696 F.

2d 246

Robert Allen BROWN and Lola V. Brown, Appellants,

v.
CATERPILLAR TRACTOR COMPANY, Appellee.
No. 81-2479.

United States Court of Appeals,

Third Circuit.
Argued April 2, 1982.
Decided Dec. 28, 1982.

John M. Tighe (argued), Tarasi & Tighe, Pittsburgh, Pa., for appellants.
Edward A. McFarland (argued), Robert S. Grigsby, Carl E. Harvison,
Thomson, Rhodes & Grigsby, Pittsburgh, Pa., for appellee.
Before GIBBONS, SLOVITER and BECKER, Circuit Judges.
OPINION OF THE COURT
BECKER, Circuit Judge.

I. Introduction
1

While on weekend duty, United States Army reservist Robert Brown sustained
injuries that he alleges were caused by the defective design of a tractorbulldozer manufactured by Caterpillar Tractor Company ("Caterpillar") for the
Department of the Army.1 Brown was seated in the passenger seat of the
bulldozer as it was clearing some land when a felled tree came over the
bulldozer's blade and struck him. Claiming that he would not have been injured
had the bulldozer been equipped with a protective structure around the
passenger seat, Brown sued Caterpillar under Pennsylvania law on theories of
negligence, breach of express and implied warranties, and strict liability.
Caterpillar moved for summary judgment, arguing that the bulldozer was not
defective as a matter of law, and that the company was insulated from suit
under the "government contractor defense" because it had built the bulldozer to
government specifications. In an opinion containing certain findings of fact, the

district court agreed with both of Caterpillar's contentions and granted summary
judgment.
2

Brown's appeal from summary judgment requires us to determine whether the

record contains any genuine issues of material fact regarding either of
Caterpillar's two contentions: (1) the absence of a defect in the bulldozer; and
(2) the sufficiency of Caterpillar's compliance with the terms of the government
contract and specifications. After scrutinizing the record, we conclude that
there are genuine issues of material fact bearing on the validity of both
contentions, and we therefore must reverse the grant of summary judgment and
remand for further proceedings. We do so, however, only after addressing two
threshold legal issues: (1) whether state or federal law governs this suit; and (2)
the anatomy and scope of the government contractor defense under the
applicable law. We conclude that state law, in this case Pennsylvania law,
governs Brown's suit; that the government contractor defense exists in
Pennsylvania; and that the defense is available against all of Brown's claims.

II. The Choice Between Federal and State Law

3

Although the parties litigated this case under Pennsylvania law before the trial
court, the question arose at oral argument in this Court whether Feres v. United
States, 340 U.S. 135, 71 S.Ct. 153, 95 L.Ed. 152 (1950), and Stencel Aero
Engineering Corp. v. United States, 431 U.S. 666, 97 S.Ct. 2054, 52 L.Ed.2d
665 (1977), require the application of federal law.2 Because the parties had not
previously addressed this issue, we requested that they do so in supplemental
briefs. After careful review of the arguments advanced in those supplemental
briefs, we conclude that there is no merit to Caterpillar's contention that federal
law governs the adjudication of this dispute.

In Feres, the Supreme Court held that the United States cannot be held liable
under the Federal Tort Claims Act for injuries to a serviceman if the injuries
"arise out of or are in the course of activity incident to service." 340 U.S. at
146, 71 S.Ct. at 159. 3 Although the Act incorporates state-created causes of
action by reference, the Court found such incorporation inappropriate in the
military context. In Stencel Aero, the Court explained the considerations that
underlay its decision in Feres:

First, the relationship between the Government and members of its Armed
Forces is " 'distinctively federal in character' " ...; it would make little sense to
have the Government's liability to members of the Armed Services dependent
on the fortuity of where the soldier happened to be stationed at the time of the
injury. Second, the Veterans' Benefits Act establishes, as a substitute for tort

liability, a statutory 'no fault' compensation scheme which provides generous

pensions to injured servicemen, without regard to any negligence attributable to
the Government.
6

431 U.S. at 671, 97 S.Ct. at 2057 (citations omitted). The Stencel Aero Court
added that the Government's immunity from suit for injuries sustained in
conjunction with military service was further justified by " '[t]he peculiar and
special relationship of the soldier to his superiors, the effects of the
maintenance of such suits on discipline, and the extreme results that might
obtain if suits under the Tort Claims Act were allowed for negligent orders
given or negligent acts committed in the course of military duty.' " Id. at 67172, 97 S.Ct. at 2057-2058 (quoting United States v. Brown, 348 U.S. 110, 112,
75 S.Ct. 141, 145, 99 L.Ed. 139 (1954)).

