(Slip Opinion) OCTOBER TERM, 2010 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
GENERAL DYNAMICS CORP. v. UNITED STATES
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FEDERAL CIRCUIT
No. 09–1298. Argued January 18, 2011—Decided May 23, 2011*
After petitioners fell behind schedule in developing a stealth aircraft
(A–12) for the Navy, the contracting officer terminated their $4.8 bil
lion fixed-price contract for default and ordered petitioners to repay
approximately $1.35 billion in progress payments for work the Gov
ernment never accepted. Petitioners filed suit in the Court of Federal
Claims (CFC), challenging the termination decision under the Con
tract Disputes Act of 1978. They argued that Federal Circuit prece
dent permitted their default to be excused because the Government
had failed to share its “superior knowledge” about how to design and
manufacture stealth aircraft. Uncovering the extent of such knowl
edge proved difficult because the design, materials, and manufactur
ing process for prior stealth aircraft, operated by the Air Force, are
closely guarded military secrets. After military secrets were dis
closed during discovery, the Acting Secretary of the Air Force warned
the CFC that further discovery into the extent of the Government’s
superior knowledge would risk disclosing classified information. The
CFC terminated such discovery and found the superior-knowledge
question nonjusticiable. The CFC subsequently converted the termi
nation into a less-Government-friendly termination for convenience
and awarded petitioners $1.2 billion. The Federal Circuit reversed.
On remand, the CFC sustained the default termination and reaf
firmed that petitioners’ superior-knowledge affirmative defense could
not be litigated. The Federal Circuit again reversed, but it found
that the state-secrets privilege prevented adjudicating petitioners’
superior-knowledge defense. On remand, the CFC again found peti
——————
* Together with No. 09–1302, Boeing Co., Successor to McDonnell
Douglas Corp. v. United States, also on certiorari to the same court.
2 GENERAL DYNAMICS CORP. v. UNITED STATES
Syllabus
tioners had defaulted, and the Federal Circuit affirmed.
Held: When, to protect state secrets, a court dismisses a Government
contractor’s prima facie valid affirmative defense to the Govern
ment’s allegations of contractual breach, the proper remedy is to
leave the parties where they were on the day they filed suit. Pp. 5–
14.
(a) The CFC held that, since invocation of the state-secrets privi
lege obscured too many of the facts relevant to the superior
knowledge defense, the issue of that defense was nonjusticiable, even
though petitioners had brought forward enough unprivileged evi
dence for a prima facie showing. In this situation, the Court must
exercise its common-law authority to fashion contractual remedies in
Government-contracting disputes. The relevant state-secrets juris
prudence comes not from United States v. Reynolds, 345 U. S. 1,
which deals with the Government’s evidentiary privilege against
court-ordered disclosure of state and military secrets, but from Totten
v. United States, 92 U. S. 105, and Tenet v. Doe, 544 U. S. 1, two
cases dealing with alleged contracts to spy.
Where liability depends on the validity of a plausible superior
knowledge defense, and when full litigation of that defense “would
inevitably lead to the disclosure of” state secrets, Totten, supra, at
107, neither party can obtain judicial relief. It seems unrealistic to
separate the claim from the defense, allowing the former to proceed
while barring the latter. Claims and defenses together establish the
justification, or lack of justification, for judicial relief; and when pub
lic policy precludes judicial intervention for the one it should also
preclude judicial intervention for the other. Suit on the contract, or
for performance rendered or funds paid under the contract, will not
lie, and courts should leave the parties to the agreement where they
stood on the day they filed suit. The Government suggests that at
the time of suit, petitioners had been held in default by the contract
ing officer and were liable for the ensuing consequences. But that
was merely one step in the parties’ contractual regime. The “position
of the parties” at the time of suit is not their position with regard to
legal burdens and the legal consequences of contract-related deter
minations, but their position with regard to possession of funds and
property. Pp. 5–10.
