**Sharing the Burden: Allocating the Risk of CERLCA Cleanup Costs**

[Major Kenneth Michael Theurer]{.smallcaps}[^1]

**I. INTRODUCTION**

Today, when a defense contractor enters into a contract with the United
States the cost of environmental cleanup is often considered part of the
contract price.[^2] The contractor passes to the taxpayer the costs of
complying with a myriad of environmental statutes and regulations.
However, prior to the enactment of environmental legislation in the
1970's and 1980's, government contracts rarely addressed environmental
issues or delineated the responsibilities of the parties. With the
passage of the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) in 1980, many defense contractors were suddenly
faced with enormous liability for the cleanup of long-forgotten sites
dating back as far as World War II.[^3] Interested in sharing these
unanticipated and prohibitive costs, the contractors sought
contributions from the United States as an "owner," "operator" or
"arranger" under CERCLA Section 107.[^4] The success of these
contractors has varied depending on a variety of factors including the
federal circuit in which the action was brought. Faced with limited
success in seeking contributions from the federal government under
CERCLA, imaginative contractors have sought other avenues of redress.

One such avenue is to bring suit against the United States based on a
breach of contract theory. Many defense contracts for war materials have
included broad indemnity provisions.[^5] Several defense contractors
have attempted to recover cleanup costs under a contract theory based on
these indemnification clauses. Only the Ninth Circuit has addressed the
issue, yet they dismissed the claim on jurisdictional grounds without
reaching the merits.[^6] At least two cases are pending in the United
States Court of Federal Claims.[^7]

The United States Supreme Court may have lent support to such
contractual theories in *United States v. Winstar*.[^8] Read in the
broadest light, *Winstar* stands for the proposition that the government
will be liable for damages if, as a result of a subsequent change in the
law, the United States denies a contractor the benefit of an earlier
bargain.[^9] With no clear majority, the Supreme Court's varying
opinions and rationales do little to provide clear guidance in this
area. The plurality decision discusses and intermixes the previous
separate doctrines of "Unmistakability" and "Sovereign Acts"---and
introduces the concept of "risk-sharing" as the primary arbiter of
government liability.[^10] The degree of uncertainty, introduced by
*Winstar,* promises to produce litigation based on contracts already 50
years old for many more years to come.

This article addresses ongoing problems with the cleanup of defense
contractor sites required under CERCLA, concluding that governmental
liability should depend on the nature of the risk allocation in the
particular contract. Section II briefly deals with the different
situation contractors of today and yesterday face when dealing with
environmental issues. Section III details defense contractor and
governmental liability under CERCLA § 107. Section IV of the article
focuses on contractors seeking damages from the United States under a
breach of contract theory based on the enactment of CERCLA as a change
in the law analogous to *Winstar.* The article analyzes the *Winstar*
issue as applied to environmental issues by the Federal Circuit in
*Yankee Atomic Electric Co. v. United States*.[^11] Even if these
contracts should survive the *Winstar* analysis, this article describes
additional impediments to recovery.

# II. DEFENSE CONTRACTS---NOW AND THEN

Presently the nation is faced with the aftermath of years of defense
spending that paid little heed to environmental consequences.
Nationwide, the cost of cleaning up federal sites is estimated at \$400
billion.[^12] With such staggering costs, it is no surprise that defense
contractors are seeking to share the costs with their contracting
partner, the United States.

Today, defense contracts are required to consider environmental
consequences throughout the procurement process. The same cannot be said
of earlier defense contractor activities that continue to pose a threat
to the environment. This section will briefly discuss environmental
concerns as addressed in modern contracts. Second, the section will
describe the provisions of older contracts and the resulting litigation.
Finally, this section will discuss some of the inherent conflicts
between the policies of environmental law and government procurement
law.

## A. Environmental Costs in Modern Defense Contracts

In the present day acquisition process, the Federal Acquisition
Regulations (FAR) set forth the types of costs a contractor may pass on
to the government during the performance of a contract.[^13] In general,
the contractor may include as overhead costs any charges that are both
reasonable and allocable to the particular defense contract.[^14] "A
cost is reasonable if, in its nature and amount, it does not exceed that
which would be incurred by a prudent person in the conduct of
competitive business."[^15] Allocable costs are those: (a) "incurred
specifically for the contract; (b) \[that\] benefit both the contract
and other work, and can be distributed to them in reasonable proportion
to the benefits received; or (c) \[that are\] necessary to the overall
operation of the business, although a direct relationship to any
particular cost objective cannot be shown."[^16]

Neither the FAR, nor DOD supplements to the FAR (DFARS), contain
specific cost principles dealing with environmental costs.[^17] Instead,
environmental costs are dealt with on an individual basis within each
contract. Environmental costs are ordinarily recognized as allowable
costs provided they are both reasonable and allocable to the contract at
hand.[^18] These "costs include costs to prevent environmental
contamination, costs to clean up prior contamination, and costs directly
associated with the first two categories including legal costs."[^19]

Additionally, modern defense acquisition policy requires consideration
of environmental consequences throughout the procurement process.[^20]
Various environmental statutes, including the National Environmental
Policy Act,[^21] Clean Air Act,[^22] Clean Water Act,[^23] and Resource
Conservation and Recovery Act,[^24] contain provisions impacting the
acquisition process. The FAR implements the mandates of these statutes.
Unfortunately, environmental awareness is a relatively recent
phenomenon, and was not considered in the formation of many Vietnam-era
and earlier defense contracts.

## B. Environmental Considerations---Defense Contracts Prior to and During the Vietnam Era

In the past decade, there have been a substantial number of defense
contractors facing large cleanup costs resulting from defense efforts
going back fifty or more years. None of these contracts contained
specific contract language dealing with the allocation of future
environmental costs. In addition, the regulations and policies in force
at the time of these contracts were silent as to the risk allocation of
the environmental consequences. However, a number of these contracts
contained broad indemnification clauses. Today, defense contractors
point to these clauses as allocating the risk of future environmental
cleanup costs to the United States. The United States, as well as many
courts, takes a much narrower view as to the scope of the
indemnification clauses.

### 1. World War II-Era Contracts

Many World War II era defense contracts contained indemnification
clauses as part of their settlement agreements authorized under the
Contract Settlements Act of 1944.[^25] At least three of these
contracts, Morgantown Ordnance Works, Willow Run, and Tucson Airport
Authority, are the subject of ongoing or recent litigation within the
federal courts.

In late 1940, DuPont entered into a cost-plus-a-fixed-fee contract with
the Department of the Army for the design, construction, and operation
of the Morgantown Ordnance Works plant near Morgantown, West
Virginia.[^26] The plant produced ammonia, methanol, formaldehyde,
hexamine, ethylene urea, and heavy water.[^27] These chemicals, produced
under the contract, were used for the manufacture of weapons, including
atomic bombs.[^28]

The original contract included an indemnification clause whereby the
government agreed:

> that all work \[under this contract\] is to be performed at the
> expense of the Government and that the Government shall hold the
> Contractor harmless against any loss, expense (including expense of
> litigation) or damage (including liability to third persons because of
> death, bodily injury or property injury or destruction or otherwise)
> of any kind whatsoever arising out of or in connection with the
> performance of work under this \[contract\].[^29]

This indemnification clause was unconditional---provided that DuPont
officials exercised due care and good faith in the operation of the
plant.[^30]

In August 1945, the parties entered into a supplemental contract,
pursuant to the Contract Settlement Act, to address the termination of
the original contract.[^31] The supplemental contract contained a clause
excepting from final release "\[c\]laims by the Contractor against the
Government, which are based upon the responsibility of the Contractor to
third parties and which involve costs reimbursable under the Contract,
but which are not now known to the Contractor."[^32]

In January 1985, the EPA notified DuPont that it was a potentially
responsible party (PRP) as defined under CERCLA § 107.[^33]
Subsequently, DuPont incurred considerable costs consistent with the
National Contingency Plan (NCP).[^34] On 25 August 1993, DuPont
submitted a certified claim to the Contracting Officer under the
Contract Disputes Act of 1978 for \$485,248.79.[^35] The parties
negotiated back and forth while DuPont continued to incur cleanup
expenses. In November 1998, DuPont submitted what it termed a "final
certified updated claim" in the amount of \$1,322,334.83, plus
interest.[^36] The Contracting Officer did not respond within 60 days
and DuPont considered the absence of a response to be a denial of the
claim.[^37] In March 1999, DuPont filed suit against the United States
in the United States Court of Federal Claims. The litigation is
currently pending.

The United States Air Force is facing a similar claim brought by Ford
Motor Company for the cleanup of the Willow Run site.[^38] Today, that
site, located in Ypsilanti, Michigan is contaminated with
polychlorinated biphenyls (PCBs) and other contaminants from its long
use as an industrial complex and airport.[^39] The estimated cost of
cleanup of the site is approximately \$70 million.[^40] During World War
II, the United States assumed ownership of the facility and contracted
with Ford Motor Company to produce B-24 "Liberator" bombers.[^41]

The cost-plus-fixed-fee contract, in many ways similar to the DuPont
contract discussed above, provided the following protections to Ford
upon termination:

> b\. Upon the termination of this contract as hereinbefore provided,
> full and complete settlement of all claims of the Contractor arising
> out of this contract shall be made as follows:
>
> 1\. The Government shall *assume and become liable for all
> obligations, commitments and claims that the Contractor may have
> theretofore in good faith undertaken or incurred in connection with
> said work and in accordance with the provisions of this contract*; and
> the Contractor shall, as a condition to receiving the payments
> mentioned in this Article, execute and deliver all such papers and
> take all such steps as the Contracting Officer may require for the
> purpose of assuring to the Government, so far as possible, the rights
> and benefits of the Contractor under such obligations or
> commitments.[^42]

The contract also contained provisions making rehabilitation of the
plant an allowable cost.[^43]

In March 1998, Ford Motor Company filed suit against the government in
the United States Court of Federal Claims seeking reimbursement of its
cleanup costs associated with the Willow Run site.[^44] On April 20,
1999, Ford Motor Company, the Department of the Air Force, and other
PRPs entered into a consent decree with the EPA for the cleanup of the
site.[^45] The settling federal agencies agreed to pay \$50,000 to the
Superfund and an additional \$450,000 to the other settling
defendants.[^46] In addition, Ford Motor Company reserved the right to
continue seeking indemnification from the United States under the Willow
Run contracts in the United States Court of Federal Claims.[^47]

Still another recent case involved a suit brought against the United
States by General Dynamics based on a series of contracts from
1942-1945. These wartime contracts were for the modification of B-24
"Liberator" military aircraft in a three-hangar facility located at the
Tucson Airport in Arizona.[^48] The contracts were between the Army Air
Forces and Consolidated Vultee Aircraft Corporation (Consolidated).[^49]
In 1944, at the conclusion of hostilities, the contracts were suspended,
and in 1945 the contracts were terminated.[^50] The wartime contracts
contained the following termination clause that was included in the
settlement agreement at the conclusion of the war:

> \(b\) Upon termination of this contract as hereinbefore provided, full
> and complete settlement of all claims of the Contractor arising out of
> this contract shall be made as follows:
>
> \(1\) The Government shall assume and become liable for all
> obligations, commitments and claims that the Contractor may have
> theretofore in good faith undertaken or incurred in connection with
> said work and in accordance with the provisions of this contract, and
> the Contractor shall, as a condition to receiving the payments
> mentioned in this Article, execute and deliver all such papers and
> take all steps as the Contracting Officer may require for the purpose
> of fully vesting in the Government the rights and benefits of the
> Contractor under such obligations and commitments. . . .
>
> \(c\) Upon the making of said payments all obligations of the
> Government to make further payments or to carry out other undertakings
> hereunder shall cease forthwith and forever; . . . except that all
> rights and obligations of the respective parties in respect of costs,
> expenses and liabilities which may thereafter be imposed on, or
> incurred by, the Contractor, without its fault or neglect, which are
> then undetermined or incapable of determination as to either
> existence, validity, or amount, shall remain in full force and effect
> (except to the extent that responsibility therefor may have been
> assumed by the Government under or pursuant to the provisions of
> subparagraph (1) of paragraph (b) of this Article).[^51]

In the 1980s, state and federal authorities discovered contaminated
groundwater in the area surrounding the Tucson Airport.[^52] In 1988,
after tracing the source of contamination to the hangar facility, the
EPA notified General Dynamics, the successor in interest to
Consolidated, that they might be a PRP.[^53] In 1994, the Tucson Airport
Authority brought an action against General Dynamics for the cost of
investigation and remediation of the contaminated site.[^54] General
Dynamics filed a third-party claim against the United States.[^55] The
claim alleged the United States had assumed all liabilities arising
under the contract and was obligated to assume General Dynamic's
defense.[^56] The Ninth Circuit, affirming the district court, ruled
that the district court lacked jurisdiction to hear the contractually
based claims and dismissed the third-party claim.[^57] The court noted
that the Court of Federal Claims was the appropriate venue.[^58] In
1999, the United States and General Dynamics entered into a consent
decree with the EPA where the United States agreed to pay \$35 million
dollars for the cleanup under CERCLA § 107.[^59] Neither the United
States, nor General Dynamics waived any possible future contractual
claims based on the wartime contracts in the United States Court of
Federal Claims.[^60]

### 2. Vietnam Era Contracts: Hercules and Vertac

Vietnam era contracts have also subjected defense contractors to
unanticipated costs resulting from contamination years after contract
performance. Contracts for the production of Agent Orange have resulted
in both CERCLA cleanup costs and separate toxic tort lawsuits. In these
cases, the contractors have sought recovery against the Government under
contract theories. Without the specific indemnification provisions of
the World War II era contracts, defense contractors have made
imaginative arguments for implied indemnification.

During the 1960s, the United States entered a series of fixed-price
production contracts for the production of a phenoxyl herbicide known as
Agent Orange.[^61] The Department of Defense wanted the defoliant for
use in the Vietnam Conflict to destroy enemy food supplies and hiding
places.[^62] The military entered into the contracts pursuant to the
Defense Production Act of 1950 (DPA).[^63] The contracts ran from 1964
to 1968 when they were terminated.[^64]

In the late 1970s, veterans and their families brought a series of
lawsuits claiming health problems relating to dioxin, a byproduct
contained in Agent Orange.[^65] The suits were consolidated in a class
action and hours before trial the defendants settled for \$180
million.[^66] Two of the defendants, Hercules Incorporated and Wm. T.
Thompson Company (Thompson), brought suit against the United States in
federal district court under tort theories of contribution and
non-contractual indemnification.[^67] After losing, the companies
brought suit in the United States Claims Court seeking recovery under
the contract.[^68]

The contracts did not contain specific indemnification provisions
similar to the World War II contracts discussed above.[^69] However, §
707 of the DPA included the following provision:

> No person shall be held liable for damages or penalties for any act or
> failure to act resulting directly or indirectly from compliance with a
> rule, regulation, or order issued pursuant to this Act . . .
> notwithstanding that any such rule, regulation, or order shall
> thereafter be declared by judicial or other competent authority to be
> invalid.[^70]

Thompson claimed relief based on an implied warranty of specifications
and based on a theory of contractual indemnification.[^71] The Claims
Court dismissed the claims and the Federal Circuit affirmed the lower
court.[^72] On appeal, the United States Supreme Court addressed the
companies' contractual claims in *Hercules, Inc. v. United States*.[^73]
The contractors argued that the government, by providing specifications,
warranted the contractor against the consequences of defects in the
specifications.[^74] The Court was unwilling to extend the *Spearin*
doctrine beyond the government warranty that the "contractor will be
able to perform the contract satisfactorily if it follows the
specifications."[^75] The Court concluded that the implied warranty of
specifications does not apply to third-party claims against a
contractor.[^76]

Additionally, Thompson alleged that under the circumstances the contract
should be read to include an "implied agreement to protect the
contractor and indemnify its losses."[^77] Thompson did not argue that
any express provision constituted a specific indemnification agreement.
Instead, it argued that circumstances surrounding the contract created
an implied indemnification agreement.[^78] The facts included that the
"Government required Thompson to produce \[Agent Orange\] under
authority of the DPA and threat of civil and criminal fines, imposed
detailed specifications, had superior knowledge of the hazards, and, to
a measurable extent, seized Thompson\'s processing facilities."[^79]
Additionally, Thompson argued § 707 of the DPA indicated a congressional
intent to hold the contractor harmless for any liability flowing from
compliance with the Act.[^80] Finally, the contractor argued that simple
fairness and equity should allow recovery.[^81]

The Supreme Court was unwilling to find such an "implied indemnification
agreement" for several reasons. First, the Court noted that it would be
unlikely that a contracting officer would agree to an open-ended
indemnification clause that would clearly violate the law.[^82] The
Anti-Deficiency Act (ADA) prohibits federal employees from entering into
a contract in excess of or before money has been appropriated.[^83] The
Comptroller General had repeatedly ruled that such open-ended agreements
to indemnify contractors against third-party liability violate the
ADA.[^84] Second, at the time of the contract there was statutory
authority to provide indemnification clauses in very particular and
well-defined situations.[^85] None of the statutory provisions for
including an indemnification clause applied, and the contracting officer
did not include such a provision. Third, the DPA § 707 provided a
defense to liability, not an indemnification.[^86] Finally, the Court
held that fairness and equity arguments were beyond the jurisdiction of
the Court.[^87] The Supreme Court, under these circumstances, was
unwilling to find an implied indemnification clause.

Another contract between Hercules and the United States for the
production of Agent Orange resulted in a contractual dispute over
Hercules' right to indemnification for CERCLA cleanup costs in *United
States v. Vertac Chemical Corp.*[^88] *Vertac* involved a Vietnam era
defense contract for production of Agent Orange.

The defense contract at issue was a "rated contract" which, under the
DPA, allowed the President to issue directives giving the contract
priority over other contracts Hercules might have. Beginning in 1967,
the United States directed Hercules to increase production---resulting
in the entire facility being devoted to the production of Agent Orange.
When Hercules was unable to meet production demands, the United States
facilitated Hercules importation of chemicals.[^89]

Hercules brought suit against the United States in district court citing
two separate bases for recovery. First, the contractor argued the
Government should be liable under CERCLA as an "operator" or
"arranger."[^90] The court rejected this argument as will be discussed
in Section III of this article. Second, Hercules argued both immunity
from liability and an implied right to indemnification from the United
States.[^91] The district court summarily rejected these arguments
without discussion.[^92] On appeal, the Eighth Circuit affirmed the
lower court's decision with a brief discussion of the merits.[^93]

According to Hercules, § 707 of the DPA, as cited above, provides a
clear and unambiguous immunity from CERCLA liability arising from the
contract. In addition, the contractor asserted that Hercules' immunity
granted under § 707, as well as the United States' waiver of sovereign
immunity and liability under CERCLA, create an implied-in-fact
contractual obligation to indemnify.[^94]

The Eighth Circuit was not persuaded, reasoning that § 707 must be read
harmoniously with the rest of the statute. Section 101(a) of the statute
sets out the purpose of the DPA, which was to give certain defense
contracts priority over other contracts when necessary for national
defense. Section 707 was designed to immunize contractors from possible
liability arising from the priority system. The court held "the
protection afforded by section 707 of the DPA extends no further than
the risk imposed by section 101(a) of the DPA."[^95] Since the immunity
argument failed, the indemnification argument likewise was without
merit. The court found the United States never implicitly promised to
indemnify the contractor against the type of liability asserted in this
case.[^96]

## C. Contracting v. CERCLA Policies

As defense contractors seek contributions from the United States, two
policies inherent in different bodies of law clash.[^97] In passing
CERCLA, Congress wanted to ensure those "responsible for any damage,
environmental harm, or injury from chemical poisons \[are tagged with\]
the cost of their actions."[^98] This responsibility is extended to the
United States with broad waivers of sovereign immunity.[^99] Procurement
law, on the other hand, contains an obligation on the part of the United
States to protect the public fisc.[^100] This results in courts narrowly
construing contracts to limit contractor recovery. With no easy
solution, defense contractors continue seeking recovery both under
CERCLA and traditional contract theories.

# III: DEFENSE CONTRACTOR CLAIMS UNDER CERCLA

When faced with the costly prospect of cleaning up a contaminated
facility, defense contractors often turn to CERCLA to share the cost
with other PRPs such as the United States. This section will examine the
legislative history of CERCLA, as well as theories of liability and
contribution. Next, this section will discuss how CERCLA applies to
actions against the United States as a PRP. Then, scenarios where
defense contractors have sought contributions against the United States
as an "owner," "operator," and "arranger" will be analyzed. The section
will conclude with a discussion of equitable allocation of costs when
the United States is found to be liable as a PRP.

## A. Legislative History of CERCLA

By the late 1970s, Congress had enacted major environmental legislation
prohibiting the disposal of harmful pollutants into the water, the air,
and onto land surface.[^101] Nonetheless, each of these statutes was
designed to prevent current and future pollution problems, and did
little to address existing problems with toxic waste sites.[^102]
Startling revelations concerning the gravity and extent of toxic dumps
within the nation highlighted the gap in the law and spurred Congress
into action.[^103]

Responding to public pressure, Congress passed the Comprehensive
Environmental Response, Compensation, and Liability Act in 1980.[^104]
Unlike other major environmental legislation, CERCLA does not contain a
provision specifically stating the purpose or the goals of the
statute.[^105] However, the legislative history accompanying the statute
lends some insight into congressional intent. According to the Senate
Report, the primary goal of CERCLA is to create a "Superfund" to allow
for the immediate cleanup and restoration of contaminated sites. Just as
important was provision of a mechanism for holding liable those
responsible for the waste.[^106] In essence, the organizations that
profit from the production of chemical wastes should be held responsible
for cleanup efforts.

Congress implemented these objectives by creating a regime of strict,
joint, and several liability on several classes of responsible
parties---"owners," "operators," "arrangers," and "transporters."[^107]
The 1986 Amendments to CERCLA ameliorated the draconian impact of this
strict, joint, and several liability by allowing responsible parties to
seek contributions towards the cleanup costs from other responsible
parties.[^108] The courts are now permitted to distribute the cleanup
costs among the responsible parties using principles of equity.[^109]

## 

### 1. Liability Under CERCLA § 107

CERCLA imposes strict liability on four classes of persons when there is
a release or threatened release of a hazardous substance.[^110] First,
CERCLA imposes liability on the owner or operator of the applicable
vessel or facility.[^111] Second, any person who in the past owned or
operated the applicable vessel or facility at the time the hazardous
waste was disposed is also liable.[^112] Third, persons who arrange for
the transport, treatment, or disposal of hazardous substances are
liable.[^113] Finally, CERCLA imposes liability on a transporter who
accepts hazardous wastes for transport to a site.[^114]

Courts require plaintiffs to show four elements in order to recover
costs under CERCLA § 107: (1) The site is a "facility" as defined in
CERCLA § 101(9); (2) A "release" or "threatened release" of a "hazardous
substance" from the site has occurred; (3) The release or threatened
release has caused the United States to incur response costs; and (4)
The defendants fall within at least one of the four classes of
responsible persons described in CERCLA § 107(a).[^115]

Liable parties are responsible for various costs associated with the
release of a hazardous substance. They are liable for "all costs of
removal or remedial action incurred by the United States Government or a
State or an Indian tribe not inconsistent with the national contingency
plan." Next, a responsible party may be liable to any other person for
necessary response costs consistent with the NCP. Additionally, a
responsible party is liable for damages to natural resources including
costs of assessing those damages. Finally, responsible parties are
liable for the costs of any health assessments or health effects studies
conducted under CERCLA § 104(i).[^116]

CERCLA § 107 recognizes three very narrow affirmative defenses to
liability. The first two eliminate liability if the release of the toxic
substance results from either an "act of God" or an "act of war."[^117]
An "act of God" is defined as "an unanticipated grave natural disaster
or other natural phenomenon of an exceptional, inevitable, and
irresistible character, the effects of which could not have been
prevented or avoided by the exercise of due care or foresight."[^118]
Courts have interpreted this exception very narrowly.[^119] While "acts
of war" is not defined within the statute, courts have narrowly
interpreted the definition to include only releases directly related to
combat operations.[^120] These two exceptions are so narrow as to have
been virtually useless in limiting liability.

