Petro Mex, LLC v. United States

N OTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
PETRO MEX, LLC,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2023-1848
______________________
Appeal from the United States Court of Federal Claims
in No. 1:14-cv-01024-MBH, Senior Judge Marian Blank
Horn.
______________________
Decided: September 12, 2024
______________________
ROBERT G REENSPOON, Dunlap Bennett & Ludwig
PLLC, Chicago, IL, argued for plaintiff-appellant. Also
represented by WILLIAM W. F LACHSBART .
K ARA WESTERCAMP , Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellee. Also repre-
sented by BRIAN M. BOYNTON, T ARA K. HOGAN, P ATRICIA M.
MCCARTHY .
______________________
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PETRO MEX , LLC v. US 2
Before M OORE, Chief Judge, CUNNINGHAM , Circuit Judge,
and MAZZANT , District Judge.1
MAZZANT , District Judge.
Petro Mex, LLC (Petro Mex) appeals a decision of the
United States Court of Federal Claims. For the following
reasons, we reverse the Court of Federal Claims’ determi-
nation that Petro Mex’s breach of contract claim is barred
by the statute of limitations. We vacate the remainder of
the Court of Federal Claims’ decision and remand for fur-
ther proceedings consistent with this opinion.
BACKGROUND
I. Factual Background
The United States Department of the Interior executed
the Garfield Lease (the Lease) with Celeste C. Grynberg in
1965. In 2004, Petro Mex assumed the Lease.
Section 1 of the Lease sets forth the “Rights of Lessee”:
Rights of Lessee. — The lessee is granted the exclu-
sive right and privilege to drill for, mine, extract,
remove, and dispose of all the oil and gas deposits,
. . . for a period of 10 years, and so long thereafter
as oil or gas is produced in paying quantities; sub-
ject to any unit agreement heretofore or hereafter
approved by the Secretary of the Interior, the pro-
visions of said agreement to govern the lands sub-
ject thereto where inconsistent with the terms of
this lease.
J.A. 3, 2133 (emphasis added). “Production in paying quan-
tities” is defined as: “production from a lease of oil and/or
1 Honorable Amos L. Mazzant, III, District Judge,
United States District Court for the Eastern District of
Texas, sitting by designation.
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PETRO MEX , LLC v. US 3
gas of sufficient value to exceed direct operating costs and
the costs of lease rentals, or minimum royalties.” 43 C.F.R.
§ 3160.0-5. Upon assumption of the Lease, Petro Mex be-
gan extracting natural gas in paying quantities pursuant
to Section 1.
Notably, Section 7 of the Lease sets forth the “Proceed-
ings in case of default”:
Proceedings in case of default. — If the lessee shall
not comply with any of the provisions of the act or
the regulations thereunder or of the lease, or make
default in the performance or observance of any of
the terms hereof (except that of payment of annual
rental which results in the automatic termination
of the lease), and such default shall continue for a
period of 30 days after service of written notice
thereof by the lessor, this lease may be cancelled by
the Secretary of the Interior in accordance with sec-
tion 31 of the act, except that if this lease covers
lands known to contain valuable deposits of oil or
gas, the lease may be cancelled only by judicial pro-
ceedings in the manner provided in section 31 of the
act, but this provision shall not be construed to pre-
vent the exercise by the lessor of any legal or equi-
table remedy which the lessor might otherwise
have. Upon cancellation of this lease, any casing
material, or equipment determined by the lessor to
be necessary for use in plugging or preserving any
well drilled on the leased land shall become the
property of the lessor. A waiver of any particular
cause of forfeiture shall not prevent the cancella-
tion and forfeiture of this lease for any other cause
of forfeiture, or for the same cause occurring at any
other time.
J.A. 3–4, 2133 (emphasis added).
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PETRO MEX , LLC v. US 4
A Board of Land Management (BLM) petroleum engi-
neer technician, Edward Fancher (Fancher), was responsi-
ble for inspecting the wells on the Lease. If Fancher
identified an issue during inspection, he had authority to
issue a Notice of Incident of Noncompliance (INC). Upon
issuance of an INC, an abatement period would follow so
that repairs could be made to bring the well back into com-
pliance. An INC is classified by either a “major” or “minor”
violation. See 43 C.F.R. § 3160.0-5 (defining “major” as
“noncompliance that causes or threatens immediate, sub-
stantial, and adverse impacts on public health and safety,
the environment, production accountability, or royalty in-
come”; defining “minor” as “noncompliance that does not
rise to the level of a major violation”).