(b) Neither side will be entirely happy with this resolution. Gen
eral Dynamics (but not Boeing) wants to turn the termination into
one for convenience and reinstate the CFC’s $1.2 billion award, but
that is not an option under the A–12 agreement. Moreover, state se
crets would make it impossible to calculate petitioners’ damages.
The Government wants a return of the $1.35 billion it paid petition
ers for work never accepted, but the validity of that claim depends on
Cite as: 563 U. S. ____ (2011) 3
Syllabus
the nonjusticiable issue whether petitioners are in default. As in Tot
ten, see 92 U. S., at 106, the Court’s refusal to enforce this contract
captures what the ex ante expectations of the parties were or rea
sonably ought to have been. They must have assumed the risk that
state secrets would prevent the adjudication of inadequate perform
ance claims. Moreover, this ruling’s impact here is likely much more
significant than its impact in future cases, except to the extent that it
renders the law more predictable and hence more subject to accom
modation by contracting parties. Whether the Government had an
obligation to share its superior knowledge about stealth technology is
left for the Federal Circuit to address on remand. Pp. 10–13.
567 F. 3d 1340, vacated and remanded.
SCALIA, J., delivered the opinion for a unanimous Court.
Cite as: 563 U. S. ____ (2011) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash
ington, D. C. 20543, of any typographical or other formal errors, in order
that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
Nos. 09–1298 and 09–1302
_________________
GENERAL DYNAMICS CORPORATION, PETITIONER
09–1298 v.
UNITED STATES
THE BOEING COMPANY, SUCCESSOR TO
McDONNELL DOUGLAS CORPORATION,
PETITIONER
09–1302 v.
UNITED STATES
ON WRITS OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT
[May 23, 2011]
JUSTICE SCALIA delivered the opinion of the Court.
We consider what remedy is proper when, to protect
state secrets, a court dismisses a Government contractor’s
prima facie valid affirmative defense to the Government’s
allegations of contractual breach.
I
In 1988, the Navy awarded petitioners a $4.8 billion
fixed-price contract to research and develop the A–12
Avenger carrier-based, stealth aircraft. The A–12 proved
unexpectedly difficult to design and manufacture, and by
December 1990, petitioners were almost two years behind
schedule and spending $120 to $150 million each month to
develop the A–12.
2 GENERAL DYNAMICS CORP. v. UNITED STATES
Opinion of the Court
Petitioners informed the Government that the cost of
completing the contract would exceed the contract price by
an “ ‘unacceptable’ ” amount. McDonnell Douglas Corp. v.
United States, 567 F. 3d 1340, 1343 (CA Fed. 2009); see
McDonnell Douglas Corp. v. United States, 182 F. 3d 1319,
1323 (CA Fed. 1999). They proposed restructuring the
contract as a cost-reimbursement agreement and offered
to absorb a $1.5 billion loss. The Department of Defense
had lost faith in the project, however, and Rear Admiral
William Morris, the Navy’s contracting officer for the A–12
agreement, terminated the contract for default on Jan
uary 7, 1991.
By that point, petitioners had spent $3.88 billion at
tempting to develop the A–12, and the Government had
provided $2.68 billion in progress payments. A few weeks
after terminating the contract, the Navy sent petitioners a
letter demanding the return of approximately $1.35 billion
in progress payments for work never accepted by the
Government. The parties later entered into a deferred
payment agreement covering this amount.
Petitioners filed suit in the Court of Federal Claims
(CFC) to challenge Admiral Morris’s termination decision
under the Contract Disputes Act of 1978, 92 Stat. 2388, as
amended, 41 U. S. C. §609(a)(1). The Federal Circuit has
recognized a governmental obligation not to mislead con
tractors about, or silently withhold, its “superior knowl
edge” of difficult-to-discover information “vital” to contrac
tual performance. GAF Corp. v. United States, 932 F. 2d
947, 949 (1991). Petitioners asserted that the Govern
ment’s failure to share its “superior knowledge” about how
to design and manufacture stealth aircraft excused their
default (and also asserted other claims not relevant here).