The final defense, raised most often, is to blame the release on an "act
or omission of a third party."[^121] This defense is also limited in
three very significant ways. First, the "act or omission" cannot occur
in connection with a contractual relationship between the parties.[^122]
Second, the defendant must prove that he exercised due care with respect
to the hazardous substance based on all the facts and
circumstances.[^123] Third, the defendant must show "he took precautions
against foreseeable acts or omissions of any such third party and the
consequences that could foreseeably result from such acts or
omissions."[^124] A defendant may raise any combination of these
defenses.[^125]

### 2. Contribution Actions Under CERCLA § 113(f)

While CERCLA § 107 grants a plaintiff a private right of action to
recover costs associated with the cleanup of a contaminated site, it
does not provide a method for one responsible party to seek
contributions from other responsible parties.[^126] In 1986, Congress
passed the Superfund Amendments and Reauthorization Act (SARA), which
added CERCLA § 113(f).[^127] Under this provision, a person could now
seek a contribution from any other party who was also a PRP.
Responsibility would now be allocated among the responsible parties
using "equitable factors as the court determines are appropriate."[^128]
The effect of this amendment was to relieve the harsh consequences of
placing the enormous cost of site cleanup on a single party without
allowing a mechanism for sharing the costs among responsible parties.

To encourage parties to settle, the 1986 Amendment, adding § 113(f)(2),
also provided a shield from further contribution claims once a
responsible party enters into an approved settlement with the United
States or a State.[^129] This section, however, does not shield a PRP
from a further action for cost recovery brought under § 107.[^130]
Without such protection from further cost recovery actions, the
protections of § 113(f)(2) are thought to be extremely limited.[^131]

### 3. Federal Government Liability---Waivers of Sovereign Immunity

CERCLA § 120, entitled "Federal Facilities," provides that all branches
of the federal government "shall be subject to, and comply with, this
chapter in the same manner and to the same extent, both procedurally and
substantively, as any nongovernmental entity, including liability under
\[CERCLA § 107\] of this title."[^132] Prior to the SARA in 1986,
essentially identical language was contained in § 107.[^133] The new
amendments created a new section to deal with issues involving the
cleanup of federal facilities.[^134] However, there is no support for
the proposition that by moving the language of § 120(a) from § 107 that
Congress intended to limit the earlier waiver of sovereign immunity to
government actions on federal facilities.[^135] Further, the term
"person" as used in CERCLA § 107, is defined in § 101 to include the
United States government.[^136]

Courts interpreting the breadth of the waiver of sovereign immunity have
wrestled with two competing concepts. First, as a guiding principle,
waivers of sovereign immunity are interpreted narrowly.[^137] In
contrast, courts construe remedial statutes, such as CERCLA, liberally
to accomplish their goals.[^138] The § 120 waiver clearly states the
federal government should be treated the same as any other "person" in
assessing liability under the statute.[^139] The conflict comes to a
head in cases where the government is acting in its sovereign capacity
as a regulator---as opposed to as a "person."

In balancing the competing concepts, courts have subdivided regulatory
activities into those dealing with cleanup activities and other
regulatory activities. Sovereign immunity is invariably recognized when
the government is acting in its regulatory capacity to effectuate the
cleanup of a site.[^140] This immunity is consistent with the grant of
immunity to state and local governments for their cleanup activities
granted in § 107(d)(2).[^141] When the government is involved in
regulatory activities other than cleanup activities the trend is to find
a waiver of sovereign immunity.[^142] Nonetheless, the existence of
regulatory oversight alone should be insufficient to find the government
liable as a responsible person.[^143]

Establishing a waiver of sovereign immunity is only the first step in
assessing the liability of the federal government. Even with the waiver,
the plaintiff still needs to establish that the government is within the
class of PRPs set out in CERCLA §107(a). While this is not a significant
hurdle when dealing with traditional facilities that are federally
owned,[^144] it is a far more difficult proposition when examining the
relationship between defense contractors and the United States.

## 

## B. Government CERCLA Liability Based on Contractual Relationships

While the waiver of sovereign immunity has not been an insurmountable
hurdle, establishing the United States' liability as a PRP under CERCLA
§ 107 is a challenge. The status of the United States as an "owner,
operator, or arranger" based on a contractual relationship seldom
presents a clear issue.

### 1. Owner Liability---Elf Atochem North America, Inc. v. United States

In some situations, defense contractors may assert the government should
be liable as an "owner" under CERCLA § 107. The few reported cases have
revolved around the definition of "facility" and what constitutes
"disposal" of a hazardous substance.[^145] Government contracts often
involve the use by a defense contractor of government furnished
property.[^146] While there would be little issue in situations where
the government furnished an entire plant, as in the case of a "GOCO"
(government-owned contractor-operated facility),[^147] the issue is
murkier when the government provides machinery or equipment that is used
at a defense contractor plant.

One such case is *Elf Atochem North America, Inc. v. United
States*.[^148] Elf Atochem of North America, Inc. (Elf) owned and
operated a plant in Pittstown, New Jersey.[^149] Elf produced the
pesticide DDT for use during World War II. The pesticide was produced
pursuant to a contract with the United States in support of the war
effort. The government considered DDT a strategic pesticide vital to the
war effort in Europe. As part of the contract, the United States leased
to Elf's predecessor in interest the equipment necessary to produce the
DDT.[^150] The parties installed the equipment at the contractor's plant
and connected it using company-owned pipes to waste ponds.[^151]

Today, the site is contaminated with chlorobenzene and benzene---both
are byproducts of DDT production.[^152] The EPA placed the site on the
NPL in 1983.[^153] Subsequently, Elf entered into a consent decree with
the EPA.[^154] Elf then brought an action under CERCLA § 113(f), seeking
contribution from the United States as a PRP.[^155]

The district court set out a six-part test for liability---Elf needed to
show that the United States 1) owned 2) a facility 3) at which hazardous
substances 4) were disposed 5) and from which there is a release or
threatened release 6) for which response costs have been incurred.[^156]
Ownership of the leased equipment was not an issue.[^157] Both the
United States and the district court acknowledged the expansiveness of
the term "facility" as defined under CERCLA § 101(9)(A).[^158] There was
no dispute that the government owned the leased equipment and that the
equipment fell within the CERCLA definition of "facility."[^159]
Additionally, both parties agreed the DDT byproducts qualified as
hazardous substances under the CERCLA § 101(14).[^160] Further, neither
party disputed that Elf had incurred response and cleanup costs.[^161]

The primary point in contention was whether there was a "disposal" of
the hazardous substance from the government-owned "facility."[^162] The
court acknowledged that CERCLA was not intended to cover internal waste
streams that were to be reclaimed or put to new use.[^163] In addition,
the court understood that the prevailing view among the circuits was
that "disposing" requires an affirmative act where the "materials were
considered waste and were thrown out, got rid of or dumped."[^164] While
once again both parties agreed the product leaving the government
equipment was "waste," they disagreed as to the location of the
disposal.[^165] The United States argued that "disposal" required
exposure to the environment.[^166] The court rejected this argument as
too narrow, instead finding that "when each of the waste streams left
the United States' equipment it was being sent to the pipes as a means
of getting rid of it, transferring it, throwing it out; in other words,
disposing of it."[^167]

The final issue was whether a "release" or "threatened release" of a
hazardous substance occurred.[^168] The United States, again narrowly
focused, argued that the government-owned equipment discharged hazardous
waste into Elf's pipes---not the environment.[^169] The court declined
to agree, instead determining that the word "release" should be
construed broadly.[^170] The only requirement is an "eventual release,
not an actual or imminent one."[^171] In addition, the court was not
swayed by the concerns of other courts that this reasoning might
"improperly merge owner liability into generator liability" if the
release were to occur at a time separate from disposal.[^172] In this
case, "\[t\]he United States \[was\] not being sued for creating waste
that was later released into the environment through no fault of its
own. Rather, the United States \[was\] being sued for disposing of its
waste directly from its equipment into pipes that lead directly to the
environment."[^173]

Under the rationale set out in *Elf Atochem*, the government may incur
liability as an "owner" of a "facility" as defined under CERCLA § 107 by
providing government furnished property. In addition, the government may
be liable when the contractor purchases equipment for which the
government will reimburse the contractor as a direct cost under the
contract.[^174] In these situations, title for the equipment often
passes to the government pursuant to contractual clauses---making the
government the owner of the "equipment"[^175]---and possibly a CERCLA
"facility." This was the situation in *Mead Corp. v. United States,* an
unpublished district court opinion.[^176] Although the government was
the "owner" of a "facility," the *Mead* court did not find a "release"
because the hazardous waste was disposed of at a different time and
location away from the "facility."[^177]

Liability in these cases is extremely fact specific and may depend on
contract clauses defining ownership of property. Without being able to
show actual government ownership of the affected facility, defense
contractors have to look to a different theory on which to hold their
contracting partner, the United States, liable.

### 2. Operator Liability---FMC Corporation v. United States

Without the facts necessary to show government ownership of a
"facility," defense contractors often assert the government should be
liable as an "operator" for the disposal of a hazardous substance. There
are at least a few cases, mentioned below, where the contractor was able
to establish the "actual control" necessary to show the government acted
as an "operator." Government regulation of an industry has never been
sufficient in itself to establish the government liability as an
"operator."[^178] Instead, the courts have focused on the pervasive
nature of the government's involvement with a contractor facility.

*FMC Corporation v. United States* (FMC), a Third Circuit case, is the
seminal case dealing with government "operator" liability based upon a
wartime contract.[^179] The case involved a facility located in Front
Royal, Virginia that was owned and operated by American Viscose from
1937 until 1963. In 1963, FMC purchased the plant. In 1982, an EPA
inspection revealed a hazardous substance in the groundwater near the
site. The substance, carbon bisulfide, is a chemical byproduct from the
production of rayon. EPA began a cleanup and informed FMC of their
liability under CERCLA. In 1990, FMC brought an action against the
United States pursuant to CERCLA § 113(f) seeking contribution for the
cost of cleanup.[^180] They alleged, among other things, that the
government was liable as an "operator" based on the government's
pervasive involvement in a World War II contract with American
Viscose.[^181]

Based on the facts presented, the court found the United States liable
as an "operator" under CERCLA § 107.[^182] First, the court dealt with
the waiver of sovereign immunity.[^183] Using the reasoning discussed
earlier, the court found the United States had waived its sovereign
immunity and was subject to suit.[^184] Next, the court turned to the
issue of liability as an "operator" and applied the "actual control"
test.[^185]

The "actual control" test was originally developed in the context of
related corporations.[^186] Under the test, one corporation would be
liable for the actions of another if it had "'substantial control' over
the other corporation. \[citation omitted\]. At a minimum, substantial
control requires 'active involvement in the activities' of the other
corporation."[^187] The court extended the application of the test to
situations where "the government \[has\] 'substantial control' over
\[a\] facility and \[had\] 'active involvement in the activities'
there."[^188] The test is "inherently fact-intensive" and based on "the
totality of the circumstances presented."[^189]

The court focused on the government's "considerable day-to-day control
over American Viscose." There were five factors the court stressed.
First, the government directed the production of the high tenacity
rayon, diverting American Viscose from its ordinary business. Second,
the government maintained significant control over the process through
regulations, inspectors, and the possibility of seizure. Third, the
government supplied the raw materials from government-built plants,
supplied an increased work force, and helped supervise employees.
Fourth, the government furnished machinery used in the production of the
rayon. Finally, the government set the price of the rayon and determined
the marketing.[^190]

The dissent in FMC applied the same test but argued that involvement in
"nuts-and-bolts management decisions \[is\] necessary for \[operator\]
liability under CERCLA."[^191] According to the dissent, the majority
misconstrued the facts by neglecting the following aspects. First,
American Viscose performed the production of rayon for profit, subject
to the same rules as the entire industry. Next, the firm's management
remained in place and actually performed the day-to-day scheduling and
made employee decisions. Additionally, the raw materials involved in the
contamination were supplied by third parties, not the government.
Furthermore, the government's involvement with employees at the plant
was at the request of American Viscose. Finally, the government's
ownership of equipment subjects it to owner liability---not operator
liability. Based on this rendition of the facts, the dissent would not
find the government liable as an "operator" of the facility.[^192]

Courts applying this same test to Vietnam-era wartime contracts have not
found the same degree of pervasive control by the government sufficient
to justify government liability.[^193] Given the unique fact-specific
nature of the holding in FMC, it is unsurprising that few defense
contractors would be able to satisfy the "actual control" test
sufficiently to prove government liability.

In *United States v. Bestfoods,* a unanimous United States Supreme Court
took on the issue of "actual control" in the context of corporate
liability in parent-subsidiary relationships.[^194] The Court
distinguished between derivative and direct liability.[^195] Consistent
with state law, the Court held that when, but only when, the corporate
veil may be pierced, may a parent be held liable for a subsidiary's
violations of CERCLA. Otherwise, the focus is on the direct liability of
the parent.[^196] The Court noted that the nature of the
parent-subsidiary corporate relationship was irrelevant to the issue of
direct liability.[^197] Instead, the actions of the parent as an
"operator" are critical.[^198] The Court went on to clarify the
definition of "operator" as it applies to the corporate relationship:

> \[U\]nder CERCLA, an operator is simply someone who directs the
> workings of, manages, or conducts the affairs of a facility. To
> sharpen the definition for purposes of CERCLA\'s concern with
> environmental contamination, an operator must manage, direct, or
> conduct operations specifically related to pollution, that is,
> operations having to do with the leakage or disposal of hazardous
> waste, or decisions about compliance with environmental
> regulations.[^199]

After *Bestfoods,* the Third Circuit's reasoning in FMC seems
suspect.[^200] Certainly, one could argue that the "actual control" test
survives as applied to government-contractor relationships. After all,
the Third Circuit recognized the test was developed in the context of a
related corporation and only applied it to government-contractor
relationships because it was "instructive."[^201] More damaging to their
logic is the Supreme Court's admonition that the focus for "operator"
liability is on operations directly related to disposal of hazardous
waste and environmental compliance.[^202] Few, if any, of the factors
detailed by the Third Circuit for finding the government liable as an
operator are related to hazardous waste disposal.[^203]

In light of the high hurdles set by FMC, and raised immeasurably by
*Bestfoods*, defense contractors will be unlikely to prevail by alleging
the government is liable as an "operator' based on their contractual
relationship. The next possibility is to allege the government is liable
as an "arranger."

### 3. Arranger Liability: United States v. Vertac

The Eighth Circuit addressed "arranger" liability as it applies to
defense contractors in *United States v. Vertac.*[^204] *Vertac*
involved a Vietnam era defense contract for production of Agent Orange
as discussed in Section II of this article. Based on the facts as
alleged, the Eighth Circuit did not find the government liable as an
"operator," or an "arranger."[^205]

The court rejected the Hercules' "operator" argument applying the
"actual control" test as set out in FMC above.[^206] The Eighth Circuit
then turned to the issue of "arranger" liability. The legal standard for
determining whether one is liable for arranging the disposal or
treatment of a hazardous substance is whether they "had the authority to
control, and did control" the production leading to the hazardous
waste.[^207] The court acknowledged that there was no requirement to
prove "personal ownership or actual physical possession of hazardous
substances as a precondition" for finding arranger liability---such a
requirement would "be inconsistent with the broad remedial purposes of
CERCLA."[^208]

However, the court placed serious limitations on the ability to find the
United States liable as an "arranger" based on wartime contracts. First,
the court dismissed Hercules' argument that the government was liable
based on the United States' regulatory powers. "A governmental entity
may not be found to have owned or possessed hazardous substances \[as an
"arranger"\] merely because it had statutory or regulatory authority to
control activities which involved the production, treatment or disposal
of hazardous substances."[^209] Instead, the court would require
immediate supervision and direct responsibility for the transportation
or disposal of the hazardous substances generated at a facility. The
court found none of the required supervision or any responsibility for
waste disposal in the facts presented by Hercules.[^210]

Hercules countered by arguing that in addition to the regulatory powers,
the additional nature of the contractual relationship was enough to
establish government liability. The court suggests that in certain
circumstances "a government contract \[may involve\] sufficient coercion
or governmental regulation and intervention to justify the United
States' liability as an arranger under CERCLA."[^211] However, the fact
that the government could require the contractor to perform the contract
and give it priority over other contracts was not sufficient for such a
finding.

Hercules also argued that the United States, by supplying raw materials,
in addition to having the authority to control the supply, production
process, and end product, should be liable as an "arranger."[^212] The
contractor analogized the situation to *Aceto.*[^213] In that case, a
chemical manufacturer hired an independent contractor to formulate
pesticides. The manufacturer owned the raw materials, the work in
progress, and the end product. Actual ownership throughout the process
was sufficient to allege "arranger" liability, even though the
manufacturer was not actually involved in the treatment or disposal of
the hazardous substance.[^214] In the present case, the court was not
convinced that Hercules could show the United States supplied or owned
either the raw material or work in progress.[^215] Facilitating the
acquisition of raw materials and the minimal involvement in the
production process was insufficient to support the allegation. Thus, the
court rejected each rationale asserting the government was liable as an
"arranger."[^216]

While *Vertac* leaves open the possibility that a contractual
relationship may lead to government liability, the circumstances appear
quite limited.[^217] Like the Supreme Court in *Bestfoods*, the court
appears to be focused on the government's direct involvement in the
production and disposal of hazardous waste.[^218] The ordinary
contractual relationship between buyer and seller will not result in
government liability.

### 4. Allocation of Cost Under CERCLA § 113(f): 

### United States v. Shell Oil Company

In the event that a defense contractor is able to show the government is
also a PRP as either an "owner," "operator," or "arranger," the
allocation of liability under CERCLA § 113(f)(1) must be
adjudicated.[^219] The courts are given remarkable discretion to apply
"equitable factors as the court determines are appropriate." In the
context of a wartime defense contract, a district court made just such
an allocation in *United States v. Shell Oil Company* (Shell Oil).[^220]

Shell Oil involved the cleanup of the McCroll Superfund Site, a
twenty-two acre site near Fullerton, California. The site was
contaminated with acid sludge byproducts from the production of
high-octane aviation fuel during World War II. The fuel was produced for
the military under heavily regulated government contracts.[^221] Despite
claims of the "act of war," and "innocent landowner" defenses, the
district court found the oil companies liable as CERCLA "arrangers" in
an earlier proceeding.[^222] In an unpublished order, the United States
was also adjudged liable as an "arranger."[^223]

During the War, the War Production Board and the Petroleum
Administration subjected the oil industry to intense oversight. The
degree of oversight included directives concerning supply of raw
materials, quarterly inventories, quantities to produce, quality of fuel
produced, and manufacturing specifications. Companies refusing to
cooperate were subject to takeover, and individuals subject to criminal
prosecution. The huge volumes demanded by the government resulted in
by-products too great to be reused, treated, or disposed of based on the
facilities available. The shortage of railroad tank cars precluded
shipment of the waste to oil company facilities in Richmond, California.
The government would not allow the oil companies to build treatment
facilities. The government was aware, and at least tacitly agreed, to
the oil companies contracting with McCroll to dump the hazardous
byproducts at the McCroll site.[^224]

The court, applying equitable factors, found the government 100 percent
liable for the waste associated with the aviation fuel program.[^225]
The court articulated three reasons. First, equitable principles should
place the cost of war on the United States as a whole as opposed to an
individual contractor.[^226] "The American public stood to benefit from
the successful prosecution of the war effort, so too must the American
public bear the burden of a cost directly and inescapably created by the
war effort."[^227]

The other two reasons dealt with the blameless action of the oil
companies. The oil companies had no alternative to land disposal since
the government use precluded the availability of tank cars necessary for
proper movement of the byproducts to the facility in Richmond,
California. Finally, the government would not approve the oil companies'
plans to build treatment plants.[^228]

Once again, the success of the defense contractor even in the allocation
process is extremely fact specific. Not many defense contractors will be
able to show the degree of control the government exerted in Shell Oil,
nor the blameless conduct of the contractors. The focus appears to be on
the relative culpable conduct of the contracting parties and the degree
to which each party benefited from the disposal of the hazardous
substance.

## C. Section Summary

Despite the staggering costs involved, and the sentiment that society as
a whole benefits from the successful prosecution of war and should
therefore bear the costs as a whole---defense wartime contractors have
been remarkably unsuccessful in seeking contributions for the cleanup of
defense facilities from the United States. The hurdles enacted by
Congress, as interpreted by the courts, greatly limit the situations
where a defense contractor will make a successful showing of government
liability. CERCLA does not mention contractual relations as a basis for
liability---and the courts do not seem likely to create such a basis.
Except in the rare case of actual government ownership of a facility
operated by a contractor, "owner" liability will not apply. Even rarer
will be instances where a contractual relationship will involve the
degree of control over the manufacture, disposal, or treatment of
hazardous waste to hold the government liable under an "operator" or
"arranger" theory. Most contractors will have to seek another avenue to
recover a share of the cost of cleanup---one such possibility is under a
breach of contract theory.[^229]

# IV. CONTRACTOR RECOVERY UNDER THE CONTRACT

## A. Dealing with the Sovereign---The Government's Split Personality

While contractors may be perplexed by the difficulty of seeking
contributions from the United States under CERCLA, they face an even
more daunting task wading through the complexities of government
procurement law. Contractors seeking reimbursement for CERCLA cleanup
costs under a contract theory are arguing in essence that the government
should assume the financial burden of changes in the law that increase
the cost of contract performance. These arguments are generally based on
either explicit or implicit promises by the government that they will
assume the risk of such a change in the law. While this argument may be
relatively new in the context of environmental cleanup costs, defense
contractors have been making similar arguments since the days of the
Civil War---only a few years after Congress passed legislation allowing
for breach of contract claims to be brought against the United States.

