THE TILTS AND TRENDS OF THE GOVERNMENT CONTRACTOR DEFENSE
Raymond Paul Johnson
Raymond Paul Johnson, A Law Corporation
2121 Rosecrans Avenue, Suite 3400
South Bay Los Angeles
El Segundo, California 90245
It can be cold in a shadow. And the government contractor defense casts quite a large shadow. Some courts, however, have even ventured beyond the edges. This paper explores the rationale and logical bounds of the government contractor defense, so that it can be limited to original intent through effective argument, whenever inevitable attempts are made to extend it.
Versions of the government contractor defense have been recognized by federal courts since before World War II. In general, the defense shields a private party from liability arising out of the performance of contractual obligations owed to the United States Government.
The United States Supreme Court first acknowledged a government contractor defense in Yearsley v. W. A. Ross Construction Co., 309 U.S. 18, 84 L.Ed. 554, 60 S.Ct. 413 (1940). In later years, different courts devised various versions. The government contractor defense, having no direct statutory basis, developed as a matter of federal common law; courts generally looked to the Feres doctrine as a foundation.
Feres holds that the Federal Tort Claims Act does not allow government liability for injuries to military service people. 1 As a consequence, both state and federal courts, applying early versions of the government contractor defense, strictly limited it to cases where plaintiffs were military personnel and defendants were military equipment manufacturers. 2
In 1988, however, the United States Supreme Court handed down its own version of the government contractor defense in Boyle v. United Technologies Corp., 487 U.S. 500, 101 L.Ed.2d 442, 108 S.Ct. 2510 (1988). The defense as established by Boyle appears deceptively straightforward, simplified in comparison to earlier versions devised by other courts. Although the Boyle decision was rendered in context of injuries allegedly arising from defective design of a military helicopter, the Supreme Court explicitly rejected argument that the defense should pertain only to injuries suffered in the course of military service. 3
B. The Boyle Test and Its Rationale
In Boyle, the Supreme Court established a three-part test for determining when a manufacturer can be shielded from strict liability for injuries caused by products designed pursuant to federal procurement contracts:
"Liability for design defects in military equipment cannot be imposed, pursuant to state law, when (1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States."4
Besides establishing this test, the Court clarified the basis for the defense. Rejecting the Feres doctrine as a foundation, the Court relied instead on the discretionary function exception to the Federal Tort Claims Act. The Supreme Court began its discussion by stating that the government contractor defense was valid even in absence of a statute explicitly preempting state tort law. The Court relied on the preemptive effect of the "unique federal interest":
"[W]e have held that a few areas, involving 'uniquely federal interests' are so committed by the Constitution and laws of the United States to federal control that state law is preempted and replaced, where necessary, by federal law of a content prescribed (absent explicit statutory directive) by the courts -- so-called 'federal common law.'"5
The Supreme Court identified two "uniquely federal interests" which had previously warranted the preemption of state law: (1) the obligations and rights of the United States under its contracts, and (2) the civil liability of federal officials for actions taken in the course of their duty. 6 The Court then declared that the government contractor defense was based on a closely related "uniquely federal interest": civil liabilities arising out of the performance of federal procurement contracts, and the federal government's interest in procuring equipment from contractors who might otherwise be held liable for the manufacture of such equipment. 7
C. The Need for a Significant Conflict
The Court recognized, however, that a "uniquely federal interest" in the procurement of equipment by the United States is not, in and of itself, sufficient to preempt state tort law. Preemption of that sort may occur only where a "significant conflict" exists between federal interests and state law. 8
The Supreme Court then determined that a "significant conflict" between federal interests and state law, in the context of government procurement, was suggested by the discretionary function exception to the Federal Tort Claims Act, 28 U.S.C. § 2680(a). The Court emphasized that this section of the FTCA recognizes the immunity of the federal government for "[a]ny claim . . . based upon the exercise or performance . . . [of] a discretionary function or duty on the part of a federal agency or an employee of the government: We think that the selection of the appropriate design for military equipment to be used by our Armed Forces is assuredly a discretionary function within the meaning of this provision." Boyle, 487 U.S. at 511, 101 L.Ed.2d at 457.
