Transcript

IN THE SUPREME COURT OF THE UNITED STATES

DELBERT BOYLE, PERSONAL REPRESENTATIVE OF THE HEIRS AND ESTATE OF DAVID A. BOYLE, DECEASED, Petitioner, v. UNITED TECHNOLOGIES CORPORATION

No. 86-492

October 13, 1987

The above-entitled matter came on for oral argument before the Supreme Court of the United States at 11:04 a.m.

APPEARANCES:

LOUIS STANTON FRANECKE, ESQ., San Francisco, California; on behalf of the Petitioner

PHILIP A. LACOVARA, ESQ., Washington, D.C.; on behalf of Respondent

DONALD B. AYER, ESQ., Washington, D.C. amicus curiae, in support of Respondent

PROCEEDINGS

CHIEF JUSTICE REHNQUIST: Mr. Franecke, you may proceed whenever you are ready.

ORAL ARGUMENT OF LOUIS STANTON FRANECKE ON BEHALF OF PETITIONER

MR. FRANECKE: Mr. Chief Justice, and may it please the Court:

On April 27, 1983 one and a half miles off the Virginia coast, a young Marine helicopter pilot and chaplain was killed in the crash of a Sikorsky CH53D helicopter. The helicopter crashed into the sea due to the negligent design and subsequent repair of the steering mechanism of that Sikorsky helicopter.

As the helicopter sank, LT David Boyle drowned because his escape system was defectively designed and did not function. And in the murky water, he was unable to use another escape route.

This case was tried to a jury verdict in favor of Appellant, where the jury was charged with a form of the Government contractor defense, a form of the Government contractor defense specifically approved by Defense counsel on the record at the Joint Appendix page 450 at the trial. Respondent did not object pursuant to Rule 51 to that jury charge on the Government contractor defense. Also, the trial judge was not requested nor did he give a jury charge of the Virginia Logan burden of proof.

Respondent appealed to the Fourth Circuit, but Respondent did not challenge the Government contractor defense as given by the trial judge in the trial jury charge. However, the Fourth Circuit sua sponte reversed the jury verdict based on (1) the Logan Case in Virginia, and (2) based on a new version of the Government contractor defense just articulated on the same day in the Fourth Circuit case of Tozer.

Now, in this Court, we, the Appellant, ask that the jury verdict be reinstated. We further ask and point out the Sikorsky's only response is an unsupportable Government contractor defense and a disagreement with the sanctity of the jury verdict.

Appellant, therefore, asks this Court to decide on this first impression several issues. They are: (1) was the jury verdict correct and should it be reinstated. Appellant contends that it was correct and it should be reinstated.

(2) Was the Appellant's Seventh Amendment rights of a right to jury trial violated by the Fourth Circuit by the Fourth Circuit announcing law that was not given to the jury and then applying that law to the facts without the benefit of a jury trial. Appellant contends that the Seventh Amendment right were violated.

QUESTION: If there had been an authoritative construction of the Government contractor defense that occurred between the trial and the appeal, do you think the Court of Appeals would have been foreclosed from ordering a new trial on the basis of the Right Rule of Law?

MR. FRANECKE: Certainly not, Justice White.

QUESTION: Well, isn't that what you were just arguing?

MR. FRANECKE: What I am arguing, however, is that there was, in fact, a form of the jury -- correction: of the Government contractor defense in fact given. In fact, it was the Agent Orange jury instruction was given to the trial court and, specifically, Mr. Booker, who sits at Respondent's table, here specifically approved that particular --

QUESTION: Well, that may be so, but you would say that the Fourth Circuit could not give the benefit of the Correct Rule of Law to a person who had approved the instruction. Is that it? Is that sort of an estoppel?

MR. FRANECKE: I am, of course, arguing that the Fourth Circuit's interpretation of what it feels was the correct of Rule of Law was incorrect.

QUESTION: I know. But assume it was right. Assume the Court of Appeals was quite right.

MR. FRANECKE: In that way, I believe that it is a violation of the Seventh Amendment right not to have remanded the case back down for a jury trial based on the law just announced by the Fourth Circuit.

QUESTION: All right. But the court could have granted a new trial anyway?

MR. FRANECKE: Yes, it could have.

QUESTION: Based on the correct rule, even though your opposition had approved the instruction.

MR. FRANECKE: Absolutely.

The third issue that I would ask this Court to decide is should there be a Government contractor defense in any form? It is the Appellant's contention that based on several reasons, law and congressional intent that there should not be a Government contractor defense enacted in the Circuits and in the Federal Common Law.

QUESTION: Mr. Franecke?

MR. FRANECKE: Yes.

QUESTION: In your reasons for granting the writ in your petition for sui juris, it strikes me your entire argument there is devoted to what is the Government contractor defense. Did the Fourth Circuit get it right? And almost nothing, in fact, I can see nothing at all to the fact that the Government had approved a jury instruction.

MR. FRANECKE: If you will look at also the reply brief, Mr. Chief Justice Rehnquist, the reply brief does address this particular issue specifically.

QUESTION: The reply brief to the Government's response to the petition.

MR. FRANECKE: That is correct. The reply brief by the Appellant does address this particular issue. And, in fact, you do beg the question that on the fourth issue that I ask this Court to decide is if this Court, by a majority rule, decides that a form of the Government contractor defense should be enacted, what form should that take?

QUESTION: Enacted?

MR. FRANECKE: Correction. Adopted.

Now, addressing the first issue --

QUESTION: May I ask?

MR. FRANECKE: Yes, Justice Brennan.

QUESTION: You said that there ought under no circumstances in any context be a defense -- contractor defense?

MR. FRANECKE: I believe that that is correct.

QUESTION: Even, for example, if the Government has required by order, compelled, the building of a helicopter precisely in the shape this was in?

MR. FRANECKE: First of all, of course, Justice Brennan, it must be looked at to determine whether or not it-- was time of war or some national emergency where Congress has specifically acted and said, "This is what we have to do.

However, the Government contractor defense that we are dealing with here is a civil question and, in most cases, is dealing with a item of equipment which has not been procured for specific time of war application. In fact, as even says --

QUESTION: What you are telling me is when this helicopter -- it was not time of war, I gather.

