Amicus Curiae Brief — Boeing Co., The v. United States, (2009) (No. 1302)

Siam. Cot, LS

FILED

Nos. 09-1298, 09-1302; [7 ‘jf 47}

IN THE a **98* 427 c

Supreme Court of the United States

GENERAL DYNAMICS CORPORATION,

Petitioner,

Vv.

UNITED STATES,

Respondent.

THE BOEING COMPANY, SUCCESSOR TO

MCDONNELL DOUGLAS CORPORATION,

Petitioner,

Vv.

UNITED STATES,

Respondent.

On Writ of Certiorari

to the United States Court of Appeals

for the Federal Circuit

BRIEF OF THE CHAMBER OF COMMERCE

OF THE UNITED STATES OF AMERICA

AS AMICUS CURIAE IN SUPPORT

OF PETITIONERS

ROBIN S. CONRAD CARTER G. PHIL1.1PS*

NATIONAL CHAMBER RICHARD KLINGLER

LITIGATION CENTER, INC. KATHLEEN M. MUEI.ER

1615 H. Street, N.W. SIDLEY AUSTIN LLP

Washington, DC 20062 1501 K Street, N.W.

(202) 463-5337 Washington, D.C. 20005

(202) 736-8000

cphillips@sidley.com

Counsel for Amicus Curiae

November 19, 2010 * Counsel of Record

WILSON-EPES PRINTING CO ,INC - (202) 789-0096 — WASHINGTON, D. C. 20002 pe

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TABLE OF CONTENTS

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INTEREST OF THE AMICUS CURIAE.............

INTRODUCTION AND SUMMARY OF ARGU-

B.

Il.

ELIMINATING DEFENSES AGAINST A

GOVERNMENT CLAIM BASED ON THE

STATE SECRETS DOCTRINE WOULD

CREATE COMMERCIAL UNCERTAIN-

TY, IMPAIRING THE PROVISION OF

GOODS AND SERVICES NEEDED FOR

THE NATIONAL DEFENSE.......0................

A.The United States Has Always Relied

On Contractors To Provide Goods And

Services For The National Defense,

Including Those Needed For Classified

I dindencthninncnnscpupiesdantindtuentamingiaiiiients

B.The Federal Circuit's Rule Would

Undermine The Contractual Certainty

That Underpins The Defense Sector’s

Ability To Provide Goods And Services

To The Government ...................cccccceceeeeeees

THE STATE SECRETS PRIVILEGE CAN

AND SHOULD BE IMPLEMENTED TO

PROTECT BOTH THE GOVERNMENT'S

MILITARY AND INTELLIGENCE

SECRETS AND THE CONTRACTUAL

RIGHTS OF DEFENSE CONTRACTORS...

(1)

6

10

14

i

TABLE OF CONTENTS—continued

Page

A.The State Secrets Privilege Should

Reflect And Protect The Government’s

Authority To Control Access To

Classified Information .............0....0....0...00. 15

B.A Claim Raised In Litigation Must Be

Dismissed If The State Secrets Privilege

Precludes Litigation Of Either The

Plaintiffs Claim Or The Defendant’s

ei 18

C.The Government May Not Use The

State Secrets Privilege As A Sword To

Further Its Claims Against Defense

SET ee eS eT SE AEROS NS 22

IIIT: cisccuistsiicoussinontesteniomsinnnesanianssdipenietoiaims 29

ill

TABLE OF AUTHORITIES

CASES Page

Bannum, Inc. v. United States, 91 Fed. Cl.

RE ae pee wee See On ee Rae 1]

Bareford v. Gen. Dynamics Corp., 973 F.2d

DR GEER GP. FIED cccoscccesesceccsecsessecssese 9, 19, 20

Bentzlin v. Hughes Aircraft Co., 833 F.

Supp. 1486 (C.D. Cal. 1993) ...............0...... i)

Bittaker v. Woodford, 331 F.3d 715 (9th

TR I sicssscessantsaposassensonexersnsnscne 23

Cabiri v. Gov't of Ghana, 165 F.3d 193 (2d

I ss sau usleniesdumsenmtoneinanonenstacines 24

CIA v. Sims, 471 U.S. 159 (1985) ........-........ 16

Crater Corp. v. Lucent Techs., Inc., 423

I’.3d 1260 (Fed. Cir. 2005) ..........0..00.00.0.025. 9

Dept of Navy v. Egan, 484 U.S. 518

ESTE TES eee ee esa ENDO eae Tea 16

Kkl-Masri vy. United States, 479 F.3d 296

ERE ep enn eee rae 19, 21

Fitzgerald v. Penthouse Int'l, Ltd., 776 F.2d

DBS CGE Cie. BBBB) .......000.ceccccceccccsceessesces. 20

Fla. Engineered Constr. Prods. Corp. v.

United States, 41 Fed. Cl. 534 (1998) ....... 12

Gardner v. New Jersey, 329 U.S. 565

ear el 24

Hepting v. AT&T Corp., 439 F. Supp. 2d

Pe ey Ae BR iccsnctninsecsnedecsccosecdinccncss 9

Kasza v. Browner, 133 F.3d 1159 (9th Cir.

SINNED cesacieccincabhiertiidammmaneatdatéeenedspgneaubnenedies 20

Lapides v. Bd. Of Regents, 535 U.S. 613

IIx ci coches cdalindideinliianteiaa ined sendaiaadaadiainrauaneedanes 23

Lichter v. United States, 334 U.S. 742

STII <sdcieninneiidiniidadsiddmnmiamaaataieeacieesioe 8%, 26

Lindsey v. Normet, 405 U.S. 56 (1972)......... 27

Lynch v. United States, 292 U.S. 571

PTE cs duseousscontsrsatacibidiacsuplnaecaieeuineccenie 10

lV

TABLE OF AUTHORITIES —continued

Pape

Malone v. United States, 849 F.2d 144]

I cece 10, 11

Mohamed vy. Jeppesen Dataplan, Inc., 614

F.3d 1070 (9th Cir., 2010) ...........0.0000.ccc eee. 9, 2]

Molerio v. FBI, 749 F.2d 815 (D.C. Cir.

SLATE ere 20, 21

Mullane v. Cent. Hanover Bank & Trust,

Ce. 338 U.S. 306 (OGO)............0..200000002........ 20

Nejad v. United States, 724 F. Supp. 753

I: I i i aleemaubceniens i)

Nelson v. Adams USA, Jnc., 529 U.S. 460

a a ee ee

Roviaro v. United States, 353 US. 53

RTE SI eres Er Py Hee a er ea EP 24

Seaboard Lumber Co. v. United States, 903

F.2d 1560 (Fed. Cir. 1990) ........0000000000....... }2

Tenenbaum v. Stmonini, 372 F.3d 776 (6th

ae ccadeupedes 20

Tenet v. Doe, 544 U.S. 1 (2005) .....000000.00000.... 2)

United States v. Burr, 25 F. Cas. 30 (C.C.D.

