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Carley v. Wheeled Coach

filed: April 16, 1993; As Corrected April 21, 1993. Second Correction May 6, 1993. Third Correction August 5, 1993.

MARY CARLEY, APPELLANT
v.
WHEELED COACH



On Appeal from the District Court of the Virgin Islands. (Civ. No. 89-00094).

Before: Becker, Cowen and Roth, Circuit Judges.

Author: Cowen

Opinion OF THE COURT

COWEN, Circuit Judge.

Plaintiff Mary Carley appeals the grant of summary judgment dismissing her claim for personal injuries caused by an alleged design defect in an ambulance manufactured by defendant Wheeled Coach Industries, Inc. ("Wheeled Coach"). The issue in this appeal is whether the manufacturer of a nonmilitary product may assert the government contractor defense, recognized in Boyle v. United Technologies Corp., 487 U.S. 500, 108 S. Ct. 2510, 101 L. Ed. 2d 442 (1988), in a strict products liability action based on a design

defect. We conclude that the government contractor defense is available to nonmilitary contractors under federal common law. However, because Wheeled Coach failed to prove that it warned the United States government of dangers in its ambulance known to Wheeled Coach but not to the government, we will reverse the grant of summary judgment and remand for trial.

I.

Plaintiff Mary Carley is an emergency medical technician employed by the Virgin Islands Department of Health at St. Croix Hospital. On September 2, 1988, she was on duty and riding as a passenger in a 1987 Ford E-350 Type II 6.9 liter diesel-powered ambulance manufactured by Wheeled Coach, a Florida corporation. While the ambulance was en route to the scene of an emergency, an automobile failed to properly yield the right-of-way. The ambulance made an evasive maneuver and flipped over. Carley suffered injuries to her knee and back, including a herniated disk. A police officer who witnessed the accident reported that the ambulance was driven in a reasonable and safe manner for an emergency situation.

The ambulance was manufactured by Wheeled Coach pursuant to a contract (No. GS-OOF-89100) with the United States General Services Administration ("GSA"). The GSA solicited bids for the manufacture of the ambulance in compliance with the Federal Specification for Ambulance KKK-A-1822B, dated June 1, 1985, which was incorporated into the contract. After Wheeled Coach completed the ambulance, a GSA quality assurance inspector examined it, concluded that it complied with contract specifications, and released it for shipment.

On April 4, 1989, Carley filed suit against Wheeled Coach in the District Court of the Virgin Islands (Civ. No. 89-94), alleging strict products liability and breach of warranty arising from the manufacture and sale of an ambulance with a design defect. Carley claimed that the ambulance was unreasonably prone to turn over during intended use because of an excessively high center of gravity. One of the affirmative defenses raised by Wheeled Coach was the government contractor defense. Wheeled Coach claimed that it was immune from liability because it built the ambulance in the performance of its obligations under a contract with the United States government.

Wheeled Coach moved for summary judgment and the district court granted the motion. The court concluded that either federal common law or Virgin Islands law governed the dispute, and that under either body of law, the government contractor defense is available to nonmilitary contractors and was established by Wheeled Coach as a matter of law. Carley moved for reconsideration on the grounds that Florida law applies, and Florida law does not recognize a government contractor defense for nonmilitary contractors. See Dorse v. Armstrong World Indus., Inc., 513 So. 2d 1265, 1269 (Fla. 1987). The district court denied her motion, concluding that even if this suit were governed by state law instead of federal common law, Virgin Islands law would apply and render Wheeled Coach immune. Carley appealed.

The district court had jurisdiction under 28 U.S.C. § 1332(a)(1) (1988), and we have jurisdiction under 28 U.S.C. § 1291 (1988). Our review of a grant of summary judgment is plenary. Clement v. Consolidated Rail Corp., 963 F.2d 599, 600 (3d Cir. 1992). We apply the same test as the district court under Fed. R. Civ. P. 56(c), asking whether there remains a genuine issue of material fact, and if not, whether the moving party is entitled to judgment as a matter of law. Id. We view all facts and all inferences therefrom in the light most favorable to the nonmoving party, in this case the plaintiff Carley. Id.

II.

