United States Court of Appeals for the Federal Circuit 

2007-5047, -5082 

AMBER RESOURCES COMPANY, AERA ENERGY LLC, 

DELTA PETROLEUM CORPORATION, OGLE PETROLEUM, INC., 

OLAC RESOURCES, LLC, POSEIDON PETROLEUM LLC, TOTAL E&P USA, INC., 

PLAINS EXPLORATION & PRODUCTION CO., NOBLE ENERGY, INC., 

ANADARKO E&P COMPANY LP, 

and DEVON ENERGY PRODUCTION COMPANY, L.P., 

 Plaintiffs-Cross Appellants, 

and 

NYCAL OFFSHORE DEVELOPMENT CORPORATION, 

 

 Plaintiff, 

v. 

UNITED STATES, 

Defendant-Appellant. 

 Steven J. Rosenbaum, Covington & Burling LLP, of Washington, DC, argued for 

plaintiffs-cross appellants. With him on the brief were E. Edward Bruce, Thomas J. 

Cosgrove, and Gina L. Paik. 

 Thomas G. Hungar, Trial Attorney, Commercial Litigation Branch, Civil Division, 

United States Department of Justice, of Washington, DC, argued for defendantappellant. On the brief were Jeanne E. Davidson, Director, Patricia M. McCarthy, 

Assistant Director, and Allison Kidd-Miller and Gregg M. Schwind, Trial Attorneys. 

Appealed from: United States Court of Federal Claims 

Senior Judge Eric G. Bruggink 
United States Court of Appeals for the Federal Circuit

2007-5047,-5082 

AMBER RESOURCES COMPANY, AERA ENERGY LLC, 

DELTA PETROLEUM CORPORATION, OGLE PETROLEUM INC., 

OLAC RESOURCES, LLC, POSEIDON PETROLEUM LLC, TOTAL E&P USA, INC., 

PLAINS EXPLORATION & PRODUCTION CO., NOBLE ENERGY, INC., 

ANADARKO E&P COMPANY LP, 

and DEVON ENERGY PRODUCTION COMPANY, L.P., 

Plaintiffs-Cross Appellants, 

and 

NYCAL OFFSHORE DEVELOPMENT CORPORATION, 

 Plaintiff, 

v. 

UNITED STATES, 

Defendant-Appellant. 

Appeal from the United States Court of Federal Claims in 02-CV-30, 04-CV-1822, and 

05-CV-249, Senior Judge Eric G. Bruggink. 

__________________________ 

 DECIDED: August 25, 2008 

___________________________ 

Before LOURIE, BRYSON, and GAJARSA, Circuit Judges.

BRYSON, Circuit Judge. 

 Over a period of years between 1968 and 1984, the federal government granted 

a number of leases to private entities to explore for and develop oil and gas resources 

in the outer continental shelf off the California coast. Because of court decisions 
2007-5047,-5082 2 

construing a 1990 statute that was enacted after the leases were in place, the 

government took action that had the effect of preventing the lessees from continuing 

exploratory activities on the leased properties, at least temporarily. The owners of the 

leases then filed suit in the Court of Federal Claims claiming that the government had 

breached the lease agreements. The Court of Federal Claims agreed with the 

leaseholders, held that they were entitled to a restitutionary award as damages for the 

breach, and awarded them restitution in the amount of the funds that had been paid for 

the leases at the time the leases were executed. The government has appealed the 

finding of liability and the damages award. See Amber Res. Co. v. United States, 68 

Fed. Cl. 535 (2005) (“Amber I”). The lessees have cross-appealed the trial court’s 

denial of their request for additional damages attributable to costs incurred during the 

development of the leases. See Amber Res. Co. v. United States, 73 Fed. Cl. 738 

(2006) (“Amber II”). We affirm the trial court’s judgment in all respects. 

I 

Under the Outer Continental Shelf Lands Act (“OCSLA”), the federal government 

has jurisdiction and control over the outer continental shelf, which is defined as 

including all submerged land that is beyond the outer limits of state jurisdiction 

(ordinarily three nautical miles from shore) and within the limits of national jurisdiction 

(ordinarily 200 miles from shore). See 43 U.S.C. §§ 1331(a), 1332; see also id. § 1301 

(defining navigable waters). The OCSLA allows the Secretary of the Interior to grant 

leases for the development of various natural resources in those submerged lands. Id.

§§ 1337, 1344-46. 
2007-5047,-5082 3 

Once the Interior Department has granted a lease for the extraction of oil and gas 

resources in the outer continental shelf, the lessee must submit an exploration plan to 

the Secretary for approval before beginning exploration on the leased property. 43 

U.S.C. § 1340(c)(1). After successful exploration, the lessee may submit a 

development and production plan, which is also subject to the Secretary’s approval 

pursuant to statute. Id. § 1351. The leases are ordinarily set to expire in five years, 

unless they begin to produce oil or gas within that period, in which case the leases 

continue for as long as oil or gas is produced in paying quantities, or approved drilling or 

well reworking is continuing on the properties. Id. § 1337(b)(2). 

If production has not started within the original term of the lease, the lessee can 

request that the Secretary of the Interior grant a suspension of the lease. As the trial 

court explained, “[l]essees frequently request suspensions to prevent lease expiration in 

the face of ongoing exploration or development activities that have not yet resulted in 

the production of oil in paying quantities.” Amber I, 68 Fed. Cl. at 538. Because the 

lessee is entitled to continue preparatory activities on the leased property during a 

granted suspension, the lessees in this case refer to granted suspensions as “green 

light” suspensions. The effect of such a granted suspension is to extend the expiration 

date of the lease for a period equal to the length of the suspension. See 30 C.F.R. 

§§ 250.174, 250.180. 

The Interior Department also has the authority to direct suspensions under 

circumstances specified by regulation, such as when the lessees’ activities “pose a 

threat of serious, irreparable, or immediate harm or damage.” 30 C.F.R. § 250.172(b). 
2007-5047,-5082 4 

During such “directed” suspensions, no offshore activity on the leases is permitted. For 

that reason, the lessees refer to directed suspensions as “red light” suspensions. 

In 1972, Congress enacted the Coastal Zone Management Act (“CZMA”), which 

is directed to conservation within the coastal zone. Pub. L. No. 92-583, 86 Stat. 1280, 

codified at 16 U.S.C. § 1451 et seq. The coastal zone is defined as including the 

coastal waters and the adjacent shorelands. In the Great Lakes, it includes all waters 

extending to the international boundary between the United States and Canada, and in 

other areas it includes all waters under state jurisdiction, generally up to three miles 

from the shore. 

The CZMA directs the federal government to encourage coastal states to 

develop coastal management plans. 16 U.S.C. § 1452. Once a state adopts a coastal 

management plan, section 307(c)(1) of the CZMA sets forth the obligation of federal 

agencies to act consistently with that plan. Id. § 1456(c)(1). At the time the leases at 

issue in this case were granted, section 307(c)(1) required each federal agency 

“conducting or supporting activities directly affecting the coastal zone” to do so “in a 

manner which is, to the maximum extent practicable, consistent with approved state 

management programs.” 16 U.S.C. § 1456(c)(1) (1982). 

A separate section of the CZMA, section 307(c)(3), provides that after the 

Secretary of Commerce approves a state’s coastal management plan, any applicant for 

a federal permit to conduct an activity that affects land or water uses in the state’s 

coastal zone is required to certify that its activity complies with the enforceable policies 

of the state’s approved program. 16 U.S.C. § 1456(c)(3). If the state objects to the 

applicant’s certification, the activity can go forward only if the Secretary of Commerce 
2007-5047,-5082 5 

determines that the activity is consistent with the objectives of the CZMA or is otherwise 

necessary in the interest of national security. Section 307(c)(3) applies to the approval 

of lessees’ exploration plans and to their development and production plans, but not to 

the processing of requests for lease suspensions. 

