Recent U.S. Supreme Court Case Broadens Scope of Immunity

for Government Contractors

by Mark R. Irvine

Campbell-Ewald Co. v. Gomez[1] involved a government contractor who assisted the Navy with recruiting. The Navy approved the contractor’s plan to send text messages to the Navy’s target audience of 100,000 young adults, as long as they had “opted in” to receive Navy information. One recipient who claimed he was not young and had not consented filed a class action suit against the contractor for violation of a federal telemarketing law.

The contractor argued, among other things, that it was not subject to suit based on “derivative sovereign immunity,” also known as “Yearsley immunity.” The Supreme Court rejected the defense, but in doing so clarified the scope of the defense in such a way that should prove useful to government contractors. Some background is helpful in understanding the clarification.

The Yearsley defense asserted by the contractor is based on a 1940 U.S. Supreme Court case by that name which considered whether a contractor could be sued under state law for damaging a landowner’s property during performance of a government contract. The court held “there is no liability on the part of the contractor for executing [Congress’] will.”[2]

Yearsley’s explanation for the holding was scant, leading courts in subsequent cases to reach varying conclusions on the scope of “Yearsley immunity.” The question of Yearsley’s scope became more complex some fifty years later after the U.S. Supreme Court’s “government contractor defense” decision in Boyle v. United Techs. Corp.[3], which arose in the context of a military equipment procurement contract. A defense under Boyle is well settled and understood – shielding contractors from tort liability for defective equipment supplied under government contract where (1) the U.S. approved reasonably precise specifications; (2) the equipment conformed to the specifications; and (3) the contractor warned the U.S. about any risks in using the equipment that were known to the contractor but not the U.S. But Boyle’s rationale was expressly based on Yearsley, and thus courts and litigants have struggled with how, and indeed whether, the two defenses relate.

For example, one federal circuit court recently questioned whether Yearsley immunity “really does stretch as broadly as its language suggests,” noting that if it did, “the Supreme Court in Boyle would presumably not have invented a new test to govern the liability of military procurement contractors; it could have simply cited Yearsley and called it a day.”[4] Another district court similarly observed that this “has become a complex area of law,” and questioned whether Yearsley immunity “is truly distinct” from the Boyle government contractor defense.[5]

The lower courts that heard the Navy text-message case before it reached the U.S. Supreme Court also addressed “Yearsley immunity” questions. The district court granted summary judgment based on Yearsley, rejecting an argument that Yearsley was outdated and that the contractor must satisfy Boyle’s three-prong test.[6] The Ninth Circuit reversed, acknowledging a Yearsley defense, but holding it inapplicable because it establishes only a “narrow rule regarding claims arising out of property damage caused by public works projects.”[7] Nor did Boyle apply, the court said, because Boyle is based on preemption of state law, and the telemarketing law at issue was federal.

Significantly for contractors, the U.S. Supreme Court rejected the Ninth Circuit’s limitation ofYearsley as a “narrow rule,” concluding instead that what is critical was not “the involvement of public works, but the contractor’s performance in compliance with all federal directions.”[8] Although the texting contractor was not entitled to immunity because it violated Navy instructions in sending text messages to nonconsenting recipients, the Court indicated that a contractor “who simply performed as the Government directed” would be entitled to immunity.

With this important clarification in contractor immunity law, contractors should find increased success regardless of type of contract, and achieve more consistent results across appellate circuits.

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[1]136 S.Ct. 663 (2016).

[2]Yearsley v. W.A. Ross Constr. Co., 309 U.S. 18, 20-21 (1940).

[3]487 U.S. 500 (1988).

[4]Adkisson v. Jacobs Eng’g Grp., Inc., 790 F.3d 641, 646 (6th Cir. 2016).

[5]Cabalce v. VSE Corp., 922 F.Supp.2d 1113, 1123 (D. Haw. 2013, aff’d sub nom. Cabalce v. Thomas E. Blanchard & Assocs., Inc., 797 F.3d 720 (9th Cir. 2015).

[6]Gomez v. Campbell-Ewald Co., No. CV 10-02007 DMG CWX, 2013 WL 655237, at *4–6 (C.D. Cal. Feb. 22, 2013), vacated, 768 F.3d 871 (9th Cir. 2014), aff'd, 136 S. Ct. 663, 193 L. Ed. 2d 571 (2016).

[7]Gomez v. Campbell-Ewald Co., 768 F.3d 871, 879 (9th Cir. 2014), aff'd, 136 S. Ct. 663, 193 L. Ed. 2d 571 (2016).

[8]136 S. Ct. at 673 n.7.