Defending the Producers: Examining Product Liability Protection for Compelled Manufacturing Under the Defense Production Act
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Defending the Producers: Examining
Product Liability Protection for
Compelled Manufacturing Under the
Defense Production Act
By: Lauren R. Greenspoon and Ryan D. Class
Lauren R. Greenspoon is a senior counsel
and Ryan D. Class is an associate at Carlton
Fields resident in the Hartford, Connecticut
office. They both practice in the area of mass
torts and product liability. Ryan also practices
in the area of construction litigation.
I
N MARCH 2020, the United States government took action to respond
began to feel acutely the effects to the emerging pandemic. 2 On
of a global outbreak of COVID-19, March 13, 2020, President Donald
a potentially-deadly respiratory Trump declared the COVID-19
illness caused by the novel pandemic to be a national
coronavirus SARS-CoV-2. 1 As emergency pursuant to Section 501
illness and fatality totals steadily (b) of the Robert T. Stafford
grew and hospitals faced the Disaster Relief and Emergency
possibility of being overwhelmed Assistance Act (“Stafford Act”). 3
by patients sick with COVID-19, While this emergency declaration
state governments and the federal permitted the federal government
1See, e.g., Ella Torres, A timeline of Cuomo’s 2Id.
and Trump’s responses to coronavirus 3Donald J. Trump, Letter from the President
outbreak, ABC NEWS (April 3, 2020), (2020), available at https://www.white
available at https://abcnews.go.com/ house.gov/wp-content/uploads/2020/03/
US/timeline-cuomos-trumps-responses- LetterFromThePresident.pdf.
coronavirus-outbreak/story?id=69914641.2 DEFENSE COUNSEL JOURNAL | JULY 2020
to assist states, financially and President Trump subsequently
otherwise, in their recovery efforts invoked the DPA to steer the
and federal agencies to coordinate production of medical devices
the response to the crisis,4 concerns and/or protective equipment for
loomed about shortages of needed health care workers by companies
medical equipment — particularly more traditionally associated with
medical ventilators5 and protective the manufacture of these goods,
face masks.6 including General Electric,
On March 18, 2020, President Medtronic, and 3M.10
Trump issued an executive order Perhaps anticipating the
invoking the Defense Production product liability issues that could
Act (“DPA”),7 a Korean War-era law arise in the context of this
that provides the president with compelled production, Secretary of
broad authority to direct Health and Human Services Alex
production activity in the United Azar issued a separate declaration
States in order to further the under the Public Readiness and
“national defense.” 8 On March 27, Emergency Preparedness (“PREP”)
the president used his authority Act 11 in the days preceding the
under the DPA to compel General president’s invocation of the DPA.
Motors, an automaker, to produce This declaration immunized
ventilators amid a national manufacturers of a broadly defined
shortage of these devices. 9 set of “covered countermeasures”
4 Trisha Anderson et al., INSIGHT: 7 Defense Production Act of 1950, 50 U.S.C.
Coronavirus and the Stafford Act—What It §§ 4501-4568 (2018).
Means for Contractors, BLOOMBERG LAW 8 See 50 U.S.C. § 4552 (14) (2018).
(March 26, 2020), available at 9 John Wagner and Colby Itkowitz, Trump
https://news.bloomberglaw.com/us-law- orders GM to manufacture ventilators under
week/insight-coronavirus-and-the- the Defense Production Act, WASH. POST (Mar.
stafford-act-what-it-means-for-contractors. 27, 2020), available at https://www.
5 Sarah Kliff et al., There Aren’t Enough washingtonpost.com/politics/trump-
Ventilators to Cope with the Coronavirus, N.Y. raises-prospect-of-ordering-gm-ford-to-
TIMES (last updated Mar. 26, 2020), manufacture-ventilators/2020/03/27/
available at https://www.nytimes.com/ 92f82db6-7043-11ea-aa80-
2020/03/18/business/coronavirus- c2470c6b2034_story.html.
ventilator-shortage.html. 10 Yelena Dzhanova, Trump Compelled these
6 Emily Feng and Amy Cheng, COVID-19 Has companies to make critical supplies, but most
Caused A Shortage of Face Masks, But of them were already doing it, CNBC (Apr. 3,
They’re Surprisingly Hard to Make, NAT’L PUB. 2020), available at https://www.cnbc.
RADIO: GOATS & SODA (Mar. 16, 2020), com/2020/04/03/coronavirus-trump-
available at https://www.npr.org/ used-defense-production-act-on-these-
sections/goatsandsoda/2020/03/16/8149 companies-so-far.html.