In the series of transactions from which this case arose, the Mineral Management 

Service (“MMS”) of the Department of the Interior granted a total of 40 leases off the 

coast of California to a number of separate operators. Thirty-five of those leases are at 

issue in this appeal. With one exception, the leases were all granted between 1979 and 

1984; the one exception was a lease granted in 1968. The leases authorized the 

grantees to explore and develop oil and gas resources under the OCSLA. In 

consideration for their exploration and development rights, the lessees paid upfront 

“bonuses” to the government. Approximately $1.1 billion was paid as consideration for 

the leases at issue in this case. In addition, the lease agreements provided that the 

lessees would make annual rental payments and would pay royalties to the federal 

government on any resources produced. The plaintiffs in this case are either the 

original lessees or their successors-in-interest. Section 1 of each lease agreement 

incorporated by reference those statutes that were in effect at the time the lease 

agreements were executed. Except for the one lease granted in 1968, the incorporated 

statutes included the CZMA and the National Environmental Policy Act (“NEPA”), Pub. 

L. No. 91-190, 83 Stat. 852 (1970), codified at 42 U.S.C. § 4331 et seq.

The Interior Department initially held auctions for the oil and gas leases without 

making a determination under the CZMA that the sales were consistent to the maximum 

extent practicable with California’s coastal management program. The Department did 
2007-5047,-5082 6 

so because it regarded the sales of leases in the outer continental shelf as not “directly 

affecting” the coastal zone and therefore not triggering the provisions of the thenapplicable version of section 307(c)(1) of the CZMA. The State of California filed suit in 

federal court challenging the Department’s interpretation of the statute. That issue 

ultimately reached the Supreme Court, and in 1984 the Court upheld the Department’s 

position in Secretary of the Interior v. California, 464 U.S. 312 (1984). 

In 1990, Congress amended section 307(c)(1) of the CZMA, changing the statute 

in ways that are of central importance to this case. First, Congress altered the coverage 

of the statute from applying to activity that “directly affect[s]” the coastal zone to 

applying to “each . . . activity within or outside the coastal zone that affects any land or 

water use or natural resource of the coastal zone.” 16 U.S.C. § 1456(c)(1). The 

Conference Report on the amendments indicated that the change was designed to 

overturn the Supreme Court’s decision in the California case and “to make clear that the 

outer Continental Shelf oil and gas lease sales are subject to the requirements of 

section 307(c)(1).” H.R. Rep. No. 101-964, at 970 (1990) (Conf. Rep.), as reprinted in

1990 U.S.C.C.A.N. 2374, 2675. The Conference Report added: “The amended 

provision establishes a generally applicable rule of law that any federal agency activity 

(regardless of its location) is subject to the CZMA requirement for consistency if it will 

affect any natural resources, land uses, or water uses in the coastal zone. No federal 

agency activities are categorically exempt from this requirement.” Id. (emphasis in 

original). 

The 1990 amendments also required each federal agency carrying out an activity 

subject to section 307(c)(1) to provide a “consistency determination” to the relevant 
2007-5047,-5082 7 

state agency before final approval of the federal activity. 16 U.S.C. § 1456(c)(1)(C). 

Under regulations promulgated pursuant to the 1990 amendments, the state agency 

has 60 days within which to submit a response to the federal consistency determination, 

detailing any objections the state may have to that determination. 15 C.F.R. 

§§ 930.36(b)(1), 930.41, 930.43. If the state agency objects, the federal agency must 

attempt to reconcile the differences, id. §§ 930.43(d), 930.44 (mediation mechanisms), 

but in any event the federal agency can ultimately submit a final notice explaining its 

conclusion that the activity in question is consistent with the state’s coastal 

management plan, id. § 930.43(d). At that point, the state’s recourse, if it is dissatisfied 

with the federal agency’s response, is to sue to enjoin the federal agency from 

proceeding with the federal activity in question. The court must then determine whether 

the federal activity is in compliance with the statutory requirement that the federal 

activity in question be carried out in a manner consistent with state management 

programs to the maximum extent practicable. If the court finds that the federal activity 

does not satisfy that requirement, the activity can continue only if the President, upon 

written request from the Secretary of the Interior, exempts the challenged elements of 

the federal agency activity from compliance with the statutory requirement. That 

override procedure can be employed only if the President determines that the proposed 

activity in question “is in the paramount interest of the United States.” 16 U.S.C. 

§ 1456(c)(1)(B). 

Following the enactment of the 1990 CZMA amendments, both MMS and the 

lessees took the position that, although consistency determinations were now required 

prior to the sale of leases authorized by the OCSLA, consistency determinations were 
2007-5047,-5082 8 

not required before granting lease suspensions under the OCSLA. Accordingly, in the 

early 1990s the lessees continued their development activities on the leased properties, 

which included preparing and submitting both exploration plans and development and 

production plans to MMS for its approval. Throughout the period following the execution 

of the leases, the terms of the leases were extended by numerous suspensions, some 

requested by the operators and some directed by MMS. In 1992, MMS directed 

suspensions in order to conduct the California Offshore Oil and Gas Energy Resources 

(“COOGER”) study, which was designed to help MMS evaluate the operators’ 

exploration and development plans, as well as to provide local governmental entities in 

California with information regarding activities on the leased properties. The lessees 

paid two-thirds of the cost of that study, and MMS paid the rest. When the COOGER 

study was nearing completion in December 1998, MMS informed the lessees that the 

directed suspensions would end on June 30, 1999, and it instructed them to submit any 

further requests for suspensions by May 15, 1999. 

The operators submitted suspension requests for each of the leases, and on 

November 12, 1999, MMS granted suspensions for most of the leases that are at issue 

in this case. The suspensions ranged from 19 to 45 months in length. MMS 

determined that four of the leases had expired by 1999. That decision was challenged 

through an administrative appeal to the Interior Board of Land Appeals, and those four 

leases are therefore not involved in this appeal. According to the trial court, none of the 

leases at issue here have produced oil or gas in paying quantities. Amber I, 68 Fed. Cl. 

at 540. 
2007-5047,-5082 9 

Immediately after MMS granted the requested suspensions, the State of 

California filed suit against the Secretary of the Interior in the United States District 

Court for the Northern District of California. The state alleged that the Secretary could 

not lawfully grant lease suspensions under the OCSLA without first performing the 

consistency determination required by the 1990 amendments to section 307(c)(1) of the 

CZMA. On June 20, 2001, the district court ruled that the 1990 CZMA amendments 

required the Secretary of the Interior to perform a consistency determination prior to 

granting the requested suspensions. California v. Norton, 150 F. Supp. 2d 1046, 1053 

(N.D. Cal. 2001) (“Norton I”). The court also held that MMS was required to provide an 

explanation of why it did not have to prepare an environmental assessment or an 

environmental impact statement under NEPA. Id. at 1057. As a remedy, the district 

court in Norton I ordered MMS to set aside its approval of the requested suspensions of 

the 36 leases as to which MMS had issued suspensions and to direct suspensions of 

those leases “for a time sufficient for it to provide the State of California with a 

consistency determination in compliance with CZMA § 1456(c)(1) and its implementing 

regulations.” Id. at 1057-58. The court also ordered that “before again granting these 

lease suspensions, MMS shall provide a reasoned explanation for its reliance on the 

categorical exclusion [from the provisions of NEPA] and the inapplicability of the 

extraordinary circumstances exceptions.” Id. at 1058. 

MMS complied with the district court’s order on July 2, 2001, by revoking the 

granted suspensions and replacing them with directed suspensions, which resulted in 

the cessation of all activities at the lease locations. Notwithstanding that action, MMS 

maintained that it was not required to perform consistency determinations and issue 
2007-5047,-5082 10 

NEPA explanations before granting the requested lease suspensions, and it undertook 

to appeal the district court’s ruling to the Ninth Circuit. 

