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The United States Court of Appeals for the Federal Circuit is now open and in session.

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God save the United States and this honorable court.

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Good morning and may it please the court.

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The trial court made two reversible errors here.

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First, it wrongly held that Congress's repeal of the Contract Settlement Act of 1944, effective as of 2011, did not cover a CSA termination complaint.

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submitted under that claims processing statute in 2019.

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And second, the court wrongly failed to apply res judicata in shell two to a claim that contained exactly the same damages that were sought and abandoned in shell one.

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Now first, Congress repealed the CSA.

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This is Judge Trinidad.

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Can I get a clarification about something?

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Aside from interest, do you agree there's a Tucker Act

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would support jurisdiction over the damages that are now in front of us?

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Yes, in this case the Tucker Act would because all of the cost were incurred less than six years ago.

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Also, plaintiffs may elect to certify a contract to dispute that claim, which, because it's a pre-1995 contract, is also very forgiving on the statute of limitations.

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Right, but I guess with the Tucker Act, for example, if we were to find the Contract Settlement Act not applicable, and to reject your race judicata argument, we could affirm, could we not?

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on all but the $75,000 or so in interest.

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Yes, that would be the outcome.

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Okay, thanks.

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Okay, Council, now I want to interrupt you.

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This is Judge O'Malley.

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Wouldn't your argument with respect to the CSA have applied to the last case where the

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monies at issue were up to 2015?

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Well, we don't believe so because under the CSA, there was a well-founded CSA claim that was filed in 2005 and then a complaint in 2006.

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So they exercised their rights to go into the Court of Federal Claims.

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And once they were in the Court of Federal Claims, the proceeding had already begun.

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But it wouldn't have cut off interest in that case?

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Likely not.

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And the reason would be is that the proceeding had already begun, and then the court had the authority under Rule 15 to kind of gross up a claim to the time of judgment, which is what the court did in that case.

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And you didn't raise this issue at all in that case?

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Right.

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We didn't raise that issue, and it's a jurisdictional issue, so it's certainly not waivable in any way.

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What is the authority?

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I don't remember whether you cited.

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I think all of this rests on the idea that under the Tucker Act, there is no waiver of sovereign immunity for prejudgment interest.

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Is that right?

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That's correct.

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And what's the authority for that?

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I don't remember whether you cited it.

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I don't believe we cited it.

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I don't think we cited that in our brief, but that is... You think it's well established?

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It's very well established with precedent from this court.

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For example, if you look at the spent nuclear fuel cases or other cases that are founded entirely on the Tucker Act.

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So on the Contract Settlement Act, why isn't the right way to read this rights and duty language to mean that they are absolutely and simply opposite sides of the same coin?

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And obviously, it's one of these kind of legal expressions that often have A and B

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which conceivably might be redundant, but in any event, why are, and you concede, I think that, have conceded in this litigation that Shell's right matured before the 2011 repeal.

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Why isn't all the relevant duty exactly the correlative of the right?

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Well, what we're, we noted that Shell's rights under the contract

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had matured.

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That's very different than rights under the CSA.

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So going back to the first principles of statutory interpretation, we'll look at the repealer schedule and the repealer schedule states, the laws specified in the following schedule are repealed except for rights and duties that matured, penalties that were incurred, and proceedings that were begun before the date of enactment of this act.

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Now, the rights and duties, penalties, and proceedings language necessarily refers back to the laws that were repealed.

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The repeal of the CSA did eliminate any contractual rights.

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It did not eliminate, say, the United States' rights under other statutes from under which the government can seek a penalty.

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So if the rights and duties arose under the contract before the repeal,

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When do you think the rights and duties rose under the CSA?

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I'm not sure how there would be a distinction.

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Because under the CSA, the rights and duties arise only with the filing of a CSA termination claim.

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And that's the holding of the luck decision that both parties cited as binding precedent in this court.

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Put another way.

