(Slip Opinion) OCTOBER TERM, 1999 1 Syllabus NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337. SUPREME COURT OF THE UNITED STATES Syllabus MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC. v. UNITED STATES CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT No. 99­244. Argued March 22, 2000- Decided June 26, 2000* Two oil companies, petitioners here, paid the Government $158 million in return for lease contracts giving them the rights to explore for and develop oil off the North Carolina coast, provided that the companies received exploration and development permission in accordance with procedures set out in, inter alia, the Outer Continental Shelf Lands Act (OCSLA), the Coastal Zone Management Act of 1972 (CZMA), and regulations promulgated pursuant to those Acts. OCSLA, among other things, requires the Department of the Interior to approve a company's Plan of Exploration (Plan) within 30 days of its submission if the Plan meets certain criteria. A company must also obtain an exploratory well drilling permit after certifying under CZMA that its Plan is consistent with each affected State's coastal zone manage- ment program. If a State objects, the Secretary of Commerce must override the objection or the certification fails. Interior may grant the permit if Commerce rules against the State. While the compa- nies' Plan was pending before Interior, the Outer Banks Protection Act (OBPA) became law. OBPA prohibited the Interior Secretary from approving any Plan until, inter alia, an OBPA-created Envi- ronmental Sciences Review Panel (Panel) reported to the Secretary and the Secretary certified to Congress that he had sufficient infor- mation to make OCSLA-required approval decisions. In no event could he approve any Plan for 13 months. Interior told Mobil the Plan met OCSLA requirements but that it would not approve the - - - - - - * Together with No. 99­253, Marathon Oil Co. v. United States, also on certiorari to the same court. 2 MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC. v. UNITED STATES Syllabus Plan until the OBPA requirements were met. It also suspended all North Carolina offshore leases. After the Panel made its report, the Interior Secretary made the requisite certification to Congress but stated that he would not consider the Plan until he received further studies recommended by the Panel. North Carolina objected to the CZMA certification, and the Commerce Secretary rejected Mobil's override request. Before the Commerce Secretary issued his rejec- tion, the companies joined a breach of contract lawsuit in the Court of Federal Claims. That court granted them summary judgment, find- ing that the Government had broken its contractual promise to follow OCSLA, that the Government thereby repudiated the contracts, and that that repudiation entitled the companies to restitution of their payments. In reversing, the Federal Circuit held that the Govern- ment's refusal to consider Mobil's Plan was not the operative cause of any failure to carry out the contracts' terms because the State's objec- tion to the CZMA certification would have prevented the exploration. Held: The Government broke its promise, repudiated the contracts, and must give the companies their money back. Pp. 8­19. (a) A contracting party is entitled to restitution if the other party "substantially" breached a contract or communicated its intent to do so. Here, the Government breached the contracts and communicated such intent. None of the provisions incorporated into the contracts granted Interior the legal authority to refuse to approve the compa- nies' Plan, while suspending the lease instead. First, such authority does not arise from the OSCLA provision, 43 U. S. C. §1334(a)(1)(A), that permits the Secretary to promulgate regulations providing for suspension of an operation or activity only upon "the request of a les- see." Second, the contracts say that they are subject to then-existing regulations and future regulations issued under OCSLA and certain Department of Energy Organization Act provisions. This explicit ref- erence to future regulations makes it clear that the contracts' catchall provisions referencing "all other applicable . . . regulations" must in- clude only statutes and regulations already existing at the time of the contracts. Thus, the contracts are not subject to future regulations promulgated under other statutes, such as OBPA. Third, an OSCLA provision authorizing suspensions in light of a threat of serious harm to the human environment did not authorize the delay, for Interior explained that the Plan fully complied with current legal require- ments and cited OBPA to explain the delay. Insofar as the Govern- ment means to suggest that OBPA changed the relevant OSCLA standard, it must mean that OBPA in effect created a new require- ment. Such a requirement would not be incorporated into the con- tracts. Finally, when imposing the delay, Interior did not rely upon any of the regulations to which the Government now refers. OBPA Cite as: 530 U. S. ____ (2000) 3 Syllabus required Interior to impose the contract-violating delay and changed pre-existing contract-incorporated requirements in several ways. By communicating its intent to follow OBPA, the Government was com- municating its intent to violate the contracts. Pp. 8­14. (b) The Government's contract breach was substantial, for it de- prived the companies of the benefit of their bargain. Under the con- tracts, the incorporated procedures and standards amounted to a gateway