regulation authorizing a governmental suspension in order to conduct “an environmental analysis”—was not itself a future regulation. Rather, a similar regulation existed at the time the parties signed the contracts,
Third, the Government refers to OCSLA,
“regulations . . . shall include . . . provisions . . . for the suspension . . . of any operation . . . pursuant to any lease . . . if there is a threat of serious, irreparable, or immediate harm or damage to life . . . , to property, to any mineral deposits . . . , or to the marine, coastal, or human environment.” (Emphasis added.)
The Government points to the OBPA Conference Report, which says that any OBPA-caused delay is “related to . . . environmental protection” and to the need “for the collection and analysis of crucial oceanographic, ecological, and socioeconomic data,” to “prevent a public harm.” H. R. Conf. Rep. No. 101-653, p. 163 (1990); see also Brief for United States 32. At oral argument, the Government noted that the OBPA mentions “tourism” in North Carolina as a “major industry . . . which is subject to potentially significant disruption by offshore oil or gas development.” § 6003(b)(3). From this, the Government infers that the pre-existing OCSLA provision authorized the suspension in light of a “threat of . . . serious harm” to a “human environment.”
The fatal flaw in this argument, however, arises out of the Interior Department’s own statement—a statement made
Finally, we note that Interior itself, when imposing the lengthy approval delay, did not rely upon any of the regulations to which the Government now refers. Rather, it relied upon, and cited, a different regulation,
We conclude, for these reasons, that the Government violated the contracts. Indeed, as Interior pointed out in its letter to North Carolina, the new statute, OBPA, required Interior to impose the contract-violating delay. See App. 129 (“The [OBPA] contains provisions that specifically prohibit the Minerals Management Service from approving any Exploration Plan, approving any Application for Permit to Drill, or permitting any drilling offshore the State of North Carolina until at least October 1, 1991”). It therefore made clear to Interior and to the companies that the United States had to violate the contracts’ terms and would continue to do so.
The dissent argues that only the statements contained in the letter from Interior to the companies may constitute a repudiation because “the enactment of legislation is not typically conceived of as a ‘statement’ of anything to any one party in particular,” and a repudiation requires a “statement by the obligor to the obligee indicating that the obligor will commit a breach.” Post, at 630-631, n. 4 (opinion of STEVENS, J.) (quoting Restatement § 250). But if legislation passed by Congress and signed by the President is not a “statеment by the obligor,” it is difficult to imagine what would constitute such a statement. In this action, it was the United States who was the “obligor” to the contract. See App. to Pet. for Cert. in No. 99-253, at 174a (lease, identifying “the United States of America” as the “Lessor”). Although the dissent points out that legislation is “addressed to the public at large,” post, at 631, n. 4, that “public” includes those to whom the United States had contractual obligations. If the dissent means to invoke a special exception such as the “sovereign acts” doctrine, which treats certain laws as if they simply created conditions of impossibility, see Winstar, 518 U. S., at 891-899 (principal opinion of SOUTER, J.); id., at 923-924 (SCALIA, J., concurring in judgment), it cannot do so here. The Court of Federal Claims rejected the application of that doctrine to this action, see
We do not say that the changes made by the statute were unjustified. We say only that they were changes of a kind that the contracts did not foresee. They were changes in those approval procedures and standards that the contracts had incorporated through cross-reference. The Government has not convinced us that Interiоr’s actions were authorized by any other contractually cross-referenced provision. Hence, in communicating to the companies its intent to follow OBPA, the United States was communicating its intent to violate the contracts.
B
The Government next argues that any violation of the contracts’ terms was not significant; hence there was no “sub-stantial” or “material” breach that could have amounted to a “repudiation.” In particular, it says that OCSLA’s 30-day approval period “does not function as the ‘essence’ of these agreements.” Brief for United States 37. The Court of Claims concluded, however, that timely and fair consideration of a submitted Exploration Plan was a “necessary reciprocal obligation,” indeed, that any “contrary interpretation would render the bargain illusory.” 35 Fed. Cl., at 327. We agree.