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this court's predecessor in love held, having availed themselves of the privileges of the Contract Settlement Act, of which there are many, plaintiffs are bound by the limitations therein fixed on bringing suits in this court.

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So what the court was holding, and it's very clear, is that parties need to make an actual election to avail themselves of CSA rights before they trigger any duties of the government.

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And then the Ford case also makes clear that you have to

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exhaust administrative remedies in the CSA before the government has any duties.

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And can I just explore a tiny bit what the consequences would be on a going forward basis?

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I'm assuming that the operation maintenance and monitoring costs continue with this McCall site, is that right?

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Yes, those costs continue.

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So if the oil companies

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don't want to lose interest on those costs.

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And if you're right about the Contract Settlement Act, should the oil companies, I don't know, let's say every two months or one month or six months, file a new claim, maybe even a new action in the Court of Federal Claims, and just keep doing that so that they're losing

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maybe a month or two of interest and just because that's the only difference between the Contract Settlement Act and the Tucker Act?

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Well, there are other allowable costs if you look at Section 106D of the Contract Settlement Act.

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But assuming that interest is the big one and the most important to the plaintiffs, they would have to make their own decision as the masters of their complaint.

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In the spent nuclear fuel context, it's a very similar situation where, generally, utilities submit claims on or about year six to capture the last six years of costs.

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But that's entirely up to the oil companies themselves as the masters of their complaint.

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And that really segues into the res judicata issue.

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The oil companies here were the masters of their complaints.

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submitted a CSA claim to the government in 2005.

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And in it, they asked for all future costs.

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And they enumerated those costs.

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If you go to page 26 of the Joint Appendix, they were even able to come up with a net present value number for these future O&M costs.

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But Counsel, what do we do with the fact that all parties

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treated the prior action as a partial breach and the Court of Federal Claims made it clear that it had no authority to address anything else.

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So are you saying if someone asserts a claim that is not cognizable at all, that that claim is sufficiently resolved and is not addressed by the court, that somehow that claim is sufficiently decided for purposes of race judicata?

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Yes, and that's this court's decision from last year and Sawinski makes that abundantly clear.

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But we don't even need to go that far in this case.

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If you look at the trial court's opinion, once again, maybe page 13 of the appendix, the court, although it never had the benefit of the trial court's record in

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the Shell 1 case, it nevertheless made the conclusion that somehow that the plaintiff would never be able to prove future damages.

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And that's simply wrong.

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In fact, as a matter of law... You referred a moment ago to Appendix Page 26 as designating a net present value of all future costs

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in perpetuity.

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Tell me what you're talking about.

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Oh, pardon me.

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It's page 29.

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And it was the 2005 administrative complaint.

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And it says they will be required to pay future response costs.

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I'm not aware on that page.

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There are a lot of words on the page.

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Oh, and subsection B. They estimate that they will be required to pay future response costs of approximately $16,651,508.

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So in 2005,

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the oil companies were able to quantify those numbers.

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And by making the claim that... They said it was an estimate.

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Council, they said it was an estimate.

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Did they not?

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Yes, they said it was an estimate, but by reading that and they were making this demand to an agency, this is a demand that the United States government pay them this money, they should be able to back that up with

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proving causation, foreseeability, and reasonable certainty.

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And that's all that's required to obtain future damages.

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Well, isn't it fair to say that they were simply saying, we could resolve all of this right now if you wanted to?

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I mean, I don't see how that is a cause of action that actually gets addressed and decided for purposes of race judicata.

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Well, the reason is that if you then go back to the CSA, the CSA mandated that when you submit a claim, that the government's decision on that claim is binding, that the decision is final and conclusive, and that it's final and conclusive unless the contractor sues in the court of federal claims within 90 days.

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So in conformance with that requirement,

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once you've made a claim under the CSA, you actually have to go to court if the government denies it.

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The plaintiffs then sued in the Court of Federal Claims.

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And pages 101 and 102 are the pages of the complaint that are relevant here, pages 101 and 102 of the appendix.

