25 Cl. Ct. 616 | Ct. Cl. | 1992
OPINION
This contractual dispute is before the Court on the defendant’s motion for summary judgment, filed pursuant to USCC Rule 56.
FACTS
Plaintiff, Hercules Incorporated (Hercules), was a manufacturer in the mid to late 1960’s of a product known as Agent Orange, which was used for military purposes by the United States Government as a defoliant during the Vietnam War. Years later, Vietnam veterans and their families, alleging that exposure to Agent Orange caused death, injuries, and birth defects, sued all the Agent Orange manufacturers, including Hercules. This multi-district product liability tort suit was settled before trial, In re “Agent Orange” Prod. Liab. Litig. (hereinafter “Settlement Opinion ”), 597 F.Supp. 740 (E.D.N.Y.1984), aff'd, 818 F.2d 145 (2d Cir.1987), cert. denied, 484 U.S. 1004, 108 S.Ct. 695, 98 L.Ed.2d 648 (1988), and Hercules was required to pay some $18 million of the total settlement amount. The instant contract suit was brought by Hercules in an attempt to recover from the United States Government the costs it incurred in defending and settling the suit in the district court.
The following facts are essentially uncontroverted: Agent Orange is a mixture of two phenoxy herbicides, 2,4-Dichloro-phenoxyacetic Acid (2,4-D), and 2,4,5-Tri-chlorophenoxyacetic Acid (2,4,5-T) in a 50/50 blend. Depending on the process utilized, when 2,4,5-T is produced, it may contain varying amounts of 2,3,7,8 Tetrachlorodibenzo-p-dioxin (dioxin), a toxic substance, although not a key ingredient of either Agent Orange or 2,4,5-T.
Hercules began producing phenoxy herbicides that contained 2,4,5-T by itself, or in a mixture with 2,4-D, in 1961,
As the Vietnam War progressed, the military needed greater amounts of Agent Orange, which Hercules supplied to the Government through fifteen contracts between May 8, 1964, and May 20, 1968. These contracts specified the formula for producing Agent Orange, and Hercules, which apparently provided no input to the Government with respect to either developing or modifying these specifications, complied with the specifications. In early 1965, during a meeting called by Dow Chemical Company, Hercules was notified of industrial health problems associated with the production of 2,4,5-T, and, later that year, it modified its process of production to eliminate the dioxin contamination. Agent Orange, 565 F.Supp. at 1269, 1274.
Some ten years later, starting in 1979, Vietnam veterans, or their estates, began filing negligence and strict liability tort actions against the chemical companies that produced Agent Orange for the Government. According to these plaintiffs, in view of the toxicity of dioxin, exposure to the Agent Orange that contained dioxin caused cancer, miscarriages, and birth defects. These actions were consolidated in the Eastern District of New York under the heading MDL No. 381.
On May 20, 1983, Hercules was granted summary judgment, based upon the district court’s finding that the plaintiff’s Agent Orange product was dioxin free, so Hercules had no knowledge of harm from dioxin contamination, and thus did not know more than the Government about the hazards associated with the use of its product. Agent Orange, 565 F.Supp. at 1274. Unfortunately for Hercules, the granting of summary judgment was reversed by the succeeding district court judge approximately five months later, and Hercules was again made part of the litigation, along with all the other manufacturers of Agent Orange.
Hercules’ share of the settlement was $18,772,568, which it paid into the settlement fund in 1984. According to Hercules, it also spent over $6 million in legal fees during the Agent Orange litigation.
Nearly 300 plaintiffs had previously opted out of the class action suit, and thus were not bound by the May, 1984 settlement. Hercules and other Agent Orange manufacturers successfully moved for summary judgment against these remaining plaintiffs. In re “Agent Orange” Prod. Liab. Litig. (hereinafter “Opt-out Opinion”), 611 F.Supp. 1223 (E.D.N.Y. 1985), aff'd, 818 F.2d 187 (2d Cir.1987), cert. denied, 487 U.S. 1234, 108 S.Ct. 2898, 101 L.Ed.2d 932 (1988). The district court judge found that (1) plaintiffs failed to present credible evidence as to causation, and that (2) the plaintiffs’ claims were barred by the Government contractor defense.
The plaintiff filed its complaint with this Court on June 8, 1990. In this suit, plaintiff seeks contractual indemnification from the Government of the amounts plaintiff paid in settlement of the veterans’ class action suit, legal fees, expenses, and costs in connection with defending all of the Agent Orange suits brought against it and “all other financial and consequential damages caused by the defendant’s breach of its contractual warranties and duties.” In response, the Government filed a motion for summary judgment on January 8, 1991, seeking dismissal of the plaintiff’s contract suit as a matter of law. The plaintiff opposes the motion and asserts that the matter should move forward to trial.
DISCUSSION
“Summary judgment is appropriate when there are no genuine issues of material fact in dispute and the moving party is entitled to judgment as a matter of law.” GAF Corp. v. United States, 19 Cl.Ct. 490, 496 (1990), aff'd, 932 F.2d 947 (Fed.Cir.1991), cert. denied, — U.S.-, 112 S.Ct. 965, 117 L.Ed.2d 131 (1992). The substantive law involved in the suit determines which facts are material, and only disputes over material facts, those which might affect the outcome of the suit under the governing law, may properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Disputes over facts that are not relevant under the controlling law will not prevent the entry of summary judgment. Id. The moving party, in this case the defendant, has the burden of establishing that there are no genuine issues of material fact, Celotex Corp. v. Catrett, 477 U.S. 317, 321, 106 S.Ct. 2548, 2551, 91 L.Ed.2d 265 (1986),
In its complaint, the plaintiff has alleged that it is entitled to contractual indemnification from the Government under four counts. All four of the counts are based on alleged breaches of implied-in-fact contract obligations. Plaintiff submits that it produced Agent Orange in the 1960’s under written contracts with the Government that contained detailed design specifications that were developed solely by the Government. It contends further that it had no part in the development of the specifications, that it manufactured the Agent Orange to the exact specifications ordered by the Government, and that it had little, if any, knowledge about the potential hazards that were inherent in the product as produced and used by the Government. Given these factual circumstances, the plaintiff argues that it is entitled to indemnification in contract for the losses it incurred in defending against and settling the' tort suits brought by the Vietnam veterans and their families against the manufacturers of Agent Orange. Hercules believes it is only equitable and fair that the Government assume the obligation and be allocated these risks because it ordered the production of Agent Orange to its own specifications, completely controlled the use (or misuse) of the product, and never shared any information about potential hazards in the product with the manufacturer. In short, if anyone was negligent here, it was the Government and the financial liability should, therefore, be borne by it and not by the innocent manufacturers of Agent Orange. The plaintiff, therefore, contends that it is entitled to be indemnified by the Government for the costs it incurred under any one of four implied-in-fact contractual theories.