On April 25, 2008, Fancher inspected three wells on the
Lease. He issued five INCs, one of which was for a major
violation—an unsealed sales valve. On May 27, 2008,
Fancher conducted a subsequent inspection and found that
Petro Mex had not corrected the prior five INCs. Addition-
ally, Fancher identified an underground gas leak. When
Fancher returned on May 29, 2008, Petro Mex had not re-
paired the leak. At that time, Fancher issued an INC for a
major violation—the gas leak—and directed Petro Mex to
repair the leak by May 31, 2008. Fancher also sealed the
oil sales valve to prevent further removal of oil.
Concurrently, Fancher issued a “Notice to Shut Down
Operation” under 43 C.F.R § 3163.1(a)(3)2 (the Shut-In
2 43 C.F.R. § 3163.1(a)(3) provides that “[w]hen nec-
essary for compliance, or where operations have been com-
menced without approval, or where continued operations
could result in immediate, substantial, and adverse im-
pacts on public health and safety, the environment, produc-
tion accountability, or royalty income, the authorized
officer may shut down operations. Immediate shut-in ac-
tion may be taken where operations are initiated and
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PETRO MEX , LLC v. US 5
Order). J.A. 2202. The Shut-In Order stated that Petro Mex
must immediately “shut in all well[s] on this [L]ease until
all leaks are corrected and all compliance issues are re-
solved.” J.A. 2202. It warned that “[o]perations are not to
be resumed until permitted by the authorized officer.” J.A.
2202.
Around the same time in May of 2008, BLM increased
Petro Mex’s existing $25,000 reclamation bond to $100,000.
Petro Mex did not immediately pay the increased bond.
On June 16, 2008, Fancher visited the wells on the
Lease for another inspection. Fancher observed that the
underground gas leak had been repaired and the wells had
been shut in so that they were inoperable. The Shut-In Or-
der remained in effect despite the repaired gas leak.
In October of 2008, the Department of the Interior is-
sued a notice of civil penalty to Petro Mex for unpaid roy-
alty payments on the gas it had produced from wells on the
Lease in 2007 and 2008. Petro Mex did not immediately
pay the civil penalty.
On March 30, 2009, Fancher conducted another inspec-
tion of the wells on the Lease. He determined that the wells
were now not capable of producing in paying quantities be-
cause a field compressor had been removed. Fancher also
noted that Petro Mex had produced oil and gas from August
through October 2008, though the Shut-In Order remained
in effect.
On April 1, 2009, Robert Hartman (Hartman), a BLM
petroleum engineer, issued a written notice to Petro Mex
conducted without prior approval, or where continued op-
erations could result in immediate, substantial, and ad-
verse impacts on public health and safety, the
environment, production accountability, or royalty in-
come.”
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PETRO MEX , LLC v. US 6
that BLM would “terminate” the Lease by operation of law
pursuant to 43 C.F.R. § 3107.2-23 “[i]f justification that the
[L]ease is capable of production in paying quantities is not
submitted within 60 days.” J.A. 2244. The notice indicated
that the removal of the field compressor “eliminates the
possibility of production from the wells.” J.A. 2244. Appel-
lants argue that Jesus Villalobos, owner and president of
Petro Mex, and Hartman communicated repeatedly con-
cerning the production of the wells, the unpaid civil pen-
alty, and the unpaid bond, but they did not reach a
resolution.
On July 21, 2009, Hartman sent a memorandum to the
BLM State Director recommending termination of the
Lease because Petro Mex’s wells were allegedly not capable
of production in paying quantities. On August 26, 2009, af-
ter determining that the wells were not capable of produc-
ing in paying quantities, BLM’s Colorado State Office
determined that the Lease terminated by operation of law.
Importantly, BLM did not file a judicial action to cancel the
Lease.
