Facts and Procedural History

The plaintiff, a former United States Navy trainee, attended a course on nuclear-powered submarines between July 1954 and October 1955. While attending this course, he spent about 10-15% of his time at Knolls Atomic Power Laboratory (“KAPL”), which was operated by GE.  He developed mesothelioma in 2019 and sued GE, among multiple defendants, alleging that he was exposed to asbestos while working at KAPL.

KAPL was owned by the United States Government and was operated by GE pursuant to a government contract. The Court noted that KAPL’s purpose was to design nuclear reactors for the United States Navy and that GE’s work there was “subject in all respects to the approval of the Contracting Officer” from the United States Government. The Atomic Energy Commission, a governmental entity, reviewed all plans and designs at KAPL, including materials specifications, components in the power plant, and building and facility plans. The contract also required GE to hire and train KAPL workers, subject to the approval of the governmental Contracting Officer.

GE removed this case to federal court and filed for summary judgment, arguing that it had sovereign immunity because it operated KAPL under the authority and direction of the United States Government. The United States District Court for the Western District of Pennsylvania granted GE’s motion and denied reconsideration. On May 24, 2024, the Third Circuit issued a non-precedential judgment, which is analyzed below, affirming the District Court. The plaintiff moved for a rehearing, which was denied on June 26, 2024.

Third Circuit’s Decision

The Court examined two potential frameworks for determining whether GE was entitled to sovereign immunity: Yearsley v. W.A. Ross Construction Co., 309 U.S. 18 (1940) and Boyle v. United Technologies Corp., 487 U.S. 500 (1988).  GE argued Yearsley applied, and plaintiff argued that Boyle applied. Notably, the Court did not address the question of whether Boyle immunity is a descendant of Yearsley immunity or whether the two doctrines are distinct leaving that question open to further interpretation. Instead, the Court found that GE was entitled to sovereign immunity under both tests.

            Yearsley Test

Pursuant to Yearsley, a contractor is derivatively immune from liability if (1) its “authority to carry out the project was validly conferred” by Congress; and (2) its work was “authorized and directed” by the federal government.  See Campbell-Ewald Co. v. Gomez, 577 U.S. 153, 167 & n.7 (2016).However, a contractor cannot claim Yearsley immunity if it exceeds its authority or fails to comply with all federal directions. Plaintiff did not dispute GE satisfied the first requirement that GE’s main activities at KAPL – the design and manufacture of nuclear reactors and vessels – were authorized and directed by the government. However, plaintiff presented no evidence that GE failed to satisfy the second requirement – that GE deviated from the United States Navy’s instructions or exceeded its contractual authority. Accordingly, the Court found that GE was entitled to sovereign immunity under Yearsley.

            Boyle Test

The Boyle test, which is applied to design defects in miliary equipment, held that liability cannot be imposed when:

 (1) the United States approved reasonably precise specifications; (2) the equipment conformed to those specifications; and (3) the supplier warned the United States about the dangers in the use of the equipment that were known to the supplier but not to the United States.

487 U.S. at 512. The Court found that GE met all three elements. The first element was met because the Navy was significantly involved in the planning and designing process for all equipment used at KAPL, and GE’s proposals all required governmental approval. The second element was satisfied as the plaintiff’s argument was that the Navy did not specify warnings, not that GE contravened them. The Court found that the third element, by far the most critical element to establish in an asbestos case, was also met. Although the record showed that both GE and the government were aware of some dangers of asbestos, the record was absent any evidence that GE had more knowledge about the dangers posed by asbestos than the United States Navy.  Thus, GE could not have notified the government of any dangers of which the government was not already aware.

To underscore its reasoning as to this third element in the Boyle framework, the Third Circuit cited to its previous decision in Papp v. Fore-Kast Sales Co., 842 F.3d 805, 814-15 (3d Cir. 2016). Of particular note, the Third Circuit noted in Papp that in a failure to warn case, the third prong of Boyle is satisfied when (1) the government exercised its discretion and approved certain warnings for the defendant’s products; (2) the defendant provided the warnings as required by the government and (3) the defendant warned the government about any asbestos hazards known to the defendant but not the government. The third element here being most crucial to the determination of whether GE’s failure to warn the plaintiff superseded the government’s authority, which the Court held that it did not since GE had no additional knowledge that the government was not privy to also.

            Sovereign Immunity

The plaintiff argued that GE could only claim sovereign immunity if the government specifically directed it to engage in the tort (i.e., failing to warn the plaintiff of the dangers of asbestos), leaving the contractor with no discretion to behave otherwise. The Court rejected this narrow interpretation (which has also been rejected by the United States Supreme Court), noting that the record was clear that GE’s work at KAPL was done pursuant to and in compliance with its contract with the government and that the government had supervision and oversight over GE’s actions.

Conclusion The court’s decision, although non-precedential, offers a detailed framework for understanding when a contractor can claim sovereign immunity.  The court was unpersuaded by the argument that a contractor cannot claim sovereign immunity if it fails to warn of asbestos dangers without specific government instruction. The key takeaway is that for a successful sovereign immunity defense under the Boyle framework, the record must show that the government’s knowledge of asbestos dangers was equal to or greater than that of the contractor.

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