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Homeowners whose property was damaged by flooding after Hurricane Katrina sued the  contractor that provided engineering and remediation services to the U.S. Army Corps of Engineers in connection with a canal that later breached during Hurricane Katrina.  The trail court granted summary judgment for the contractor based on the government contractor defense – but this was reversed on appeal.  The Fifth Circuit Court of Appeals in the case of Katrina Canal Breaches Litigation v. Washington Group International, Inc., 620 F.3d 455 (5th Cir. 2010), held that the contractor was not entitled to the government contractor defense since the Corps provided only general specifications that were not precise and did not dictate the manner in which the work was to be done.

The contractor had an indefinite delivery/indefinite quantity contract with the Corps known as the Total Environmental Restoration Contract (TERC).  The contract set forth general requirements for all anticipated work by the contractor with the understanding that the Corps would approve a specific Statement of Work (SOW) for each Task Order it issued to the contractor.

Work on the canal in question was performed by the contractor pursuant to a SOW that contained a brief description general description of the work to be done to characterize contaminants at the area and remediate the site in accordance with any applicable environmental standards.  Based on the SOW, the contractor submitted a more detailed work-plan to the Corps for review – which after much back and forth resulted in agreement for how to perform the work in the form of a final Recommendation Report.  After that Report was completed, the Corps issued another SOW with more general directions to the contractor consistent with that Report.  From that SOW, the contractor drafted work plans and submitted them to the Corps for approval.Additional SOWs and work plans later followed due to differing site conditions that were encountered during the work.  Of particular note is the fact that the contractor submitted a proposal that dealt with the excavation and disposal of the newly discovered subsurface structures, and the Corps rejected that proposal as too costly.  The Corps suggested ways to cut costs—including to use on-site borrow matter as the primary source of backfill material.  The final proposal submitted by the contractor incorporated that suggestion by the Corps, and the contractor proceeded to complete the work according to the approved plan.

When Hurricane Katrina struck land, several levees and floodwalls failed—with two of the breaches being in levees near areas where the contractor had done extensive work.  In a class action lawsuit against the contractor, the plaintiffs claimed that the failure of the levees was a result of the negligent and improper backfilling and compaction of the excavated locations by the contractor in violation of the standard of care.  In reviewing whether the government contractor immunity (GCI) was applicable under the factual circumstances, the Fifth Circuit reviewed the applicability of a three-part test that was established by the U.S. Supreme Court in the case of Boyle v. United Technologies Corp., 487 U.S. 500 (1988) which held:

“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.”

Applying the Boyle test to the Katrina claims, the court stated that the first stop of Boyle “requires that the government approved reasonably precise specification [and] [t]hat entails both the existence of reasonably precise specifications and the approval of those specifications by the government.”   Although the Corps in an effort to reduce costs approved specifications that mandated on-site material as the primary source of the backfill material, and also specified that the contractor could import off-site backfill if there was insufficient on-site material available, those specifications were deemed by the court to be “imprecise.”  As stated by the court:

“First, the specifications that authorized the use of on-site backfill material were not reasonably precise in regard to how WGI should parse through all the on-site material to determine which was suitable. The Corps neither mandated the composition of the backfill material nor established precise procedures to test material for its suitability as backfill. The only Corps specification was that the material had to be clean, not contaminated, and not full of debris. Given, however, the wide variety in the types of matter that could be used as backfill material, that specification is not reasonably precise. The composition of the backfill used by WGI serves as one factor in plaintiffs’ tort claim, so it cannot be said that “the specifications address, in reasonable detail, the product design feature, alleged to be defective.” (citation omitted).  The Corps did not approve any specifications regarding the precise composition of the on-site backfill material….

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“But there is no information in the record indicating that the Corps imposed additional requirements regarding the composition of the off-site material, nor is there any indication that the Corps applied any testing process to evaluate the off-site backfill material before approving its use.FN9 Given the absence of reasonably precise specifications in the proposal under which WGI was operating, any such additional evidence is necessary to find that the Corps approved reasonably precise specifications and did not merely allow WGI to exercise principal discretion over the composition of the off-site backfill material.”

An argument was made by the contractor that the Corps approved compaction methods and was therefore responsible for the specification.  The court found, however, that that there were no precise specifications for backfill compaction and did not specify what method the contractor should use for doing compaction.

“The question, however, is not whether the Corps approved of any decision regarding the compaction method. The relevant inquiry, instead, is whether the Corps approved sufficiently precise specifications, such that it is evident that the government was the primary agent of decision over the compaction method. “If the government approved imprecise or general guidelines, then discretion over important design choices would be left to the government contractor.” Trevino, 865 F.2d at 1481. By providing only general instructions regarding the compaction method, the Corps ensured that WGI would have significant discretion over the method chosen. The *465 exercise of that discretion by WGI is not protected by the GCI doctrine.”

In summing up the matter, the court stated “The government contractor defense in Boyle, ‘[s]tripped to its essentials,’ is fundamentally a claim that ‘[t]he Government made me do it.’  To adhere to this basic principle, it is essential that the specifications approved by the government are reasonably precise.”  In this case, the court concluded that the Corps didn’t “make” the contractor use exact backfill material nor “require” it to select the compaction method that it used.  Consequently, the government contractor defense was held to be inapplicable and unavailable.

Comment: Questions concerning the availability of the government contractor defense may be important in the context of the work performed by contractors on the oil spill remediation following the BP – Deep Water Horizon debacle.  I reviewed the contracts that several oil spill response contractors were required to sign with different states and private organizations.  Whereas it seemed those contractor should be protected by a government contractor type of defense under various federal statutes, some of those contracts required the contractors to either waive any potential immunity, and even worse, to indemnify, defend and hold harmless the states and private companies with whom they contracted – even for damages caused for reasons other than the contractor’s negligence.   When the government contracts with a contractor to perform functions such as those that were performed on the canals in New Orleans or the oil spill at the Deep Water Horizon, there should be general support for the government contractor defense to protect these contractors against extraordinary risk they could not contemplate, could not price, and could not reasonably manage – particularly with the frugal budgets the government desires.