The Ninth Circuit, however, strongly disagreed, calling the government’s position “so off the mark as to be embarrassing,” and labeling its assertion of the defense a “lapse” in the government’s obligation.

On June 2, 2003, the United States Court of Appeals for the 9th Circuit issued its decision in the case of Cervantes v. United States, reinstating a lawsuit by a Mexican citizen against the United States or allegedly selling him a vehicle containing 119 pounds of marijuana welded into its bumpers.

Mr. Cervantes, a 67 year old man with no criminal record, purchased a car at a U.S. Customs auction. He was later arrested by U.S. Customs while attempting to drive the same vehicle into the United States, when agents discovered 119 pounds of marijuana welded into the car’s bumpers. Mr. Cervantes was confined for 3 and ½ months, until Customs concluded that the marijuana was so old that it may have been in the car before Mr. Cervantes purchased the vehicle at auction.

The primary issue on appeal in Cervantes was whether the United States is immune from suit under the “detention of goods” exception to the Federal Tort Claims Act (FTCA). Under the FTCA, the United States can be sued and held liable “in the same manner and to the same extent” as a private entity, with certain exceptions. One of the exceptions is “claims arising… in respect of… the detention of goods by any officer of customs.” In Cervantes, the United States asserted that this exception barred Cervantes’ claim, and the trial court agreed, dismissing the case.

Most remarkable about Cervantes is the strong language of the opinion, which all but assumes negligence liability on behalf of the government without any consideration of other potential immunity defenses (or facts that might be proved at trial). Transcripts of oral argument indicate that the Court even ordered the parties to go outside and attempt to settle the matter, underscoring the Court’s assumptions regarding liability. In closing its written opinion, the Court stated: “In asserting the detention of goods exception as its defense, rather than compensating a plaintiff it has seriously wronged, the United States thumbs its nose at its obligation to see that justice is done.”

The Court went significantly out of its way to chastise the United States Attorney for its position, invoking the language of Berger v. United States, a venerable and well-known criminal case in which the U.S. Supreme Court emphasized the prosecutor’s role- as an agent of the government-to seek justice, rather than merely to obtain a conviction. In translating this duty to civil cases, the Court appears to have elevated the duty of the government in civil cases- by statute, liable “in the same manner and to the same extent as a private individual under like circumstances”- to ensure reparation of all wrongs potentially caused by its actions.

Notably, while emphasizing the higher duty of the United States Attorney to seek justice, the Court distinguished the obligations of the government from those of private party litigants- who apparently remain free to assert defenses to civil liability- but this in itself raises special concerns for those private companies that perform work for the government.

Query: Given the Court’s willingness to assume liability on the government’s part- with no evidence or record otherwise establishing duty breach, or causation- what exposure do government contractors at the state and federal level face when third parties are harmed by a government action or program?

The Government Contractors’ Defense.

Generally, a non-negligent government contractor is not liable for harm caused to a third party for performance of a contract with the government according to its terms. This rule was first announced in Brenner v. Atlantic Dredging Company 134 NY 156, 31 NE 328 (1892), and has been followed uniformly by virtually every federal and state court to consider the issue. The U.S. Supreme Court adopted the rule in Yearsley v. Ross Construction Company, 309 U.S. 18 (1940); and the Ninth Circuit followed suit in Myers v. United States, 323 F.2d 580 (9th Cir. 1963). California courts also recognize this as the general rule; see Gruner v. Barber (1962) 207 Cal.App.2d 54.

These cases create a “safe harbor” for government contractors who faithfully perform the requirements of a government contract. During 1986 the U.S. Supreme Court affirmed and expanded the defense to include state products liability causes of action in Boyle v. United

TechnologiesCorp., 487 U.S. 500; 108 S.Ct 2510 (1986), holding that where the product complies with the requirements of the government contract, and the contractor informs the government of any dangers known to the contractor and not the government, the contractor may not be held liable under theories of product liability.

Government contractors have been held liable because they were negligent in the manner in which they performed the contract, or the contract vested discretion in the manner of performance with the contractor- thus giving rise to a duty in the exercise of that discretion.

Given the state of the law, and the increasing perception of the government as the insurer of last resort against all harm to society, government contractors must be vigilant in defining and performing their duties for government agencies. For example, a contractor can define duties under a government contract to ensure that (1) all discretionary functions- decisions regarding policy for which governments are immune from suit- are vested in the government agency, and (2) that the contractors duties are clearly spelled out, so that faithful performance of the duties provides a safe harbor against claims of third parties who may be injured by the government action.