In Boyle v. United Technologies Corp., 487 U.S. 500, 507-08, 108 S. Ct. 2510, 2515-16, 101 L. Ed. 2d 442 (1988), the Supreme Court held that before state tort law is applied in a products liability action involving the government contractor defense, it must first be determined whether state law is in significant conflict with the federal interests associated with federal procurement contracts. The Court announced a three-prong test for determining when state tort law is displaced by federal common law in a suit against a military contractor:

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. at 512, 108 S. Ct. at 2518; Maguire v. Hughes Aircraft Corp., 912 F.2d 67, 70 (3d Cir. 1990). If all three prongs are met, the government contractor defense is established and the defendant manufacturer is immune from liability under state law.

In Boyle, the Court specifically applied the government contractor defense in the context of a military procurement contract. The defendant manufacturer built a military helicopter with an allegedly defective escape hatch in compliance with specifications provided by the United States. 487 U.S. at 502-03, 108 S. Ct. at 2513. The Court, however, did not address whether the government contractor defense is also available to manufacturers of nonmilitary products, an issue which has generated a significant split in authority.*fn1 We conclude that the reasoning of Boyle applies to both military and nonmilitary contractors.*fn2

The Court initially observed that a few areas involving uniquely federal interests are so committed to federal control by the Constitution and laws of the United States that state law is preempted and replaced, where necessary, by federal common law. Id. at 504, 108 S. Ct. at 2514. The Court identified two areas of unique federal concern: the obligations to and rights of the United States under its contracts, id. at 504-05, 108 S. Ct. at 2514 (citing United States v. Little Lake Misere Land Co., 412 U.S. 580, 592-94, 93 S. Ct. 2389, 2396-97, 37 L. Ed. 2d 187 (1973)), and the civil liability of federal officials for actions taken in the course of their duty, id. at 505, 108 S. Ct. at 2514-15 (citing Westfall v. Erwin, 484 U.S. 292, 295, 108 S. Ct. 580, 583, 98 L. Ed. 2d 619 (1988)). Though neither of these two lines of precedent involved a federal interest unique to the military, they provided the basis for judicial recognition of the government contractor defense. See id. at 504-07, 108 S. Ct. at 2414-15.

The Court also relied heavily on Yearsley v. W.A. Ross Construction Co., 309 U.S. 18, 60 S. Ct. 413, 84 L. Ed. 554 (1940) (cited in Boyle, 487 U.S. at 506, 108 S. Ct. at 2515), in which a construction company damaged the property of riparian landowners while constructing dikes pursuant to a contract with the United States government. The construction project was authorized by an act of Congress and supervised by federal officials. The Court held that the contractor could not be held liable for damages under state law, reasoning that "if [the] authority to carry out the project was validly conferred, that is, if what was done was within the constitutional power of Congress, there is no liability on the part of the contractor for executing its will." Id. at 20-21, 60 S. Ct. at 414.

This same rationale, which is equally applicable to military and nonmilitary contractors, underlies the modern government contractor defense. A private contractor who is compelled by a contract to perform an obligation for the United States should, in some circumstances, share the sovereign immunity of the United States. Though the contractor in Yearsley was an agent of the United States, id., while the contractor in Boyle and the present case were independent contractors, this distinction was not significant to the Court in Boyle. See 487 U.S. at 505-06, 108 S. Ct. at 2515. The Court regarded the federal interest in a performance contract in Yearsley as being essentially the same as the federal interests in procurement contracts. See id. "The liability of independent contractors performing work for the Federal Government . . . is an area of uniquely federal interest." Id. at 505 n.1, 108 S. Ct. at 2515 n.1. The imposition of liability on an independent contractor who enters into a procurement contract with the United States directly implicates the significant federal interest in the completion of the government's work. See id. at 505, 108 S. Ct. at 2515. That significant federal interest exists regardless of whether the procurement contract is military or nonmilitary in nature.

The Court in Boyle acknowledged that there is a unique federal interest in all contracts in which the government procures equipment, not just those with military suppliers. See id. at 506-07, 108 S. Ct. at 2515-16. The Court described how tort actions against government contractors can harm the government: "The 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, 108 S. Ct. at 2515-16. Thus, without the government contractor defense, it would be more difficult and costly for the government to acquire products. The government would suffer this economic harm regardless of whether it procured a product for military or civilian use.