II. Proceedings before the
Interior Board of Land Management
Petro Mex filed a timely administrative appeal with
the Interior Board of Land Management (IBLA) challeng-
ing BLM’s termination of the Lease as violative of Petro
3 43 C.F.R. § 3107.2-2 provides that “[a] lease which
is in its extended term because of production in paying
quantities shall not terminate upon cessation of production
if, within 60 days thereafter, reworking or drilling opera-
tions on the leasehold are commenced and are thereafter
conducted with reasonable diligence during the period of
nonproduction. The 60-day period commences upon receipt
of notification from the authorized officer that the lease is
not capable of production in paying quantities.”
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PETRO MEX , LLC v. US 7
Mex’s rights under the Mineral Leasing Act (MLA). J.A.
514, 520. On September 27, 2010, the IBLA issued its deci-
sion reversing BLM’s termination and remanding to BLM.
J.A. 513.
Under the MLA, “a lease in its extended term termi-
nates automatically when production ceases.” J.A. 517 (cit-
ing 30 U.S.C. § 226(e) (2006)). However, there are three
exceptions to lease termination: “(1) where the lessee be-
gins reworking or drilling a well within 60 days after pro-
duction ceased; (2) where BLM has ordered a suspension of
lease operations or production; and (3) where the lessee
places a well capable of producing in paying quantities in
producing status within a reasonable time after receiving
notice from BLM.” J.A. 517–18 (citing 30 U.S.C. § 226(i)).
The IBLA explained that
[b]oth [30 U.S.C. § 226(i)] and the case law differ-
entiate between a lease without a well capable of
production in paying quantities and one containing
a well capable of production in paying quantities.
When the term of an oil and gas lease has been ex-
tended by production and there is no well capable
of production in paying quantities when production
ceases, the lessee has 60 days to commence rework-
ing or drilling operations and must continue the re-
working or drilling operations with reasonable
diligence to avoid lease termination; if such opera-
tions are not timely initiated and diligently pur-
sued, the lease terminates automatically upon
cessation of production. . . . Notice is not required
in this situation. . . . When the term of an oil and
gas lease has been extended by production and the
lease does contain a well capable of production in
paying quantities, however, BLM must notify the
lessee and allow a reasonable time of at least 60
days from receipt of the notice to place the well into
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PETRO MEX , LLC v. US 8
production to avoid having BLM declare the lease
expired by operation of law for lack of production.
J.A. 518–19 (citing Coronado Oil Co., 164 Interior Dec. 309,
322–23 (IBLA 2005), aff’d. Coronado Oil Co. v. U.S. Dep’t
of Interior, No. 05-CV-111-J (D. Wyo. Aug. 23, 2006), ap-
peal dismissed, No. 06-8083 (10th Cir. Sept. 14, 2007)).
Petro Mex contended BLM’s Grand Junction Field Of-
fice (the Field Office) erred in determining that the wells
were not capable of producing in paying quantities and that
Petro Mex was “precluded by [the Shut-In Order] from re-
storing production under the MLA’s third exception.” J.A.
520–21. The IBLA noted it was “undisputed that if [the
Shut-In Order] w[as] lifted, Petro Mex could install field
compressors and return [the wells] to producing status
shortly thereafter.” J.A. 521. Thus, the IBLA agreed with
Petro Mex that it was error to determine that the wells
were not capable of producing gas in paying quantities un-
der 43 C.F.R. § 3107.2-2 because they lacked a field com-
pressor and an ability to compress the gas produced for
pipeline transport. J.A. 522.
Because the wells were capable of producing in paying
quantities, the IBLA determined that Petro Mex could
have avoided lease termination under the MLA if it could
place the wells in producing status within a reasonable
time after receiving notice under 43 C.F.R. § 3107.2-3. J.A.
522. However, the Field Office refused to lift the Shut-In
Order, and it remained in place through August 26, 2009,
when BLM terminated the lease. J.A. 523. The IBLA found
that the Field Office erroneously refused to lift the Shut-In
Order. J.A. 523. And the IBLA further explained, “[u]ntil
[the Field Office] lifts [the Shut-In Order] and gives notice
to Petro Mex under 43 C.F.R. § 3107.2-3, BLM cannot ter-
minate [the Lease] for nonproduction.” J.A. 523. “If it in-
tends to pursue lease termination under 30 U.S.C. § 226(i),
BLM must allow Petro Mex a reasonable time in which to
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PETRO MEX , LLC v. US 9
place its wells in a producing status after such notice is
given.” J.A. 523.