The United States Court of Claims was established by statute in 1855 to
hear claims, including contractual claims.[^230] Prior to this time,
Congress handled such matters on an ad hoc basis by passing private
legislation.[^231] The newly-formed court was writing on a largely clean
slate. Many of the principles developed in the early cases survive today
as courts sort out the circumstances under which the government will be
treated as any other contracting party---and in what circumstances
special exceptions should apply. Today, these competing methods of
treating the government in its contractual relationships are sometimes
referred to as the "congruence," and the "exceptionalism"
theories.[^232] The United States Court of Claims first addressed the
dichotomy between the government as lawgiver and the government as
contracting partner when a Civil War defense contractor was stung by a
change in the law.[^233]

*United States v. Deming* involved a contract between Israel Deming and
the United States Marine Corps, for the purchase of rations during the
Civil War.[^234] In 1861, the quartermaster, on behalf of the United
States, entered into a contract for the daily supply of rations.[^235]
In August of that same year, Congress passed a duty on some of the
supplies making up the rations.[^236] Despite the loss, Israel Deming
continued to supply rations for the remainder of the year.[^237] In
1862, Deming again entered into a contract with the Marines to supply
rations. In February 1862, Congress passed the Legal Tender Act, which
raised the cost of contract performance[^238]---and once again the
contractor suffered a loss.[^239] The contractor filed suit for
\$3,558.48 for damages caused by the imposition of new conditions upon
the contracts.[^240]

In one brief paragraph, the United States Court of Claims set forth what
became known as the "Sovereign Acts" doctrine and explained the dual
nature of the government as sovereign and the government as a private
contractor:

> This statement of his case is plausible, but is not sound. And herein
> is its fallacy: that it supposes general enactments of Congress are to
> be construed as evasions of his particular contract. This is a grave
> error. A contract between the government and a private party cannot be
> specially affected by the enactment of a general law. The statute
> bears upon it as it bears upon all similar contracts between citizens,
> and affects it in no other way. In form, the claimant brings this
> action against the United States for imposing new conditions upon his
> contract; in fact he brings it for exercising their sovereign right of
> enacting laws. But the government entering into a contract, stands not
> in the attitude of the government exercising its sovereign power of
> providing laws for the welfare of the State. The United States as a
> contractor are not responsible for the United States as a lawgiver
> were this action brought against a private citizen, against a body
> corporate, against a foreign government, it could not possibly be
> sustained. In this court the United States can be held to no greater
> liability than other contractors in other courts.[^241]

The court elaborated on the dual nature of the government in a second
case during the same term.[^242] The court asserted that the government,
while being sued as a contracting party, cannot be made liable for its
acts as a sovereign.[^243] Further, the court stated that:

> In this court, the United States appear simply as contractors; and
> they are to be held liable only within the same limits as any other
> defendant would be in any other court. Though their sovereign acts
> performed for the general good may work injury to some private
> contractors, such parties gain nothing by having the United States as
> their defendants.[^244]

While the Sovereign Acts doctrine is only one theory advanced for
relieving the government from liability for changes in the law, these
cases underscore the complexities involved in dealing with the "split
personality" of the government as both a contracting partner and as a
sovereign.[^245]

Over the years, courts have continued to struggle over the nature of the
government as a contracting partner. The courts developed several
judicial theories for limiting the government's liability for
contractual obligations based on changes in the law. In addition to the
Sovereign Acts doctrine, a restriction known as the Unmistakability
doctrine requires surrender of sovereign power to be in unmistakable
terms.[^246] The Reserved Powers doctrine prevents a sovereign from
surrendering certain state powers under any condition.[^247] In order
for an agent to contract away the sovereign powers of the United States
requires an "express delegation" of that authority.[^248] The United
States Supreme Court addressed each of these theories in *United States
v. Winstar,* a case holding the government liable for an implied promise
to assume the risk of a future change in the law.[^249]

## B. Allocating the Costs of Changes in the Law---*United States v. Winstar*

On July 1, 1996, the Supreme Court issued a ninety-eight page
opinion.[^250] The fragmented decision contains a plurality opinion by
Justice Souter, a concurrence by Justice Breyer, a separate opinion
concurring in the judgment by Justice Scalia, joined by Justices Kennedy
and Thomas, and a dissent by Chief Justice Rehnquist joined in part by
Justice Ginsburg.[^251] The decision has generated scores of law review
articles, many critical of the reasoning employed by the justices.[^252]
The opinions do little to clarify a confusing area of the law.

### 1. Factual Background

*Winstar* involves a suit brought against the United States by three
financial institutions (thrifts). The suit alleged a contractual breach
and an unconstitutional taking by the United States brought about by the
passage of the Financial Institutions Reform, Recovery, and Enforcement
Act of 1989 (FIRREA).[^253] The basis for the dispute involved the
savings and loan crisis in the 1980s.

In the late 1970s and early 1980s, the combination of high inflation and
high interest rates caused the failure of numerous savings and loans.
The response of government regulators was to deregulate the industry and
reduce capital reserve requirements. Despite, and perhaps because of
these measures, the savings and loan industry continued to falter and
many thrifts failed. The Federal Savings and Loan Insurance Corporation
(FSLIC) became stretched to the point that it lacked the resources to
liquidate all of the failing thrifts. To avoid the impending crisis, the
Bank Board decided to encourage healthy thrifts and outside investors to
buy out the failing thrifts in "supervisory mergers."[^254]

Obviously, the liabilities of the failing thrifts exceeded their assets
making them poor investments for other institutions. In addition, the
FSLIC was in no position to offer a cash subsidy equal to the difference
between the failed thrifts liabilities and assets. Instead, the Bank
Board offered "cash substitutes" in the way of special accounting
procedures. One incentive was to allow the acquiring institution to
count "supervisory goodwill" towards the reserve requirement.
"Supervisory goodwill" was the excess of the purchase price for the
failed thrift over its assets. Without this incentive the acquisition
would be impossible since the gaining thrift would, in most cases,
become insolvent immediately after the purchase. Another incentive was
to allow the acquiring institution to amortize the "supervisory
goodwill" over periods of up to forty years. This allowed the thrifts to
show "paper profits" in the initial years after the acquisition and seem
more profitable than they were. A third incentive was to allow the
acquiring thrift to use cash contributions from the FSLIC as "capital
credit." Without requiring the thrift to subtract the amount from the
"supervisory goodwill," this led to double counting of the amount in the
capital reserve.[^255]

The three thrifts involved in this case, Glendale Federal Bank, Winstar
Corporation, and The Statesman Group, Inc. entered into agreements with
the Bank Board in 1981, 1984, and 1988 respectively. The agreements
involved the incentives discussed above.[^256]

In 1989, responding to public pressure, Congress passed FIRREA. The
legislation had immediate and drastic effects on the savings and loan
industry. The FSLIC was abolished and the Office of Thrift Supervision
under the Treasury Department replaced the Bank Board. More importantly
many of the "incentives" previously agreed to by the Bank Board were
outlawed. Thrifts were required to maintain three percent of their total
assets as core capital. Intangible assets, such as "supervisory
goodwill," were no longer counted as part of the required core capital.
A transitional rule allowed the "supervisory goodwill" to be counted as
half the core capital requirement, but only through 1995.[^257]

Federal regulators seized and liquidated both Winstar and Statesman soon
after FIRREA became law---because the thrifts did not meet the new
capital requirements. Glendale avoided seizure, but only because of
massive private investment. Each of the institutions filed suits that
followed a tortuous path to the United States Supreme Court.[^258] In
1996, six years after first bringing suit, the Supreme Court heard the
case and delivered a very fragmented decision affirming the government's
liability in this situation.

### 2. Plurality Opinion of Justice Souter---Focusing on Risk Allocation

Justice Souter begins his opinion by deferring to the lower courts on
the question of whether a contract even existed between the government
and the thrifts. Unlike a typical government contract, the basis for the
"contract" was many disparate documents which the government asserted
were merely statements of existing policy and not a contractual
undertaking. Disagreeing, Justice Souter approves of the lower court's
determination that the documents which were incorporated into a final
agreement composed a contractual commitment. The contractual commitment
included an approval of the proposed merger, and an agreement to record
"supervisory goodwill" as a capital asset to be amortized over a period
of years.[^259]

Justice Souter finds nothing in the documentation that purported to bar
the government from making changes in the manner of regulating the
industry in the future.[^260] Instead, relying on principles of private
contracts, the Court considers "this promise as the law of contracts has
always treated promises to provide something beyond the promisor\'s
absolute control, that is, as a promise to insure the promisee against
loss arising from the promised condition\'s nonoccurrence."[^261]
Justice Souter finds this to be an implied promise to shift the risk of
changes in the law---he never cites to specific language in the
agreement.[^262] This section of the opinion concludes that the passage
of FIRREA constituted a breach of this implied promise.[^263]

Justice Souter's conclusions concerning the nature of the contract are
critical to his later reasoning in the opinion. By characterizing the
contracts as risk-shifting agreements rather than promise not to change
the law---Justice Souter avoids application of the Unmistakability
doctrine and the Sovereign Acts doctrine.

Justice Souter traces the origins of the Unmistakability doctrine to the
English common law concept that "one legislature may not bind the
legislative authority of its successors."[^264] This concept was limited
in this country by the Contract Clause of the United States Constitution
that barred states from passing laws that impair the obligations of
contracts.[^265] Early courts realized the Contracts Clause could become
a serious threat to the sovereign responsibilities of states.[^266] One
solution was the development of the Reserved Powers doctrine that would
forbid the contracting away of certain sovereign powers.[^267] The
second solution was the development of the Unmistakability doctrine to
strictly construe contracts purporting to barter away sovereign power.
By 1862, the Supreme Court formulated the Unmistakability doctrine as
the requirement that no sovereign power will be surrendered "unless such
surrender has been expressed in terms too plain to be mistaken."[^268]

The Unmistakability doctrine was formulated to address problems with the
Contracts Clause that prohibit states from passing laws that abrogate
their contractual obligations.[^269] However, the Contract Clause is not
applicable to the federal government.[^270] It was not until 1986 that
the Supreme Court expanded the scope of the doctrine to include
contractual relations between the federal government and
contractors.[^271] In *Bowen v. Public Agencies Opposed to Social
Security Entrapment,* the Court dealt with a state-federal agreement
regarding the right of a state to withdraw state employees from the
social security scheme. In 1983, Congress changed the law eliminating
the right to withdraw. The State of California and citizen groups filed
suit. The Court applied the doctrine to federal contracts stating
"contractual arrangements, including those to which the sovereign itself
is a party, 'remain subject to subsequent legislation' by the
sovereign."[^272]

The Court reached a similar conclusion a year later in *United States v.
Cherokee Nation of Okla.*[^273] In that case, the Government had
conveyed a property right in the Arkansas River to an Indian Tribe
through a treaty. Subsequently, the government made navigation
improvements that the tribe asserted damaged their property interests.
The Indian Tribe sued the United States seeking just compensation. The
Court held that the government's navigational easement was an element of
sovereignty that could only be surrendered in "unmistakable
terms."[^274]

Justice Souter whittles these cases down to the simple holding that:

> a contract with a sovereign government will not be read to include an
> unstated term exempting the other contracting party from the
> application of a subsequent sovereign act (including an Act of
> Congress), nor will an ambiguous term of a grant or contract be
> construed as a conveyance or surrender of sovereign power.[^275]

Justice Souter then makes a jump in logic to conclude that: "\[t\]he
application of the doctrine thus turns on whether enforcement of the
contractual obligation alleged would block the exercise of a sovereign
power of the Government."[^276] Justice Souter maintains that this is
not remedy-based because "the particular remedy sought is not
dispositive." According to him, there are cases where a claim for
damages could in effect block the exercise of a sovereign power such as
taxation---and the Unmistakability doctrine would have to be satisfied.
At the other extreme, "humdrum" supply contracts would never be subject
to the Unmistakability doctrine. Provided that a contract is "reasonably
construed to include a risk‑shifting component that may be enforced
without effectively barring the exercise of that power, the enforcement
of the risk allocation raises nothing for the unmistakability doctrine
to guard against, and there is no reason to apply it."[^277]

Using this rationale, the Unmistakability doctrine is inapplicable to
the facts in *Winstar.* The "contracts" between the thrifts and the
United States do not attempt to bind Congress from future changes in the
law. Instead, Justice Souter reads the contracts "as solely
risk‑shifting agreements and \[the thrifts\] seek nothing more than the
benefit of promises by the Government to insure them against any losses
arising from future regulatory change."[^278] Thus, by creating the
legal fiction of an implied agreement to indemnify, Justice Souter
avoids application of the Unmistakability doctrine to the present case.

Using a similar type of reasoning, Justice Souter dispatches the next
two

government arguments. The Reserved Powers doctrine traces its history as
a limitation placed on the Contracts Clause.[^279] The doctrine is meant
to prevent a state from contracting away an "essential attribute of its
sovereignty."[^280] The government argued the doctrine has a similar
application to contracts by the federal government. Even so, Justice
Souter once again points out that the contract in this case was for
indemnification. "\[A\] contract to adjust the risk of subsequent
legislative change does not strip the Government of its legislative
sovereignty."[^281]

A similar fate met the government's argument that the Bank Board lacked
the authority to "fetter the exercise of sovereign power."[^282] Justice
Souter agrees that the authority to contract away sovereign power must
be clear and unmistakable. However, there was no such contract and the
Court could avoid the issue.[^283]

Justice Souter goes to great lengths to analyze and then reject a
"sovereign acts" defense that the government did not emphasize in their
presentation to the Court.[^284] He rejects the argument claiming that
the "facts of this case do not warrant application of the doctrine, and
even if that were otherwise the doctrine would not suffice to excuse
liability under this governmental contract allocating risks of
regulatory change in a highly regulated industry."[^285] In making his
argument, Justice Souter applies his analysis to all government
contracts, refusing to distinguish between regulatory and non-regulatory
contracts.[^286] Further, he fails to explain any interaction between
the Sovereign Acts and Unmistakability doctrines.

In formulating his view of the Sovereign Acts doctrine, Justice Souter
relies upon the sole Supreme Court case addressing the issue. The
Supreme Court had adopted the Sovereign Acts doctrine in *Horowitz v.
United States.*[^287] In that case, the Ordnance Department agreed to
sell silk to a private contractor and to ship the material within a
specified time. Another federal agency placed an embargo on the shipment
of silk, substantially delaying the delivery. Meanwhile, the price of
silk plummeted and the contract became unprofitable to the contractor.
The contractor filed suit for damages and on appeal, the Supreme Court
rejected the claim holding: "the United States when sued as a contractor
cannot be held liable for an obstruction to the performance of the
particular contract resulting from its 'public and general' acts as a
sovereign.\"[^288]

Justice Souter is mindful that the purpose behind the Sovereign Acts
doctrine is to ensure the government is to be treated the same as a
private contractor---the congruence principle.[^289] He sets up a
two-part test to apply the Sovereign Acts doctrine. First, one must
determine whether the sovereign act is attributable to the government as
a contractor. Second, if the answer is no, one should apply ordinary
principles of private contract law---the impossibility doctrine.[^290]

Applying the first prong requires a determination of the degree of
governmental "self-interest" in the sovereign act.[^291] *Horowitz's*
"public and general" criteria are one method of ensuring the sovereign
act is relatively free of self-interest. If the impact on a government
contract is "incidental to the accomplishment of a broader governmental
objective," ordinary private contract principles apply.[^292] "The
greater the Government's self-interest, however, the more suspect" the
claim of the Sovereign Acts defense should be.[^293] Justice Souter
holds: "a governmental act will not be "public and general" if it has
the substantial effect of releasing the Government from its contractual
obligations."[^294]

The first prong only exempts the government, under the prescribed
circumstances, from the ordinary contracting principle that "a
contracting party may not obtain discharge if its own act rendered
performance impossible."[^295] The second prong applies the common-law
doctrine of impossibility that:

> \[w\]here, after a contract is made, a party\'s performance is made
> impracticable without his fault by the occurrence of an event the
> non‑occurrence of which was a basic assumption on which the contract
> was made, his duty to render that performance is discharged, unless
> the language or the circumstances indicate the contrary.[^296]

To assert the impossibility defense, the government would need to prove
that the nonoccurrence of the change in the law was a basic assumption
of the contract.[^297] The law assumes the parties will have "bargained
with respect to any risks that are both within their contemplation and
central to the substance of the contract."[^298] Absence of a provision
gives rise to the inference that the risk was assumed by the
government.[^299]

Under the facts presented, Justice Souter does not find for the
government under either prong of the test. FIRREA did not lack the
"self-interest" necessary to find that it was "public and general." The
act had the substantial effect of relieving the government of its
obligations to the thrifts under the agreements. Justice Souter points
to the legislative history where it was clear Congress expected the
legislation to have a severe impact on agreements between the government
and the thrifts. The fact that the purpose of FIRREA was "to advance the
general welfare" did not lessen the impact on the government's
contractual obligations. Therefore, Justice Souter would not allow the
government to be relieved of its obligations under the Sovereign Acts
defense.[^300]

Nonetheless, Justice Souter applies the second prong assuming for the
purpose that FIRREA qualified as a "public and general" act. However, he
also finds that the impossibility defense is not available to the
government. The very existence of the contract for regulatory treatment
between the government and the thrifts argues against any assumption by
the parties that the rules would not change. In addition, Justice Souter
had already found the contract included an implied agreement to
indemnify the thrifts. Language or circumstances that allocate the risk
of a change to the party seeking discharge also negates the
impossibility defense.[^301]

For the reasons stated above, Justice Souter, joined by Justices Stevens
and Breyer, and in part by Justice O'Connor found for the thrifts. No
part of the decision was joined by a majority of the Court and the
reasoning in the concurring opinions differed substantially---creating
doubt as to the validity of rationale.

### 3. Concurrence of Justice Breyer: Unmistakability, Who Needs It?

Justice Breyer, although concurring with Justice Souter's plurality
opinion, wrote separately to address a different view of the
Unmistakability doctrine. Justice Breyer is unwilling to legitimize
Unmistakability by even referring to it as a doctrine, instead it is
merely "unmistakability" language contained in a few distinguishable
cases.[^302] Justice Breyer sharply rejects the government and dissent's
notion that the Unmistakability doctrine is an incantation that
"normally shields the Government from contract liability where a change
in the law prevents it from carrying out its side of the bargain."[^303]
A firm believer in congruence principles, Justice Breyer acknowledges
that the language might have been appropriate in the few cases where
applied by the Supreme Court. However, it was "not intended to displace
the rules of contract interpretation applicable to the Government as
well as private contractors in numerous ordinary cases, and in certain
unusual cases, such as this one."[^304]

The government as contractor should be "governed generally by the law
applicable to contracts between private individuals.\"[^305] Justice
Breyer argues that the congruence principle makes sense on policy
grounds. "\[I\]n practical terms it ensures that the government is able
to obtain needed goods and services from parties who might otherwise,
quite rightly, be unwilling to undertake the risk of government
contracting."[^306] Justice Breyer makes only small concessions to the
exceptionalism theory that the government should be treated differently:

> This is not to say that the government is always treated just like a
> private party. The simple fact that it is the government may well
> change the underlying circumstances, leading to a different inference
> as to the parties\' likely intent---say, making it far less likely
> that they intend to make a promise that will oblige the government to
> hold private parties harmless in the event of a change in the law. But
> to say this is to apply, not to disregard, the ordinary rule of
> contract law.[^307]

Justice Breyer finds additional support for his congruence views in the
Tucker Act, which allows suits for damages against the United States
based on "any claim . . . founded . . . upon any express or implied
contract."[^308] In the past the Supreme Court has allowed such suits
based on implied-in-fact contracts "founded upon a meeting of minds,
which, although not embodied in an express contract, is inferred, as a
fact, from conduct of the parties showing, in the light of the
surrounding circumstances, their tacit understanding."[^309] According
to Justice Breyer, this evinces an intent by Congress to allow suits
based on promises that are far from unmistakable---and lends support to
the theory the government should be treated the same as a private
party.[^310]

Justice Breyer finds two bases for rejecting application of the
unmistakability language. First, the three cases where the Supreme Court
used language referring to unmistakability should not be read as
imposing a requirement of clear language before surrendering sovereign
power. Justice Breyer determines that the outcome of these cases did not
rest on application of the unmistakability language contained in the
decision. In two of the cases, Justice Breyer concludes there was no
evidence of any type of promise not to change the law in the first
place.[^311] In the third case, there was statutory language where
Congress reserved the right to alter or amend the law.[^312] The facts
of those cases did not warrant extension of this language into a
doctrine of contract interpretation.

The second reason for limiting application of the unmistakability
language is the nature of the promises in the earlier cases. In those
cases, the claim was that the government had promised not to "legislate,
or otherwise exercise its sovereign powers."[^313] This is far different
from ordinary contracts, or even unusual cases such as in *Winstar.*
These contracts only promise to hold a party harmless for changes in the
law---changes that the government is free to make.[^314] Justice Breyer
dismisses the government argument that financial liability might deter
future legislation and therefore warrants application of an
Unmistakability doctrine. Application of a different rule of contract
interpretation based on "the amount of money at stake, and therefore (in
the Government\'s terms) the degree to which future exercises of
sovereign authority may be deterred, seems unsatisfactory."[^315]

In sum, Justice Breyer finds that the unmistakability language found in
those earlier decisions might reflect the "unique features of
sovereignty" present. He concludes, however, that the language was not
"meant to establish an 'unmistakability' rule that controls more
ordinary contracts, or that controls the outcome here."[^316] As applied
to *Winstar*, the agreements contained promises to hold the thrifts
harmless were inferred from the contractual language. "\[T\]here is no
special policy reason related to sovereignty which would justify
applying an 'unmistakability' principle here."[^317]

### 4. Concurrence of Justice Scalia---Unmistakability, 

### Reversing the Presumption

Justice Scalia, joined by Justices Thomas and Kennedy, concurs in the
judgment. However, they offer a substantially different rationale for
their decision. In a brief opinion, Justice Scalia defines the
Unmistakability doctrine in a new way and subsequently rejected the
Sovereign Acts doctrine as adding nothing to the law.

Justice Scalia begins by taking issue with the plurality's
characterization of the contractual agreements between the United States
and the thrifts. By characterizing the contracts as "risk-shifting
agreements" the plurality contends that the contracts did not "constrain
the exercise of sovereign power, but only \[made\] the exercise of that
power an event resulting in liability for the Government."[^318] Justice
Scalia finds this ploy to avoid application of sovereign defenses
without merit. This approach "has no basis in our cases, which have not
made the availability of these sovereign defenses (as opposed to their
validity on the merits) depend upon the nature of the contract at
issue.\"[^319] Even more, this method of contractual interpretation is
invalid: "Virtually every contract operates, not as a guarantee of
particular future conduct, but as an assumption of liability in the
event of nonperformance: 'The duty to keep a contract at common law
means a prediction that you must pay damages if you do not keep it---and
nothing else.'"[^320]

Additionally, Justice Scalia criticizes the plurality opinion for
finding the Unmistakability doctrine was not applicable to the facts
presented in the case. "The 'unmistakability' doctrine has been applied
to precisely this sort of situation---where a sovereign act is claimed
to deprive a party of the benefits of a prior bargain with the
government."[^321] However, unlike the dissent, Justice Scalia does not
find that application of the Unmistakability doctrine precludes the
thrifts' claim.

While professing a philosophy of congruence, Justice Scalia is forced to
recognize the exceptional nature of government contracts. Applying
congruence principles, he argues that the Unmistakability doctrine does
little beyond "normal principles of contract interpretation."[^322]
"Generally, contract law imposes upon a party to a contract liability
for any impossibility of performance that is attributable to that
party's own action."[^323] In almost the same breath, he recognizes the
exceptionalist idea that the government-as-contractor is different.
"Governments do not ordinarily agree to curtail their sovereign or
legislative powers, and contracts must be interpreted in a commonsense
way against that background understanding."[^324] Therefore, the
Unmistakability doctrine creates a reverse presumption that the
government has not agreed to contract away its sovereign authority.

When the subject matter of a contract involves an agreement to regulate
in a particular manner, Justice Scalia would not require a further
second promise not to renege on that promise. According to Justice
Scalia, the dissent argument that the government only agrees to certain
regulation unless it is subsequently changed is absurd. Such an argument
"is an absolutely classic description of an illusory promise."
Therefore, Justice Scalia concludes that the agreement between the
thrifts and the government constituted an "unmistakable" promise that
satisfies the requirements of the law.[^325]

In a single paragraph, Justice Scalia dismisses the government's
arguments based on "reserved powers" and "express delegation." Neither
of these principles is well defined by Supreme Court jurisprudence.
Justice Scalia finds the Reserved Powers notion inapplicable to
contracts setting out commercial risks.[^326] Instead the "reserved
powers" are "the federal police power or some other paramount
power."[^327] Whatever is required by the "express delegation" concept
was satisfied by the regulations allowing the Bank Board to enter these
types of contracts.

Justice Scalia expresses little use for the Sovereign Acts doctrine:

> In my view the \"sovereign acts\" doctrine adds little, if anything at
> all, to the \"unmistakability\" doctrine, and is avoided whenever that
> one would be---i.e., whenever it is clear from the contract in
> question that the Government was committing itself not to rely upon
> its sovereign acts in asserting (or defending against) the doctrine of
> impossibility, which is another way of saying that the Government had
> assumed the risk of a change in its laws.[^328]

This summary rejection is less surprising when one realizes that Justice
Scalia's explanation of the Unmistakability doctrine is based on the
same principles that the plurality and dissent use to describe the
Sovereign Acts doctrine.[^329]

### 5. Rehnquist's Dissent---Saving Unmistakability and Sovereign Acts 

In a dissenting opinion, Chief Justice Rehnquist expresses concern that
the plurality has announced sweeping and untenable changes to the
Unmistakability doctrine and virtually eliminated the Sovereign Acts
doctrines. Justice Ginsburg joins in the Chief Justice's dissent except
with respect to his argument concerning the Sovereign Acts doctrine.

