SCOTUS Decision in General Dynamics v. United States

Today the Supreme Court issued its decision in General Dynamics Corp. v. United States (No. 09-1298), which addresses “what remedy is proper when, to protect state secrets, a court dismisses a Government contractor’s prima facie valid affirmative defense to the Government’s allegations of contractual breach.” [Slip Op. 1] In this case, the contractors’ defense was “that the Government’s failure to share its ‘superior knowledge’ about how to design and manufacture stealth aircraft excused their default.” [Slip Op. 2]

Writing for a unanimous Court, Justice Scalia notes that “in the present context the state-secrets issue raises something quite different from a mere evidentiary point. . . .  What we are called upon to exercise is not our power to determine the procedural rules of evidence, but our common-law authority to fashion contractual remedies in Government-contracting disputes.” [Slip Op. 6-7] He explains:

Where liability depends upon the validity of a plausible superior-knowledge defense, and when full litigation of that defense would inevitably lead to the disclosure of state secrets, neither party can obtain judicial relief.
…
Judicial refusal to enforce promises contrary to public policy (here, the Government’s alleged promise to provide superior knowledge, which we could not determine was breached without penetrating several layers of state secrets) is not unknown to the common law, and the traditional course is to leave the parties where they stood when they knocked on the courthouse door. [Slip Op. 7-9]

In conclusion:

[T]he state-secrets evidentiary privilege is not to be lightly invoked. Courts should be even more hesitant to declare a Government contract unenforceable because of state secrets. It is the option of last resort, available in a very narrow set of circumstances. Our decision today clarifies the consequences of its use only where it precludes a valid defense in Government-contracting disputes, and only where both sides have enough evidence to survive summary judgment but too many of the relevant facts remain obscured by the state-secrets privilege to enable a reliable judgment. [Slip Op. 13-14]

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