We recognize that the lease contracts gave the companies more than rights to obtain approvals. They also gave the companies rights to explore for, and to develop, oil. But the need to obtain Government approvals so qualified the likely future enjoyment of the exploration and development rights that the contract, in practice, amounted primarily to an opportunity to try to obtain exploration and development rights in accordance with the procеdures and under the standards specified in the cross-referenced statutes and regulations. Under these circumstances, if the companies did
The Government’s modification of the contract-incorporated processes was not technical or insubstantial. It did not announce an (OBPA-required) approval delay of a few days or weeks, but of 13 months minimum, and likely much longer. The delay turned out to be at least four years. And lengthy delays matter, particularly where several successive agency approvals are at stake. Whether an applicant approaches Commerce with an Interior Department approval already in hand can make a difference (as can failure to have obtained that earlier approval). Moreover, as we have pointed out, OBPA changed the contract-referenced procedures in several other ways as well. Supra, at 619.
The upshot is that, under the contracts, the incorporated procedures and standards amounted to a gateway to the companies’ enjoyment of all other rights. To significantly narrow that gateway violated material conditions in the contracts. The breach was “substantia[l],” depriving the companies of the benefit of their bargain. Restatement § 243. And the Government’s communication of its intent to commit that breach amounted to a repudiation of the contracts.
C
The Government argues that the companies waived their rights to restitution. It does not deny that the United States repudiated the contracts if (as we have found) OBPA’s changes amounted to a substantial breach. The Government does not claim that the United States retracted its repudiation. Cf. id., § 256 (retraction will nullify the effects of repudiation if done before the other party either changes position in reliance on the retraction or communicates that it considers the repudiation to be final). It cannot claim that
The United States points to three events that, in its view, amount to continued performance of the contracts. But it does not persuade us. First, the oil companies submitted their Exploration Plan to Interior two days after OBPA became law. Supra, at 611. The performance question, however, is not just about what the oil companies did or requested, but also about what they actually received from the Government. And, in respect to the Exploration Plan, the companies received nothing.
Second, the companies subsequently asked the Secretary of Commerce to overturn North Carolina’s objection to the companies’ CZMA consistency certification. And, although the Secretary’s eventual response was negative, the companies did at least receive that reply. Supra, at 613. The Secretary did not base his reply, however, upon application of the contracts’ standards, but insteаd relied in large part on the findings of the new, OBPA-created, Environmental
Third, the oil companies received suspensions of their leases (suspending annual rents and extending lease terms) pending the OBPA-mandated approval delays. Supra, at 612-613. However, a separate contract—the 1989 memorandum of understanding—entitled the companies to receive these suspensions. See App. to Brief for United States 2a (letter from Toni D. Hennike, Counsel, Mobil Exploration & Producing U. S. Inc., to Ralph Melancon, Regional Supervisor, U. S. Dept. of Interior Minerals Management Service, dated Feb. 21, 1995 (quoting the memorandum as a basis for the requested suspensions)). And the Government has provided no convincing reason why we should consider the suspensions to amount to significant performance of the lease contracts in question.
We conclude that the companies did not receive significant postrepudiation performance. We consequently find that they did not waive their right to restitution.
D
Finally, the Government argues that repudiation could not have hurt the companies. Since the companies could not have met the CZMA consistency requirements, they could not have explored (or ultimately drilled) for oil in any event. Hence, OBPA caused them no damage. As the Government puts it, the companies have already received “such damages as were actually caused by the [Exploration Plan approval] delay,” namely, none. Brief for United States 43-44; see also 177 F. 3d, at 1340. This argument, however, misses the basic legal point. The oil companies do not seek damages for breach of contract. They seek restitution of their initial payments. Because the Government repudiated the lease contracts, the law entitles the companies to that restitution
whether the contracts would, or would not, ultimately have produced a financial gain or led them to obtain a definite right to explore. See supra, at 608. If a lottery operator fails to deliver a purchased ticket, the purchaser can get his money back—whether or not he eventually would have won the lottery. And if one party to a contract, whether oil company or ordinary citizen, advances the other party money, principles of restitution normally require the latter, upon repudiation, to refund that money. Restatement §373.