The dissent argues that the primary opinion effects drastic changes in
the Unmistakability doctrine "shrouding the residue with clouds of
uncertainty."[^330] Both the dissent and plurality agree "that the
unmistakability doctrine is a 'special rule' of government contracting
which provides, in essence, a 'canon of contract construction that
surrenders of sovereign authority must appear in unmistakable
terms.'"[^331] The Chief Justice's primary disagreement with the
plurality opinion concerns Justice Souter's framework for applying the
doctrine. Practically speaking, there is no way to determine whether an
award of damages would amount to an exemption or block to sovereign
authority before an assessment of liability. In other words, the test
requires an assessment of damages before liability is established. The
Chief Justice remarks that if this were permitted, any plaintiff could
avoid the defense "by claiming the Government had agreed to assume the
risk, and asking for an award of damages for breaching that implied
agreement."[^332]

Additionally, Chief Justice Rehnquist does not agree with the
plurality's justifications for departing from the precedent set out in
earlier cases. The plurality opinion argues that the contracts at issue
in *Winstar*, unlike the earlier precedents, "do not purport to bind
Congress from enacting regulatory measures"---and hence, the
Unmistakability doctrine should not be applied. The Chief Justice points
out that the very purpose of a canon of construction is to determine
whether the contract impermissibly binds Congress---and therefore it
would have to be applied first. The Chief Justice remarks: "if a canon
of construction cannot come into play until the contract has first been
interpreted as to liability by an appellate court, and remanded for
computation of damages, it is no canon of construction at all."[^333]

Likewise, the dissent does not believe that the Unmistakability doctrine
has impaired the government's ability to enter contracts. For decades,
the law has prevented Congress from changing the law to avoid
contractual obligations without paying damages. On the flip side, the
law has also recognized that the government does not "shed its sovereign
powers because it contracts." To date, the dissent observes there has
not been a "diminution in bidders" that would require such a drastic
change in the law.[^334]

The dissent also criticizes the plurality for changes to "the existing
sovereign acts doctrine which render the doctrine a shell." Chief
Justice Rehnquist asserts that Justice Souter has mischaracterized the
long history of the doctrine that has emphasized the dual roles of the
government as contractor and sovereign. "By minimizing the role of
lawgiver and expanding the role as private contractor, the principal
opinion has thus casually, but improperly, reworked the sovereign acts
doctrine."[^335] The dissent disagrees that the basic premise of
*Horowitz* is "to put the Government in the same position it would have
enjoyed as a private contractor." The dissent would emphasize the
holding from *Deming* that "\[t\]he United States as a contractor are
not responsible for the United States as lawgiver."[^336]

The dissent is equally critical of the pluralities new characterization
of the "public and general" requirement as depending on governmental
motive for enacting a change to the law. Accordingly, the requirement of
determining whether a sovereign act is "self-interested" is unworkable.
The Chief Justice is particularly disturbed by the plurality's use of
the comments of individual legislators to determine whether an act is
"self-relief."[^337] Instead, the dissent would leave the law as it is.
Under *Lynch*, specific legislation aimed at avoiding payment of a
contract is a breach. "But, as the term 'public and general' implies, a
more general regulatory enactment . . . cannot by its enforcement give
rise to contractual liability on the part of the Government."[^338]
Using this standard, the dissent would find FIRREA to be "public and
general" and would allow the government to assert the sovereign act
doctrine as a defense.

Justice Scalia's concurrence is also singled out for criticism. The
dissent takes exception to Justice Scalia's finding of an implicit
obligation not to frustrate the contract through subsequent sovereign
acts. Such an "implicit" promise does not comport with the dissent's
view of "unmistakable terms." The Chief Justice likewise is critical of
Justice Scalia's failure to make findings necessary to support his
decision. Justice Scalia errs by relying on the findings of lower courts
that ruled the Unmistakability doctrine does not apply.[^339]

The Chief Justice concludes by critiquing Justice Breyer for finding an
"unmistakable" promise to pay the thrifts in the event that the
regulatory scheme changed. Justice Breyer does not make findings of fact
himself but relies on the "principal opinion's careful examination of
the circumstances." The dissent argues that Justice Breyer errs by
making an "illusory factual finding" not supported in the record. [^340]

According to Chief Justice Rehnquist, none of the other opinions can
reach their desired result "without changing the status of the
Government to just another contractor under the laws of contracts." This
does not comport with the dissent's strongly exceptionalist view that
"\[m\]en must turn square corners when they deal with the government."
This view is based on "the necessity of protecting the federal
fisc---and the taxpayers who foot the bills---from possible improvidence
on the part of the countless Government officials who must be authorized
to enter into contracts for the Government."[^341]

## C. Distilling *Winstar*---What's left?

### 1. Weaknesses

The Court in *Winstar* leaves future courts and practitioners in serious
doubt as to the state of law. Very few of the principles stated by the
plurality command the support of a majority of the justices. There are
certain common areas, however, that both other members of the Court and
outside commentators soundly and justifiably criticize.

One question unanswered by the Court is why the documents in this case
constitute a contract as opposed to a consent agreement. Historically,
regulatory agreements have been analyzed under the Takings Clause rather
than using principles of government contract law.[^342] By finding a
contractual agreement, the Court in *Winstar* then is forced to apply
principles that might not be appropriate.

After accepting as given the existence of a contract, Justice Souter's
use of a "recharacterization" device to avoid application of the
sovereign defenses is difficult to justify except as a ploy to reach a
desired outcome.[^343] Justice Souter reads an implied promise not to
change the regulatory scheme into the agreements between the thrifts and
government. One of the few points agreed upon by the majority of the
Court is the fallacy of this approach. All agree that the
Unmistakability doctrine is a "canon of construction." Black's Law
Dictionary defines "Canons of construction" as "\[t\]he system of
fundamental rules and maxims which are recognized as governing the
construction or interpretation of written instruments."[^344] In other
words, the Unmistakability doctrine should be used to determine whether
there is in fact an enforceable contract between the government and a
private party.

Contrary to common sense, the plurality finds an enforceable contract
before they decide to apply the Unmistakability doctrine. Justice Souter
invokes Holmes' theory that "promises to provide something beyond the
promisor\'s absolute control . . . \[is\] a promise to insure the
promisee against loss arising from the promised condition\'s
nonoccurrence."[^345] Applying this logic, Justice Souter avoids the
application of the Unmistakability doctrine because a promise to insure
or indemnify, he argues, does not ordinarily implicate issues of
sovereignty.[^346] Using this same logic, almost any contract could be
viewed in the same manner and the doctrine would be virtually worthless.

While the plurality may have used this technique to sidestep application
of the Unmistakability doctrine, they ignore the minefield they may have
entered. During the same term as *Winstar*, the Supreme Court examined
these issues in the *Hercules* decision discussed in Section II of this
article.[^347] Broad agreements to indemnify or insure ordinarily run
afoul of the Anti-Deficiency Act which prevents government officials
from spending money that Congress has not appropriated or allocated for
that contract.[^348] Government officials that enter such agreements
without specific authority would be acting *ultra vires* rendering the
agreement void. As the *Hercules* court asserts, "\[t\]here is also
reason to think that a contracting officer would not agree to the
open‑ended indemnification. . . ."[^349] Therefore, it may not be
reasonable for the court to find an "implied" agreement to insure or
indemnify to begin with. The better rule is to step back and apply the
Unmistakability doctrine as intended---as a rule of construction.

Equally faulty is the plurality's application of an untenable
"remedy-based" test to determine application of the Unmistakability
doctrine.[^350] Justice Scalia criticizes this approach in part because
it is without precedent.[^351] However, more problematic is the
application of the rule. When does an agreement to pay damages
effectively limit sovereign authority? The answer does not appear to be
the amount of damages sought. The *Winstar* cases, and similar
agreements with other thrifts, involved potential liability of
extraordinary sums of money.[^352]

Another problem is the failure of any of the opinions to explain the
interaction and relation between the Sovereign Acts and Unmistakability
doctrines. The doctrines, although similar, have different origins. The
Sovereign Acts doctrine has a long history as applied to federal
contracts. The United States Claims Court and its predecessors have
addressed it numerous times since the court's inception in the
mid-1800's. The doctrine has traditionally been applied to contracts
made by the government in its private capacity as contractor.[^353] The
Unmistakability doctrine traces its history to English common law
concerning the power of one legislature to bind the next. In our
country, it was developed in the context of the Contract Clause. The
doctrine has only been applied to federal contracts for less than two
decades---and in only a couple cases.[^354]

The dissent at least recognizes that the doctrines are "not entirely
separate principles"---but offers no further explanation.[^355] Justice
Scalia would do away with the Sovereign Acts doctrine, since he believes
it adds nothing. However, his reformulation of the Unmistakability
doctrine seems to be derived in large part on the Sovereign Acts
doctrine.[^356] With *Winstar* as a precedent, courts today cannot say
with any degree of confidence which doctrine applies and in what
situations.

The *Winstar* decision has also been criticized for failing to
distinguish between agreements the government enters as a regulator and
others it enters into as a market-participant. More than one commentator
has suggested that this distinction should be used to clarify
application of the Sovereign Acts doctrine and the Unmistakability
doctrine.[^357] One suggestion is that the Unmistakability doctrine
should not be applied to agreements with the
government-as-contractor---leaving only application of the Sovereign
Acts doctrine.[^358] For regulatory, or government-as-sovereign
agreements both doctrines would be applied, although the Sovereign Acts
doctrine would add little.[^359]

### 2. Areas of Agreement

In spite of internal discord and external criticism, some guiding
principles find support among a majority of the justices and survive
*Winstar.* One area of agreement among a majority of the justices is a
condemnation of Justice Souter's "recharacterization" of the
government's agreements into promises to compensate in the event of a
regulatory change. The concurring opinion of Justice Scalia, joined by
Justices Thomas and Kennedy as well as the dissent of Chief Justice
Rehnquist, joined by Justice Ginsburg, all reject this device.

One commentator has suggested "one would not go far astray in simply
considering \[the plurality opinion to be\] the majority opinion."[^360]
Of the four defenses raised by the government, "unmistakability,"
"reserved powers," "express delegation," and "sovereign acts," the three
majority opinions diverge significantly only on the Unmistakability
doctrine.[^361] A majority of the justices would apply an
Unmistakability doctrine but only the two-member dissent leave any teeth
in that doctrine.

Another view, suggested by Professor Schwartz, would ignore labels such
as Unmistakability or Sovereign Acts and instead look at the underlying
principles in order to find agreement:

> \[T\]he key element of an approach likely to command majority support
> is a rebuttable presumption that by entering a contract the Government
> does not promise to curtail the exercise of its sovereign power that
> could affect contractual performance. The strength of this presumption
> and the kind of evidence necessary to rebut it is primarily a function
> of the level of generality of the governmental action that interferes
> with the promised performance. Careful attention to the particular
> undertaking involved and the surrounding circumstances is required in
> determining whether the risk of a change in regulatory regime has been
> assigned to the Government. The allocation of this risk *cannot* be
> determined simply by automatically recharacterizing a governmental
> promise that literally concerns the regulatory treatment to be
> afforded a contractor into a promise of indemnity in the event of
> regulatory change.[^362]
>
> Without an adequate framework, courts since 1996 have been forced to
> assess agreements between the United States and their contracting
> partners. The aftermath will include confusion and litigation as
> courts are forced to reassess the doctrines "clarified" by the United
> States Supreme Court.[^363]

## D. *Winstar* Creeps into the Environmental Field---*Yankee* 

## *Atomic Electric Company v. United States*

Less than one year after the Supreme Court rendered the decision in
*Winstar,* the Court of Appeals for the Federal Circuit took up a case
addressing similar issues.[^364] The Court reversed a decision by the
Court of Federal Claims applying the Sovereign Acts and Unmistakability
doctrines to a contract between the Department of Energy and a nuclear
energy plant.[^365] The *Yankee* decision applies the teachings of
*Winstar* to more traditional government contracts in a non-regulatory
field. In addition, it expands the Sovereign Acts and Unmistakability
doctrines to contracts that may be considered fully performed before a
change in the law frustrated the contractor's expectations. The decision
reveals the difficulty in applying the splintered *Winstar* holdings to
subsequent cases. The case is also illustrative of how the Court of
Federal Claims and the Federal Circuit will apply the Sovereign Acts and
Unmistakability doctrines to future claims.

### 1. Yankee Atomic and the Energy Policy Act

Yankee Atomic Electric Company (Yankee Atomic) located in Rowe,
Massachusetts was formed in 1954 by a variety of utilities that banded
together to produce nuclear-generated electricity.[^366] From 1963 until
its closure in 1992, Yankee Atomic entered into a series of fixed-price
contracts with the United States for the purchase of enriched uranium to
be used as fuel for the nuclear reactor.[^367] In the late 1980s,
Congress realized that the agencies selling the nuclear fuel had failed
to price the material high enough to pay for the clean up of the
radioactive waste left as the government processing plants aged and were
decommissioned.[^368] In response, Congress passed the comprehensive
Energy Policy Act of 1992 to address many concerns---including the
cleanup of these sites.[^369]

The Energy Policy Act created the Uranium Enrichment Decontamination and
Decommissioning Fund to finance the cleanup of the government-owned
enrichment plants. The funds were to be raised in part with public funds
and in part by a special assessment of domestic utilities. The special
assessment was divided among utilities based on the number of
DOE-produced uranium enrichment units a particular utility actually
used. If a utility purchased a DOE enrichment unit and sold it to
another utility, it did not count. By the same token, if they purchased
a DOE enrichment unit from another utility, it was counted in assessing
the using utility's pro-rata share of the assessment.[^370]

Yankee Atomic was assessed \$3 million even though they had already
closed prior to passage of the Act.[^371] The company filed suit in the
Court of Federal Claims to recover these funds. The Court of Federal
Claims ruled in favor of Yankee Atomic. Applying the Sovereign Acts
doctrine the court determined that "\[t\]he doctrine of 'public and
general' 'sovereign acts,' laid down in \[Horowitz\] does not relieve
the Government from liability where it has specially undertaken to
perform the very act from which it later seeks to be excused."[^372] In
other words, the court believed the Energy Policy Act was targeted to
avoid a government contract. On appeal, the Federal Circuit disagreed.

### 2. Federal Circuit Applies Winstar

As in *Winstar,* the characterization of the agreement was dispositive
to the outcome of the case. Both Yankee Atomic and the Federal Court of
Claims viewed the special assessment as a retroactive price increase to
the earlier contracts between the United States and the
contractor.[^373] The government viewed the special assessment as
unrelated to the earlier contracts and instead as an exercise of the
sovereign taxing authority.[^374] To sort through the issues the Federal
Circuit applied the Sovereign Acts and Unmistakability doctrines in
sequence.

The Federal Circuit appears to adopt the *Winstar* plurality's version
of the Sovereign Acts doctrine but applies it only in part. In assessing
the dual natures of the government, the court states: "The
Government‑as‑contractor cannot exercise the power of its twin, the
Government‑as‑sovereign, for the purpose of altering, modifying,
obstructing or violating the particular contracts into which it had
entered with private parties. Such action would give the
Government‑as‑contractor powers that private contracting parties
lack."[^375] On the other hand, the "Government-as-sovereign must remain
free to exercise its powers."[^376] The Federal Circuit reasons that the
Sovereign Acts doctrine is employed to balance the roles. The Sovereign
Acts doctrine "is not a hard and fast rule, but rather a case‑specific
inquiry that focuses on the scope of the legislation in an effort to
determine whether, on balance, that legislation was designed to target
prior governmental contracts."[^377] Application of the doctrine entails
determining whether the government acted with the purpose of benefiting
the Government-as-contractor, or whether the legislation was passed for
the public benefit.[^378]

The Federal Circuit turns a blind eye to the *Winstar* plurality's
analysis of the Sovereign Acts doctrine as an examination of the degree
of the government's self interest. Noticeably missing is an application
of the plurality's observation that: "\[W\]hen we speak of governmental
'self‑interest,' we simply mean to identify instances in which the
Government seeks to shift the costs of meeting its legitimate public
responsibilities to private parties."[^379] Missing also is
consideration of the plurality's "holding that a governmental act will
not be 'public and general' if it has the substantial effect of
releasing the Government from its contractual obligations."[^380]
Further, the Federal Circuit fails to complete the analysis. The
*Winstar* plurality determined that if the sovereign act is "public and
general," "the Government\'s defense to liability depends on the answer
to the further question, whether that act would otherwise release the
Government from liability under ordinary principles of contract
law."[^381]

Even with the truncated analysis, it is difficult to see how the Federal
Circuit differentiates the Energy Policy Act from FIRREA in terms of the
amount of governmental "self-interest" involved. Both acts involved
sweeping changes to their respective fields and only small portions of
each directly affected contractual agreements with the government.
However, both acts had severe economic consequences for private parties
that were current or former contracting parties with the United States.

The Federal Circuit avoids this difficulty by not making any comparison
at all. Instead, they focus exclusively on the Energy Policy Act and
faults Yankee Atomic for focusing on the aspects of the act that affect
them directly. The court asserts the purpose of the Energy Policy Act
was to spread the cost of a problem they only realized after making the
contract. The Federal Circuit makes much of the fact that utilities not
involved directly in contracts with the United States had to pay based
on the amount of DOE-manufactured enriched uranium they purchased on the
secondary market. This emphasis is difficult to reconcile with
*Winstar.* Thrifts that were not involved in agreements with the Bank
Board were also affected by the changes in capital requirements under
FIRREA. FIRREA also purported to be enacted to protect the public and
was a "mammoth" legislation only parts of which involved the agreements
at issue in *Winstar.*

Nonetheless, the Federal Circuit found the Energy Policy Act to be
"public and general" and therefore the Sovereign Acts defense was
applicable. Instead of completing the *Winstar* plurality's Sovereign
Acts analysis concerning whether the contracts had allocated the risk,
the court immediately steps to the Unmistakability doctrine.

The Federal Circuit carefully steps through the *Winstar*
Unmistakability thicket by trying to analyze the facts in a manner
inoffensive to each of the opinions. The Federal Circuit believes that
the Supreme Court justices were consistent in the formulation of the
doctrine that:

> \[A\] contract with a sovereign government will not be read to include
> an unstated term exempting the other contracting party from the
> application of a subsequent sovereign act (including an act of
> Congress), nor will an ambiguous term of a grant or contract be
> construed as a conveyance or surrender of sovereign power.[^382]

The court acknowledges that the problem is not in articulation of the
doctrine, but rather in deciding under what circumstances it applies.
The Federal Circuit notes that the plurality found application of the
doctrine depended on the nature of the contractual agreement. At the
same time, the Federal Circuit observes that five other Supreme Court
justices disagreed with this reasoning. The Federal Circuit reacted by
applying both tests.

The Federal Circuit observes the contracts between DOE and Yankee Atomic
could be easily characterized as risk-shifting agreements.[^383] The
agreements at issue are fixed-price contracts. As the Supreme Court has
held "\[w\]here one agrees to do, for a fixed sum, a thing possible to
be performed, he will not be excused or become entitled to additional
compensation, because unforeseen difficulties are encountered.\"[^384]
Before venturing too far down this trail, the Federal Circuit notes that
"the plurality also expressly stated that application of the
unmistakability doctrine turns on whether enforcement of the contractual
obligation would effectively block the exercise of a sovereign power of
the Government."[^385] The opinion argues that the damages Yankee Atomic
is seeking would in effect be a tax rebate that the plurality "seemed to
recognize as a block to the exercise of sovereign power."[^386] Using
that rationale, the Federal Circuit applies the Unmistakability
doctrine.

According to the court, next comes an analysis of whether the contracts
between Yankee Atomic and the government contained an unmistakable
promise not to impose a general assessment against all utilities that
benefited from DOE's enrichment services.[^387] This characterization of
the issue is of paramount importance because Yankee Atomic argued that
the fixed-price nature of the contract is an unmistakable promise
forbidding a future price increase. By requiring that the "unmistakable
promise" be in such precise terms, the court, of course, finds no such
promise. The Federal Circuit determined that the contract was fully
performed when the government provided the enriched uranium and the
contractors paid the negotiated price.[^388] Yankee Atomic did have a
vested contract right, but the subsequent legislation was unrelated to
any attempt to retroactively increase the price.[^389]

Thus, the Federal Circuit finds for the United States because the
passage of the Energy Policy Act was a "public and general" sovereign
act and the contractual agreements did not contain unmistakable promises
that would preclude the government from exercising that sovereign power.
While the *Yankee* decision can be viewed as an expansion of *Winstar*
principles into a non-regulatory setting and to include completed
contracts, the Federal Circuit's application of the principles is quite
restricted.[^390] Less certain will be future cases where the
application of the Unmistakability doctrine cannot be reconciled with
the competing *Winstar* opinions.

The dissent begins by noting a problem virtually ignored by the majority
opinion.[^391] These contracts were fully and satisfactorily performed.
Therefore, Yankee Atomic cannot make a claim that the government
breached the contract. However, the completed contract does create a
vested property right protected by the Takings Clause of the Fifth
Amendment.[^392] "The Fifth Amendment prohibits the federal government
from depriving a person of property 'without due process of law' and
from taking private property 'without just compensation.'"[^393] Once
the contract was fully performed, the government may not deprive a party
of the benefits of those contracts.

The dissent views the Energy Policy Act as nothing more than a
retroactive price increase. The dissent does not consider it important
that the legislation was to relieve the government from the burden of
unforeseen costs. The nature of the fixed-price contract allocated the
risk of unforeseen costs to the seller---in this case the United
States.[^394] The Fifth Amendment "was designed to bar Government from
forcing some people alone to bear public burdens which . . . should be
borne by the public as a whole."[^395]

Based on this reasoning, the dissent does not believe that either the
Sovereign Acts or Unmistakability doctrines should be applied. The
Sovereign Acts doctrine is a defense to a government breach of contract.
However, because this is not a breach case, the dissent viewed the
doctrine as wholly inapplicable. Likewise, the Unmistakability doctrine
is a canon of construction because Yankee Atomic is not seeking
enforcement of a contractual obligation. Instead, they are seeking to
prevent an unlawful exaction of Yankee Atomic's money. Based on this
reasoning, the dissent found for Yankee Atomic based on an illegal
taking theory.[^396]

## E. *Winstar* Meets CERCLA---Defense Contractors Seek to Share the Burden

### 1. Applying Winstar Criteria

The *Yankee* court was fortunate that its analysis did not depend on
which *Winstar* version of the Sovereign Acts and Unmistakability
doctrines was applied. The court was able to reach the same ends with
alternate applications of the facts to the law. Applying the *Winstar*
decision to the contracts illustrated in Section II of this article
forces one to wade through the thicket. Each version of the doctrines
leads down a different path---in the end, at least in this application,
the paths seem to converge.

Unlike the situation in *Winstar,* the World War II and Vietnam era
agreements are classic agreements entered into by the
government-as-contractor. The World War II era contracts were
cost-plus-fixed-fee supply contracts for the production and modification
of contracts. The Vietnam era contracts discussed in *Hercules* and
*Vertac* were fixed-price supply contracts for the sale of the
herbicide, Agent Orange.[^397] Neither the World War II nor Vietnam Era
contracts contained any language explicitly allocating the cost of
environmental cleanup. None contained explicit language whereby the
government promised not to change the law with respect to environmental
regulation.

Given the age of these contracts, one could assume the contracts have
been fully completed by both parties. However, the World War II
contracts contained provisions whereby claims unknown to the contractor
survived the final settlement.[^398] This would presumably include the
explicit indemnification provisions contained in the contracts. The
Vietnam era contractors would argue that the implied indemnification
agreements likewise survived the contract.

The *Winstar* court started with the presumption that not only was there
a contract, but also a breach of contract. Moreover, the *Winstar*
breach occurred during the period of contract performance. In assessing
a breach, it is well established that the latest point at which a breach
can occur is when the contract is complete.[^399] CERCLA, being passed
in 1980, occurred many years after the performance was completed in the
defense contracts discussed in Section II. However, after *Yankee,* the
finality of the contract does not appear to affect the application of
the Sovereign Acts and Unmistakability doctrines.