MR. FRANECKE: It was built in 1968 in an undeclared war in Vietnam, I believe. However, the issue in this case is also that the defect that was alleged --

QUESTION: Yes, but what I am trying to get at is, to understand your position, it is that no matter what the circumstances, that the manufacturer may build the helicopter even if they are given all the plans and all the design and everything else by the Government and said, "Do it this way. No other way." They still do not have a defense?

MR. FRANECKE: I believe the answer is the question, the basic question to the Government contractor defense is: Does the Government truly know what it is buying. In other words, if they were given the plans and the specifications as you say --

QUESTION: Then I gather your answer to me is, yes, that is your position?

MR. FRANECKE: That is my position. That is correct.

QUESTION: Now, you are saying that is a position, I take it, as a matter of Federal law, there is no such defense. Would it not be possible that as a matter -- I guess this is a case applying Virginia tort law; is it?

MR. FRANECKE: It was tried under Virginia tort law, Justice Stevens.

QUESTION: Is it not possible that Virginia might recognize a defense on behalf of a defendant who was just obeying orders and didn't do anything independently?

MR. FRANECKE: It is entirely possible that that could be an interpretation in the individual states. However, I would also point out to the Court that our system of tort law under negligent strict liability and breach of warranty already covers all of the elements that are already contained within this proposed Government contractor defense. So, all the various states already have it, as well as the system of Federal law.

QUESTION: No, but if you are suing on a design defect, it certainly would be open to the manufacturer to say, "I didn't design it. Somebody else designed it; namely, the United States Navy," or whatever it is. That would be a defense; wouldn't it?

MR. FRANECKE: That is a central issue of the Government contractor defense but it comes back to whether or not the Government truly was informed or truly had the knowledge that it was buying a defective product and what that defect was. In that case, then it would be Appellant's position that the Government does have the right to buy it and it would be a form of assumption of the risk, if you will. So, they could accept it under those circumstances. But there are several steps that have to be taken.

QUESTION: Who assumes the risk? I mean somebody who is not -- let's assume somebody who is not in the Government is hurt, does he assume the risk? I don't understand.

MR. FRANECKE: No, he does not. And that is also part of the central problem with this whole Government contractor defense, Justice Scalia. A person, who, as we know under the law -- a civilian can easily sue a Government contractor if he is riding in a military aircraft or a military product.

QUESTION: Take this hypothetical: Suppose -- imagine the days when the Post Office was actually a Government agency and the Post Office buys a whole bunch of right-hand drive vehicles so he can put the stuff in the mailboxes. Now, that is obviously a dangerous place to have the steering wheel. Right? It is apparent. The Government orders it, though. An accident occurs with a private vehicle on the street and the manufacturer who made these defective vehicles with right-hand drive is sued by the person who is hurt by the accident. That manufacturer has no defense?

MR. FRANECKE: That manufacturer --

QUESTION: If the state chooses to allow such a suit.

MR. FRANECKE: First of all, that manufacturer has every defense that is afforded to them under negligent strict liability and breach of warranty.

QUESTION: Oh, yes, it is negligent to drive on the right side of a vehicle.

MR. FRANECKE: But the point is they can then show that the Government in fact said, "That is where I want that steering wheel. I specifically want it that way, therefore, here it is." And that is why the contractor builds it that way. That comes under negligence. The contractor isn't negligent if it followed the Government's specific request. Strict liability, also the test would be applied: Did the contractor warn the Government of all of the inherent risks of the right-hand drive so that the Government can make an intelligent choice.

QUESTION: Mr. Franecke, what was the basis of Federal jurisdiction in this case? Was it diversity of citizenship?

MR. FRANECKE: Yes, it was diversity.

QUESTION: So, the Fourth Circuit is simply applying Virginia law?

MR. FRANECKE: It was by agreement because the aircraft crashed within one and a half miles, the Death on the High Seas Act did not apply. So, Virginia law applied.

QUESTION: And, so, we are just basically reviewing a question here of Virginia tort law?

MR. FRANECKE: No, we are reviewing here, I believe, the whole issue of the Government contractor defense.

QUESTION: Well, what is the source of law? Is it Virginia law?

MR. FRANECKE: Only because --

QUESTION: Well, I mean answer my question. I asked you: Is it Virginia law? Do you answer that question, yes? Or do you answer it, no?

MR. FRANECKE: I answer that it was the Federal law as announced by the various Circuits prior to this case in articulating the Government contractor defense.

QUESTION: And what is the source of the Federal law?

MR. FRANECKE: Source of the Federal law goes back to the Agent Orange case in the Eastern District of New York in the McKay v. Rowell out of the Ninth Circuit.

QUESTION: And what is the source that they say the Federal has in those opinions?

MR. FRANECKE: They go back historically to the Yearsley Case which came out, I believe, in 1940, which was a question, to answer Justice Scalia's question where the Government specifically formulated construction plans for a dam.

QUESTION: No, I don't mean the substance of the defense, but we are dealing with a case that ordinarily would be decided strictly under Virginia law. And you say, no, there is a Federal element in it here.

MR. FRANECKE: That is correct.

QUESTION: The Fourth Circuit had to apply a particular rule as to Government contractors, even though perhaps the Supreme Court of Virginia wouldn't. And why is that?

MR. FRANECKE: Because they evidently, the Circuit Courts feel that there is an overriding Federal interest involved here because the Sikorsky helicopter was a Federal product -- correction: It was a contractor who sold it to the Federal Government. It was a Marine who was killed in this particular crash and we had an overriding question of other circuits which had announced forms of the Government contractor defense and the trial judge believed that a Government contractor defense should be given.

QUESTION: You know, but I realize the trial judge, but I would like to hear more from you about why this is -- why there is an element of a Federal question here rather than something that Virginia is free to decide for itself. What is the closest case from this Court on the point?

MR. FRANECKE: In the Fourth Circuit --

QUESTION: I asked you: What is the closest case from this Court.

MR. FRANECKE: This case, none. Feres/Stencel Doctrine would be the only one --

QUESTION: Stencel.