MMS informed the lessees by letter that it would begin work on the consistency 

determinations and that, given the 90-day notice requirement under the regulations 

before an agency can take final action, the earliest it could expect the process to be 

completed was by December 2001. MMS subsequently reconsidered its position, 

however, and decided not to prepare the consistency determinations and the NEPA 

explanations pending resolution of the appeal of the Norton I decision. The lessees 

protested that course of action by letter on August 31, 2001, and again on September 

21, 2001. Over the lessees’ objections, however, MMS decided that it would not take 

those steps until the appeal was resolved. 

On January 9, 2002, the lessees filed this action in the Court of Federal Claims, 

asserting that the application of the 1990 CZMA amendments to their leases constituted 

a material breach of the lease agreements that entitled them to rescission of the leases 

and restitution of the payments they had made under the lease agreements. Several 

months after that action was filed, the Ninth Circuit affirmed the district court’s decision 

in Norton I. California v. Norton, 311 F.3d 1162 (9th Cir. 2002) (“Norton II”). Following 

the appellate court’s decision, the case was remanded to the district court. After 

additional briefing, the district court issued an injunction requiring MMS to perform the 

consistency determinations that the Ninth Circuit had held to be required under the 

CZMA before granting the requested suspensions. At MMS’s request the lessees 

provided the requisite information for the consistency determinations that MMS was 

ordered to perform in the Norton I case. 
2007-5047,-5082 11 

In 2005, MMS determined that the updated suspension requests were consistent 

with California’s coastal management plan. However, California objected to MMS’s 

consistency determinations and pointed out a number of alleged deficiencies underlying 

those determinations. During the same year, MMS prepared environmental 

assessments in response to the district court’s ruling on the NEPA challenge to the 

granted suspensions. In those environmental assessments, MMS found that the 

requested suspensions had no significant impact on the environment. Several 

environmental groups challenged the adequacy of the analysis in the environmental 

assessments, and in August 2005 the district court held MMS’s analysis to be 

insufficient and required MMS to conduct an “adequate NEPA analysis on lease 

suspension,” which the trial court in this case interpreted to require MMS to prepare an 

environmental impact statement relating to the granting of the requested suspensions. 

Shortly after the district court’s ruling in August 2005, the Court of Federal Claims 

granted partial summary judgment of liability with respect to 36 of the offshore leases at 

issue in this case. The court ruled that Congress’s enactment of the 1990 amendments 

to the CZMA constituted an anticipatory repudiation of the lease agreements. The court 

reached that conclusion because it found that the 1990 amendments established new 

statutory requirements that deviated significantly from the procedures and standards 

that were in effect when the leases were executed, and that the statutory imposition of 

new procedures and standards violated section 1 of the lease agreements. 

According to the court, the government breached the lease agreements in 2001 

when it revoked the requested suspensions and replaced them with directed 

suspensions. That breach was material, the court found, because the effect of the new 
2007-5047,-5082 12 

procedures and standards was to order an indefinite suspension of the lessees’ 

activities on the leased properties, with no indication as to when, if ever, exploratory and 

preparatory activities could resume under the lessees’ requested suspensions. 

Although the court acknowledged that, “even before the Norton decisions, the lessees 

were not guaranteed every suspension they requested,” the court explained that the 

lessees “were entitled to have such requests acted upon by MMS pursuant to the 

OSCLA and its implementing regulations,” as set forth in section 1 of the leases. Amber 

I, 68 Fed. Cl. at 547. 

Because it found that the 1990 CZMA amendments constituted a repudiation of 

the contracts, the trial court invoked the general rule in repudiation cases that the nonrepudiating party is entitled to restitution “for any benefit that he has conferred on the 

repudiating party.” Amber I, 68 Fed. Cl. at 544, quoting Restatement (Second) of 

Contracts § 373 (1981). As a remedy, the trial court ordered the government to pay 

restitution to the plaintiffs in the amount of more than $1.1 billion dollars. The judgment 

represented the return of the funds the plaintiffs or their predecessors-in-interest had 

paid in the form of upfront bonus payments as consideration for the rights associated 

with the offshore leases. The trial court, however, denied the lessees’ request to 

recover additional sums representing the sunk costs that the plaintiffs or their 

predecessors-in-interest had paid to exploit the leases before work was stopped by the 

directed suspensions that were ordered following the district court’s ruling in the Norton

litigation. The court ruled that those costs did not confer any benefit on the government 
2007-5047,-5082 13 

and could be recovered, if at all, only on a reliance or expectancy theory of damages, 

which the plaintiffs had chosen not to advance. Amber II, 73 Fed. Cl. at 747-52.1

II 

The government does not dispute that MMS entered into commercial contracts 

with the lessees, and it does not invoke any special rule applicable to government 

contract cases, such as the “sovereign acts doctrine,” that would entitle the government 

to treatment different from that accorded to private contracting parties. Accordingly, the 

government’s rights and duties under its contracts with the lessees in this case “are 

governed generally by the law applicable to contracts between private individuals.” 

Mobil Oil Exploration & Producing Se., Inc. v. United States, 530 U.S. 604, 607 (2000), 

quoting United States v. Winstar Corp., 518 U.S. 839, 895 (1996) (plurality opinion). 

Nonetheless, the government contends that under the law applicable to contracts 

between private individuals, (1) Congress’s enactment of the 1990 CZMA amendments 

did not constitute a repudiation of the existing lease agreements regarding oil and gas 

rights off the California coast, and (2) no governmental conduct constituted a breach of 

the lease agreements that entitles the plaintiffs to restitution of the entirety of the funds 

that they or their predecessors paid for the leases.2

 1

 Although the trial court entered summary judgment relating to 36 of the 40 

leases on which this action was brought, the government subsequently moved for 

reconsideration as to one of the leases, and administrative proceedings are still pending 

as to the remaining four. A final judgment under Rule 54(b) of the Rules of the Court of 

Federal Claims was therefore entered only as to 35 leases. 

 

2

 The leases at issue in this case have not been affected by the moratoriums 

on offshore drilling because they do not apply to existing leases. See, e.g., Pub. L. No. 

110-161, Div. F, Title I, §§ 104-05, 121 Stat. 1844, 2118 (2007); Statement on Outer 

Continental Shelf Oil and Gas Development, 26 Weekly Comp. Pres. Doc. 1006 (June 

26, 1990). 
2007-5047,-5082 14 

Repudiation is defined as 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.” Restatement (Second) of Contracts § 250. “Total breach,” 

in turn, is defined as a breach that “so substantially impairs the value of the contract 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; see

Mobil Oil, 530 U.S. at 608. 

In finding that the enactment of the 1990 CZMA amendments effected a 

repudiation of the government’s obligations under the lease agreements, the trial court 

followed the reasoning of the Supreme Court in Mobil Oil, which involved offshore oil 

and gas leases similar to those at issue here. In Mobil Oil, two oil companies that had 

leases off the coast of North Carolina sought restitution of their upfront bonus payments 

of about $156 million, contending that the enactment of the Outer Banks Protection Act 

(“OBPA”) constituted a repudiation of their lease agreements. 530 U.S. at 607, 613. 

Under the original agreements, the Department of the Interior had to approve any 

exploration plan that satisfied the OCSLA’s requirements within 30 days. The OBPA, 

however, placed a temporary moratorium on any further offshore work for at least 13 

months and required new analysis reports to be completed. Id. at 614. The Supreme 

Court ruled that section 1 of the lease agreements constituted a promise by the 

government not to impose any requirements on the exploitation of the leases beyond 

those contained in the statutes that were in effect when the leases were executed and 

regulations were promulgated under those statutes. Id. at 616. Because the OBPA 

imposed new requirements inconsistent with the terms to which the parties had agreed 
2007-5047,-5082 15 

in section 1 of the lease agreements, the Supreme Court held that the lease 

agreements had been breached. Id. at 618. The breach was material, the Court held, 

because it constituted a “modification” of the procedures incorporated by reference into 

the lease agreements that was “not technical or insubstantial.” Id. at 621. 