The plaintiffs first theory involves the matter of the Government’s alleged superi- or knowledge. Here, the plaintiff asserts that there was an implied-in-fact obligation on the part of the Government to reveal its superior knowledge concerning the unprecedented military use of Agent Orange by the Government so as to not increase the plaintiff’s cost of performance under the contract.
The second theory alleged is a straight forward duty on the part of the Government “to exercise good faith and not increase Hercules costs by using Agent Orange in Southeast Asia in an unprecedented military manner that failed to avoid potential health risks, including by not taking adequate precautions and safeguards or providing * * * adequate warnings * * (Emphasis added.)
The third theory alleged by the plaintiff would place a duty on the Government to use the plaintiff’s product after production in a way that would avoid potential health risks and thus avoid harming the plaintiff. This is the so-called reverse warranty obligation on the part of the Government.
Fourth and finally, the plaintiff alleges a warranty of specification theory. This theory is based upon an alleged Governmental breach of its implied-in-fact contractual obligation “to establish specifications and requirements for Agent Orange sufficient to make Agent Orange adequate and suitable for the unprecedented intended and actual military use to which it was put in Southeast Asia * *
The defendant, for its part, opposes each one of the plaintiff’s four breach of implied-in-fact contract arguments on factual as well as legal grounds. In addition, the defendant asserts that the rationale surrounding the Government contractor defense supplies an independent legal basis for finding in its favor. Finally, although not pressed by the Government, since the plaintiff’s contractual theories are all based on the concept of contractual indemnification, that matter also will be discussed in the concluding section of this opinion.
After full consideration of the parties’ briefs and oral arguments, it is evident to the Court that only the plaintiff’s fourth claim regarding the warranty of specification has any potential vitality. The first
A. Plaintiffs Implied-In-Fact Contract Claims
1. The first three claims.
There is a line of cases which allows Government contractors to recover from the Government the unexpected increased costs of performance of a contract if the Government, at the time the contract was formed, had superior knowledge regarding difficulties in production which were not apparent and were not otherwise known by the contractor. American Ship Bldg. Co. v. United States, 228 Ct.Cl. 220, 654 F.2d 75 (1981); Hardeman—Monier—Hutcherson v. United States, 198 Ct.Cl. 472, 458 F.2d 1364 (1972); J.A. Jones Constr. Co. v. United States, 182 Ct.Cl. 615, 390 F.2d 886 (1968); Helene Curtis Indus., Inc. v. United States, 160 Ct.Cl. 437, 312 F.2d 774 (1963); J.F. Shea Co. v. United States, 4 Cl.Ct. 46 (1983).
From this precedent, the plaintiff argues that the Government is liable to the manufacturers of Agent Orange for their costs in defending and settling the suits brought against them by Vietnam veterans. This is because the Government allegedly knew more about the hazards of dioxin contained in the Agent Orange than did the herbicide manufacturers, and the Government breached its duty (contractual obligation) to reveal this superior knowledge to the plaintiff.
The defendant counters that the plaintiff and its predecessor were experienced manufacturers of 2,4,5-T, and they continued to manufacture 2,4,5-T commercial products the entire time the plaintiff was supplying Agent Orange to the United States. Also, they complied with the general reporting and registration requirements of the Federal Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. §§ 135 et seq. (1964) (FIFRA).
While the determination of how much knowledge both the plaintiff and the Government had about the hazards of dioxin and Agent Orange is fact-intensive and not suitable for summary judgment, this Court believes it is not necessary to reach a decision on this factual issue. In analyzing these cases, it is clear to this Court that the doctrine of superior knowledge covers only unexpected costs in the performance of the contract. None of the cases cited by the plaintiff involving the doctrine of superior knowledge extend the doctrine beyond the production of the item contracted for, be it disinfectant powder (Helene Curtis) or the construction of a dock in Australia (Hardeman—Monier—Hutcherson). In all of the cases cited above, the Government knew about some non-obvious obstacle that anyone would encounter in trying to produce the contracted-for item. For example, in Helene Curtis, it was a new substance that needed grinding in order to mix properly into the disinfectant powder, and, in Hardeman — Monier— Hutcherson, it was severe weather conditions and water currents that made the dock much more difficult to construct.
The common thread is that, in all of these cases, the contractor had to spend more time or money on production than it anticipated when entering into the contract with the Government because of latent difficulties in the manufacturing or construction process. Also, the Government, at the
[W]here (1) a contractor undertakes to perform without vital knowledge of a fact that affects performance costs or duration, (2) the government was aware the contractor had no knowledge of and had no reason to obtain such information, (3) any contract specification supplied misled the contractor, or did not put it on notice to inquire, and (4) the government failed to provide the relevant information.
