On January 20, 2016, the Supreme Court clarified the scope of "Yearsley immunity" – a form of derivative sovereign immunity available to qualifying government contractors – in its decision in Campbell-Ewald Co. v. Gomez. Until two weeks ago, many courts had misconstrued the Supreme Court's 1940 decision, Yearsley v. W.A. Ross Const. Co., 309 U.S. 18, 60 S. Ct. 413 (1940), and held its immunity protected only those government contractors sued in connection with their work on public works projects. The Supreme Court in Gomez, however, confirmed that the Yearsley immunity defense applies so long as the contractor can demonstrate it complied with the government's specifications regardless of whether the subject matter of the contract involved public works.
Thus, after Gomez, the Yearsley derivative sovereign immunity defense may be asserted by all government contractors, not just those working on public works projects. This immunity is not merely a defense against liability – it is immunity from suit that, if available, should be asserted early, at the outset of litigation, especially because a district court's denial of Yearsley immunity may be appealed immediately without waiting for summary judgment or trial. Moreover, a defense based on Yearsley may also be a basis to seek immediate removal of the entire case filed in state court to federal court based on federal officer removal under 28 U.S.C. section 1442(a). To remove a case under the federal officer provision based on Yearsley, however, the defendant contractor need not prove the merits of its immunity defense, but only that it has a "colorable defense" to assert such immunity – a showing deemed to be something less than required on a motion for summary judgment. Because defendants only have 30 days from the service of the complaint (or from the formal service of another pleading or other document first giving rise to the defense) to file their notice of removal, early identification and development of the Yearsley defense is crucial.
While the Supreme Court's decision in Gomez greatly expands the array of government contracts to which Yearsley immunity may be applied, it can only be successfully deployed where the contractor can establish it fulfilled its obligations under the contract and followed the government's specifications and requirements. Therefore, contractors considering asserting immunity based on Yearsley must carefully consider whether the government's specifications or requirements at issue were sufficiently well defined, and whether the harm or damage alleged by the plaintiff resulted from the contractor following the government's specifications or requirements and not the contractor's own negligence or intentional wrongdoing.
In sum, the Gomez decision is a welcome clarification for government contractors who may now assert Yearsley as potential immunity from suit, and a colorable basis for removal of a state court action to federal court, regardless of whether their contracts involved public works projects.
This article is presented for informational purposes only and is not intended to constitute legal advice.