Relying upon this reading of Feres, the Court in Stencel Aero decided that the
United States could not be sued under the Federal Tort Claims Act by a
contractor seeking indemnification for damages paid by it to a member of the
Armed Forces injured in the course of military service. First, the Court
determined that "[t]he relationship between the Government and its suppliers of
ordnance is certainly no less 'distinctively federal in character' than the
relationship between the Government and its soldiers." Id. 431 U.S. at 672, 97
S.Ct. at 2058. "If, as the Court held in Feres, it makes no sense to permit the
fortuity of the situs of the alleged negligence to affect the liability of the
Government to a serviceman ..., it makes equally little sense to permit that situs
to affect the Government's liability to a Government contractor for the identical
injury." Id. Second, the Court concluded,

8 seems quite clear that where the case concerns an injury sustained by a soldier
it
while on duty, the effect of the action upon military discipline is identical whether
the suit is brought by the soldier directly or by a third party. The litigation would
take virtually the identical form in either case, and at issue would be the degree of
fault, if any, on the part of the Government's agents and the effect upon the
serviceman's safety. The trial would, in either case, involve second-guessing military
orders, and would often require members of the Armed Services to testify in court as
to each other's decisions and actions. This factor, too, weighs against permitting any
recovery by petitioner against the United States.
Id. at 673, 97 S.Ct. at 2058. 4
9

The underpinnings of Feres and Stencel Aero do not justify the application of
federal law in this case. Although it may not make sense to permit the fortuity
of the situs of the alleged misfeasance to affect the government's liability, the

same cannot be said of the liability of a government contractor to a serviceman.

Manufacturers who market their products throughout the nation regularly face
the possibility that they will be subjected to different standards of liability in
different jurisdictions. Second, a suit by a serviceman against a government
contractor presents no danger of circumventing the limitations on governmental
liability contained in the Veteran's Benefits Act. Third, because such suits
generally do not necessitate the second-guessing of military decisions
envisioned in Feres and Stencel Aero, they do not pose the same threat to
military discipline as do suits against the Government.
10

In addition, Caterpillar has raised no argument suggesting that the application of

state law would pose a threat to an identifiable federal policy, nor has it cited
any decision that has so held. Indeed, although a substantial number of suits
have been brought by servicemen against military suppliers, in no case has
federal law displaced state law,5 and the courts of appeals in three circuits have
explicitly held that state law governs such suits. 6 We agree: Pennsylvania law,
not federal law, governs the case at bar.

III. The Government Contractor Defense

11

The decision to apply Pennsylvania law does not end our inquiry, for the status
of the government contractor defense in Pennsylvania is far from clear.
Caterpillar submits that compliance with the specifications of a government
contract constitutes a complete defense, regardless of the theory on which the
action is brought. Brown, however, questions the continued vitality of the
government contractor defense in Pennsylvania. In particular, Brown argues
that the defense is not available in an action based on strict liability or breach of
warranty; alternatively, Brown contends that the defense insulates a contractor
from liability only if the contractor demonstrates that it was compelled by the
government to comply with the specifications responsible for causing the
injuries.

12

As Judge Adams remarked in Becker v. Interstate Properties, 569 F.2d 1203,

1204 (3d Cir.1977), cert. denied, 436 U.S. 906, 98 S.Ct. 2237, 56 L.Ed.2d 404
(1978), "[t]he task of a federal court sitting in diversity is frequently not an easy
one, for it must forsake its realm of expertise and assume the aspect of a court
of the forum state." For a number of reasons, we are at a particular
disadvantage in this case. First, although it appears that Pennsylvania courts
have recognized the government contractor defense in negligence actions, they
have never addressed its applicability in the contexts of strict liability and
breach of warranty. Second, there have been significant changes in the direction
of Pennsylvania tort law since the Pennsylvania Supreme Court first announced

the availability of the government contractor defense. Finally, the limited

number of situations in which the Pennsylvania courts have examined the
government contractor defense have not sufficiently defined its contours.
13

Under these circumstances, we must predict how Pennsylvania courts would

decide these issues. See Barris v. Bob's Drag Chutes & Safety Equipment, Inc.,
685 F.2d 94, 98 (3d Cir.1982). To do so, we consider the policies underlying
the applicable legal doctrines, the doctrinal trends indicated by these policies,
and the decisions of other courts. See Pennsylvania Glass Sand Corp. v.
Caterpillar Tractor Co., 652 F.2d 1165, 1167 (3d Cir.1981); McKenna v. Ortho
Pharmaceutical Corp., 622 F.2d 657, 662 (3d Cir.), cert. denied, 449 U.S. 976,
101 S.Ct. 387, 66 L.Ed.2d 237 (1980).