Applying the *Winstar* plurality's Sovereign Acts doctrine requires two
steps. The first step is an analysis of whether the act is attributable
to the government-as-contractor. If it is not, the second step is to
apply ordinary rules applicable to private contracts---specifically the
impossibility defense.[^400]

The first step in assessing whether the sovereign act should be
attributed to the government in its role as contractor is an examination
of the statute. This requires an analysis of the degree of
"self-interest" in the legislation. The "public and general" language
provides criteria for determining the amount of governmental
self-interest. CERCLA, more so than the Energy Policy Act or FIRREA, was
passed to address national concerns.[^401] The statute has no provisions
that can be construed as targeting contracting partners of the United
States. In fact, under broad waivers of sovereign immunity, the United
States and all private parties are essentially treated the same. Impact
on federal contracting obligations can properly be considered
"incidental to the accomplishment of a broader governmental
objective."[^402] In spite of enormous costs to its contracting
partners, it is difficult to make a straight-faced argument that CERCLA
was passed in order to relieve the government of its contractual
burdens.[^403] The *Yankee* court would end the analysis here; however,
the *Winstar* plurality would then apply the private contract law of
impossibility to determine whether the government should be relieved of
its obligation to perform.

The *Yankee* court's failure to address this prong may in part be
because they recognized this classic defense to a breach of contract is
conceptually difficult to apply to a completed contract. Nonetheless,
application of the defense may be useful in assessing whether or not the
government's action should be excused regardless of whether the action
is labeled a taking or a breach. In order to assert the impossibility
defense, the *Winstar* plurality required the government to show that
the nonoccurrence of the sovereign act was a basic assumption of the
contract. In addition, the government would have to show the contract
did not allocate the risk of the change.

The *Winstar* plurality found that in the context of a regulatory
agreement, the parties undoubtedly contemplated the possibility of a
regulatory change. For the government, this was fatal to the
impossibility defense in *Winstar.* In the context of the defense
contracts at issue here, it is a safe assumption that neither party
anticipated that Congress would pass CERCLA in response to widespread
toxic contamination.

Next, the government must clear a second hurdle---proving no allocation
of the risk. The *Yankee* court highlights that the nature of the
contract itself may suggest a risk allocation. *Yankee* is the fairly
atypical situation in which the government is the seller. In the
contracts involving recovery of CERCLA cleanup costs, the government
acted as the buyer. Nonetheless, the rules are clear regardless of the
government's role as buyer or seller. A fixed-price contract places the
risk of unanticipated costs on the seller.[^404] In contrast,
cost-reimbursement contracts remove the risk of unanticipated costs from
the seller.[^405] "\[U\]nder a cost-reimbursement contract, the
contractor's profit is not affected by the cost of performance because
incurred costs will be reimbursed and the amount of the fee is
predetermined."[^406]

The World War II contacts can be distinguished from their Vietnam-era
counterparts by type---the former being cost-reimbursement and the
latter being fixed-price. The government assumed the risk of
unanticipated costs in the earlier contracts but not the latter. Using
this rationale, one can argue that the impossibility defense is not
available to the government where they have assumed the risk of
unanticipated costs through the use of cost-reimbursement type
contracts. Presumably, the World War II contractors would prevail, at
least through this stage of the analysis.

There is no clear indication from *Winstar* about whether the
Unmistakability doctrine should be applied independently of the
Sovereign Acts doctrine. The *Yankee* court, however, indicates the
doctrine should only be applied if the Sovereign Acts doctrine indicates
the act is "public and general." But then again, the *Yankee* court did
not apply the impossibility defense.

The *Winstar* plurality, in a portion of the decision opposed by a
majority of the justices, applies a threshold test to determine whether
or not to apply the Unmistakability doctrine. The threshold test is that
if a contract can reasonably be construed as containing a risk-shifting
component, and if that component can be enforced without barring the
exercise of sovereign power, then there is no reason to apply the
Unmistakability doctrine.[^407] The *Yankee* court, consistent with the
*Winstar* majority, applies the Unmistakability doctrine whenever the
issue of liability turns on a sovereign act by the government.

The defense contracts discussed in Section II above can easily be
characterized as risk allocations. If a court were to apply the
plurality's threshold test, the Unmistakability doctrine would not be
applicable to the World War II cost-reimbursement contracts, since the
government is allocated the risk of unanticipated costs. However, the
Vietnam era fixed-price contracts allocate risk to the contractor, and
therefore the Unmistakability doctrine would apply. However, before
dropping the requirement that the contract contain an unmistakable
promise, the plurality would first examine the contracts to see if
enforcement would block exercise of the sovereign power.

Damages sought to enforce the defense contracts at issue would not be an
affront to the government's sovereignty. While "\[t\]he Government
cannot make a binding contract that it will not exercise a sovereign
power . . . it can agree in a contract that if it does so, it will pay
the other contracting party the amount by which its costs are increased
by the Government\'s sovereign act."[^408] According to the *Winstar*
plurality, the only type of enforcement that would block the exercise of
sovereign power would be an injunction, or damages that amount to a tax
rebate. Typically, the plurality would not find enforcement of "humdrum
supply contracts" subject to the Unmistakability doctrine.[^409] The
vitality of CERCLA would not be harmed by enforcement of these
contracts. As a goal, CERCLA seeks to spread the cost of environmental
cleanup to those who benefited from the destruction of the
environment.[^410] CERCLA shifts the cost to governmental and private
entities alike. There doesn't appear to be any CERCLA policy that would
be thwarted by enforcement of the contracts.

While the *Winstar* plurality never discusses application of the
Unmistakability doctrine, both the concurring opinion of Justice Scalia
and the dissent discuss application of the doctrine. Justice Scalia
treats the Unmistakability doctrine as a rule of presumed intent. This
reverse presumption is that the government did not promise that none of
its sovereign acts will incidentally prevent contract performance by
itself or the other party to the contract. When the subject matter of
the contract is to maintain the current state of the law, Justice Scalia
would not require a second promise to keep the first promise. In the
context of a regulatory agreement, Justice Scalia was willing to find an
unmistakable promise implicit in the nature of the contract.[^411] Chief
Justice Rehnquist, in his dissent, takes a more literal view. The
dissent asserts that "a waiver of sovereign authority will not be
implied, but instead must be surrendered in unmistakable terms."[^412]
The Federal Circuit in *Yankee* never spells out exactly what standard
they are applying.

However, the *Yankee* court does provide some very specific guidance
that is useful in analyzing defense contracts involving CERCLA cleanup
costs. First, the Federal Circuit will not imply an unmistakable promise
from a fixed-price contract that allocates risk to the government.[^413]
Second, they will not imply an unmistakable promise from general
legislation.[^414] Therefore, it is probable that they will not find a
waiver of sovereign authority in unmistakable terms based on the
cost-reimbursement nature of the World War II production contracts. With
certainty, they would not find a waiver in the Vietnam fixed-price Agent
Orange contracts given that they already allocate the risk to the
contractor. The defense contractors in both situations can counter that
in addition to the nature of the contract, the contracts also contain
either actual or implied indemnity provisions.

The World War II defense contracts all contained very specific
indemnification clauses incorporated into the termination settlement
agreements. While the language of the three vary slightly, the Tucson
agreement is illustrative of all three. It provides in part that
"\[t\]he Government shall assume and become liable for all obligations,
commitments and claims that the Contractor may have theretofore in good
faith undertaken or incurred in connection with said work and in
accordance with the provisions of this contract. . . ."[^415] In
addition, it provides that some claims will survive final settlement.
The settlement agreement provides that all claims will:

> cease forthwith and forever; ...except that all rights and obligations
> of the respective parties in respect of costs, expenses and
> liabilities which may thereafter be imposed on, or incurred by, the
> Contractor, without its fault or neglect, which are then undetermined
> or incapable of determination as to either existence, validity, or
> amount, shall remain in full force and effect.[^416]

These indemnification clauses appear on the face to be a very precise
allocation of the risk of further unanticipated costs under the contract
and should qualify as a waiver of sovereign authority in unmistakable
terms. The costs associated with CERCLA legislation certainly qualify as
costs or liabilities imposed on the contractor.[^417] While litigation
over the meaning of the provisions of the indemnity clause is likely, on
the face they appear to be a promise in "unmistakable terms."

The *Yankee* court comments in the context of that case that the
contract did not expressly state "that Yankee Atomic will be immune from
any future assessments made by the Government upon the industry as a
whole."[^418] The Federal Circuit does not explicitly state that they
would require the "unmistakable terms" of a waiver to be so detailed.
Additionally, there is no case law suggesting such an impossible
standard. Such a requirement would preclude parties from allocating the
risk of events they could not specifically anticipate. Certainly, such
an interpretation would be a dispositive obstacle in the CERCLA cleanup
cases. Virtually no one during the 1940s anticipated the consequences of
waste disposal on the environment---or the need for legislative remedies
such as CERCLA.

The Vietnam-era Agent Orange contracts do not contain similar express
indemnity clauses. Instead, the contractors find implied indemnification
agreements based on the nature of the contract and the Defense
Production Act.[^419] The Supreme Court, as discussed in Section II, was
unwilling to read an implied indemnification agreement into the
contract.[^420] In addition, the *Yankee* court is unwilling to find a
waiver of sovereign authority in unmistakable terms based on general
legislation. Therefore, the prognosis for a contractual recovery is dim.

In sum, after wading through the Sovereign Acts and Unmistakability
doctrines as twisted and convoluted by the Supreme Court and Federal
Circuit, the results are fairly predictable. First, it is indisputable
that CERCLA is "public and general" and qualifies as a sovereign act.
There is no evidence to support an argument that Congress passed the
legislation intending to benefit the government-as-contractor. Applying
the plurality's second step---the impossibility defense---yields the
same results as application of the Unmistakability doctrine. The
application of any of the articulated tests is heavily influenced by the
degree of risk allocation present in the contract. The World War II
contractors have strong arguments based on both the risk allocations
inherent in the cost-reimbursement contract and the express
indemnification clauses provided within the contract. The fixed-price
contracts entered into by the Agent Orange contractors are another
story. The nature of the contract allocates the risk to the seller and
the evidence to support even an implied indemnification clause is weak.
Therefore under any analysis, the World War II contractors should
prevail---at least to this point. Fixed-price supply contracts without
indemnification provisions---i.e. the Agent Orange type
contracts---present a far weaker case.

### 2. Further Obstacles

In both *Winstar* and *Yankee*, the courts were able to complete their
analysis after discussion of the Unmistakability and Sovereign Acts
doctrines. Neither of those cases involved additional issues typical of
more ordinary supply contracts.[^421] Even if a defense contractor
prevails through this state of the analysis, they will encounter several
more legal hurdles before recovering under a contract theory. These
issues, although each could warrant another article, will only be
briefly discussed.

Contractors seeking reimbursement of CERCLA cleanup costs must select
the appropriate forum for the suit. In 1996, General Dynamics sought to
enforce the Consolidated Contract discussed in Section II in the federal
district court of the District of Arizona.[^422] They filed suit under
the Administrative Procedures Act (APA).[^423] The contractor
specifically sought specific enforcement of contractual provisions
calling for the United States to assume the contractor's defense in the
CERCLA actions. The District Court granted summary judgment to the
United States, finding the court lacked jurisdiction. On appeal, the
Ninth Circuit discussed the limitations of federal district court
jurisdiction.[^424]

The Court begins by noting that in a suit against the United States the
starting assumption is that no relief is available unless it is
specifically provided. "\[T\]hat a plaintiff against the United States
may receive less than complete relief in the federal courts should not
necessarily be viewed as an inappropriate result, for such a plaintiff
is accorded, by statute, more relief than historical principles of
sovereign immunity would allow."[^425] The APA provides for jurisdiction
in federal district court if three conditions are met: "(1) its claims
are not for money damages, (2) an adequate remedy for its claims is not
available elsewhere and (3) its claims do not seek relief expressly or
impliedly forbidden by another statute."[^426] The Ninth Circuit
determined that only the third prong prevented the relief General
Dynamics sought.

By seeking specific performance of the contract, General Dynamics
satisfied the first two prongs of the test.[^427] Even if the remedy
requires a payment of money, the court found a suit for specific
performance is not equivalent to an action for "money damages."[^428]
Likewise, because the Court of Federal Claims is not authorized to grant
equitable relief, there is no adequate remedy available elsewhere. The
Ninth Circuit pointed to a Supreme Court decision holding: "We are not
willing to assume, categorically, that a naked money judgment against
the United States will always be an adequate substitute for prospective
relief."[^429]

The third prong is problematic for General Dynamics because the Tucker
Act forbids such relief. The Tucker Act provides that "\[t\]he United
States Court of Federal Claims shall have jurisdiction to render
judgment upon any claim against the United States founded . . . upon any
express or implied contract with the United States. . . ."[^430] While
the district courts have concurrent jurisdiction for claims under
\$10,000, the Court of Federal Claims has exclusive jurisdiction over
other claims. If the claims are contractually based, the district court
has no jurisdiction. Since General Dynamics is seeking to have the
district court determine what its rights under the contract are, the
claim is contractually based. Therefore, defense contractors will be
required to bring suit in the Court of Federal Claims with the
limitation that they will be limited to a monetary remedy.[^431]

More than one commentator suggests that the Anti-Deficiency Act presents
a major obstacle to the claims of defense contractors for CERCLA cleanup
costs under a contract theory.[^432] The Anti-Deficiency Act flows from
the Appropriations Clause of the United States Constitution that places
control of the purse strings within the Congress. The Clause states: "no
Money shall be drawn from the Treasury, but in Consequence of
Appropriations made by Law."[^433] The Act provides:

> (a)(1) An officer or employee of the United States Government or of
> the District of Columbia government may not‑‑
>
> \(A\) make or authorize an expenditure or obligation exceeding an
> amount available in an appropriation or fund for the expenditure or
> obligation;
>
> \(B\) involve either government in a contract or obligation for the
> payment of money before an appropriation is made unless authorized by
> law.[^434]

However, the courts have long held that neither the Anti-Deficiency Act
nor the Appropriations Clause is a defense to a breach of contract claim
against the government.[^435] "\[N\]either the Appropriations Clause of
the Constitution, nor the Anti-Deficiency Act, shield the government
from liability where the government has lawfully entered into a contract
with another party."[^436]

The ADA, therefore, does not provide an independent defense for the
government for the breach of a contract *lawfully* entered into with
another party. On the other hand, a contract that has been entered into
in violation of a statute is *void ab initio* and the government may
avoid the contract.[^437] This includes contracts entered into "in the
face of express congressional prohibition."[^438] The Supreme Court
noted in *Hercules* that "'the accounting officers of the Government
have never issued a decision sanctioning the incurring of an obligation
for an open‑ended indemnity in the absence of statutory authority to the
contrary.'"[^439]

As far as the World War II contracts are concerned, the Contracts
Settlement Act of 1944 provided that authority. The Act provides in
part:

> Each contracting agency shall have authority, notwithstanding any
> provisions of law other than contained in this Act . . . in settling
> any termination claim, to agree to assume, or indemnify the war
> contractor against, any claims by any person in connection with such
> termination claims or settlement. This subsection shall not limit or
> affect in any way any authority of any contracting agency under the
> First War Powers Act, 1941, or under any other statute.[^440]

Therefore, the contracts did not violate the Anti-Deficiency Act at
formation, because of statutory authority to include broad
indemnification provisions. The Anti-Deficiency Act was neither a bar
making them *void ab initio* nor a defense to a subsequent breach of
those contracts.

Contractors seeking enforcement of an indemnification provision would
have the additional burden of showing the CERCLA cleanup costs are
sufficiently related to the contract. Each of the contracts discussed in
Section II are worded slightly differently---but each suggests the
indemnification clause is limited to liability arising from the contract
performance.[^441] Commentators have suggested that costs incurred so
many years after contract performance are simply too attenuated.[^442]
The counter argument is that the contamination occurred at the time of
contract performance and flowed directly from contract performance.

### 3. Finality vs. The Takings Clause

A final legal impediment to defense contractor recovery is the concept
of "finality." The contracts at issue are in many cases more than 50
years old. As the dissent in *Yankee* observed, the latest a breach of
contract claim can accrue is when a contract is complete.[^443] Today, a
contract is completed when the government issues final payment.[^444]
Before making final payment, the government often requires a release of
claims and liabilities. Provisions of the FAR often bar claims not
asserted before final payment.[^445] There are limited circumstances
where a contractor can avoid a release and still assert a claim after
"final payment."[^446]

However, the World War II contracts discussed in Section II, are subject
to Settlement Agreements entered into pursuant to the Contract
Settlement Act of 1944. The stated purpose of the Act was in part "to
assure to prime contractors and subcontractors, small and large, speedy
and equitable final settlement of claims under terminated war
contracts."[^447] The Act defines "the term \'final and conclusive,\' as
applied to any settlement, finding, or decision means that such
settlement, finding or decision shall not be reopened, annulled,
modified, set aside, or disregarded . . . in any suit, action, or
proceeding except as provided by this chapter."[^448] In addition, the
Act spells outs exceptions to finality:

> where any such settlement is made by agreement, the settlement shall
> be final and conclusive, except (1) to the extent otherwise agreed in
> the settlement; (2) for fraud; (3) upon renegotiation to eliminate
> excessive profit under section 1191 of Appendix to Title 50, unless
> exempt or exempted under such section; or (4) by mutual agreement
> before or after payment. . . .[^449]

In a case interpreting the Act, the Court of Appeals for the Federal
Circuit held: "It is clear that Congress did not intend, unless there
was a plain or explicit exception, to leave contracts open and unsettled
for decades. Rather, Congress wanted to end with finality war-time
contracts and move swiftly into a peace-time economy."[^450]

The contracts at issue appear to contain language with explicit
exceptions exempting certain contractor claims from finality. Each of
the settlement agreements contain different but similarly broad language
exempting currently unknown claims arising from the final settlement.
The DuPont Contract exempts "\[c\]laims by the Contractor against the
Government, which are based upon the responsibility of the Contractor to
third parties and which involve costs reimbursable under the Contract,
but which are not now known to the Contractor."[^451] The Consolidated
Contract exempts: "costs, expenses and liabilities which may thereafter
be imposed on, or incurred by, the Contractor, without its fault or
neglect, which are then undetermined or incapable of determination as to
either existence, validity, or amount, shall remain in full force and
effect. . . ."[^452] Finally, the Ford settlement agreement apparently
contained language exempting unknown third-party claims arising from the
contract.[^453] The courts will have to wrestle with whether these are
"plain and explicit" exceptions that justify leaving these extremely old
contracts open. However, a finding that the contracts have been fully
performed and finally settled may not sound the death knell to a
contractor's suit.

After *Yankee*, the finality of a contract apparently has no impact on
the court's analysis of a contractor's claim when applying the Sovereign
Acts and Unmistakability doctrines. The majority states the reasoning is
the same: "\[r\]egardless of whether the situation is characterized as a
breach of contract, an unlawful taking, or an unlawful exaction, the
arguments stem from Yankee Atomic\'s prior contracts with the
Government."[^454] The dissent, disagreed stating the Unmistakability
and Sovereign Acts doctrines are not applicable to unlawful takings
cases.[^455]

The Takings Clause of the Fifth Amendment states: \"Nor shall private
property be taken for public use, without just compensation.\"[^456]
Although takings cases typically involve the government confiscating
private property for public use, the clause has been found to prevent
government interference with other property interests, including
contractual rights. "Rights against the United States arising out of a
contract with it are protected by the Fifth Amendment\" of the United
States Constitution.[^457] "Congress \[is\] without power to reduce
expenditures by abrogating contractual obligations of the United States.
To abrogate contracts, in the attempt to lessen government expenditure
would be not the practice of economy, but an act of repudiation.\"[^458]
The purpose of the Takings Clause of the Fifth Amendment is to prevent
the government \"from forcing some people alone to bear public burdens
which, in all fairness and justice, should be borne by the public as a
whole.\"[^459] Further, \"a strong public desire to improve the public
condition is not enough to warrant achieving the desire by a shorter cut
than the constitutional way of paying for the change."[^460]

Historically, claims of an unlawful taking based on CERCLA have not been
successful. While the Supreme Court has never addressed the issue, many
district and circuit courts have. In one of the most often cited cases,
*United States v. Northeastern Pharmaceutical & Chemical Co., Inc.*
(NEPACCO), the Eighth Circuit rejected a takings claim because the
government-mandated cleanup did not deprive the plaintiff of a "property
interest" protected under the Fifth Amendment.[^461] Many of the other
claims have involved situations where the government-mandated cleanup
required physical occupation of the plaintiff's property.[^462] In the
few cases where the plaintiff prevailed, they were able to establish the
physical occupation was permanent.[^463] Very few cases have involved
claims of an unlawful taking based on a contractual relationship with
the government.

In *Eastern Enterprises v. Apfel* (Eastern)*,* the United States Supreme
Court addressed the applicability of the Takings Clause to the Coal
Act.[^464] The Coal Act was passed in 1992 to address the failing
pension programs initially established in 1950 and 1974. In an attempt
to stabilize pensions, Congress assessed corporations that had employed
miners in the past. Eastern Enterprises, which had been out of the coal
business since 1965, was assessed. They filed suit claiming this was an
unlawful taking.[^465] The Supreme Court agreed. In reaching their
decision the Court held: the "inquiry, by its nature, does not lend
itself to any set formula, and the determination whether \"\'justice and
fairness\' require that economic injuries caused by public action
\[must\] be compensated by the government, rather than remain
disproportionately concentrated on a few persons,\" is essentially ad
hoc and fact intensive."[^466] However, the Court enunciated at least
three factors they consider important: \"the economic impact of the
regulation, its interference with reasonable investment backed
expectations, and the character of the governmental action.\"[^467]

Hercules, Inc., in continuing litigation arising from the cleanup of the
Jacksonville, Arkansas site discussed in Section II, argued CERCLA
involved an unconstitutional taking in light of the Supreme Court's
decision in *Eastern.*[^468] The district court summarily dismissed the
claim finding the retroactive application of CERCLA was constitutional
in light of *NEPACCO*.[^469] The court did not discuss the effect of
CERCLA on the Agent Orange contracts as a taking of a vested property
right.

In 1993, prior to the *Eastern* decision, the district court rejected
Shell Oil's unlawful taking claim. In finding Shell liable for the
cleanup of the McColl superfund site, the district court found CERCLA
does not involve taking issues at all. "In view of the statutorily
provided right of contribution, CERCLA\'s provision for allocating
liability for the cleanup of public hazards cannot fairly be
characterized as a taking at all." The court reasoned this was because:
"CERCLA, as amended by SARA, clearly provides a mechanism by which
parties held liable for response costs under section 107(a) may allocate
those costs among themselves through contribution suits under section
113(f). . . ."[^470]

To date, no court has squarely addressed whether retroactive application
of CERCLA is an unlawful taking of a vested property right in completed
contracts. Certainly, the right of contribution under CERCLA is limited
to other PRPs. As discussed in Section III, a contracting partner is not
ordinarily considered a PRP---absent some fairly extraordinary
circumstances. Without a right to contribution, the *Shell* court may
have reached a different conclusion. After all it was that same court
that in a subsequent decision, remarked: "\[t\]he American public stood
to benefit from the successful prosecution of the war effort, so too
must the American public bear the burden of a cost directly and
inescapably created by the war effort."[^471]

## F. Section Summary

Defense contractors seeking to recover CERCLA cleanup costs under
contractual theories are entering an area of the law fraught with
uncertainty. *Winstar* does provide precedent for claims against the
government when changes in the law adversely affect its contractual
relationship. *Yankee* extends the analysis to completed contracts and
to non-regulatory agreements with the government. The primary obstacle
will be CERCLA's characterization as a "public and general" sovereign
act. However, that does not end the analysis. Defense contractors have a
colorable claim when the contractual relationship allocates the risk of
change to the government.

