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Santa Clara Valley Water Dist. v. Olin Corp.

ELR Citation: 38 ELR 20232
Nos. No. C-07-03756, (N.D. Cal., 08/18/2008)

The Federal Circuit affirmed a lower court decision holding that the U.S. government breached lease agreements it entered into with oil companies to explore for and develop oil and gas resources in the outer continental shelf off the California coast and ordering it to pay over $1.1 billion in restitution. Congress amended the Coastal Zone Management Act (CZMA) in 1990 after the leases were in place. Those amendments constituted an anticipatory repudiation of the lease agreements. The 1990 amendments established new statutory requirements that deviated significantly from the procedures and standards that were in effect when the leases were executed, thereby violating portions of the lease agreements. Because the 1990 CZMA amendments constituted a repudiation of the contracts, the oil companies are entitled to restitution "for any benefit...conferred on the repudiating party." Here, the trial court properly ordered the government to pay restitution in the amount of more than $1.1 billion dollars. The judgment represents the return of the funds the companies or their predecessors-in-interest had paid in the form of upfront bonus payments as consideration for the rights associated with the offshore leases.