The strongest reason for making the government contractor defense available to all contractors is the Court's express rejection of the Feres doctrine as the basis of the defense, and its reliance instead on the discretionary function exception of the Federal Tort Claims Act ("FTCA"), 28 U.S.C. § 2680(a) (1988). See Boyle, 487 U.S. at 510-11, 108 S. Ct. at 2517-18. The Feres doctrine renders the United States immune from tort liability for injuries to servicemen arising out of or in the course of activity incident to military service. Feres v. United States, 340 U.S. 135, 146, 71 S. Ct. 153, 159, 95 L. Ed. 152 (1950); see also Stencel Aero Eng'g Corp. v. United States, 431 U.S. 666, 673-74, 97 S. Ct. 2054, 2059, 52 L. Ed. 2d 665 (1977) (United States not liable for indemnification of government contractor that paid damages to serviceman injured during military service). Prior to Boyle, courts generally considered Feres to be the source of the government contractor defense. See, e.g., Koutsoubos v. Boeing Vertol, Div. of Boeing Co., 755 F.2d 352, 354 (3d Cir.), cert. denied, 474 U.S. 821, 106 S. Ct. 72, 88 L. Ed. 2d 59 (1985); McKay v. Rockwell Int'l Corp., 704 F.2d 444, 449 (9th Cir. 1983), cert. denied, 464 U.S. 1043, 104 S. Ct. 711, 79 L. Ed. 2d 175 (1984). In Boyle, however, the Court explicitly rejected Feres as the basis for the defense, reasoning that the Feres doctrine is too broad because it would render contractors immune for injuries caused by any standard equipment purchased by the government, and too narrow because it would permit state regulation of military decisions through tort actions brought by civilians. Boyle, 487 U.S. at 510-11, 108 S. Ct. at 2517-18. Instead of relying on Feres, which applies only to torts arising out of military service, the Court instead relied on the discretionary function exception of the FTCA, which applies to government action in both military and nonmilitary matters.

The FTCA authorizes damages suits against the United States for injuries caused by the tortious conduct of any federal employee acting within the scope of his employment, to the same extent that a private person would be liable under state law. 28 U.S.C. § 1346(b) (1988). This waiver of sovereign immunity, however, does not apply to "any claim . . . based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government, whether or not the discretion involved be abused." Id. § 2680(a). In Boyle, the Court stated that the discretionary function exception of the FTCA suggests the outlines of a "significant conflict" between federal interests and state law in the procurement context which would justify displacement of state law. 487 U.S. at 511, 108 S. Ct. at 2518. The Court concluded that the selection of military equipment designs by the armed forces is a discretionary function within the meaning of section 2680(a), for the following reasons:

[Selection of military equipment designs] 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. The financial burden of judgments against the contractors would ultimately be passed through, substantially if not totally, to the United States itself, since defense contractors will predictably raise their prices to cover, or to insure against, contingent liability for the Government-ordered designs.

Id. at 511-12, 108 S. Ct. at 2518 (citation omitted). Though government contracts for nonmilitary products do not involve considerations of combat effectiveness, all of the other policy reasons cited by the Court in support of the government contractor defense are equally applicable to military and nonmilitary procurements.*fn3 To determine the design of a nonmilitary product, the government sometimes may engage in complex engineering analysis and may trade off product safety in favor of other technical, economic, or social considerations. If nonmilitary contractors were not protected by a government contractor defense, their increased financial burdens would pass through to the government. Also, allowing state tort actions against nonmilitary contractors who have complied with government contracts would, in effect, empower state authorities to "second-guess" federal policy decisions respecting the design of products for use in civilian projects. See United States v. S.A. Empresa de Viacao Aerea Rio Grandense (Varig Airlines), 467 U.S. 797, 814, 104 S. Ct. 2755, 2765, 81 L. Ed. 2d 660 (1984) (The purpose of the discretionary function exception is to prevent "judicial 'second-guessing' of legislative and administrative decisions grounded in social, economic, and political policy through the medium of an action in tort.").

After Boyle, the discretionary function exception to the FTCA indicates the scope of the government contractor defense. Id. at 511, 108 S. Ct. at 2518. We therefore must consider whether the government performs a discretionary function when, with knowledge of safety risks, it determines the design of a nonmilitary product and procures it through a contract. If such action falls within the exception, then the government is immune from tort liability, and the supplier should be able to raise the government contractor defense.