# V. CONCLUSION

Today, as a matter of law and policy, government contracts are required
to incorporate provisions designed to protect the environment. In
addition, parties to government contracts are subject to a veritable
plethora of environmental regulations and oversight by the EPA. However,
the country is still faced with the cost of years of environmental
neglect and the challenge of paying the bill. The environmental costs of
defense contracts alone are substantial. This article has reviewed the
challenge of spreading the cost among those responsible for the
widespread contamination resulting from defense contracts.

Section II began by outlining some of the provisions in current
contracting procedures to avoid environmental problems and to allocate
the costs of environmental cleanup. As a contrast, a number of defense
contracts from the Vietnam and World War II eras were discussed. None of
those contracts contained explicit provisions to deal with environmental
consequences. As a result, several of those contracts have resulted in
litigation. Litigation over two of the World War II contracts is pending
currently in the United States Court of Federal Claims.

Section III examined in some detail the liability of defense contractors
under CERCLA. The various attempts by contractors to assert government
liability as a contracting partner was discussed. Because a contractual
relationship is not enough to establish a party as a PRP, defense
contractors have had to struggle to show the United States was either an
"owner," "operator," or "arranger." The key factor has been to establish
that the government exercised a substantial degree of control. However,
after *Bestfoods,* many of the factors used by the court in *FMC* do not
appear to be applicable. The ability of defense contractors to establish
the government as a PRP, based on a contractual relationship, in the
future looks unlikely.

Section IV turned to another avenue by which defense contractors have
attempted to recover the costs of environmental cleanup. *United States
v. Winstar* was analyzed in detail as a case where the Supreme Court
found the government liable for a breach of contract following a
Congressional change in the law. The Unmistakability and Sovereign Acts
doctrines were examined as ways to determine the allocation of risk when
the law changes and frustrates contractual expectations. *Yankee*
examined application of the difficult *Winstar* principles to the effect
of a change in the law on a completed contract. The defense contracts,
discussed in Section II, were then analyzed in light of the court's
teachings. The article concludes that the nature of the contract and the
specific provisions allocating the risk of change should be paramount in
assessing the claims. As a result, claims under the World War II
contracts appear to have merit. In contrast, the Vietnam era fixed-price
contracts appear to allocate the risk to the contractor. Section III
concluded by briefly examining other obstacles as well as alternate
theories of liability under the Takings Clause.

In the final analysis, the question is reduced to the following: "who
should bear the cost of defense contracts that benefited both the public
at large and the individual defense contractors?" The district court in
*Shell Oil* believed that "the American public stood to benefit from the
successful prosecution of the war effort, so too must the American
public bear the burden of a cost directly and inescapably created by the
war effort." However, the entire purpose of entering written contracts
is to assign risk. When a contract fails to clearly assign risk,
allocating responsibility and cost entails a tortured journey through a
judicial maze. The result after *Winstar* is uncertainty*.*

[^1]: ^\*^ *Major Theurer (B.S., Colorado State University; M.S., Boston
    University; J.D., University of Cincinatti; LL.M., George Washington
    University Law School) is an environmental litigation attorney
    assigned to the Environmental Law and Litigation Division, Air Force
    Legal Services Agency.*

[^2]: Defense Contract Audit Agency (DCAA) Contract Audit Manual 7640.1,
    Vol. 1, **¶** 7-2120.1-.2 (Jan. 2001) \[hereinafter DCAAM 7640.1\]
    ("Environmental costs are normal costs of doing business and are
    generally allowable costs if reasonable and allocable....
    Environmental costs include costs to prevent environmental
    contamination, costs to clean up prior contamination, and costs
    directly associated with the first two categories including legal
    costs"); *See generally* Robert Burton, *DMMC Tackles High Profile
    Cost Issues*, 34 F[all]{.smallcaps} P[rocurement]{.smallcaps}
    [Law]{.smallcaps} 14, 15 (1998).

[^3]: Comprehensive Environmental Response, Compensation, and Liability
    Act (CERCLA), 42 U.S.C.A. §§ 9601-9675 (1995 & Supp. 2000). As an
    example, in January 2000 the United States entered into a settlement
    agreement with Lockheed Martin to pay half of a \$265 million
    cleanup effort already incurred and one-half of future cleanup costs
    at the "Skunk Works" facility located in Burbank, California. The
    plant was used by the United States government and the defense
    contractor for the production of numerous warplanes including the
    F-117 Stealth Fighter. Andrew Blankstein, *U.S. to Reimburse
    Lockheed in Toxic Cleanup Environment: Under Settlement, Government
    Will Pay Firm More Than \$155 Million for Ground Water, Soil
    Contamination in Burbank,* [L.A. Times]{.smallcaps}, Jan. 21, 2000,
    at B1.

[^4]: *See, e.g.,* East Bay Mun. Util. Dist. v. United States*,* 142
    F.3d 479 (D.C. Cir. 1998) (finding wartime mining operation was not
    sufficiently controlled by federal government to establish operator
    liability); United States v. Vertac Chemical Corp., 46 F.3d 803 (8th
    Cir. 1995) (holding government not liable as an operator for
    production of agent orange during Vietnam conflict at contractor
    plant); FMC Corp. v. United States, 29 F.3d 833 (3rd Cir. 1994)
    (holding government liable under an "actual control" theory for
    cleanup of a WWII defense contractor facility); Maxus Energy Corp.
    v. United States, 898 F. Supp. 399 (N.D. Tex. 1995) (concluding
    government not liable under same reasoning as *United States v.
    Vertac*).

[^5]: *See infra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^6]: Tucson Airport Auth. v. General Dynamics Corp., 136 F.3d 641 (9th
    Cir. 1998).

[^7]: *See infra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^8]: United States v. Winstar Corp., 518 U.S. 839 (1996).

[^9]: *See infra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^10]: 518 U.S. 839, 871-910 (1996).

[^11]: 112 F.3d 1569 (Fed. Cir. 1997). For a discussion, *see infra*
    notes Error: Reference source not found-Error: Reference source not
    found and accompanying text.

[^12]: *See* *\$400 Billion Toxic Cleanup Bill*, [Wash.
    Post]{.smallcaps}, July 18, 1996, at A25. *See also* Randall J.
    Bunn, *Contractor Recovery for Current Environmental Cleanup Costs
    under World War II-Era Government Contract Indemnification Clauses,*
    41 [A.F. L. Rev.]{.smallcaps} 163, 163 n.3 (1997). The cost of
    cleaning up federal facilities and federally controlled sites in
    Colorado alone is estimated at more than \$12 billion. Burt Hubbard,
    *Toxic Cleanup Dwarfs DIA Cost; Time Delays Adding To \$12 Billion
    Price Tag To Be Paid By Taxpayers,* [The Denver]{.smallcaps} [Rocky
    Mountain News]{.smallcaps}, Mar. 29, 1998, at 4A.

[^13]: Although there is no single statute governing acquisitions for
    all agencies, there is a single government-wide procurement
    regulation. 41 U.S.C.A. § 405 (1987 & Supp. 2000). The regulation,
    known as the Federal Acquisition Regulation (FAR) is codified at 48
    C.F.R. Ch. 1 (1999). Individual agencies have supplemental
    regulations codified in various sections of 48 C.F.R. The Department
    of Defense Federal Acquisition Supplement (DFARS) is codified at 48
    C.F.R. Ch. 2 (1999).

[^14]: FAR, 48 C.F.R. § 31.201-2 (1999) (allowable costs are those which
    are reasonable and allocable).

[^15]: FAR, 48 C.F.R. § 31.201-3 (1999) (determining reasonableness).

[^16]: FAR, 48 C.F.R. § 31.201-4 (1999) (determining allocability).

[^17]: *See* Burton, *supra* note Error: Reference source not found, at
    15.

[^18]: DCAAM 7640.1, Vol. 1, *supra* note Error: Reference source not
    found, ¶ 7-2120.1.

[^19]: DCAAM 7640.1, Vol. 1, *supra* note Error: Reference source not
    found, ¶ 7-2120.2.

[^20]: Department of Defense Directive (DODD) 5000.1, Defense
    Acquisition ¶ 4.2.12 (Mar. 15 1996) (canceled and superceded by DODD
    5000.1, The Defense Acquisition System (Oct. 23, 2000)) ("It is DoD
    policy to prevent, mitigate, or remediate environmental damage
    caused by acquisition programs. Prudent investments in pollution
    prevention can reduce life-cycle environmental costs and liability
    while improving environmental quality and program performance. In
    designing, manufacturing, testing, operating and disposing of
    systems, all forms of pollution shall be prevented or reduced at the
    source whenever feasible."). *See also* Hon. Jacques S. Gansler,
    Under Secretary of Defense (Acquisition and Technology), Address at
    the 24th Annual Environmental Symposium, Tampa, Florida (Apr. 7,
    1998).

[^21]: National Environmental Policy Act, 42 U.S.C.A. § 4432 (requiring
    all federal policies, regulations, and public laws are required to
    be implemented in accordance with environmental policies set forth
    in the NEPA).

[^22]: 42 U.S.C.A. § 7606 (1995) (providing that contracts with
    violators of the CAA are prohibited and requires contracts entered
    into "must effectuate the purpose and policy" of the CAA).

[^23]: 33 U.S.C.A. § 1368 (1995) (preventing contracting with a person
    who has been convicted of violating the CWA at a facility where the
    violation occurred).

[^24]: 42 U.S.C.A. § 6901 (1995) (requiring that acquisitions set a
    preference for "recovered" materials instead of new).

[^25]: Contract Settlement Act of 1944, 41 U.S.C.A. § 101 *et seq.*
    (1987).

[^26]: Complaint, E.I. Du Pont De Nemours and Co. v. United States,
    complaint filed, No. 99-101C (Fed. Cl., Mar. 2, 1999) at 2
    \[hereinafter DuPont Complaint\].

[^27]: *Id*. at 3.

[^28]: *Id*.

[^29]: Cost-Plus-A-Fixed-Fee, Design, Engineering, Construction,
    Equipment and Operation Contract, No. W-ORD-490, War Department
    (Nov. 28, 1940) at Article III(A)(8) \[hereinafter DuPont
    Contract\]; DuPont Complaint, *supra* note Error: Reference source
    not found, at 5.

[^30]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 5.

[^31]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 5.

[^32]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 5.

[^33]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 8; The Morgantown Ordnance Works was added to the National
    Priorities List \[hereinafter NPL\] when the list was updated for
    the second time in 1984. 49 Fed. Reg. 40,320 (1984) (codified at 40
    C.F.R. pt. 300).

[^34]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 9.

[^35]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 10.

[^36]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 14.

[^37]: DuPont Complaint, *supra* note Error: Reference source not found,
    at 15.

[^38]: Complaint, Ford Motor Co. v. United States, complaint filed, No.
    98-186 (Fed. Cl., Mar. 18, 1998) \[hereinafter Ford Complaint\].

[^39]: The Willow Run site by agreement between the PRPs, the EPA and
    the state was not placed on the NPL. *Willow Run PCBs to be
    Contained On-site*, [Superfund Wk]{.smallcaps}., Jan. 6, 1995,
    *available at* 1995 WL 7503998.

[^40]: *Willow Creek Begins PCB Dig*, [Superfund Wk]{.smallcaps}., Aug.
    29, 1997, *available at* 1997 WL 12955954.

[^41]: Contract No. W 535-ac-21216, Sept. 26, 1941, at 2 (on file with
    the Environmental Law and Litigation Division, Air Force Legal
    Services Agency, Arlington, Va.) \[hereinafter Ford Contract\]. For
    a detailed discussion of the Willow Run contract and the
    indemnification clauses, *see* Bunn, *supra* note Error: Reference
    source not found. At the peak of production, the plant turned out a
    B-24 bomber every fifty-nine minutes. [Warren B. Kidder, Willow Run:
    Colossus Of American Industry, Home Of Henry Ford's B-24 "Liberator"
    Bomber]{.smallcaps} 138, 189 (1995[).]{.smallcaps}

[^42]: Ford Contract, *supra* note Error: Reference source not found
    (emphasis added).

[^43]: Ford Contract, *supra* note Error: Reference source not found.

[^44]: *See* Ford Complaint, *supra* note Error: Reference source not
    found.

[^45]: Consent Decree, United States v. Ford Motor Co., No. 98-71305,
    (E.D. Mich., Apr. 20, 1999), *available at* 1999 EPA Consent LEXIS
    83.

[^46]: *Id.* at 13.

[^47]: *Id.* at 21.

[^48]: Tucson Airport Auth. v. General Dynamics Corp., 922 F. Supp. 273,
    277 (D. Ariz. 1996), *aff'd,* 136 F.3d 641 (9th Cir. 1998).

[^49]: *Id*.

[^50]: *Id.* at 278.

[^51]: *Id;* Contract No. W 535-ac-26999, Oct. 5, 1942 (on file with the
    Environmental Law and Litigation Division, Air Force Legal Services
    Agency, Arlington, Va.) \[hereinafter Consolidated Contract\].

[^52]: 922 F. Supp. at 277-78.

[^53]: 922 F. Supp. at 278.

[^54]: 922 F. Supp. at 278-79.

[^55]: 922 F. Supp. at 279.

[^56]: 922 F. Supp. at 279.

[^57]: 136 F.3d at 647.

[^58]: 136 F.3d at 648.

[^59]: Consent Decree, United States v. Tucson Airport Authority, No.
    CIV-99-313-TUC-WDB, (D. Ariz., June 17, 1999), *available at* 1999
    EPA Consent LEXIS 124.

[^60]: *Id.* at 125-26.

[^61]: Hercules, Inc. v. United States, 516 U.S. 417, 419 (1996).

[^62]: *Id*.

[^63]: *Id.*; Defense Production Act of 1950 \[hereinafter DPA\], Pub.
    L. No. 774, 64 Stat. 798 (codified as amended at app. 50 U.S.C.A. §
    2061 *et seq.* (1991).

[^64]: 516 U.S. at 419.

[^65]: 516 U.S. at 420*.*

[^66]: The judge ruled that the viability of the "government contractor
    defense" could not be determined before a trial on the facts. *Id.*
    The plaintiffs who opted out of the class action subsequently lost
    at trial based on "government contractor defense." *See In re*
    "Agent Orange" Prod. Liab. Litig., 818 F.2d 187, 189 (2d Cir. 1987).

[^67]: 818 F.2d at 207.

[^68]: Hercules, Inc. v. United States, 25 Ct. Cl. 616 (1992); Wm. T.
    Thompson Co. v. United States, 26 Ct. Cl. 17 (1992).

[^69]: 516 U.S. at 424.

[^70]: DPA § 707 (codified at 50 app. U.S.C. § 2157 (1991)).

[^71]: 516 U.S. at 421-22.

[^72]: 516 U.S. at 421.

[^73]: 516 U.S. at 417.

[^74]: *See* 516 U.S. at 424-25.

[^75]: 516 U.S. at 425 (*quoting* from United States v. Spearin, 248
    U.S. 132, 136 (1918)).

[^76]: 516 U.S. at 425.

[^77]: 516 U.S. at 426.

[^78]: 516 U.S. at 426*.*

[^79]: 516 U.S. at 426.

[^80]: 516 U.S. at 429.

[^81]: 516 U.S. at 430.

[^82]: 516 U.S. at 427-28.

[^83]: The Anti-Deficiency Act, 31 U.S.C.A. § 1341 (1983 & Supp. 2000).
    *See infra* notes Error: Reference source not found-Error: Reference
    source not found and accompanying text.

[^84]: 516 U.S. at 427; In re Assumption of Liability of Contractor
    Liability to Third Persons---Reconsideration, 62 Comp. Gen. 361,
    364-365 (1983).

[^85]: 516 U.S. at 428 (citing as an example, 50 U.S.C. § 1431 (Supp. V
    1988)).

[^86]: 516 U.S. at 429-30.

[^87]: 516 U.S. at 430.

[^88]: United States v. Vertac Chemical Corp., 46 F.3d 803 (8th Cir.
    1995). In 1964, Hercules, a chemical manufacturer in Jacksonville,
    Arkansas, won a competitive bid to supply the United States with the
    defoliant. During the period 1964-1968, Hercules produced and
    supplied Agent Orange to the United States. During the contract,
    Hercules disposed of the waste associated with the production of
    Agent Orange. The United States was aware of the waste but not
    consulted concerning disposal. After the contract ended, Hercules
    produced other products using the same chemicals involved in the
    site's contamination. *Id.* at 806-07.

[^89]: *Id*. at 807. The contract also subjected Hercules to the
    Walsh-Healey Act---setting certain health and safety standards. The
    government conducted inspections pursuant to this act on two
    occasions. However, the government was not involved in personnel
    issues and did not own any of the equipment used in the plant.
    Hercules profited from the contract. *Id.* at 806-07.

[^90]: *See infra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^91]: 46 F.3d at 811.

[^92]: 46 F.3d at 812.

[^93]: 46 F.3d at 812-13.

[^94]: 46 F.3d at 812*.*

[^95]: 46 F.3d at 812 (quoting Hercules, Inc. v. United States, 24 F.3d
    188, 203-04 (Fed. Cir. 1994)).

[^96]: 46 F.3d at 812.

[^97]: Phillip M. Kannan, *The Compensation Dimension of CERCLA:
    Recovering Unpaid Contract Costs*, 30 U. MEM. L. REV. 29, 52 (1999).

[^98]: [S. Rep. No]{.smallcaps}. 96-848, pp. 6119, 13, U.S.Code Cong. &
    Admin. News 1980, p. 6119 (1980); United States v. Bestfoods, 524
    U.S. 51, 55-56 (1998) (quoting passage with approval).

[^99]: The waiver of sovereign immunity under CERCLA provides:

    > Each department, agency, and instrumentality of the United States
    > (including the executive, legislative, and judicial branches of
    > government) shall be subject to, and comply with, this chapter in
    > the same manner and to the same extent, both procedurally and
    > substantively, as any nongovernmental entity, including liability
    > under section 9607 of this title.

    42 U.S.C.A. § 9620(a)(1) (1995).

[^100]: *See* Universal Canvas, Inc. v. Stone, 975 F.2d 847, 850
    (Fed.Cir. 1992); United States v. Hatcher, 922 F.2d 1402, 1410 (9th
    Cir. 1991); City of El Centro v. United States, 922 F.2d 816, 824
    (Fed.Cir. 1990) (dissent).

[^101]: *See generally* Federal Water Pollution Control Act, also known
    as the Clean Water Act \[hereinafter CWA\], 33 U.S.C.A. §§ 1251-1387
    (1986 & Supp. 2000); Clean Air Act (CAA), 42 U.S.C.A. §§ 7401-7671q
    (1995 & Supp. 2000); Resource Conservation and Recovery Act (RCRA),
    42 U.S.C.A. §§ 6901-6992k (1995 & Supp. 2000); Safe Drinking Water
    (Public Health Service) Act, 42 U.S.C.A. §§ 300f-300j-26 (1991 &
    Supp. 1998); Ocean Dumping (Marine Protection, Research, and
    Sanctuaries) Act, 33 U.S.C.A. §§ 1401-1445 (1986 & Supp. 2000).

[^102]: [S. Rep No]{.smallcaps}. 96-848, at 10-12 (1980), *reprinted
    in*, Arnold & Porter Legislative History: P.L. 96‑510.

[^103]: In 1977, a reporter for a small upstate New York newspaper wrote
    an article detailing a particularly disturbing account of the
    actions of a large chemical company. For years, Hooker Chemical had
    discarded barrels of chemical waste into the abandoned Love Canal
    near Niagara Falls, New York. After filling the canal with toxic
    waste, the company sold the land to the city to build an elementary
    school and playground. The surrounding land was developed into a
    housing area. Over the years, the barrels began to deteriorate
    causing subsiding and the leaching of the chemicals into the
    surrounding earth. Residents of the area developed severe health
    problems including liver problems, miscarriages, birth defects,
    sores, and rectal bleeding. In August 1978, President Carter
    declared the area a federal emergency. The school and homes in the
    area were boarded up, and residents were evacuated. *Id.* at 8-9.

[^104]: CERCLA, 42 U.S.C.A. §§ 9601-9675 (1995 & Supp. 2000).

[^105]: *See, e.g.,* CAA § 101, 42 U.S.C.A. § 7401 (1995); CWA § 101, 33
    U.S.C.A. § 1251 (1986 & Supp. 2000); RCRA § 1002, 42 U.S.C.A. § 6901
    (1995).

[^106]: [S. Rep No]{.smallcaps}. 96-848, at 12-13 (1980), *reprinted
    in*, Arnold & Porter Legislative History: P.L. 96‑510.

[^107]: *Id.* While the statute does not specifically mention strict
    liability, courts have interpreted the statute in that manner. *See*
    *FMC Corp*., 29 F.3d. at 835 ("\[l\]iability for the costs incurred
    is strict").

[^108]: CERCLA § 113(f), 42 U.S.C.A. § 9613(f) (1995); *See also* Martin
    A. McCrory, *Who's on First: CERCLA Cost Recovery, Contribution, and
    Protection,* 37 [Am. Bus. L.J.]{.smallcaps} 3, 18-19 (1999).

[^109]: CERCLA § 113(f), 42 U.S.C.A. § 9613(f)(1) (1995) ("In resolving
    contribution claims, the court may allocate response costs among
    liable parties using such equitable factors as the court determines
    are appropriate.")

[^110]: CERCLA § 107(a), 42 U.S.C.A. § 9607(a) (1995).

[^111]: CERCLA § 107(a)(1), 42 U.S.C.A. § 9607(a)(1) (1995). The term
    "facility" is broadly defined to include:

    > \(A\) any building, structure, installation, equipment, pipe or
    > pipeline (including any pipe into a sewer or publicly owned
    > treatment works), well, pit, pond, lagoon, impoundment, ditch,
    > landfill, storage container, motor vehicle, rolling stock, or
    > aircraft, or (B) any site or area where a hazardous substance has
    > been deposited, stored, disposed of, or placed, or otherwise come
    > to be located; but does not include any consumer product in
    > consumer use or any vessel.

    CERCLA § 101(9), 42 U.S.C.A. § 9601(9) (1995). The term "owner or
    operator" is tautologically defined as "any person owning or
    operating such facility." CERCLA § 101(20)(A), 42 U.S.C.A. §
    9601(20)(A) (1995). The Supreme Court has expounded upon the
    definition of "operator" in *United States v. Bestfoods,* 524 U.S.
    51, 66-67 (1998); *see infra,* notes Error: Reference source not
    found-Error: Reference source not found and accompanying text.

[^112]: CERCLA § 107(a)(2), 42 U.S.C.A. § 9607(a)(2) (1995).

[^113]: CERCLA § 107(a)(3), 42 U.S.C.A. § 9607(a)(3) (1995).

[^114]: CERCLA § 107(a)(4), 42 U.S.C.A. § 9607(a)(4) (1995).

[^115]: Envtl. Trans. Sys., Inc. v. Emsco, Inc. 969 F.2d 503, 506 (7th
    Cir. 1992); United States v. Aceto Agric. Chems. Corp., 872 F.2d.
    1373, 1378-79 (8th Cir. 1989); Amoco Oil Co. v. Borden, Inc., 889
    F.2d 664, 668 (5th Cir. 1989). The elements to be proved are not
    always consistent in various courts and are often fact-specific
    depending on the allegations of the plaintiff. *See, e.g., infra*
    text accompanying note Error: Reference source not found.

[^116]: CERCLA § 107(a), 42 U.S.C.A. § 9607(a)(4)(D) (1995).

[^117]: CERCLA § 107(b), 42 U.S.C.A. § 9607(b)(1)-(2) (1995).

[^118]: CERCLA § 101(1), 42 U.S.C.A. § 9601(1) (1995).

[^119]: United States v. M/V Santa Clara I, 887 F. Supp. 825, 843
    (D.S.C. 1995) (a severe storm at sea did not qualify as an "act of
    God"); McCrory, *supra* note Error: Reference source not found at
    15.