The Court further reasoned that imposing state tort liability on federal contractors "would produce the same effect sought to be avoided by the FTCA exemption. The financial burden of judgment against the contractors would ultimately be passed through . . . to the United States itself." Boyle, 487 U.S. at 511-12, 101 L.Ed.2d at 457-58."In sum, we are of the view that state law which holds Government contractors liable for design defects in military equipment does in some circumstances present a 'significant conflict' with federal policy and must be displaced." Boyle, id. (emphasis added).
II. APPLICATION OF THE GOVERNMENT CONTRACTOR DEFENSE: THE MILITARY vs. NON-MILITARY EQUIPMENT ISSUE
A. Is the "Significant Conflict" Between Federal Interest and State Law Limited to Procurement of Military Equipment?
Is the Boyle government contractor defense applicable only to military equipment? The Boyle decision arose out of the crash of a military helicopter. The Court failed, however, to state whether the government contractor defense applies to non-military equipment, leading to widely varying decisions by different courts. Most of those decisions have turned on whether the exercise of federal discretion involved in procurement of non-military equipment created a "significant conflict" with state tort law in the eye of the court.
There is general agreement that the federal government's procurement of non-military equipment constitutes a "unique federal interest." See, e.g., Nielsen v. George Diamond Vogel Paint Co., 892 F.2d 1450, 1454 (9th Cir. 1990): "The underlying premise in Boyle applies to all government contracts, and is not limited to the military context. That premise is that there is a "uniquely federal interest" in potential liabilities arising out of the performance of any government contract, regardless of its military or civilian nature." See also Carley v. Wheeled Coach, 991 F.2d 1117, 1120 (3rd Cir. 1993): "The Court in Boyle acknowledged that there is a unique federal interest in all contracts in which the government procures equipment, not just those with military suppliers."
Courts are sharply divided, however, on whether the "unique federal interest" involved in procurement of non-military equipment gives rise to a significant conflict with state law. Courts on both sides of the issue have looked to the nature of the federal discretion exercised in selecting non-military equipment.
Courts limiting the government contractor defense to military equipment have emphasized that special considerations involved in military decisions are what make the conflict between federal interest and state law particularly "significant." In Nielsen, supra, the Court of Appeals for the Ninth Circuit relied upon the military context of the Boyle decision, and the Supreme Court's rejection of the Feres doctrine as a basis, reasoning that "the interests of the government in avoiding scrutiny of sensitive military decisions . . . are the same regardless of whether the injured party . . . is a member of a military service or a civilian."9 The Ninth Circuit further emphasized that "the reasons for shielding both the government and the contractor from liability for military equipment design are the same as those underlying the Feres doctrine. These are considerations peculiar to the military field. . . . [T]he policy behind the defense remains rooted in considerations peculiar to the military."10
The Ninth Circuit revisited the same issue in In re Hawaii Federal Asbestos Cases, 960 F.2d 806, 812 (9th Cir. 1992), and again emphasized that manufacturers of non-military equipment should not be entitled to the protection of the government contractor defense. In support of its decision, the Ninth Circuit again looked to the nature of the federal discretion involved in procurement decisions, and emphasized the special considerations involved in military decisions:
"That Boyle speaks of the military contractor defense as immunizing contractors only with respect to the military equipment they produce for the United States is consistent with the purposes the Court ascribes to that defense. The Boyle Court noted that the military makes highly complex and sensitive decisions regarding the development of new equipment for military usage.
• • • • •
"These same concerns do not exist in respect to products readily available on the commercial market. . . . The products have not been developed on the basis of involved judgments made by the military but in response to the broader needs and desires of end-users in the private sector."11
On the other hand, courts extending the Boyle defense to manufacturers of non-military products have contended that federal discretion exercised in that procurement involves considerations and policy judgments at least comparable to decisions regarding military equipment. The same courts argue that the "significant conflict" between federal and state interests found in Boyle was not the exercise of discretion itself, but rather the possibility that manufacturers under government contract might "pass through" to the federal government the additional costs of liability imposed on them by state law. See, e.g., Carley v. Wheeled Coach, 991 F.2d 1117 (3rd Cir. 1993), where the Third Circuit held the government contractor defense applicable to a civilian ambulance manufactured under contract with the United States General Services Administration. 12
B. What Constitutes "Military Equipment"?
The conflict between the Ninth Circuit's holding in Nielsen, supra, limiting the Boyle government contractor defense to military contractors, and the approach of the Third Circuit in Carley, supra, extending the defense to non-military contractors, may not be resolved by the Supreme Court any time soon. Assuming, however, that the government contractor defense is raised before a court applying the Nielsen rule, a further question remains unresolved: just exactly what is military equipment? How is it defined?
