6 Skywritings Spring 2005

Going on the Offense with the GovernmentContractor Defense

Denny Shupe and Tracey Dolin1

Schnader Harrison Segal & Lewis LLPPhiladelphia, PAdshupe@schnader.com

In defending government contractors,an important defense that counselmust consider from day one is thegovernment contractor defense. It iswell established that the governmentcontractor defense may grant immu-nity to contractors who provide equip-ment to the United States federalgovernment on the theory that a con-tractor should not be liable for provid-ing a product pursuant to governmentdirectives. Successfully applied, it isan invaluable tool for defendants to goon the offensive and, in the right case,obtain summary judgment. Althoughthe government contractor defensehistorically has been used by manu-facturers, it more recently has beenapplied to grant immunity to compa-nies providing services pursuant tocontracts with the federal government.

The government contractor defensewas espoused by the Supreme Courtin Boyle v. United Technologies Corp.2

In Boyle, the Supreme Court recog-nized that there are areas that involve“uniquely federal interests” and heldthat performance under a federal pro-curement contract implicates such aninterest. The Court stated that, in or-der to displace state law, a “significantconflict” must exist between an iden-tifiable federal policy or interest andthe operation of state law. In Boyle,

the Court found that the state-im-posed duty of care was precisely con-trary to the duty imposed by thegovernment contract and, therefore, a“significant conflict” existed that war-ranted the displacement of state law.3

To decide whether a “significantconflict” that would displace state lawexists, the Supreme Court outlined athree-prong test to determine whethera judgment against the contractorwould threaten a discretionary func-tion of the federal government.4 TheCourt reasoned that government con-tractors are immunized from liabilitywhen (1) the government approvedreasonably precise specifications; (2)the equipment conformed to thosespecifications; and (3) the contractorwarned the government about thedangers in the use of the equipmentthat were known to the contractor butnot to the government.

Because most cases applying thegovernment contractor defense dealwith procurement contracts, applica-tion of the Boyle test typically focuseson design defects. As discussed below,recent case law has shown some courtsnarrowly interpreting the defense inthe nature of the strict proofs requiredto show the government approved rea-sonably precise specifications, andthat the contractor warned of the dan-gers known to it but not the govern-ment. A more recent and importantdevelopment has involved applicationof the Boyle test in the context of ser-vice contracts.

With respect to the first prong ofthe Boyle test, government approval ofreasonably precise specifications, thekey inquiry is whether the govern-ment exercised discretion over the par-ticular design feature in question.Documents such as initial design andprocurement specifications, drawings,blueprints and mock-ups that wereexchanged between the governmentand the contractor should be ob-tained. What the courts look for is a“continuous back-and-forth” discus-sion between the contractor and thegovernment. It is not enough that thegovernment signed-off or initialed thebottom of the specifications. Rather,the government must have had a con-siderable amount of substantive inputand not have delegated critical designdecisions to the private contractor.This does not mean that the contrac-tor cannot actively participate in thedesign process. It means that the gov-ernment cannot merely “rubber-stamp” the contractor’s work.

The second prong of the Boyle test,conformance to the government’sspecifications, is closely related to thefirst. Proof of conformance to thegovernment’s specifications also is evi-dence that it was the government, notthe contractor, that exercised discre-tion over the feature at issue. Devia-tion during the manufacturing processfrom the government’s specificationscould mean that the contractor exer-cised discretion in the manufacturing

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of the equipment, or that it intro-duced a manufacturing defect.

An argument that has been raisedis whether the government contractordefense applies to manufacturing de-fects as opposed to design defects.5

The defense applies if the plaintiff al-leges that all of the pieces of equip-ment contained the samemanufacturing defect and the equip-ment was manufactured according tothe government’s specifications. Itdoes not apply, however, where a par-ticular piece of equipment was madeimproperly (contrary to governmentspecifications), or where there was“shoddy workmanship.” In those cir-cumstances, the government did notexercise discretion and the contractoris not protected.

The third prong of the governmentcontractor defense requires that thecontractor warn the governmentabout the dangers of the equipmentthat were known to the contractor butnot to the government. This prong isrequired to encourage contractors toshare information with the govern-ment. One way to prove this prong isto provide clear evidence that the con-tractor warned the government aboutthe particular defect at issue and thegovernment chose not to alter the de-sign. Another way is to argue that thecontractor was no more aware of thedanger than was the government. InOliver v. Oshkosh Truck Corp.,6 thecontractor successfully argued that itwas not “more aware” of any dangerassociated with the configuration ofthe fuel tanks and exhaust systemthan was the Marine Corps.7

In addition to design defect claims,many plaintiffs bring failure-to-warnclaims to which the government con-tractor defense may apply. In Oliver,

the Seventh Circuit held that a “de-fendant may not defeat a state failure-to-warn claim simply by establishingthe elements of the government con-tractor defense with respect to aplaintiff ’s design claim.”8 The courtfound that failure-to-warn claims dif-fered practically as well as theoreti-cally from design claims, but appliedthe Boyle test to the failure-to-warnclaims because similar policy consider-ations controlled both the design de-fect and failure-to-warn situations.The Oliver court held that summaryjudgment was properly granted be-cause Oshkosh met the first prong byproving that the Marine Corps im-posed “reasonably precise specifica-tions” with respect to the warnings,and met the second prong by comply-ing with the Marine Corps’ warnings.Interestingly, even though the Olivercourt stated that failure-to-warnclaims were different from design de-fect claims, the court relied on theproof submitted for the design defectclaim under the third prong to sup-port a finding that Oshkosh did notfail to warn the Marine Corps of anydangers in the use of the equipmentthat were known to Oshkosh but notto the Marine Corps.