Finally, the IBLA explained that “BLM has lost sight
of the distinction between cancelling a lease with a well ca-
pable of producing oil and gas lease in paying quantities for
noncompliance and terminating such a lease for nonpro-
duction.” J.A. 524. “Not being allowed to resume production
from [the Lease] because of BLM’s [Shut-In Order] is not
synonymous with [its] not having wells capable of produc-
tion. Petro Mex’s failure to comply with the authorized of-
ficer’s order renders the [Lease] subject to cancellation
through judicial proceedings . . . .” J.A. 524. Accordingly,
the IBLA reversed BLM’s termination of the Lease. J.A.
525. After the IBLA entered its decision, the Field Office
lifted the Shut-In Order, and Petro Mex resumed produc-
tion.
III. Proceedings before the Court of Federal Claims
On October 22, 2014, Petro Mex filed its Complaint in
the Court of Federal Claims, asserting breach of contract
claims against the United States (the Government) under
the Tucker Act, 28 U.S.C. § 1346, 1491. J.A. 159. Petro Mex
alleged two separate breaches of the Lease: 1) “[the Gov-
ernment] breached the Lease[] and its agreement with
Petro Mex by ordering Petro Mex to cease production on
the Lease[] in October of 2008” and 2) “[the Government]
breached the Lease[] and its agreement with Petro Mex by
attempting to terminate the Lease[] on or about August 26,
2009.”4 J.A. 63–64, 165. The Government filed a motion to
dismiss Petro Mex’s Complaint on statute-of-limitations
grounds, which the Court of Federal Claims denied. J.A.
60.
4 Petro Mex only appeals the Court of Federal
Claims’ decision as to the second alleged breach, termina-
tion of the Lease on or about August 26, 2009.
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PETRO MEX , LLC v. US 10
Petro Mex then moved for partial summary judgment,
arguing that issue preclusion should apply to its breach of
contract claims. J.A. 847. In Petro Mex’s view, it was enti-
tled to partial summary judgment on the issue of liability
based on the IBLA’s decision that BLM terminated the
Lease in violation of the MLA. J.A. 847–48. The Court of
Federal Claims denied Petro Mex’s motion for partial sum-
mary judgment, determining that issue preclusion was not
applicable. J.A. 1144. The Court of Federal Claims opined
that “Petro Mex did not raise breach of contract claims be-
fore the [IBLA]” and “whether the Government committed
a material breach of contract was not fully litigated by the
parties” in the IBLA proceeding. J.A. 1143–44. The IBLA’s
“decision was based on a narrow set of issues that did not
ultimately decide whether a breach of contract occurred.”
J.A. 1144. And the IBLA “did not need to determine
whether the Government breached the [L]ease to decide
that termination was improper based on bureaucratic
guidelines.” J.A. 1144. The Court of Federal Claims con-
ducted no further analysis on issue preclusion. J.A. 1144.
The Court of Federal Claims held a bench trial. J.A. 1.
In its post-trial filing, the Government again argued that
Petro Mex’s breach of contract claim is barred by the stat-
ute of limitations. J.A. 60. In response, Petro Mex made the
following assertions:
Petro Mex asserts, and has always asserted, that
the specific action constituting breach of the
[L]ease was the actual unauthorized termination of
the [L]ease on or about August 26, 2009. While the
original failure to lift the Shut-In Order in June
2008 began a series of actions that ultimately led
to the Government’s decision to terminate the
[L]ease, that particular action was, in fact, an “in-
dependent and distinct event” that can be found to
have its own “associated damages.”
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PETRO MEX , LLC v. US 11
J.A. 79. The Court of Federal Claims construed these two
assertions as one argument under a continuing claims doc-
trine theory. Id.