Uncovering the extent of the Government’s prior experi
ence with stealth technology proved difficult. The design,
materials, and manufacturing process for two prior stealth
aircraft operated by the Air Force—the B–2 and the F–
Cite as: 563 U. S. ____ (2011) 3
Opinion of the Court
117A—are some of the Government’s most closely guarded
military secrets. “ ‘[N]eed-to-know’ or [special] access con
trols beyond those normally provided for access to Con
fidential, Secret, or Top Secret information” apply. 32
CFR §154.3(x) (2010); see App. 384–385. The Government
nevertheless granted 10 members of petitioners’ litigation
team “access to the Secret/Special Access level of the B–2
and F–117A programs.” Id., at 385. Four of those ten
individuals received access to even the most sensitive
aspects of the programs. See ibid.
That neither satisfied petitioners’ thirst for discovery
nor prevented the unauthorized disclosure of military
secrets. In March 1993, Acting Secretary of the Air Force
Michael Donley asserted the state-secrets privilege to bar
discovery into certain aspects of stealth technology beyond
petitioners’ “need-to-know” authorizations. At a deposi
tion that month, a former Navy official’s responses to
questions by petitioners and the Government revealed
military secrets neither side’s litigation team was author
ized to know. Copies of the unclassified deposition were
widely distributed and quoted in unsealed court filings
until Government security officials discovered the breach
a month later. A July 1993 deposition caused further
unauthorized disclosures of military secrets.
These disclosures led Acting Secretary of the Air Force
Merrill McPeak to file a declaration with the CFC. He
warned that further discovery into the extent of the Gov
ernment’s superior knowledge “would present a continuing
threat of disclosure of . . . military and state secrets” sur
rounding the “weight, profile or signature, and materials
involved in the design and construction of ‘stealt[h]’ . . .
aircraft and weapons systems.” Id., at 633, 635. Even
relatively straightforward and innocuous questions, in his
opinion, “would pose unacceptable risks of disclosure of
classified, special access information,” id., at 636, includ
ing the potential disclosure of covert Government pro
4 GENERAL DYNAMICS CORP. v. UNITED STATES
Opinion of the Court
grams, id., at 637.
The CFC took Secretary McPeak’s concerns seriously
and terminated discovery relating to superior knowledge.
It later decided that the extent of the Government’s supe
rior knowledge was a nonjusticiable question. Both sides
had enough evidence to “present a persuasive case” on
the superior-knowledge issue, but the CFC worried that,
“wit[h] numerous layers of potentially dispositive facts”
hidden by the privilege, its superior-knowledge rulings
“would be a sham,” McDonnell Douglas Corp. v. United
States, 37 Fed. Cl. 270, 280, 284–285 (1996), and one that
would threaten national security, see id., at 281–282.
In 1996, for reasons not relevant here, the CFC con
verted the termination into a less-Government-friendly
termination for convenience and awarded petitioners $1.2
billion. McDonnell Douglas Corp. v. United States, 35 Fed.
Cl. 358. The Federal Circuit reversed, 182 F. 3d, at 1332,
and left it for the CFC to reconsider on remand whether
the need to protect military secrets precluded discovery
into the superior-knowledge issue, id., at 1329–1330.
After a 6-week trial, the CFC sustained the default
termination, McDonnell Douglas Corp. v. United States,
50 Fed. Cl. 311, 326 (2001), and reaffirmed that the par
ties could not safely litigate whether the Government’s
superior knowledge excused petitioners’ default, id., at
325. The Court of Appeals reversed the default termina
tion, but agreed that the state-secrets privilege prevented
adjudicating whether the Government’s superior knowl
edge excused the default. See McDonnell Douglas Corp. v.
United States, 323 F. 3d 1006, 1024 (CA Fed. 2003). It
rejected petitioners’ assertion that the Government could
not pursue a claim against a party and then use the state
secrets privilege to completely preempt defenses to that
claim; the Court of Appeals believed United States v.
Reynolds, 345 U. S. 1, 12 (1953), had already “rejected”
this “very argument.” 323 F. 3d, at 1023. Litigants can
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Opinion of the Court
not complain, the Court of Appeals held, when the state
secrets privilege trumps a defense “in [a] purely civil
matter, suing the sovereign on the limited terms to which
it has consented.” Ibid.