Although the government contrac-tor defense has been primarily usedwith procurement contracts, recentcases such as Arnhold v. McDonnellDouglas Corp.,9 and Hudgens v. BellHelicopters/Textron10 extended the appli-cation of the defense to service contracts.

In Arhnold, a landowner brought aclaim against McDonnell Douglas forproperty damage to his buildingcaused by sonic booms from militaryaircraft owned by or under the controlof McDonnell Douglas. McDonnellDouglas moved for summary judg-

ment on the ground that it was en-titled to immunity under the govern-ment contractor defense. The plaintiffargued that Boyle did not extend togovernment service contracts.

The trial court disagreed and saidthat not only does Boyle extend togovernment service contracts, but thatthe Supreme Court’s decision in Boylerelied heavily on Yearsley v. W.A. RossConstruction Co.,11 which held that acontractor who had constructed dikespursuant to a contract with the fed-eral government could not be held li-able for damages under state law if hewas performing according to the willof the federal government. Indeed,Justice Scalia writing for the majorityin Boyle stated that “[t]he federal in-terest justifying [the holding inYearsley] surely exists as much in procure-ment contracts as in performance con-tracts; we see no basis for a distinction.”12

In Arnhold, the court modified theBoyle test to require that the contrac-tor show: (1) reasonably precise flightprocedures and government approvalof the procedures; (2) that the proce-dures it actually employed conformedto those specifications; and (3) that itwarned the government about dangersin the flight procedures that wereknown to the contractor but not tothe United States.

In Hudgens, DynCorp was undercontract with the Army to maintain afleet of UH-1 or “Huey” helicopters atthe Army’s base in Fort Rucker, Ala-bama. On May 1, 1999, plaintiffswere piloting one of the Huey heli-copters when the tail fin separatedfrom the aircraft resulting in a crash.Plaintiffs claimed that DynCorp wasnegligent under Alabama law for fail-ing to properly maintain the helicop-ter by not following either the FAA’s

8 Skywritings Spring 2005

airworthiness directive (providing thatoperators inspect a modified fin sparfor cracks at least once during eachsubsequent eight hours of flight time,using a bright light and a 10X magni-fying glass) or Bell Helicopter’s “Mili-tary Alert Bulletin” (recommending“tap hammer” and fluorescent dyepenetrant inspections within 25 flighthours of the bulletin’s receipt and at180-day intervals thereafter).

The trial court granted summaryjudgment finding that the govern-ment contractor defense applied toservice contracts and that the defen-dant met all three prongs of the Boyletest as a matter of law.13 The EleventhCircuit affirmed the ruling of the trialcourt, stating, “…the governmentcontractor defense recognized in Boyleis applicable to the service contractbetween the Army and DynCorp.” Inso holding, the Eleventh Circuitmodified the Boyle test to require thatdefendant show: (1) the United Statesapproved reasonably precise mainte-nance procedures; (2) DynCorp’s per-formance of maintenance conformedto those procedures; and (3)DynCorp warned the United Statesabout the dangers in reliance on theprocedures that were known toDynCorp but not to the UnitedStates.

The Court found that DynCorppassed the Boyle test by presentingevidence that: (1) the Army’s mainte-nance guidelines constituted a com-prehensive regime that DynCorp wasnot expected to supplement throughany procedures other than those spe-cifically set forth, and that the precau-tions advised by the FAA and Bell hadbeen affirmatively and deliberatelyomitted by the Army from the pre-scribed maintenance procedures; (2)

DynCorp was not expected to con-form to the FAA and Bell procedures,and there was no crack visible to thenaked eye during the pertinent timethat mechanics following Army proce-dures should have looked at the rel-evant portion of the fin spar; and (3)the Army was well aware of the dangerdescribed in the FAA directive andBell bulletin regarding inspection ofthe fin spar and that the Army de-cided not to implement the precau-tions (this prong was conceded to bythe plaintiffs as having been met byDynCorp).

As with the decisions regardingprocurement contracts, the key factorin the Arhnold and Hudgens cases isthat the government retained discre-tion regarding the danger at issue.

