Hercules Inc. v. U.S., s. 92-5124

• Decision Date: 04 May 1994
• Docket Number: Nos. 92-5124,92-5138,s. 92-5124
• Citation: 24 F.3d 188
• Parties: HERCULES INCORPORATED, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee. WM. T. THOMPSON COMPANY, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 188

24 F.3d 188

HERCULES INCORPORATED, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

WM. T. THOMPSON COMPANY, Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

Nos. 92-5124, 92-5138.

United States Court of Appeals,

Federal Circuit.

May 4, 1994.

Rehearing and Suggestion for Rehearing In Banc Denied and

Declined July 7, 1994.

Gregory W. Homer, Atty., Anderson, Kill, Olick & Oshinsky, Washington, DC, argued, for plaintiff-appellant, Hercules Inc. With him on the brief, were Nancy A. Markowitz and Jerold Oshinsky. Of counsel was Walter S. Rowland, Hercules Inc., of Wilmington, DE.

David S. Fishback, Asst. Director, U.S. Dept. of Justice, Washington, DC, argued, for defendant-appellee. With him on the brief, were Stuart M. Gerson, Asst. Atty. Gen., J. Patrick Glynn, Director, Torts Branch, Stephen M. Doyle and Burke M. Wong.

Alan Dumoff, Atty., Swankin & Turner, Washington, DC, argued, for plaintiff-appellant, Wm. T. Thompson Co. With him on the brief, was James S. Turner.

Stephen M. Doyle, Atty., U.S. Dept. of Justice, Washington, DC, argued, for defendant-appellee. With him on the brief, were Stuart M. Gerson, Asst. Atty. Gen., J. Patrick Glynn, Director, Torts Branch, David S. Fishback, Asst. Director, and Burke M. Wong.

Before PLAGER, CLEVENGER, and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

In these consolidated appeals, Hercules Incorporated (Hercules) and Wm. T. Thompson Company (Thompson), respectively, appeal the April 2 and April 22, 1992 judgments of the United States Claims Court. ¹ In those judgments, the court dismissed Hercules' and Thompson's complaints after granting the motions of the United States for summary judgment. ² Hercules and Thompson, who are chemical manufacturers, had sought to recover the sums they contributed to a fund established in connection with the settlement of a district court class action tort suit brought against them and other companies by and on behalf of individuals who were exposed to a defoliant known as "Agent Orange" during the Vietnam War. Hercules and Thompson also had sought to recover the attorney fees and expenses incurred in that litigation. ³ Finding no error in the Claims Court's decisions, we affirm the judgments.

BACKGROUND

The following facts are not in dispute:

A. Historical

In the mid to late 1960s, Hercules and Thompson were members of a group of chemical companies that manufactured Agent Orange for the United States military. Agent Orange is a blend of equal parts of 2,4-Dichlorophenoxyacetic Acid (2,4-D) and 2,4,5-Trichlorophenoxyacetic Acid (2,4,5-T), both of which are phenoxy herbicides. Hercules, Inc. v. United States, 25 Cl.Ct. 616, 618 (1992). Depending on its method of production, Agent Orange may contain varying amounts of 2,3,7,8 Tetrachlorodibenzo-p-dioxin (dioxin), an extremely toxic substance. Id. The military used Agent Orange during the Vietnam War to defoliate large areas of forest so that Viet Cong and North Vietnamese troops could not hide beneath the foliage from view of aircraft. The military mixed the Agent Orange produced by the various chemical companies and stored the mixture in large drums. Id. at 619. During the relevant period, the government and the military had considerable knowledge of hazards associated with 2,4,5-T and dioxin. In re "Agent Orange" Prod. Liab. Litig., 565 F.Supp. 1263, 1266 (E.D.N.Y.1983).

Hercules began producing phenoxy herbicides containing 2,4,5-T in 1961. Hercules, 25 Cl.Ct. at 619. It produced Agent Orange for the government between May 8, 1964, and May 20, 1968, pursuant to fifteen separate contracts. Id. The military supplied the formula and specifications for manufacturing Agent Orange, with which Hercules complied. Id. In its complaint in the Claims Court, Hercules alleged that it manufactured and supplied Agent Orange pursuant to the Defense Production Act of 1950, 50 U.S.C. app. Sec. 2061-2170 (1964) (hereinafter, DPA). ⁴ In 1965, Hercules learned of the health risks associated with 2,4,5-T and changed its method of production to eliminate dioxin from its product. Id.; In re "Agent Orange", 565 F.Supp. at 1274. From 1966 to 1970, Hercules' product was not measurably contaminated with dioxin. Id.