MR. FRANECKE: Would be the only one that would start getting close to it.

QUESTION: Or Yearsley?

QUESTION: What about Clearfield Trust?

QUESTION: What about Yearsley?

MR. FRANECKE: Yearsley may. I think, though, the Feres/Stencel Doctrine is actually a closer articulation in modern times of what the actual question is.

In Yearsley, there was such a specific compulsion by the Government to build the particular dam a specific way, that the contractor had absolutely no discretion, assuming he didn't do it negligently. And, in fact, he didn't do it negligently. The dam failed. And he said, "Well, the Government told me to build it that way."

That is, in a sense, an extension of what we are dealing with here under the Government contractor defense, but the Feres/Stencel Doctrine seems to be the overriding policy question that we are dealing with here as to whether or not a Serviceman has the same rights as you and I do if they are using a defective product that is not in a combat situation in time of war.

QUESTION: Why isn't the overriding Federal question the ability of the Federal Government to determine the incidence of Federal contracting which include not just the rights between the Government and the contractor, but the extent to which, on the basis of this contract, the private contractor can be held liable to a third party. So, in other words, Clearfield Trust is what brings us into all of this. Just because a state chooses to eliminate the doctrine, the old doctrine of the necessity of privity of contract before any defect in the product can be sued upon, just because a state chooses to eliminate it, the Federal law of contracts does not necessarily eliminate it.

MR. FRANECKE: That is also true, Justice Scalia. I think that is a good point. I think, however, it comes back to the question of whether we have a judiciary question here or whether we have a congressional or legislative question. And that seems to be because this is the first time that this Court has heard the Government contractor defense as to on what basis it should be construed.

QUESTION: Well, all the Courts of Appeal, without exception, who have addressed it, have recognized some form of Government contractor defense; have they not?

MR. FRANECKE: That is correct, Justice O'Connor.

QUESTION: No Court of Appeals has just totally rejected it, as you would have us do?

MR. FRANECKE: I think that there have been various rejections of forms of it and that seems to be the main issue, here.

QUESTION: Well, they have all accepted a defense.

MR. FRANECKE: Yes.

QUESTION: There are different formulations of it. You are here saying, "Don't recognize any Government contractor defense at all."

MR. FRANECKE: That is correct. And I think that there are ample reasons why it should not be a form of any defense. It is already -- and, of course, the first thing that should be questioned is: Does this Court want to extent Feres/Stencel doctrines of a special relationship of the military to contractors and such that a military person cannot sue a contractor and, if they do sue, are they met with a special defense? In other words, a special defense for a special class of people.

QUESTION: Why is it based on Feres, necessarily? You have been calling it the Government contractor defense, not the defense contractor defense?

MR. FRANECKE: It seems to be the closest analogy that we have come to in our research to try to understand what policy considerations are to be or should be considered by the Court.

QUESTION: Oh, I think the policy considerations are the ability of the Government to determine the incidence of Government contracts -- of a Government contract. Now, you have in the Federal Tort Claims Act an immunity that is retained for the Government with respect to discretionary functions.

MR. FRANECKE: Yes.

QUESTION: And that, it seems to me, goes down the tube once you say that although the Government can't be sued, whenever the Government buys anything from a contractor, as it universally does, especially in the military field, the Government can end up paying the bill indirectly because, although the discretionary function can't be brought home to the Government, it can to the contractor. The contractor's price goes up. It is just the same as if we didn't have that provision in the Tort Claims Act. Why isn't that a Federal policy that is served, quite apart from Feres.

MR. FRANECKE: Without addressing the discretionary function portion of the Federal Tort Claims Act, there are several empirical evidence that has been brought forth in my briefs regarding the fact that the cost factor is not really an issue. For instance, Congress, we believe, has the purview to enact whatever it may want with regard to military suits against contractors. They were presented with all of these cost arguments in 1984 in the -- I think it's Section 794 of a procurement act cited in my briefs. The Congress rejected those arguments and in essence said, "Yes, there might be a slight increase in the cost of the various products, but what has happened in the past is is that we have bought tremendously expensive products and they haven't worked because they weren't designed right in the first place. Isn't it better to spend a little more in the testing and the design in the first place than it is to spend the billions down the line to repair it?"

I give you an example like the shuttle, which is a good example of it. That was a specific design by Morton Thiokol, which we lost not only a billion dollars in a orange puff of smoke, we also lost a second billion dollars when we have to replace the shuttle and 350 million dollars to redesign the booster, let alone seven lives. That was poor design in the first place. And that, we believe, and is Appellant's position that it is Congress' decision as to how and what procedure it should have with regard to its procurement process.

QUESTION: Well, it would seem to me that Congress could always step into the act. If this Court recognized a Government contractor defense, obviously, Congress can come in and grant immunity or make adjustment if it sees fit.

MR. FRANECKE: That is, of course, correct. I would also point out that Congress has not enacted a Government contractor defense. Congress has also --

QUESTION: Well, that is perhaps because Congress doesn't know what our Court would have to say about whether it exists or doesn't exist. We have never spoken on the issue.

MR. FRANECKE: That is perhaps correct, however, I think Congress has given a lot of indications of how it feels. For instance, the Federal Tort Claims Act, the only exception under the Federal Tort Claims Act that applies to military people specifically is that a military person cannot sue, under the Federal Tort Claims Act -- correction, the exception of the combat situations. Other than that, they have every other right to sue the Government.

QUESTION: Well, maybe the Government contractor defense should not be limited to the military.

MR. FRANECKE: That is a question, of course, that the Respondents are asking you to reach that point. However, I again point out to the Court that every element in the Government contractor defense is still contained within every element of negligence, strict liability, and breach of warranty which applies across the board.

QUESTION: Well, it isn't. It depends on how it is formulated because the general contract specification defense typically available in state tort law would extend perhaps only to specifications that are very precise and not necessarily to the kind of situation that may have been involved here where the contractor participates in the design or for a performance type specification.