14

First enunciated by the Pennsylvania Supreme Court in Ference v. Booth &

Flinn Co., 370 Pa. 400, 88 A.2d 413 (1952), the government contractor defense
was more fully explored in Valley Forge Gardens, Inc. v. James D. Morrissey,
Inc., 385 Pa. 477, 123 A.2d 888 (1956). Valley Forge Gardens offered two
justifications for the defense.7 The court first reasoned that, although a
government contractor does not enjoy the state's sovereign immunity, "if the
contractor, in privity with the State or its instrumentality, performs the contract
work which the State is privileged to have done, the privilege operates to
relieve the contractor from liability to third persons except for negligence or
willful tort in performance of the work." Id. at 483-84; 123 A.2d at 891.8 This
"privilege" rationale echoes the United States Supreme Court's reasoning in
Yearsley v. W.A. Ross Construction Co., 309 U.S. 18, 20-21, 60 S.Ct. 413,
414, 84 L.Ed. 554 (1940), in which the Court held that a federal contractor was
not liable for injuries resulting from work done pursuant to government
contract: the authority to perform the work had been validly conferred, and the
contractor was not liable for executing the government's will.

15

Second, Valley Forge Gardens offered an "efficiency" rationale--i.e., that the

government contractor defense is essential to the smooth and predictable
operation of government procurement programs:

16 the rule were otherwise, 'the bidding on contracts with a [governmental

[I]f
instrumentality] would be somewhat hazardous, because the contractor could never
know what the amount of damages which he might have to pay to abutting property
[sic] would be.' Also, ... '[t]he contractor's bid is based upon the theory that the
public agency has a legal right to submit its plans and specifications for the work to
be performed, and that if [the contractor] performs the work in accordance with the
plans and specifications he will incur no liability in the absence of negligence.'

17

385 Pa. at 484, 123 A.2d at 891-92 (citations omitted).9

18

Two recent developments in Pennsylvania law might be thought to sap the

vitality of the government contractor defense, particularly as it applies to strict
liability and warranty claims.10 The first development is the Pennsylvania
Supreme Court's abrogation of the doctrine of sovereign immunity in Mayle v.
Pennsylvania Department of Highways, 479 Pa. 384, 388 A.2d 709 (1978). At
first blush, the decision of Pennsylvania's highest court to expose the state itself
to liability would seem to undercut a government contractor's claim to an
immunity that is derived from the government's privilege. But Valley Forge
Gardens made explicit that the privilege there described is distinct from the
state's sovereign immunity; hence the Commonwealth's decision to expose itself
to liability does not necessarily mean that it would also so expose its
contractors.

19

Another development--or, more accurately, series of developments--cautions

hesitation in the extension of the government contractor defense to strict
liability or warranty claims. Since Ference and Valley Forge Gardens,
Pennsylvania has adopted the Restatement (Second) of Torts Sec. 402A,11 see
Webb v. Zern, 422 Pa. 424, 220 A.2d 853 (1966), and its courts have applied
Sec. 402A in a way that characterizes Pennsylvania as a "liberal" state in its
construction of strict liability doctrine. See Bruffett v. Warner
Communications, Inc., 692 F.2d 910 at 922 (3d Cir.1982) (Gibbons, J.,
dissenting) ("[T]he Supreme Court of Pennsylvania in recent years has in many
areas of the law been a leader in adopting reforms in the common law."). In
Salvador v. Atlantic Steel Boiler Co., 457 Pa. 24, 32, 319 A.2d 903, 907
(1974), for example, the Pennsylvania Supreme Court ruled that a manufacturer
of a product "is effectively the guarantor of his products' safety," and in
Azzarello v. Black Brothers Co., 480 Pa. 547, 559, 391 A.2d 1020, 1027
(1978), the Court held that "the term 'unreasonably dangerous' has no place" in
jury instructions in a design defect case. Moreover, Azzarello made clear that
the primary justification for imposing liability for defective products upon
suppliers is risk spreading. Id. at 553, 391 A.2d at 1023-24. Brown argues that
these developments in Pennsylvania tort law should lead to the imposition of
liability upon the supplier of a defective product whether or not the government
demanded the item in its defective state. He observes that any supplier could
respond to the prospect of such liability by raising his bid or seeking
indemnification from the government in order to cover the cost of the risk.

20

Although the question is close, we believe that Pennsylvania would retain the
government contractor defense notwithstanding these intervening developments

in its tort law. We draw this conclusion for several reasons. First, the
Pennsylvania Supreme Court did reaffirm the viability of the government
contractor defense in 1970, see supra note 10, and we are reluctant to say that
the defense has been abandoned after such a recent suggestion to the contrary.
21

Second, the weight of common law authority supports retention of the defense.
Although no Pennsylvania court has reached the issue, a substantial number of
other state and federal courts have recently held that the government contractor
defense applies to strict liability claims. See, e.g., In re "Agent Orange" Product
Liability Litigation, 534 F.Supp. 1046, 1054-56 & n. 1 (E.D.N.Y.1982); Ross v.
M.R.C. Corp., No. 78-956, slip op. at 5-7 (W.D.Pa. August 4, 1980)
(Pennsylvania law), aff'd mem., 642 F.2d 443 (3d Cir.1981); Hunt v. Blasius,
supra note 9; McCabe Powers Body Co. v. Sharp, 594 S.W.2d 592 (Ky.1980);
Sanner v. Ford Motor Co., 144 N.J.Super. 1, 364 A.2d 43 (1976), aff'd, 154
N.J.Super. 407, 381 A.2d 805 (1977), cert. denied, 75 N.J. 616, 384 A.2d 846
(1978); Casabianca v. Casabianca, supra note 9. All of these courts have
concluded that the justifications for the defense in the negligence context apply
with equal force in the context of a strict liability claim. 12 Finally, we expect
that the recent spate of proposed products liability legislation, most of which
incorporates the government contractor defense,13 would persuade the
Pennsylvania Supreme Court of the defense's continued viability.