29294/covid-19-has-caused-a-shortage-of- 11 See 42 U.S.C. § 247-6d (2018).
face-masks-but-theyre-surprisingly-hard-
to-make.Defending the Producers 3
against tort liability relating to the protection against product liability
use of these countermeasures and suits for DPA-compelled
preempted any contrary state law. manufacturing going forward. The
The secretary defined these PREP Act is both limited in its
countermeasures as including applicability — applying only in
“any . . . device . . . used to treat, cases of “a disease or other health
diagnose, cure, prevent, or mitigate condition or other threat to health
COVID-19, or the transmission of [that] constitutes a public health
SARS-CoV-2 or a virus mutating emergency” or a credible risk of
therefrom, or any device used in the such disease 14 — and is subject to
administration of any such product, the secretary of Health and Human
and all components and constituent Services’ discretion both in its
materials of any such product.”12 invocation and its scope.15 The
This declaration likely DPA’s codified liability protection,16
encompasses the entire use cycle of meanwhile, has never been
a covered countermeasure, explicitly held to shield
including its manufacture, and thus manufacturers from tort liability.17
would (with certain limitations for In this article, we will argue that,
cases of willful misconduct) shield contrary to some interpretations,
manufacturers from liability arising the DPA’s codified liability
from the manufacture of covered protection should be interpreted to
countermeasures in response to the shield compelled manufacturers
COVID-19 outbreak.13 against product liability claims.
Although the secretary’s Instances of compelled production
declaration under the PREP Act should be shielded from product
presents a useful liability shield for liability claims under the doctrine
compelled manufacturing activity of Yearsley immunity as well as the
under the DPA in response to closely related “government
COVID-19, the current invocation of contractor defense” provided
the DPA raises serious questions certain conditions are met. We will
about the need for more permanent first examine the origins of the DPA
12 Declaration Under the Public Readiness and-liability-immunity-during-the-
and Emergency Preparedness Act for coronavirus.
Medical Countermeasures Against COVID- 14 42 U.S.C. § 247-6d (b) (1).
19, 85 Fed. Reg. 15,198 (Mar. 17, 2020). 15 42 U.S.C. § 247-6d (b).
13 See, e.g., Lee F. Lasris, COVID-19 Response: 16 50 U.S.C. § 4557 (2018).
The PREP Act and Liability Immunity During 17 See Kelly Belnick, Emergency Laws
the Coronavirus Outbreak, LEWIS BRISBOIS Protect Cos. Enlisted in COVID-19 Fight,
BISGAARD & SMITH LLP: LEGAL ALERTS (Mar. 30, LAW360 (Apr. 2, 2020), available at
2020), available at https://lewis https://www.law360.com/articles/12591
brisbois.com/newsroom/legal- 73/emergency-laws-protect-cos-enlisted-
alerts/covid-19-response-the-prep-act- in-covid-19-fight.4 DEFENSE COUNSEL JOURNAL | JULY 2020
and its use before the COVID-19 declaration of policy, was to
pandemic. We then will examine empower the president “to
the language of the DPA’s codified promote the national defense, by
liability protections, as well as meeting, promptly and effectively,
relevant case law analyzing these the requirements of military
protections. After that, we will look programs in support of . . . national
to two judicially created doctrines, security . . . and by preventing
Yearsley immunity and the undue strains and dislocations
government contractor defense, as upon wages, prices, and production
well as the specific application of or distribution of materials for
contractor immunity in the context civilian use . . . .”19 The focus of the
of disaster relief efforts. In closing, DPA remains on promoting national
we will argue that each of these defense, although Congress
defenses — direct immunity under expanded the definition of this term
Section 707 of the DPA, in addition to encompass both traditional
to immunity under Yearsley and its military aims and ones more closely
progeny as well as the government implicating the United States’
contractor defense — offers a civilian population, specifically:
potential avenue to avoid liability “programs for military and energy
based on compelled production. production or construction,
Finally, we will offer suggested military or critical infrastructure
practice pointers for manufacturers assistance to any foreign nation,
to ensure that manufacturers do homeland security, stockpiling,
not foreclose the availability of space, and any directly related
these defenses to themselves and activity. Such term includes
properly assert these defenses in emergency preparedness activities
any potential litigation. conducted pursuant to title VI of
[the Stafford Act] and critical
I. Background infrastructure protection and
restoration.”20 Executive Orders
The federal government delegate the president’s authority
enacted the DPA in September 1950, for implementing the DPA to
spurred by the outbreak of the pertinent cabinet secretaries, with
Korean War. 18 The purpose of the the secretary of Health and Human
DPA, as set forth in Congress’ Services responsible for the
18 CONG. RESEARCH SERV., THE DEFENSE natsec/R43767.pdf [hereinafter CRS
PRODUCTION ACT OF 1950: HISTORY, REPORT].
AUTHORITIES, AND CONSIDERATIONS FOR 19 Defense Production Act of 1950, Pub. L.
CONGRESS 2 (updated Mar. 2, 2020), No. 81-774, 64 Stat. 798, § 2 (codified as
available at https://fas.org/sgp/crs/ amended at 50 U.S.C. § 4502 (2018)).