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And once again, they asked for future damages.

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Although they didn't actually use the term future, did they?

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This is paragraph 26 and 27 of the original complaint.

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They said they're entitled to it, and they're entitled to all costs, whatever, but they didn't actually use it in the future.

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But put that aside.

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I took it from your brief that you agree that if during the, during Shell 1, I guess we call it,

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there had been a formal withdrawal of that claim, there would not, of a request, assuming one was made, for all future response costs, that there would not be race judicata.

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Right?

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They would have a better case.

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But the problem is that the trial court in shell one, or in shell two for that matter, never went through that analysis.

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The court in shell two, without the benefit of the record in shell one, made a conclusion that these costs that were sought were entirely speculative.

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And rather than following the plain... Okay, but put aside...

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the question of speculativeness now.

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I thought it was clear from your brief and indeed from the law that if Shell had formally said, we are not here speaking the costs not yet incurred, that

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that would then bring the matter, make the matter available once those costs were incurred in a future case.

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You don't concede that or you do concede that?

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If they had done that in their administrative claims, certainly, it's not quite as simple.

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There would have to be some sort of adjudication either that the court didn't have jurisdiction or some sort of decision along those lines that would allow

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allow them to bring the case again, but that's exactly, but that's a very different fact pattern.

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This case is actually right on all fours with Sewinski, where... I really can't accept the right on all fours with Sewinski.

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I mean, Sewinski relies heavily on brain life.

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I mean, in an infringement context, once you have been deemed a non-infringer, then you remain a non-infringer as it relates to the same product.

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That's a very unique

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patent infringement context.

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It's not on all fours with Sewinski.

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Well, Sewinski also covered what are the basic rules regarding risk judicata and also held that failure to a prosecute in a case is an adjudication on the merits.

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So this case, due to the oil company's failure to prosecute,

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act as a judgment on the merits, and it meets all of the elements of race judicata.

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I see my time is up.

[00:16:38] Speaker 00:
Okay, now we'll save your rebuttal time.

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Any more questions at the moment for Mr. Thucydides?

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None for me.

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All right, thank you.

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Then we'll hear from Mr. Kirk.

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Thank you, Judge Newman, and may it please the Court.

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The government's race judicata argument is foreclosed by this Court's clear line of precedence in the spent nuclear fuel cases

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recognizing that an exception to ordinary race judicata rules applies where, as here, the defendant commits an ongoing series of partial breaches.

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In Indiana, Michigan, the court held that future damages were unavailable because the breach was partial, not total, and that the utilities were still awaiting the balance of the government's performance.

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As the court explained in the

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Council, do you agree with your friend on the other side that you, though, in your administrative claim, at least, you asked for those future monies?

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We did, Your Honor.

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We did judge O'Malley, but we don't think that makes any difference for several reasons.

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Number one, as you pointed out, that was in a context under the Contract Settlement Act where the act encourages the parties to settle their differences if possible, and the hope then was we could make an estimate and settle our differences.

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Second, the fact that the complaint pointed out that the costs were ongoing,

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is not in any way a suggestion that the breach was not partial because the costs were ongoing.

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And in fact, in shell one, the oil companies recovered all of the costs incurred between 2006 and the trial at the end of 2015, beginning of 2016.

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And third and most importantly, your honor, it just doesn't matter if the oil companies ask for future costs.

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We know that from Indiana, Michigan.

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Indiana, Michigan asked for future costs in the Court of Federal Claims.

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And then it came to this court asking for future costs.

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Yet this court held, no, future costs in a partial breach case are not available because they're speculative.

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And Indiana, Michigan raised the concern, well, under ordinary race judicata rules involving the rule against splitting claims,

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isn't that going to leave us completely without a remedy?

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And the court said no to that as well and squarely held that in such cases, the proper result is for the victim of the breach to bring follow-on suits to collect the costs as they are incurred.