[^120]: *See* United States v. Shell Oil Co., 841 F. Supp. 962, 970-72
    (C.D. Ca. 1993); McCrory, *supra* note Error: Reference source not
    found, at 15.

[^121]: CERCLA § 107(b)(3), 42 U.S.C. § 9607(b)(3) (1995).

[^122]: *Id.*

[^123]: *Id.*

[^124]: *Id.*

[^125]: *Id.*

[^126]: *See* CERCLA § 107, 42 U.S.C.A. § 9607 (1995).

[^127]: Superfund Amendments and Reauthorization Act of 1986, Pub. L.
    No. 99-499, 100 Stat. 1613, 1647 (1986) (codified at 42 U.S.C.A. §
    9613(f) (1995)) \[hereinafter SARA\].

[^128]: *Id*.

[^129]: *Id.* at 1648 (codified at 42 U.S.C.A. § 9613 (f)(2) (1995)).

[^130]: *See* Key Tronic Corp. v. United States, 511 U.S. 809 (1994)
    ("Thus the statute now expressly authorizes a cause of action for
    contribution in § 113 and impliedly authorizes a similar and
    somewhat overlapping remedy in § 107.").

[^131]: *See* McCrory, *supra* note Error: Reference source not found,
    at 33.

[^132]: CERCLA § 120(a), 42 U.S.C.A. § 9620(a)(1) (1995).

[^133]: Pub.L. No. 96-510, Title I, § 107(g), 94 Stat. 2767, 2783 (1980)
    (original waiver of sovereign immunity provided that "\[e\]ach
    department, agency, or instrumentality of the executive,
    legislative, and judicial branches of the Federal Government shall
    be subject to, and comply with, this Act in the same manner and to
    the same extent, both procedurally and substantively, as any
    nongovernmental entity, including liability under this section.").
    The 1986 SARA amendments moved nearly identical language to the new
    § 120. Pub.L. No. 99‑499, Title I, § 120, 100 Stat. 1613, 1666
    (1986). *See also,* *FMC Corp*., 29 F.3d at 842.

[^134]: CERCLA § 120, 42 U.S.C.A. § 9620 (1995).

[^135]: *FMC Corp*., 29 F.3d at 842. The Third Circuit found the
    argument limiting government liability to "Federal Facilities"
    unavailing for three reasons. First, the language in the new § 120
    clearly states the government will be held liable the same as any
    other person. *Id.* Second, the language in § 120 was essentially
    identical to the earlier waiver contained in the old § 107. *Id.*
    Finally, the language in the new § 120 provided for government
    liability under § 107. *Id.* *See also* Steven G. Davison,
    *Government Liability Under CERCLA*, 26 [B.C. Envtl. Aff. L.
    Rev]{.smallcaps}. 47, 52-54 (1997); William B. Johnson, Annotation,
    *Liability of Federal Government under § 107(a) of Comprehensive
    Environmental Response, Compensation, and Liability Act,* [127
    A.L.R. Fed.]{.smallcaps} 511, 528-29 § 5 (1995).

[^136]: CERCLA § 101(21), 42 U.S.C.A. § 9601(21) (1995).

[^137]: United States v. Idaho, 508 U.S. 1 (1993); United States v.
    Nordic Village Inc., 503 U.S. 30 (1992); *FMC Corp*., 29 F.3d at
    839.

[^138]: *FMC Corp*., 29 F.3d at 840 (citing United States v. Alcan
    Aluminum Corp., 964 F.2d 252, 258 (3d Cir. 1992).

[^139]: *See* CERCLA § 120, 42 U.S.C.A. § 9620 (1995 & 1999 WESTLAW
    electronic update).

[^140]: The majority of these cases involve suits alleging EPA has
    failed in some manner during cleanup efforts. *See, e.g.,* *FMC
    Corp*., 29 F.3d at 839; In re Paoli R.R. Yard PCB Litig., 790 F.
    Supp. 94 (E.D. Pa 1992), *aff'd without op.*, 980 F.2d 724 (3d Cir.
    1992); United States v. Atlas Minerals & Chems., Inc., 797 F. Supp.
    411, 419-21 (E.D. Pa 1992); United States v. Azrael, 765 F. Supp.
    1239 (D. Md. 1991); United States v W. Processing Co., 761 F. Supp
    725 (W.D. Wash. 1991).

[^141]: CERCLA § 107(d)(2), 42 U.S.C.A. § 9607(d)(2) (1995).

[^142]: *FMC Corp*., 29 F.3d at 839-41; United States v. Iron Mountain
    Mines, 881 F. Supp. 1432 (E.D. Cal. 1995). *But see* United States
    v. American Color and Chem. Corp., 858 F.Supp 445 (M.D. Pa 1994)
    (holding that government immunity is only waived when acting as a
    business concern and not in a regulatory capacity); Johnson, *supra*
    note Error: Reference source not found, at § 7.

[^143]: Davison, *supra* note Error: Reference source not found, at
    83-4, *citing to* Vertac Chem. Corp., 46 F.3d at 808; United States
    v. Dart Indus., 847 F.2d 144, 146 (4th Cir. 1988); Maxus Energy
    Corp., 898 F. Supp. at 406‑7; Lincoln v. Republic Ecology Corp., 765
    F. Supp. 633, 638‑39 (C.D. Cal. 1991); Hassayampa Steering Comm. v.
    Arizona, 768 F. Supp. 697, 702 (D. Ariz. 1991); United States v. New
    Castle County, 727 F. Supp. 854, 874 (D. Del. 1989); New York v.
    City of Johnstown, 701 F. Supp. 33, 36 (N.D.N.Y. 1988).

[^144]: *See, e.g.,* *FMC Corp*., 29 F.3d at 840 ("\[A\]lthough no
    private party could own a military base, the government is liable
    for cleanup of hazardous wastes at military bases because a private
    party would be liable if it did own a military base.").

[^145]: *See, e.g.*, Elf Atochem North America, Inc. v. United States,
    868 F. Supp. 707, 709-11 (E.D. Pa. 1994) (describing both term
    "facility" and what constitutes a "disposal"); Mead Corp. v. United
    States, No. C-2-92-326, slip op., 1994 WL 733567 (S.D. Ohio Jan. 14,
    1994) (describing both term "facility" and what constitutes a
    "disposal"); Kaiser Aluminum & Chem. Corp. v. Catellus Dev. Corp.,
    976 F.2d 1338, 1342-43 (9th Cir. 1992) (describing broad reach of
    term "disposal").

[^146]: Government policy is to ordinarily require contractors to
    furnish all property necessary to perform a government contract.
    FAR, 48 C.F.R. § 45.102 (1999). However, there are many situations
    where government property, including materials and production
    facilities are used in the performance of government contracts.
    *See* [John Cibinic, Jr. & Ralph C. Nash, Jr., Administration Of
    Government Contracts]{.smallcaps} 619 (3d ed. 1995). Part 45 of the
    FAR governs the use of government furnished property in government
    contracts. FAR, 48 C.F.R. Pt. 45 (1999).

[^147]: FAR, 48 C.F.R. § 45.301 (defining "facilities" as used in FAR to
    include "plant equipment and real property").

[^148]: *Elf Atochem*, 868 F. Supp. 707. *See also* Rospatch Jessco
    Corp. v. Chrysler Corp., 962 F. Supp. 998, 1007-08 (W.D. Mich. 1995)
    (acknowledging government ownership of equipment but unable to
    determine whether there was a release of hazardous waste from the
    equipment to support government liability).

[^149]: *Elf Atochem*, 868 F. Supp. at 708, 713.

[^150]: *Id.* at 708.

[^151]: *See id.* at 708, 710-12.

[^152]: *Id.* at 708.

[^153]: *Id.*

[^154]: *Id.*

[^155]: *Id.* *See supra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text for a discussion of
    contribution actions under CERCLA § 113(f).

[^156]: *Elf Atochem*, 868 F. Supp. at 709. This is a slightly expanded
    recitation of the elements required to prevail under CERCLA § 107
    than that set out by other courts. *See supra* note Error: Reference
    source not found and accompanying text.

[^157]: *Elf Atochem*, 868 F. Supp. at 709.

[^158]: *Id*. *See supra* note Error: Reference source not found
    describing definition of "facility."

[^159]: *Elf Atochem*, 868 F. Supp. at 709.

[^160]: *Id.* at 709-10. Hazardous substances are broadly defined to
    include both listed and characteristic hazardous waste under RCRA,
    as well as hazardous wastes listed under other substantive
    environmental law including the CAA and CWA. CERCLA § 101(14), 42
    U.S.C.A. § 9601(14) (1995).

[^161]: *Elf Atochem*, 868 F. Supp. at 712.

[^162]: *Id.* at 710-12.

[^163]: *Id.* at 710 (citing to [H.R. Rep. No]{.smallcaps}. 1491 (1976),
    *reprinted in* 1976 U.S.C.C.A.N. 6238, 6240).

[^164]: *Id*.

[^165]: *Id.* at 711.

[^166]: *Id*. The United States based its opinions on two asbestos cases
    where discharges to a closed environment did not constitute
    disposal. 3550 Stevens Creek Assoc. v. Barclays Bank, 915 F.2d 1355,
    1362 (9th Cir. 1990); Tragarz v. Keene Corp., 980 F.2d 411, 427 (7th
    Cir. 1992). The *Elf* court distinguished the asbestos cases because
    they dealt with the productive use of a hazardous substance rather
    than a waste stream as in the instant case. 868 F. Supp. at 711.

[^167]: 868 F. Supp. at 711.

[^168]: *Id.* at 711-12.

[^169]: *Id.* at 712.

[^170]: *Id.*

[^171]: *Id.* (citing Amland Props. Corp. v. Aluminum Corp., 711 F.
    Supp. 784, 793 (D.N.J. 1989)).

[^172]: *Id.*

[^173]: *Id.*

[^174]: For a discussion of situations in which contract property
    becomes government property, *see* [Cibinic & Nash]{.smallcaps},
    *supra* note Error: Reference source not found, at 620-22.

[^175]: Government contracts often contain clauses detailing situations
    in which title to contract property passes to the government. In
    fixed-price contracts the standard clause provides:

    > If this contract contains a provision directing the Contractor to
    > purchase material for which the Government will reimburse the
    > Contractor as a direct item of cost under this contract---
    >
    > \(i\) Title to material purchased from a vendor shall pass to and
    > vest in the Government upon the vendor\'s delivery of such
    > material; and
    >
    > \(ii\) Title to all other material shall pass to and vest in the
    > Government upon---
    >
    > \(A\) Issuance of the material for use in contract performance;
    >
    > \(B\) Commencement of processing of the material or its use in
    > contract performance; or

    \(C\) Reimbursement of the cost of the material by the Government,
    whichever occurs first.

    FAR, C.F.R. § 52.245-2(c)(4) (1999).

[^176]: *See* Mead Corp. v. United States, No. C-2-92-326, slip op.,
    1994 WL 733567 (S.D. Ohio Jan. 14, 1994).

[^177]: *Id.* In *Mead*, pursuant to the contract the government owned
    equipment used by the defense contractor to manufacture munitions.
    *Id.* at 1. The waste was disposed of trenches on site at the
    contractor plant. *Id.* at 2. The court declined to find the
    government liable, apparently reasoning the government did not own
    the trenches. *Id.* at 4. The court found the release must occur at
    the facility from which the waste was disposed. *Id.* at 5.

[^178]: East Bay Mun. Util. Dist. v. United States*,* 142 F.3d 479 (D.C.
    Cir. 1998) (wartime mining operation was not sufficiently controlled
    by federal government to establish operator liability).

[^179]: FMC Corp. v. United States, 29 F.3d 833 (3d Cir. 1994). For an
    argument that the government should not be liable for its
    contractual relationships when it is acting in a regulatory
    capacity, *see* Van S. Katzman, Note, *The Waste of War: Government
    CERCLA Liability at World War II Facilities,* 79 [Va. L.
    Rev]{.smallcaps}. 1191 (1993).

[^180]: 29 F.3d at 835.

[^181]: *Id.* FMC alleged the government was liable as an "owner,"
    "operator," and "arranger." *Id.* The government admitted to "owner"
    liability as it applied to government equipment at the plant. *Id.*
    at 838 and 854 (dissent). The court expressed no opinion as to
    "arranger" liability and merely affirmed the decision of the
    district court. *Id.* at 846. The contract in question was entered
    into after the attack on Pearl Harbor. It called for the production
    of high tenacity rayon---vital to the production of war-related
    products like airplane and truck tires. The War Production Board
    directed American Viscose's production of high tenacity rayon; it
    was a diversion from the factory's ordinary production of textile
    rayon. American Viscose was required to comply with War Production
    Board requirements or face seizure by the federal government. The
    production of high tenacity rayon involved the use of
    government-owned machinery, which was leased back to American
    Viscose. Adjacent to the site, the government built a plant to
    supply raw materials by direct pipeline. The government had
    representatives on site with authority to promulgate rules governing
    all operations at the site. The government was involved in
    investigating and resolving labor problems. In addition, the
    government was aware of the generation of hazardous waste and the
    disposal of 65,500 cubic yards of waste at highly visible on-site
    basins. *Id.* at 836-38.

[^182]: *Id.* at 845.

[^183]: *Id.* at 838-42.

[^184]: See *supra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text for a discussion of
    the sovereign immunity.

[^185]: *FMC*, 29 F.3d at 843-45.

[^186]: *Id.* at 843. *See* Lansford-Coaldale Joint Water Auth. v.
    Tonolli Corp., 4 F.3d 1209 (3d Cir. 1993) (developing "actual
    control" test as applied to corporations).

[^187]: *FMC*, 29 F.3d at 843.

[^188]: *Id.* The Eighth Circuit adopted the same "actual control" test
    for application to defense contracts in United States v. Vertac, 46
    F.3d 803 (8th Cir. 1995).

[^189]: *Id*. at 845.

[^190]: *Id.* at 844.

[^191]: *Id.* at 851(dissent) (citing FMC v. United States, 786 F. Supp.
    471 (E.D. Pa. 1990)).

[^192]: *Id*. at 852-54.

[^193]: United States v. Vertac Chem. Corp., 46 F.3d 803 (8th Cir. 1995)
    (government not liable as an operator or arranger for production of
    Agent Orange during Vietnam conflict at contractor plant); Maxus
    Energy Corp. v. United States, 898 F. Supp. 399 (N.D. Tex. 1995)
    (government not liable using same reasoning as United States v.
    Vertac).

[^194]: 524 U.S. 51 (1998).

[^195]: *Id.* at 65.

[^196]: *Id*.

[^197]: *Id*.

[^198]: *Id.* at 66.

[^199]: *Id.* at 66-67.

[^200]: *See* Major Romans, *Supreme Court Clarifies Corporate Liability
    for Parent Corporations*, [Army Law.]{.smallcaps}, Oct. 1998, at 64.

[^201]: *FMC*, 29 F.3d at 843.

[^202]: *Bestfood*s, 524 U.S. at 66-67.

[^203]: *See supra* note Error: Reference source not found and
    accompanying text; Romans, *supra* note Error: Reference source not
    found, at 64.

[^204]: 46 F.3d 803 (8th Cir. 1995).

[^205]: *Id.* at 809, 811.

[^206]: *Vertac*, 46 F.3d at 807-809; *See* *supra* notes Error:
    Reference source not found-Error: Reference source not found and
    accompanying text.

[^207]: *Vertac*, 46 F.3d at 810.

[^208]: *Id.* (quoting United States v. Northeastern Pharm. & Chem. Co.,
    810 F.2d 726, 743 (8th Cir. 1986).

[^209]: *Id*.

[^210]: *Id.*

[^211]: *Id.* at 811 (citing Northeastern Pharm. & Chem. Co., 810 F.2d
    at 886).

[^212]: *Id.*

[^213]: United States v. Aceto Agric. Chems. Corp., 872 F.2d 1373 (8th
    Cir. 1989).

[^214]: *Id.* at 1378-82.

[^215]: *Vertac*, 46 F.3d at 811.

[^216]: *See also* Maxus Energy Corp. v. United States, 898 F. Supp. 399
    (N.D. Tex. 1995). Like Vertac, Maxus involved a Vietnam era contract
    for the production of Agent Orange. *Id.* at 402. Factually, the
    cases are nearly identical, although the contractor in Maxus did not
    dispose of barrels on site, most of the contamination was from
    leakage and spilling. The district court analyzed the contractors
    claim that their case was analogous to Aceto. *Id.* at 406. Once
    again, the court did not find actual or constructive government
    ownership of the raw materials or government control over the
    manufacturing process. The court refused to impose liability based
    upon the buyer-seller relationship under the contract. *Id.* at
    406-07*.*

[^217]: *See* United States v. Shell Oil, CV 91-0589-RJK (1995 U.S.
    Dist. LEXIS 19778) (C.D. Cal. 1995) (unpublished). The district
    court in Shell Oil took exception to the analysis of "arranger
    liability" in *Vertac* and found the United States liable based on a
    World War II era contract for aviation fuel. *Id.* at 22. The court
    found the government to be an arranger because its control over the
    raw materials amounted to "ownership." *Id.* In rejecting *Vertac*
    the court reasoned:

    > When the Government, as a practical matter, orders a private
    > company to supply a finished product, dictates the delivery dates,
    > the quantity to be shipped, the prices of the materials, the
    > specifications of the raw materials, and provides the
    > transportation for the raw materials, there can be no question but
    > that it is \"supplying\" the raw materials within the meaning of
    > *Aceto*.

    *Id.* at 22.

[^218]: *See supra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^219]: CERCLA § 113(f), 42 U.S.C.A.. § 9613(f) (1995). *See supra*
    notes Error: Reference source not found-Error: Reference source not
    found and accompanying text.

[^220]: 13 F. Supp 2d. 1018 (C.D. Cal. 1998).

[^221]: *Id.* at 1020.

[^222]: United States v. Shell Oil Co., 841 F. Supp. 962 (C.D. Cal.
    1993) (district court opinion discussing Shell Oil liability for
    cleanup of McColl Superfund Site).

[^223]: 13 F. Supp 2d. at 1019; *see supra* note Error: Reference source
    not found.

[^224]: *Id.* at 1019-24.

[^225]: *Id.* at 1027.

[^226]: *Id.* (analogizing the oil company contract to the situation at
    the rayon plant in *FMC Corp*., 29 F.3d at 833.) See *supra* notes
    Error: Reference source not found-Error: Reference source not found
    for a discussion of the FMC case.

[^227]: *Id.*

[^228]: *Id.* at 1027-28.

[^229]: *See* Bunn, *supra* note Error: Reference source not found. For
    an argument that CERCLA costs are more likely to be recovered under
    a CERCLA theory than under the contract, see Kannan, *supra* note
    Error: Reference source not found, at 49-50.

[^230]: Act of Feb. 24, 1855, ch. 122, 10 Stat. 612 (1855). This statute
    was a predecessor to the Tucker Act that gave the Court of Claims
    jurisdiction to hear claims against the United States. Act of Mar.
    3, 1887, ch. 359, 24 Stat. 505 (1887). These functions were later
    handled by the United States Claims Court which was established by
    the Federal Courts Improvement Act of 1982. P.L. 97-164, 96 Stat. 25
    (1982). The court was renamed the United States Court of Federal
    Claims in 1992 by the Federal Courts Administration Act of 1992.
    P.L. 102-572, 106 Stat. 4506 (1992). For an interesting article
    covering the history and jurisdiction of the United States Court of
    Claims, see Richard H. Seamon, *Separation of Powers and the
    Separate Treatment of Contract Claims Against the Federal Government
    for Specific Performance,* 43 [Vill. L. Rev]{.smallcaps}. 155
    (1998).

[^231]: *See* William L. England, Jr., *Constitutionality of Article I
    Court Adjudication of Contract Disputes Act Claims*, 16 [Pub. Cont.
    L.J.]{.smallcaps} 338, 341 (1987).

[^232]: *See generally* Joshua I. Schwartz, *Liability for Sovereign
    Acts: Congruence and Exceptionalism in Government Contracts Law*, 64
    [Geo. Wash. L. Rev]{.smallcaps}. 633 (1996).

[^233]: *Id.* at 651-65.

[^234]: Deming v. United States, 1 Ct. Cl. 190 (1865).

[^235]: *Id.* at 190.

[^236]: *Id*.

[^237]: *Id.*

[^238]: Legal Tender Act of 1862, ch. 33, 12 Stat. 345 (1862). This
    statute made the federal currency paper-based and not backed up by a
    gold standard resulting in a devaluation of the currency. 1 Ct. Cl.
    at 190.

[^239]: *Id*.

[^240]: *Id.*

[^241]: *Id*.

[^242]: Jones v. United States, 1 Ct. Cl. 383 (1865).

[^243]: *Id.* at 384.

[^244]: *Id*.

[^245]: What is now known as the Sovereign Acts doctrine was explicitly
    adopted by the United States Supreme Court in only a single case,
    *Horowitz v. United States*, 267 U.S. 458 (1925), a three-page
    opinion, prior to its acceptance in *United States v. Winstar*. 518
    U.S. at 923 (Scalia, concurring opinion).

[^246]: The modern Unmistakability doctrine traces its roots to cannons
    of construction that disfavor implied government obligations in
    contracts. 518 U.S. at 874. *See* Providence Bank v. Billings, 4
    Pet. 514, 7 L.Ed. 939 (1830); Proprietors of Charles River Bridge v.
    Proprietors of Warren Bridge, 11 Pet. 420, 9 L.Ed. 773 (1837).

[^247]: The Reserved Powers doctrine also traces its roots to the first
    half of the nineteenth century and shares its origin with the
    Unmistakability doctrine. 518 U.S. at 874; West River Bridge Co. v.
    Dix, 6 How. 507, 12 L. Ed. 535 (1848); Stone v. Mississippi, 101
    U.S. 814 (1880); Lynch v. United States, 292 U.S. 571 (1934).

[^248]: *See, e.g.,* Home Tel. & Tel. v. City of Los Angeles, 211 U.S.
    265 (1908).

[^249]: United States v. Winstar, 518 U.S. 839 (1996).

[^250]: *Id.* The opinions span pages 839-937 of the U.S. Supreme Court
    Reporter.

[^251]: *Id.*

[^252]: A Westlaw KeyCite of the *Winstar* decision conducted on Mar. 4,
    2000 indicated 104 secondary sources discussing the decision, many
    in a critical light.

[^253]: Financial Institutions Reform, Recovery, and Enforcement Act of
    1989 \[hereinafter FIRREA\], Pub.L. No. 101‑73, 103 Stat. 183
    (codified in part at 12 U.S.C.A. § 1464 (1994)).

[^254]: The plurality opinion sets out the factual background of the
    case in great detail. *See* 518 U.S. at 844-61.

[^255]: *Id*.

[^256]: *Id*.

[^257]: *Id*.

[^258]: Each party originally filed suit in the Court of Federal Claims
    and was granted summary judgment against the United States for
    breach of contract. *See* Winstar Corp. v. United States, 21 Ct. Cl.
    112 (1990) (finding an implied‑in‑fact contract but requesting
    further briefing on contract issues); 25 Ct. Cl. 541 (1992) (finding
    contract breached and entering summary judgment on liability);
    Statesman Sav. Holding Corp. v. United States, 26 Ct. Cl. 904 (1992)
    (granting summary judgment on liability to Statesman and Glendale).
    The courts rejected the government's two central defenses based on
    the Unmistakability doctrine and the Sovereign Acts doctrine. *See*
    518 U.S. at 859. The cases were consolidated on appeal to the
    Federal Circuit. Winstar Corp. v. United States, 994 F.2d 797 (Fed.
    Cir. 1993). A panel from the Federal Circuit reversed, finding the
    allocation of the risk to the government was not "unmistakable."
    *Id.* at 811-13. On rehearing *en banc*, the full court reversed the
    panel and affirmed the Court of Federal Claims. Winstar Corp. v.
    United States, 64 F.3d 1531 (Fed. Cir. 1995) (*en banc*).