20 50 U.S.C. § 4552 (14) (2018).Defending the Producers 5
administration of the DPA as it outbreak and is found in Section
pertains to “health resources.” 21 In 101 (a) of Title I of the DPA. 25 To
his order invoking the DPA to battle invoke these powers “to control the
COVID-19, President Trump general distribution of any material
reemphasized his delegation of his in the civilian market,” the
authority to execute the DPA to the president must find “(1) that such
secretary of Health and Human material is a scarce and critical
Services.22 material essential to the national
Under the DPA, the executive defense, and (2) that the
branch has a wide-ranging set of requirements of the national
powers vis-à-vis private sector defense for such material cannot
manufacturers, including (1) the otherwise be met without creating
ability to prioritize the fulfillment of a significant dislocation of the
certain government contracts; (2) normal distribution of such
the ability to provide financial material in the civilian market to
incentives, such as loans, to such a degree as to create
facilitate production; and (3) the appreciable hardship.”26
ability to intercede in corporate Although the aforementioned
decision-making, for instance by language, as well as the DPA’s
blocking certain mergers and wartime inception, would suggest
acquisitions. 23 The first set of that its use is limited to periods of
powers in this list, permitting the dire national emergency or
president both to prioritize private wartime mobilization, successive
manufacturers’ fulfillment of presidential administrations
certain government contract orders continuously have invoked the DPA
over the fulfillment of non- in the military procurement
government orders and also to realm. 27 According to a report by
direct the allocation of “materials, the Federal Emergency
services, and facilities” 24 in service Management Agency, the
of the national defense, is most Department of Defense has used the
relevant to the present COVID-19 DPA’s prioritization authority
21 Exec. Order No. 13,603, 3 C.F.R. 13603 pinion/defense-protection-act-covid.html.
(2012). Notably, all presidents since the DPA’s
22 Exec. Order No. 13,909, 3 C.F.R. 13909 passage have invoked it in some capacity,
(2020). either “to prioritize federal contracts or to
23 CRS REPORT, supra note 18, at 2. shore up vulnerabilities in domestic
24 50 U.S.C. § 4511 (a) (2018). production that threaten the defense
25 Id. § 4511. industrial base.” Jane Chong, How to
26 Id. § 4511 (b). Actually Use the Defense Production Act, THE
27 James E. Baker, Opinion, It’s High Time We ATLANTIC (Apr. 6, 2020), available at
Fought This Virus the American Way, N.Y. https://www.theatlantic.com/ideas/archiv
TIMES (Apr. 3, 2020), available at e/2020/04/how-actually-use-dpa-fight-
https://www.nytimes.com/2020/04/03/o covid-19/609469/.6 DEFENSE COUNSEL JOURNAL | JULY 2020 “continuously and extensively” “space industrial base.”31 The DPA’s since 1950, placing approximately allocation authority, meanwhile, 300,000 prioritized orders per has gone unused since the end of year. 28 Presidents of both parties the Cold War, although certain also have used the DPA outside the civilian aircraft remain allocated military context, with former under it for purposes of the Civil Presidents Bill Clinton and George Reserve Air Fleet.32 W. Bush each invoking the DPA in early 2001 to ensure the transmission of electrical power II. Potential Avenues for and natural gas to the state of Liability Protection California in the midst of that state’s energy crisis. 29 Former President The president’s ability not only Barack Obama used the DPA to to prioritize the fulfillment of force American tele- government contracts but also to communications companies to compel the production of needed disclose information on their use of goods raises important liability foreign-manufactured components questions, particularly in the in an effort to root out potential context of manufacturers making cyberespionage, 30 while President products outside of their normal Trump invoked the DPA in 2017 to business lines in order to assist in promote the production of various combating a national emergency. materials deemed important to the These concerns can arise in the 28 DEP’T OF HOMELAND SEC., THE DEFENSE Says, NBC NEWS (Nov. 30, 2011), available at PRODUCTION ACT COMMITTEE REPORT TO http://www.nbcnews.com/id/45499713/ CONGRESS 8 (June 24, 2019), available at ns/technology_and_science- https://www.fema.gov/media-library- security/t/feds-hunt-spyware-foreign- data/1582898704576-dc44bbe61cce made-network-components-report- 3cf763cc8a6b92617188/2018_DPAC_Repo says/#.Xp2v8euSk2w. rt_to_Congress.pdf. “Rated orders” permit 31 Donald J. Trump, Letter from the President the federal government to prioritize its own – Defense Production Act of 1950 (June 30, contracts above competing contracts from 2017), available at https://www. other purchasers. See FED. EMERGENCY MGMT. whitehouse.gov/briefings-statements/ AGENCY, Information for Contractors About letter-president-defense-production-act- Priority-Rated Orders, (Aug. 13, 2018) 1950-2/. available at https://www.fema.gov/ 32 Baker, supra note 27. The Civil Reserve information-contractors-about-priority- Air Fleet is composed of civilian airliners rated-orders. meant to provide auxiliary airlift capacity to 29 Daniel H. Else, CONG. RESEARCH SERV., the Department of Defense in times of DEFENSE PRODUCTION ACT: PURPOSE AND SCOPE 2 emergency. Civil Reserve Air Fleet, U.S. AIR (2009), available at https://fas.org/spg/ FORCE, (July 28, 2014), available at sgp/crs/natsec/RS20587.pdf. https://www.af.mil/About-Us/Fact- 30 Paul Wagenseil, Feds Hunt Spyware in Sheets/Display/Article/104583/civil- Foreign-Made Network Components, Report reserve-air-fleet/.
