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In the 20 years since the U.S. Supreme Court first recognized a federal common law defense to state products liability claims for private contractors on government projects who follow government specifications, litigants have sparred about just how much discretion the government must exercise over the product’s specifications in order to pre-empt state law claims against private contractors. Is it enough for the government to know about and accept a risk of harm posed by specifications that actually were drawn up by the contractor? Or must the government itself have more substantive input into the actual specifications? Recently, the 2d U.S. Circuit Court of Appeals took an expansive view of the government-contractor defense in a case arising out of one of the first mass tort class action settlements. See In re “Agent Orange” Product Liability Litigation, 517 F.3d 76 (2d Cir. 2008). From the first mass tort settlement to today The term “Agent Orange” commonly refers to a series of color-coded defoliants used by the U.S. military between 1961 and 1971 during the Vietnam conflict to eliminate the ground cover in which enemy combatants could hide and attack U.S. forces. These defoliants were a mixture of two component herbicides, one of which contained trace amounts of dioxin as a result of its manufacture. Agent Orange thus contained dioxin as well, and the precise amount of dioxin in a batch depended on the production method used by the Agent Orange manufacturer. In the late 1970s, a group of veterans brought a class action against the manufacturers of Agent Orange for various personal injuries that they alleged were attributable to their exposure to the dioxin in Agent Orange during the Vietnam conflict. The Eastern District of New York became the Multidistrict Litigation transferee for all federal Agent Orange claims, and on the eve of trial in 1984, the manufacturers entered into a class action settlement for $180 million � which was the largest mass tort settlement at the time. Under the settlement, veterans had until a 1994 cutoff date to file claims. In the end, some $330 million was distributed to roughly 291,000 class members. The Eastern District of New York granted summary judgment to the defendants for the claims of those plaintiffs who had affirmatively opted out of the settlement. In the 1990s, veterans whose injuries allegedly manifested after the 1994 cutoff for filing claims sued the manufacturers, arguing that the prior settlement could not preclude their post-cutoff claims because their interests had not been adequately represented, since no money had been reserved to pay the claims for injuries arising after the cutoff. The 2d Circuit agreed that the interests of the class representatives in the settlement irreconcilably conflicted with those of the post-cutoff veterans. See Stephenson v. Dow Chem. Co., 273 F.3d 249, 261 (2d Cir. 2001). As a result, the Eastern District of New York was then faced with products liability claims from post-cutoff veterans, as well as from Vietnamese nationals who also alleged injury from exposure to Agent Orange. After many rounds of procedurally unique briefing and argument, the Eastern District of New York ultimately granted summary judgment to the manufacturers, concluding, inter alia, that the government-contractor defense barred both design defect and failure-to-warn claims, and that the manufacturing defect claims were barred because the defendants’ products conformed to the government’s specifications. See In re “Agent Orange” Prod. Liab. Litig., 304 F. Supp. 2d 404, 441-42 (E.D.N.Y. 2004). In Boyle v. United Technologies Corp., 487 U.S. 500 (1988), the U.S. Supreme Court had recognized a transitive form of sovereign immunity for the exercise of discretionary governmental functions, holding as a matter of federal common law that state products liability law is displaced by the government contractor defense when ” ‘(1) the United States approved reasonably precise specifications [for the allegedly defectively designed equipment]; (2) the equipment conformed to those specifications; and (3) the [contractor that supplied the equipment] warned the United States about the dangers in the use of the equipment . . . known to the supplier but not to the United States.’ ” Agent Orange, 517 F.3d at 88 (quoting Boyle). The underlying policy rationale was simple: “It makes little sense to insulate the Government against financial liability for the judgment that a particular feature of military equipment is necessary when the Government produces the equipment itself, but not when it contracts for the production.” Boyle, 487 U.S. at 511-12. Thus when state tort law would impose duties that conflict with what the government has determined to be in the national interest, those duties must be suspended for private contractors to the same extent that they would be for the government. In Agent Orange, the 2d Circuit was faced with a situation in which private contractors � not the government � had drawn up the formulas for the defoliants at issue, in some instances using their own commercially available