To satisfy the requirements of the doctrine, the vital knowledge, which the Government possesses and the contractor does not, must be a fact that affects performance costs or duration of performance. In the case at hand, plaintiff does not claim that it had any unforseen problems in the manufacture of the Agent Orange which increased the costs of production or caused a delay in performance. Thus, the superior knowledge doctrine does not apply to plaintiff’s claim and does not entitle it to recover costs that were not connected to actual performance under the contract, which was for the manufacture of the Agent Orange to the detailed Government specification. See generally, Lopez v. A. C. & S., Inc. 858 F.2d 712, 717-18 (Fed.Cir.1988), cert. denied, 491 U.S. 904, 109 S.Ct. 3185, 3186, 105 L.Ed.2d 694 (1989). Prior case precedent simply does not allow the expansion of the doctrine of superior knowledge to be extended as far as the plaintiff apparently wants it to stretch. The time frame that the courts have found appropriate to review has always been the period of performance only — not some indefinite time stretching well into the future.
In its second and closely related theory, the plaintiff argues that, under basic contract principles, the Government had a duty to act in good faith and not increase the plaintiff’s contract costs. Petrofsky v. United States, 222 Ct.Cl. 450, 616 F.2d 494 (1980), cert. denied, 450 U.S. 968, 101 S.Ct. 1488, 67 L.Ed.2d 618 (1981); Commerce Int’l Co. v. United States, 167 Ct.Cl. 529, 338 F.2d 81 (1964). According to the plaintiff, the defendant breached this duty by failing to use Agent Orange in a safe manner and avoid potential health risks because the Government did not provide identification of the defoliant’s active ingredients or give warnings concerning its proper use. Based on the Government’s alleged failure to carry out these measures, plaintiff claims it is therefore entitled to reimbursement for the costs of the Agent Orange litigation as increased costs of performance.
The Government submits that there was no increase in the cost of performance since plaintiff fully performed the supply contracts at the agreed price. Also, the defendant avers there was no defect in the specification which could give rise to a claim of this type.
The Court finds that the Government has not breached its duty to act in good faith not to increase the cost of performance for basically the same reasons as discussed in the superior knowledge section above. This is another performance-related doctrine that will not be extended as a matter of law to assigning liability to a contracting party for matters that occur at some distant point in the future. The shoe simply does not fit. It is true that this Court has held that it is conceivable that third-party liabilities could be considered costs of performance at the time of entering the contracts. Johns-Manville Corp. v. United States, 13 Cl.Ct. 72, 161 (1987), vacated on jurisdictional grounds, 855 F.2d 1571 (Fed.Cir.1988). However, we agree that:
Judicial recognition has not been extended to the notion that a supply item produced according to specifications in a satisfactory manner, yet causing damages due to its use, can be the basis of a claim to recover damages as a cost of performance.
In its third theory, the plaintiff has likewise argued that the Government had a duty to exercise due care in using the plaintiff’s product in order to avoid harming the plaintiff. According to the plaintiff, the Government breached this duty by mixing plaintiff’s allegedly dioxin-free product with the dioxin-contaminated products of other manufacturers. Also, plaintiff avers that the Government again breached this duty by failing to provide adequate warning labels about the hazards of Agent Orange and forbidding the plaintiff to do so. Thus, plaintiff argues that, by mixing plaintiff’s product with contaminated products and prohibiting warning labels, the Government subjected plaintiff to potential liability that did not exist previously.
As an aside, it is noted that the plaintiff continually refers to the Government as having various “duties” running to the plaintiff. It should also be noted in this connection that the Court has contract jurisdiction, and the concept of “duty” arises primarily in tort analysis. The Court, however, does not have jurisdiction over matters sounding in tort. 28 U.S.C. § 1491(a)(1) (1988). Aetna Casualty and Sur. Co. v. United States, 228 Ct.Cl. 146, 655 F.2d 1047 (1981). Although the plaintiff’s arguments come perilously close to a jurisdictional block, the plaintiff’s claims will be viewed as allegations of contractual obligations on the part of the Government to perform, or refrain from performing, in a certain way.
As the defendant has pointed out, the United States Court of Appeals for the Federal Circuit in Lopez rejected a claim similar to the plaintiff’s, calling it “bizarre and novel.” As the court in Lopez has stated: “an implied warranty relating to the use by the buyer after delivery, and warranting it would not harm the seller is novel, and no reason is shown why anyone could have so supposed at the date of sale by any inference from the circumstances.” Id., 858 F.2d at 716. Defendant deems this a reverse warranty claim, and this seems an accurate portrayal.
Looking to the guidance of the Federal Circuit in Lopez, it is clear that this reverse warranty theory must be considered to be a contract implied-in-fact, if it exists at all. To establish a contract implied-in-fact, there must be factual circumstances which indicate that the parties have actually come to a meeting of the minds and taken upon themselves corresponding obligations and liabilities. Hirschmann v. United States, 11 Cl.Ct. 338, 342 (1986). Such a factual inference is not supported by any of the circumstances surrounding the sale of the Agent Orange by plaintiff to the Government.
While plaintiff may believe it is fairer to allocate the liability to the user of the product, this type of reverse warranty, based on fairness of risk allocation, is cognizable only as a quasi-contract implied-at-law, Santisteven v. Dow Chem. Co., 506 F.2d 1216, 1219 (9th Cir.1974). This Court is without jurisdiction to consider implied-in-law contracts. United States v. Mitchell, 463 U.S. 206, 218, 103 S.Ct. 2961, 2968, 77 L.Ed.2d 580 (1983); Lopez, 858 F.2d at 714-15; Hirschmann, 11 Cl.Ct. at 342.