to the companies' enjoyment of their rights to explore and develop oil. Timely and fair consideration of a submitted Plan was a material condition of the contracts, yet the Government announced an OBPA-required delay of 13 months minimum, and the delay turned out to be at least four years. This modification of the proce- dures was not technical or insubstantial, and it amounted to a repu- diation of the contracts. Pp. 15­16. (c) Although acceptance of a once-repudiated contract can consti- tute a waiver of the restitution right that repudiation would other- wise create, none of the events that the Government points to- that the companies submitted the Plan to Interior two days after OBPA became law, that the companies subsequently asked the Commerce Secretary to override North Carolina's objection to the CZMA certifi- cation, and that the companies received suspensions of their leases pending OBPA-mandated approval delays- amounts to significant postrepudiation performance. Pp. 16­18. (d) Finally, the Government's argument that OBPA caused the companies no injury because they could not have met the CZMA con- sistency requirements misses the point: The companies seek not damages for breach of contract but restitution of their initial pay- ments. Because the Government repudiated the 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. Pp. 18­19. 177 F. 3d 1331, reversed and remanded. BREYER, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and O'CONNOR, SCALIA, KENNEDY, SOUTER, THOMAS, and GINSBURG, JJ., joined. STEVENS, J., filed a dissenting opinion. Cite as: 530 U. S. ____ (2000) 1 Opinion of the Court NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Wash- ington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press. SUPREME COURT OF THE UNITED STATES _________________ Nos. 99­244 and 99­253 _________________ MOBIL OIL EXPLORATION AND PRODUCING SOUTHEAST, INC., PETITIONER 99­244 v. UNITED STATES MARATHON OIL COMPANY, PETITIONER 99­253 v. UNITED STATES ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT [June 26, 2000] 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 abs o- lute, 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. 2 MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC. v. UNITED STATES Opinion of the Court IA A description at the outset of the few basic contract law principles applicable to this case will help the reader understand the significance of the complex factual circu m- stances that follow. "When the United States enters into contract relations, its rights and duties therein are go v- erned 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 case. As set forth in the Restatement of Contracts, the relevant principles specify that, when one party to a co n- tract 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 reli- ance." 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 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 perfor mance." Id., §243. As applied to this case, these principles amount to the following: If the Government said it would break, or did break, an important contractual promise, thereby "sub- stantially 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 com- panies 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 Cite as: 530 U. S. ____ (2000) 3 Opinion of the Court 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. B In 1981, in return for up-front "bonus" payments to the United States of about $158 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 Car o- lina 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. 99­253, pp. 174a­185a. 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 Outer Continental Shelf Lands Act (OCSLA), 67 Stat. 462, as amended, 43 U. S. C. §1331 et seq. (1994 ed. and Supp. III), and the Coastal Zone Management Act of 1972 (CZMA), 16 U. S. C. §1451 et seq., specify that leaseholding companies wishing to explore and drill must successfully complete the following four procedures. First, a company must prepare and obtain Department of the Interior approval for a Plan of Exploration. 43 U. S. C. §1340(c). Interior must approve a submitted 4 MOBIL OIL EXPLORATION & PRODUCING SOUTHEAST, INC. v. UNITED STATES Opinion of the Court Exploration Plan unless it finds, after "consider[ing] avai l- able relevant environmental information," §1346(d), that the proposed exploration "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). Where approval is warranted, Interior must act quickly- within "thirty days" of the company's submission of a proposed Plan. §1340(c)(1). 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. 16 U. S. C. §1456(c)(3). If a State objects, the certification fails, unless the Secretary of Commerce overrides the State's objection. If Commerce rules against the State, then Interior may grant the permit. §1456(c)(3)(A). Third, where waste discharge into ocean waters is at issue, the company must obtain a National Pollutant Discharge Elimination System permit from the Environ- mental Protection Agency. 33 U. S. C. §§1311(a), 1342(a). It can obtain this permit only if affected States agree that its Exploration Plan is consistent with the state coastal zone management programs or (as just explained) the Secretary of Commerce overrides the state objections. 16 U. S. C. §1456. 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. 43 U. S. C. §1351. Again, Interior's approval is conditioned upon certification that the Plan is consistent with state coastal zone management plans- a certification to which States