22

We also believe that Pennsylvania law would make the defense available in the
strict liability context. As noted above, the weight of authority in other
jurisdictions, as well as the tenor of recent and proposed legislation, so
suggests. Such a conclusion also accords with the Pennsylvania Supreme
Court's "privilege" and "efficiency" rationales. If Pennsylvania's public policy
dictates that the contractor should enjoy or share the government's "privilege,"
he should do so regardless of the plaintiff's theory of liability. In addition, to the
extent that the defense lessens disruption of government procurement
operations by enabling contractors to assess their costs accurately and by
encouraging them to bid for government contracts, it is no less disruptive for
contractors to be exposed to strict liability, particularly when, as a practical
matter, most products liability suits are brought on multiple theories.

23

Although these considerations lead us to conclude that the defense is also

applicable to claims based on breach of warranty,14 we add an important caveat:
we do not believe that a contractor's performance in accordance with the
government's specifications would be a defense if the goods furnished to the
government were themselves defective. For example, in General State
Authority v. Coleman Cable & Wire Co., 27 Pa.Commw. 385, 365 A.2d 1347
(1976), the court ruled that a contractor could not be held in breach of warranty

for supplying a certain kind of cable pursuant to a government contract, but that
the contractor could be held liable for breach of warranty if the cable itself
breached any pertinent warranties. This approach is consistent with Ference
and Valley Forge Gardens. Although both cases held that, in the context of a
negligence action, the contractor is insulated from liability when he has acted in
accordance with the contractual specifications, both also stated that the
contractor is not so shielded when he has performed negligently or in a willfully
tortious manner.15
24

Brown argues that there is another, more restrictive limitation on the

availability of the government contractor defense. Invoking Merritt, Chapman
& Scott Corp. v. Guy F. Atkinson Co., 295 F.2d 14 (9th Cir.1961), and Sanner
v. Ford Motor Co., supra, 144 N.J.Super. p. 14, 364 A.2d 43, Brown contends
that Caterpillar cannot avail itself of the defense unless it can show
"compulsion," i.e., that it had no discretion in designing the bulldozer and was
compelled to build it in the manner specified by the government. Brown also
argues that the defense is not available if Caterpillar had been able to suggest
modifications in or additions to the bulldozer's design at any time before final
delivery. Caterpillar, however, submits that compulsion plays no role in the
government contractor defense, and that the company had no obligation beyond
strict compliance with the government's specifications.

25

Caterpillar's argument seems to accord with existing Pennsylvania case law.

Neither Ference nor Valley Forge Gardens mentions compulsion, much less
refers to it as an element of the government contractor defense. Indeed Valley
Forge Gardens makes quite clear that the key to a successful defense is strict
compliance with the government contract. See supra pp. 250-251. At the same
time, Caterpillar's approach fails to take into account the different types of
situations in which the defense is invoked. Some government contracts, for
example, involve comprehensive and detailed specifications. Others, however,
contain rather sketchy specifications that neither require nor preclude a
particular safety device. Under Caterpillar's approach, as long as the safety
device is not mentioned in the specifications, the manufacturer or seller can
invoke compliance as a defense against liability for injury caused by the
device's absence, even if installing the device would cost pennies and eliminate
a risk known to be high. Moreover, Caterpillar's argument ignores the fact that
many government contracts are negotiated, rather than bid on a "take it or leave
it" basis.16 Although the government undoubtedly enjoys the greater bargaining
power in such situations, see United States v. Seckinger, 397 U.S. 203, 216, 90
S.Ct. 880, 887, 25 L.Ed.2d 224 (1970), there is certainly opportunity for input
by the contractor.

26

If we were writing on a clean slate, or were ourselves fashioning the law of

Pennsylvania, we might well be persuaded that a contractor must prove some
degree of compulsion in order to successfully raise the government contractor
defense.17 We are, however, constrained by existing Pennsylvania law, and it
would be inappropriate at this juncture for us to include a compulsion element
on such a speculative basis. The law of the Commonwealth, as it now stands,
places no greater obligation on a contractor than to execute the government's
specifications "carefully." See Patraka v. Armco Steel Co., 495 F.Supp. 1013,
1020 (M.D.Pa.1980). We therefore apply the defense as enunciated in Ference
and Valley Forge Gardens; we now turn to the application of that defense to the
facts of this case.