III
Contract law expresses no view about the wisdom of OBPA. We have еxamined only that statute‘s consistency with the promises that the earlier contracts contained. We find that the oil companies gave the United States $156 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. The breach “substantially impair[ed] the value of the contract[s].” Id., §243. And therefore the Government must give the companies their money back.
For these reasons, the judgment of the Federal Circuit is reversed. We remand the cases for further proceedings consistent with this opinion.
It is so ordered.
JUSTICE STEVENS, dissenting.
Since the 1953 passage of the Outer Continental Shelf Lands Act (OCSLA),
From the outset, however, it was apparent that the Outer Banks project might not succeed for a variety of reasons. Among those was the risk that the State of North Carolina would exercise its right to object to the completion of the project. That was a risk that the parties knowingly assumed. They did not, however, assume the risk that Congress would enact additional legislation that would delay the completion of what would obviously be a lengthy project in any event. I therefore agree with the Court that the Government did breach its contract with petitioners in failing to approve, within 30 days of its receipt, the plan of exploration petitioners submitted. As the Court describes, ante, at 609-610, the leases incorporate the provisions of the OCSLA into their terms, and the OCSLA, correspondingly, sets down this 30-day requirement in plain language.
I do not, however, believe that the appropriate remedy for the Government‘s breach is for petitioners to recover their full initial investment. When the entire relationship between the parties is considered, with particular reference to the impact of North Carolina‘s foreseeable exercise of its right tо object to the project, it is clear that the remedy ordered by the Court is excessive. I would hold that petitioners are entitled at best to damages resulting from the delay caused by the Government‘s failure to approve the plan within the requisite time.
To understand the nature of the breach, and the appropriate remedy for it, it is necessary to supplement the Court‘s chronological account. From the time petitioners began discussing their interest in drilling an exploratory well 45 miles off the coast from Cape Hatteras in the fall of 1988, until (and even after) the enactment of the Outer Banks Protection Act (OBPA), §6003, on August 18, 1990, their exploration proposal was fraught with problems. It was clear to petitioners as early as October 6, 1988 (and almost certainly before), that the State of North Carolina, whose approval petitioners knew they had to have under their lease terms in order to obtain the requisite permits from the Department of the Interior (DOI), was not going to go along readily. App. 61-63 (letter from North Carolina Governor James G. Martin to Ralph Ainger, Acting Regional Manager, Minerals Management Service (MMS) (a division of the DOI)). As the Court explains, ante, at 610, without the State‘s approval pursuant to the Coastal Zone Management Act (CZMA),
That is why petitioners pursued multiparty negotiations with the Federal Government and the State to help facilitate the eventual approval of their proposal. As part of these negotiations, petitioners entered into a memorandum of understanding with North Carolina and the Federal Government, and, according to the terms of that agreement, submitted a draft plan of exploration (POE) to DOI and to the State. App. 79-85. The Government also agreed to prepare draft and final environmental impact reports on petitioners’ draft POE and to participate in public meetings and hearings regarding the draft POE and the Government‘s findings about its environmental impact. Id., at 81-82. Among other things, this agreement resulted in the Government‘s preparation in 1990 of a three-volume, 2,000-page special environ
Although the State thereafter continued to express its dissatisfaction with the prospect of exploration and development, voicing its displeasure with the Government‘s draft environmental findings, id., at 86-95, and rejecting petitioners’ application for a separate required permit, id., at 96-97,2 petitioners nonetheless submitted a final POE to DOI on August 20, 1990, pursuant to the lease contract terms. This final plan, it must be noted, was submitted by petitioners two days after the enactment of the OBPA—the event petitioners claim amounted to (either) an anticipatory repudiation of the lease contracts, or a total breach, Brief for Petitioner in No. 99-244, p. 19 (“[I]n enacting the OBPA, the Government anticipatorily repudiated its obligations under the leases . . .“); Brief for Petitioner in No. 99-253, p. 21 (“The enactment of the OBPA placed the United States in total breach of the petitioners’ leases“).
