In a move that pushes the end of a winding court battle yet further away, a California Appellate Court June 19 remanded the breach-of-contract suit filed against the city by its former oil drilling partner back to the trial court level, where lawyers will presumably present new evidence.

Macpherson Oil originally filed the suit in 1999 after the Hermosa Beach City Council canceled its contract with the firm citing newly discovered health and safety concerns.

Macpherson is suing the city for $100 million based on city permit fees and the anticipated loss of profit the oil firm would have accrued from the 30-year drilling contract.

The court made its recent decision in light of a relatively recent appellate court ruling involving a ballot initiative passed by Hermosa Beach voters in 1995 prohibiting all oil drilling in the city, which the court permitted the city to retroactively apply to the Macpherson project.

“This just means more litigation because the trial court will now reconsider the whole breach-of-contract matter,” said Hermosa Beach City Attorney Mike Jenkins. “This means more time and energy, but we are not starting out on bad footing. It wasn’t what we expected.”

According to Phillipa Altmann, one of Macpherson’s attorneys with Bright and Brown, this decision allows for lawyers representing the oil firm to present new information supporting their breach-of-contract argument.

“We are pleased that we can finally put on our case and prove the nature of our damages which we thought was taken away from us in the previous trial court hearings,” Altmann explained. “We feel Macpherson was treated poorly in the trial court and the court of appeals recognized this. We will definitely be presenting new evidence as to the damage. Undoubtedly, this is a good thing for Macpherson.”

The oil project’s fate was sealed when the appellate court finally recognized the retroactive application of Measure “E” in 2001, reversing an earlier court ruling which would have still allowed Macpherson to drill.

Jenkins noted although the city reviewed new evidence in an independent environmental report that warranted the breaking of the lease, the vote of Hermosa Beach people by way of a court-ruled constitutional impairment of an agreement is what ultimately sealed the fate of the project.

The city contends Macpherson’s lawsuit is erroneous in that the company is asking for damages by conjecturing what it could collect in revenues from the project. Jenkins said companies wishing to do business in Hermosa Beach knowingly pay permit fees at the risk of possibly dealing with the rejection of a project either at the city level or with the California Coastal Commission.

Although the city has failed to convince the appellate court to reject Macpherson’s suit altogether, officials still contend the matter has no merit.

“It is our position that because Proposition ‘E’ is a constitutionally valid initiative … it therefore completely bars any action for damages with no remedy against the city,” Jenkins said. “Secondly, if the court does rule that Macpherson is entitled to damages and the only restitution is reimbursement, there are certain costs that are not recoverable because that is a risk companies take when applying for permits. Macpherson also wants lost profits, which is not appropriate. Why should it get the benefit when it did not do anything? They did not construct a drill. They did not dig a well or drill, and there is no guarantee that there is any oil.”

Altmann added the city’s independent environmental report served only as a farce in halting the progress of the project and lent no new evidence. Altmann said the nature of the damages is based on proven facts outlined in Macpherson’s argument that oil does, in fact, exist in the city’s ground thus providing Macpherson with the leverage needed to collect such a large amount.

“With our view on Measure ‘E,’ it is obvious the project will never move forward and so pursuing money damages is the only remedy,” she said. “We are seeking damages under contract law. The city has said the amount of damages we are seeking is speculative but we have seen oil production in the area and we know there is oil in the ground. It is really a nonissue.”