MR. FRANECKE: That is entirely possible and that is correct, that there is that element of how much participation was there. However, by sanctifying a Government contractor defense, you are saying that it is the Government that holds the ultimate expertise in the procurement process rather than the private contractors who hold out their expertise for profit and who are supposedly the ones who have been building the particular product. Remember, we are talking about products that go all the way from refrigerators to missiles, from jets to beans: everything. 52,000 procurement contracts a day by some of the statistics I've read. That we are going to be talking about a defense all across the board.

QUESTION: I suppose though that you do have the kind of situation where, perhaps, the Government wants to design some exotic product and doesn't know how to do it itself and might want to rely, at least in part, on the expertise of the private industry.

MR. FRANECKE: Absolutely. And I think that that is already covered by the existing law under negligence, strict liability, et cetera. It is a question of if you look at whether or not the Government knows specifically what it is purchasing. If it is specifically purchasing a specific defect. What we find in these cases on the practical sense is we find nut and bolt defects, not exotic defects, as such.

QUESTION: Can I ask about the space shuttle thing. Your position is that if the Government had produced that shuttle, itself, there wouldn't have been any suit possible because the engineering defect, whatever it was, would clearly come within the discretionary function provision of the Tort Claims Act; right?

MR. FRANECKE: No, I don't agree with that particular narrow view of the discretionary function under the Federal Tort Claims Act.

QUESTION: I thought that was a broad view.

MR. FRANECKE: Well, in the sense that -- in the sense that certainly there is discretionary function to provide by the Government certain rules and regulations; however, it has been the interpretation that the execution of those rules and regulations is not precluded by the discretionary function. Now, I grant you, of course, there is a gray area.

QUESTION: This isn't in the execution of a rule or regulation. It is an engineer sitting down saying, "What is the best way to do this?" If that isn't a discretionary call, I really don't know what is.

Anyway, assume that that's covered, you would say that even though be Government couldn't be sued, if the Government contracts with someone else to do the same job and participates actively in designing it with that person, then the Government can't be sued, but the other person can be sued?

MR. FRANECKE: That is correct. And part of the defense would be, even under the basic law now in place, is to show whether or not it was the Government who specifically, knowledgeably said, "This is what we want, even though it is a defect," like your example of the right-hand drive, or whether the Government just rubber stamped a design submitted by the contractor.

QUESTION: Oh, well, then you are acknowledging a Government contractor defense but you say it only applies when the Government has actively participated.

MR. FRANECKE: It applies in any other context of any other contract. If you or I go down and buy a Ford automobile off the show room floor, we are, in essence, contracting saying, "We are accepting that product." Now, I may be a mechanic or an engineer and I may have superior knowledge, but if those brakes fail, just because I approve the purchase of that contract doesn't mean I don't have the right to be able to sue back because of the defect design of Ford.

QUESTION: No, but if a third party is injured --

MR. FRANECKE: Yes.

QUESTION: If a third party is injured and I have cooperated in the design of that car, it seems to me I would be suable; wouldn't I?

MR. FRANECKE: If you had participated, then it is covered under assumption of the risk, which is not a Government contractor defense but an existing negligence, strict liability test in the various Circuits or in the various states.

QUESTION: The third party assumes the risk?

MR. FRANECKE: Well, no, not the third party. Of course, the third party could then sue -- perhaps could sue you depending on your participation, of course. That is correct.

QUESTION: That is what we are talking about here.

MR. FRANECKE: Yes. The issue here, however, is that we have a military person suing a Government contractor. There isn't a third party, necessarily. He is employed by the Government and that is where the Feres/Stencel starts coming in as to whether or not he can or cannot incident to military service sue further on while he is using a Government product. It is a very thorny issue.

I would like to reserve, unless there are any further questions, I would like to reserve the balance of my time, if I may, Mr. Chief Justice.

CHIEF JUSTICE REHNQUIST: Yes, you may, Mr. Franecke.

We will hear now from you, Mr. Lacovara.

ORAL ARGUMENT OF PHILIP A. LACOVARA ON BEHALF OF RESPONDENT

MR. LACOVARA: Thank you, Mr. Chief Justice, and may it please the Court:

Before turning to the contours of the military contractor defense as virtually all of the Courts of Appeals but one have defined that defense, I would like to undertake to show why this case does squarely present that issue and no other issue. Counsel --

QUESTION: First, though, Mr. Lacovara, you are going to insist on calling it the military contractor defense, although you want it expanded to cover all contractors, and your opponent insists on calling it the Government contractor defense, although he would limit it if it exists at all to military contractors, just as long as we have our terminology in mind, I guess we can live with it.

(Laughter.)

MR. LACOVARA: We have used the term military contractor defense in our brief, Justice Scalia, somewhat designedly. The only argument that we are making before this Court is that the defense -- this defense, there may be others including the contract specification defense to which Justice O'Connor referred, that would apply to providers of civilian products. The argument in favor of the defense that we have invoked in this case is that it applies because of the nature of military procurement and the constitutional system under which that process takes place, as well as other doctrines that this Court has recognized that are unique to the military relationship. So, we have chosen to use the term --

QUESTION: I take it the unique doctrine is that this Court has the power to make rules for the regulation of the Army and the Navy?

MR. LACOVARA: No. Quite the contrary. What we are suggesting is that as a corollary of the separation of powers, the courts should not intervene in reexamining design decisions when those decisions are at bottom decisions made by the political branches of the Government. That is what tort litigation challenging the design of a military product involves if the contractor meets the standards that we say were met here.

QUESTION: But what you are asking us to do, Mr. Lacovara is to formulate a Federal Common Law rule that protects Government contractors in this situation where ordinarily state law would govern.

MR. LACOVARA: That's correct. The Court of Appeals, Mr. Chief Justice, in this case, relied on its separate opinion in a companion case, the Tozer Case, decided the same day by the same panel. In that case, the panel expressly stated in the concluding footnote that this is a matter of Federal Common Law even where the case arises under the diversity jurisdiction. Almost all of the court -- all of the Courts of Appeals that have addressed the question have reached that conclusion.

The reasons for treating this as a matter of Federal Common Law are similar to those to which Justice Scalia referred. This Court has held in two, I would submit, closely analogous areas that Federal Common Law does govern.

QUESTION: Are you going to go on with those?