Va. 1807) (No. 14692D)..............0..........0008. 17

United States v. Reynolds, 345 US. 1

REE EERE ERIS ip ek ie eos a One Te passim

United States v. Rylander, 460 U.S. 752

a eeelatamenubeisaaennes 23

United States v. Smith, 780 F.2d 1102 (4th

caine sseevepsisnecuesssesinesgunes 24

United States v. U.S. Fid. & Gear. Co., 309

a sudaeeeenevansennien> 24

United States v. Winstar Corp. 518 US.

SIRE eres reer ore 4,6, 13, 14, 28

Wehling v. CBS, 608 F.2d 1084 (5th Cir.

a ae enaneeenmaeres 23

Zuckerbraun yv. Gen. Dynamics Corp., 544

Fe Pe Ge GAs RIOD cesccccescciceescnsscsencosvns 21

TABLE OF AUTHORITIES—continued

STATUTES AND REGULATIONS Page

i eT OI ci nsticccctetctnnsdaciccoieniens 24

iia carcasectinidetnieahiibenankciiain 24

28 U.S.C. §$ 1605(a)(1) .........ceceseececeecesesceseseee 24

kt SS 24

ae Tk” eae 10, 11, 12, 26

| RARSPRREEEREE nna oreerceeiacrw nvm onr ee 11

SEER RIERA ean near a eee 11

it aiicccciniemcncrtectiasnesatisdslielindieesientaiaile 16

eee Ee ee ae ee ee 10

ee See ae ee 11

EXECUTIVE ORDERS

Exec. Order 12829, 58 Fed. Reg. 3479 (Jan.

ESSERE eit ae oer meet momar 16

Exec. Order 13526, 75 Fed. Reg. 707 (Dec.

A TE sscenccbiimniguinigriananiiadanmbeniiantintiwnss 16

SCHOLARLY AUTHORITY

Harold J. Krent, Reconceptualizing Sovere-

ign Immunity, 45 Vand. L. Rev. 1529

a a ar 10, 28

OTHER AUTHORITIES

Gov't Accountability Office, DOD Assess-

ments of Supplier-Base Availability for

Future Defense Needs, available at

http://www.gao.gov/new.items/d10317r.

vl

TABLE OF AUTHORITIES—continued

Gov't Executive, Top 100 Defense Con-

tractors (Aug. 15, 2010), available at

http://www.govexec.com/story_page_pf.

cfm ’?articleid=45909&printerfriendlyvers

Info. Security Oversight Office, Classified

Information Nondisclosure Agreement

Briefing Booklet, available at http://www.

archives. gov/isoo/training/standard-form-

RUE RE eRe SS a eate cee

Moshe Schwartz, Congressional Research

Serv., Defense Acquisitions: How DOD

Acquires Weapon Systems and Recent

Efforts to Reform the Process (July 10,

2009), available at http://www.fas.org/

sgp/crs/natsec/RL34026.pdf .............0..0..004.

U.S. Dep’t of Commerce, Statistical Ab-

stract of the United States: 2010,

available at http://www.census.gov/prod/

2009pubs/10statab/defense.pdf .................

U.S. Dep’t of Homeland Security, National

Infrastructure Protection Plan, Defense

Industrial Base, available at http://

www.dhs.gov/xlibrary/assets/nipp_

snapshot_defenseindustrialbase.pdf.........

Page

8

INTEREST OF THE AMICUS CURIAE

The Chamber of Commerce of the United States of

America (the Chamber) submits this brief as amicus

curiae in support of petitioners General Dynamics

Corporation and The Boeing Company.!

The Chamber is the world’s largest business

federation. The Chamber represents more than

300,000 direct members and indirectly represents an

underlying membership of more than three million

companies and professional organizations of every

size, in every industry sector, and from every region

of the country. An important function of the

Chamber is to represent the interests of its members

in matters before Congress, the Executive Branch,

and the courts. To that end, the Chamber regularly

files amicus briefs in cases that raise issues of vital

concern to the nation’s business community. This is

such a case.

Many members of the Chamber do business with

the federal government. The Chamber also

represents businesses in industries, such as defense

and acrospace, transportation, information

technology, and telecommunications, which long have

served the nation by entering contracts to provide tlhe

federal government with goods and services that are

vital to the nation’s security. Such contracts often

relate to defense or national security programs that

are highly classified. For this reason, the question

! Pursuant to Supreme Court Rule 37.6, amicus curiae states

that no counsel for any party authored this brief in whole or in

part and that no entity or person, aside from amicus curiae, its

members, and its counsel, made any monetary contnbution

towards the preparation and submission of this brief. Counse!

of record for all parties have consented to the filing of this brief

in letters on file with the Clerk’s office.

2

presented in this case—whether the Government

may prevail in its contract claim against a contractor

because its assertion of the state secrets privilege

completely deprives the contractor of its facially valid

defense to that claim—is of particular concern to the

Chamber and its members.

INTRODUCTION AND SUMMARY OF

ARGUMENT

This case concerns whether the federal government

may protect classified information by invoking the

state secrets privilege and allow that privilege to

serve as the basis for the Government to prevail on

its own contract claim against defense contractors.

While honoring the invocation of the privilege is quite

proper, allowing the federal government to gain

financially from the privilege at the expense of the

Government's contractor is unconscionable.

Sustaining a government claim worth billions of

dollars after the Government’s invocation of the

privilege has eliminated the contractor’s defense does

serious violence.to basic due process principles that

have uniformly and appropriately guided judicial

resolution of how the state secrets doctrine affects

pending claims. In addition, significant commercial

uncertainty would arise in the defense procurement

process if the Government were permitted not only to

define private parties’ contract rights by establishing

the government contracting system and negotiating

individual defense contracts, but also to nullify

certain of those rights on an ad hoc basis as

particular contract disputes arise.