Defending the Producers 7
contractual realm — for example, a shall not be held liable for damages
manufacturer that is forced to delay or penalties for any act or failure to
shipments to a commercial act resulting directly or indirectly
customer due to government from compliance with any
orders taking precedence and provision of this part, or an official
thereby breaches its contract with action . . . .” 34 Despite neither
the commercial customer. Section 707 nor its implementing
Alternately, these concerns may regulation containing language
arise in tort — for instance, in the limiting their applicability to
case of a manufacturer that is contract claims, courts have only
compelled to make products held definitively that Section 707
outside of its usual area of expertise protects against contract liability
and unintentionally does so in a and have left its applicability to tort
defective manner. Statutory liability uncertain.
protections in the DPA resolve Notwithstanding Section 707’s
contractual concerns, but the tort seemingly expansive limitation on
questions remain in large part producer liability for complying
unsettled. with orders under the DPA, the
volume of case law involving it is
A. DPA Section 707 rather low. As one court observed
in the early 1980s, although the
The DPA and its implementing DPA had been in effect for more
regulations each contain provisions than three decades, it was able to
that seem to address find only two cases analyzing
manufacturers’ liability concerns in Section 707’s applicability.35 Both
both the contractual and the tort of these cases involved contract
contexts. The statutory liability liability, rather than tort. 36
protection is found in Section 707 of Nevertheless, an understanding of
the DPA, 33 which provides in part: the court’s application of Section
“No person shall be held liable for 707 to one of these cases in
damages or penalties for any act or particular, Eastern Air Lines, Inc. v.
failure to act resulting directly or McDonnell Douglas Corp., 37 is
indirectly from compliance with a instructive in understanding both
rule, regulation, or order issued Section 707 itself as well as certain
pursuant to this chapter . . . .” The subsequent courts’ hesitancy to
DPA’s implementing regulations apply Section 707 to tort claims.
similarly provide that “[a] person
33 Defense Production Act of 1950, Pub. L. 35 In re Agent Orange Prod. Liab. Litig., 597
No. 81-774, 64 Stat. 798, § 707 (codified as F. Supp. 740, 845 (E.D.N.Y. 1984).
amended at 50 U.S.C. § 4557 (2018)). 36 Id.
34 15 C.F.R. § 700.90 (2020). 37 532 F.2d 957 (5th Cir. 1976).8 DEFENSE COUNSEL JOURNAL | JULY 2020
Eastern Air Lines occurred in any “informal but nonetheless
the context of escalating U.S. concerted government priorities
involvement in the Vietnam War policy”44 that was meant to ensure
and involved breach of contract that government production needs
claims by the plaintiff, a civilian received higher prioritization than
airline, against the defendant, a their civilian analogues.
manufacturer of aircraft for both Subsequent courts accepted
civilian and military use. 38 The that Eastern Air Lines established
plaintiff alleged that it had suffered Section 707 as a defense to contract
damages as a result of delays in the claims by aggrieved contractual
defendant’s delivery of new counterparties but were less
aircraft. 39 While the defendant did receptive to the notion that Section
not contest that these delays had 707 acted as a shield against tort
occurred, it argued that they were liability. In another case set against
excusable given that it had been the backdrop of military
forced to satisfy the government’s procurement during the Vietnam
orders first as a result of, among War, the court in In re Agent Orange
other things, prioritization of these Product Liability Litigation
contracts under the DPA.40 As such, evaluated the merits of a settlement
one of the defendant’s arguments agreement between military
was that Section 707 shielded it veterans claiming injuries arising
from liability arising out of the from the “Agent Orange” defoliant
plaintiff’s breach of contract that had been used in the theater of
claims.41 combat during the war and the
The court in Eastern Air Lines various manufacturers of Agent
agreed with the defendant, Orange.45 As part of an inquiry into
explaining that Section 707 “is the plaintiffs’ likelihood of success
simply declaratory of the common at trial, the court examined Section
law [doctrine of impossibility]” 42 707 as a possible defense to tort
and therefore provided a valid liability. 46 It opined that Section
defense to breach of contract 707 likely did not extend to tort
claims.43 Further, the court held, liability for two reasons: Section
Section 707 did not apply solely to 707 corresponded to the
formal orders placed under the DPA president’s prioritization authority
but rather applied in the context of under Section 101 and “should
38 Id. at 961-962. 43 Id.
39 Id. at 964. 44 Id. at 998.
40 Id. 45 In re Agent Orange Prod. Liab. Litig., 597 F.
41 Id. at 996-997. Supp. at 746-747.
42 Id. at 997 (quoting United States v. Tex. 46 Id. at 843-845.
Constr. Co., 224 F.2d 289, 293 (5th Cir.
