The Supreme Court held yesterday in General Dynamics Corp. v. United States that the federal government can invoke the state-secrets privilege to prevent a government contractor from raising a defense to the government’s breach of contract claim.
The federal government terminated a contract to build a type of stealth aircraft with two defense contractors due to extensive scheduling delays, exposing the contractors to severe contractual penalties. To avoid a default judgment and raise a defense, the contractors were required to file a claim in the Court of Federal Claims. They argued that the breach resulted from the government’s failure to provide “superior knowledge” necessary to successfully fulfill their contractual obligations. Although the trial court found that the contractors made an initial showing that their defense was valid, the government invoked the state secrets privilege, claiming that allowing the contractors to proceed with their defense would expose government secrets to the public.
The Court of Federal Claims ruled in favor of the government without addressing the contractors’ defense, finding that allowing the contractors’ defense to proceed would risk exposure of government secrets. The contractors argued that the government should not be able to win a default judgment against a private party by invoking the state secrets privilege to deprive the party of its defense.
The Supreme Court, in a unanimous opinion authored by Justice Scalia, held that the public policy problems with allowing courts to adjudicate claims because of the risk of exposing government secrets also apply to defenses. “It is claims and defenses together that establish the justification, or lack of justification, for judicial relief; and when public policy precludes judicial intervention for the one it should preclude judicial intervention for the other as well.” As a result, the Court prevented both the contractors and the government from recovering damages and held that the lower court must “leave the parties where they are” at the time the lawsuit is filed to avoid injustice based on incomplete evidence.
Alliance for Justice highlighted this case because the state secrets privilege has been used extensively by the government to force dismissal of cases brought by victims of torture inflicted during the Bush administration, thereby undermining accountability for illegal conduct.
By siding with the government in this case, the Supreme Court extended a privilege that needs to be narrowed, not expanded.