2. The plaintiff’s warranty of specification claim.
In United States v. Spearin, 248 U.S. 132, 136-37, 39 S.Ct. 59, 61, 63 L.Ed. 166 (1918), the Supreme Court held that the inclusion of detailed specifications in a contract prepared by the Government imported a warranty that, if the specifications were followed, the resulting product would be adequate, and the contractor would not be responsible for the consequences of defects in the specifications. This implied warranty of specification has been recognized in many cases since Spearin. See e.g., Ordnance Research, Inc. v. United States, 221 Ct.Cl. 641, 609 F.2d 462 (1979); Hol-Gar Mfg. Corp. v. United States, 175 Ct.Cl. 518, 360 F.2d 634 (1966); Blount Bros. Corp. v. United States, 872 F.2d 1003 (Fed.Cir.1989).
Plaintiff argues that an implied-in-fact warranty of specification arose in this case because the Government supplied detailed specifications for Agent Orange to Hercules, and the plaintiff manufactured the defoliant in accordance with these detailed specifications. The warranty of specification means that the Government impliedly warranted that the item made to the precise specification would be safe and free from defects. Plaintiff claims that the Government breached this warranty because the plaintiff was subjected to tort suits by third parties who claimed they were injured by the Agent Orange the plaintiff manufactured.
The Government contends that plaintiffs claim is nearly identical to claims made by the asbestos manufacturers that, based on contract theories, attempted to recover from the United States costs they incurred as a result of suits brought by shipyard workers who were exposed to asbestos dust from using insulating products. The asbestos manufacturers made these products in accordance with military specifications and sold them to the United States during the World War II era and thereafter. Accordingly, the defendant relies on two asbestos-related cases, Lopez and GAF Corp., for its defensive position. The Government contends that these cases bar the plaintiffs warranty of specification claim on the grounds that the factual circumstances of this case do not support finding an implied-in-fact agreement, a meeting of the minds, and this Court lacks jurisdiction over contracts that are implied at law. Lopez, 858 F.2d at 714-15; GAF Corp., 932 F.2d at 950.
For a warranty to be implied in fact, the plaintiff must demonstrate that “the circumstances strongly supported a factual inference that a warranty was implied.” Lopez, 858 F.2d at 715. Such an inference arises only when the Government specifications told the contractor “just how to do the job”, Id. at 716, and not when they merely specified some certain characteristic in the contracted-for product. GAF Corp., 932 F.2d at 950. With respect to the claims of breach of warranty of specification, the Court agrees with the plaintiff that the underlying bases of the decisions in Lopez and GAF Corp. were that the asbestos companies knew about the dangers of their products before entering into the contracts with the Government and that the products manufactured under the Government contracts did not differ materially from those already sold commercially. Thus, there was no basis for finding a factual inference that the specifications constituted an “extensive Government intrusion into the asbestos production process which might suggest that the Government intended to warrant the product’s safety.” GAF Corp., 932 F.2d at 950.
Plaintiff argues that, in this case, there exists the extensive Government intrusion into the Agent Orange production process that suggests that the Government intended to warrant the product’s safety. Also, the plaintiff alleges that it is unlike the asbestos manufacturers because it knew less than the Government did about the defoliant, and Agent Orange differed materially from the products plaintiff sold commercially.
However, even assuming that a warranty of specification arose from the Government’s detailed specifications for Agent Orange, there must be more than the mere existence of a warranty to entitle the plaintiff to recover against the Government. Plaintiff must also show that this warranty
Turning again to Spearin and its progeny, the implied warranty of specification was breached when the product, made in accordance with the detailed specification created by the Government, was inadequate, and the inadequacy clearly caused some damage. In Spearin, the sewer was inadequate due to a problem with a blocked sewer pipe in the existing system; the new pipe broke, and the sewer overflowed and damaged the dry dock that the contractor was building for the Government. Id., 248 U.S. at 134, 39 S.Ct. at 60. In Poorvu, the parking area for a building was constructed with inadequate support below it, in accordance with the Government’s specifications. This caused the parking area to settle and put pressure on water pipes that were located beneath it. These pipes broke, and the water spilling from them saturated the ground under the building, which then weakened the support under the building, causing it to settle severely into the ground. Id., 190 Ct.Cl. at 646-47, 420 F.2d at 997.
In these cases, it is clear that the specification was inadequate, and the resulting defect in the finished product caused obvious and direct damage. The courts in these cases appeared to analyze these situations by determining first, whether or not some damage had occurred, and second, whether or not the specification written by the Government was defective. If these two circumstances were present, the courts then determined which party should bear the risk of the faulty specification causing the damage. The implied warranty of specification is the method by which the court can allocate the risk of the faulty specification to the Government, which created the specification, rather than to the contractor, who actually built the defective item that caused the damage. See John C. Cibinic, Jr. & Ralph C. Nash, Jr., Administration of Government, Contracts 199-202 (2d ed. 1985). As stated in Spearin, 248 U.S. at 136, 39 S.Ct. at 61, “if the contractor is bound to build according to plans and specifications prepared by the owner, the contractor will not be responsible for the consequences of defects in the plans and specifications.” Also, the court held in Poorvu that “the government must answer for damage incurred because of inadequate plans it has furnished.” Id., 190 Ct.Cl. at 651, 420 F.2d at 1000.
In this case, plaintiff asserts that the Government designed faulty specifications for Agent Orange because dioxin contaminated the specified defoliant product. The damage plaintiff claims as a result of the faulty specification is, however, the settlement costs it incurred when veterans claimed they were injured by the dioxin in the Agent Orange used for military purposes in Vietnam. Thus, the plaintiff claims that the Government breached the warranty by subjecting the chemical manufacturer to tort liability running to third parties who were injured by the Government’s use of the Agent Orange manufactured by the plaintiff. However, for several reasons, the plaintiff cannot prove that it was actually subjected to tort liability by third parties because of its manufacture of Agent Orange for the Government’s military use. First, dioxin has never been scientifically proven to cause the injuries that the veterans alleged, and second, the plaintiff was protected from liability to the veterans in any event under the Government contractor defense, which is discussed later in this opinion. Thus, to the extent that the warranty of specification does exist in this case, there has been no breach of the implied warranty of specification because the alleged defect in the herbicide has never been proven, and the plaintiff would not have been liable to third parties even if the specifications had been defective due to the Government contractor defense.