On remand, the CFC again found petitioners had de
faulted. McDonnell Douglas Corp. v. United States, 76
Fed. Cl. 385, 430 (2007). The Court of Appeals affirmed,
see 567 F. 3d, at 1356, and we granted certiorari to review
its state-secrets holding. 561 U. S. ___ (2010).
II
Many of the Government’s efforts to protect our national
security are well known. It publicly acknowledges the size
of our military, the location of our military bases, and the
names of our ambassadors to Moscow and Peking. But
protecting our national security sometimes requires keep
ing information about our military, intelligence, and dip
lomatic efforts secret. See Haig v. Agee, 453 U. S. 280, 307
(1981); Martin v. Mott, 12 Wheat. 19, 30–31 (1827). We
have recognized the sometimes-compelling necessity of
governmental secrecy by acknowledging a Government
privilege against court-ordered disclosure of state and
military secrets.
In Reynolds, three civilian contractors died during a test
flight of a B–29 bomber. Their widows filed wrongful
death suits against the Government and sought discovery
of the Air Force’s accident-investigation report. Federal
discovery rules, then as now, did not require production of
documents protected by an evidentiary privilege. See 345
U. S., at 6; Fed. Rule Civ. Proc. 26(b)(1). We held that
documents that would disclose state secrets enjoyed such a
privilege; the state-secrets privilege, we said, had a “well
established” pedigree “in the law of evidence.” 345 U. S.,
at 6–7.
The penultimate paragraph of Reynolds rejected the
widows’ assertion that if the Government invoked the
6 GENERAL DYNAMICS CORP. v. UNITED STATES
Opinion of the Court
state-secrets privilege it had to abandon the claim to
which the thereby privileged evidence was relevant. That
was, the widows observed, the price paid in criminal cases.
If the Government refuses to provide state-secret informa
tion that the accused reasonably asserts is necessary to
his defense, the prosecution must be dismissed. See id., at
12; Jencks v. United States, 353 U. S. 657, 672 (1957). The
penultimate paragraph of Reynolds said that this was a
false analogy. A like abandonment of the Government’s
claim is not the consequence “in a civil forum where the
Government is not the moving party, but is a defendant
only on terms to which it has consented.” 345 U. S., at 12.
Both petitioners and the Court of Appeals rely upon this
statement to support their differing positions.
We think that Reynolds has less to do with these cases
than the parties believe—and its dictum (of course), less
still. Reynolds was about the admission of evidence. It
decided a purely evidentiary dispute by applying eviden
tiary rules: The privileged information is excluded and the
trial goes on without it. That was to the detriment, of
course, of the widows, whom the evidence would have
favored. But the Court did not order judgment in favor
of the Government. Here, by contrast, the CFC decreed
the substantive result that since invocation of the state
secrets privilege obscured too many of the facts relevant to
the superior-knowledge defense, the issue of that defense
was nonjusticiable, and the defense thus not available.
See 37 Fed. Cl., at 284–285. And that was so even though
petitioners had brought forward enough unprivileged
evidence to “make a prima facie showing.” Id., at 280.
While we disagree, for reasons set forth below, with the
CFC’s disposition of the remainder of the case, its percep
tion that in the present context the state-secrets issue
raises something quite different from a mere evidentiary
point seems to us sound. What we are called upon to
exercise is not our power to determine the procedural
Cite as: 563 U. S. ____ (2011) 7
Opinion of the Court
rules of evidence, but our common-law authority to fashion
contractual remedies in Government-contracting disputes.
See Priebe & Sons, Inc. v. United States, 332 U. S. 407,
411 (1947). And our state-secrets jurisprudence bearing
upon that authority is not Reynolds, but two cases dealing
with alleged contracts to spy.