In this case, the Federal Circuit held that the

invocation of the state secrets privilege protected the

Government's classified information and permitted

the Government to prevail in its multi-billion-dollar

3

claim against two government contractors selected by

the Navy to design and build an aircraft using highly

classified stealth technology. Under the Federal

Circuit’s approach, invoking the privilege eliminated

the contractors’ key defense against the

Government's claim that the contractors’ delay placed

them in contractual default. That defense was that

the Government failed to share its “superior

knowledge” and critical information that was

necessary to prevent them from pursuing a “ruinous

course of action.”2 App. 202a. Because the

contractors were stripped of their ability to argue on

this basis that the Government’s actions should be

deemed a termination of the contract for convenience,

rather than based on the contractors’ default, the

Federal Circuit ruled in favor of the Government on

its default termination claim. As a result, the

Government is demanding that the contractors

return approximately $2.9 billion in_ progress

payments and interest (see General Dynamics Br. at

21), and the contractors will not. be reimbursed for

the $1.2 bilhon in unreimbursed costs (now more with

interest) the Court of Federal Claims found they

spent performing the contract before it was

terminated by the Government (see Boeing Br. at 17).

The court of appeals’ decision causes great

uncertainty for businesses that enter contracts with

the Government that relate to classified matters

affecting national security, homeland security, and

intelligence matters. Under the Federal Circuit's

rule, these businesses have little assurance that their

contractual rights and defenses will be judicially

enforced where the Government may assert that

2 Citations to the Petition Appendix are to the Appendix to the

Petition for Writ of Certiorari filed by Genera] Dynamics in No

09-1298.

4

relevant evidence is protected by the state secrets

privilege. Contractors have little basis to assess or

contract around the risk of the Government invoking

the privilege. The court’s decision “expand{s] the

Government’s opportunities for contractual

abrogation, with the certain result of undermining

the Government's credibility at the bargaining table

and increasing the cost of its engagements,” United

States v. Winstar Corp., 518 U.S. 839, 884 (1996)

(plurality opinion), the very result this Court has

sought to avoid in cases where the Government has

breached its contractual obligations and attempted to

walk away cost-free. If the Federal Circuit’s decision

stands, the defense contracting process would shift

from one grounded in rule of law principles toward a

less workable, one-sided deal that gives the United

States so much leverage that contractors may be

unwilling to enter into such arrangements. Cf. id. at

913 (Breyer, J., concurring) (where Government can

breach contract with impunity, private businesses

might “quite rightly, be unwilling to undertake the

risk of government contracting”).

This Court can restore certainty to the contracting

process without calling into question’ the

Government's legitimate ability to invoke the state

secrets privilege and shield classified information

from disclosure in this or any other case. In the

Chamber's view, the Government is fully empowered

to protect sensitive information, such as the stealth

aircraft technology at issue in this case. Here, the

state secrets privilege was properly invoked because

a sufficiently senior official determined that

disclosure reasonably could be expected to “severely

5

jeopardize national security.” App. 375a (quoting

declaration of Secretary Donley). The proper

invocation of the privilege should not, however, allow

a court to enter judgment for the Government on its

default termination claim if the privilege prevents

the contractors from defending against’ the

Government's assertion that they were in default.

The Government’s claim instead should be resolved

by applying the most basic principles of fundamental

fairness and due _ process, with the effect of

accommodating the nation’s security interests and

restoring contractual certainty. Lower courts

correctly dismiss claims brought against’ the

Government, government contractors, or others when

the Government’s invocation of the state sccrets

privilege deprives the plaintiff of evidence needed to

establish prima facie case—or deprives the defendant

of evidence needed to present a defense. Dismissal of

claims in the latter case is a logical and proper

implication of basic due process principles: courts

cannot order relief against a party that is precluded

from defending itself. Nelson v. Adams USA, Inc.,

529 U.S. 460, 466 (2000). This Court should apply

those principles here.

These’ principles should’ especially support

dismissal of the Government’s claim against a

defense contractor. The Government, acting in its

sovereign capacity, has already protected its interests

by enacting the Contract Disputes Act and

promulgating the Federal Acquisition Regulation,

which establishes the contract dispute process and

gives the Government unique rights, such as the

right to terminate a contract for its own convenience.

3 The Chamber's knowledge of the facts of this case 1s limited

to those set forth in the lower court opinions reprinted in the

Petition Appendices.

6

The Government, acting in its propriety capacity,

further protects its interests by negotiating the terms

of particular contracts. The Government, acting as a

litigant advancing a contract claim in federal court,

should not be permitted in addition to use its

authority to protect state secrets to eliminate a

contractor’s prima facie defense, thereby securing to

the United States an enormous financial windfall and

imposing on the contractor an equally enormous out-

of-pocket loss. Due process precludes that outcome,

where the Government blatantly attempts to shift

“the costs of meeting its legitimate’ public

responsibilities to private parties.” Winstar, 518 U.S.

at 896.

ARGUMENT

I, ELIMINATING DEFENSES AGAINST A

GOVERNMENT CLAIM BASED ON THE

STATE SECRETS DOCTRINE WOULD

CREATE COMMERCIAL UNCERTAINTY,

IMPAIRING THE PROVISION OF GOODS

AND SERVICES NEEDED FOR THE

NATIONAL DEFENSE.

The Federal Circuit held that the Government’s

invocation of the state secrets privilege eliminates a

contractors’ “superior knowledge” defense in a

government contract dispute and that as a result the

Government prevails in its contract claim. The court

rejected the traditional approach that protects

classified information and bars the prosecution of any

claim where the invocation deprives a party of a

defense to the claim. By enabling the invocation of

the privilege to defeat a contractual right held

against the Government, the Federal Circuit’s rule

creates considerable uncertainty surrounding the

enforceability of government contracts that directly

7

or indirectly involve classified matters. That result,

in turn, threatens to undermine and make less

efficient the government contract system the United

States has long used to procure the goods and

services that are critical to the nation’s security—

with the inevitable result that costs will increase or

fewer services will be provided. In sum, allowing the

state secrets doctrine to be used as it has in this case

is both bad government contracting practice and

hopelessly inconsistent with any notion of due

process.

A. The United States Has Always Relied On

Contractors To Provide Goods And

Services For The National Defense,

Including Those Needed For Classified

Programs.

The United States has always relied on the

innovation and efficiency of the private sector to

provide goods and services for the national defensc.

This practice is quite unlike that of most former and

current Communist nations, which rely instead on

instrumentalities of the government, or many

European nations, which rely on companies

substantially owned by the government. In 1775, the

Continental Congress established a procurement

system and appointed a quartermaster general and a

commissary general to procure clothing, weapons,

transportation and engineering services for the

Continental Army.‘ As the threats facing the nation

and the needs of the military changed over the next

two centuries, the Government continued its reliance

4 See Moshe Schwartz, Congressional Research Service,

Defense Acquisitions: How DOD Acquires Weapon Systems and

Recent Efforts to Reform the Process 1-2 (July 10, 2009),

available at http://www.fas.org/sgp/crs/natsec/rl34026_pdf.