The Boyle Court did not specifically decide whether non-military products are covered by the government contractor defense, therefore the Boyle opinion provides little guidance as to what differentiates military and non-military products. However, the Court did state that the defense would not apply to "injuries caused to military personnel by a helicopter purchased from stock . . . or by any standard equipment purchased by the government."13
Some items procured by the federal government are so clearly "military equipment" that no dispute arises. Ejection seats in fighter aircraft, for example, are frequently at issue in products liability litigation, and liability for design defects are repeatedly challenged by the government contractor defense. 14
The characterization of other products procured by the military, however, can be less certain. Particularly at issue are those products procured by the military that are also commercially available in the civilian sector. In Stone v. FWD Corp., 822 F.Supp. 1211 (D. Md. 1993), for example, the court ruled that a fire truck manufactured for the U.S. Navy constituted "military equipment." The court rejected the plaintiff's contention to the contrary, holding that "a piece of heavy machinery used to protect and support military operations and material falls well within the scope of the term 'military equipment. '"15
On the other hand, the court in Hawaii Federal Asbestos Cases, supra, rejected the notion that a commercially available product constituted military equipment. In that case, the Ninth Circuit held that asbestos insulation was not military equipment entitling defendants to the government contractor defense. 16 Evidence indicated that the insulation was exactly the same product sold in significant quantities to private industry, and comparatively very little was sold to the military. 17 The court held that "the products responsible for [plaintiffs'] injuries were not specialized items of military equipment but were, instead, goods sold on the ordinary commercial market."18
III LIABILITY FOR DEFECTS: WHAT DEFECTS FALL SUBJECT TO THE GOVERNMENT CONTRACTOR DEFENSE?
A. "Manufacturing" vs."Design" Defects: Labels Can Be a Distraction
The government contractor defense in Boyle precludes state tort liability for design defects in military equipment where the three-prong test is satisfied. 19 As such, the Boyle defense does not apply to manufacturing defects. In any event, obviously, a product with a manufacturing defect could not meet the second prong of the Boyle test; the equipment would not conform to reasonably precise specifications.
Application of the Boyle rule has never been obvious to some, however, and purported distinctions between design and manufacturing defects have resulted in considerable confusion. Defendant military equipment manufacturers have tried to characterize any and all defects in their products as design defects to take advantage of the government contractor defense. 20
The confusion, however, has been exacerbated by unfortunate language used by the Eleventh Circuit in Harduvel v. General Dynamics Corp., 878 F.2d 1311 (11th Cir. 1989). The product defect in that case was "wire chafing": the rubbing and scraping of wires in the electrical system of the F-16 jet fighter, as a result of placing wires without adequate insulation. 21
The Eleventh Circuit tried to distinguish "manufacturing" and "design" defects in the following way:
"If a defect is one inherent in the product or system that the government has approved, it will be covered by the defense. Where a defect is merely an instance of shoddy workmanship, it implicates no federal interest. This distinction between 'aberrational' defects and defects occurring throughout an entire line of products is frequently used in tort law to separate defects of manufacture from those of design."22 (emphasis added. )
Courts generally rejected the Eleventh Circuit's test for distinguishing between manufacturing and design defects, but complicated matters further by imposing other tests for determining when a military product defect was one of "design" or "manufacture." See Mitchell v. Lone Star Ammunition, Inc., 913 F.2d 242, 248 (5th Cir. 1990), where the Fifth Circuit emphasized a distinction based on whether the defect occurred in the manufacturing process.