Section 1 of the lease agreements at issue in this case is identical to section 1 of 

the lease agreements at issue in Mobil Oil. Consequently, applying the Supreme 

Court’s analysis of that provision of the leases, we treat the lease agreements as 

incorporating by reference any statutes or regulations that were in effect at the time of 

the leases’ execution and any regulations promulgated pursuant to those statutes. 

Because the last of the subject leases was executed in 1984, all of the leases (except 

for the one executed in 1968) incorporated the CZMA by reference, but none of them 

incorporated the 1990 CZMA amendments. With reference to the Supreme Court’s 

analysis in Mobil Oil, we therefore must determine whether the 1990 CZMA 

amendments are sufficiently similar to the provisions of the OBPA that were at issue in 

Mobil Oil so as to render the 1990 CZMA amendments, and MMS’s conduct pursuant to 

those amendments, either a repudiation of the lease agreements at the time of 

enactment or a total breach of those agreements at the time MMS revoked the granted 

suspensions in July 2001. 

A 

The government first contends that the 1990 CZMA amendments did not 

constitute a repudiation of the lease agreements because the parties did not treat the 

amendments as such immediately upon their enactment. For that proposition, the 

government cites Dingley v. Oler, 117 U.S. 490 (1886), which characterized repudiation 
2007-5047,-5082 16 

as a “distinct and unequivocal absolute refusal to perform the promise” that “must be 

treated and acted upon as such by the party to whom the promise was made.” Id. at 

503; see also United States v. DeKonty Corp., 922 F.2d 826, 828 (Fed. Cir. 1991). The 

government points out that both MMS and the lessees took the position throughout the 

1990s that the 1990 CZMA amendments did not apply to the lessees’ suspension 

requests, and thus this case does not satisfy the requirements that the repudiation must 

be an unequivocal refusal to perform and must be treated as such by the promisee. 

Reasoning by analogy from the Supreme Court’s decision in Mobil Oil, the trial 

court viewed the 1990 CZMA amendments as a repudiation of the lease agreements, 

just as the Supreme Court in Mobil Oil treated the enactment of the OBPA as a 

repudiation of the lease agreements in that case. In Mobil Oil, the Supreme Court 

pointed out that the OBPA required the Department of the Interior “to impose the 

contract-violating delay.” 530 U.S. at 618. Moreover, promptly after the enactment of 

the OBPA, the Department of the Interior advised the lessees that it intended to follow 

the prescriptions of that Act, thereby expressly “communicating its intent to violate the 

contracts.” Id. at 620. 

With regard to the issue of repudiation by legislation, this case is different from 

Mobil Oil in an important respect. Not only had the parties in this case been performing 

under the lease agreements for years before the 1990 CZMA amendments were 

enacted, but they continued to perform under the lease agreements for another 11 

years after the enactment of the 1990 amendments on the assumption that the 1990 

amendments did not apply to lease suspensions. 
2007-5047,-5082 17 

Unlike in Mobil Oil, where the effect of the new statute was obvious and was 

recognized by the government immediately, in this case it was not until the district court 

entered its injunction in Norton I that MMS responded (as it was compelled to do) by 

revoking the granted suspensions. That was the first time the 1990 CZMA amendments 

had any effect on the parties’ performance under the lease agreements. In fact, in their 

complaint in this case, the plaintiffs allege that the 1990 enactment “did not clearly 

communicate the Government’s intent to deviate significantly from the existing 

procedures and standards so as to materially delay or interfere with the lessees’ 

operations.” To the contrary, according to the complaint, “[w]hen the 1990 amendments 

were enacted, neither the Government nor the Lessees believed that the Amendments 

had such an effect, or that the Amendments would have any impact on the Lessees’ 

right to obtain lease suspensions.” For that reason, it would be unrealistic to treat the 

1990 CZMA amendments as a governmental repudiation of the lease agreements as of 

the time of enactment. 

The government—in the person of MMS—continued to perform under the lease 

agreements as if the CZMA amendments did not apply to the suspensions at all. The 

trial court made essentially the same point when it observed that it “would have been 

absurd for the plaintiffs to have treated the adoption of the amendments as a breach in 

1990” because even MMS “agreed with plaintiffs through at least 1999 that the 

amendment should not be construed to apply to lease extensions.” Amber II, 73 Fed. 

Cl. at 750. Because the parties to the lease agreements all treated the agreements as 

unaffected by the 1990 CZMA amendments, we conclude that the 1990 enactment itself 

did not constitute either a breach or an anticipatory repudiation that gave the lessees a 
2007-5047,-5082 18 

right to restitution at that time. It was not until the court’s decisions in the Norton

litigation that the effect of the 1990 amendments became clear and that MMS began 

treating the amendments as affecting its suspension decisions. It was only at that point 

that the government can be said to have repudiated the lease agreements by putting 

into practice the new rules applicable to the availability of requested suspensions. 

While court decisions construing statutes are typically viewed as not changing 

the law but merely announcing what the law has meant since its enactment, that 

characterization of a court’s role in statutory interpretation does not provide useful 

practical guidance in a case such as this one. It would ignore the reality of the situation 

in this case to suggest that the interpretation of the 1990 CZMA amendments, as 

ultimately announced by the courts more than a decade later, was clear to the parties 

from the moment of enactment or that the governing principles of contract law should be 

applied as if it were. The fact of the matter is that, right or wrong, the parties interpreted 

the 1990 CZMA amendments in a way that would not have resulted in a breach. Only 

after the rulings of the district court and the court of appeals in the Norton litigation did it 

become apparent to the parties that the 1990 CZMA amendments applied to requests 

for suspensions of the leases at issue in this case. Therefore, we think the best 

characterization of the sequence of events is that the central act on which this case 

turns is not the enactment of the 1990 CZMA amendments, but the injunction entered 

by the district court effectively requiring MMS to apply the provisions of the 1990 CZMA 

amendments to the leases in question and MMS’s implementation of the decision of the 

district court, as affirmed by the court of appeals. For that reason, we disagree with the 

trial court that the enactment of the 1990 CZMA amendments constituted a repudiation 
2007-5047,-5082 19 

of the lease agreements by the government and that the lessees are entitled to the 

remedy of restitution because of that act of repudiation. 

That conclusion does not, however, establish that the remedy of restitution was 

unjustified. The trial court based its decision to grant restitution as a remedy at least in 

part on its conclusion that the government’s subsequent conduct, in July 2001, when it 

revoked the requested suspensions and replaced them with directed suspensions, 

constituted a repudiation or a total breach of the lease agreements. If that is so, the trial 

court’s restitution remedy could be justified on that ground without regard to the 

correctness of the court’s ruling on the issue of anticipatory repudiation in 1990. We 

therefore now turn to the question whether MMS’s conduct in July 2001 constituted a 

repudiation of the lease agreements or a total breach of the government’s obligations 

under those agreements. 

B 

The trial court held that the post-agreement statutory requirement that MMS 

perform consistency determinations before granting suspension requests resulted in a 

total breach of those agreements when, as a result of the decision in Norton I, MMS 

revoked the requested suspensions and imposed directed suspensions in their place. 

The government advances several arguments as to why the 1990 statutory change, as 

construed and implemented by the courts, did not have that effect, and why there was 

no breach of the lease agreements in this case. 

The linchpin of each of the government’s arguments is that the lessees had no 

“clear, unqualified right” to be granted suspensions before the 1990 CZMA 

amendments, and that the 1990 amendments did not abrogate any such right. See
2007-5047,-5082 20 

Cienega Gardens v. United States, 331 F.3d 1319, 1334 (Fed. Cir. 2003). The lessees 

had no clear, unqualified right to the requested suspensions, the government argues, 

because from the time the lease agreements were entered MMS had discretion to deny 

requests for suspensions if it concluded that the suspensions were not “in the national 

interest.” 43 U.S.C. § 1334(a)(1); see also 30 C.F.R. § 250.12(b)(3)(i) (1980) (requiring 

MMS to determine if a lease suspension was in the national interest after considering 

“[a]ll known significant national benefits and national costs”); 30 C.F.R. § 250.110 

(1999) (permitting lease suspensions at the request of the lessee if the suspension “is in 

the national interest” and is necessary (1) to “facilitate proper development of a lease”; 

(2) to allow lessees reasonable time for construction, drilling, and arrangement of sales 

contracts; (3) to avoid the requirement of continued operations that would result in 

premature abandonment of a well; or (4) to ensure that the operation is economical). 