IV. The Grant of Summary Judgment

27

The district court determined that summary judgment for Caterpillar was
appropriate because, in its view: (1) the facts bearing on the absence of a defect
were undisputed, and the bulldozer was not defective as a matter of law; (2) no
warnings were required by law or by the contract; and (3) Caterpillar had
complied with the government's specifications and was thereby insulated from
liability.

28

In reaching these conclusions, the district court made several findings of fact.
Brown v. Caterpillar Tractor Co., No. 80-1147, slip op. at 2-4 (W.D.Pa. July
17, 1981). First, the court found that the contract between Caterpillar and the
United States did not require a canopy or other overhead protective structure; to
the contrary, the court found that the prescribed test method, requiring the
"mount[ing] of Government-loaned canopy and engine guards," implied that
the specifications did not call for the bulldozer to have its own canopy. The
court buttressed its conclusion with a reference to a government specification
that protective devices were not to impair the bulldozer's "operating functions";
the district court stated that "a canopy would have impaired the military
operation and functions of the [bulldozer] by restricting the operator's field of
view." Id. at 3. Finally, the district court focused upon a specification that a
rifle case be mounted on the bulldozer.

29 fact that the tractor was to be supplied with a rifle case indicates the
The
Government's desire to use the tractor for Military applications and in particular for
the Vietnam war, a conflict which was in progress during the time period pertinent
to this contract. The need for the rifle case is a clear indication that the Government
did not desire a canopy on a tractor. Such a canopy would have interfered with the
military operation and function of the tractor.

30

Id. In short, the court found that "the Government knew of the dangers involved
and did not specify the need or the desire for a canopy except at the
Government's insistence." Id. at 2. The court thus concluded that the absence of
a defect was undisputed and that the bulldozer was not defective as a matter of
law. Having reached that conclusion, the court found that neither the law nor
the contract required any warning that the bulldozer was unsafe if operated
without a canopy. Finally, the court found that Caterpillar had complied with
the specifications and was thereby insulated from liability.

31

Brown contends that it was improper for the district court to have made these
findings on a motion for summary judgment, and that the judgment should be
reversed because there are disputed issues of material fact regarding the
existence of a defect, the requirements of the contract, and Caterpillar's
compliance with the specifications. To support his argument, Brown relies on
answers to interrogatories, various admissions, three exhibits allegedly showing
that Caterpillar participated in designing the bulldozer (or at least had discretion
to change certain features), and the affidavit of his expert in civil engineering,
Dr. James P. Romualdi.18

32

Applying the standards for summary judgment previously enunciated by this

Court,19 we agree with Brown that summary judgment was inappropriate in this
case.

33

Turning first to the question whether the bulldozer was defective, we hold that
Brown's contentions regarding the bulldozer's defects and inadequate
warnings20 were not so obviously baseless that the district judge should have
made findings of fact to the contrary and taken the issues from the jury. Brown
alleges that he was injured as a result of Caterpillar's failure both to equip the
bulldozer with a protective structure around the passenger seat and to warn of
the dangers involved in operating the bulldozer without such a protective
structure. These allegations were supported by Dr. Romualdi's affidavit, which
concluded that the absence of both a protective structure and a warning not only
rendered the bulldozer unsafe for use in land-clearing operations but also
directly caused Brown's injury.21

34

We reach the same conclusion regarding the question whether Caterpillar's

contract performance was sufficient to entitle it to successfully invoke the
government contractor defense. Relying solely on the contract--a veritable tome
of technical specifications, bidding notices, and communications between the
government and Caterpillar--the district court found that the parties neither
intended nor understood a protective structure to be required.

35

We do not agree that the contract so unambiguously reveals the parties' intent.
Brown suggests that the contract's reference to a government-loaned canopy for
testing purposes is probative of the parties' awareness that such a protective
structure was necessary for some uses. In addition, Dr. Romualdi's affidavit
suggests that the bulldozer did not satisfy the government's specifications in
two respects. First, he stated that the specifications required the bulldozer to be
safe for use but that the absence of a protective structure precluded compliance
with that requirement. Second, he opined that Caterpillar's failure to warn that
the bulldozer could not be used safely in land-clearing operations violated the
specification that the bulldozer "shall be equipped with instruction plates or
diagrams, including warnings or cautions, describing any special or important
procedure to be following in assembling, operating, or servicing the
[bulldozer]."

36

Although Dr. Romualdi's interpretation of the contract is inadmissible, see

supra note 21, our independent review of the contract suggests that the
construction advocated by Caterpillar and adopted by the district court does not
necessarily follow as a matter of fact. Summary judgment was thus
inappropriate. "If the non-moving party presents us with a reasonable reading of
the contract which varies from that adopted by the district court, then a question
of fact as to the meaning of the contract exists which can only be resolved at
trial." Landtect Corp. v. State Mutual Life Assurance Co., 605 F.2d 75, 80 (3d
Cir.1979).