"This Court, however, believes the Eleventh Circuit's reasoning that manufacturing defects consist only of aberrational defects in unfortunate. One can certainly conceive of situations in which a manufacturer's shoddy workmanship -- neither approved nor authorized by the Government -- produces a defect that occurs throughout an entire line of products. . . . Defects of this nature are clearly a result of the manufacturing process, not the design process. In such situations, no federal interest would support the extension of the government contractor defense. In this Court's opinion, the relevant inquiry is the degree of the manufacturer's responsibility for the defect in question."23
Following Mitchell, however, the Fifth Circuit rejected analyzing whether a "manufacturing" or "design" defect was at issue. In Bailey v. McDonnell Douglas Corp., 989 F.2d 794, 801 (5th Cir. 1993), the court held that labelling a claim as one of "manufacturing" or "design" defect is irrelevant in evaluating applicability of the government contractor defense. The Fifth Circuit emphasized that whether the defense applies should not be determined by a label; strict adherence to the Boyle three-prong test ensures that the defense is limited to appropriate claims. Bailey, id.
B. Performance Requirements: Not "Reasonably Precise" Specifications and Not Necessarily Grounds for Alleging Defect
The first two prongs of the Boyle test require that the United States approve reasonably precise specifications for military equipment, and that the equipment conform to those specifications. 24 But what are "specifications"? And how precise is "reasonably precise"?
Frequently, specifications for military equipment include general performance criteria. These criteria are broad descriptions of what the equipment is supposed to do, and how it is expected to perform. In an action where the government contractor defense is raised, a defendant may try to claim that the military's description of general performance requirements for a product constituted government approval of reasonably precise specifications. Likewise, a plaintiff may claim that where a product failed to perform as specified, it failed to conform to government-approved specifications. Both are probably wrong.
Military specifications providing only general performance criteria are usually found not to be "reasonably precise" specifications. In Kleeman v. McDonnell Douglas Corp., 890 F.2d 698, 700 (4th Cir. 1989), for example, the product specification at issue was a requirement, stated in the manufacturer's production contract, that the landing gear of the F/A‑18 aircraft "withstand normal landing loads without bending, unlocking or causing uncontrolled motion of the aircraft." The Kleeman court held that such performance requirements are not the "reasonably precise specifications" contemplated by the Boyle three-prong test. 25
See also Sundstrom v. McDonnell Douglas Corp., 816 F.Supp. 577 (N.D. Cal. 1992), where the particular performance requirement discussed was Military Specification 9479B, which established a "functional baseline" for the F-16 aircraft seat ejection system:
"The seat system shall be free of any projections or sharp edges which could snag, jam, or damage clothing and equipment, injure the seat occupant or maintenance personnel, foul personal equipment, jeopardize operation of seat components, or interfere with recovery parachute operation."26
Plaintiff asserted that the seat design failed to conform to this specification, and that defendants therefore failed to satisfy the second prong of the Boyle defense test. 27 The court rejected this argument, relying on the rationale of the Kleeman court, stating:
"As [defendant] correctly points out, a proscription against projections which would snag equipment is simply not the type of 'reasonably precise specification' to which the Boyle test refers. Requiring a government contractor to conform its product to qualitative, precatory goals would entirely vitiate the Boyle defense."28
If then performance requirements are not the "reasonably precise specifications" referred to in Boyle, what is a "precise specification"? The decision in Kleeman, supra, provides some guidance:
"The ultimate design of the product is determined not only by the original procurement and contract specifications, but also by specific, quantitative engineering analysis developed during the actual production process.
• • • • •
"The contract also required [defendant] to submit detailed design drawings to the Navy for approval as the general specifications became embodied in the actual landing gear. The Navy reserved the right to reject drawings and to require revisions and modifications. These working drawings, and not simply the general qualitative specifications from the procurement stage, comprise 'the reasonably precise specifications' contemplated by Boyle."29
See also In re Aircraft Crash Litigation Frederick, Maryland, 752 F.Supp. 1326, 1350 (S.D. Ohio 1990): To assert the government contractor defense, the contract in question must require the particular product to conform to a detailed government-approved specification that sets forth the product's design with such specificity that it could be used by any manufacturer to make the same product.
IV. BEYOND THE SCOPE OF BOYLE: RECENT DEFENSE STRATEGIES ASSOCIATED WITH THE GOVERNMENT CONTRACTOR DEFENSE
A. Government Contractor Status: Grounds for Removal to Federal Court?
Can a manufacturer establish grounds for removal from state to federal court by asserting the government contractor defense? On its face, the question seems absurd, yet two recent decisions have indicated that it is indeed possible in some courts under particular facts.