It is clear to this Court, after reviewing the many and varied decisions regarding the veterans’ suits against the herbicide manufacturers, that Agent Orange and dioxin have never been proven to cause the injuries claimed by the veterans. As stated
As for damages arising from contract breaches, it is axiomatic that such damages are limited to those that were reasonably foreseeable at the time the parties formed the contract. Hadley v. Baxendale, 9 Ex. 341, 156 Eng.Rep. 145 (1854). In Northern Helex Co. v. United States, 207 Ct.Cl. 862, 888, 524 F.2d 707, 721 (1975), cert. denied, 429 U.S. 866, 97 S.Ct. 176, 50 L.Ed.2d 146 (1976), the court reviewed the rules governing damages for breach of contract and concluded that the authorities support denial of claims where “costs are too remote, speculative, and consequential to be compensable as damages.” In this case, it is apparent that the costs (damages) plaintiff incurred by defending and settling a lawsuit brought by veterans, who were never able to prove that the plaintiff’s product injured them, were not reasonably foreseeable at the time the contract was formed between the Government and the plaintiff.
Plaintiff urges that there is a strong judicial policy favoring settlements and the fact that it settled the underlying case, rather than litigating the issue of its liability to the veterans, should not count against plaintiff in its attempt to recover from the Government for breach of warranty. It is true that settlements are encouraged. See e.g., Ahern v. Central Pac. Freight Lines, 846 F.2d 47, 48 (9th Cir.1988); Janneh v. GAF Corp., 887 F.2d 432, 435 (2d Cir.1989). However, the eases plaintiff cites regarding the recovery of settlements paid to third parties involve indemnification agreements, either implied-in-fact or implied at law. Travelers Ins. Co. v. United States, 493 F.2d 881 (3d Cir.1974); Parfait v. Jahncke Serv., Inc., 484 F.2d 296 (5th Cir. 1973), cert. denied, 415 U.S. 957, 94 S.Ct. 1485, 39 L.Ed.2d 572 (1974). As noted earlier, this Court does not have jurisdiction over contracts implied at law. United States v. Mitchell, 463 U.S. at 218, 103 S.Ct. at 2968. As for an implied-in-fact contract, the factual circumstances do not support one because it simply was not foreseeable to the parties that the Agent Orange class action settlement would come to pass more than a decade after the contracts to supply the defoliant were formed. The facts may support an implied warranty of specification, but they cannot be stretched so far as to support the theory that the parties came to a meeting of the minds that there would be an indemnification agreement between them if the implied warranty of specification was alleged, but never proven, to be violated.
As for plaintiff’s claim of attorney fees, the court in Kania v. United States, 227 Ct.Cl. 458, 467, 650 F.2d 264, 269, cert. denied, 454 U.S. 895, 102 S.Ct. 393, 70 L.Ed.2d 210 (1981), noted that “jurisdiction to award counsel fees and other litigation expenses as an element of breach damages would be extremely dubious. It is the kind of consequential damages not normally awarded in contract breach cases.” Also see Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Overall, “[cjourts do not, in awarding breach damages, follow through the remote indirect consequences of the breach as distinguished from those directly in contemplation when the contract was made.” Kania, 227 Ct.Cl. at 467, 650 F.2d at 269. Thus, plaintiff cannot support a contention that it suffered compensable damages to the amount of its legal fees and costs as a result of the Government’s
Finally, the question remains as to whether plaintiff could ever have been found liable to third parties, even if causation between Agent Orange and veterans’ injuries had been proven. The Government contractor defense would certainly present a serious obstacle to a manufacturer’s liability to military service personnel for defects in products made to Government specifications for military applications. See Boyle v. United Technologies Corp., 487 U.S. 500, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988); Stencel Aero Eng’g Corp. v. United States, 431 U.S. 666, 97 S.Ct. 2054, 52 L.Ed.2d 665 (1977); and Feres v. United States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950). The Government contractor defense will be discussed more fully in a later section of this opinion, but its impact on any liability the plaintiff would have to third parties must be noted at this juncture. The plaintiff asserts, in its arguments involving superior knowledge, that it manufactured the product to detailed specifications and lacked the knowledge it alleges the Government had regarding the hazards of Agent Orange. If this is true, then the plaintiff would avoid liability to third parties based on the Government contractor defense. Boyle, 487 U.S. at 512, 108 S.Ct. at 2518. The plaintiff had an absolute defense. Plaintiff was well aware of this strong defense before it agreed to settle the claims of the veterans because, in 1983, it was granted summary judgment in its favor on the basis of the Government contractor defense, Agent Orange, 565 F.Supp. at 1275, even though plaintiff was later brought back into the case. Thus, in addition to the reasons already discussed above, there was no breach of the warranty of specification based on the manufacturer’s tort liability to third parties supposedly injured by the product because the manufacturer, under the circumstances alleged, was protected from liability by the Government contractor defense.
After consideration of all of the plaintiff’s contractual arguments, it is apparent that most of the theories plaintiff advanced do not apply to hold the Government liable for the amount paid in connection with the settlement of the class action suit. The warranty of specification might apply to the Government based on the detailed specification for the production of Agent Orange. However, plaintiff has failed to come forth with the required quantum of proof regarding the breach of this warranty and the contract damages flowing therefrom. Thus, the moving party is entitled to summary judgment because the nonmoving party, the plaintiff, has “failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof.” Celotex v. Catrett, 477 U.S. at 323, 106 S.Ct. at 2552.