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And that decision in Indiana and Michigan followed the general rule going back almost 100 years to the New York Life decision in the Supreme Court in the 1930s.

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It followed the restatement on judgment, section 26.

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And it followed the- Mr. Kirk, this is Judge Torano.

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Can I just, I guess, ask something that I didn't remember being a focus of the government's brief, but something of a focus of the argument this morning.

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But does this principle of the partial breach exception to race judicata apply even in a situation where, in the particular circumstances, the future damages, in fact, are not speculative?

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And this obviously ties to the $16 million or a thousand or something, $16 million estimate in that page.

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29 of the appendix in the claim submitted to the agency.

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I believe that the law treats them as speculative as a matter of law, notwithstanding the oil company's attempt to come up with a net present value estimate in the claim letter.

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And I would direct you to New York Life on that, Your Honor, and to Indiana, Michigan.

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What the court said in Indiana, Michigan was that

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future damages necessarily have a highly speculative nature.

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That's at 422 F3, 1376.

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And if you think about it, no one can know what the costs will be beforehand.

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One can make an estimate, but by its very nature, that's going to be highly speculative.

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And that's why the government itself argued in Indiana, Michigan, that

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future damages were speculative and the government agreed that follow-on suits could be brought.

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And as to the government's argument in this case that because we sought future damages in the claim letter that somehow that wipes out the rule, that can't be right because Indiana, Michigan squarely held even though the plaintiff there was seeking future damages.

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The government has cited no authority for

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it's proposed rule that some kind of formal disavowal or a dismissal without prejudice is necessary to preserve the right to seek the follow-on cost and follow-on suit.

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And once again, Ms.

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Aniata- Can I just ask this?

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In all of the litigation here, Shell 1, 2, or whatever, has the government ever conceded

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that the net present value of the future response costs at issue here are non-speculative?

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I don't believe so.

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Even assuming that your claim to the agency, the 16 million and change claim, represents some sort of assertion on your part that those costs are non-speculative in fact.

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That presumptive assertion, presumptive just for purposes of the question, was not one the government ever agreed with, was it?

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Your honor, I don't believe the government has ever addressed it either way.

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They have not said, taken a position that they're not speculative.

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And I don't believe they've taken a position that they are or conceded that they are speculative.

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They just, you know, studiously not spoken to the question.

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We turn to the CSA issue for a second.

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You seem to say that under the CSA, the rights and duties mature, and I think you have two different times.

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One is when CERCLA was enacted, and the other is when the companies are held liable.

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Am I misreading that or have you not decided when you think they mature under the CSA?

[00:23:28] Speaker 03:
We think that they mature.

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And again, it's really not under the CSA.

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The source of the rights and duties is the contract.

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But to answer your question, your honor, we believe that both the rights and the duties matured when CERCLA was enacted.

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We recognize there's an argument that maybe they didn't mature until

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circle of liability was fixed by the judgment in the California District Court imposing circle of liability on the oil companies.

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But as Judge Leto recognized, which of the two it is just doesn't matter, because both are well before the 2011 repealers statute.

[00:24:07] Speaker 05:
So you think that, counsel, I know you're excited here, but you think that the CSA grandfather clause ties

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directly to the contract, is that right?

[00:24:22] Speaker 03:
It does, Your Honor, and the reason it does is we're supposed to look for the rights and duties of the parties and the oil company's right to indemnification and the government's duty to indemnify is found in the contract.

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If you look at the CSA, it defines a termination claim in reference to include, quote, any claim under a terminated war contract.

[00:24:48] Speaker 03:
That's 41 USC section 103H.

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We are bringing a claim under the terminated ABGAS contracts from World War II.

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And if you look at the plain language of the contract, and it's set out in a block quote on page 39 of the red brief, both the oil company's right to be reimbursed and the government's duty to indemnify mature wants, quote, a federal law required

[00:25:15] Speaker 03:
the oil companies to pay, quote, new or additional charges by reason of the production of gas.