Following petitioners’ submission of the final POE, DOI then had a duty, under the terms of the OCSLA as incorporated into the lease contract, to approve that plan “within thirty days of its submission.”
DOI‘s explanation came two days later, on September 21, 1990, in a letter to Mobil Oil from the MMS‘s Acting Regional Supervisor for Field Operations, Lawrence Ake. Without commenting on DOI‘s substantive assessment of the POE, the Ake letter stated that the OBPA “specifically prohibit[s]” the MMS from approving any POE “until at least October 1, 1991.” App. 129. “Consequently,” Mr. Ake explained, the MMS was suspending operation on the Manteo Unit leases “in accordance with 30 CFR § 250.10(b)(7),” ibid., a regulation issued pursuant to the OCSLA and, of course, incorporated thereby into the parties’ lease agreement. One week after that, on September 28, 1990, the MMS‘s Regional Director, Bruce Weetman, sent a letter to Governor Martin of North Carolina, elaborating on MMS‘s actions upon receipt of the August 20 POE. App. to Pet. for Cert. in No. 99-253, pp. 193a-195a. According to Weetman, the POE “was deemed complete on August 30, and transmitted to other Federal Agencies and the State of North Carolina on that date. Timely comments were received from the State of North Carolina and the U. S. Coast Guard. An analysis of the potential environmental [e]ffects associated with the Plan was conducted, an Environmental Assessment (EA) was prepared, and a Finding of No Significant Impact (FONSI) was made.” Id., at 193a. Based on these steps taken by the MMS, it concluded that the POE was “approvаble” but that the MMS was “currently prohibited from approving it.” Thus, the letter concluded, the POE would “remain on file” pending the resolution of the OBPA requirements, and the lease suspensions would continue in force in the interim. Id., at 194a.
In my judgment, the Government‘s failure to meet the required 30-day deadline on September 19, 1990, despite the fact that the POE was in a form that merited approval, was a breach of its contractual obligation to the contrary.3 After this, its statement in the September 21 Ake letter that the OBPA prohibited approval until at least October 1991 must also be seen as a signal of its intent to remain in breach of the 30-day deadline requirement for the coming year. The question with which the Court is faced, however, is not whether the United States was in breach, but whether, in light of the Government‘s actions, petitioners are entitled to restitution rather than damages, the usual remedy for a breach of contract.
As the Court explains, ante, at 608, an injured party may seek restitution as an alternative remedy only “on a breach by non-performance that gives rise to a claim for damages for total breach or on a repudiation.” Restatement (Second) of Contracts §373 (1979) (hereinafter Restatement (Second)). Whether one describes the suspect action as “repudiation” (which itself is defined in terms of total breach, see ante, at 608) or simply “total breach,” the injured party may obtain restitution only if the action “so substantially impairs the value of the contract to the injured party . . . that it is just in the circumstances to allow him to recover damages based on all his remaining rights to performance.” Restatement (Second) §243. Although the language varies to some small degree, every major statement of contract law includes the same admonition. See, e. g., 5 A. Corbin, Contracts §1104, pp. 558, 562 (1964) (“Restitution is an available remedy only
Beyond this, it is important to underscore as well that restitution is appropriate only when it is “just in the circumstances.” Restatement (Second) §243. This requires us to lоok not only to the circumstances of the breach itself, but to the equities of the situation as a whole. Finally, even if a defendant‘s actions do not satisfy the foregoing requirements, an injured party presumably still has available the standard contract remedy for breach—the damages petitioners suffered as a result.
