General Dynamics Corp. v. United States | |
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Argued January 18, 2011 Decided May 23, 2011 | |
Full case name | General Dynamics Corporation, Petitioner v. United States |
Docket no. | 09–1298 |
Citations | 563 U.S. 478 ( more ) 73 S.Ct. 528; 97 L. Ed. 727; 2011 U.S. LEXIS 3830 |
Case history | |
Prior | McDonnell Douglas Corp. v. United States, 76 Fed. Cl. 385 (2007); affirmed, 567 F.3d 1340 (Fed. Cir. 2009); cert. granted, 561 U.S. 1057(2010). |
Court membership | |
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Case opinion | |
Majority | Scalia, joined by unanimous |
General Dynamics Corp. v. United States, 563 U.S. 478 (2011), is a U.S. Supreme Court case in which the State Secrets Privilege prevented the plaintiff from using the evidence it needed to protect itself from an expensive judgement. [1]
In 1988 the U.S. Navy ordered a new stealth aircraft, the A-12 Avenger, to be built by contractors General Dynamics and McDonnell Douglas. The parties agreed to what would be the main problem with the contract: instead of a "cost-reimbursable" contract (which would have limited the contractors' liability to the funding provided by the Government, and is the most commonly used when dealing with new weapons systems, especially with new technology), they agreed to a "fixed-price" contract (which required the contractors to complete the work regardless of final cost) of around US$4.8 billion (the competing industry team, composed of contractors Northrop, Grumman, and Vought, somewhat surprisingly never submitted a final bid and dropped out of the competition, possibly due to the intended contract type).
Not unexpectedly (given the nature of the program) the contract encountered difficulty in meeting the technical requirements, which resulted in huge cost overruns, but in this case the overruns (combined with the contract type) threatened the existence of both companies, two of the largest United States defense contractors. The contractors requested that the fixed-price contract be converted to a cost-reimbursable contract, agreeing to absorb $150 million in cost overruns as consideration. Instead, in 1991 the Navy gave up and cancelled the contract, saying too little progress had been made. Yet the cancellation would cause another problem: instead of cancelling the contract as a "termination for convenience" (where the Government decides it no longer wants an item; this may require the Government to spend additional funds to make a contractor whole), it instead chose to cancel it as a "termination for default" (where the Government cancels a contract upon belief that the contractor is not performing in accordance with contract terms, and often demands repayment of funds provided), and asked the contractors to return roughly US$1.35 billion of "progress payments" (payments based upon work performed) already made. The contractors refused, saying the government had kept too much information secret under the "state secrets privilege" for there to be adequate progress, and therefore a default termination was not justified. [2]
The manner in which the program was canceled led to years of litigation between the contractors and the Department of Defense over breach of contract:
In September 2010, the U.S. Supreme Court said it would hear the arguments of the two companies that the government canceled the project improperly and that the use of a state secrets claim by the U.S. prevented them from mounting an effective defense. [4]
In May 2011, the Supreme Court set aside the Appeals Court decision and returned the case to it "for proceedings consistent with this opinion". [5] The Court unanimously held that "when litigation would end up disclosing state secrets, courts may not try the claims and may not award relief to either party." [6] Thus it neither granted the contractors the US$1.2 billion awarded in the earlier termination for convenience, nor the Navy the roughly US$1.35 billion in prior payments made.
In January 2014, the case was settled with Boeing and General Dynamics agreeing to pay US$400 million to the Navy, equally divided between them. [7]
The False Claims Act of 1863 (FCA) is an American federal law that imposes liability on persons and companies who defraud governmental programs. It is the federal government's primary litigation tool in combating fraud against the government. The law includes a qui tam provision that allows people who are not affiliated with the government, called "relators" under the law, to file actions on behalf of the government. This is informally called "whistleblowing", especially when the relator is employed by the organization accused in the suit. Persons filing actions under the Act stand to receive a portion of any recovered damages.
General Dynamics Corporation (GD) is an American publicly traded aerospace and defense corporation headquartered in Reston, Virginia. As of 2020, it was the fifth-largest defense contractor in the world by arms sales, and fifth largest in the United States by total sales. The company is a Fortune 100 company, and was ranked No. 94 in 2022.
The General Dynamics/McDonnell Douglas A-12 Avenger II was a proposed American attack aircraft from General Dynamics and McDonnell Douglas. It was to be an all-weather, carrier-based stealth bomber replacement for the Grumman A-6 Intruder in the United States Navy and Marine Corps. Its Avenger II name was taken from the Grumman TBF Avenger of World War II.
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The United States Court of Federal Claims is a United States federal court that hears monetary claims against the U.S. government. It was established by statute in 1982 as the United States Claims Court, and took its current name in 1992. The court is the successor to trial division of the United States Court of Claims, which was established in 1855.
United States v. Reynolds, 345 U.S. 1 (1953), is a landmark legal case decided in 1953, which saw the formal recognition of the state secrets privilege, a judicially recognized extension of presidential power. The US Supreme Court confirmed that "the privilege against revealing military secrets ... is well established in the law of evidence".
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The Supreme Court of the United States handed down ten per curiam opinions during its 2010 term, which began October 4, 2010 and concluded October 1, 2011.
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