United States: Government Contractor Defense Applies To Commercial Product Supplier

A California appellate court recently affirmed a decision granting summary judgment in favor of an asbestos supplier under the government contractor defense. Kase v. Metalclad Insulation Corp., 2016 Cal. App. LEXIS 1025 (Cal. Ct. App. 2016) (case certified for publication). As articulated in Boyle v. United Technologies Corp., 487 U.S. 500 (1988), the government contractor defense bars certain product liability claims against government contractors who satisfy a three-prong test. In Kase, the court reaffirmed that simply because a product is commercially available does not preclude application of the government contractor defense.

In that case, Gary Kase and his wife sued Metalclad Insulation Corporation ("Metalclad"), among other defendants, alleging that, during his work on Navy vessels in the early 1970s, Mr. Kase was exposed to asbestos-containing insulation, Unibestos, which was supplied by Metalclad. In turn, Metalclad filed a motion for summary judgment, arguing that the government contractor defense precluded the plaintiffs' defective design claim.¹ The trial court agreed with Metalclad and granted the motion.

On appeal, the California appellate court explained that the issue is "whether the Navy's procurement of asbestos insulation for its nuclear submarines comes within the ambit of the government contractor defense[.]" Id. at 1. The court looked to the Supreme Court's discussion of the government contractor defense in Boyle. See id. at 13-19.

The government contractor defense arises from an exception in the Federal Tort Claims Act precluding suits based upon the government's discretionary decisions. See Boyle, 487 U.S. at 511 (quoting 28 U.S.C. § 2608(a)). Because the government's procurement of specifically designed military equipment is a discretionary decision, contractors complying with those decisions should be likewise shielded from suit. See id. at 511-13. The Supreme Court reasoned that "[t]he imposition of liability on Government contractors will directly affect the terms of Government contracts: either the contractor will decline to manufacture the design specified by the Government, or it will raise its price. Either way, the interests of the United States will be directly affected." Id. at 507. To successfully advance this defense, a government contractor must show that: "(1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States." Id. at 512.

In applying this three-three pronged test, the Kase court concluded that Metalclad satisfied each factor, thereby proving its entitlement to the government contractor defense. As to the first element, the court explained that Metalclad was required to provide "insulation of both 'subtype 1B, fibrous-temperatures up to 750 °F' and 'subtype 1F, fibrous-temperature up to 1200°F'" and, given these specifications, "Unibestos was the only prequalified product." Id. at 7-8. The court, accordingly, determined that "all the benchmarks of 'reasonably precise specifications' [were] present—the Navy made a deliberative design choice in issuing specifications that, in 1968, could only be met with, and thus required, asbestos-containing insulation[.]" Id. at 36. Although the court did not expressly discuss the second element, the court did so implicitly by explaining that Metalclad had supplied Unibestos, the only prequalified insulation. Finally, the court concluded that the Navy was fully aware of the health risks associated with asbestos and "Metalclad was not aware of any risk of which the Navy was not already aware." Id. at 39. As such, the court concluded that Metaclad satisfied the government contractor defense, and the trial court correctly granted summary judgment in Metalclad's favor. Id. at 39-40.

This case confirms that even a manufacturer or supplier of a widely available commercial product may fall under the purview of the government contractor defense so long as the government's required specifications are "reasonably precise." Moreover, this case illustrates that the government contractor defense is a strong affirmative defense, providing the chance for a manufacturer or supplier to obtain a favorable judgment on a dispositive motion. Accordingly, manufacturers and suppliers who are being sued for products arising from a procurement contract should consider the application of the government contractor defense.

Footnote

1. In that case, the plaintiffs also asserted a failure to warn claim, but Metalclad argued a different basis for summary judgment on that count. The California appellate court affirmed the trial court's grant of summary judgment in favor of Metalclad, thereby disposing of both causes of action. But because the appellate court's discussion on the failure to warn claim was not submitted for publication, and because the government contractor defense was not applied to that claim, a discussion of the failure to warn claim is outside the scope of this article.

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