General Dynamics Corp. v. United States

PETITIONER: General Dynamics Corporation
RESPONDENT: United States
LOCATION: General Dynamics Corporation

DOCKET NO.: 09-1298
DECIDED BY: Roberts Court (2010-2016)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 563 US 478 (2011)
GRANTED: Sep 28, 2010
ARGUED: Jan 18, 2011
DECIDED: May 23, 2011

ADVOCATES:
Carter G. Phillips - for the petitioners
Neal Kumar Katyal - Acting Solicitor General, Department of Justice, for the respondent

Facts of the case

More than 20 years ago, General Dynamics Corp. and McDonnell Douglas Corp. signed a contract to build eight A- 12 Avenger stealth fighters for the U.S. Navy at a total estimated cost of more than $4 billion. Three years later, the Navy and then-Defense Secretary Dick Cheney declared the company in default and canceled the contract. The government has argued that the companies weren't able to produce the aircraft as designed on schedule and is seeking repayment of $1.35 billion, plus more than $2.5 billion in accumulated interest, arguing that the companies failed to meet the terms of the contract. Meanwhile, General Dynamics Corp. and Boeing Co., which inherited the litigation through its purchase of McDonnell Douglas, contend that the delay was caused by the government's refusal to share essential stealth technology.

The government has argued that the companies couldn't press that argument because litigating the issue would require the disclosure of military secrets and jeopardize national security. Two lower courts agreed.

Question

The "state secrets" doctrine prevents disclosure of important state secrets in litigation. Can the government sue a federal contractor for breach of contract then use the state secrets doctrine to prevent the contractor from raising a defense that would require the contractor to disclose secret information?

Media for General Dynamics Corp. v. United States

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

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

Antonin Scalia:

-- I'm already tired.

Let me care that much about this one.

This case comes to us on -- on writ of certiorari to United States Court of Appeals for the Federal Circuit.

General Dynamics and Boeing, the petitioners here, entered a fixed price $4.8 billion contract to develop a stealth fighter aircraft for the Navy.

After they had fallen well behind schedule, the contracting officer terminated the contract for default and ordered the companies to repay approximately $1.35 billion in progress payments for work the Government never accepted.

Petitioners filed suit in the Court of Federal Claims, challenging the termination under the Contract Disputes Act of 1978.

They argued that Federal Circuit precedent would excuse their default because the Government had failed to share its "superior knowledge" about how to design and manufacture stealth aircraft.

As the litigation proceeded, it proved difficult to uncover the extent of the -- of the Government's superior knowledge because the design, materials and manufacturing process for prior stealth aircraft operated by the Air Force are closely guarded military secrets.

After some of those secrets were inadvertently disclosed during discovery, the Acting Secretary of the Air Force warned the Court of Federal Claims that further discovery into the extent of the Government's superior knowledge would risk disclosing classified information.

The Court terminated discovery and declared the superior knowledge question to be nonjusticiable.

After years of litigation and two remands from the Federal Circuit, the Court of Federal Claims finally sustained the default termination.

The Federal Circuit affirmed that judgment.

It agreed that the state-secrets privilege prevented adjudicating petitioners' superior knowledge defense and it rejected petitioners' argument that the Government could not pursue a claim against the party and then use the state-secrets privilege to preempt defenses to that claim.

We granted certiorari to review the state-secrets holding.

Today, in the unanimous opinion filed with the clerk, we vacate the judgment of the Court of Appeals.

The Federal Circuit believed that our 1953 decision in United States versus Reynolds had already rejected petitioners' arguments.

We think that Reynolds has -- has less to do with these cases than the Court of Appeals or for that matter, the party's belief.

Reynolds upheld the Government's assertion of the state-secret privilege to exclude certain evidence in a trial dealing with injuries caused by the B-29 bomber.

The case was about the admission of evidence.

It decided a purely evidentiary dispute by applying evidentiary rules.

The privilege information was excluded and the trial went on without it.

Here, by contrast, the Court of Federal Claims decreed the substantive result that since invocation of the state-secrets privilege obscured too many of the facts relevant to the superior knowledge defense, that defense was simply not available.

What we are called upon to exercise today is not our power to determine the procedural rules of evidence, but rather our common law authority to fashion contractual remedies in Government-contracting disputes.

And our state-secrets jurisprudence bearing upon that authority is not Reynolds, but two cases dealing with alleged contracts to spy.

Our 1876 decision in Totten versus United States and our 2005 decision in Tenet versus Doe, both held that "Public policy forbids suits based on covert espionage agreements."

Totten was a suit by a claimed union spy in the Civil War for the compensation he had allegedly been promised.

Tenet was a suit by claimed CIA spies for compensation they had allegedly been promised.

Rather than risk disclosure of espionage relationships, we left the parties to those suits where we found them the day they came into Court.

We think a similar situation obtains here and that the same consequence should follow.

Reliability depends upon the validity of a plausible, superior knowledge defense.