By Laura Donohue, Associate Professor of Law, Georgetown University Law Center. The analysis was first posted on ContractsProf Blog.
Heads or tails, the government wins, Justice Kagan noted during oral argument this morning in the consolidated case of General Dynamics v. U.S. and Boeing v. U.S. (Nos. 09-1298 & 09-1302).
The issue before the Court is whether the government can invoke state secrets privilege to prevent a superior knowledge defense in a civil suit.
Plaintiffs argue that their 1988 contract to develop stealth technology for the A-12 Avenger relied on the government subsequently providing classified, technical information. The government's failure to do so resulted in the companies' inability to meet their development schedule.
The government's contracting officer found default termination of the contract and demanded the return of unliquidated damages-defined broadly by the Acting Solicitor General during oral argument as claims not approved by the government, in this case, some $1.35 billion.
The key problem with the plaintiffs' position is that there is no language in the contract indicating that the contractors were to receive specialized information from the government. To the contrary, the government set up a competitive situation, awarding pre-contracts to two teams, to see who could develop the most impressive stealth technology. As Acting Solicitor General Neal Katyal noted, the contract was to acquire technology, not to provide it.
Katyal asserted that the courts should not be in the business of interfering in contract law, where sophisticated parties had the obligation to include any unwritten assumptions into the contract itself.
He further stated that plaintiffs' failure to perform, explicitly contemplated in the language of the agreement, established the contracting officer's right to determine default. In light of Totten, plaintiffs had been on notice that state secrets may be asserted in subsequent suits.
Herein lies the rub: Mr. Carter Philips, who argued for General Dynamics and Boeing, suggested that the government could not claim default termination and then hide behind state secrets when the contractors attempted to bring a superior knowledge defense. As the moving party, the government was in a position akin to that of a prosecutor in a criminal case-indeed, the money at stake was substantial: between $1.35 billion and $5 billion, depending upon the immediate calculus employed. Reynolds did contemplate such a situation and recognized that the government could not have it both ways.