After trial, the Court of Federal Claims entered its
Findings of Fact and Conclusions of Law. The Court of Fed-
eral Claims disagreed with Petro Mex’s argument that the
continuing claims doctrine applied. J.A. 82. Rather, it
found that the termination of the Lease in August 2009 was
a “continuing negative effect[]” of BLM’s failure to lift the
Shut-In Order in June or July of 2008. Id. Therefore, the
Court of Federal Claims held that Petro Mex was on notice
that its claim accrued prior to August 2008. J.A. 83. Ac-
cordingly, Petro Mex’s claim for breach of contract was
barred by the six-year statute of limitations. Id.
Additionally, the Court of Federal Claims held that
BLM’s termination of the Lease was not a breach of the
Lease. J.A. 122. And if BLM had breached the Lease,
BLM’s breach would be excused by Petro Mex’s prior mate-
rial breaches. J.A. 143.
Petro Mex appeals. We have jurisdiction under 28
U.S.C. § 1295(a)(3).
D ISCUSSION
I. Statute of Limitations
“We review whether a claim is barred by the statute of
limitations de novo.” Katzin v. United States, 908 F.3d
1350, 1358 (Fed. Cir. 2018).
Pursuant to the Tucker Act, the Court of Federal
Claims has jurisdiction over “any claim against the United
States founded either upon the Constitution, or any Act of
Congress or any regulation of an executive department, or
upon any express or implied contract with the United
States, or for liquidated or unliquidated damages in cases
not sounding in tort.” 28 U.S.C. § 1491(a)(1). “Every claim
of which the United States Court of Federal Claims has
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PETRO MEX , LLC v. US 12
jurisdiction shall be barred unless the petition thereon is
filed within six years after such claim first accrues.” 28
U.S.C. § 2501. This six-year statute of limitations is a ju-
risdictional requirement. Bianchi v. United States, 475
F.3d 1268, 1274 (Fed. Cir. 2007).
“[A] statute of limitations begins to run from the date
the plaintiff’s cause of action ‘accrues.’” Hair v. United
States, 350 F.3d 1253, 1260 (Fed. Cir. 2003) (citing 28
U.S.C. § 2501). “Generally, a claim against the United
States first accrues on the date when all the events have
occurred which fix the liability of the Government and en-
title the claimant to institute an action.” Bowen v. United
States, 292 F.3d 1383, 1385 (Fed. Cir. 2002) (internal quo-
tation marks omitted); see also Hopland Band of Pomo In-
dians v. United States, 855 F.2d 1573, 1577 (Fed. Cir. 1988)
(stating that a claim accrues “only when all the events
which fix the government’s alleged liability have occurred
and the plaintiff was or should have been aware of their
existence”).
However, the continuing claims doctrine allows “later
arising claims even if the statute of limitations has lapsed
for earlier events.” Tamerlane, Ltd. v. United States, 550
F.3d 1135, 1145 (Fed. Cir. 2008) (citation omitted). “The
continuing claims doctrine has been applied when the gov-
ernment owes a continuing duty to the plaintiffs. In such
cases, each time the government breaches that duty, a new
cause of action arises.” Boling v. United States, 220 F.3d
1365, 1373 (Fed. Cir. 2000). The doctrine is applicable
where a plaintiff’s claim is “inherently susceptible to being
broken down into a series of independent and distinct
events or wrongs, each having its own associated dam-
ages.” Brown Park Ests.–Fairfield Dev. Co. v. United
States, 127 F.3d 1449, 1456 (Fed. Cir. 1997). By contrast,
the continuing claims doctrine does not apply to single
events that have continuing negative effects. Id.
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PETRO MEX , LLC v. US 13
On appeal, Petro Mex argues that the Court of Federal
Claims erred in determining that its breach of contract
claim based on BLM’s wrongful termination of the Lease
accrued prior to August 2008. Petro Mex generally charac-
terizes its argument as one applying the continuing claims
doctrine, but it makes several assertions that support an
accrual argument.