In Totten v. United States, 92 U. S. 105 (1876), the
administrator of a self-styled Civil War spy’s estate
brought a breach-of-contract suit against the United
States. He alleged that his testator had entered into a
contract with President Lincoln to spy on the Confederacy
in exchange for $200 a month. After the war ended, the
United States reimbursed expenses but did not pay the
monthly salary. We recognized that the estate had a
potentially valid breach-of-contract claim but dismissed
the suit. The contract was for “a secret service,” and
litigating the details of that service would risk exposing
secret operations and other clandestine operatives “to the
serious detriment of the public.” Id., at 106–107. “[P]ublic
policy,” we held, “forbids the maintenance of any suit . . .
the trial of which would inevitably lead to the disclosure of
matters which the law itself regards as confidential, and
respecting which it will not allow the confidence to be
violated.” Id., at 107.
Six years ago, we reaffirmed that “public policy for
b[ids]” suits “based on covert espionage agreements.”
Tenet v. Doe, 544 U. S. 1, 3 (2005). Such suits threaten to
undermine ongoing intelligence-gathering and covert
operations—two vital aspects of national security—
through inadvertent exposure of espionage relationships.
Id., at 11. Rather than tempt fate, we leave the parties to
an espionage agreement where we found them the day
they filed suit.
We think a similar situation obtains here, and that the
same consequence should follow. Where liability depends
upon the validity of a plausible superior-knowledge de
8 GENERAL DYNAMICS CORP. v. UNITED STATES
Opinion of the Court
fense, and when full litigation of that defense “would
inevitably lead to the disclosure of” state secrets, Totten,
supra, at 107, neither party can obtain judicial relief. As
the CFC concluded, that is the situation here. Disclosure
of state secrets occurred twice before the CFC terminated
discovery. See 37 Fed. Cl., at 277–278. Every document
request or question to a witness would risk further disclo
sure, since both sides have an incentive to probe up to
the boundaries of state secrets. State secrets can also be
indirectly disclosed. Each assertion of the privilege can
provide another clue about the Government’s covert pro
grams or capabilities. See Fitzgerald v. Penthouse Inter
national, Ltd., 776 F. 2d 1236, 1243, and n. 10 (CA4 1985).
For instance, the fact that the Government had to con
tinue asserting the privilege after granting petitioners
access to B–2 and F–117A program information suggests
it had other, possibly covert stealth programs in the 1980’s
and early 1990’s.
It seems to us unrealistic to separate, as the CFC did,
the claim from the defense, and to allow the former to
proceed while the latter is barred. It is claims and de
fenses together that establish the justification, or lack of
justification, for judicial relief; and when public policy
precludes judicial intervention for the one it should pre
clude judicial intervention for the other as well.* If, in
Totten, it had been the Government seeking return of
funds that the estate claimed had been received in pay
ment for espionage activities, it would have been the
height of injustice to deny the defense because of the
Government’s invocation of state-secret protection, but to
——————
*Of course, this does not mean the nonjusticiability of one aspect
of a case will necessarily end the entire litigation. If, for example, the
Government asserts two justifications for its default termination, and if
state secrets deprive the contractor of a prima facie valid defense to
only one of those claims, the court can still adjudicate the validity of the
other.
Cite as: 563 U. S. ____ (2011) 9
Opinion of the Court
maintain jurisdiction over the Government’s claim and
award it judgment. Judicial refusal to enforce promises
contrary to public policy (here, the Government’s alleged
promise to provide superior knowledge, which we could
not determine was breached without penetrating several
layers of state secrets) is not unknown to the common law,
and the traditional course is to leave the parties where
they stood when they knocked on the courthouse door.
“In general, if a court will not, on grounds of public
policy, aid a promisee by enforcing the promise, it will not
aid him by granting him restitution for performance that
he has rendered in return for the unenforceable promise.
Neither will it aid the promisor by allowing a claim in
restitution for performance that he has rendered under
the unenforceable promise. It will simply leave both
parties as it finds them, even though this may result in
one of them retaining a benefit that he has received as
a result of the transaction.” 2 Restatement (Second) of
Contracts §197, Comment a, p. 71 (1979); see, e.g., Worlton
v. Davis, 73 Idaho 217, 222–223, 249 P. 2d 810, 814 (1952).
