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A rising trade imbalance. A soaring war budget. These haven’t been the best of days for the U.S. Treasury. Add one more to the list: a $1.1 billion fine for breach of contract with 12 oil and gas companies. That was the ruling of a U.S. Court of Federal Claims judge last week in a dispute involving more than three dozen contracts awarded to the companies for rights to develop in areas off the coast of California in the 1980s. Their claim: that subsequent changes in federal law stymied the development of those reserves, violating the contracts. The companies, which included Amber Resources Co., Delta Petroleum Corp., Aera Energy, and Total, among others, turned to Covington & Burling attorneys who had handled a similar claim by Mobil Oil a few years before. One company, Nycal Offshore Development Corp., used Jackson Walker. “It reinforces the fundamental rule that when it comes to contracts, the government is treated largely the same as others and that if it doesn’t abide by its obligations, it has to pay the damages,” says Steven Rosenbaum, a Covington partner who handled the case. A Department of Justice spokesperson said the government hasn’t decided whether to appeal the case. Either way, the plaintiffs aren’t through yet � they’re preparing for a second round of court battles over damages.
Emma Schwartz can be contacted at [email protected].

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