B. The Government Contractor Defense
Even if this Court is in error when it finds no breach and no damages as a matter of law in this case, the plaintiff would still not be able to recover in this action because of the Government contractor defense and the law in regard to contract indemnification. Defendant alleges that, regardless of the resolution of the contractual issues in this matter, the Government contractor defense provides a separate and independent basis for a denial of plaintiff’s claims. Based on the policies underlying the Government contractor defense, the defendant states that the plaintiff cannot be allowed to recover indirectly through this contract suit for reimbursement what the veterans could not recover directly against the Government under the Federal Tort Claims Act, 28 U.S.C. § 2671-80 (1988) (FTCA), i.e., tort damages from the Government payable to military personnel for injuries allegedly sustained while serving on active duty.
Plaintiff counters that the Government contractor defense was not settled law at the time of the settlement with the veterans in the class action suit, so there was the possibility that it might have been held liable to the veterans for billions of dollars. Thus, their decision to settle was very reasonable in the face of the possibility of massive liability. Also, plaintiff argues that the Government, in a brief it filed, argued against the application of the
While the Government contractor defense is certainly important to the resolution of the issues in this case, both parties have neglected to consider crucial matters in support of their respective arguments. What is primarily at issue in this case is the Government’s liability to the plaintiff under these circumstances, not just the plaintiff’s liability to the veterans. Fortunately, this issue has already been considered by the Supreme Court in Stencel, and this Court will follow its clear guidance in the instant case.
In Stencel, a serviceman, who was injured when the ejection system of his fighter aircraft malfunctioned, brought a product liability damage action against the manufacturer, Stencel, and the United States. Stencel cross-claimed against the Government for indemnity claiming that any malfunction in the system was due to faulty Government specifications and components. Based on the earlier Feres case, the Supreme Court upheld the district court’s grant of summary judgment for both the Government and Stencel against the serviceman and also upheld the dismissal of Stencel’s cross-claim against the Government.
In the Feres case, the Supreme Court held that an on-duty serviceman who is injured due to the negligence of Government officials may not recover against the United States under the FTCA. Id., 340 U.S. at 146, 71 S.Ct. at 159. The Supreme Court in Stencel reviewed the Feres decision and concluded that it rested on three factors. First, the Supreme Court found that the relationship between the Government and its military personnel is distinctively federal in character, and, thus, it would not make sense to have the liability of the Government to an injured serviceman depend on the law of the place where the injury occurred. Second, the Supreme Court determined that the statutory compensation scheme, which provides pensions and medical services to injured servicemen without regard to any negligence by the Government, stands as a legal substitute for allowing the Government to be sued in tort for negligence. Third and finally, the Supreme Court concluded that military discipline and the relationship between a soldier and his superiors, which has no counterpart in civilian affairs, might be distorted by the imposition of tort liability. Stencel, 431 U.S. at 671-72, 97 S.Ct. at 2057-58.
In the case of the contractor suing the Government, the Supreme Court determined that the same factors were relevant and that it must “consider the impact of these factors where, as here, the suit against the Government is not brought by the serviceman himself, but by a third party seeking indemnity for any damages it may be required to pay the serviceman.” Id., 431 U.S. at 672, 97 S.Ct. at 2058. The first factor, the application of federal rather than state law, and the third factor, the effect of tort liability on military discipline, operated with equal force in suits by the serviceman and suits by the contractor. Id., 431 U.S. at 672-73, 97 S.Ct. at 2058-59. The second factor, the existence of the military compensation scheme, the Supreme Court found more difficult to apply in the case of the contractor suing to recover funds it had paid the serviceman. However, it concluded that the compensation scheme served the dual purpose of providing an efficient remedy for the injured serviceman and also protected the Government through its limitation of liability provisions which provide an upper limit on the Government’s liability for service-connected injuries. Id., 431 U.S. at 673, 97 S.Ct. at 2059. Thus, in Stencel, 431 U.S. at 673, 97 S.Ct. at 2059, the Supreme Court determined that:
To permit petitioner’s claim would circumvent this limitation, thereby frustrating one of the essential features of the Veterans’ Benefits Act. As we stated in a somewhat different context concerning the Tort Claims Act: “To permit [petitioner] to proceed ... here would be to judicially admit at the back door that which has been legislatively turned away at the front door. We do not believe that the [Federal Tort Claims] Act permits*630 such a result.” [Citations omitted, alterations and omissions in original.]
Therefore, the contractor was not allowed to recover from the Government where the underlying claim for which the contractor was seeking indemnity was made by an injured serviceman. In conclusion, the Court observed that “[s]ince the relationship between the United States and [the contractor] is based on a commercial contract, there is no basis for a claim of unfairness in this result.” Id., 431 U.S. at 674, 97 S.Ct. at 2059.
The situation analyzed in Stencel, a contractor seeking indemnity from the United States for claims made by an injured serviceman, is analogous to plaintiffs claim in this case. Plaintiff in this action is seeking repayment from the Government of amounts it paid to injured military service personnel based on the Government’s provision of specifications for the product which allegedly harmed the military service personnel. While in its later briefs plaintiff has shied away from its request for contractual indemnification, perhaps to avoid the application of the Stencel case, it is clear that indemnity is what plaintiff seeks regardless of the title plaintiff applies to it. Black’s Law Dictionary 769 (6th ed. 1990) defines indemnity as “reimbursement.” Reimbursement of the amounts it paid in settlement and legal fees is what plaintiff requests here, and, thus, the strictures of the Stencel case apply and foreclose plaintiff’s claim that the Government must reimburse it for its costs and fees in connection with the Agent Orange litigation. This suit by the plaintiff is a “back door” attempt to recover from the Government what the Feres doctrine blocked at the front door; that is, damages for injuries suffered by servicepersons in the line of duty. Accordingly, the rationale of Stencel requires this Court to deny the plaintiff’s claim.