Thompson produced phenoxy herbicides containing 2,4,5-T and 2,4-D in the 1950s and 1960s. Thompson, however, originally declined to bid on the government's solicitation to chemical manufacturers for the production of Agent Orange. Wm. T. Thompson Co. v. United States, 26 Cl.Ct. 17, 20 (1992). In due course, however, the government invoked the DPA and required Thompson to supply Agent Orange pursuant to two contracts dated April 19, 1967, and May 24, 1968. In re "Agent Orange", 565 F.Supp. at 1272. Between September 1967 and January 1969, Thompson supplied Agent Orange to the military. Id. There is no evidence that Thompson was aware of the health risks associated with Agent Orange. Id. at 1273. As in the case of Hercules, the government provided the formula and specifications for Agent Orange without any input from Thompson.

B. The Agent Orange Litigation

Starting in 1979, numerous tort actions were filed by Vietnam veterans and their families against the various chemical manufacturers who produced Agent Orange for the government, including Hercules and Thompson. The tort actions alleged that the veterans' exposure to dioxin contained in Agent Orange produced by the chemical companies had caused various health problems for the plaintiffs, such as cancer, miscarriages, and birth defects. The Judicial Panel on Multi-District Litigation consolidated these tort actions in the United States District Court for the Eastern District of New York, under the heading MDL No. 381. The court certified a class comprising all veterans claiming injuries who had served in or near Vietnam between 1961 and 1972, pursuant to Fed.R.Civ.P. 23(b)(3). The certified class also included the veterans' spouses Hercules and Thompson, along with several other defendant manufacturers, moved for summary judgment in the district court on the ground that, because of their status as government contractors, the government contractor defense shielded them from liability for any injuries to the veterans or their families allegedly caused by exposure to Agent Orange. In re "Agent Orange", 565 F.Supp. at 1265. ⁵ In a previous pretrial order, the district court had defined the contours of the government contractor defense as follows:

parents, and children (born before January 1, 1984) directly or derivatively injured as a result of the veterans' exposure. In re "Agent Orange" Prod. Liab. Litig., 506 F.Supp. 762, 787-92 (E.D.N.Y.1980). Plaintiffs were allowed to "opt out" of the Rule 23(b)(3) class by May 1, 1984. Id. As discussed below, nearly 300 of the plaintiffs opted out.

[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:

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

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

3. That the government knew as much or more than the defendant about the hazards to people that accompanied use of "Agent Orange."

Id. (quoting In re "Agent Orange" Prod. Liab., 534 F.Supp. 1046, 1055 (E.D.N.Y.1982)).

On May 20, 1983, the district court granted summary judgment for Hercules and Thompson, along with two other manufacturers of Agent Orange, finding that they met the requirements of the "government contract defense." Id. at 1273, 1274. In so ruling, the district court framed the "central issue" as whether the third element of the government contractor defense had been established, i.e., "whether the government knew as much as or more than the contracting defendant about the hazards to people that accompanied the use of 'Agent Orange.' " Id. at 1265.

With respect to Hercules, the district court concluded that because its "product was dioxin-free, Hercules had no knowledge of harm from dioxin contamination caused by its product and thus did not know more than the government about hazards associated with the use of its product." Id. at 1274.

In Thompson's case, the district court concluded that although the evidence established that Thompson may have had "knowledge of possible health hazards related to the manufacture of Agent Orange[, the evidence did not establish] knowledge in Thompson of hazards to users." Id. at 1273 (emphasis supplied). In contrast, the district court believed that "it [was] clear by 1967, when Thompson first contracted to manufacture Agent Orange, the government had a significant amount of knowledge about dioxin ... and its association with ... health problems." Id.

Hercules' and Thompson's victory in the district court proved to be short-lived, however. After summary judgment was entered in their favor and in favor of the other two Agent Orange manufacturers--but before a judgment of dismissal was entered--the case was transferred to another judge in the Eastern District of New York. In November of 1983, the transferee judge reconsidered the issue and denied the summary judgment motions of Hercules and Thompson. See In re "Agent Orange" Prod. Liab. Litig., 597 F.Supp. 740, 753 (E.D.N.Y.1984).

On May 7, 1984, the date that trial would have begun in the class action suit, the parties reached a settlement. The settlement called for the creation of a $180 million settlement fund, with each defendant contributing to the fund in proportion to its percentage of the total volume of Agent Orange produced, with a factor for the level of dioxin in the particular manufacturer's product. In re "Agent Orange", 597 F.Supp. at 748. Hercules' share of the settlement was about ten percent, valued at $18,772,568. Thompson's Upon settlement of the class action, the defendant...