1955)).Defending the Producers 9
correspond to the risk imposed, viz., Agent Orange claims and involved a
the possible need for the contractor manufacturer’s efforts to seek
to break its contracts with or the indemnification from the U.S.
increased risk to employees or government for costs incurred in
users posed by speeded-up the defense and settlement of the
production”; 47 and second, claims at issue in In re Agent Orange
Congress likely would not have Product Liability Litigation. 52
implemented a change of this Hercules presented an interesting
nature to tort law without explicitly procedural posture: the
stating so.48 Notably, the court manufacturer was not seeking
based its first argument on the immunity from the underlying
notion that compelled production Agent Orange claims; rather, it was
under Section 101 was unlikely to seeking to have the United States,
increase the risk of injury to users post hoc, indemnify the
of, or others exposed to, a manufacturer’s decision to settle
manufacturer’s product, as well as these claims.
its determination that any such risk The manufacturer rested its
was already accounted for through claims on two arguments: the
the so-called government government’s contract to purchase
contractor defense. 49 With respect Agent Orange contained an implied
to its second argument, the court warranty against third-party
contrasted Section 707 to a liability claims; and government
provision of one of the DPA’s compulsion under the DPA carried
statutory predecessors, the First with it an implied-in-fact
War Powers Act, which explicitly agreement by the government to
permitted the president to make indemnify the manufacturer
certain indemnification payments against subsequent claimed losses
to government contractors.50 by third parties.53 In rejecting both
The most crucial case of these arguments, the Supreme
examining the extent of the DPA’s Court drew heavily on statutory
liability protection, Hercules, Inc. v. authority forbidding entities
United States, 51 is as notable for responsible for government
what the Supreme Court explicitly procurement from providing the
declined to address as it is for the “open-ended indemnity for third-
Court’s ultimate holding. Hercules party liability” it characterized the
also took place in the context of manufacturer as seeking.54 Further
47 Id. at 845. 51 516 U.S. 417 (1996).
48 Id. 52 Id. at 422.
49 Id. The government contractor defense is 53 Id. at 424-425.
discussed in detail at Part II.B, infra. 54 Id. at 427.
50 Id.10 DEFENSE COUNSEL JOURNAL | JULY 2020
demonstrating that its holding was not indemnity. By expressly
focused squarely on the providing a defense to liability,
manufacturer’s attempt to impose Congress does not implicitly agree
post hoc indemnification on the that, if liability is imposed
government, the Court explained notwithstanding that defense, the
that, had the government wanted to Government will reimburse the
indemnify the manufacturer unlucky defendant.”57 The Court
against any subsequent claims, also explicitly declined the
statutory mechanisms existed for it government’s invitation to
to do so. The Court stated: “These interpret Section 707 “as only
statutes, set out in meticulous detail barring liability to customers
and each supported by a panoply of whose orders are delayed or
implementing regulations, would displaced on account of the priority
be entirely unnecessary if an accorded Government orders under
implied agreement to indemnify § 101 of the DPA,” holding that,
could arise from the circumstances given the nature of the claims
of contracting. We will not interpret before it, it needed only to rule on
the DPA contracts so as to render Section 707’s applicability in the
these statutes and regulations indemnification context.58
superfluous.”55
Notably, the Supreme Court, B. Yearsley and the Government
although affirming the lower Contractor Defense
court’s ultimate holding, expressly
refused to do so on the basis of the Judicially created doctrines
lower court’s determination that insulating government contractors
Section 707 was applicable only to from liability provide additional
contractual liability claims.56 The avenues for liability protection in
Court instead held only that Section the context of DPA-compelled
707 could not be used to impose production. 59 The doctrine of
indemnification on the federal Yearsley immunity, named for the
government, explaining: “The case that gave rise to it, and a
statute plainly provides immunity, closely related doctrine that has
55 Id. at 428-429. U.S. CHAMBER INST. FOR LEGAL REFORM,
56 Id. at 422. Covering the Contractors: The Current State
57 Id. at 429-430. of the Government Contractor Defense, 5
58 Id. at 430 n.14. (Feb. 2017), available at https://www.
59 An open question is whether the arnoldporter.com/-/media/files/
immunity provided by these doctrines is perspectives/publications/2017/02/cover
immunity from liability alone or whether it ing-the-contractors.pdf. While the type of
immunizes government contractors from immunity provided by these doctrines
suit entirely., “[T]he more recent trend is . . . presents an important question, it is
as an affirmative defense to liability.” See beyond the scope of this article.Defending the Producers 11
come to be known as the damage caused to the petitioners’
government contractor defense land, the Supreme Court set forth
offer examples of this species of two criteria that, if met, would
protection. 60 In a very general immunize a government contractor
sense, both of these doctrines against liability: the contractor’s
provide ways for contractors authority to act on behalf of the
building products or otherwise federal government must have
doing work at the federal been validly conferred; and the
government’s behest to avoid contractor must have been acting
liability for damages caused by within the bounds of this
their work for the government. authority. 64 In the Court’s words:
Yearsley immunity shields “[I]f what was done was within the
contractors performing work for constitutional power of Congress,
the federal government from there is no liability on the part of the
lawsuits arising out of this work contractor for executing its will . . . .