III
Given these requirements, I am not persuaded that the actions by the Government amounted either to a repudiation of the contracts altogether, or to a total breach by way of its neglect of an “essential” contractual provision.
I would, at the outset, reject the suggestion that there was a repudiation here, anticipatory or otherwise, for two reasons. First, and most basic, the Government continued to perform under the contractual terms as best it could even after the OBPA‘s passage.4 Second, the breach-by-delay
While acknowledging the OBPA‘s temporary moratorium on plan approvals, the Ake letter to petitioner Mobil states that the Government is imposing a lease suspension—rather than a cancellation оr recision—and even references an existing OCSLA regulatory obligation pursuant to which it is attempting to act. The Weetman letter explains in detail the actions the MMS took in carefully considering petitioners’ POE submission; it evaluated the plan for its compliance with the OCSLA‘s provisions, transmitted it to other agencies and the State for their consideration, took the comments of those entities into account, conducted the requisite analyses, and prepared the requisite findings—all subsequent to the OBPA‘s enactment. It cannot be doubted that the Government intended to continue performing the contract to the extent it thought legally permissible post-OBPA.
Indeed, petitioners’ own conduct is inconsistent with the contention that the Government had, as of August 18, 1990,
After the State of North Carolina filed its formal CZMA objections on November 19, 1990 (indicating that the State believed a contract still existed), petitioners promptly sought in December 1990—again under statutory terms incorporated into the contracts—to have the Secretary of Commerce override the objections,
And petitioners were not finished with the leases yet. After petitioners received this adverse judgment from Commerce, they sought the additional lease suspensions described, see App. to Brief for United States 1a (letter from Toni Hennike, Counsel, Mobil Oil, to Ralph Melancon, Regional Supervisor, MMS, Feb. 21, 1995), insisting that “the time period to seek judicial review of the Secretary‘s decisions had not expired when the MMS terminated the [pre-existing] suspensions,” and that “[s]ince the Secretary‘s decision is being challenged, it is not a final decision and will not be until it is upheld by a final nonappealable judgment issued from a court with competent jurisdiction,” id., at 2a. Indeed, petitioners have pending in the United States District Court for the District of Columbia at this very moment their appeal from the Secretary of Commerce‘s denial of petitioners’ override request of North Carolina‘s CZMA objections. Mobil Oil Exploration & Producing Southeast, Inc. v. Daley, No. 95-93 SSH (filed Mar. 8, 2000).
Absent, then, any repudiation, we are left with the possibility that the nature of the Government‘s breach was so “essential” or “total” in the scope of the parties’ contractual relationship as to justify the remedy of restitution. As above, I would reject the suggestion that the OBPA somehow acted ex proprio vigore to render a total breach of the parties’ contracts. See ante, at 621 (“OBPA changed the contract-referenced procedures in several other ways as well“); Brief for Petitioner in No. 99-253, at 21. The OBPA was not passed as an amendment to statutes that the leases by their terms incorporated, nor did the OBPA state that its terms were to be considered incorporated into then-existing leases; it was, rather, an action external to the contract, capable of affecting the parties’ actions but not of itself changing the contract terms. The OBPA did, of course, impose a legal duty upon the Secretary of the Interior to take actions
In rejecting the Government‘s argument that the breach was insufficiently material, the Court‘s reliance on the danger of rendering the parties’ bargain illusory, see ante, at 620, is simply misplaced. I do not contest that the Government was contractually obliged to give petitioners’ POE prompt consideration and to approve the POE if, after that consideration, it satisfied existing OCSLA dеmands; nor would I suggest that petitioners did not receive as part of their bargain a promise that the Government would comply with the procedural mechanisms established at the time of contracting. But that is all quite beside the point; the question is not whether this approval requirement was part of the bargain but whether it was so “essential” to the bargain in the scope of this continuing contract as to constitute a total breach.