Specifically, Petro Mex asserts that its breach of con-
tract claim “based on [] BLM’s termination of the [L]ease
in August 2009 is based on an ‘independent and distinct’
breach of the [] [L]ease.” Appellant’s Opening Br. 36. More-
over, Petro Mex asserts that its claim for breach of contract
could not have accrued prior to August 2008 because not
all the necessary events had occurred. See Appellant’s
Opening Br. 37–38 (citing Hopland, 855 F.2d at 1577 (“[A]
cause of action against the government has ‘first accrued’
only when all the events which fix the government’s alleged
liability have occurred and the plaintiff was or should have
been aware of their existence.”)). According to Petro Mex,
though the Shut-In Order should have been lifted by mid-
2008, termination “was not even a whisper” at that time.
Appellant’s Opening Br. 38. Thus, “no cause of action by
Petro Mex for wrongful-termination-breach was possible”
yet. Appellant’s Opening Br. 38.
In response, BLM argues that Petro Mex did not suffi-
ciently challenge the Court of Federal Claims’ determina-
tion of the accrual date on appeal. Further, BLM argues
that the continuing claims doctrine does not apply because
termination of the Lease was a natural consequence of the
Shut-In Order.
Though Petro Mex’s briefing could be clearer, we un-
derstand Petro Mex to be arguing that the accrual date for
its breach of contract claim is August 26, 2009—the date
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PETRO MEX , LLC v. US 14
BLM terminated the Lease.5 We agree with Petro Mex that
the Court of Federal Claims erred in determining that
Petro Mex’s claim accrued prior to August 2008.
Petro Mex’s breach of contract claim for wrongful ter-
mination of the Lease stems from BLM’s termination of the
Lease. Thus, Petro Mex’s claim could not have accrued un-
til BLM terminated the Lease. Only after this final event
took place was Petro Mex entitled to bring an action for
breach of contract based on that termination. See Bowen,
292 F.3d at 1385. Accordingly, Petro Mex’s breach of con-
tract claim accrued on August 26, 2009, when BLM termi-
nated the Lease. Petro Mex filed its claim in the Court of
Federal Claims on October 22, 2014—less than six years
after the claim accrued. As such, Petro Mex’s claim for
breach of contract for wrongful termination is not time-
barred. We reverse the decision of the Court of Federal
5 Petro Mex has contended on several occasions
throughout the course of litigation that its breach of con-
tract claim accrued on August 26, 2009. Petro Mex first did
so in its Complaint when it alleged that “[t]he United
States breached the Lease[] and its agreement with Petro
Mex by attempting to terminate the Lease[] on or about
August 26, 2009 when it had no valid contractual, statutory
or regulatory grounds to do so.” J.A. 165. In its post-trial
filing in the Court of Federal Claims, Petro Mex asserted
that “the specific action constituting a breach of the [L]ease
was the actual unauthorized termination of the [L]ease on
or about August 26, 2009.” J.A. 79. At oral argument before
this Court, counsel for Petro Mex confirmed that Petro Mex
claims its breach of contract claim based on termination
accrued on August 26, 2009—the date BLM terminated the
Lease. Oral Arg. at 2:34–5:18,
https://cafc.uscourts.gov/home/oral-argument/listen-to-ora
l-arguments/.
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PETRO MEX , LLC v. US 15
Claims with respect to the August 26, 2009 breach of con-
tract claim.
Petro Mex makes additional arguments that the Court
of Federal Claims erred in determining that the continuing
claims doctrine does not apply to its breach of contract
claim. We decline to address these arguments in light of
our holding that Petro Mex’s breach of contract claim for
wrongful termination accrued on August 26, 2009.
II. Issue Preclusion
“The application of issue preclusion presents a question
of law that we review de novo.” SynQor, Inc v. Vicor Corp.,
988 F.3d 1341, 1347 (Fed. Cir. 2021).
“The idea [of issue-preclusion] is straightforward: Once
a court has decided an issue, it is ‘forever settled as be-
tween the parties.’” B & B Hardware, Inc. v. Hargis Indus.,
Inc., 575 U.S. 138, 147 (2015). “‘[W]hen an issue of fact or
law is actually litigated and determined by a valid and final
judgment, and the determination is essential to the judg-
ment, the determination is conclusive in a subsequent ac-
tion between the parties, whether on the same or a
different claim.’” Id. (citing Restatement (Second) of Judg-
ments § 27 (A.M.L. Inst. 1980)).