These cases differ from the common-law cases that we
know, in that the unenforceability did not exist at the time
the contract was formed, See 2 Restatement (Second) of
Contracts §179, Comment d, at 18, but arose because
of the Government’s assertion of the state-secrets privilege
that rendered the promise of superior knowledge unadju
dicable. We do not see why that should affect the remedy.
Suit on the contract, or for performance rendered or funds
paid under the contract, will not lie, and the parties will
be left where they are.
The law of contracts contains another doctrine that
relates to the CFC’s concern about the reliability of its
judgment “without numerous layers of potentially disposi
tive facts,” 37 Fed. Cl., at 284–285. The Statute of Frauds,
which has been with us since the 17th century, reflects
concerns about the reliability of oral evidence. See Valdez
10 GENERAL DYNAMICS CORP. v. UNITED STATES
Opinion of the Court
Fisheries Development Assn., Inc. v. Alyeska Pipeline Serv.
Co., 45 P. 3d 657, 669 (Alaska 2002); 9 R. Lord, Williston
on Contracts §21:1, pp. 170–172 (4th ed. 1999 and 2010
Supp.). It assumes a valid, enforceable agreement be
tween the parties but nevertheless leaves them without a
remedy absent reliable evidence—a writing. See 1 id.,
§1:21, at 82 (4th ed. 2007 and 2010 Supp.); 9 id., §21:5, at
192. So also here, it is preferable to leave the parties
without a remedy rather than risk the “potential injus
tice,” Valdez Fisheries, supra, at 669, of misjudging the
superior-knowledge issue based on a distorted evidentiary
record.
The Government suggested at oral argument that where
the parties stood at the time of suit was that petitioners
had been held in default, liable for the ensuing conse
quences. See Tr. of Oral Arg. 48–49; see also Brief for
United States 32, n. 9, 34–35. That had been the declara
tion of the contracting officer, pursuant to Chapter 9
(entitled “Contract Disputes”) of Title 41 (entitled “Public
Contracts”). See 41 U. S. C. §605. It was “final and con
clusive . . . unless an appeal or suit is timely commenced.”
§605(b). We regard that, however, as merely one step in
the contractual regime to which the parties had agreed. It
has no more bearing upon the question we are discussing
than would a provision in a private contract that declara
tion of default by one of the parties is final unless con
tested in court. The “position of the parties” in which we
will leave them is not their position with regard to legal
burdens and the legal consequences of contract-related
determinations, but with regard to possession of funds and
property.
III
Neither side will be entirely happy with the resolution
we reach today. General Dynamics (but not Boeing) wants
us to convert the termination into one for convenience and
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Opinion of the Court
reinstate the CFC’s $1.2 billion damages award. See Brief
for Petitioner in No. 09–1298, pp. 58–61. The language of
the A–12 agreement does not give us that option. It au
thorizes a court to convert a default termination into a
termination for convenience only if it “determine[s] that
the Contractor was not in default, or that the default
was excusable.” 48 CFR §52.249–9(g) (2010). Our opinion
does not express a view on those issues. It holds them
nonjusticiable.
Moreover, state secrets would make it impossible to
calculate petitioners’ damages. A termination for conven
ience ordinarily entitles a contractor to recover its in
curred costs of performance, reasonable termination ex
penses, and a reasonable profit on the work performed (or
an offset to account for the contractor’s expected losses
had the contract been performed to completion). See
§52.249–2(g). The CFC’s $1.2 billion award to petitioners
in 1996 simply reflected their actual costs incurred minus
progress payments received. The CFC decided it could not
calculate petitioners’ expected losses (or profits) without
deciding the extent to which the Government’s alleged
failure to share its superior knowledge contributed to
petitioners’ cost overruns—a nonjusticiable question. See
37 Fed. Cl., at 285. Absent proof of the Government’s
superior knowledge, and of how the sharing of that would
have made this a profitable contract, the $1.2 billion
award might represent an undeserved windfall.
