ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA (Civil Action No. 80-1147).
Gibbons, Sloviter, and Becker, Circuit Judges.
While on weekend duty, United States Army reservist Robert Brown sustained injuries that he alleges were caused by the defective design of a tractor-bulldozer manufactured by Caterpillar Tractor Company ("Caterpillar") for the Department of the Army.*fn1 Brown was seated in the passenger seat of the bulldozer as it was clearing some land when a felled tree came over the bulldozer's blade and struck him. Claiming that he would not have been injured had the bulldozer been equipped with a protective structure around the passenger seat, Brown sued Caterpillar under Pennsylvania law on theories of negligence, breach of express and implied warranties, and strict liability. Caterpillar moved for summary judgment, arguing that the bulldozer was not defective as a matter of law, and that the company was insulated from suit under the "government contractor defense" because it had built the bulldozer to government specifications. In an opinion containing certain findings of fact, the district court agreed with both of Caterpillar's contentions and granted summary judgment.
Brown's appeal from summary judgment requires us to determine whether the record contains any genuine issues of material fact regarding either of Caterpillar's two contentions: (1) the absence of a defect in the bulldozer; and (2) the sufficiency of Caterpillar's compliance with the terms of the government contract and specifications. After scrutinizing the record, we conclude that there are genuine issues of material fact bearing on the validity of both contentions, and we therefore must reverse the grant of summary judgment and remand for further proceedings. We do so, however, only after addressing two threshold legal issues: (1) whether state or federal law governs this suit; and (2) the anatomy and scope of the government contractor defense under the applicable law. We conclude that state law, in this case Pennsylvania law, governs Brown's suit; that the government contractor defense exists in Pennsylvania; and that the defense is available against all of Brown's claims.
II. The Choice Between Federal and State Law
Although the parties litigated this case under Pennsylvania law before the trial court, the question arose at oral argument in this Court whether Feres v. United States, 340 U.S. 135, 95 L. Ed. 152, 71 S. Ct. 153 (1950), and Stencel Aero Engineering Corp. v. United States, 431 U.S. 666, 52 L. Ed. 2d 665, 97 S. Ct. 2054 (1977), require the application of federal law.*fn2 Because the parties had not previously addressed this issue, we requested that they do so in supplemental briefs. After careful review of the arguments advanced in those supplemental briefs, we conclude that there is no merit to Caterpillar's contention that federal law governs the adjudication of this dispute.
In Feres, the Supreme Court held that the United States cannot be held liable under the Federal Tort Claims Act for injuries to a serviceman if the injuries "arise out of or are in the course of activity incident to service." 340 U.S. at 146.*fn3 Although the Act incorporates state-created causes of action by reference, the Court found such incorporation inappropriate in the military context. In Stencel Aero, the Court explained the considerations that underlay its decision in Feres :
First, the relationship between the Government and members of its Armed Forces is "'distinctively federal in character'" . . .; it would make little sense to have the Government's liability to members of the Armed Services dependent on the fortuity of where the soldier happened to be stationed at the time of the injury. Second, the Veterans' Benefits Act establishes, as a substitute for tort liability, a statutory 'no fault' compensation scheme which provides generous pensions to injured servicemen, without regard to any negligence attributable to the Government.
431 U.S. at 671 (citations omitted). The Stencel Aero Court added that the Government's immunity from suit for injuries sustained in conjunction with military service was further justified by "'the peculiar and special relationship of the soldier to his superiors, the effects of the maintenance of such suits on discipline, and the extreme results that might obtain if suits under the Tort Claims Act were allowed for negligent orders given or negligent acts committed in the course of military duty.'" Id. at 671-72 (quoting United States v. Brown, 348 U.S. 110, 112, 99 L. Ed. 139, 75 S. Ct. 141 (1954)).
Relying upon this reading of Feres, the Court in Stencel Aero decided that the United States could not be sued under the Federal Tort Claims Act by a contractor seeking indemnification for damages paid by it to a member of the Armed Forces injured in the course of military service. First, the Court determined that "the relationship between the Government and its suppliers of ordnance is certainly no less 'distinctively federal in character' than the relationship between the Government and its soldiers." Id. at 672. "If, as the Court held in Feres, it makes no sense to permit the fortuity of the situs of the alleged negligence to affect the liability of the Government to a serviceman . . ., it makes equally little sense to permit that situs to affect the Government's liability to a Government contractor for the identical injury." Id. Second, the Court concluded,
it seems quite clear that where the case concerns an injury sustained by a soldier while on duty, the effect of the action upon military discipline is identical whether the suit is brought by the soldier directly or by a third party. The litigation would take virtually the identical form in either case, and at issue would be the degree of fault, if any, on the part of the Government's agents and the effect upon the serviceman's safety. The trial would, in either case, involve second-guessing military orders, and would often require members of the Armed Services to testify ...