8

on private enterprise. During World War II, for

example, “Congress sought to do everything possible

to retain and encourage individual initiative in the

world-wide race for the largest and quickest

production of the best equipment and supplies.”

Lichter v. United States, 334 U.S. 742, 768 (1948).

The private sector continues to be vital to homeland

security and national defense today because “the vast

majority of critical [defense industrial base] assets

reside in the private sector.”> Thousands of suppliers

now contract with the Department of Defense to

provide the weapons, equipment, and raw materials

to achieve national security objectives.® In 2009, the

Department of Defense purchased more than $380

bilhon in goods and services from the nation’s top 100

defense contractors.? And in fiscal year 2010, outlays

on national defense were estimated to represent

almost 20 percent of total federal outlays and almost

five percent of gross domestic product.®

5U.S. Dep't of Homeland Security, National Infrastructure

Protection Plan, Defense Industrial Base Sector 2, available at

http://www.dhs.gov/xlibrary/assets/nipp_snapshot_defenseindus

trialbase.pdf.

6 Gov't Accountability Office, DOD Assessments of Supplier-

Base Avatlability for Future Defense Needs; Briefing to the

Senate Committee on Banking and Housing, Urban Affairs,

Subcommittee on Security and International Trade and Finance

2 (Oct. 27, 2009), available at http://www.gao.gov/new.items/

d10317r.pdf.

7Gov’'t Executive, Top 100 Defense Contractors (Aug. 15,

2010), available at http://)www.govexec.com/story_page_pf.cfm?

articleid=43388&printerfriendlyvers= 1.

8 U.S. Dep’t of Commerce, Statistical Abstract of the United

States: 2010, tbl.491, at 326, available at http://www.census.

gov/prod/2009pubs/10statab/defense pdf.

9

As this case and earlier cases illustrate, the

application of the state secrets privilege often arises

in the context of—and has the potential to affect—the

development and manufacture of the most advanced,

and thus most classified, technologies used by the

military. United States v. Reynolds, 345 U.S. 1 (1953)

(testing of secret electronic equipment aboard a B-29

aircraft); Crater Corp. v. Lucent Techs., Inc., 423 F.3d

1260 (Fed. Cir. 2005) (development and manufacture

of underwater coupling device for fiber optics);

Bareford v. Gen. Dynamics, Corp., 973 F.3d 1138 (5th

Cir. 1992) (design and manufacture of Navy’s

Phalanx anti-missile system); Bentzlin v. Hughes

Aircraft Co., 833 F. Supp. 1486 (C.D. Cal. 1993)

(manufacture of air-to-ground missile used by the Air

Force during Operation Desert Storm); Nejad v.

United States, 724 F. Supp. 753 (C.D. Cal. 1989)

(design and manufacture of Navy’s AEGIS ship-based

air defense system). Cases concerning the state

secrets doctrine have also addressed support

allegedly provided by companies to intelligence

agencies. E.g. Mohamed v. Jeppesen Dataplan, Inc.,

614 F.3d 1070 (9th Cir., 2010) (en banc) (alleged

provision of counter-terrorism-related transport

service to intelligence agency); Hepting v. AT&T

Corp., 439 F. Supp. 2d 974 (N.D. Cal. 2006) (alleged

telecommunications support to National Security

Agency). Thus, the defense and intelligence

communities and the nation in general have been

well served by government contractors.

10

B. The Federal Circuit's Rule Would

Undermine the Contractual Certainty

That Underpins The Defense Sector’s

Ability To Provide Goods And Services

To The Government.

As Justice Brandeis recognized, “[p]unctilious

fulfillment of contractual obligations is essential” to

the government’s ability to enter contracts. Lynch v.

United States, 292 U.S. 571, 580 (1935). Since the

Government first waived sovereign immunity for

contract claims in 1855, the assurance that private

companies can enforce their contracts with the

Government has been viewed as “indispensable to the

efficient operation of government, for without it,

qualified private contractors might not undertake

government i projects....”. Harold J. Krent,

Reconceptualizing Sovereign Immunity, 45 Vand. L.

Rev. 1529, 1565 (1992).

Today, the Federal Acquisition Regulations govern

the award, performance and _ termination = of

government contracts through rules intended to

ensure that the private sector can “deliver on a timely

basis the best value product or service to the

[Government], while maintaining the public’s trust

and fulfilling public policy objectives.” 48 C.F-.R.

§ 1.102(a). If a government contractor believes the

Government has not complied with its contractual

obligations, it may file a claim with the contracting

officer. 41 US.C. § 605(a). likewise, if the

Government believes that a contractor is in breach of

its obligations, the contracting officer may find that

the contractor is in default and terminate the

contract. Jd.; see also Malone v. United States, 849

F.2d 1441, 1443 (Fed. Cir. 1988). The contracting

officer’s decision “shall be final and conclusive and

not subject to review by any forum, tribunal, or

1]

Government agency, unless an appeal or suit is

timely commenced,” 41 U.S.C. § 605(b), by the

contractor filing an appeal to the agency board of

contract appeals, id. § 606, or a lawsuit in the Court

of Federal Claims, td. § 609(a).

One effect of the contracting officer’s decision to

terminate the contract for default is that the

Government is “not lable for the contractor's costs on

undelivered work and is entitled to the repayment of

advance and progress payments, if any, applicable to

that work.” 48 C.F.R. § 49.402-2(a). A default

termination can also harm the contractor’s ability to

obtain future government contracts, or even result in

the contractor's debarment from future government

contracts. See Malone, 849 F.2d at 1445: Bannum,

Inc. v. United States, 91 Fed. Cl. 160, 171-72 (2009).

This scheme has two remarkable qualities. First, a

termination for default obviously carries with it

extraordinarily negative consequences for the

government contractor. It not only deprives the

contractor of the potential profit in the contract, but

also requires disgorgement of monies received for

services actually rendered on the Government's

behalf and threatens the contractors ability to

receive future government contracts. Thus, the

termination for default can be described as the “death

penalty” in government contracting.

Second, even though a claim that the contractor 1s

in default of a contract 1s a Government claim for

which the Government bears the burden of proof,

Malone, 849 F.2d at 1443, the statutory scheme does

not require the Government to bring suit to establish

the contractor's liability. See also Pet. Opp. at 14-15

(conceding that “default termination has _ been

deemed a ‘government claim’ . . . for which the

government bears the burden of proof under the

}2

CDA”). Instead, the statutory scheme provides that

the contracting officer's default termination decision

is final and unreviewable in any forum unless it 1s

challenged by the contractor in the Court of Federal!)