The Government, for its part, wants a return of the
$1.35 billion it paid petitioners in progress payments for
work which it says it never approved. But the validity of
that claim depends upon whether petitioners are in de
fault on their contract. If they are not, termination for
convenience of the Government would entitle them to
retain those progress payments (unless, of course, they
would have incurred a loss on the entire contract). Nei
ther the question whether they are in default nor the
12 GENERAL DYNAMICS CORP. v. UNITED STATES
Opinion of the Court
question whether performance of the entire contract would
have left them with a loss can be judicially determined
because of the valid assertion of the state-secret privilege.
We leave the parties where they are. As in Totten, see
92 U. S., at 106, our refusal to enforce this contract cap
tures what the ex ante expectations of the parties were or
reasonably ought to have been. Both parties “must have
understood,” ibid., that state secrets would prevent courts
from resolving many possible disputes under the A–12
agreement. The Government asked petitioners to develop
an aircraft the design, materials, and manufacturing
process for which would be closely guarded military se
crets. See Contract Schedule H–1, App. 73–75; Contract
Security Classified Specification, id., at 129–135. The
contract itself was a classified document at one point. See
Contract Schedule H–1, ¶8, id., at 75. Both parties—the
Government no less than petitioners—must have assumed
the risk that state secrets would prevent the adjudication
of claims of inadequate performance.
We believe, moreover, that the impact of our ruling on
these particular cases (which we think produces rough,
very rough, equity) is probably much more significant than
its impact in future cases, except to the extent that it
renders the law more predictable and hence more subject
to accommodation by contracting parties. They can ne
gotiate, for example, the timing and amount of progress
payments to account for the possibility that state secrets
may ultimately render the contract unenforceable. The
Government’s concern that contractors will raise frivolous
superior-knowledge defenses designed to goad the Gov
ernment into asserting the state-secrets privilege is mis
placed. To begin with, the rule we announce today applies
only when the superior-knowledge defense is supported by
enough evidence to make out a prima facie case. More
over, Government contractors—especially cutting-edge
defense contractors of the sort likely to operate in the
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state-secrets field—are repeat players. Even apart from
the judicial sanctions available to punish bad conduct,
see Fed. Rules Civ. Proc. 11, 26(g), they have strong incen
tive to behave rather than risk missing out on the next
multibillion-dollar defense contract. And finally, while we
anticipate that the rule we set forth will ordinarily control
Government-contract disputes that become nonjusticiable
because of state secrets, what we promulgate today is not
a statute but a common-law opinion, which, after the
fashion of the common law, is subject to further refine
ment where relevant factors significantly different from
those before us here counsel a different outcome.
The foregoing analysis assumes that the Government
generally has an obligation to share its superior knowl
edge, see GAF Corp., 932 F. 2d, at 949; the parties have
not challenged that assumption. The Government argued
below, however, that it does not have that obligation with
respect to “highly classified information,” and does not
have it when (as was the case here) the agreement specifi
cally identifies information that must be shared. Brief for
United States 52. The Court of Appeals did not address
those questions (it had no reason to, given its disposition
of petitioners’ appeal), and we did not grant certiorari to
decide them. Those issues (and whether they can safely be
litigated without endangering state secrets) therefore
remain for the Court of Appeals to address on remand.
* * *
In Reynolds, we warned that the state-secrets eviden
tiary privilege “is not to be lightly invoked.” 345 U. S., at
7. Courts should be even more hesitant to declare a Gov
ernment contract unenforceable because of state secrets.
It is the option of last resort, available in a very narrow
set of circumstances. Our decision today clarifies the
consequences of its use only where it precludes a valid
defense in Government-contracting disputes, and only
14 GENERAL DYNAMICS CORP. v. UNITED STATES
Opinion of the Court
where both sides have enough evidence to survive sum
mary judgment but too many of the relevant facts remain
obscured by the state-secrets privilege to enable a reliable
judgment.
We vacate the judgment of the Court of Appeals and
remand the cases for further proceedings consistent with
this opinion.
It is so ordered.