patented technology. Moreover, dioxin was not called for in the specifications; rather, it was an unwanted byproduct of a component, and the plaintiffs argued that dioxin could be minimized using commercially available production methods. As such, they suggested, the dioxin was properly considered a manufacturing defect. Finally, the plaintiffs argued, the contractors that supplied the defoliants knew of risks experienced by their employees who made the defoliants, and they failed to disclose those risks to the government. The 2d Circuit rejected each of these arguments and, in so doing, gave broad effect to the policies underlying the government-contractor defense rather than rigidly applying the elements articulated in Boyle. It recognized that the first element, which requires “reasonably precise specifications,” is designed to get at whether the government exercised actual decision-making authority, rather than acting as a mere rubber stamp for decisions made primarily by contractors. See Agent Orange, 517 F.3d at 91. Because there was sufficient evidence that the government had considered the risks posed by use of the dioxin-containing herbicide component and had resisted industry efforts to change the composition of Agent Orange, the 2d Circuit concluded that the government had exercised sufficient discretion to satisfy the first element of the defense: “In framing the first Boyle requirement, the Boyle Court sought to ‘assure that the suit . . . is within the area where the policy of the ‘discretionary function’ would be frustrated’ absent the availability of the defense. Although the Court used the term ‘reasonably precise specifications,’ we think that . . . reordering the same product with knowledge of its relevant defects plays the identical role in the defense as listing specific ingredients, processes, or the like.” Id. at 96 (quoting Boyle). The 2d Circuit made short shrift of the plaintiffs’ challenge to the second element, that the product comply with the government’s specifications. Dioxin was necessarily present in one of the component herbicides, and the government knew that fact. There was no evidence that the products delivered did not meet the suppliers’ contractual obligations, and thus the second element was met. As for the third element, the plaintiffs pointed to evidence that some contractors were aware of workplace dangers associated with producing the dioxin-containing herbicide used in Agent Orange and that those dangers were not communicated to the government. The defendants, however, pointed to the evidence that they had communicated all known risks from operational use of the defoliant on the battlefield. The 2d Circuit rejected the notion that the third element requires a contractor to inform the government of all product risks, reasoning that to do so would be impractical and impede the federal interest in “getting the Government’s work done.” Id. at 98-99. Rather, it held that “a defendant may satisfy the third Boyle requirement if it demonstrates that it fully informed the government about hazards related to the government’s exercise of discretion that were ‘substantial enough to influence the military decision’ made . . . .The defendants can demonstrate a fully informed government decision by showing either that they conveyed the relevant known and ‘substantial enough’ dangers, or that the government did not need the warnings because it already possessed the information.” Id. at 99. Thus the 2d Circuit affirmed summary judgment for the defendants on the veterans’ products liability claims, as well as on the Vietnam nationals’ state law products liability claims. See Vietnam Ass’n for Victims of Agent Orange v. Dow Chemical Co., 517 F.3d 104, 123-24 (2d Cir. 2008). The decision is likely to be an oft-cited precedent By broadly interpreting the fundamental policy underlying the government-contractor defense, the 2d Circuit’s Agent Orange opinion may be expected to be applied frequently. Recently, the 2d Circuit suggested in dicta that this sort of “derivative” sovereign immunity could be applicable outside the military contractor context to private entities that provide federally coordinated disaster relief. See In re World Trade Center Disaster Site Litig., No. 06-5324-cv, 2008 WL 783386 (2d Cir. March 26, 2008). And the Agent Orange interpretation of the elements of the government-contractor defense also may be expected to play a role in courts’ determinations of whether, as an element of federal officer removal under 28 U.S.C. 1442(a)(1), a defendant has raised a colorable federal defense to the plaintiff’s claims. See, e.g., Wright v. A.W. Chesterton Co., No. C07-05403, 2008 WL 512728 (N.D. Calif. Feb. 25, 2008) (denying motion to remand asbestos case in which defendant asserted the government contractor defense); Papapetrou v. The Boeing Co., No. 07 C 5892, 2008 WL 548770 (N.D. Ill. Feb. 25, 2008) (denying motion to remand helicopter crash case in which defendant asserted that defense). J. Russell Jackson is a partner in the complex mass torts group of New York’s Skadden, Arps, Slate, Meagher & Flom.

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