Hercules Inc. v. United States

PETITIONER: Hercules Inc.
RESPONDENT: United States
LOCATION: Seminole Tribe

DOCKET NO.: 94-818
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 516 US 417 (1996)
ARGUED: Oct 30, 1995
DECIDED: Mar 04, 1996

ADVOCATES:
Carter G. Phillips - Argued the cause for the petitioners
Carter Phillips - for petitioners
Edward C. DuMont - Department of Justice, argued the cause for the United States, supporting the respondent

Facts of the case

During the 1960s, the United States government contracted with several chemical manufacturers, including Hercules Incorporated and Wm. T. Thompson Company, to manufacture the herbicide known as Agent Orange. After health problems arose, Vietnam veterans and their families began filing lawsuits against the manufactures. The manufacturers incurred substantial costs defending, and then settling, the claims. The manufactures then filed suit under the Tucker Act to recover such costs from the Government on theories of contractual indemnification and warranty of specifications provided by the government. Ultimately, the Court of Appeals rejected the theory of implied warranty of specifications and the theory of implied promise to indemnify for liabilities incurred in performing the contracts. The appellate court also held that, by settling, the manufactures had voluntarily assumed liability for which the Government was not responsible.

Question

May the chemical manufacturers of Agent Orange recover costs incurred from defending and settling third-party tort claims arising out of their performance of Government contracts from the Government on alternative theories of contractual indemnification or warranty of specifications provided by the Government?

Media for Hercules Inc. v. United States

Audio Transcription for Oral Argument - October 30, 1995 in Hercules Inc. v. United States

William H. Rehnquist:

We'll hear argument now in Number 94 818, Hercules, Incorporated v. United States.

Mr. Phillips.

Carter G. Phillips:

Mr. Chief Justice, and may it please the Court--

This is a case about simple fairness.

The petitioners were compelled under the threat of civil and criminal penalties to produce Agent Orange.

They were required to produce it according to precise specifications commanded by the United States Government.

The specifications ensured that dioxin would be produced, which the United States knew, and the Government also knew, and the court of appeals expressly found that dioxin is an extremely hazardous substance.

Petitioners knew none of these facts, and the United States knew them and declined to divulge any of that information to the United States... or, excuse me, to the petitioner.

The Agent Orange that was produced by the petitioners was done so in strict conformity to the requirements of the United States, and the United States then used it in unheard of concentrations and exposed thousands of American military and others to the risks that arise from the dioxin.

Antonin Scalia:

Who can't recover against the United States.

Carter G. Phillips:

Who cannot recover against the United States?

Antonin Scalia:

I mean, I really find your simple fairness argument a little hard to take in this field.

I mean, if there's anybody who's been done out of simple fairness, it's the soldiers who were injured by this thing, and they can't sue, so haven't we abandoned simple fairness in this field?

Carter G. Phillips:

No.

I think it's a question of--

Antonin Scalia:

Should we be outraged that the companies cannot pass on their liability, when the injured parties themselves can't recover?

Carter G. Phillips:

--Well, at least some portion of the injured parties, of course, are taken care of by veterans benefits programs, and that was a decision the court made a long time ago with respect to the--

Antonin Scalia:

Sure, the companies had golden parachutes, too, or something else, but that's a different question, whether they can get moneys--

Carter G. Phillips:

--But the... as I understand the theory, Justice Scalia, the quid pro quo for depriving soldiers of the ability to go against the United States on a tort theory was because they have other remedies, and therefore the Court interpreted the Tort Claims Act not to prove... not to allow recovery.

That says nothing, though, about what ought to be the relationship between the contractors and the United States.

It seems to me quite clear that in defining that relationship you have to look to the basic law of... the basic Federal common law, and what rules make sense there.

William H. Rehnquist:

--Well, but it's been established for a long time, Mr. Phillips, that he who deals with the Government must turn square corners.

That is, it's not a matter of equity, or something like that, it's a matter of waiver of sovereign immunity, which is always strictly construed.

Carter G. Phillips:

That's absolutely correct, Your Honor, but there's no question in this case that there's been a waiver of sovereign immunity.

The lodgings that were filed with the Court demonstrate the existence of a contract.

The Tucker Act expressly waives sovereign immunity for all contract claims.

We're simply trying to ascertain the broad outlines of what's within those contracts based on principles this Court has long followed in terms of when do you imply either indemnification agreements or warranties based on the relationship between the parties and the course of conduct between the parties.

The litigation in this particular case arose in the wake of the initial settlements that were done by the petitioners after they were sued by the... those who had been exposed to Agent Orange.

Ruth Bader Ginsburg:

Mr. Phillips, with respect to that, suppose this case had developed that Judge Pratt's acceptance of the Government's contractor defense had stuck, that there had been no change of district judges, and he had entered that judgment, an appeal is taken, and the companies are concerned about how the court of appeals would resolve the Government contractor defense, so they settle, precisely the terms that we have before us here.

They settle, and then they want to be reimbursed by the Government for the cost of that settlement.