General Dynamics Corp. v. United States - Oral Argument - January 18, 2011

General Dynamics Corp. v. United States

Media for General Dynamics Corp. v. United States

Audio Transcription for Opinion Announcement - May 23, 2011 in General Dynamics Corp. v. United States

Audio Transcription for Oral Argument - January 18, 2011 in General Dynamics Corp. v. United States

John G. Roberts, Jr.:

We will hear argument first this morning in Case 09-1298, General Dynamics v. United States, and the consolidated case, 09-1302, the Boeing Company v. United States.

Mr. Phillips.

Carter G. Phillips:

Thank you, Mr. Chief Justice, and may it please the Court:

The proposition that Petitioners are here challenging is the one adopted or embraced by the Federal Circuit that says that the United States Government can declare that certain of its government contracting partners have operated in default and under those circumstances can reach into the government contractor's pocket, withdraw at the time $1.35 billion of monies that were spent by the United States, but for services that were rendered, without question, pursuant to the contract, pursuant to the instructions of the United States Government, and that when the contractor seeks to defend against the claim that it has engaged in some kind of default conduct, that the government can assert the state-secrets privilege and in so doing deprive the contractor of the ability effectively to respond to the government's conclusion.

Under those circumstances, it seems to me that the statement in this Court's decision in United States v. Reynolds, which is that the government is certainly free to assert the state-secrets privilege, but when it does so it has to assume certain responsibilities that come from it, at least in the circumstances where the United States is the moving party.

Ruth Bader Ginsburg:

Mr. Phillips, when the contractors -- when they failed to deliver the first aircraft at the time specified by the contract, their reason was that its costs would far outrun the contract price, and so it sought to reformulate the contract.

At that time -- correct me if I'm wrong, but I think at that time the contractor said nothing at all about superior knowledge and the government's obligation to share information that it hadn't shared.

Carter G. Phillips:

There was nothing specific with respect to that, Justice Ginsburg.

The first time the contractors identified the superior knowledge problem arose, obviously, when the government took the extraordinary step of issuing a cure notice, because up until that point, obviously, the parties are attempting to negotiate and work to a final resolution of this project, as you would hope any contracting entities would, to bring the contract to a happy resolution, so--

Ruth Bader Ginsburg:

But you would expect them to say, if that was the impediment to going forward on this contract, to at least mention it.

Carter G. Phillips:

--Well, I think you have to put it in context, Justice Ginsburg, because during this period of time, obviously, there were consistent efforts and requests being made to get access to both the B-2 and the A-117 stealth technologies, and there were discussions that went back and forth, and the district court -- and the Court of Federal Claims specifically held, eventually the information was forthcoming, but it was, candidly, too little and too late to effectively allow the contract to proceed as -- as planned.

So I think -- I mean, I agree, you know, in a perfect world, maybe you would have identified this.

But in this situation, the parties are simply trying to come to some kind of a resolution that allows both sides to be satisfied by the final--

Sonia Sotomayor:

Mr. Phillips--

Carter G. Phillips:


Sonia Sotomayor:

--why wasn't the need to share that technology a part of this contract or a condition to the contract.

I've gone through the contract -- or, not all of it; enough of it.

I haven't found anywhere in the contract that it requires the U.S. to share information with you.

Does that have anything to do with what due process would require?

Carter G. Phillips:

No, I think -- I think, Justice--

Sonia Sotomayor:

I'm going to pose a hypothetical.

Let's assume the contract required the sharing of state secrets and the government then invokes its privilege.

Is that a different case than this one in terms of due process?

Wouldn't the -- wouldn't the former situation, where it's been made a condition of the contract, require a different treatment than this situation where the government's just saying, if you want to raise a defense that's not part of the contract, then you do what every other litigant with a privilege does -- who a privilege has been invoked against; you proceed with whatever evidence you have.

Carter G. Phillips:

--Well, you have to--

Sonia Sotomayor:

That's usually what happens with other privileges.

Carter G. Phillips:


And we would have been perfectly content to proceed with the evidence we had.

But the ultimate decision by the Court of Federal Claims was that it was impossible to ultimately be in a position to resolve it.

But I want to answer your more fundamental question, Your Honor as to the -- the basic point is that the background principle of law, the superior knowledge defense, is the understanding of the parties when they enter into an agreement.