Because MMS had discretion to deny lease suspensions even before 1990, the 

government claims that the lessees cannot demonstrate that the 1990 CZMA 

amendments voided any clear, unqualified right to such suspensions, even if the 1990 

amendments added significantly to the burdensomeness of the procedure necessary to 

obtain the requested suspensions. The government contends that, unlike in the instant 

case, the breach in Mobil Oil concerned just such a “clear” right, i.e., the lessees’ right 

to have MMS issue “within thirty days” an approval of a submitted exploration plan that 

satisfied the OCSLA’s requirements. Because the lessees in this case had no such 

clear right to have their suspension requests granted, the government argues, the 

breach analysis in Mobil Oil is inapplicable here. 
2007-5047,-5082 21 

We reject the government’s argument because it is based on what we regard as 

an incorrect interpretation of Mobil Oil. The Supreme Court in Mobil Oil acknowledged 

that the lease agreements in that case did not give the lessees any ultimate rights to 

develop the leases or produce oil and gas, and that granting permission for ongoing 

exploration and development was clearly a matter subject to the discretion of the 

Department of the Interior. See 530 U.S. at 620. Nonetheless, the Mobil Oil Court 

concluded that section 1 of the leases in that case, which was identical to section 1 of 

the leases in this case, contained a guarantee as to what procedures the Interior 

Department would follow in exercising that discretion, and that a change in those 

procedures deprived the lessees of an important benefit of their bargain. 

The Mobil Oil Court observed that section 1 of the leases provided that the lease 

agreement would not be “subject to future regulations promulgated under other statutes, 

such as new statutes like OBPA.” 530 U.S. at 616. Otherwise, the Court explained, 

“[w]ithout some such contractual provision limiting the Government’s power to impose 

new and different requirements, the companies would have spent $158 million to buy 

next to nothing.” Id. Section 1 of the lease agreements at issue in this case promised 

the same thing. Because the 1990 CZMA amendments, as interpreted by the courts in 

the Norton litigation, imposed significantly more burdensome requirements for granting 

lease suspensions, the new statute in this case breached the lease agreements in the 

same way as the new statute in Mobil Oil. 

It is true, as the government contends, that the Court in Mobil Oil devoted 

considerable attention to the requirement of the OCSLA that the government act on the 

lessees’ exploration plans within 30 days. That requirement, which the Court 
2007-5047,-5082 22 

characterized as in effect incorporated into the lease agreements, was identified as a 

right of the lessees that was clearly breached by the enactment of the OBPA. The 

government is incorrect, however, in asserting that the Supreme Court’s analysis of the 

breach in Mobil Oil focused solely on the 30-day approval provision, or that the Court 

suggested that without the violation of that right there would have been no breach. 

By itself, the 30-day approval requirement in Mobil Oil was not what the lessees 

bargained for. Instead, they bargained for a right to explore for and extract oil and gas 

from the leases, subject to a particular statutory regime. It was the overall change in 

that regime, not just the overriding of the 30-day approval provision, that the Court 

regarded as the breach, as the Court’s opinion makes clear. 

In Mobil Oil, the government made an argument closely analogous to the one it is 

making in this case, and the Supreme Court rejected that argument for reasons that are 

equally applicable here. The government argued that even before the enactment of the 

OBPA, MMS could have invoked its broad regulatory authority to postpone 

consideration of the lessees’ exploration plans, notwithstanding the 30-day approval 

period set forth in the OCSLA. The Court explained that the contracts in Mobil Oil

contained “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.” 530 U.S. at 615. However, the Court 

refused to view those other sources of statutory and regulatory authority broadly and in 

the abstract, so as to negate the pre-OBPA right to a prompt decision on the lessees’ 

exploration plans. In particular, the Court pointed out that the “fatal flaw” in the 

government’s argument arose out of the Interior Department’s determination that the 
2007-5047,-5082 23 

exploration plan “fully complies” with pre-OBPA legal requirements, including the 

requirements of the OCSLA. Id. at 618. Moreover, the Court observed that, when it 

imposed the lengthy approval delay in Mobil Oil, the Interior Department “did not rely 

upon any of the regulations to which the Government now refers.” Id.

This case is like Mobil Oil in both of those respects. Although the government 

cites the OCSLA and its regulations as authorities on which it could have based its 

refusal to grant the lessees’ requested suspensions, the revocation of the suspensions 

was in fact based on the 1990 CZMA amendments, not on the preexisting version of the 

OCSLA. And, as in Mobil Oil, the Interior Department had already determined that the 

suspensions in this case satisfied the “national interest” requirements of the OCSLA 

because MMS had granted the suspensions under the OCSLA, and it revoked those 

suspensions only after the district court held that the 1990 CZMA amendments applied 

to the grant of suspensions. Thus, the Supreme Court’s analysis in Mobil Oil compels 

us to conclude that the hypothetical authority of MMS to invoke other grounds to deny 

requested suspensions is not sufficient to avoid a finding of breach. That is so at least 

where the actual ground for revoking the granted suspensions and imposing directed 

suspensions in their place was the 1990 CZMA amendments which, like the provisions 

of the OBPA in Mobil Oil, were not incorporated into the lease agreements. 

There is a further problem with the government’s argument that the decision in 

Mobil Oil turned on the breach of the “clear, unqualified right” to have the agency 

approve a compliant exploration plan within 30 days. The Supreme Court justified its 

conclusion that the enactment of the OBPA resulted in a breach not only because of the 

violation of the 30-day approval provision of the OCSLA, but also because the OBPA 
2007-5047,-5082 24 

“changed pre-existing contract-incorporated rights in several ways.” 530 U.S. at 619. In 

particular, the court wrote that the OBPA 

delayed approval, not only of an Exploration Plan but also of Development 

and Production Plans; and it delayed the issuance of drilling permits as 

well. It created a new type of Interior Department environmental review 

that had not previously existed, conducted by the newly created 

Environmental Sciences Review Panel; and, by insisting that the Secretary 

explain in detail any differences between the Secretary’s findings and 

those of the Panel, it created a kind of presumption in favor of the new 

Panel’s findings. 

Id. Those changes, the Court wrote, “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.” Id.

The changes effected by the 1990 CZMA amendments are of the same kind and 

had the same effect of creating a more burdensome regime for obtaining granted 

suspensions, even though granted suspensions were potentially of great importance to 

preserving the value of the leases. First, the CZMA amendments required the Interior 

Department to conduct consistency determinations in connection with requested 

suspensions under a new and more exacting standard (consistency “to the maximum 

extent practicable with the enforceable policies of approved State management 

programs”). Moreover, even if the Interior Department could readily complete the 

consistency determinations, the Department would have had no control over whether 

California would object to the consistency determinations and ultimately pursue its rights 

to contest the grant of suspensions by bringing suit under the Administrative Procedure 

Act, thereby completely derailing the lessees’ ability to apply for and receive lease 

suspensions. The government counters that California has always had the option to 

sue under the Administrative Procedure Act to seek to enjoin the granting of the 
2007-5047,-5082 25 

requested suspensions. The point, however, is that before the 1990 CZMA 

amendments, California could not have sued to block the lease suspensions on the 

ground that the consistency determinations were contrary to the state’s coastal 

management plan. The 1990 CZMA amendments therefore effectively gave California 

significantly greater substantive rights in challenging the suspensions based on alleged 

inconsistency with its coastal management plan. By enhancing California’s right to 

challenge the requested suspensions, the 1990 amendments limited the lessees’ 

prospects of obtaining those suspensions. The procedures put into place by the 1990 

CZMA amendments thus altered the lessees’ rights in a way that, when put into effect 

by the injunction in the Norton case, resulted in a breach of the original lease 

agreements. 