“[I]n those situations in which Congress has authorized
agencies to resolve disputes, ‘courts may take it as given
that Congress has legislated with the expectation that the
principle [of issue preclusion] will apply except when a
statutory purpose to the contrary is evident.’” SynQor, Inc.,
988 F.3d at 1347 (citing B & B Hardware, 575 U.S. at 148).
Accordingly, issue preclusion applies to findings in admin-
istrative proceedings where the “administrative agency is
acting in a judicial capacity and resolve[s] disputed issues
of fact properly before it which the parties [] had an ade-
quate opportunity to litigate.” U.S. v. Utah Constr. & Min-
ing Co., 384 U.S. 394, 422 (1966). “[B]oth this court and
the Supreme Court have recognized the binding effect of
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PETRO MEX , LLC v. US 16
IBLA decisions on related lawsuits before the Claims
Court.” Taylor Energy Company LLC v. United States, 975
F.3d 1303, 1311 n.6 (Fed. Cir. 2020) (citing United States
v. Utah Construction and Mining Co., 384 U.S. 394, 422–
23, (1966); Aulston v. United States, 823 F.2d 510, 514–15
(Fed. Cir. 1987)).
Issue preclusion bars successive litigation when the fol-
lowing elements are met: “(1) identity of the issues in a
prior proceeding; (2) the issues were actually litigated; (3)
the determination of the issues was necessary to the result-
ing judgment; and (4) the party defending against preclu-
sion had a full and fair opportunity to litigate the issues.”
Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 719
F.3d 1367, 1371 (Fed. Cir. 2013).
In its order on summary judgment, the Court of Fed-
eral Claims determined that BLM’s violation of the MLA
for wrongful termination, as decided in the IBLA proceed-
ing, should not be given preclusive effect when considering
Petro Mex’s breach of contract claim because there was not
identity of issues. J.A. 1143. Specifically, the Court of Fed-
eral Claims found that “Petro Mex did not raise breach of
contract claims before the [IBLA]” and the IBLA’s decision
“did not ultimately decide whether a breach of contract had
occurred.” J.A. 1143–44. Therefore, in the Court of Federal
Claims’ view, issue preclusion did not apply, and Petro Mex
was not entitled to summary judgment. J.A. 1144.
On appeal, Petro Mex argues that issue preclusion is
applicable, and the Court of Federal Claims erred in declin-
ing to apply the concept to the IBLA’s findings due to in-
sufficient identity of issues. In Petro Mex’s view, the
IBLA’s conclusion that BLM wrongfully terminated the
Lease should have been given preclusive effect when the
Court of Federal Claims considered Petro Mex’s claim for
breach of contract. In support, Petro Mex contends that the
IBLA’s findings rendered in the administrative proceeding
addressed a key subsidiary issue also raised in the federal
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PETRO MEX , LLC v. US 17
judicial proceedings: whether BLM wrongfully terminated
the Lease. And Petro Mex contends that the allegation that
BLM wrongfully terminated the Lease is a “key compo-
nent” of Petro Mex’s breach of contract claim. Therefore,
Petro Mex claims that the issues are sufficiently identical.
Further, Petro Mex argues that the remainder of the issue
preclusion elements are met and that this Court should
conclude that BLM breached the Lease.
In response, the Government contends that the IBLA
decision does not answer the question of whether BLM ma-
terially breached the Lease by terminating it pursuant to
43 C.F.R. § 3107.2-2. Thus, the Government argues that
issue preclusion does not apply.
We find that the Court of Federal Claims erred when it
did not conduct a proper issue preclusion analysis. At the
summary judgment stage, the Court of Federal Claims de-
termined the IBLA’s decision that BLM terminated the
Lease in violation of the MLA had no preclusive effect on
Petro Mex’s breach of contract claim because there was not
identity of issues. Though a violation of a regulation does
not always equate to a breach of contract, see Nutt v. United
States, 12 Cl. Ct. 345, 351 (1987), aff’d sub nom. Smithson
v. United States, 847 F.2d 791, 794–95 (Fed. Cir. 1988), the
Court of Federal Claims did not consider BLM’s specific
contractual obligations when analyzing whether there was
identity of issues. Rather, the Court of Federal Claims
made the sweeping determination that because the IBLA
did not directly decide whether a breach of contract had oc-
curred, there was not identity of issues and issue preclu-
sion did not apply to Petro Mex’s claim. This was error.