In Dalehite v. United States, 346 U.S. 15, 73 S. Ct. 956, 97 L. Ed. 1427 (1953), a ship loaded with ammonium nitrate fertilizer exploded in a Texas harbor. The fertilizer was produced by private contractors at government plants according to government specifications. The Court held that the government was not liable for injuries caused by the explosion because it performed a discretionary function under 28 U.S.C. § 2680(a) when it planned the fertilizer shipment program, determined the ingredients of the fertilizer, and determined the methods for coating, storing, and shipping it. See id. at 37-42, 73 S. Ct. at 969-71. The Court stated that the discretionary function exception "includes more than the initiation of programs and activities. It also includes determinations made by executives or administrators in establishing plans, specifications or schedules of operations. Where there is room for policy judgment and decision there is discretion." Id. at 35-36, 73 S. Ct. at 968 (footnote omitted).

Other courts have held that when the government determines the design of a roadway or bridge, it performs a discretionary function under section 2680(a) and is immune from tort liability for injuries caused by alleged defects in design. See Miller v. United States, 710 F.2d 656, 666-67 (10th Cir.), cert. denied, 464 U.S. 939, 104 S. Ct. 352, 78 L. Ed. 2d 316 (1983); Wright v. United States, 568 F.2d 153, 158-59 (10th Cir. 1977), cert. denied, 439 U.S. 824, 99 S. Ct. 94, 58 L. Ed. 2d 117 (1978); Schmitz v. United States, 796 F. Supp. 263, 268 (W.D. Mich. 1992); Baum v. United States, 765 F. Supp. 268, 275-76 (D. Md. 1991). The government also performs a discretionary function under section 2680(a) when it makes a decision regarding the design, purchase, and resale of Post Office vehicles and therefore is not liable for injuries caused by defects in those vehicles. See Jurzec v. American Motors Corp., 856 F.2d 1116, 1118-20 (8th Cir. 1988) (government's sale of postal jeep with cursory warning of its rollover propensity was a discretionary act); Myslakowski v. United States, 806 F.2d 94, 99 (6th Cir. 1986) (government's sale of postal jeep with no warning of its rollover propensity was a discretionary act), cert. denied, 480 U.S. 948, 107 S. Ct. 1608, 94 L. Ed. 2d 793 (1987); Ford v. American Motors Corp., 770 F.2d 465, 467 (5th Cir. 1985) (same); Shirey v. United States, 582 F. Supp. 1251, 1262 (D.S.C. 1984) (same). "Both the evaluation of actual or suspected hazards, and the decision to proceed in a particular manner in light of those hazards, are protected discretionary acts, not subject to tort claims in the district court." Ford, 770 F.2d at 467. The Post Office's discretionary decision to order or sell postal vehicles with particular design hazards is analogous to the GSA's procurement of ambulances (or other nonmilitary products) with potentially dangerous designs. Both fall within the scope of section 2680(a).

The Court in Boyle premised the government contractor defense on the discretionary function exception of the FTCA, and we believe that the government performs a discretionary function when it procures a nonmilitary product with an awareness of its dangers. We therefore conclude that the government contractor defense is available to nonmilitary contractors.*fn4

Our holding is consistent with Burgess v. Colorado Serum Co., 772 F.2d 844, 846 (11th Cir. 1985), and Boruski v. United States, 803 F.2d 1421, 1430 (7th Cir. 1986). In Burgess, the court held that the government contractor defense was not limited to military products and therefore could be raised by the manufacturer of a brucellosis vaccine. After observing that the defense originated in cases immunizing private contractors from liability arising out of public work projects, 772 F.2d at 846 (citing Yearsley, 309 U.S. at 18, 60 S. Ct. at 413; Myers v. United States, 323 F.2d 580 (9th Cir. 1963)), the court concluded that the rationale of the defense is the extension of sovereign immunity, and that in circumstances where the government would not be liable, private actors acting pursuant to government directives should not be liable either. Id. Thus, the court reasoned that it would be illogical to limit the defense to military contractors, because any contractor who acts in the sovereign's stead and meets the ...


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