Claims or the relevant agency board of contract

appeals. 41 U.S.C. § 605(b); Seaboard Lumber Co. v.

United States, 903 F.2d 1560, 1562 (Fed. Cir. 1990).

The Government's claim in this case was initially

adjudicated through just’ this process. The

contracting officer granted the Government’s claim

that the contractors were in default and terminated

the contract. App. 8a. A few wecks later, the Navy

sent the contractors a letter demanding the return of

approximately $1.35 bilhon in unliquidated progress

payments under the contract. Id. Had the

contractors not filed suit challenging the default

termination, that determination would have become

final and unreviewable. That determination did not

become final, however, because the contractors filed

suit, Claiming that they were not im default because,

among other reasons, the Government breached its

duty to disclose its “superior knowledge” and the

“eritacal information” necessary to prevent them from

“unknowingly pursuing a@ ruinous course of action.”

App. 202a. Specifically, the Government had

extensive knowledge concerning stealth technology

that the contractors lacked. With that technology, it

is alleged, the contractors would have fulfilled all of

their contractual obligations in timely fashion. But

without that technology, Boeing and General

Dynamics were left to flounder in search of

sophisticated solutions to extremely complicated

technical problems. This is the classic situation

where the party who fails to comply with the contract

is found not to be in breach of contract. See, e.g., Fla.

Engineered Constr. Prods. Corp. vy. United States, 41

13

Fed. Cl. 534, 542 (1998) (contractor may raise

Government's failure to share superior knowledge as

a complete defense to Government’s§ default

termination claim). After the Government invoked

the state secrets privilege to preclude discovery of

evidence necessary to litigate the contractors’

superior knowledge defense, the trial court concluded

that the defense “could not be tried because the

resulting threat to national security would not permit

it.” App. 243a-244a.

At this point, however, the courts below abandoned

the traditional approach to implementing the state

secrets privilege and created the rule that so

threatens contract rights and the commercial

certainty that the government contracting process

depends upon for success. Instead of dismissing the

Government’s default termination claim because the

state secrets privilege deprived the contractors of the

superior knowledge defense, sce infra pp. 18-21

(outlining traditional approach), the Court of Federal

Claims dismissed only the contractors’ superior

*nowledge defense (App. 246a) and entered judgment

10or the Government on its default termination claim

(App. 177a). That is, the court allowed the

Government to prevail based on the Government’s

own actions that eliminated the contractors’ defense.

In affirming this decision, the Federal Circuit

granted the Government a wholly one-sided and

purely discretionary means of avoiding its

contractual commitments in cases involving sensitive

classified information. The natural and inevitable

result of this contractual uncertainty is to undermine

the defense sector’s ability and willingness to enter

such contracts, which “produce[s] the untoward result

of compromising the Government’s practical capacity

to make contracts[.]” Winstar, 518 U.S. at 884. And,

14

where contractors are willing to enter contracts

despite the increased commercial uncertainty, they

must address that increased risk as any other

commercial party would—-through increased charges

or reduced service provision. But this Court has

routinely rejected Government efforts to achieve

short-term gains by trying’ to short-change

contractors, recognizing that the long-term

consequences to the public interest would be much

worse if the Government were to prevail in a

particular dispute on a theory that would broadly

harm the contracting community. I/d.; see also id. at

913 (Breyer, J., concurring) (rules promoting

contractual certainty “ensure[] that the government

is able to obtain needed goods and services from

partics who might otherwise, quite rightly, be

unwilling to undertake the risk of government

contracting’); id. at 921 (Scalia, J., concurring)

(contract should not be read to make _ the

Government's performance discretionary). To be

sure, the amount of money involved in this dispute is

not insignificant, but it will pale in comparison to the

ultimate costs the United States will incur in the

event that all government contractors must turn a

jaundiced eye to every agreement they are asked to

enter into that implicates government secrets.

Il. THE STATE SECRETS PRIVILEGE CAN

AND SHOULD BE IMPLEMENTED TO

PROTECT BOTH THE GOVERNMENT'S

MILITARY AND INTELLIGENCE SECRETS

AND THE CONTRACTUAL RIGHTS OF

DEFENSE CONTRACTORS.

This case presents no occasion to balance the

nation’s security against the rights of litigants, or to

reconsider the entirely appropriate rule that courts

should defer to the determination by sufficiently

15

senior Executive Branch officials that sensitive

national security information should be protected

from disclosure in litigation. Instead, resolving this

case requires only the application of established

principles already developed in cases determining the

litigation consequences of the Government’s

invocation of the state secrets privilege. Those

principles require dismissal of a claim when

information subject to the state secrets privilege is

necessary to a private party’s ability to litigate either

the claim or especially a defense to a claim before the

court. Any other result would be inconsistent with

due process principles. Here, those principles

require dismissal of a claim whereby the Government

seeks to have a court find the contractors liable on a

contract claim on which it seeks payment of billions

of dollars by parties who cannot defend themselves

due solely to the Government’s invocation of the

privilege.

A. The State Secrets Privilege Should

Reflect And Protect the Government’s

Authority To Control Access’ To

Classified Information.

This case appropriately focuses on the litigation

consequences of the Government’s invocation of the

state secrets privilege, rather than on the conditions

or processes that may give rise to the assertion of the

privilege. Defense contractors often handle the most

sensitive national security information on _ the

Government’s behalf and appreciate that only senior

government officials have the full scope of

% The Court could resolve this case based on the Due Process

Clause or avoid the constitutional issue by implementing the

privilege to require the dismissal of the Government’s default

termination claim.

16

information and expertise needed to assess the

potential harm that release of information may pose

to the nation’s security. Courts appropriately defer to

the Government's invocation of the privilege, and

accordingly protect sensitive national security

information. See infra pp. 16-18. In contrast, courts

cannot defer to the Government's preferences

regarding the judicial actions required once that

information is protected from disclosure.

For reasons “too obvious to call for enlarged

discussion,” CIA v. Sims, 471 U.S. 159, 170 (1985),

the “protection of classified information must be

committed to the broad discretion of the agency

responsible, and this must include broad discretion to

determine who may have access to it.” Dep't of Navy

v. Egan, 484 U.S. 518, 529 (1988). Businesses that

enter contracts with the Government therefore

understand that the relevant federal agency decides

whether information relating to the contract should

be classified. See Exec. Order 13526, 75 Fed. Reg.