Additionally, the Court of Federal Claims erred when
it did not consider the preclusive effect of any of the IBLA’s
other findings. By way of example, the IBLA found the fol-
lowing:
• It was error to determine that the wells “were
not capable of producing gas in paying
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PETRO MEX , LLC v. US 18
quantities under 43 C.F.R. § 3107.2-2 because
they currently lacked field compressors.” J.A.
522.
• “Until [the Field Office] lifts [the Shut-In Or-
der] and gives notice to Petro Mex under 43
C.F.R. § 3107.2-3, BLM cannot terminate [the
Lease] for nonproduction. If it intends to pursue
lease termination under 30 U.S.C. § 226(i),
BLM must allow Petro Mex a reasonable time
in which to place its wells in a producing status
after such notice is given.” J.A. 523.
• “Petro Mex’s failure to comply with the author-
ized officer’s order renders the [Lease] subject
to cancellation through judicial proceedings,
provided the procedures in 43 C.F.R §§ 3108.3
and 3163.1 are followed.” J.A. 524.
Despite these findings by the IBLA, the Court of Federal
Claims did not conduct any analysis on their preclusive ef-
fect.
The IBLA previously made findings that gave rise to
its decision that BLM wrongfully terminated the Lease in
violation of the MLA. At the summary judgment stage, the
Court of Federal Claims erred when it did not conduct a
proper issue preclusion analysis on the IBLA’s finding that
BLM wrongfully terminated the Lease. Moreover, the
Court of Federal Claims erred when it did not conduct an
issue preclusion analysis at all on the other findings by the
IBLA. We vacate the Court of Federal Claims’ decision and
remand for it to consider what preclusive effect, if any, the
IBLA’s findings have on the parties’ claims.
III. Breach of Contract and Prior Material Breach
Petro Mex additionally contends the Court of Federal
Claims erred in determining that BLM’s termination of the
Lease was not a breach of the Lease. And Petro Mex further
contends that the Court of Federal Claims erred in alter-
natively determining that if BLM had breached the Lease,
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PETRO MEX , LLC v. US 19
BLM’s breach would be excused by Petro Mex’s prior mate-
rial breaches.
Because the Court of Federal Claims erred in not con-
ducting a proper issue preclusion analysis in the first in-
stance, we do not need to reach these issues. On remand,
the Court of Federal Claims should consider these remain-
ing claims.6
CONCLUSION
For the foregoing reasons, Petro Mex’s breach of con-
tract claim for wrongful termination of the Lease is not
barred by the statute of limitations. Petro Mex’s claim ac-
crued on August 26, 2009—the date the Lease was termi-
nated. Therefore, we reverse the Court of Federal Claims’
determination that the six-year statute of limitations ex-
pired with regards to the August 26, 2009 breach of con-
tract claim.
Because the Court of Federal Claims erred when it did
not properly consider whether the findings previously
made by the IBLA have preclusive effect, we vacate the re-
mainder of the Court of Federal Claims’ decision, and we
6 At oral argument, counsel for the Government con-
ceded that because the IBLA determined that the well on
the Lease was capable of producing in paying quantities
and Petro Mex was not allowed to produce, the Field Office
should have judicially cancelled the Lease. Oral Arg. at
27:55–28:05, https://cafc.uscourts.gov/home/oral-argu-
ment/listen-to-oral-arguments/. When counsel for the Gov-
ernment was asked if she agreed that there was a violation
of Section 7 of the Lease, she responded, “Correct. They
should have judicially cancelled the Lease. And that is
what the IBLA said.” Oral Arg. at 28:30–28:37,
https://cafc.uscourts.gov/home/oral-argument/listen-to-ora
l-arguments/.
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PETRO MEX , LLC v. US 20
remand for it to conduct further proceedings consistent
with this opinion.
REVERSED-IN-PART, VACATED-IN-PART, and
REMANDED
COSTS
No costs.
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