[00:25:21] Speaker 03:
So under that contract, their duty to indemnify and our right to receive indemnification matured once a federal law required payment.

[00:25:32] Speaker 05:
Circle was an accident.

[00:25:35] Speaker 05:
One other question.

[00:25:35] Speaker 05:
I'm sorry.

[00:25:37] Speaker 05:
You might not know the answer to this, but how many

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pre-existing contracts do you think are covered by what I call the grandfather clause in CSA that still exists despite the repeal of CSA in 2011?

[00:25:58] Speaker 03:
I think there's a fair number because I'm aware of contracts similar to the ones that issue in this case with other oil companies.

[00:26:10] Speaker 03:
So I think

[00:26:11] Speaker 03:
Okay.

[00:26:12] Speaker 03:
It will be ongoing.

[00:26:13] Speaker 05:
Thank you.

[00:26:16] Speaker 03:
The contract, the government takes the position that the duty to indemnify didn't mature until the oil companies requested payment under the Contract Settlement Act, but that's not correct.

[00:26:28] Speaker 03:
The contracts don't say that the government shall pay upon request.

[00:26:32] Speaker 03:
They say that the government shall pay when a federal law requires the oil companies to incur new and additional charges.

[00:26:39] Speaker 03:
The government's argument confuses the procedures that must be followed to enforce the right with the substantive source of the right itself, which defines when the right matures.

[00:26:53] Speaker 03:
All the Contract Settlement Act does is lay out the administrative steps that must be taken before filing a suit in the court of federal claims.

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But it recognizes, again, in the definition of termination claim, that the substantive source of the right is the terminated war contract.

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This court's predecessor in the Linz case squarely held that the right to payment on a treasury bill matured in July 1974, excuse me, but the claim did not accrue until September 1974 when the plaintiff presented it for payment.

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Linz confirms that the steps a right holder must take to enforce his right after it matures has no bearing on when the right matures.

[00:27:38] Speaker 03:
Under my friend's logic, if the government had voluntarily carried out its contractual duty to indemnify after the oil company's rights had matured, such that there was no CSA administrative proceeding was even necessary, somehow the right and duty would not have matured at all.

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Well, that can't be right.

[00:27:57] Speaker 03:
The government also seems to argue in passing that the contractual duty to pay did not mature until the oil companies incurred and paid the remediation costs.

[00:28:06] Speaker 03:
But even if the government preserved this argument, it fails because it confuses when the duty matures with when performance of the duty came due.

[00:28:16] Speaker 03:
We know that from the binding decision in the Crafts case.

[00:28:19] Speaker 03:
The issue there was whether an army reserve officer was entitled under a 1947 statute to retire as a colonel rather than as a lieutenant colonel as the army maintained.

[00:28:31] Speaker 05:
What is your response to the government's argument that

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that you really have to look to the point at which the administrative effort has been exhausted to see when the rights and duties mature?

[00:28:47] Speaker 03:
Your Honor, my answer is you have to look at the substantive source of the rights and duties, and that's the contract, not the merely procedural rules for making a claim through the administrative process.

[00:29:02] Speaker 03:
The contract is the source.

[00:29:04] Speaker 03:
And the contract says that the right to indemnification matures when a federal law requires you to pay something.

[00:29:12] Speaker 03:
And the federal law required the oil companies to pay when CERCLA was enacted in 1980.

[00:29:19] Speaker 03:
And again, the crack case illustrates this, Your Honor, because there the claim was made under a 1947 statute

[00:29:28] Speaker 03:
The officer retired in 1952, and then the 1947 statute was repealed in 1956 with a savings clause just like ours that preserved rights and duties that had matured prior to the 1956 repealer.

[00:29:44] Speaker 03:
The court of claims held in that case that Kratz's rights matured upon his 1952 retirement, not when he made his claim after 1956, and not when the pension payments serially came due

[00:29:58] Speaker 03:
from 1952 forward.

