Opinion ID: 669850
Heading Depth: 3
Heading Rank: 3

Heading: Reverse Warranty

Text: 60 Hercules argues that the government had an implied-in-fact contractual obligation to use the Agent Orange produced by it in a manner so as to avoid both potential risks to servicemen and the subsequent tort suits against appellants. A material issue of fact exists, Hercules asserts, as to whether this obligation arose when the government ordered Hercules to package Agent Orange in drums marked only with an orange band, thus precluding Hercules from applying the extensive warnings and instructions normally placed on its commercial herbicides. According to Hercules, because it was not permitted to place adequate warnings on the Agent Orange containers, the government thereby warranted to Hercules that the government's use of the product would take into account the absence of warnings and instructions designed to assure the product's safe use. Alternatively, Hercules asserts that a material issue of fact exists as to whether the government's mixing of Hercules' dioxin-free Agent Orange with dioxin-tainted Agent Orange imposed potential liability on Hercules that otherwise would not have existed. In so mixing, Hercules argues, the government assumed obligations that properly include compensating it for liabilities incurred as a result of such conduct. Hercules further contends that courts have recognized the existence of an implied-in-fact warranty running from the purchaser to the seller where the purchaser has engaged in conduct which warrants the imposition of a duty to exercise due care in using a seller's product. The Claims Court characterized Hercules' claim as being based on a reverse warranty theory. Hercules, 25 Cl.Ct. at 624. 61 Irrespective of the name used to identify the theory advanced by Hercules, we rejected a similar claim in Lopez v. A.C. & S., Inc., 858 F.2d 712 (Fed.Cir.1988), aff'g, 649 F.Supp. 149 (W.D.Wash.1986). In Lopez, a civilian employee exposed to asbestos at a naval shipyard brought an action in the United States District Court for the Western District of Washington against several manufacturers who had supplied the asbestos pursuant to a government contract. Upon settling the employee's claim, the asbestos manufacturers filed third-party complaints in the district court, based in part on the Little Tucker Act, 28 U.S.C. Sec. 1346, seeking to recover their settlement payments and litigation expenses from the government. The manufacturers' Tucker Act claims were based on the theory that in specifying asbestos, the government impliedly warranted to the asbestos manufacturers that its use of their product would not expose the manufacturers to unforeseen defective product liabilities to persons who might be injured by exposure to the asbestos. Lopez, 858 F.2d at 714. In dismissing the Tucker Act claims, the district court held that such claims were barred by operation of the Anti-Deficiency Act, 31 U.S.C. Sec. 1341. Lopez, 649 F.Supp. at 159. As an alternative basis, the district court dismissed the manufacturers' claims for lack of jurisdiction, noting that jurisdiction under the Tucker Act extends only to claims arising out of express or implied-in-fact contracts, and not to claims arising out of implied-in-law contracts. Id. The district court concluded that no express contract term existed and that, as a matter of law, the vendor/vendee relationship between the manufacturers and the government, standing alone, did not create an implied-in-fact agreement by the government to indemnify the manufacturers for injuries resulting from the use of the asbestos purchased under the contract. Id. at 160. We affirmed the district court's dismissal of the manufacturers' Tucker Act claims on the grounds that the Tucker Act did not provide for claims based on contracts implied-in-law, and that an implied-in-fact warranty running from the government to the manufacturers was a bizarre and novel theory that could not be inferred from the circumstances of the case. Lopez, 858 F.2d at 714-15, 716-17. 12 Although the Lopez decision did not go so far as to hold that a claim for breach of reverse warranty could never be brought under the Tucker Act, it made clear that any such warranty would have to be either express or implied-in-fact, rather than implied-in-law. Id. at 716. 62 Hercules has not alleged an express reverse warranty. Beyond that, we are hard-pressed to see how the circumstances of this case could support an inference that Hercules and the government came to a meeting of the minds and [took] upon themselves [the] corresponding obligations and liabilities that would accompany a warranty running from the purchaser to the seller. Hercules, 25 Cl.Ct. at 624 (citing Hirschmann v. United States, 11 Cl.Ct. 338, 342 (1986)). 13 We prefer, however, to rest our decision on this point on the government contractor defense. Even assuming that an implied-in-fact reverse warranty could be found and could be said to have been breached, Hercules' claim fails for the same reason that Hercules' and Thompson's claims based upon an implied warranty of specifications fail. Specifically, in view of the government contractor defense, Hercules could not prove that its damages were caused by the breach of such a warranty. Rather, Hercules' damages were the result of its decision to enter into the settlement with the Agent Orange plaintiffs. 14 63