707 (Dec. 29, 2009). If classified information is

released to a government contractor, the contractor

also understands that the information must “be

safeguarded in a manner equivalent to its protection

within the executive branch of Government.” Exec.

Order 12829, 58 Fed. Reg. 3479 (Jan. 6, 1993).

Government contracts involving classified

information contain a “Security Requirements” clause

restricting the disclosure of classified information, 42

C.F.R. § 4.404, and employees of government

contractors must certify that they will abide by the

restrictions on the release of classified information.

See Information Security Oversight Office, Classified

Information Nondisclosure Agreement Briefing

Booklet, available at http://www.archives.gov/isoo/

training/standard-form-312.html. Sanctions associat-

17

ed with contractors’ disclosure of classified infor-

mation are severe. The Government “may move to

terminate the contract or to seek monetary damages

from the contractor, based on the terms of the

contract” and may also criminally prosecute

individuals or organizations. Jd. at Question 20.

The Government also appropriately controls

disclosure of, and access to, classified information in

litigation. The common law has long recognized a

privilege for the government to withhold information

in the interest of national security. See Reynolds,

345 U.S. at 7 (discussing English cases); United

States v. Burr, 25 F. Cas. 30, 37 (C.C.D. Va. 1807)

(No. 14692D) (Marshall, C.J.) (suggesting that a

letter from a general might be privileged if it

“contains any matter the disclosure of which would

endanger the public safety”).

In Reynolds, this Court established an appropriate

framework for the Government’s invocation of the

state secrets privilege. To ensure that a suitably

knowledgeable and accountable Executive Branch

official makes the national security assessment, the

privilege must be asserted by the “head of the

department which has control over the matter, after

actual personal consideration by that officer.”

Reynolds, 345 U.S. at 8. To ensure that the

Executive Branch articulates the basis for its

conclusions and sets forth the degree of potential

harm to the nation’s security, the “court itself must

determine whether the circumstances are appropriate

for the claim of privilege, and yet do so without

forcing a disclosure of the very thing the privilege is

designed to protect.” Jd. If the court is satisfied,

“from all the circumstances of the case, that there isa

reasonable danger that compulsion of the evidence

will expose military matters which, in the interest of

18

national security should not be divulged,” the

Government may not be compelled to produce the

evidence. /d. at 10-11.

The Reynolds framework is an entirely reasonable

means to protect the national security while fostering

the accountability of the Executive Branch, and it

functioned in just that manner in this case. The

contracting parties most familiar with information

related to that withheld at the Government’s request

do not challenge the propriety of the Government’s

decision to invoke the state secrets privilege. Nor

could a court or private party reasonably suggest that

the general subject matter of the privileged

material—details of the stealth technology protecting

the Nation’s most advanced aircraft—does not

deserve protection from public disclosure Cf. id. at

10. The litigants do not call for greater judicial

scrutiny of the Government's determination, or fault

the lower courts’ treatment of the invocation of the

privilege or the related information itself. Instead,

they rightly focus on whether their defense can be

nullified, and the Government awarded a financial

windfall, as a result of the Court’s honoring the

Executive Branch’s assessment of the national

security consequences of disclosing the privileged

information.

B. A Claim Raised In Litigation Must Be

Dismissed If The State Secrets Privilege

Precludes Litigation Of Either The

Plaintiffs Claim Or The Defendant’s

Defense.

This Court and lower courts have, in fact, already

set forth the principles that govern the litigation

consequences that follow once a court declines to

permit or order release of information subject to a

properly supported invocation of the state secrets

19

privilege. In broad terms, those principles focus on

whether a party’s claim can be fully litigated (and

judicial relief thereafter ordered) in the absence of

the information subject to the privilege. Claims that

have no evidentiary support in the absence of the

withheld information are dismissed, and claims

subject to defenses that cannot be asserted in the

absence of the withheld information are dismissed as

well. See infra pp. 19-21. Those simple principles

reflect a proper understanding of the role of the

courts, which especially cannot order relief against a

party that has been stripped of the ability to defend

itself in court. Due process principles require no less

and should require dismissal of the Government’s

claim in this case.

As this Court recognized in Reynolds, 345 U.S. at

11, in many cases it will be possible for the plaintiff

to establish a prima facie case without the

information protected by the state secrets privilege.

In some cases, however, withholding the privileged

information will deprive the plaintiff of the evidence

needed to establish a case. E.g., El-Masri v. United

States, 479 F.3d 296, 309 (4th Cir. 2007) (dismissing

plaintiffs lawsuit against CIA officials because “El-

Masri would need to rely on witnesses whose

identities, and evidence the very existence of which,

must remain confidential in the interest of national

security”); Bareford, 973 F.2d at 1142 (dismissing

plaintiffs’ tort suit against the manufacturer of the

Phalanx anti-missile system because their “claim of

manufacturing and design defects requires proof of

what the Phalanx system was intended to do and the

ways in which it fails to accomplish these goals,” all

information subject to the state secrets privilege). In

that situation, the claim must be dismissed because

there is simply no way to establish a right to recovery

20

without disclosing information that must, in the

interest of national security, remain secret.

Dismissal of a claim is unquestionably a “harsh

sanction. But the results are harsh in either

direction and the state secrets doctrine finds the

greater public good — ultimately the less harsh

remedy — to be dismissal.” Jd. at 1144; see also, e.g.,

Fitzgerald v. Penthouse Intl, Ltd., 776 F.2d 1236,

1238 n.3 (4th Cir. 1985) (“When the state secrets

privilege is validly asserted, the result is unfairness

to individual litigants—through the loss of important

evidence or dismissal of a case—in order to protect a

greater public value”).

In other cases more directly relevant to this case,

the plaintiff may be able to establish a prima facie

case without information protected by the state

secrets privilege, but the defendant—usually the

Government or a contractor that acted pursuant to a

contract in a classified program—needs privileged

information to establish a defense to the claim. In

this situation, dismissal is even more clearly the

appropriate remedy, although the justification is

shghtly different. E.g., Tenenbaum v. Simonini, 372

F.3d 776 (6th Cir. 2004); Kasza v. Browner, 133 F.3d

1159 (9th Cir. 1998); Molerio v. FBI, 749 F.2d 815

(D.C. Cir. 1984) (Scalia, J.). “The fundamental

requisite of due process of law is the opportunity to be

heard.” Mullane v. Cent. Hanover Bank & Trust, Co.