[00:30:01] Speaker 03:
It matured when his right to the pension, his substantive right to the pension kicked in, and that kicked in when he retired.

[00:30:09] Speaker 03:
Here, the oil company's rights and duties matured when, under the contract, a federal law required them to make payments.

[00:30:19] Speaker 03:
The federal law required them to make payments once CERCLA was enacted.

[00:30:24] Speaker 03:
And with that, Your Honors, unless the court has further questions, I'm happy to subside.

[00:30:31] Speaker 00:
Anything else for Mr. Kirk?

[00:30:35] Speaker 00:
Okay.

[00:30:35] Speaker 00:
No, thank you.

[00:30:35] Speaker 00:
Hearing nothing, Mr. Tosini, you have your rebuttal time.

[00:30:40] Speaker 02:
Thank you.

[00:30:41] Speaker 02:
I'd like to just begin with the discussion of Indiana, Michigan.

[00:30:44] Speaker 02:
Indiana, Michigan, first of all, was not a res judicata case because it involved damages available within a single case.

[00:30:52] Speaker 02:
Here we have a final and conclusive judgment

[00:30:54] Speaker 02:
that the trial court essentially reopened in this case to allow damages.

[00:31:00] Speaker 02:
Second, this case is not really a sniff case because the contracts were terminated in the 1940s, unlike Indiana and Michigan.

[00:31:08] Speaker 02:
And the most important holding in Indiana and Michigan was that damages for total breach

[00:31:18] Speaker 02:
would have been foreclosed by statute in that case, because the contract was ongoing.

[00:31:22] Speaker 02:
The government still had the obligation to continue taking nuclear waste from these facilities.

[00:31:29] Speaker 05:
Turning to the TSA... Can you tell me, Council, how you distinguish the Kratz case?

[00:31:36] Speaker 02:
Well, the Kratz case, yes, the relevant administrative action was when Mr. Kratz was involuntarily retired before the repeal.

[00:31:47] Speaker 02:
So for example, if you want to look at a hypothetical, let's say Mr. Kratz had his 20 years in before the statute was changed to a less favorable statute.

[00:31:57] Speaker 02:
And he decided to stay in until afterwards.

[00:32:00] Speaker 02:
Well, he had a right to retire beforehand, but he didn't retire until the new statute was enacted.

[00:32:06] Speaker 02:
He would have been subject to the new statute.

[00:32:10] Speaker 02:
But his involuntary retirement, at the time that the government involuntarily retired him,

[00:32:15] Speaker 02:
was unlawful in that the government retired him as a lieutenant colonel instead of a colonel.

[00:32:21] Speaker 02:
So you got hit the nail right on the head that this was the administrative action that's relevant in Kress.

[00:32:28] Speaker 02:
And I'd like to close with the Contract Settlement Act issue.

[00:32:34] Speaker 02:
There's a very clear opposition between the two parties that we believe rights and duties under the CSA are what

[00:32:45] Speaker 02:
the court should be looking at the plaintiff's allege under the contracts.

[00:32:49] Speaker 02:
We do not make any contention regarding plaintiff's rights under the contracts.

[00:32:56] Speaker 02:
All this has to do, as we discussed earlier, all that really matters here are rights and duties under the CSA in the plain language of the repealer statute.

[00:33:06] Speaker 02:
And the Luft case that both parties cited makes clear that those rights and duties did not

[00:33:16] Speaker 02:
Those rights and duties did not arise until there was an actual CSA termination claim filed.

[00:33:20] Speaker 02:
Thank you.

[00:33:21] Speaker 00:
Okay.

[00:33:22] Speaker 00:
Any more questions, Mrs. Sasini?

[00:33:25] Speaker 00:
Nope.

[00:33:25] Speaker 00:
No.

[00:33:26] Speaker 00:
All right.

[00:33:27] Speaker 00:
Thank you.

[00:33:27] Speaker 00:
Thanks to both counsels.

[00:33:29] Speaker 00:
The case is taken under submission.