Recoupment

A Chevron dispute about the Department of the Interior’s collection of natural gas royalties led to the question whether “the agency must credit all of W&T’s prior overdeliveries in calculating the cumulative delivery shortfall.” Observing that the defense of “equitable recoupment is ‘never barred by the statute of limitations so long as the main action itself is timely,'” the Fifth Circuit rejected the Department’s three arguments against its application – looking to three common reference points for resolving such disputes:

1. Statutory limitations. A statutory prohibition on “pursu[it of] any other equitable or legal remedy, whether under statute or common law” did not clearly preclude the assertion of this defense;
2. Factual linkage. “This objection is easily dispatched, as the Department of the Interior’s requirement that payments be made on a monthly basis does not trump the reality that each monthly obligation arises from a single contract: the lease.
3. Overall equities. The Department’s facially “neutral application of the statute of limitations across the industry does not counteract the inequitable result that W&T suffered  . . . .”

W&T Offshore v. Bernhardt, No. 18-30876 (Dec. 23, 2019).