Hercules, Inc. v. United States, 516 U.S. 417 (1996)

Hercules, Inc. v. United States

No. 94-818 (1996)

Argued October 30, 1995
Decided March 4, 1996
516 U.S. 417

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

Syllabus

Petitioner chemical manufacturers produced the defoliant Agent Orange under contracts with the Federal Government during the Vietnam era. After they incurred substantial costs defending, and then settling, tort claims by veterans alleging physical injury from the use of Agent Orange, petitioners filed suits under the Tucker Act to recover such costs from the Government on alternative theories of contractual indemnification and warranty of specifications provided by the Government. The Claims Court granted summary judgment against them and dismissed the complaints. The Court of Appeals consolidated the cases and affirmed.

Held: Petitioners may not recover on their warranty of specifications and contractual indemnification claims. Pp. 422-430.

(a) The Tucker Act’s grant of jurisdiction to the Claims Court to hear and determine claims against the Government that are founded upon any "express or implied" contract with the United States, 28 U.S.C. § 1491(a), extends only to contracts either express or implied in fact, not to claims on contracts implied in law, see, e.g., Sutton v. United States, 256 U.S. 575, 581. Because the contracts at issue do not contain express warranty or indemnification provisions, petitioners must establish that, based on the circumstances at the time of contracting, there was an implied agreement between the parties to provide the undertakings that petitioners allege. Pp. 422-424.

(b) Neither an implied contractual warranty of specifications nor United States v. Spearin, 248 U.S. 132, the seminal case recognizing a cause of action for breach of such a warranty, extends so far as to render the United States responsible for costs incurred in defending and settling the veterans’ tort claims. Where, as here, the Government provides specifications directing how a contract is to be performed, it is logical to infer that the Government warrants that the contractor will be able to perform the contract satisfactorily if it follows the specifications. However, this inference does not support a further inference that would extend the warranty beyond performance to third-party claims against the contractor. Thus, the Spearin claims made by petitioners do not extend to post-performance third-party costs as a matter of law. Pp. 424-425.

(c) Although the Government required petitioner Thompson to produce Agent Orange under authority of the Defense Production Act of 1950 (DPA) and threat of civil and criminal fines, imposed detailed specifications, had superior knowledge of the hazards, and, to a measurable extent, seized Thompson’s processing facilities, these conditions do not give rise to an implied-in-fact agreement to indemnify Thompson for losses to third parties. The Anti-Deficiency Act, which bars federal employees from entering into contracts for future payment of money in advance of, or in excess of, an existing appropriation, 31 U.S.C. § 1341, must be viewed as strong evidence that a contracting officer would not have provided, in fact, the contractual indemnification Thompson claims. And the detailed statutes and regulations that enable such contracting officers to provide indemnity agreements to certain contractors show that implied agreements to indemnify should not be readily inferred. Also contrary to Thompson’s argument, the DPA provision specifying that

[n]o person shall be held liable for damages or penalties for any act or failure to act resulting directly or indirectly from compliance with a[n] . . . order issued pursuant to this Act,

50 U.S.C.App. § 2157, does not reveal an intent to indemnify contractors. Likewise, since Thompson claims a breach of warranty by its customer, rather than its seller and supplier, it misplaces its reliance on Ryan Stevedoring Co. v. Pan-Atlantic S. S. Corp., 350 U.S. 124. Finally, petitioners’ equitable appeal to "simple fairness" is considerably weakened by the fact that the injured veterans could not recover from the Government, see Feres v. United States, 340 U.S. 135, and, in any event, may not be entertained by this Court, see United States v. Minnesota Mutual Investment Co., 271 U.S. 212, 217-218. Pp. 426-430.

24 F.3d 188, affirmed.

REHNQUIST, C.J., delivered the opinion of the Court, in which SCALIA, KENNEDY, SOUTER, THOMAS, and GINSBURG, JJ., joined. BREYER, J., filed a dissenting opinion, in which O’CONNOR, J., joined, post, p. 431. STEVENS, J., took no part in the consideration or decision of the case.