339 U.S. 306, 314 (1950) (internal quotation marks

omitted). In the context of civil litigation, this

principle means that courts must provide the

defendant with “an adequate opportunity to defend

against the imposition of liability.” Nelson, 529 at

466. If the invocation of the state secrets privilege

has the practical effect of depriving the defendant of

the ability to raise a defense, the courts cannot,

21

consistent with the due process that they are charged

to provide, allow the plaintiff to continue to litigate

the claim. Indeed, it would be a “mockery of justice”

for the court to impose lability erroneously because

the evidence needed to establish the defense to the

claim is protected by the state secrets privilege.

Molerio, 749 F.2d at 825. This result is also entirely

consistent with this Court’s unanimous approach to

barring litigation of matters in the intelligence

context that inherently involve classified information.

See Tenet v. Doe, 544 U.S. 1 (2005).

The Government has acknowledged the validity of

these rules on many occasions and has invoked them

to have courts dismiss claims brought by third parties

against the United States or its contractors when the

court cannot determine the defendant’s liability

without information protected by the state secrets

privilege. See, e.g., Mohammed, 614 F.3d at 1087

(agreeing with Government that plaintiffs’ claims

against a government contractor should be dismissed

because “there is no feasible way to litigate

Jeppesen’s alleged liability without creating an

unjustifiable risk of divulging state secrets”); El-

Masri, 479 F.3d at 310 (dismissing plaintiffs’ claims

against the United States because “virtually any

conceivable response to [plaintiffs'] allegations would

disclose privileged information”); Zuckerbraun v. Gen.

Dynamics Corp., 935 F.2d 544, 547 (2d Cir. 1991)

(dismissing plaintiffs’ claims against defense

contractors where the “factual questions concerning

the lability of the defendants” cannot be resolved

without information that “is in its entirety classified

and subject to the claim of privilege”). In these cases,

the Government appropriately uses the state secrets

privilege as a shield to protect against the imposition

of liability on a claim the Government or its

22

contractors cannot fully defend without disclosing

classified information that, in the interest of national

security, must remain secret.

C. The Government May Not Use the State

Secrets Privilege As A Sword To Further

Its Claims Against Defense Contractors.

The principles of fundamental fairness. that

determine the litigation consequences of the state

secrets privilege, outlined above, directly require that

the Government’s termination of contracts for default

should be converted into a_ termination for

convenience when invocation of the _ privilege

eliminates the contractors’ ability to defend the

assertion of “default.” The Government is entitled to

no special treatment in this respect. Indeed, the

Government's ability to manage its litigation risks

related to the government contracting process, its

ability to contro] when the privilege is invoked, and

the contractual obligations it owes to defense

contractors all decidedly favor refusing to allow the

United States to assert that the termination of the

contracts was for default.

Like a private contracting party, the Government

protects its interests by negotiating favorable

contract terms. But unlike a private party, the

Government also protects its interests by establishing

the laws and regulations that govern the resolution of

disputes that arise under government contracts. The

Government has protected its interests in just this

fashion by enacting rules that give it unique rights—

such as the right to terminate a contract for its own

convenience—that private companies do not share.

This case is extraordinary because the Government

seeks yet another way to advance its contractual

interests: by asking the courts to allow’ the

Government to use the state secrets privilege not

23

simply as a shield to protect military secrets, but also

as a sword to prevail on the Government’s own

contract claim by precluding litigation of a private

party’s contractual defense to that claim. In granting

that request, the Federal Circuit sanctioned an

unprecedented application of the state secrets

privilege that deprives the contractors of due process.

The Federal Circuit’s decision is inconsistent with

the courts’ longstanding refusal to allow litigants to

use a privilege as both a sword and a shield. See,

e.g., United States v. Rylander, 460 U.S. 752, 761

(1983) (Fifth Amendment privilege against self-

incrimination); Bittaker v. Woodford, 331 F.3d 715

(9th Cir. 2003) (attorney-client privilege). Only this

rule is consistent with the requirement that litigants

in our judicial system be afforded “an adequate

opportunity to defend against the imposition of

liability.” Nelson, 529 U.S. at 466. For this reason,

courts do not permit a party to advance a claim while

refusing to disclose information that could provide its

adversary with a defense to that claim: a litigant

“should not be required to defend against a party who

refuses to reveal the very information which might

absolve [him] of all liability.” Wehling v. CBS, 608

F.2d 1084, 1088 (5th Cir. 1979).

This reasoning applies equally to governments and

private litigants. As this Court has recognized,

allowing a government to promote its “litigation

interests” by freely asserting both a claim and

immunity in the same case “could generate seriously

unfair results.” Lapides v. Bd. Of Regents, 535 U.S.

613, 619 (2002). Consequently, a state government

may not advance its claim, or deflect counterclaims,

by invoking state sovereign immunity, including that

recognized by the Eleventh Amendment. Jd. For

example, when a state files a bankruptcy claim, “it

24

waives any immunity which it otherwise might have

had respecting the adjudication of the claim.”

Gardner v. New Jersey, 329 U.S. 565, 574 (1947).

Likewise, a foreign government may not pursue a

claim and assert foreign sovereign immunity as a

defense to that claim (or as to counterclaims). See 28

U.S.C. § 1607; Cabiri v. Gov't of Ghana, 165 F.3d 193

(2d Cir. 1999); see also 28 U.S.C. § 1605(a)(1). And,

when the United States commences a civil action

against a private party, the “defendant may, without

statutory authority,” assert a counterclaim to recoup

“an amount equal to [the Government’s] principal

claim.” United States v. U.S. Fid. & Guar. Co., 309

U.S. 506, 511 (1940).

This principle of fundamental fairness extends to

the Government's privileges related to classified

information and the national security. Although the

Classified Information Procedures Act (“CIPA”), 18

U.S.C. app. 3 §§ 1-16, provides a measure of

protection to classified information in the course of

prosecutions, the Government may not use its

provisions to secure a materia! litigation advantage.

The Government is required instead to abandon the

claim where litigation of the claim or a related

defense depends on information the Government

chooses not to disclose. See id. § 6(e)(2) (dismissal of

claim or count, or finding against Government).

Similarly, outside the context of CIPA, the

Government must choose between pursuing a

prosecution and invoking executive privilege to

protect classified information or other government

secrets material to a defense against’ the

Government’s case. See United States v. Smith, 780

F.2d 1102, 1107-08 (4th Cir. 1985) (en banc); see also

Roviaro v. United States, 353 U.S. 53, 60 (1957).

