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Sovereign and Derivative Immunity in Government Contracts

In hopes of capturing as many responsible parties from which to recover, a plaintiff will institute proceedings against any and all individuals or entities that may have plausible liability for the alleged injury. But in instances where the plaintiff is a private citizen claiming wrongdoing by the government, it faces the difficult jurisdictional hurdle of sovereign immunity. Because absent few exceptions, the government is not only immune from liability but also from suit.

In an effort to circumvent this obstacle, a plaintiff may in turn sue the government’s contractor, provided it can make a factual showing that the alleged injury arose from actions the contractor performed on behalf of the government. This approach, however, has its own problems, as contractors will likely raise the theory of derivative immunity. Unlike true sovereign immunity, though, contractors are not immune from suit, meaning they cannot attack a court’s jurisdiction to hear the case and must proceed to a merits showing that immunity shields them from liability.

The Government’s Sovereign Immunity

Sovereign immunity provides the government absolute immunity, meaning from suit and liability.

Immunity from suit implicates a court’s subject matter jurisdiction, barring a suit altogether. This doctrine is rooted in the idea that the government should be protected from lawsuits to ensure its proper functioning and to avoid burdens that could interfere with its ability to serve the public.

Immunity from liability, conversely, arises in instances where the government has consented to be sued. The most notable of consents are the Tucker Act and the Federal Torts Claims Act, which, respectively, waive the federal government’s immunity on certain monetary claims like breach of contract and for claims against the government for personal injury, property damage, or wrongful death.

A Contractor’s Derivative Immunity

Contractors undertake many of the functions of government. And in that capacity they may face suit for any alleged wrongdoing. Yet, they do not enjoy the same level of protection. In some instances, though, a contractor may assert what is known as derivative immunity.

This theory extends the principle of sovereign immunity to contractors as a result of their relationship with the government. The immunity potentially afforded, however, is only from liability. Effectively, the doctrine is a defense against liability on the merits in order to protect a private entity for conduct performed in compliance with a validly formed contract and under the government’s direction and control. And while it does not jurisdictionally preclude suit, it is nevertheless a powerful instrument for contractors facing third-party claims.

The Takeaway

Although contractors may lack immunity from suit and have to proceed through litigation, they nevertheless have a broad and effective challenge to liability as a result of their contractual affiliation with the government. The key consideration is whether the contractor performed under and within the scope of its government contract.

A contractor must, therefore, appreciate that simply performing under a government contract does not entitle it to absolute immunity. But, through derivative immunity, it does have the opportunity to exercise a compelling defense to liability. This defense, however, is merits-based. So contractors need to ensure that they understand the legal elements of derivative immunity and how it has been judicially interpreted and then tailor their undertaking and oversight of contract performance accordingly.

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