37

We do not suggest that the district court's conclusions were incorrect. We only
hold that the contract, on its face, does not reveal the intent of the parties, and
we are not prepared to say that the voluminous and largely unfocused contract
documents, coupled with the ongoing dealings between Caterpillar and the
Army, leave no room for argument that a protective structure was required.22
The question on a motion for summary judgment is not what the facts may be,
but simply whether any disputed material facts exist. As this court stated in
DeLong Corp. v. Raymond International, Inc., 622 F.2d 1135, 1138 n. 2 (3d
Cir.1980) (citations omitted), "Even though a district court's statement of the
undisputed facts may be helpful to a reviewing court, ... it is not appropriate for
a district court to resolve conflicting issues of material fact on a motion for
summary judgment.... Thus, a district court does not engage in fact-finding,
within the meaning of [Fed.R.Civ.P.] 52, on a motion for summary judgment."
Brown had demanded a jury in this case, and, to the extent that the parties'
versions of the facts conflicted, resolution of that dispute was for the jury, not
the court.

38

The district court's grant of summary judgment will be vacated and this case

will be remanded for further proceedings consistent with this opinion.

Jurisdiction is founded upon diversity of citizenship. See 28 U.S.C. Sec. 1332

(1976)

Both parties continue to agree that if state law governs, it is Pennsylvania law
that should be applied

Feres was an action brought by the executrix of a serviceman who had been
killed when the barracks in which he was sleeping caught fire. The complaint
alleged that the United States had been negligent in quartering the decedent in
barracks it knew to be unsafe due to a defective heating plant

The Court also concluded that to permit the third party claim would circumvent
the liability limitation provisions built into the Veterans' Benefits Act

See, e.g., Boeing Airplane Co. v. Brown, 291 F.2d 310 (9th Cir.1961); O'Keefe
v. Boeing Co., 335 F.Supp. 1104 (S.D.N.Y.1971)
In addition, the Supreme Court in Day & Zimmerman v. Challoner, 423 U.S. 3,
96 S.Ct. 167, 46 L.Ed.2d 3 (1975) (per curiam), relied on Klaxon Co. v. Stentor
Electric Manufacturing Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477
(1941), in order to determine which state's law to apply in a suit by a
serviceman against an ordnance supplier. This reliance on Klaxon strongly
implies that state law governs all such suits.

In re "Agent Orange" Product Liability Litigation, 635 F.2d 987 (2d Cir.1980),
cert. denied, 454 U.S. 1128, 102 S.Ct. 980, 71 L.Ed.2d 116 (1981); Foster v.
Day & Zimmermann, Inc., 502 F.2d 867 (8th Cir.1974); Whitaker v. HarvellKilgore Corp., 418 F.2d 1010 (5th Cir.1969)
Although not of precedential effect, the Supreme Court's denial of certiorari in
the Agent Orange litigation merits some consideration. Before passing upon the
certiorari petition, the Court invited the Solicitor General to file a brief
expressing the views of the United States on the choice-of-law question. 452
U.S. 958, 101 S.Ct. 3105, 69 L.Ed.2d 969 (1981). At page nine of his
responding brief, the Solicitor General argued against application of federal
law: "In the judgment of those charged with administering the nation's military
and veterans' affairs, the federal interests involved here are not sufficiently
unique and pressing to warrant the conclusion that 'there exists 'a significant
conflict between some federal policy or interest and the use of state law.' ' "
About one month later, the Court denied the petition for writ of certiorari.

Although both Valley Forge Gardens and Ference involved claims against a
state contractor, we have no doubt that the cases have equal force with regard to
the liability of a federal contractor

Although the Court's language could be interpreted to mean that the

government contractor defense is available only when the underlying cause of
action is not based on negligence, the more plausible reading of Valley Forge
Gardens and Ference is that a government contractor would not be immune if
he negligently deviated from the specifications

Other jurisdictions have invoked other rationales in support of the defense.

Some courts have reasoned that the defense is necessary in order to reduce the
government's costs in obtaining goods and services. See, e.g. Dolphin Gardens,
Inc. v. United States, 243 F.Supp. 824, 827 (D.Conn.1965); Hunt v. Blasius, 55
Ill.App.3d 14, 12 Ill.Dec. 813, 817-818, 370 N.E.2d 617, 621-22 (1977), aff'd
on other grounds, 74 Ill.2d 203, 23 Ill.Dec. 574, 384 N.E.2d 368 (1978). One
court has suggested that the defense is akin to vicarious sovereign immunity.
See Green v. ICI America, Inc., 362 F.Supp. 1263, 1265 (E.D.Tenn.1973).
Another court has reasoned that the defense is an offshoot of military necessity
if the contractor is a military supplier in time of war. See Casabianca v.
Casabianca, 104 Misc.2d 348, 428 N.Y.S.2d 400 (Sup.Ct.1980). In re "Agent
Orange" Product Liability Litigation, 506 F.Supp. 762, 793 (E.D.N.Y.1980),
theorized that the defense recognizes that holding the contractor liable serves
no deterrent effect when the government is the responsible party

10

In its only other opinion on the government contractor defense, Lobozzo v.