There is some appeal to the government’s contention that because the lessees 

had no enforceable right to granted suspensions before the 1990 CZMA amendments, 

that enactment did not deprive the lessees of any rights and thus did not breach the 

lease agreements. That argument, however, is not only contrary to the approach 

employed by the Supreme Court in Mobil Oil, but reflects an overly formalistic view of 

the value of the lease agreements to the lessees. As the government made clear at 

oral argument, it would take the same position if the 1990 CZMA amendment made it 

essentially impossible to obtain granted suspensions under any circumstances, even 

though the likelihood of obtaining suspensions under the pre-1990 administrative regime 

may have been a significant consideration inducing the lessees to enter into the leases. 

It does not reflect the realities of the situation to say that the lessees were not worse off 

with respect to their interest in obtaining suspensions after the 1990 CZMA 
2007-5047,-5082 26 

amendments than they were before. We think the trial court put the matter well when it 

summarized the effect of the 1990 statute as follows: 

We recognize that, even before the Norton decisions, the lessees were 

not guaranteed every suspension they requested. At that time, however, 

the lessees were entitled to have such requests acted upon by MMS 

pursuant to the OCSLA and its implementing regulations. The lessees 

bargained for these procedures and standards by incorporating them into 

the leases via Section 1. . . . Section 1 erects the gateway through which 

the lessees must pass in order to suspend their leases and preserve their 

rights. The applicability of the amendments to § 307(c)(1) has narrowed 

this gateway. 

Amber I, 68 Fed. Cl. at 547-58. 

The 1990 CZMA amendments thus made it more difficult for the lessees to 

continue the exploration and development of their leases. As the Mobil Oil Court 

explained, “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.” 530 U.S. at 621. The 

gateway here has likewise been narrowed because the procedure for obtaining the 

granting of lease suspensions was made subject to another environmental assessment 

standard—the consistency determinations required by CZMA. For that reason, we 

agree with the trial court that the 1990 CZMA amendments, as applied at the time of the 

revocations of the requested suspensions in July 2001 and thereafter, amounted to a 

breach of the lease agreements at issue in this case. 

C 

The government next argues that even if it breached the lease agreements, the 

breach was not sufficiently material to justify the remedy of restitution because the 

lessees would have experienced the same delays that they faced in this case even if 
2007-5047,-5082 27 

section 307(c)(1) of the CZMA had never been amended. The government’s argument 

focuses on its obligations under NEPA, which provided part of the rationale for the 

courts’ rulings in the Norton litigation. The delays in this case, according to the 

government, “are just as attributable to NEPA as they are to the amended section 

1456(c)(1).” 

The government points out that MMS is authorized under its regulations to direct 

lease suspensions where such suspensions are necessary to complete NEPA 

environmental impact statements or to implement judicial decrees. 30 C.F.R. 

§§ 250.110(b)(4), (7). Because the decision in Norton I was predicated not only on the 

1990 CZMA amendments but also on the requirements of NEPA, which MMS had not 

satisfied, the government contends that the lessees would have been no better off in 

2001 even if the 1990 CZMA amendments had never been enacted. 

The trial court rejected the government’s NEPA-based argument, concluding that 

the government had “failed to demonstrate any meaningful redundancy between the 

procedures of consistency determinations and NEPA analysis for lease suspension 

requests.” Amber I, 68 Fed. Cl. at 553. Although acknowledging that the procedures 

required by amended section 307(c)(1) of the CZMA and by NEPA both require “some 

type of environmental assessment,” 68 Fed. Cl. at 553, the trial court noted that NEPA 

does not require compliance with state coastal management plans. Thus, according to 

the court, despite the preexisting requirements of NEPA, the enactment of amended 

section 307(c)(1) of the CZMA created “new ‘procedures and standards’ that ‘deviate 

significantly’ from those already in existence” at the time the leases were executed, and 

therefore gave rise to a material breach under the analysis used by the Supreme Court 
2007-5047,-5082 28 

in Mobil Oil. Id. That conclusion is further supported by regulations promulgated by the 

Department of Commerce, which state that “a Federal agency’s federal consistency 

obligations under the [CZMA] are independent of those required under NEPA and are 

not necessarily fulfilled by the submission of a NEPA document.” 15 C.F.R. § 930.37. 

With respect to the government’s argument that the requirements of NEPA have 

been as responsible as amended section 307(c)(1) of the CZMA for the revocation of 

the requested suspensions and the ensuing delay, the trial court stated that even 

assuming the delay resulting from the section 307 procedures is no longer than the 

delay caused by NEPA, any parallel delay “does not lessen the material impact of 

§ 307(c)(1) on lease suspension procedures.” Amber I, 68 Fed. Cl. at 553. The trial 

court noted that under amended section 307(c)(1), the MMS, before granting a 

suspension request, “must now comply with new consistency determination 

procedures.” Id. Furthermore, the court observed, “the agency’s decision to grant a 

suspension request is subject to a stricter standard—whereas the decision to suspend 

was once solely the agency’s, now such a decision is subject to the scrutiny of the 

relevant coastal state.” Id. Finally, the court stated that the change in procedures 

resulting from the 1990 CZMA amendments “has created a new risk for lease 

cancellation.” Id. Therefore, even though the decisions of the courts in the Norton 

litigation were based on NEPA as well as on section 307(c)(1), the court concluded that 

“the applicability of § 307(c)(1) has created an additional impediment to the grant of a 

requested suspension” and for that reason the application of section 307(c)(1) materially 

breached the lease agreements. Id.
2007-5047,-5082 29 

The government’s argument is essentially one of causation. The breach in issue 

cannot be material, according to the government, because there is no showing that it 

would have led to more adverse consequences for the lessees than the NEPA 

requirements imposed by the courts in Norton. There are two problems with that 

argument, however. First, there is no showing that the burdens imposed on the lessees 

by the NEPA requirements identified by the courts in the Norton case are equivalent to 

(or more restrictive than) the burdens imposed by section 307(c)(1). In fact, as the trial 

court pointed out, NEPA on its face imposes significantly fewer restrictions on the 

agency than the amended version of section 307(c)(1). As noted, NEPA is merely a 

procedural statute—it requires the agency to consider the environmental effects of its 

actions, but does not grant rights to the states or anyone else to affect or alter agency 

action. By contrast, section 307(c)(1) accords states the right to object to the granting 

of a requested suspension on substantive grounds, as it gives the states the right to a 

judicial remedy under the Administrative Procedure Act if the agency’s activity has not 

been “carried out in a manner which is consistent to the maximum extent practicable” 

with state coastal management programs. 16 U.S.C. § 1456(c)(1)(A). 

Second, the government’s causation argument is quite similar to the causation 

analysis that this court employed in its decision in the Mobil Oil case and that the 

Supreme Court rejected when it reversed this court’s judgment in that case. In our 

opinion, we held in part that the lessees in that case were not entitled to relief because 

we concluded that the enactment of the OBPA had essentially no effect on the lessees. 

That was because the lessees did not establish that they would have been able to 

obtain the necessary approvals for drilling and production even in the absence of the 
2007-5047,-5082 30 

OBPA. Marathon Oil Co. v. United States, 177 F.3d 1331, 1338 (Fed. Cir. 1999). The 

Supreme Court in Mobil Oil expressly rejected that analysis, holding that because the oil 

companies were not seeking damages for breach of the lease agreements, but instead 

were seeking restitution of their initial payments based on the government’s repudiation 

of the agreements, “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.” 530 U.S. at 623-24. 

Applying that aspect of the Supreme Court’s analysis to this case, we reach the 

same conclusion: because the decisions in the Norton litigation, and MMS’s conduct 

pursuant to those decisions, constituted a governmental repudiation of the lease 

agreements, and because the lessees are seeking restitution of their initial payments, 

not expectancy damages, it is irrelevant that other causes may also have prevented 

them from obtaining the requested suspensions. As the Supreme Court explained, in 

this context the lessees are not required to show that they would have been successful 

in obtaining the right to drill and would ultimately have profited from the leases. 