The reasoning of Feres and Stencel was later amplified and extended by the Supreme Court in Boyle v. United Technologies Corp., 487 U.S. 500, 108 S.Ct. 2510, 101 L.Ed.2d 442 (1988), which involved an action between private parties but implicated the Federal Government’s interests. In Boyle, a United States Marine co-pilot was killed when his helicopter crashed into the water during a training exercise. Although the Marine survived the impact, he was unable to escape from the submerged helicopter and drowned. Based on state tort law, the Marine co-pilot’s estate sued the Government contractor that built the helicopter, claiming that the escape hatch was designed negligently because it opened outwards and was unusable when the helicopter was under water, due to the pressure of the water outside the submerged craft. The Government contractor (United Technologies) contended that it made the escape hatch to the precise specifications required by its contract with the Government and therefore was not liable under state tort law.
Even though it was a state law tort suit between private parties, the Supreme Court found that “the Federal Government’s interest in the procurement of equipment is implicated by suits such as the present one — even though the dispute is one between private parties.” Id., 487 U.S. at 506, 108 S.Ct. at 2515. Thus, federal law could possibly apply. However, for federal law to displace state tort law, there must be a significant conflict between a federal policy and the operation of the state tort law. Id., 487 U.S. at 507, 108 S.Ct. at 2515. Looking at the Federal Tort Claims Act, 28 U.S.C. §§ 2671-80 (1988) (FTCA), the Supreme Court identified a provision that suggested the outlines of a significant conflict between federal interests and state tort law in the area of Government procurement. While the FTCA authorized suits against the Government for harm caused by the negligent or wrongful conduct of Government employees in certain circumstances, it specifically excepted from consent to suit any claims based on the exercise of a discretionary function by a federal agency or employee, 28 U.S.C. § 2680(a) (1988). Boyle, 487 U.S. at 511, 108 S.Ct. at 2518. The Court determined that:
[T]he selection of the appropriate design for military equipment to be used by our Armed Forces is assuredly a discretion*631 ary function within the meaning of this provision. It often involves not merely engineering analysis but judgment as to the balancing of many technical, military, and even social considerations, including specifically the trade-off between greater safety and greater combat effectiveness. And we are further of the view that permitting “second-guessing” of these judgments * * * through state tort suits against contractors would produce the same effect sought to be avoided by the FTCA exemption. [Citations omitted.]
Id. Thus, the state law, which would hold the Government contractor liable for design defects in military equipment, is displaced by the federal policy and law of deferring to military discretion in the procurement of military equipment embodied in the FTCA.
The Supreme Court in Boyle adopted a three-part test to determine when, to avoid conflict with the discretionary function exception, displacement of state law is appropriate. It stated:
Liability for design defects in military equipment cannot be imposed, pursuant to state law, when (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., 487 U.S. at 512, 108 S.Ct. at 2518. If the contractor satisfies this test, then it is not subject to tort liability under state law for defects in equipment it manufactured for the military in conformance with precise specifications provided by the Government. This is because such liability would infringe on the discretionary function exception to the FTCA by allowing a state court to second-guess indirectly the Government’s judgment in the selection of the appropriate design for military equipment.
The defendant argues here that the plaintiff’s Tucker Act claim for contractual damages, just like a state court tort suit, is an attempt to have the judiciary second-guess the Government’s decision to procure and employ Agent Orange. The defendant claims that this flies in the face of the Government contractor defense and the discretionary function exception and that it does violence to the policy of Government discretion in military procurement which these doctrines protect. Thus, based on the policies underlying the Government contractor defense, the defendant contends that the plaintiff is barred from recovery on its Tucker Act claim.
The Government contractor defense is important to the instant case for two reasons. First, its underlying policies, as expressed in Boyle, are to protect the discretion of the Government in procuring military equipment, as mandated by the discretionary function exception to the FTCA. Therefore, this Court must determine whether these policies apply equally to suits by contractors against the Government as they do to suits by injured military personnel against the contractor, which Boyle addressed specifically. Second, this Court must consider whether the Government contractor defense operated in the suits plaintiff faced and provided plaintiff with such a strong defense that it is without grounds to claim that it was actually in grave danger of being held liable to third parties in tort for injuries stemming from the product it produced for the Government.
This Court agrees with the defendant’s argument that the policies supporting the Boyle decision apply with equal force to an attempt by a Government contractor to sue the Government directly. The Supreme Court in Boyle was concerned with preserving the discretion of the military in choosing the appropriate design for military equipment because this choice involves balancing many conflicting considerations, including the trade-off between safety and combat effectiveness. Id., 487 U.S. at 511, 108 S.Ct. at 2518. This exact same discretion and balancing by the Government is implicated in the case at issue. The Government procured Agent Orange to serve military needs in Vietnam. The product was designed and used to save Ameri
Plaintiff submits that Boyle was several years subsequent to the settlement in this case in 1984, and that, in 1984, the application of the Government contractor defense was at best, uncertain. In effect, plaintiff argues that Boyle created a new doctrine and that it should not be applied retroactively. This raises the second reason for consideration of the Government contractor defense; namely, its availability to the plaintiff as a defense in the state tort suits it faced. The defendant contends that the plaintiff would never have been required to pay the veterans for their alleged injuries because, as a Government contractor, the plaintiff was completely protected by the Government contractor defense. The Government notes that plaintiff was, in fact, granted summary judgment earlier against the opt-out claimants in view of the Government contractor defense in the district court, Opt-Out Opinion, 611 F.Supp. at 1263-64. Also, the United States Court of Appeals for the Second Circuit affirmed on this basis, because “[sjubjecting military contractors to full tort liability would inject the judicial branch into political and military decisions that are beyond its constitutional authority and constitutional competence.” In re “Agent Orange”Prod. Liab. Litig., 818 F.2d at 191.