Adam Eidemiller, Inc., 437 Pa. 360, 263 A.2d 432 (1970), the Pennsylvania
Supreme Court held that the rule of Valley Forge Gardens did not apply to a
case involving injuries caused by blasting, which the court classified as an
ultrahazardous activity. In so holding, the court reformulated the government
contractor defense so that it "applies in the absence of negligence, willfully
tortious conduct, or activities, such as blasting, for which liability without fault
is imposed." Id. at 365, 263 A.2d at 435. We do not think that Lobozzo stands
for more than the proposition that the defense is ineffective against a claim for
injuries arising out of an ultrahazardous activity

11

Section 402A states:

(1) One who sells any product in a defective condition unreasonably dangerous
to the user or consumer or to his property is subject to liability for physical
harm thereby caused to the ultimate user or consumer, or to his property, if
(a) the seller is engaged in the business of selling such a product, and

(b) it is expected to and does reach the user or consumer without substantial
change in the condition in which it is sold.
(2) The rule stated in Subsection (1) applies although
(a) the seller has exercised all possible care in the preparation and sale of his
product, and
(b) the user or consumer has not bought the product from or entered into any
contractual relation with the seller.
Restatement (Second) of Torts Sec. 402A (1965).
12

To the extent that the recent developments discussed in the text may have
undercut the rationales advanced in Valley Forge Gardens, we believe that the
Pennsylvania Supreme Court is likely to adopt the justifications for the defense
that have been advanced by other courts, see supra note 9

13

In particular, the United States Department of Commerce Task Force on

Product Liability, under the chairmanship of Professor Victor E. Schwartz, has
promulgated a Uniform Product Liability Law, reprinted at 44 Fed.Reg. 62714
(1979), which codifies the government contractor defense at section 108:
Sec. 108. Relevance of Legislative or Administrative Regulatory Standards and
Mandatory Government Contract Specifications
....
(C) When the injury-causing aspect of the product was, at the time of
manufacture, in compliance with a mandatory government contract
specification relating to design, this shall be an absolute defense and the
product shall be deemed not defective under Subsection 104(B), or, if the
specification related to warnings or instructions, under Subsection 104(C) or
105(A).
(D) When the injury-causing aspect of the product was not, at the time of
manufacture, in compliance with a mandatory government contract
specification relating to design, the product shall be deemed defective under
Subsection 104(B), or, if the specification related to warnings or instructions,
under Subsection 104(C) or 105(A).
The analysis following Sec. 108 states:
Subsection (C) addresses a highly specialized problem with respect to a product

that had been manufactured strictly in accordance with mandatory

specifications set forth in a government contract. When compliance with such a
standard leads to an injury, the government, not the product seller, is the
appropriate defendant. As the court in Hunt v. Blasius, 55 Ill.App.3d 14, 12
Ill.Dec. 813, 817-818, 370 N.E.2d 617, 621-22 (1977), indicated, 'public policy
dictates that bidders who comply strictly with governmental specifications
should be shielded from liability in any respect in which the product complies.'
When enacting this provision, a legislature should ensure that its own state
government bears financial responsibility (either through tort law or through a
compensation system) for the harm it has caused by directing that the product
conform to contract specifications.
Subsection (D) provides a counterweight to Subsection (C). If the bidder fails to
comply with a mandatory government contract specification, and this failure to
comply caused the claimant's injury, the product seller will [sic] deemed liable
under Subsection 104(B) if the specification related to design, or under
Subsection 104(C) or 105(A) of [sic] the specification related to instruction or
warnings. If the manufacturer's compliance exceeded the government
regulation and the product failed, liability should not be imposed under this
Section--in that case, the technical 'failure to comply' would not be the
proximate cause of the injury that befell claimant.
14

We are again influenced by similar conclusions of courts in other jurisdictions,

see, e.g., In re "Agent Orange" Product Liability Litigation, supra, 534 F.Supp.
at 1055-56; Casabianca v. Casabianca, supra note 9, as well as the Uniform
Law's recognition of this defense in this context, see Uniform Product Liability
Law, supra note 13, Sec. 102(D), 44 Fed.Reg. at 62717 (defining "product
liability claims" to include breach of express or implied warranty). We also
note the practical similarity between Sec. 402A claims and breach of warranty
claims under Pennsylvania law. See Salvador v. Atlantic Steel Boiler Co., 457
Pa. 24, 319 A.2d 903 (1974); MacDougall v. Ford Motor Co., 214 Pa.Super.
384, 388, 257 A.2d 676, 678 (1969)

