Kern Oil and Refining Co., Plaintiff/counter-Defendant-Appellee v. Tenneco Oil Co., Defendant/counterclaimant-Appellant

Kern Oil & Refining Co. filed an action against Tenneco Oil Company, seeking restitution for payments made to Tenneco under an alleged mistake of fact. Tenneco filed various counterclaims, including a claim for lost profits arising out of Kern Oil’s failure to supply crude oil to Tenneco. In No. 84-6268, Tenneco challenges the district court’s judgment in favor of Kern Oil on the restitution claim. In No. 84-6482, Tenneco seeks reversal of the district court’s order granting attorneys’ fees to Kern Oil. In No. 84-6367, Tenneco challenges the dismissal of the lost profits counterclaim for lack of prosecution. We affirm.

I

Background

Kern Oil is a general partnership doing business in California. Tenneco is a Delaware corporation with its principal place of business in Texas. On May 19, 1977, Tenneco entered into a contract to sell crude oil to Kern Oil. Tenneco agreed to sell its production from twenty-four specified leases to Kern Oil. The contract contained the following terms:

(emphasis added). The primary issue in this case is the interpretation of those terms.

In the mid-1970s, the Federal Energy Administration adopted a complex system to regulate the price of domestic…