* * *When planning your defense strat-egy, one of the first things to ex-plore is application of thegovernment contractor defense.Whether for procurement contractsor service contracts, the governmentcontractor defense provides an in-valuable summary judgment toolwhere the factual circumstances ex-ist for its application. However, itsapplication is very document inten-sive, will normally involve the needfor supportive deposition testi-mony, is applied narrowly and onlywhen all three Boyle factors are met.Therefore, a good practice is to ob-tain all documents and correspon-dence between the contractor andthe government very early on in thelitigation and to inquire of the keyplayers about the circumstances ad-dressed in the documents. The goalis to present documents and testi-mony that show that the govern-ment maintained discretion over

the allegedly defective part or pro-cedure in question.1 Mr. Shupe, a retired Air Force pilot, is Chair

of the Aviation Group at Schnader HarrisonSegal & Lewis LLP and Vice Chair of DRI’sAerospace Law Committee. Ms. Dolin is amember of Schnader’s Aviation Group, and bothare resident in the firm’s Philadelphia office.

2 487 U.S. 500 (1988).3 Such conflict with state law is not automatic.

For example, a government officer who or-ders, by model number, a quantity of stockhelicopters that happen to contain a particu-lar feature was viewed by the Supreme Courtin Boyle not to have any significant interest inthat feature and, therefore, there was no con-flict with state law.

4 “After Boyle, the discretionary function excep-tion to the Federal Claims Tort Act indicatesthe scope of the government contractor de-fense.” Carley v. Wheeled Coach, 991 F.2d1117, 1122 (3d Cir. 1993).

5 See, e.g., Harduvel v. General Dynamics Corp.,878 F.2d 1311, 1317-18 (11th Cir. 1989)

6 96 F.3d 992, 1001 (7th Cir. 1996).7 See also Miller v. Honeywell Int’l Inc., 2002 U.S.

Dist. LEXIS 20474, at *65 (S.D. Ind. Sept.30, 2002) (finding defendant met its primafacie burden under the third prong of theBoyle test by showing that the Army engineerswere fully aware of the dangers of leaving the“old magnetic plugs” in place), aff ’d, 2004U.S. App. LEXIS 15261 (7th Cir. July 21,2004), petit. for cert. dismissed, 2005 U.S.LEXIS 1 (U.S. Jan. 3, 2005). But see Carley v.Wheeled Coach, 991 F.2d 1117, 1126 (3d Cir.1993) (finding that defendant did not estab-lish that the government was well aware ofthe roll-over propensities of vehicles withhigh centers of gravity).

8 96 F.3d 992, 1003 (7th Cir. 1996).9 992 S.W.2d 346, (Ct. App. Mo. 1999).10 328 F.3d 1329 (11th Cir. 2003).11 309 U.S. 18 (1940).12 Boyle, 487 U.S. at 506.13 There were two actions that were not con-

solidated. However, both judges grantedsummary judgment on the grounds that thegovernment contractor defense applied.

14 Mr. Shupe, a retired Air Force pilot, is Chairof the Aviation Group at Schnader HarrisonSegal & Lewis LLP and Vice Chair of DRI’sAerospace Law Committee. Ms. Dolin is amember of Schnader’s Aviation Group, and bothare resident in the firm’s Philadelphia office.

15 487 U.S. 500 (1988).16 Such conflict with state law is not automatic.

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For example, a government officer who or-ders, by model number, a quantity of stockhelicopters that happen to contain a particu-lar feature was viewed by the Supreme Courtin Boyle not to have any significant interest inthat feature and, therefore, there was no con-flict with state law.

17 “After Boyle, the discretionary function excep-tion to the Federal Claims Tort Act indicatesthe scope of the government contractor de-fense.” Carley v. Wheeled Coach, 991 F.2d1117, 1122 (3d Cir. 1993).

18 See, e.g., Harduvel v. General Dynamics Corp.,878 F.2d 1311, 1317-18 (11th Cir. 1989)

19 96 F.3d 992, 1001 (7th Cir. 1996).20 See also Miller v. Honeywell Int’l Inc., 2002

U.S. Dist. LEXIS 20474, at *65 (S.D. Ind.Sept. 30, 2002) (finding defendant met itsprima facie burden under the third prong ofthe Boyle test by showing that the Army engi-neers were fully aware of the dangers of leav-ing the “old magnetic plugs” in place), aff ’d,2004 U.S. App. LEXIS 15261 (7th Cir. July21, 2004), petit. for cert. dismissed, 2005 U.S.LEXIS 1 (U.S. Jan. 3, 2005). But see Carley v.Wheeled Coach, 991 F.2d 1117, 1126 (3d Cir.1993) (finding that defendant did not estab-lish that the government was well aware ofthe roll-over propensities of vehicles withhigh centers of gravity).

21 96 F.3d 992, 1003 (7th Cir. 1996).22 992 S.W.2d 346, (Ct. App. Mo. 1999).23 328 F.3d 1329 (11th Cir. 2003).24 309 U.S. 18 (1940).25 Boyle, 487 U.S. at 506.26 There were two actions that were not con-

solidated. However, both judges grantedsummary judgment on the grounds that thegovernment contractor defense applied.