ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, May 25, 2011

Guest Post from Neil O'Donnell on General Dynamics

O'Donnell Mr. O'Donnell is a shareholder in Rogers Joseph O'Donnell, a San Francisco law firm, and co-author, with his partner, Dennis Callahan, of a recent article on the General Dynamics case.  

Given the oral argument, it was not a surprise that Justice Scalia wrote the opinion in General Dynamics v. United States.  But who would have thought that this vigorous champion of applying what he dubbed the “go away principle of jurisprudence” to this nearly 20 year old case would be the author of a unanimous decision by the Court that created the distinct possibility that this litigation would go on for several more years.

For the most part the decision follows a path that could have been predicted by listening to the oral argument.  Scalia for the Court agreed with the Court of Federal Claims that determining whether the Government had violated its obligation to disclose superior knowledge to the contractors and therefore invalidated its termination of the contractors for default, could not be ascertained without probing several layers of facts, all at great risk to national security.  He posited, fairly enough, that each party to the litigation would have the incentive to go right up to the line of state secrets in trying to prove its case, and that, as a result, witnesses may inadvertently disclose secret information.  And he strongly supported, as a policy matter, the conclusion that these risks made the contractor’s superior knowledge defense nonjusticiable.

Justice Scalia Faced with this situation, Justice Scalia adopted the approach he had suggested at argument.  First, he rejected the analysis on which the parties had devoted much of their energy in briefing and arguing the case.  He was uninterested in trying to determine who was the “moving party” under the rubric of the Supreme Court’s first (and last)  foray into the application of the state secrets privilege to civil litigation, United States v. Reynolds, 345 U.S. 1 (1953). Rather than prolonging this exercise akin to counting angels on the head of a pin, he sensibly observed that it was the “claims and the defenses together that establish the justification, or lack of justification, for judicial relief.”  And from there he concluded that the invocation of the state secrets privilege in this case made it impossible to determine who was right, whichever party was regarded as making the affirmative claim or asserting the defense.

Justice Scalia then invoked courts’ “common law authority to fashion contractual remedies in Government contracts.”  In so doing, he laid out the legal support for that proposition that neither side had been able to provide him at oral argument.  He used that authority to leave the parties in the position that they were in at the time that the dispute began.  That meant that the contractors did not have to pay back the $1.35 billion in progress payments that they had been paid but not yet earned.  And it meant that the Government did not have to pay the contractors another $1.2 billion in costs of performance that they had incurred but for which they had not yet been reimbursed.  Most outside observers would have agreed with the Court that it would have achieved what Scalia called “rough, very rough, equity” if this had been the final result of the case. 

 Unfortunately, it was not.  Instead, astonishingly, Justice Scalia, seemingly the advocate of finally bringing this decades long dispute to an end, added a paragraph late in the opinion which has every prospect of keeping the litigation going for several years more.  In remanding the case to the Federal Circuit, the Court specifically noted that no court had considered the Government’s claim that the well-established rule that the Government has an obligation to disclose superior knowledge to its contractors might not apply if the information was itself highly classified or if the contract had specified what information would be disclosed.  In this high stakes litigation (with interest, the swing between victory and defeat could be as much as $5 billion) this invitation to the Government to keep the litigation going at the Federal Circuit seems sure to be accepted.  So much for go away jurisprudence.

[Posted, on behalf of Neil O'Donnell, by JT]

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