MR. LACOVARA: I will mention them at this point, Mr. Chief Justice. The Standard Oil Case in which the Court said that the relationship among the United States, its soldiers and third parties who allegedly injure soldiers is to be governed by Federal Common Law and then, more recently, in the Stencel Aero Case where the issue was specifically relationship between a military contractor and the United States concerning liability for an accident involving a military product, the Court again held, in so many words, that the relationship between the United States and its contractors is to be governed --

QUESTION: But that was a Federal Tort Claims Act Case, Stencel. Was it not?

MR. LACOVARA: Yes, but what the Court was deciding was that the underlying law that would be applied -- indeed, in Stencel, the Court said, "As a matter of Federal law, we will not recognize a claim, a tort claim or an indemnity claim." The Tort Claims Act, Mr. Chief Justice, as you know, simply waives the Government' sovereign immunity and leaves it subject to suit if there is some underlying basis for a claim.

QUESTION: Under the law of a particular state.

MR. LACOVARA: That is correct. And in this Court, in Stencel Aero, the Court said, "Congress has waived the Tort Claims Act immunity from suit." We then have to look to see whether there is a claim for relief that the contractor may assert against the Government. And the Court held that question is to be determined by Federal Common Law. And the Court decided as a matter of Federal Common Law not to permit the claim. But I think all of the reasons --

QUESTION: That was the claim against the United States?

MR. LACOVARA: Against the United States. But the underpinning of the decision as in the Standard Oil Case was that where you are talking about a matter of this sort, the relationship which is really tripartite, the United States, its service personnel, and the contractors who are hired by the United States to provide material for the war and defense efforts, the incidence of that relationship have to be treated as a matter of Federal Common Law. And I think that is not disputed by Petitioner.

QUESTION: I know it isn't disputed by Petitioner, but why isn't something Congress could settle much more easily than we could: define the proper terms to this act.

MR. LACOVARA: There is no doubt that Congress could address the issue, Justice Stevens.

QUESTION: Well, which is the more capable law making entity in this particular area?

MR. LACOVARA: I would say that the courts have quite adequate competence in the matter and should undertake this responsibility. We are, after all, talking about doctrines of liability to which this is a defense. And those are court-created liabilities.

QUESTION: The question the Federal court created liabilities --

MR. LACOVARA: They may or may not be.

QUESTION: None of them are.

MR. LACOVARA: Half of these cases, Justice Stevens arise under the Death on the High Seas Act or some equivalent matter where there is direct Federal jurisdiction.

QUESTION: I'm sorry. You are right. There are a lot of those.

MR. LACOVARA: One of the things that I'm pointing out is that it makes no sense in administering a system in this part of the century to have disparate rights. And that is one reason for having Federal law rather than 50 or 51 jurisdiction laws --

QUESTION: Well, of course, that is an argument against the way the Federal Tort Claims Acts is structured, too.

MR. LACOVARA: Congress has decided, because most of the torts that Congress had in mind were automobile accident cases and things of that sort where the primary interest that a jurisdiction might have in deciding what the rules of law would be would be that of the locale where the accident occurred. It is a very different situation, as the Court said in Standard Oil and Stencel Aero, where you are talking about military relationships.

QUESTION: Well, isn't it possible that this court might decide to, quite logically, adopt such a defense in DOHSA cases, Death on the High Seas Act cases, but not adopt it in a case where it simply turns on state tort law?

MR. LACOVARA: Well, that is conceivable outcome. The Court has to decide what legal regime, what jurisdictions law will apply. We have spent five or six pages in our brief explaining why all of the Courts of Appeals that have addressed the issue have sensibly concluded that this needs to be resolved as a matter of uniform Federal Common Law. It is purely fortuitous where one of these helicopters or a jet aircraft of the type involved in several of the other cases may be operating, this accident happened to occur just short of the three-mile limit in the Atlantic Ocean. It is purely fortuitous where it occurred. It would make no sense, I submit, Mr. Chief Justice, to say that if the accident had occurred in another mile seaward, Federal law would apply, but the contractor here has liability --

QUESTION: But, in a way, Congress has already said. It has said where the DOHSA law, act applies. That wouldn't be some novel thing that the Court goes out and says, "Well, two and a half miles is a good idea." Congress has said that in the DOHSA.

MR. LACOVARA: Yes. I agree that there are lines that have to be drawn and that there are conceivable places that someone might draw the line other than applying Federal Common Law. My submission is that the best policy arguments for choosing a rule of law, and a rule of law has to be chosen, support fashioning a Federal uniform common law.

Now, the question that was asked by Justice Stevens was: Shouldn't this be left to Congress?

And I think the answer is, although Congress plainly has power under Article 1 to fashion or redefine the defense, as Justice O'Connor indicated.

QUESTION: Or do away with it.

MR. LACOVARA: Or do away with it. The point is that we are talking about a determination in court what is the appropriate limit of liability if any for a contractor who complies with a Government approved design and provides a product that the Department of the Navy decided was appropriate for military use. That is a question of judicially fashioned law. All of the doctrines to which Mr. Franecke referred are court-created doctrines. The courts have felt quite comfortable fashioning appropriate defenses to deal with those doctrines of negligence or breach of implied warranty or strict liability.

I submit that as this Court has said on other occasions, despite Erie v. Thompkins --

QUESTION: You have to refer a Federal law. You have to say, "This is a defense that we, the courts, hold as required by Federal law."

MR. LACOVARA: Yes, sir. Well, let me say that I think the outcome would be the same if state law governed.

QUESTION: Well, I know, but we are saying it is Federal law.

MR. LACOVARA: We are urging that this Court agree with the lower courts that this is an appropriate area for development and recognition of Federal interests which justify applying Federal law in this case.

QUESTION: And you would say this even though the state, under state law, there would be no such a defense?

MR. LACOVARA: Yes. Absolutely. Because of the interests that we think are at stake, it should not be permissible for a state to say, "We will impost liability on a contractor for executing the will of the Department of the Navy in providing equipment that the Navy wants provided in order to provide for the national defense." That is a matter of primary interest to the national government under the allocation of powers between Federal and state governments. And I think Standard Oil is exactly that kind of case, as is Stencel Aero.