[^259]: 518 U.S. at 861-67.

[^260]: *Id.* at 868.

[^261]: *Id.* at 868-69.

[^262]: *Id*.

[^263]: *Id*.

[^264]: *Id.* at 872 (citing 1 [W. Blackstone, Commentaries on the Laws
    of England]{.smallcaps} 90 (1765)).

[^265]: U.S. [Const]{.smallcaps}. art I, § 10, cl. 1.

[^266]: 518 U.S. at 874.

[^267]: *See* West River Bridge Co. v. Dix, 6 How. 507, 12 L. Ed. 535
    (1848) (holding that a state\'s contracts do not surrender its
    eminent domain power).

[^268]: *Winstar*, 518 U.S. at 875 (citing Jefferson Branch Bank v.
    Skelly, 1 Black 436, 446, 17 L. Ed. 173 (1862)).

[^269]: The clause provides: "No state shall, without the Consent of
    Congress, . . . pass any . . . Law impairing the Obligation of
    Contracts. . . ." [U.S. Const]{.smallcaps}. art I, § 10, cl. 1.

[^270]: Pension Benefit Guaranty Corp. v. R.A. Gray & Co., 467 U.S. 717,
    732 n.9 (1984).

[^271]: Bowen v. Pub. Agencies Opposed to Soc. Sec. Entrapment, 477 U.S.
    41 (1986).

[^272]: *Id.* at 52 (quoting Merion v. Jicarilla Apache Tribe, 455 U.S.
    130 (1982)).

[^273]: United States v. Cherokee Nation of Okla., 480 U.S. 700 (1987).

[^274]: *Id.* at 707.

[^275]: *Winstar*, 518 U.S. at 878.

[^276]: *Id.* at 879.

[^277]: *Id.* at 879-80.

[^278]: *Id.* at 881.

[^279]: *See* Stone v. Miss., 101 U.S. 814 (1880).

[^280]: *Winstar*, 518 U.S. at 888 (quoting United States Trust Co. of
    N.Y. v. New Jersey, 431 U.S. 1, 23 (1977).

[^281]: *Id.* at 889.

[^282]: *Id.* Justice Souter based his analysis on an earlier case, Home
    Tel. & Tel. Co. v. Los Angeles, 211 U.S. 265, 273 (1908).

[^283]: 518 U.S. at 890-91.

[^284]: The government devoted only three of their forty-six page brief
    to the Sovereign Acts doctrine as compared to twenty pages applied
    to the Unmistakability doctrine. Brief for the Petitioner at 43‑46,
    United States v. Winstar Corp., 518 U.S. 839 (1996) (No. 95‑865)
    (*available at* 1996 WL 99716). *See also* Joshua I. Schwartz,
    *Assembling Winstar: Triumph Of The Ideal Of Congruence In
    Government Contracts Law?,* 26 [Pub. Cont. L.J.]{.smallcaps} 481,
    515-16 (1997) (hereinafter Schwartz II).

[^285]: 518 U.S. at 891.

[^286]: *Id.* at 894.

[^287]: *Horowitz*, 267 U.S. at 458.

[^288]: *Id.* at 461.

[^289]: 518 U.S. at 892-93.

[^290]: *Id.* at 896.

[^291]: Justice Souter defines governmental self-interest as instances
    where the government tries "to shift its legitimate public
    responsibilities to private parties." *Id.* at 896.

[^292]: *Id.* at 898.

[^293]: *Id.*

[^294]: *Id.* at 899.

[^295]: *Id.* at 904.

[^296]: [Restatement (Second) of Contracts]{.smallcaps} § 261.

[^297]: 518 U.S. at 905 (citing [Restatement (Second) of
    Contracts]{.smallcaps} § 261).

[^298]: *Id*.

[^299]: *Id.* (citing Lloyd v. Murphy, 25 Cal.2d 48, 54, 153 P.2d 47, 50
    (1944) ("\[i\]f \[the risk\] was foreseeable there should have been
    provision for it in the contract, and the absence of such a
    provision gives rise to the inference that the risk was assumed.")).

[^300]: *Id.* at 903-04.

[^301]: *Id.* at 905-10.

[^302]: *Id.* at 910-19 (Breyer, J., concurring).

[^303]: *Id.* at 910.

[^304]: *Id.* at 911.

[^305]: Lynch v. United States, 292 U.S. 571, 579 (1934). Justice Breyer
    also cites the following cases as precedent for application of
    congruence principles to government contracts. *See* Perry v. United
    States, 294 U.S. 330, 352 (1935); Sinking Fund Cases, 99 U.S. 700,
    719 (1879) ("The United States are as much bound by their contracts
    as are individuals. If they repudiate their obligations, it is as
    much repudiation, with all the wrong and reproach that term implies,
    as it would be if the repudiator had been a State or a municipality
    or a citizen").

[^306]: 518 U.S. at 913 (Breyer, J., concurring).

[^307]: *Id*.

[^308]: Tucker Act, 28 U.S.C. § 1491(a)(1).

[^309]: 518 U.S. at 914 (Breyer, J., concurring) (quoting Baltimore &
    Ohio R. Co. v. United States, 261 U.S. 592, 597 (1923)).

[^310]: *Id*.

[^311]: *See* Merion v. Jicarilla Apache Tribe, 455 U.S. 130 (1982);
    United States v. Cherokee Nation of Okla., 480 U.S. 700 (1987).
    *Merion* involved leases by an Indian tribe to private parties to
    extract oil and gas. The private parties maintained the leases
    contained an implicit waiver not to impose a tax. The Court found
    the lease was silent on the issue and was not willing to infer a
    waiver from silence. 455 U.S. at 148. *Cherokee* involved
    interpretation of a treaty that was likewise silent as to whether
    sovereign rights had been contracted away. 480 U.S. at 706-07.

[^312]: *Bowen*, discussed *supra* note Error: Reference source not
    found, contained a congressional statute that reserved the right to
    "alter, amend, or repeal" any provision. *Bowen,* 477 U.S. at 55.

[^313]: 518 U.S. at 916 (Breyer, J., concurring).

[^314]: *Id.* at 916-17.

[^315]: *Id.* at 917.

[^316]: *Id.* at 918.

[^317]: *Id*.

[^318]: *Id.* at 919 (Scalia, J., concurring).

[^319]: *Id*.

[^320]: *Id.* (quoting [Oliver W. Holmes]{.smallcaps}, *The Path of the
    Law* (1897), *in* 3 [The Collected Works of Justice
    Holmes]{.smallcaps} 391, 394 (S. Novick ed. 1995)).

[^321]: *Id.* at 920.

[^322]: *Id*.

[^323]: *Id*.

[^324]: *Id.* at 921.

[^325]: *Id*.

[^326]: *Id.*

[^327]: *Id.* at 923 (quoting Lynch v. United States, 292 U.S. 571, 579
    (1934)).

[^328]: *Id.* at 923-24.

[^329]: *See* Schwartz II, *supra* note Error: Reference source not
    found, at 543-44.

[^330]: 518 U.S. at 924 (Rehnquist, C.J., dissenting).

[^331]: *Id*.

[^332]: *Id.* at 927.

[^333]: *Id.* at 930-31.

[^334]: *Id.* at 929.

[^335]: *Id.* at 931.

[^336]: *Id.* (quoting 1 Ct. Cl. at 191).

[^337]: *Id.* at 933-34.

[^338]: *Id.*

[^339]: *Id.* at 935-36.

[^340]: *Id.* at 936-37.

[^341]: *Id.* at 937.

[^342]: Alan R. Burch, *Purchasing the Right to Govern: Winstar and the
    Need to Reconceptualize the Law of Regulatory Agreements*, 88 [Ky.
    L.J.]{.smallcaps} 245, 251-52 (Winter 1999-2000).

[^343]: *See* Michael P. Malloy, *When You Wish Upon Winstar: Contract
    Analysis and the Future of Regulatory Action*, 42 [St. Louis U.
    L.J.]{.smallcaps} 409, 440 (1998) ("There is more than a little
    obfuscation in this recharacterization.").

[^344]: [Blacks's Law Dictionary]{.smallcaps} 142 (6th ed. 1990).

[^345]: 518 U.S. at 868-69 (Souter, J.).

[^346]: *Id.* at 920 (Scalia, J., concurring); *See* Gillian Hadfield,
    *Of Sovereignty and Contract: Damages for Breach of Contract by
    Government,* 8 [S. Cal. Interdis. L.J.]{.smallcaps} 467, 485 (1999).

[^347]: *See supra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^348]: Burch, *supra* note Error: Reference source not found, at
    312-13.

[^349]: 516 U.S. at 426-28 .

[^350]: See Michael W. Graf, *The Determination of Property Rights in
    Public Contracts After Winstar v. United States: Where has the
    Supreme Court Left Us?*, 38 [Nat. Resources J.]{.smallcaps} 197,
    226-234 (1998).

[^351]: 518 U.S. at 919 (Scalia, J., concurring).

[^352]: One commentator suggests the price in these cases approached
    \$30 billion, Burch, *supra* note Error: Reference source not found,
    at 421.

[^353]: *See* Burch, *supra* note Error: Reference source not found, at
    379.

[^354]: Justice Scalia criticizes the "so-called" Sovereign Acts
    doctrine because it has only been applied by the Supreme Court in a
    single case, *Horowitz.* 518 U.S. at 923. He never acknowledges the
    long history as applied to federal contracts within the specialized
    United States Claims Court and its successors. *See, e.g.,*
    *Deming*, 1 Ct. Cl. at 190; *Jones,* 1 Ct. Cl. 383; Sunswick Corp.
    v. United States, 109 Ct. Cl. 772 (1948). The use of the
    Unmistakability doctrine is more susceptible to this criticism. It
    has only been applied to federal contractual agreements in a single
    case, *Bowen.* 477 U.S. 41. The other two cases mentioned involved a
    contract between an Indian tribe and a private party, *Merion,* and
    a treaty with an Indian tribe, *Cherokee.* *See* 455 U.S. 130; 480
    U.S. 700.

[^355]: 518 U.S. at 937 (Rehnquist, C.J., dissenting).

[^356]: Schwartz II, *supra* note Error: Reference source not found, at
    554-55.

[^357]: *See, e.g.,* Graf, *supra* note Error: Reference source not
    found, at 255-56; Burch, *supra* note Error: Reference source not
    found, at 386-87; Malloy, *supra* note Error: Reference source not
    found, at 446 ("The opinion refused to accept a simple dichotomy
    between 'regulatory' and 'nonregulatory' capacities of the
    government. . . .").

[^358]: Graf, *supra* note Error: Reference source not found, at 255.

[^359]: Graf, *supra* note Error: Reference source not found, at 255*.*

[^360]: Graf, *supra* note Error: Reference source not found, at 255*.*

[^361]: Burch, *supra* note Error: Reference source not found, at
    372-73.

[^362]: Schwartz II, *supra* note Error: Reference source not found, at
    556.

[^363]: *See* Malloy, *supra* note Error: Reference source not found, at
    450 ("What is both extraordinary and unfortunate, however, is the
    absolute lack of guidance with which the *Winstar* decision leaves
    us.").

[^364]: *Yankee*, 112 F.3d 1569. In the environmental field, most of the
    commentary has been on the application of *Winstar* principles to
    habitat conservation plant contracts under the Endangered Species
    Act. *See, e.g.,* Amy C. Derry, Note, *No Surprises After Winstar:
    Contractual Certainty and Habitat Conservation Planning Under the
    Endangered Species Act,* 17 [Va. Envtl. L.J]{.smallcaps}. 357
    (1998); Jean O. Melious & Robert D. Thornton, *Contractual Ecosystem
    Management Under the Endangered Species Act: Can Federal Agencies
    Make Enforceable Commitments?*, 26 [Ecology L.Q]{.smallcaps}. 489
    (1999).

[^365]: *See* Yankee Atomic Elec. Co. v. United States, 33 Fed. Cl. 580
    (1995).

[^366]: 33 Fed. Cl. at 582.

[^367]: 112 F.3d. 1572.

[^368]: [H.R. Rep. No]{.smallcaps}. 474, 102d Cong., 2d Sess., pt. I, at
    142, 144; pt. VIII, at 76, 78 (1992), reprinted in 1992 U.S.C.C.A.N.
    1965, 1967, 2294, 2296.

[^369]: Energy Policy Act of 1992, Pub. L. No. 102-486, 106 Stat. 2776.

[^370]: 112 F.3d at 1572.

[^371]: *Id.* at 1573.

[^372]: 33 Fed. Cl. at 585 (quoting Freedman v. United States, 320 F.2d
    359, 366 (Ct. Cl. 1963)).

[^373]: 112 F.3d at 1573.

[^374]: *Id.*

[^375]: *Id.* at 1575.

[^376]: *Id*.

[^377]: *Id.*

[^378]: *Id*.

[^379]: 518 U.S. at 896.

[^380]: *Id.* at 899.

[^381]: *Id.* at 896.

[^382]: 112 F.3d at 1578 (quoting *Winstar,* 518 U.S. at 878).

[^383]: *Id.* at 1579.

[^384]: United States v. Spearin, 248 U.S. 132, 136 (1918); *See also*
    ITT Arctic Servs., Inc. v. United States, 524 F.2d 680, 691 (Ct. Cl.
    1975) (that "the \[seller\] in a fixed‑price contract assumes the
    risk of unexpected costs. In firm fixed‑price contracts, risks fall
    on the \[seller\], and the \[seller\] takes account of this through
    his prices.").

[^385]: 112 F.3d at 1579.

[^386]: *Id*.

[^387]: *Id.* at 1580.

[^388]: *Id.*

[^389]: It is important to note that when analyzing the CERCLA issue
    that the Federal Circuit indicates it would apply the same analysis
    to either an ongoing contractual relationship or a vested contract
    right. *See* 112 F.3d. at 1580, 1582.

[^390]: While the *Yankee* court applied the *Winstar* analysis of the
    Unmistakability and Sovereign Acts doctrines to completed contracts
    in a non-regulatory setting, some commentators view the decision as
    a reversal in direction, giving the government a free hand to
    repudiate contracts. *See* Deneen J. Melander & Nancy R. Wagner,
    *Winstar and Yankee Atomic: The Government's Power to Retroactively
    Alter Contracts,* 28 [Nat'l Contract Management J]{.smallcaps}. 1
    (1997).

[^391]: However, the majority does note:

    > Throughout its briefs, Yankee Atomic contends that the special
    > assessment constitutes a breach of its contracts with the
    > Government. Technically, however, this does not appear to be a
    > case involving a breach of contract. Typically, a contract breach
    > occurs while the contract is being performed, whereas the
    > contracts in the present case have been fully performed by both
    > parties. This appears to have been the view of the Court of
    > Federal Claims, as indicated by the notable absence in its opinion
    > of any reference to breach of contract. This distinction does not
    > affect our decision, however. Regardless of whether the situation
    > is characterized as a breach of contract, an unlawful taking, or
    > an unlawful exaction, the arguments stem from Yankee Atomic\'s
    > prior contracts with the Government.

    *Id.* at 1573 n.2.

[^392]: [U.S. Const]{.smallcaps}. amend. V.

[^393]: 112 F.3d at 1582 (citing *Lynch,* 292 U.S. at 579) (Mayer, C.J.
    dissenting).

[^394]: *Id.*

[^395]: *Id.* at 1583 (quoting Armstrong v. United States, 364 U.S. 40,
    49 (1960)).

[^396]: *Id.* at 1583-84.

[^397]: *Hercules,* 516 U.S. at 419 (the government "entered into a
    series of fixed‑price production contracts"). The *Vertac* opinion
    does not specify the nature of the contracts for the purchase of
    Agent Orange. However, both *Hercules* and *Vertac* specify that the
    contractor bid for the contract from the government indicating use
    of sealed bidding which was the preferred technique used at that
    time in government contracting. [John Cibinic, Jr. & Ralph C. Nash,
    Jr., Formation Of Government Contracts]{.smallcaps} 505 (3d ed.
    1998). Sealed bidding requires the use of fixed-price contracts.
    FAR, 48 C.F.R. § 14.104 (1999).

[^398]: *See supra* note Error: Reference source not found and
    accompanying text.

[^399]: *See, e.g.,* Mulholland v. United States, 361 F.2d 237, 239‑40
    (Ct. Cl. 1966) (at the latest, a breach of contract claim accrues
    when the contract is completed); Henke v. United States, 60 F.3d
    795, 799‑800 (Fed.Cir. 1995).

[^400]: *See supra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^401]: For a discussion of the legislative history leading up to the
    passage of CERCLA, see *supra* notes Error: Reference source not
    found-Error: Reference source not found and accompanying text.

[^402]: *Winstar,* 518 U.S. at 898.

[^403]: The Senate report accompanying the legislation makes no mention
    of a desire to eliminate the government's contractual obligations.
    *See* [S. Rep]{.smallcaps}. 96‑848, *supra* note Error: Reference
    source not found.

[^404]: *ITT Arctic Serv., Inc.,* 524 F.2d at 691.

[^405]: [Cibinic & Nash,]{.smallcaps} *supra* note Error: Reference
    source not found, at 1061.

[^406]: *Id*.

[^407]: 518 U.S. at 880.

[^408]: Amino Bros. Co. v. United States, 372 F.2d 485, 491 (Ct. Cl.
    1967).

[^409]: 518 U.S. at 880.

[^410]: *See supra* note Error: Reference source not found and
    accompanying text.

[^411]: 518 U.S. at 919-22 (Scalia, J., concurring).

[^412]: 518 U.S. at 926 (Rehnquist, C.J., dissenting).

[^413]: 112 F.3d at 1580.

[^414]: *Id*.

[^415]: Consolidated Contract, *supra* note Error: Reference source not
    found.

[^416]: *Id*.

[^417]: The definition of "impose" is "\[t\]o levy or exact as by
    authority; to lay as a burden tax, duty or charge." [Blacks's Law
    Dictionary]{.smallcaps} 518 (6th ed. 1990).

[^418]: 112 F.3d at 1579.

[^419]: *Hercules*, 516 U.S. at 426, 429-30.

[^420]: *See supra* notes Error: Reference source not found-Error:
    Reference source not found and accompanying text.

[^421]: 518 U.S. at 880.

[^422]: Tucson Airport Authority v. General Dynamics Corp., 922 F. Supp.
    273 (D. Ariz. 1996).

[^423]: Administrative Procedures Act, 5 U.S.C. § 701, *et. seq.*

[^424]: Tucson Airport Authority v. General Dynamics Corp.*,* 136 F.3d
    641 (9th Cir. 1998).

[^425]: *Id.* at 644.

[^426]: *Id.* at 645.

[^427]: See Seamon, *supra* note Error: Reference source not found for
    an article discussing limitations of seeking specific performance
    from the government.

[^428]: *See id*.

[^429]: Bowen v. Mass., 487 U.S. 879, 905 (1988).

[^430]: Tucker Act, 28 U.S.C. § 1491(a)(1).

[^431]: *See* 136 F.3d at 646-47.

[^432]: *See, e.g.,* Bunn, *supra* note Error: Reference source not
    found, at 218-27; Kannan, *supra* note Error: Reference source not
    found, at 31.

[^433]: U.S. [Const]{.smallcaps}. art. I, § 9, cl. 7.

[^434]: Anti-Deficiency Act, 31 U.S.C.A. § 1341 (1983 & Supp. 2000).

[^435]: Ferris v. United States, 27 Ct. Cl. 542, 546 (1892) ("exhaustion
    of appropriation justifies stopping a contractor\'s work, but does
    not constitute a defense to a breach of contract claim"); Parsons v.
    United States, 15 Ct. Cl. 246, 247 (1879).

[^436]: Wetsel-Oviatt Lumber Co. v. United States, 38 Fed. Cl. 563, 570
    (1997).

[^437]: *See generally* [Cibinic & Nash]{.smallcaps}, *supra* note
    Error: Reference source not found, at 74-77.

[^438]: Amer. Tel. & Tel. Co. v. United States, 124 F.3d 1471, 1494-95
    (Fed. Cir. 1997).

[^439]: *Hercules,* 516 U.S. at 428 n.10 (quoting *In re* Assumption by
    Gov't of Contractor Liab. to Third Persons---Reconsideration, 62
    Comp. Gen. 361, 364‑365 (1983)).

[^440]: 41 U.S.C. § 120.

[^441]: *See, e.g.,* Consolidated Contract, *supra* note Error:
    Reference source not found; DuPont Contract, *supra* note Error:
    Reference source not found; and Ford Contract, *supra* note Error:
    Reference source not found and accompanying text for the language of
    the indemnification clauses.

[^442]: See Bunn, *supra* note Error: Reference source not found, at
    227-30, for an in-depth analysis of whether the costs are allowable
    and a comparison to cases of third-party liability arising from
    asbestos claims.

[^443]: 112 F.3d at 1582.

[^444]: *See* [Cibinic & Nash]{.smallcaps}, *supra* note Error:
    Reference source not found, at 1209-38.

[^445]: *See, e.g.,* Changes Clause, FAR, 48 C.F.R. § 52.243-1(c)
    (1999).

[^446]: Contractors have successfully asserted several theories to avoid
    a general release, including: a) lack of consideration for a
    supplemental agreement; b) mutual mistake by the parties concerning
    the release; c) economic duress and use of unfair tactics by
    government in getting contractor to sign release; d) fraud; and e)
    lack of authority by government official. *See* [Cibinic &
    Nash]{.smallcaps}, *supra* note Error: Reference source not found,
    at 1231-38.

[^447]: Contract Settlement Act of 1944, 41 U.S.C. § 101(b).

[^448]: 41 U.S.C. § 103(m).

[^449]: 41 U.S.C. § 106(c).

[^450]: Am. Employers Ins. Co. v. United States, 812 F.2d 700 (1987).

[^451]: DuPont Contract, *supra* note Error: Reference source not found.

[^452]: Consolidated Contract, *supra* note Error: Reference source not
    found.

[^453]: *See* Bunn, *supra* note Error: Reference source not found, at
    232.

[^454]: 112 F.3d at 1573 n2.

[^455]: *Id.* at 1583 (dissent).

[^456]: [U.S. Const]{.smallcaps}. amend. V.

[^457]: *Lynch,* 292 U.S. at 579.

[^458]: Perry v. United States, 294 U.S. 330, 352‑53 (1935).

[^459]: Armstrong v*.* United States, 364 U.S. 40, 49 (1960).

[^460]: Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 416 (1922).

[^461]: United States v. Northeastern Pharmaceutical & Chemical Co.,
    Inc., 810 F.2d 726 (8th Cir. 1986).

[^462]: *See, e.g.,* Juliano v. Montgomery-Otsego-Schoharie Solid Waste
    Management Auth., 983 F. Supp. 319 ( No. Dist. N.Y. 1997).

[^463]: *See* Hendler v. United States, 952 F.2d 1364 (Fed. Cir. 1992).

[^464]: Eastern Enter. v. Apfel, 524 U.S. 498 (1998); Coal Indus.
    Retiree Health Benefit Act of 1992 \[hereinafter Coal Act\], 26
    U.S.C.A. §§ 9701-9722 (1994 & Supp. II).

[^465]: 524 U.S. at 504-18.

[^466]: *Id.* at 522.

[^467]: *Id*; One district court, in an unpublished opinion, applied the
    test set out in *Eastern* to CERCLA. The court rejected the notion
    that CERCLA liability amounted to a taking, however, the case did
    not deal with a vested contract as a property right. *See* United
    States v. Asarco, Inc., Case No. CV 96-0122-N-EJL, *available at*
    1999 U.S. Dist. LEXIS 18924 (Dist. Idaho 1999).

[^468]: United States v. Vertac Chem. Corp., 33 F. Supp 2d. 769, 784-85
    (E.D. Ark. 1998).

[^469]: *Id*.

[^470]: *Shell Oil Co.,* 841 F. Supp. at 974.

[^471]: *Shell Oil Co.,* 13 F. Supp 2d. at 1027.