The federal officer removal statute, 28 U.S.C. § 42(a)(1), allows federal officials and persons acting under them to remove state court actions brought against them for their official acts. 28 U.S.C. § 1442(a)(1) specifically provides:
(a) A civil action or criminal prosecution commenced in a state court against any of the following persons may be removed by them to the district court of the United States
(1) Any officer of the United States or any agency thereof, or person acting under him, for any act under color of such office.
Invoking the federal officer removal statute requires that the moving party satisfy three elements: (1) defendant must raise a colorable federal defense to plaintiff's claims; (2) defendant must establish that it acted under the direction of a federal officer; and (3) defendant must demonstrate a causal connection between plaintiff's claims and acts performed under federal authority. 30
In Ryan v. Dow Chemical Co., 781 F.Supp. 934 (E.D.N.Y. 1992), defendants were manufacturers of the chemical defoliant Agent Orange, produced under contract for the Defense Department. 31 To satisfy the first element required for federal officer removal, defendant raised both the Boyle government contractor defense and the immunity available to contractors under the Defense Production Act. 32 As to the second element, however, defendants failed to prove they were "acting under" federal officers in their production of Agent Orange.
The Ryan court noted that the U.S. Government sought only to buy ready-to-order herbicides, and that defendants were being sued "for formulating and producing a product all of whose components were developed without direct government control and all of whose methods of manufacture were determined by the defendants. . . . The necessary direct and detailed official control over the acts for which the defendants are now being sued is therefore lacking."33 The court held that defendants did not meet the requirements of the federal officer removal statute, and found remand proper, subject only to completion of pending appeals. 34
In Fung v. Abex Corp., 816 F.Supp. 569 (N.D. Cal. 1992), however, defendant was the manufacturer of U.S. Navy submarines. Plaintiffs were U.S. Navy employees exposed to asbestos while on board those submarines. 35 Defendant argued that federal removal was proper under 28 U.S.C. § 1442(a)(1). The court decided that defendant's stated intention to raise the Boyle defense satisfied the "colorable federal defense" requirement for federal officer removal. 36
The Fung court then distinguished its facts from those of Ryan:
"While the government contracted defendant to build submarines in the instant case, it monitored General Dynamics' performance at all times and required the defendant to construct and repair the vessels in accordance with the applicable and approved specifications incorporated into the contracts. . . . The government also performed extensive dock and sea trials . . . to ensure complete conformity with design specifications. Given the fact that defendant has established that the government . . . exercised "direct and detailed" control over the construction of the vessels, the "acting under" requirement of § 1442(a)(1) has been satisfied."37
B. Related Attempts to Apply the Federal Government's "Combatant Activities" Immunity to Military Contractors
In addition to the federal government's "discretionary function immunity," the Federal Tort Claims Act, 28 U.S.C. § 2680, creates numerous other exemptions from liability. 28 U.S.C. § 2680(j), in particular, provides that the federal government shall not be held liable for "[a]ny claim arising out of the combatant activities of the military or naval forces, or the Coast Guard, during time of war." This immunity was recently extended to military equipment contractors, based on the rationale for federal preemption described in Boyle.