QUESTION: Standard Oil was a case in which the Court first held that the issue is one that should be controlled by Federal law. But then, rather than fashioning the novel remedy, the Court said, "It is up to Congress because they are much better equipped than we are to make the rules."

MR. LACOVARA: In that situation, where you --

QUESTION: It seems to me that case cuts against you.

MR. LACOVARA: Where you were talking about a situation where there were going to be no operational impacts on the conduct of the Armed Forces, the question was: What are the financial consequences for the Government when a soldier is injured in an automobile accident?

We are talking here and I think the Solicitor General will be addressing these issues in a moment about something that is much more fundamental, more important and more immediate in determining what the effect will be on the system of Federal military procurements. This is a matter that the courts have not only fashioned out of whole cloth. That is not the way, an accurate way of describing this, as Petitioner would suggest. This is an area where the courts have taken long established Common Law doctrines, including several doctrines that this Court, itself, has fashioned: the Yearsley Case involving one aspect of the Government specifications defense.

QUESTION: That was a condemnation case. The claim there was that there was condemnation. The defense was then you remedy is against the United States. That is entirely different.

MR. LACOVARA: I think that understates the significance of the case, Justice Stevens. Other courts have interpreted it more broadly as the rationale in the Court's opinion would suggest: the focus was not so much on the availability of a possible Fifth Amendment remedy against the United States, but on the unfairness of imposing liability on the contractor. But to take the case back another 30 years to the Spearin Case which is also cited in our brief, there was no condemnation element there and the Court said, in so many terms, "When a contractor complies with the specifications provided by the United States, the contractor is not responsible for the consequences of compliance with those specifications." That is a generally recognized Common Law doctrine recognized not only by this Court, but recognized in the restatement of Torts and what the Federal and state courts have done, and Justice O'Connor is absolutely correct in saying no court, Federal or state, has rejected this defense. What they have said is, as liability law has been allowed to evolve, it is appropriate for the courts to fashion appropriate limits or defenses for evolving liability claims and to apply the analogous doctrines to recognize the defense in cases of this sort where, as the proof shows, the Department of the Navy specifically approved those very design features that Plaintiff claims are the basis for a monetary award.

QUESTION: In the trial of this case, did you argue that there was any such defense as a matter of Virginia law?

MR. LACOVARA: No. The issue, when it was submitted to the court in request for instructions was framed by both parties with citations to the McKay Case, the Tillett Case and other -- Koutsoubos in the District Court, other Federal cases that had eventuated by that time. Now, there were other state law defenses that were made, but, as I was about to suggest to the Chief Justice, the outcome might be the same, probably would be the same under state law because the states, when they have been confronted with cases of this sort, have also recognized a military contractor defense, but our submission is that, although that underscores one of the reasons why the Court wouldn't be displacing state policy by adopting Federal Common Law, it is a factor that the Court should recognize in feeling that Federal Common Law is the appropriate way to assure uniformity for products that will be used fortuitously throughout --

QUESTION: There certainly is a difference, rather sharp difference of opinion in the courts below as to the shape that such a defense should take. Its contours.

MR. LACOVARA: I think that there is only one exception to what I would say is the uniform approach of the Federal courts. That is the Eleventh Circuit's decision in Shaw.

I think it is fair to say, Justice O'Connor, that when you read all of the --

QUESTION: Well, if it is a performance type specification or a situation where the contractor participates with the Government in designing the product, is there a duty of the contractor to warn of defects that it knows or should know exist?

MR. LACOVARA: That is the single question that has divided the Eleventh Circuit from the other courts. All of the other Courts of Appeals that have addressed this have now said that the defense applies where the contractor either gets specifications promulgated by the Government, which is rare, or participates in the design.

The one point of division is what is the nature of the contractor's duty to warn. The Eleventh Circuit said, "The contractor has a burden of reasonable inquiry," which we and the Government say would actually disrupt the process and lead to less safety than more.

All the other Courts of Appeals have said the issue is simply: Does the contractor actually know of something, a hazard in the design about which the Government is ignorant.

QUESTION: Are Government contractors permitted to include costs of getting liability insurance; do you know?

MR. LACOVARA: That can be an overhead cost under certain kinds of relationships. If it is a fixed price contract, however, and I believe the record here indicates that the contract for these helicopters which were procured for military service in Vietnam during the war, was a fixed price contract.

QUESTION: And then it could be incorporated in the price?

MR. LACOVARA: It depends on the negotiation process. I think another point on that, really a side light, I think, in terms of the mission before the Court, is that when these contracts were let and when these helicopters were being designed, it was in the 1960's when a liability suit of this sort would have been virtually unthinkable. We are in this position 25 years after this contract process began because liability law has evolved far beyond insurance coverage at the time, but I think that is not the real issue on which we reset.

I was going to emphasize that the only issue before the Court is that one. In Petitioner's brief before the Court of Appeals, he said on two occasions, and the Court of Appeals took him at his word and expressly reported this in its opinion, that the only issues that were being advanced were the claims that there was a negligent repair of this servo-system and a negligent design of the escape system. Petitioner said that twice in his brief below and that is the way the Court of Appeals characterized the case.

I think it is too late now to say that there is another negligent design issue that this Court ought to address. The Logan Case, the Virginia law burden of proof case on page 395 of the transcript was specifically argued as a basis for directing a verdict on the ground that Plaintiff had not borne his burden under Virginia law. That is exactly what the Court of Appeals held on appeal was the case here.

So, as the case comes before this Court, the only issue is the one that was framed in the petition: What are the appropriate standards for the military contractor defense. We have explained in our brief why the defense should exist, why it should be recognized as a matter of Federal Common Law and why it is a corollary of important constitutional and legal doctrines. At bottom, it is a separation of powers question. In this kind of suit or any kind of suit, where the Plaintiff is claiming that he is entitled to damages because military equipment has been improperly designed and where the contractor shows that that very feature was approved by the military, what the Plaintiff is asking the Court and civilian jury to do is to say that the military decision to provide him or her with that piece of material was wrongful and should bear consequences.