This fact does not, of course, relieve the Government of liability for breach. It does, however, make it inappropriate to conclude that the Government‘s pre-November 19 actions in breach were sufficiently “material” to the successful completion of the parties’ project to justify giving petitioners all of their money back. At the time of the Government‘s breach, petitioners had no reasonable expectation under the lease contract terms that the venture would come to fruition
While apparently recognizing that the substantiality of the Government‘s breach is a relevant question, see ante, at 608, the Court spends almost no time at all concluding that the breach was substantial enough to award petitioners a $156 million refund, ante, at 620-621. In a single brief paragraph of explanation, the Court first posits that the Government “did not announce an . . . approval delay of a few days or weeks, but of 13 months minimum and likely much longer.” Ante, at 621. The Court here is presumably referring to the Ake letter to Mobil written a few days after the expiration of the 30-day deadline. But the Government‘s “statement” to this effect could matter only in the context of evaluating an intended repudiation; because, as I have explained, that “announcement” cannot be seen as a repudiation of the contract, I do not see how the statement itself exacerbates the effect of the Government‘s breach. What matters in evaluating a breach, of course, is not what the Government said, but what the Government did. And what the Government did was, as I have explained, continue to perform in every other way possible—evaluating the August 20 POE; suspending the leases, including suspensions in response to petitioners’ express requests (suspensions that continue in effect
The Court also asserts, without support, that “[w]hether an applicant approaches Commerce with an Interior Department approval already in hand can make a difference (as can failure to have obtained that earlier approval).” Ibid. Although the Court thereby implies that the Secretary of Commerce‘s handling of petitioners’ CZMA override request was somehow tied to the DOI‘s failure to issue the required approval, there is record evidence that petitioners’ CZMA appeals were not “suspended, impeded, or otherwise delayed by enactment or implementation of the . . . OBPA . . . .” App. 187 (declaration of Mаrgo E. Jackson, Conoco Inc. v. United States, No. 92-331-C (Fed. Cl., Apr. 6, 1994) (Commerce Department supervisor in charge of handling Mobil‘s appeals)). Whether or not the Secretary‘s decision was in
In the end, the Court‘s central reason for finding the breach “not technical or insubstantial” is that “lengthy delays matter.” Ante, at 621. I certainly agree with that statement as a general principle. But in this action, that principle does not justify petitioners’ request for restitution. On its face, petitioners’ contention that time was “of the essence” in this bargain is difficult to accept; petitioners themselves waited seven years into the renewable 10-year lease term before even floating the Outer Banks proposal, and waited another two years after the OBPA was passed before filing this lawsuit. After then accepting a full 10 years of the Government‘s above-and-beyond-the-call performance, time is now suddenly of the essence? As with any venture of this magnitude, this undertaking was rife with possibilities for “lengthy delays,” indeed “inordinate delays encountered by the lessee in obtaining required permits or consents, including administrative or judicial challenges or appeals;”
IV
The risk that North Carolina would frustrate performance of the leases executed in 1981 was foreseeable from the date the leases were signed. It seems clear to me that the State‘s objections, rather than the enactment of OBPA, is the primary explanation for petitioners’ decision to take steps to avoid suffering the consequences of the bargain they made. As a result of the Court‘s action today, petitioners will enjoy a windfall reprieve that Congress foolishly provided them in its decision to pass legislation that, while validly responding to a political constituency that opposed the development of the Outer Banks, caused the Government to breach its own contract. Viewed in the context of the entire transaction, petitioners may well be entitled to a modest damages recovery for the two months of delay attributable to the Government‘s breach. But restitution is not a default remedy; it is available only when a court deems it, in all of the circumstances, just. A breach that itself caused at most a delay of two months in a protracted enterprise of this magnitude does not justify the $156 million draconian remedy that the Court delivers.
Accordingly, I respectfully dissent.