provided that the contractor validly Where an agent or officer of the
was authorized to perform the Government purporting to act on its
work in question. In Yearsley, the behalf has been held to be liable for
defendant company had contracted his conduct causing injury to
with the U.S. government pursuant another, the ground of liability has
to an act of Congress to construct been found to be either that he
dikes in the Missouri River.61 In the exceeded his authority or that it
process of constructing these dikes, was not validly conferred.” 65
the company washed away a Provided that these conditions
portion of the petitioners’ land, were met, the contractor would be
leading the petitioners to seek deemed immune, with its immunity
compensation for the value of this derivative of the federal
land. 62 Petitioners alleged that the government’s own sovereign
destruction of their land was a immunity.66
taking as defined under the Fifth
Amendment to the U.S. Constitution, Nearly fifty years later in Boyle
and they were accordingly entitled v. United Technologies Corp., 67 the
to just compensation.63 Supreme Court articulated what
In holding that the contractor has come to be known as the
could not be held liable for the “government contractor defense,”
60 Yearsley v. W.A. Ross Constr. Co., 309 U.S. 66 Id. at 21 (citing The Paquete Habana, 189
18 (1940). U.S. 453, 465 (1903) (“[W]hen the act of a
61 Id. at 19. public officer is authorized or has been
62 Id. at 19-20. adopted by the sovereign power, whatever
63 Id. at 20. the immunities of the sovereign, the agent
64 Id. at 20-21. thereafter cannot be pursued.”)).
65 Id. 67 487 U.S. 500 (1988).12 DEFENSE COUNSEL JOURNAL | JULY 2020
which addresses specifically the independent contractor performing
issue of product liability claims its obligation under a procurement
arising out of government contract, rather than an official
procurement contracts. In Boyle, a performing his duty as a federal
Marine Corps helicopter pilot died employee, but there is obviously
after the helicopter he was piloting implicated the same interest in
crashed into a body of water and he getting the Government's work
was unable to escape, eventually done.” 72 The Court went on to
causing him to drown.68 The pilot’s explain that “[t]he imposition of
father brought state law design liability on Government contractors
defect claims against the company will directly affect the terms of
responsible for manufacturing the Government contracts: either the
helicopter, alleging that it had contractor will decline to
constructed the helicopter with a manufacture the design specified
defective, outward-opening escape by the Government, or it will raise
hatch, which was made useless its price.”73
when exposed to water pressure.69 Rather than finding all products
The manufacturer’s immunity manufactured in accordance with
claims were based in part on the government procurement contracts
notion that it produced the to be immune from state tort claims
helicopters according to exact under the government contractor
specifications mandated by the defense, the Court explained that
federal government rather than such immunity would apply only
specifications that it could itself when certain conditions were met.
control.70 There first would need to exist “a
In a 5-4 decision, the Supreme significant conflict . . . between an
Court agreed with the identifiable ‘federal policy or
manufacturer, finding that the interest and the [operation] of state
performance of federal law.’” 74 In finding that such a
procurement contracts presented a conflict existed in Boyle, the Court
“uniquely federal” interest such looked to the portion of the Federal
that this interest preempted the Tort Claims Act (“FTCA”) 75 that
plaintiff’s state law tort claims. 71 exempted “discretionary functions”
The Court analogized the performed by government
contractor’s liability to that of a employees from suit, explaining
federal employee, explaining that that the design of military hardware
“[t]he present case involves an required numerous discretionary
68 Id. at 502. 72 Id. at 505.
69 Id. at 503. 73 Id. at 507.
70 See id. 74 Id. (citations omitted).
71 Id. at 504. 75 28 U.S.C. § 2680 (a) (2018).Defending the Producers 13
determinations and that it would be product from stock without a
improper to contradict the policy significant interest in the alleged
articulated in the FTCA by allowing design defect, the government has
plaintiffs to “second-guess” what not made a discretionary decision
were essentially government in need of protection, and the
decisions by holding private defense is therefore inapplicable.”79
contractors liable.76 The remaining Notably, given that Boyle
condition was a requirement that occurred in the context of military
three specific criteria be met: “(1) hardware, some courts, chiefly
the United States approved those in the Ninth Circuit, have held
reasonably precise specifications; that the government contractor
(2) the equipment conformed to defense applies solely to military
those specifications; and (3) the procurement rather than to
supplier warned the United States government contract manu-
about the dangers in the use of the facturing more generally. 80
equipment that were known to the Multiple circuits, meanwhile, have
supplier but not to the United held the opposite and found that
States.” 77 As suggested in the the government contractor defense
Court’s holding and emphasized by applies to all government
several subsequent courts, the procurement activity, military or
government’s participation in the otherwise. 81 Other circuits,
determination or approval of including the Second Circuit, have
specifications for the challenged not explicitly held that the
product must be active. 78 In the government contractor defense
words of the U.S. Court of Appeals applies outside of military