Now, the United States is immunized under either Feres or more generally under the discretionary function exception and the question, therefore, is: Should there be a backdoor attack on the nature of the military decision by exposing the contractor to liability in tort for the consequences of the design decision, that the contractor proves were specifically approved by the military department.

QUESTION: What if the helicopter, by reason of some other defect, in the rotor, for example, falls down and hurts some civilians?

MR. LACOVARA: If it is a negligent manufacture or an aspect --

QUESTION: No. A design defect in the rotor.

MR. LACOVARA: If it is a design effect concerning a feature of the helicopter that was not before the military department --

QUESTION: No, it was before the military department, too.

MR. LACOVARA: If it was approved the military?

QUESTION: Same as here. Everything is the same as here, only it is the rotor and it hurts a civilian instead of a serviceman.

MR. LACOVARA: Okay. What you have there, Justice Scalia, is a different question, obviously. Several of the bases for the military contractor defense would involve or could involve immunity under that circumstance, just as the United States would be immune if the decision that the Court would have to make would be to inquire into the soundness, the reasons of the military judgment to design a helicopter with those rotors, you might very well have the same reasons for a defense even where the civilian is injured.

One factor that would not be present that is present in this type of case, and it is the typical case involving military accidents is that Congress has another system of compensation that it has set up equivalent to Workmen's Comp system. So, the balance might be different, but some of the bases for immunity would apply.

I have ceded the balance of my time to the Solicitor General. And, if there are no questions from the Court, I would rest at that point.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Lacovara.

We will hear now from you, Mr. Ayer.

ORAL ARGUMENT OF DONALD B. AYER AS AMICUS CURIAE SUPPORTING RESPONDENT

MR. AYER: Thank you, Mr. Chief Justice, and may it please the Court:

The United States is in this case as amicus because we believe that the issue here is whether the courts or the military should decide the appropriate standard of operator safety in sophisticated military weapons systems. We also believe that this may be the paradigmatic Federal Common Law case under the Clearfield Trust doctrine because of the uniquely Federal interest which we are dealing with here. We are dealing with the national defense and the ability of the United States Government and the military to procure sophisticated weapons systems.

The analogy that I think is closest in terms of --

QUESTION: Of course, you could have -- you could say that and still, supposing this helicopter, you know, had simply fallen apart and injured a civilian on the ground, it would not necessarily be the same rule of law that would apply. Would it?

Mr. AYER: I don't think it would be necessarily, Your Honor. And I would agree with Mr. Lacovara's response to Justice Scalia's question on that point. These are balancing questions, we must confess. And in that sense, we think the closest area of legal doctrine in terms of an analogy is the area of Federal employee immunity.

In that instance, you are talking about protecting the general functioning of the Government and that is an area where this Court has, for years and years, dealt with cases involving questions of whether the balance of the interests of defending the Government functioning, outweigh the interests of the plaintiffs in that particular situation.

I think in those cases, it has been clear that the Common Law approach has been the appropriate approach. It has been clear to this Court in case after case.

QUESTION: Yes, but many of those cases arise under Section 1983, their construction with Federal statute which presumptively adopted Common Law rules that were applied, not just a matter of Federal Common Law, but general Common Law.

MR. AYER: Well, that is correct, Your Honor, but many -- a number of cases also have not dealt with constitutional principles or 1983. They have dealt with Common Law actions.

QUESTION: Well, most of those against Federal officials, the question really comes down to whether there is an implied cause of action against the Federal official.

MR. AYER: Well, that true. That is correct.

QUESTION: And in your Clearfield Case, which of course is the principal example, the United States was a party to that case

MR. AYER: That is correct. But we believe that the overriding the priority on making sure that the United States Government and, particularly, in the context of military procurement and the involvement in the national defense, that that is a priority that has got to be considered whether the United States is a party or not.

QUESTION: Who would you say is better competent to draw the appropriate rules in this area, in the military procurement? Congress or this Court?

MR. AYER: Well, certainly, they both, I think, are competent.

QUESTION: That is not my question.

MR. AYER: Well, I think in terms of case by case --

QUESTION: Which do you think is better able to do the job?

MR. AYER: I think in terms of stating general principles, it is arguable that it would be more appropriate for Congress to do it. On the other hand, given the fact that cases are going to be coming up with various factual situations that are not susceptible to treatment within a precise rule, it seems the --

QUESTION: Surely, you don't want us to decide every case. You want us to lay down some broad general principles. Don't you?

MR. AYER: We would like you to decide this case and state a principle which is suitably narrow to deal with this case.

QUESTION: Well, what if there were a committee of Congress now to get together and say, "We want to look into the possibility of a Government contractor defense." What do you think their sense would be, looking at what's been decided. Do you think they would say the Federal courts have already established such a defense? Or do you think they would say, "Well, the Supreme Court has never spoken. It is just a brand new issue?

MR. AYER: Now, prior to any decision?

QUESTION: No, prior to our deciding this case, but looking at the cases that the Courts of Appeals have decided.

MR. AYER: Well, I think they would certainly view themselves as free to change the law as it now exists in the Court of Appeals.

QUESTION: But do you think they would say the courts, the Federal courts have established a Government contractor defense? Or do you think they would say, "No, the Supreme Court hasn't spoken, so the courts have just done nothing in that area.

MR AYER: Well, they would certainly be aware that courts around the country are applying such a defense. So, in terms of the practical reality, that defense does exist. This court would not have spoken unless they might feel that the issue had been finally resolved.

QUESTION: What field do you think we are better at making law than the Congress is? I mean you say here the Congress is better. Where are we better?

MR. AYER: Well, I would qualify --

QUESTION: Anywhere?

(Laughter.)

MR. AYER: I think there are situations, Justice Scalia, where case by case, adjudication is absolutely unavoidable. And we believe that this is such an area. And we believe that the fundamental necessity of allowing the Government to proceed in the area of sophisticated weapons systems by the kind of cooperative relationship with private industry that is involved in this case that that priority makes it possible to say that the defense that we are talking about is really inherent in the power that has been conferred on the Defense Department and the Services to go forward with procurement.

QUESTION: Well, what is it at bottom? A separation of powers argument?