Plaintiff argues that it is unfair to retroactively apply Boyle, which was decided in 1988, to the issues plaintiff faced at the time of the settlement in 1984. However, this Court is not applying Boyle retroactively. The Government contractor defense existed long before Boyle. See Yearsley v. W.A. Ross Constr. Co., 309 U.S. 18, 60 S.Ct. 413, 84 L.Ed. 554 (1940). Instead, using Boyle as a guide, this Court is applying the holdings of Feres (1950) and Stencel (1977), as discussed earlier, and the discretionary function exception to the FTCA, to the issues presented in this case. Feres, Stencel, and the FTCA were all operative at the time of the settlement in 1984 and would have barred a military contractor’s tort liability to injured military service personnel. In fact, the defense was fully discussed by Judge Pratt in his 1983 decision, which granted the plaintiff’s motion for summary judgment and allowed the plaintiff to be removed from the Settlement case based on the operation of the Government contractor defense. Agent Orange, 565 F.Supp. at 1265. Thus, the later decision in Boyle did not chart a new course for Government contractors. It merely enunciated and clarified the Government contractor defense which already existed.
As a final note, plaintiff also argues that the Government has taken inconsistent positions, by opposing the
C. Contract Indemnification
Plaintiff asserts in all four of its contractual claims that it is entitled to “contractual indemnification.” The exact bases for these claims are unclear, and it appears that these claims are actually allegations made for the purpose of proving damages due to the breach of the warranty of specification which have already been addressed. Nevertheless, plaintiff’s indemnification claims will be resolved separately.
For contractual indemnification to exist and to be actionable in this Court, it must arise from an express or implied-in-fact contract term involved here. There is, of course, no express contract indemnification term. However, even if this Court were to assume, which it does not, that such an implied-in-fact contract term arose from the dealings between the parties, the term itself could not operate to bind the Government. It is clear that the United States cannot be bound by a contract, or a term within a contract, into which its agents were without the legal authority to enter. Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384, 68 S.Ct. 1, 3, 92 L.Ed. 10 (1947). This principal applies regardless of whether or not the contract is express or implied. Sutton v. United States, 256 U.S. 575, 580, 41 S.Ct. 563, 565, 65 L.Ed. 1099 (1921). However, the plaintiff cannot show that the agent of the Government had the authority to enter a binding indemnification agreement because, for indemnity to exist, there must be either a prior appropriation to cover the possible costs of indemnity and/or a statutory exception to this rule permitting such payments. See Matter of: Assumption by Government of Contractor Liability to Third Persons—Reconsideration, 62 Comp.Gen. 361 (1983). This is because an unfunded or unexcepted indemnification term would violate the Anti-Deficiency Act, 31 U.S.C. § 1341 (1988), which bars a federal agency from entering into a contract for future payments in excess of an existing appropriation. The Act states, in pertinent part, that officers or employees of the United States may not:
(A) make or authorize an expenditure or obligation exceeding an amount available in an appropriation or fund for the expenditure or obligation; or
(B) involve [the] government in a contract or obligation for the payment of money before an appropriation is made unless authorized by law.
31 U.S.C. § 1341 (1988).
Thus, in California-Pacific Util. Co. v. United States, 194 Ct.Cl. 703 (1971), the Court of Claims dismissed an indemnification claim brought by a utility company seeking to recover amounts paid in settlement to a federal employee injured by one of its electric poles. The Court stated that:
The United States Supreme Court, the Court of Claims, and the Comptroller General have consistently held that absent an express provision in an appropriation for reimbursement adequate to make such payment, [the Anti-Deficiency Act] proscribes indemnification on the*634 grounds that it would constitute the obligation of funds not yet appropriated.
Id., 194 Ct.Cl. at 715.
In the present case, plaintiff presents no appropriation or statutory exemption which would authorize indemnification in this case. Thus, even if an implied indemnification agreement existed, it would be unenforceable under the Anti-Deficiency Act. Therefore, the plaintiff has no grounds for recovery on any contractual indemnification theory.
In final summary, the plaintiff has failed to convince this Court that it can recover on any one of its four implied-in-fact contract theories. Further, even if any one of its four contract theories could be found to be factually supportable, the plaintiff would still lose this lawsuit because of the application of the Government contractor defense to the undisputed facts and/or the application of the Anti-Deficiency Act bar to any recovery in indemnification by contract.
CONCLUSION
For the reasons stated above, the defendant’s motion for summary judgment is granted, and the complaint is to be dismissed.
Costs to the prevailing party.
. Defendant has, in the alternative, moved to dismiss, pursuant to USCC Rule 12.
. While it has not been proven scientifically or legally, the Vietnam veterans believed that exposure to Agent Orange caused cancer and birth
. Reasor-Hill Corporation, which was purchased by Hercules in 1961, produced herbicides containing, 2,4,5-T or 2,4-D beginning in the early 1950’s.
. The defoliant Agent Orange and Hercules' commercial herbicides were of different concentrations and were applied differently. Agent Orange contained roughly twice as much 2,4,5-T per gallon as the typical Hercules herbicide. Also, the Government used Agent Orange undiluted and sprayed at a rate of 3 gallons per acre, as compared to the dilution of Hercules' herbicide at a ratio of 100 to 1, sprayed at a rate of 1 gallon per acre.
. The Government was not invited to that meeting, and there was evidence that Dow feared Government intervention into, and control of, the entire herbicide industry. Agent Orange, 565 F.Supp. at 1269.
. The court also found that no individual plaintiff could prove which defendant chemical cornpany had manufactured the Agent Orange to which he allegedly had been exposed.
. In addition to the general reporting and registration requirements imposed by FIFRA, 7 U.S.C. § 135a, the act also requires manufacturers to test products prior to marketing them. Specifically, 7 C.F.R. § 162.106 (1949) requires that the manufacturer have the product thoroughly tested by experimenters, and if it is "likely to cause injury to human beings, or desirable plants or animals, its limitations from these standpoints should be determined and adequate cautions placed on the label.”