In Koohi v. United States, 976 F.2d 1328 (9th Cir. 1992), plaintiffs' deaths, during the recent Iran-Iraq conflict, were caused by an Aegis anti-aircraft missile, launched from the U.S.S. Vincennes, which shot down a civilian Iranian airliner.38 Plaintiffs brought claims against the weapon's manufacturers for design defects in the Aegis system. 39
The Ninth Circuit noted that, in Boyle, the Supreme Court recognized that exceptions to the Federal Tort Claims Act can preempt tort actions against defense contractors under certain circumstances: where imposition of liability on a defense contractor "will produce some effect sought to be avoided by the FTCA exception."40 The court then concluded that plaintiffs' design defect claim against the Aegis manufacturers was preempted by the "combatant activities" exception to the Federal Tort Claims Act. 41
Recently, however, the FTCA "combatant activities" exception was extended even further, to grant military contractors immunity from manufacturing defect claims, in Bentzlin v. Hughes Aircraft Co., ____ F.Supp. ___, 1993 W.L. 394584, 93 Daily Journal D.A.R. 12798 (C.D. Cal. 1993). The facts of Bentzlin arose from a well-publicized incident in the Persian Gulf during Operation Desert Storm. Decedents were U.S. Marines, riding in an armored vehicle toward enemy Iraqi forces. A Maverick missile, launched from a U.S. Air Force A-10 aircraft, struck the vehicle. Plaintiffs brought suit, claiming that the incident was caused by a manufacturing defect in the Maverick missile. 42
The district court began its analysis by announcing that, in this case, the Boyle defense did extend to manufacturing defects in military equipment. The court rationalized that "[i]n single use military products such as the Maverick missile, design and manufacturing are interrelated," and that state tort manufacturing defect suits "would interfere with the federal government's interest in obtaining and using such weaponry."43 The court thus decided: "Such cases must be dismissed on the pleadings."44
The flaw in the district court's reasoning, however, seems obvious. Any characterization of a claim as one for "manufacturing defect" or "design defect" should be irrelevant in determining whether the Boyle defense applies. 45 If military equipment fails to conform to design specifications, the Boyle defense simply does not apply. 46
The Bentzlin court, however, did limit its radical extension of the government contractor defense in manufacturing defect cases. The court decided that Boyle preemption of manufacturing defect claims extended only to "sophisticated combat weaponry, such as the Maverick missile," and was limited to "technically sophisticated products produced exclusively for combat use."47
But, then, the district court turned to consider the preemptive effect of the "combatant activities" exemption to the Federal Tort Claims Act. The court announced that in its opinion the "Boyle preemption analysis also supports preemption of manufacturing defect suits arising in the context of war, regardless of the level of sophisticated technology of the allegedly defective weaponry."48 The court discussed a plethora of contended federal interests, including "secrecy of wartime strategy," "military morale," and even "the federal interest in maintaining the dignity of casualties suffered by soldiers."49 The district court concluded:
"The federal interests that exist in wartime would be frustrated by allowing state tort suits against government contractors that arise from wartime deaths, even when plead as manufacturing defect claims. . . . The combatant activities exception generates a federal common law defense which immunizes manufacturers such as Hughes from state tort suits arising from war."50
Here, too, the court's reasoning certainly appears flawed. If the Boyle Court intended that the government contractor defense extend to injuries caused to military personnel by any and all defects in military equipment, then the Supreme Court would not have clearly and emphatically rejected the Feres doctrine as the basis for any government contractor defense. See Boyle, 487 U.S. at 510, 101 L.Ed.2d at 456-57:
"We do not adopt this analysis because it seems to us that the Feres doctrine, in its application to the present problem, logically produces results that are in some respects too broad and in some respects too narrow. Too broad, because if the Government contractor defense is to prohibit suit against the manufacturer whenever Feres would prevent suit against the Government, then even injuries caused to military personnel . . . by any standard equipment purchased by the Government, would be covered. Since Feres prohibits all service-related tort claims against the Government, a contractor defense that rests upon it should prohibit all service-related tort claims against the manufacturer - making inexplicable the three limiting criteria for contractor immunity."
The government contractor defense established by the U.S. Supreme Court in Boyle v. United Technologies Corp., supra, is a doctrine of federal preemption. State tort actions are preempted, as a matter of federal common law, whenever the unique interests of the federal government are in significant conflict with the operation of state law.
The unique federal interest protected by the Boyle defense is the government's interest in obtaining military equipment through procurement contracts. That federal interest, according to the Court, can be in significant conflict with state tort law regarding design defects if and when the three-part Boyle test is satisfied.
If federal discretion is not exercised, as through approval of reasonably precise equipment specifications, no conflict can exist between federal interest and state law, and the government contractor defense is inapplicable. Labelling defects as "design" or "manufacturing" defects should never substitute for careful analysis regarding whether the manufacturer created the defect without government authorization through such reasonably precise specifications.
In addition, determinations of (1) whether the government contractor defense applies to non-military equipment, (2) what constitutes military equipment, (3) what are reasonably precise specifications, and (4) whether federal removal is proper under the federal officer removal statute should all depend on the level of conflict between federal interest and state law, and the exercise of express federal discretion involved. Likewise, any extension of the "combatant activities immunity" to equipment defects, not resulting from the exercise of federal discretion, is wholly inconsistent with the principles stated by the United States Supreme Court in Boyle.