for the Second Circuit, summarizing procurement but have signaled
Boyle and related cases: “Where the receptivity to the notion of applying
government merely rubber stamps the defense to all government
a design . . . or where the contract manufacturing.82
[g]overnment merely orders a
76 Boyle, 487 U.S. at 511-512. 82 See, e.g., Bennett v. MIS Corp., 607 F.3d
77 Id. at 512. 1076, 1090 (6th Cir. 2010) (“It is at least
78 Id. plausible that the government contractor
79 In re Agent Orange Prod. Liab. Litig., 517 defense could apply outside the military
F.3d 76, 90 (2d Cir. 2008) (citations procurement contract context because the
omitted). Supreme Court noted that the origins of the
80 See, e.g., In re Haw. Fed. Asbestos Cases, defense, at least in part, were based upon a
960 F.2d 806, 811-812 (9th Cir. 1992). case that immunized a private contractor
81 See, e.g., Hudgens v. Bell from liability arising out of its performance
Helicopters/Textron, 328 F.3d 1329 (11th of a public works project.”); In re World
Cir. 2003); Carley v. Wheeled Coach, 991 Trade Center Disaster Site Litig., 521 F.3d
F.2d 1117 (3rd Cir. 1993). 169, 197 (2nd Cir. 2008) (“The Supreme
Court likewise suggested that the14 DEFENSE COUNSEL JOURNAL | JULY 2020
Applying both Yearsley and based on their compliance with
Boyle, the Second Circuit in In re federal decision-making.87
World Trade Center Disaster Site The In re World Trade Center
Litigation 83 expanded the appli- defendants argued that the ultimate
cability of the government source of their derivative immunity
contractor defense into the disaster was a section of the Stafford Act
recovery context.84 The plaintiffs in with language markedly similar to
In re World Trade Center were the “discretionary function”
various individuals involved in the language of the FTCA on which the
cleanup efforts following the Boyle court had relied.88 Codified at
September 11, 2001, terrorist 42 U.S.C. § 5148, the Stafford Act’s
attacks on the World Trade Center immunity provision provides that
in New York City.85 These plaintiffs “[t]he Federal Government shall not
sued the City of New York, the Port be liable for any claim based upon
Authority of New York and New the exercise or performance of or
Jersey, and others, alleging that the failure to exercise or perform a
they had been exposed to toxic discretionary function or duty on
fumes and other hazardous the part of a Federal agency or an
conditions during the cleanup employee of the Federal
efforts and that the defendants had Government in carrying out the
failed to monitor these conditions provisions of this chapter.” 89 In
properly, provide the plaintiffs with setting up a framework for the
adequate safety equipment, or government contractor defense
otherwise warn the plaintiffs of pursuant to Section 5148, the court
these hazards. 86 The defendants first evaluated whether the federal
argued that their actions were part agencies responsible for
of the federal government’s administering the World Trade
coordinated post-9/11 recovery Center cleanup 90 were acting in a
plan and that they should be discretionary manner and would
entitled to derivative immunity thus be entitled to immunity under
[government contractor] defense is not 85 Id. at 173.
limited to military contractors.”). 86 Id.
83 521 F.3d 169. 87 Id. at 176.
84 Id. at 197 (“Without deciding its 88 Id. at 198.
applicability in other contexts, we think that 89 42 U.S.C. § 5148 (2018).
the rationale for the government contractor 90 The Army Corps of Engineers, the
defense would extend to the disaster relief Occupational Safety and Health
context due to the unique federal interest in Administration, and the Environmental
coordinating federal disaster assistance Protection Agency. See In re World Trade
and streamlining the management of large- Center Disaster Site Litig., 521 F.3d at 195
scale disaster recovery projects, as n.29.
evidenced by the Stafford Act.”).Defending the Producers 15
the Stafford Act.91 The court looked immunize itself from claims that it
in part to the Supreme Court’s had violated the Telephone
explanation of the FTCA’s Consumer Protection Act by
“discretionary function” exception improperly sending text messages
in United States v. Gaubert, 92 in to non-consenting recipients as
which the Supreme Court had held part of a recruiting campaign for the
first that “[t]he [discretionary U.S. Navy. 96 Specifically, the
function] exception covers only acts marketing firm sought to avail itself
that are discretionary in nature” of immunity derivative of the
and would be inapplicable if, for Navy’s own sovereign immunity,
instance, a statute or regulation laid notwithstanding the fact that the
out a required course of action, and Navy had directed the marketing
second, that “the exception protects firm only to send text messages to
only governmental actions and recipients who had opted in to
decisions based on considerations receiving such messages. 97 The
of public policy.”93 Then, the Court Court rejected the marketing firm’s
evaluated whether the same attempts to establish Yearsley
principles that gave rise to immunity for itself, succinctly
derivative immunity in Yearsley and explaining that “[w]hen a
Boyle applied in the context of the contractor violates both federal law
case before it, finding ultimately and the Government’s explicit
that they did: “If a federal agency instructions, as here alleged, no
orders a private contractor or City ‘derivative immunity’ shields the
agency to implement decisions contractor from suit by persons
made by the federal agency, in its adversely affected by the
discretion, we think that ‘the violation.”98
interests of the United States will be
directly affected’ if the contractor or C. Application of these
City agency does not follow those Defenses to the COVID-19
orders for fear of liability.”94 Response
Finally, in Campbell-Ewald Co. v.
