News: Sovereign Immunity upheld for a Government Contractor

Updated: Feb 10, 2020

The Fourth Circuit Court of Appeals recently affirmed a lower court decision to dismiss a Telephone Consumer Protection Act (“TCPA”) lawsuit against General Dynamics Information Technology, Inc. (“GDIT”), on the basis that GDIT was immune from suit as a government contractor under what is known as the “Yearsley doctrine.” Craig Cunningham v. GDIT, No. 17-1592 (Apr. 24, 2018). This decision is significant for government contractors that are sued by third parties for alleged injuries arising from the performance of federal contracts. The court's court’s discussion and application of Yearsley immunity confirms availability and viability of the defense in a variety of contexts, including when contractors are sued under state tort law.

The decision is consistent with a long line of Fourth Circuit decisions in which contractors have been granted protection from liability when they perform work that supports important governmental functions.

GDIT was hired to assist the Centers for Medicare and Medicaid Services (“CMS”), a government agency, by calling individuals using an auto-dialer and a pre-approved script to provide information about their health insurance options under the Affordable Care Act. When plaintiff received one of these calls, he filed a lawsuit alleging that GDIT had violated the TCPA for failing to obtain his prior consent.

The Fourth Circuit agreed with the lower court, finding that GDIT was immune from suit under the Supreme Court’s Yearsley doctrine. In Yearsley, the Supreme Court held that the doctrine of sovereign immunity that traditionally applies to the U.S. government may be extended to government contractors in instances where (1) the government authorized the contractor’s actions in question; and (2) the government “validly conferred” such authorization. Yearsley v. W.A. Ross Construction Co., 309 U.S. 18, 20-21 (1940).

On appeal, Plaintiff argued that the lower court erred in applying Yearsley because: (1) the doctrine only applies to state law claims, not federal statutory claims; (2) the government did not authorize GDIT’s actions; (3) the government cannot “validly confer” the authority to engage in conduct that violates the law; and (4) the doctrine is a merits defense from liability rather than a source of jurisdictional immunity.

The Fourth Circuit rejected each of these arguments, finding that :

  1. Nothing in Yearsley limits its applicability to state law claims, and the defense may be asserted to bar a court’s jurisdiction over certain federal claims;

  2. GDIT faithfully performed the duties specified in its contract with the government;

  3. “The purpose of Yearsley immunity is to prevent a government contractor from facing liability for an alleged violation of law, and thus, it cannot be that an alleged violation of law per se precludes Yearsley immunity”;

  4. Yearsley is a jurisdictional defense, which deprives federal courts of jurisdiction to hear certain claims against government contractors, and

  5. The parties had conducted enough jurisdictional discovery to provide the plaintiff “sufficient procedural safeguards” and the court sufficient information to justify dismissal on Rule 12(b)(1) grounds (i.e., “75 days of limited discovery on the applicability of Yearsley, which included six subpoenas, four Touhy requests, numerous other document requests, six depositions of GDIT and CMS employees, and supplemental briefing on the issue”).

This of course is an important protection for government contractors that substantially mitigates the risk of contractors performing on behalf of the government.

#governmentcontractor #sovereignimmunity #SupremeCourt #FourthCircuit #BusinessLaw