MR. AYER: Well, it is arguably separation of powers. I think maybe preemption is a little closer, Justice O'Connor. The idea that the power of the Government to get weapons systems without itself manufacturing all of them is a power that I think it is fair to say is inherent in the power to provide for the national defense. And that is really what we are talking about here. We are talking about complex changing technology where it is not practical for all sorts of reason for the United States Government to set up factories to manufacture this equipment which changes every few weeks. And it is perfectly reasonable to enlist the assistance of private industry in doing that.

Now, the absence of a defense does not absolutely prohibit that, but it creates burdens which were alluded to by Justice Scalia, quite correctly: burdens which include increasing cost, which include delays in the ability to get the product produced because the contractor is focusing not only on what the Government wants but what state courts in their tort law application responsibility are demanding.

The biggest problem that is generated is the incentive that is created to not go forward with a cooperative relationship with the Government. Under the contract specification defense that applies in most states, a contractor will have a defense if he simply does what the Government tells him. And the question here is whether the Government can enter into a cooperative give-and-take relationship to get this kind of equipment or does it have to do it at arms' length, simply saying, "We want this."

If the Government can't have that kind of cooperative relationship, it is going to be impossible to develop the technology that we need on the leading edge of technology around the world.

And that is why I say this defense is really inherent in the power to provide for the national defense.

I would just like to briefly emphasize that we are concerned that the defense also be limited. We are not foreclosing a similar defense in later different cases, but this defense in this case need only and should only be limited to, (1) military equipment, (2) features of military equipment which can be described as "special order," either an entire system that is special ordered or specific features on a system which is generally available, which are special ordered.

We are not in favor of creating a defense for the Government for the contractor when he provides a can of beans which is no different than every other can of beans that it provides, nor when the contractor provides a jeep which is just like every other jeep. Unless the Government says, "We want this one to be different." Or, unless the contractor says, "This is just our standard jeep. Now, for you, in your application, we would like to put on a something or other. We would like to put on a special metal undercoating," or something like that, "to make it safe." And the Government comes back and says, "No, we want it just the way it is." In our view, that would be a special order application. But we are not talking about protecting contractors when they are selling the Government the same thing they sell to everybody else, even if they run blueprints past the Government and the Government signs off and says, "This is what we want."

What we are trying to protect is the process, the interaction and the developmental process of products. And we feel that the Government has got to be able to have that flexibility to deal on a close coupled basis with contractors or you are really denying the Government the ability to procure these fundamentally essential weapons systems that it has got to have.

The other ways in which the defense is limited in our view and is limited under the McKay test, (1) there is no protection when the manufacturer produces a product negligently or fails to live up to the specifications. So, we are not in favor of simply a blanket immunity such as was embodied in one of the pieces of legislation that was put up for a vote in Congress last year.

And, finally, there is, of course, the burden of warning the Government of known hazards.

QUESTION: How about hazards they should know of?

MR. AYER: We do not believe that there should be a burden to warn of hazards they should have known because that does exactly what we seek to avoid and that is put the decision on the procurement process in the hands of the courts.

QUESTION: Even if it doesn't meet general industry standards?

MR. AYER: Certainly not, if -- certainly not, looking to civilian industry standards. But we would submit even looking to somewhat amorphous standard of the military industry because we think the Government has got to be able to say, for example, in a crisis situation, "We want this product. We want these specifications, and we want it now. We don't want it in three months after you have had time to run all the tests that you would run if you were trying to produce this under some standard that a court would dictate."

I see my time is up. Thank you very much.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Ayer.

Mr. Franecke, you have four minutes remaining.

ORAL ARGUMENT OF LOUIS STANTON FRANECKE ON BEHALF OF PETITIONER - REBUTTAL

MR. FRANECKE: Thank you, Mr. Chief Justice.

I think it has become abundantly clear at this point that the central issue here is a policy decision. It is, of course, Appellant's view that if Congress wished to enact a Government contractor defense or a defense specific for Government contractors, it could do so. And it has declined to do so despite hearing these same arguments that have been put forth by the Solicitor General and as well as Mr. Lacovara and in other legislation that has worked itself around this issue.

I think it should be reminded to the Court that we are talking here about a special defense for special people. And it is Appellant's view that this is especially wrong. What would you be asked next? To enact a stock broker defense? Or an auto maker defense? Or every sector of our American industrial complex that has a special type of area of product: airplane, automobile, boat, will start going into specific rules for those specific manufactures.

QUESTION: Or maybe your defense that says a Federal employee can't be sued under state tort law for activities in the discharge of his Federal functions. We made that one up; didn't we?

MR. FRANECKE: Yes, I believe you did. And, of course, Congress also enacted a specific exclusion under Federal Employees Benefits Act, but also under the Veterans Benefit Act, Congress said there is no exclusivity. There is nothing implied --

QUESTION: Why would we make up that one and not this one? Which ones do you want us to get into and which ones not?

MR. FRANECKE: If we did not have any system of law that already applied to this type of a case, of a military person suing a Government contractor, I would say then we would probably have to start interpreting where we are going. But we already have negligence. We already have product liability. We already have breach of warranty. All of these defenses are available to United Technology Sikorsky to prove that supposedly the Government approved this one particular -- or these defects in this helicopter.

In the actual record in this case, there was not one military person that testified at the trial and said, "We approved the escape system. We approved the specific defect in the control system." That did not exist in this record. And the military has not said that in this particular case.

And I would also again point out to the Court that a jury heard all the evidence, including the Defendant's position on the facts and found for the Appellant, despite even a version of the Government contractor defense having been given.

And I also think that it is important that if Your Honors are inclined to adopt a form of the Government contractor defense, there are a multitude of issues that have to be balanced because this defense would apply, then, throughout the entire military procurement process. And Congress, instead of wanting something of this nature has in fact in 1984 been enacting legislation that has made the Government procurement complex even more competitive and have been trying to disassociate themselves with the close symbiotic relationship between the Government and the contractors to create more of an actual competition.

Thank you.

CHIEF JUSTICE REHNQUIST: Thank you, Mr. Franecke. The case is submitted.

(Whereupon, at 12:01 p.m., the case in the above-entitled matter was submitted.)