D 

The government further argues that the lessees elected to continue performance 

under the lease agreements despite the enactment of the 1990 CZMA amendments and 

the initial ruling in the Norton I litigation, and therefore have waived their right to sue for 

restitution. As we have noted, the breach did not occur until after the decision in Norton 

I. Consequently, any actions taken by the lessees between 1990 and the 2001 ruling in 

Norton I cannot be understood as reflecting continued post-breach performance by the 

lessees or constituting an election to continue performance in spite of a breach. 
2007-5047,-5082 31 

Immediately after Norton I, the lessees sent MMS several letters asking the 

agency to perform the consistency analyses ordered by the district court, but MMS did 

not do so. That conduct also does not constitute an election, because it is well 

established that merely requesting assurance from the other party that it does not intend 

to breach the agreement does not constitute an election to continue performance and to 

forgo the right to sue the other party for breach. Restatement (Second) of Contracts § 

257 (“The injured party does not change the effect of a repudiation by urging the 

repudiator to perform in spite of his repudiation or to retract his repudiation.”). 

The government next contends that the lessees made an election through their 

actions after the Ninth Circuit affirmed the district court’s ruling in Norton I. On remand, 

the State of California and other plaintiffs in that case sought to force the Department of 

the Interior to perform the consistency analyses required by the 1990 CZMA 

amendments. Several of the lessees who had previously intervened in that case on the 

side of the Interior Department filed a motion in response to the government’s 

opposition to the injunction, explaining their position that the Department “should have 

expeditiously issued” the consistency analysis required by the 1990 CZMA amendments 

“upon the Court’s June 2001 decision.” The government argues that the position the 

lessees took in their briefs at that time amounted to an election. The government’s 

position is that the lessees were essentially asking the district court in the Norton

litigation to order continued performance under their lease agreements. The district 

court subsequently entered the injunction, and MMS sent further requests to the lessees 

for information MMS claimed it needed in order to perform the analyses. The lessees 

submitted the information under protest. 
2007-5047,-5082 32 

The trial court found that the lessees’ actions did not constitute an election, and 

we agree. The lessees maintained a consistent position throughout the proceedings in 

the Norton litigation. They explained in their response to the Department’s opposition to 

the injunction that they “allege that the United States is in material breach, and seek 

relief that the Leases be rescinded, and the United States provide restitution to the 

lessees.” None of those filings manifested an intention to continue performance under 

the leases. The subsequent cooperation of the lessees after the Norton I injunction also 

does not qualify as continued performance, given that the lessees made clear that they 

were cooperating under protest. The doctrine of election does not allow court-ordered 

performance to count as an election, because the term “election” connotes a voluntary 

acceptance of a change in the contract. 

E 

At the end of the day, we are persuaded that the Mobil Oil case is sufficiently 

similar to this one that the Supreme Court’s analysis in that case governs this case and 

requires that we affirm the trial court’s judgment. To be sure, as the government has 

pointed out and as we have discussed above, there are differences between this case 

and Mobil Oil that in some ways make this case a stronger case for the government 

and, correspondingly, a less compelling one for the lessees. In particular, the breach in 

Mobil Oil was at least somewhat more clear-cut, and unlike in Mobil Oil the parties in 

this case had performed for many years under the lease agreements before the 

statutory interpretation that led to the breach. Nonetheless, we are persuaded that the 

Supreme Court’s analysis in Mobil Oil extends to the circumstances of this case. If we 

are wrong, and the differences between this case and the Supreme Court’s decision in 
2007-5047,-5082 33 

Mobil Oil are significant enough to call for a different result, we think it is preferable for 

the members of that Court to distinguish or limit the scope of their precedent than for us 

to do it for them. 

III 

In a challenge to the amount of the restitution award, the government argues that 

the trial court’s order requiring the return of the full amount of the upfront lease bonus 

payments should be overturned. The government argues that restitution is a “limited 

remedy” that exists primarily to make “the non-breaching party whole.” Glendale Fed. 

Bank, FSB v. United States, 239 F.3d 1374, 1380 (Fed. Cir. 2001). Accordingly, the 

government contends that the restitutionary award in this case should be limited to the 

amount of money that the current lessees paid to purchase the lease agreements rather 

than the amount the original lessees paid as upfront bonus payments. To award the 

current lessees the upfront bonus payments, according to the government, would be an 

unfair “windfall,” contrary to this court’s precedent in Admiral Financial Corporation v. 

United States, 378 F.3d 1336 (Fed. Cir. 2004); Hansen Bancorp, Inc. v. United States, 

367 F.3d 1297 (Fed. Cir. 2004); and LaSalle Talman Bank, F.S.B. v. United States, 317 

F.3d 1363 (Fed. Cir. 2003). 

The return of upfront payments is ordinarily appropriate in cases of repudiation 

and was explicitly endorsed in Mobil Oil: “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. . . .” 530 U.S. at 623; see also E. Allan Farnsworth, Farnsworth on Contracts

§ 12.19 (3d ed. 2004) (“Restitution as remedy for breach . . . is limited to cases in which 
2007-5047,-5082 34 

the injured party has a claim for damages for total breach.”); John E. Murray, Jr., Corbin 

on Contracts § 1104 (rev. ed. 2007) (“In the case of a repudiation there is no doubt that 

the injured party has a choice of remedies: (1) an action for damages . . . [or] (2) 

restitution of such value as he may have already conferred upon the repudiator.”). The 

only question before us is whether restitution of the entire upfront bonus award is 

improper for plaintiffs who were not the original purchasers of the leases. 

The trial court ruled, and we agree, that the new leaseholders “stand in the 

shoes” of the original lessees. See Farnsworth on Contracts § 11.8; Corbin on 

Contracts § 51.1 (“Among the axiomatic phrases in contract law, the clear victor in the 

law of assignments is, ‘The assignee stands in the shoes of the assignor.’”). The 

government argues, however, that the new leaseholders do not deserve restitution of 

the full amount of the upfront bonuses because they bought leases at a discount, and 

restitution would award them significantly more than they paid for the leases. That 

argument carries no weight, however, if the new leaseholders stand in the shoes of the 

original lease owners, as general principles of contract law dictate that they do. 

The cases on which the government relies to support its “windfall” argument are 

not to the contrary, because they do not address the impact of a prior assignment on an 

award of restitution. See Admiral Financial, 378 F.3d at 1345 (noting that restitution 

would be a “windfall” where there were indications that the non-breaching party would 

have failed financially regardless of the breach); Hansen, 367 F.3d at 1318 (directing 

lower court to consider whether an award of restitution would make the non-breaching 

party better off than if the breach had not occurred); LaSalle, 317 F.3d at 1376-77 

(affirming trial court’s refusal to award damages on a restitution theory when the 
2007-5047,-5082 35 

benefits to the breaching party were alleged to include accounting costs). Because we 

agree with the trial court that any benefits that would not have been a windfall to the 

original lessees cannot be considered a windfall to the assignees who are entitled to 

assert all the rights of the original lessees, we do not need to reach the lessees’ 

argument that it would be an impermissible windfall to the government to allow it to 

retain a portion of the upfront bonus payments simply because the original lessees had 

transferred their interests in the leases for less than the amount they had originally paid 

for them. 

The government makes the further argument that the trial court did not have 

jurisdiction to award restitution because equitable remedies against the government are 

not available under the Tucker Act, 28 U.S.C. § 1491(a). We have held, however, that 

because an award of restitution in a breach of contract case is a standard contractbased remedy, the Court of Federal Claims has jurisdiction to grant that form of relief. 

See Acme Process Equip. Co. v. United States, 347 F.2d 509, 530 (Ct. Cl. 1965), rev’d 

on other grounds, 385 U.S. 138 (1966) (restitution characterized as “an alternative 

remedy for breach of contract in an effort to restore the innocent party to its precontract 

status quo, and not to prevent the unjust enrichment of the breaching party”). 