25

The court of appeals reasoned that a different

result 1s warranted here because, it beheved, the

contractors “are not at jeopardy from an attack on

them by the government,” but rather “are the

plaintiffs in this purely civil matter, suing the

sovereign on the limited terms to which it has

consented.” App. 208a. ‘Therefore, the “Fifth

Amendment does not require that they be able to

present all defenses[.]” Jd. at 208a-209a. That ruling

fundamentally misconceives the nature of the

Government’s claim, the unique scheme _ the

Government has established to resolve government

contract disputes, and the due process implications of

stripping the contractors of their defense.

The fact that this case arises in the civil, rather

than the criminal, context is not relevant, for even in

civil cases, a litigant must be given an “adequate

opportunity to defend against the imposition of

hability.” Nelson, 529 U.S. at 466. As previously

noted, supra at p. 11, the effect of a termination for

default is not only to deprive a contractor of profits it

would have made on the contract, but also to require

the contractor to repay the monies it received for

services performed on the Government’s behalf and

perhaps to reduce or eliminate the contractor's ability

to receive additional government contracts in the

future. Thus, while the Government does not seek to

deprive the contractors of liberty in this case, it most

certainly seeks, through its default termination

claim, to require them to pay billions of dollars to the

Government.

The Federal Circuit's analysis thus rests on the

empty formalism of labeling the contractors as

“plaintiffs” and disregards the due process principles

associated with when a court may grant relief to a

party on its claim or compel payment by a losing

26

party. And, even the court’s labeling is mistaken. As

previously discussed, supra at pp. 10-12, the

contractors are styled as plaintiffs in this case only

because the Government gave itself (acting through

the contracting officer) the power to determine when

its contractors are in breach of contract, and made

that determination final and legally binding unless

challenged by the contractors. See 41 U.S.C. § 605

(Contract Disputes Act). That is, the defense

contractors nominally are “plaintiffs” only because

the Government structured the defense contracting

process to relieve itself of the normal obligation of

having to sue the contractors to assert its breach of

contract claim. Thus, only by clevating form over

substance can the Federal Circuit’ hold that the

posture of this Itigation supports permitting the

Government to use the state secrets privilege to

deprive the contractors of their right to present an

adequate defense. that the Government itself caused

the breach of contract.

The Government's reversal of the normal htigation

process 1s consistent with due process only because it

still affords the contractors an opportunity to dispute

and defend against the Government's breach of

contract claim by filing a lawsuit to obtain a judicial

hearing. See Lichter, 334 U.S. at 789-92 (upholding

similar scheme under the Reneyotiation Act that

enabled the Government to recover “excessive profits”

on military goods and services during World War II

unless the contractor challenged the Government's

determination in the Tax Court). Nor does any

consideration related to sovereign immunity require a

different result. While the United States has the

sovereign authority to require a contractor to initiate

a lawsuit to avoid being held lable on a government

contract claim, sovereign immunity cannot erase a

27

contractual right—and trigger judicial enforcement

against a private party—once the Government has

already entered the contract. The Government’s

claim against its contractors is hardly analogous to

the claim of a third party who, like the plaintiffs in

Reynolds, has no contractual relationship with the

Government and may sue the Government in tort

only because the Government has waived sovereign

immunity. In the former situation, the Government

is advancing its own contract claim, which in this

case could require the contractors to pay the

Government more than $2.8 billion in contract

payments and interest, in addition to forfeiting $1.2

billion (plus interest) in unrefunded costs incurred

performing the contract. In the latter situation, “the

Government is not the moving party, but is a

defendant only on terms to which it has consented.”

Reynolds, 345 U.S. at 12.

Although the Fifth Amendment hardly requires the

Government to answer in damages for every violation

of law, it does require that when the Government

seeks judicial relief against a private party and

proposes to extract from it billions of dollars, that

party must be afforded an “adequate opportunity to

defend against the imposition of liability.” Nelson,

529 U.S. at 466; see also, e.g., Lindsey v. Normet, 405

U.S. 56, 66 (1972) (due process requires that “there

be an opportunity to present every available

defense”) (quoting Am. Surety Co. v. Baldwin, 287

U.S. 156, 168 (1932)). The Federal Circuit’s rule

denies government contractors this opportunity to

defend against government contract claims when, as

in this case, the Government’s invocation of the state

secrets privilege precludes litigation of the

contractors’ defense.

28

The Federal Circuit’s rule is particularly flawed in

the context of this case because the Government can

terminate the contract for convenience, which is a

substantial but not one-sided remedy. See, e.g.,

Krent, supra, at 1565-66 (when the Government

terminates a contract for convenience, it may “escape

the full consequences of a breach” because the

contractor may not obtain specific performance and

its recovery is generally limited to costs incurred,

profit on work done, and the cost of preparing the

termination settlement proposal). Thus, even leaving

due process principles to one side, the Government's

interests can be fully protected without depriving

contractors of their defenses to government claims

and thereby shifting to government contractors the

entire cost of protecting classified information.!® Cf.

Winstar, 518 U.S. at 896 (balancing the Government's

“need for freedom to legislate with its obligation to

honor its contracts” by refusing to give the

Government relief from its contractual commitments

in “instances in which the Government seeks to shift

the costs of meeting its legitimate public

responsibilities to private parties’). Accordingly,

10 The Government's suggestion that contractors might “raise

a superior-knowledge claim simply to induce the government to

invoke the state-secrets privilege” (Pet. Opp. at 18) is wholly

unfounded. When litigating against parties that already hold

security clearances and have been trusted to handle extremely

sensitive information, the Government would rarely need to

invoke the privilege. And, in the usual] case even following

invocation of the privilege (as in the initial phases of this case),

the parties’ claims can be litigated through the courts’

traditional methods of protecting classified information and

proceeding based on otherwise available evidence. See

Reynolds, 345 U.S. at 11. In addition, defense contractors are

often highly dependent on the Government's continued

willingness to do business with them, which creates very

considerable incentives against litigating in bad faith.

29

simple justice—reflected both in sound government

contracting policy and due process—requtrres that the

termination for cause be converted to a termination

for convenience.

CONCLUSION

For the foregoing reasons, the judgment of the court

of appeals should be reversed.

Respectfully Submitted,

ROBIN S. CONRAD CARTER G. PHILLIPS*

NATIONAL CHAMBER RICHARD KLINGLER

LITIGATION CENTER, INC. KATHLEEN M. MUELIFR

1615 H Street, N.W. SIDLEY AUSTIN LLP

Washington, DC 20062 1501 K Street, N.W.

(202) 463-5337 Washington, D.C. 20005

(202) 463-5337 (202) 736-8000

cphillips@sidley.com

Counsel for Amicus Curtae

November 19, 2010 * Counsel of Record