Gomez, 95 the Supreme Court A manufacturer compelled to
reaffirmed the parameters of produce unfamiliar products under
Yearsley immunity. In Campbell- the DPA should be aware of each
Ewald, a marketing firm sought to possible defense to liability and
91 In re World Trade Center Disaster Site 94 In re World Trade Center Disaster Site
Litig., 521 F.3d at 195. Litig., 521 F.3d at 197.
92 Id. (citing United States v. Gaubert, 499 95 136 S. Ct. 663 (2016).
U.S. 315, 322 (1991)). 96 Id. at 668.
93 Gaubert, 499 U.S. at 322-323. 97 Id. at 672.
98 Id.16 DEFENSE COUNSEL JOURNAL | JULY 2020
prepared to invoke each in the issue in cases like the present
event that they are faced with scenario does pose an increased
product liability claims arising out likelihood of injury, because it
of this production. As it pertains to involves manufacturers making
Section 707 of the DPA, products outside of their normal
manufacturers should note, business lines in response to an
pursuant to Hercules, that the unprecedented national emergency.
statute does not permit the Further, while the government
imposition of mandatory contractor defense should shield
indemnification on the federal manufacturers in the present
government. Thus, any scenario, the applicability of this
manufacturer seeking to shield defense to manufacturers’
itself under Section 707 must not compelled DPA production is by no
agree to settle any claims against it means as clear-cut as in Boyle’s
and expect the federal government military procurement realm. Finally,
to repay these amounts afterward. with respect to the Court’s second
As the Supreme Court explained assertion that Congress would have
in Hercules, Section 707 provides been more explicit if it intended
immunity — although whether this Section 707 to limit tort liability for
immunity applies only in contract DPA-compelled production, it
or to tort claims as well remains an should be noted that the In re Agent
open question. A manufacturer Orange court couched that
seeking to invoke Section 707 in the discussion in the context of
tort context should argue first that indemnification rather than
the statute’s language contains no immunity. As Hercules
explicit limitations that would demonstrated, the imposition of
confine its protection to the indemnity on the federal
contractual realm. It would be government is an exceedingly
prudent to counter the factors that difficult hurdle and likely would
led the district court, in evaluating require congressional assent.
the settlement in In re Agent Orange, Immunity, however, presents an
to opine that Section 707 was entirely different question and
inapplicable to tort claims. The analysis.
court in that case first posited that Yearsley immunity, as well as
compelled production would be the related concept of derivative
unlikely to increase the risk of immunity based on Stafford Act
injury and, in any event, that the disaster relief efforts as articulated
government contractor defense in In re World Trade Center, also
would provide a liability shield in offer potential avenues for
such an instance. Here, by contrast, compelled manufacturers to seek
the sort of compelled production at shelter from product liability claims.Defending the Producers 17
Similar to In re World Trade Center, designs used in the products
the COVID-19 pandemic is a requisitioned pursuant to the DPA.
declared national emergency under In the case of COVID-19, the
the Stafford Act, with the ventilators and other products
Department of Health and Human ordered pursuant to the DPA are
Services serving as the lead agency being sold directly to the federal
coordinating the federal government, thus satisfying the
response.99 Given the delegation of procurement-based application of
the president’s DPA authority to this defense. 100 Accordingly, a
various Cabinet secretaries, the manufacturer compelled under the
invocation of the DPA to direct DPA to produce goods for sale to the
production activity in response to a federal government should seek to
national emergency arguably is a involve the government actively in
discretionary agency function as the design and/or approval of the
referenced by 42 U.S.C. § 5148. If products at issue. The
manufacturers hesitate to follow manufacturer must also ensure that
agency directives to produce it warns the government of any
certain goods under the DPA out of known hazards in the product or
fear of liability, it would directly products requisitioned. Finally, in
affect the United States’ interests in the event that litigation threatens,
disaster recovery — the exact the manufacturer and/or the
scenario posited by the Second manufacturer’s counsel should be
Circuit in In re World Trade Center. aware of courts’ views in the
Keeping in mind the limitations of relevant jurisdiction(s) with
Yearsley and Campbell-Ewald, respect to Boyle’s applicability
however, a manufacturer should outside of military procurement.
ensure that its DPA-compelled
manufacturing activity is conducted III. Conclusion
within the parameters of applicable
federal directives. While no manufacturer actively
Finally, the government wishes to provide a defective
contractor defense as articulated in product to market, the possibility of
Boyle may offer a third avenue for product liability claims is an ever-
liability protection in cases of present one, perhaps even more so
compelled production, depending in the context of government-
on the federal government’s compelled production of goods
involvement in approving the outside of a manufacturer’s usual
99See Trump, supra note 3, at 2. available at https://www.politico.com/
100 Tanya Snyder and Gavin Bade, GM, news/2020/04/08/general-motors-
Philips sign DPA contract for ventilators, ventilators-coronavirus-174724.
POLITICO (last updated Apr. 8, 2020),18 DEFENSE COUNSEL JOURNAL | JULY 2020 repertoire. Given the PREP Act’s limited, discretionary nature and the president’s expansive powers under the DPA, manufacturers faced with future compelled production under the DPA should keep in mind Section 707, Yearsley immunity, and the government contractor defense as potential avenues to immunize themselves against product liability claims arising out of DPA production.
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