 Finally, the government argues that the original lessees could not have assigned 

the “right” to restitution because no breach occurred prior to the assignment of the 

contracts. The Restatement of Contracts acknowledges that it may not be permissible 

to assign “future” rights not yet possessed by the assignor. Restatement (Second) of 

Contracts § 321(2) (“a purported assignment of a right expected to arise under a 

contract not in existence operates only as a promise to assign the right when it arises 
2007-5047,-5082 36 

and as a power to enforce it.”). That principle does not apply in this context, however, 

because the right to enforce a contract does not come into existence upon breach. 

Even if breach is regarded as a condition precedent to the existence of the right to seek 

contract enforcement, such a conditional right is considered to pass along with the 

assignment. See, e.g., Nashville Lodging Co. v. Fed. Deposit Ins. Corp., 934 F. Supp. 

449, 456 (D.D.C. 1996); Restatement (Second) of Contracts § 320 (“The fact that a right 

is . . . conditional does not prevent its assignment before the condition occurs.”). Thus, 

the assignment of a contract includes the assignment of the right to enforce the 

contract, which entitles the assignee to pursue all available contract remedies. 

IV 

 In their cross-appeal, the appellees argue that the trial court erred by ruling that 

they could not recover any damages beyond the upfront bonus payments. The lessees 

sought return of their “sunk costs” of approximately $727 million that they expended in 

developing the offshore leases. We agree with the trial court that lessees cannot 

receive compensation for those “sunk costs” under a restitution theory of recovery. 

The trial court initially denied recovery of the lessees’ sunk costs on the ground 

that such a remedy would amount to recovery under a “reliance” theory. If the lessees 

elected that remedy, the court held, the government would be entitled to defend by 

showing that the leases would not have been profitable. The lessees accordingly 

elected not to pursue any damages based on their expectancy interests. Amber II, 73 

Fed. Cl. at 740. After surveying various sources that describe the ways in which the 

restitution interest can be measured, the trial court concluded that it would be 

appropriate to grant restitution to the extent that the government received a “benefit.” 
2007-5047,-5082 37 

The court found that none of the sunk costs qualified as a benefit to the government, 

however, because even though those costs were “foreseeable and incurred pursuant to 

the contract,” they “did not directly benefit the government in the same way as the upfront [lease bonus] payments.” Id. at 746. The trial court reasoned that without knowing 

whether the leases would ultimately be revenue-generating, there would not be any way 

of knowing whether the exploratory activities actually conferred a benefit on the 

government. 

On appeal, the lessees urge us to adopt a more expansive approach to the 

concept of “benefit.” They argue that sunk costs “do constitute benefits to the 

Government for purposes of restitution by a breaching party, because they were 

incurred in fulfillment of contractual obligations.” The contractual obligations that the 

lessees identify are those provisions of their leases that required them to act with “due 

diligence” in developing the oil and gas resources. See 43 U.S.C. §§ 1337(b)(4) 

(describing “due diligence” requirements), 1344(b)(4); 30 C.F.R. subpart 250B. Failure 

of a lessee to act with due diligence could have resulted in lease cancellation or 

ineligibility to obtain future leases. 43 U.S.C. §§ 1334(c), 1334(a)(2)(C)(ii)(II), 1337(d). 

The lessees argue that their efforts to satisfy the due diligence requirements benefited 

the government because, if the efforts had been successful, the government would 

have received royalties from the resulting production. 

The government responds that the due diligence requirements of the leases are 

not a sufficient basis for a restitution award because they do “not require the 

performance of any specific tasks or the expenditure of any specific amounts for 

exploration.” The government argues that “at most, ‘due diligence’ requires only 
2007-5047,-5082 38 

efficient and orderly exploration of a lease upon an agreed-upon schedule, as opposed 

to contractually required tasks and costs.” 

This court has previously explained that “restitution is proper only where the 

contribution that the non-breaching party is seeking to recover was made in exact 

conformity with the literal terms of the contract; recovery may not be had where the 

plaintiff acted voluntarily, even if the action was taken with the intent to effectuate the 

spirit of the agreement.” Hansen, 367 F.3d at 1306, describing Landmark Land Co. v. 

Fed. Deposit Ins. Corp., 256 F.3d 1365, 1375 (Fed. Cir. 2001). It appears clear that due 

diligence was a contractual obligation of the leases, and that the lessees’ performance 

was therefore not strictly voluntary. The lessees had to perform ongoing exploratory 

activities pursuant to the requirements of the lease. Consequently, they can attempt to 

recover those costs even though the leases themselves did not specify precisely what 

actions the lessees were required to take. See Landmark, 256 F.3d at 1373 (where 

contract specified that plaintiffs had to make an initial contribution of “not less than” $20 

million to the trust, plaintiffs were allowed to collect entire amount of initial contribution, 

not just the $20 million explicitly mentioned in the contract). 

Nonetheless, while the lessees may have been required to perform due diligence 

activities under their leases, the question remains as to how to value those activities. 

The lessees argue that restitution should be measured by the costs of the due diligence 

activities. As the trial court noted, however, there are different ways to measure 

restitution, including two methods that this court has recognized as appropriate. See, 

e.g., Landmark, 256 F.3d at 1372 (describing “two alternative measures of relief in 

restitution,” either the “value of the benefits received by the defendant due to the 
2007-5047,-5082 39 

plaintiff’s performance,” or “the cost of the plaintiff’s performance”); see also

Restatement (Third) of Restitution § 49(2) (Tentative Draft No. 5, 2007) (listing four 

alternative measures of restitution where property has been transferred, including 

market value and value based on agreement); Restatement (Second) of Contracts § 

344(c) (defining “restitution interest” as “having restored . . . any benefit . . . conferred 

on the other party”). 

While in some cases actual cost would be an appropriate measure of restitution, 

the facts of this case do not support such an award. To return the sunk costs to the 

lessees would be an attempt to restore them to the status quo ante, which is one 

purpose of restitution. The trial court explained, however, that a return to the status quo 

ante in this case is impossible given that the lessees cannot return the leases to the 

government in the same condition in which they received them. See, e.g., Hansen, 367 

F.3d at 1315 (“[S]ection 384 of the [Second] Restatement [of Contracts] precludes 

restitution when the non-breaching party cannot return ‘any interest in property that he 

has received in exchange in substantially as good condition as when it was received by 

him. . . .’”). Moreover, both the government and the lessees invested a significant 

amount of time and resources in developing the leases before the implications of the 

1990 CZMA amendments became clear. Under these circumstances, where both 

parties have participated in apparent good faith for the better part of 20 years, the 

purpose of restitution is adequately served by having the government return the initial 

payments; it is not clear that the net effect of the parties’ performance during the 

pendency of the leases has been to confer a benefit on the government at the expense 

of the lessees. 
2007-5047,-5082 40 

The only benefit even arguably received by the government for the lessees’ due 

diligence activities was informational in nature. In a similar situation where the nonbreaching party sought restitution damages but the valuation of allegedly conferred 

benefits was too uncertain, this court remanded for a determination of actual costs 

under a reliance theory of damages. See Glendale Fed. Bank, FSB, 239 F.3d at 1382-

83 (denying restitution on the basis that the only benefit arguably conferred on the 

government–time–was not amenable to valuation); see also LaSalle Talman Bank, 317 

F.3d at 1376 (noting that “when restitution damages are based on recovery of the 

expenditures of the non-breaching party in performance of the contract, the award can 

be viewed as a form of reliance damages”). In this case, however, the lessees have 

already elected not to pursue reliance damages by choosing to forgo any damages 

based on their expectancy interests. Thus, the lessees are left with only the option of 

pursuing damages under a restitution theory. Given the inherently uncertain nature of 

calculating the benefit conferred by the lessees’ due diligence activities, we conclude 

that the trial court did not err in denying any additional award of damages attributable to 

the lessees’ activities in seeking to develop the leases. 

 Each party shall bear its own costs for these appeals. 

AFFIRMED.