15

This limitation also suggests that, in the strict liability context, Pennsylvania
would recognize the government contractor defense for claims of defective
design but not for claims of defective manufacture

16

In 1980, "85-90% of all federal contract dollars ... were let through negotiated
procurements." Comment, Requests for Proposals in State Government
Procurement, 130 U.Pa.L.Rev. 179, 181 (1981) (citing Commission on
Government Procurement, 1 Report of the Commission on Government
Procurement 20 & n. 25 (1971) )

17

We are particularly troubled by the scenario in which the specifications are

skeletal, the contract is negotiated, and the contractor, knowing of a high risk of
serious harm, fails to install a relatively inexpensive safety device. We therefore
find appealing the Uniform Law's reference to "compliance with a mandatory
government contract specification." Uniform Product Liability Law, supra note
13, Sec. 108(C), 44 Fed.Reg. at 62730
We also find attractive the novel approach adopted by Judge Pratt in In re
"Agent Orange" Product Liability Litigation, 534 F.Supp. 1046
(E.D.N.Y.1982). Responding to plaintiffs' contention that the manufacturing
chemists possessed greater knowledge of Agent Orange's toxic properties than
did the government, Judge Pratt formulated the government contractor defense
as follows:
A supplier ... has a duty to inform the military of known risks attendant to a
particular weapon that it supplies, so as to provide the military with at least an
opportunity fairly to balance the weapon's risks and benefits.... [T]he court ...
concludes that a defendant in this case will be entitled to judgment dismissing
all claims against it based on that defendant's having supplied "Agent Orange"
to the government pursuant to a contract, if the defendant proves:

That the government established the specifications for "Agent Orange";

That the "Agent Orange" manufactured by the defendant met the government's
specifications in all material respects; and

That the government knew as much as or more than the defendant about the
hazards to people that accompanied use of "Agent Orange."
Id. at 1055. See also Note, Liability of a Manufacturer for Products Defectively
Designed by the Government, 23 B.C.L.Rev. 1025 (1982) (arguing that the
"government contract defense" is overly broad because it provides no incentive
for contractors to avoid reckless conduct).
The record does not suggest, however, that we are faced in this case with either
the above-described scenario or the situation envisioned by Judge Pratt.

18

Caterpillar submitted no affidavits with its motion for summary judgment, but
relied instead upon the pleadings, answers to interrogatories, admissions, and
depositions. These papers included the contract

19

Fed.R.Civ.P. 56(c) permits summary judgment only "if the pleadings,

depositions, answers to interrogatories, and admissions on file, together with
the affidavits, if any, show that there is no genuine issue as to any material fact

and that the moving party is entitled to a judgment as a matter of law." The
burden of demonstrating the absence of all genuine issues of material fact rests
on the moving party, Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct.
1598, 1608, 26 L.Ed.2d 142 (1970); all inferences from the evidence must be
drawn in favor of the party opposing the motion, Small v. Seldows Stationery,
617 F.2d 992 (3d Cir.1980); and summary judgment may not be granted if there
is "the slightest doubt" about material facts, Tomalewski v. State Farm Life
Insurance Co., 494 F.2d 882, 884 (3d Cir.1974)
20

Under Pennsylvania law, either defective design or the absence of a warning

may be sufficient to support a finding that a product is defective. Greiner v.
Volkswagenwerk Aktiengeselleschaft, 540 F.2d 85 (3d Cir.1976)

21

Dr. Romualdi's opinion was based on his review of the contractual documents
between Caterpillar and the United States, Caterpillar's responses to Brown's
request for admissions, and Brown's deposition, as well as Dr. Romualdi's
inspection of the bulldozer and the scene of the accident. Although we
disregard the portion of the affidavit containing legal conclusions, Dr.
Romualdi's opinions about design safety are admissible, See Knight v. Otis
Elevator Co., 596 F.2d 84, 87-88 (3d Cir.1979), as are his opinions about
causation, see Nielson v. Armstrong Rubber Co., 570 F.2d 272, 276-77 (8th
Cir.1978). "[W]here ... affidavits are submitted to oppose the grant of summary
judgment, opinion evidence is appropriately considered to support the existence
of a disputed issue of fact." Paton v. LaPrade, 524 F.2d 862, 871 (3d Cir.1975)

22

In concluding that the contract did not call for a protective canopy, the district
court also found, without support in the record, that such a structure would have
impaired the bulldozer's use in military maneuvers. The court's reliance on this
finding also suggests that summary judgment was inappropriate. "Although the
interpretation of a written contract that is clear and unambiguous is for the
court, ... once the court determines that [extrinsic] evidence is pertinent to the
construction of an ambiguous contract; [sic] it is for the jury to resolve the
ambiguities and find the parties' intent." Chuy v. Philadelphia Eagles Football
Club, 595 F.2d 1265, 1271 (3d Cir.1979) (en banc) (citations omitted)