How the courts protect contractors whose weapons kill G.I.s; Bell Helicopter's lawyers are indemnifying the defense industry.
On May 26, 1981, the main rotor blade of the Bell Cobra helicopter that Army Major Douglas Dowd and Navy Lieutenant Robert Ellis were flying snapped off and buzzsawed through the cockpit, killing them both. Dowd and Ellis were added to the list of some 250 U.S. servicemen killed over the past 20 years in nearly 70 accidents aboard similar Bell helicopters. The crashes were linked to a phenomenon known as "mast bumping,' which occurs when Bell's patented, two-bladed rotor see-saws excessively as it spins, snapping the mast that fastens the rotor blade to the rest of the helicopter.
Alerted to the long-standing and never-fixed mast problem that killed their husbands, the pilots' widows filed suit against Bell Helicopter Textron, Inc., contending the company should have done more to guard against the crash. After a three-week federal court trial in early 1985, the jury sided with the widows and awarded them $3.65 million in damages. Bell appealed that verdict to the trial judge, who, in a sternly-worded order, upheld the award as just.
But then Bell appealed to the 4th U.S. Circuit Court of Appeals. In the jury trial, Bell had argued mainly that there was nothing wrong with its design, and that the crash was the fault of the pilots. It also had tested out a new argument, an argument that it emphasized in its appeal to the 4th Circuit: Bell maintained that responsibility for its own design of the rotor system, regardless of its merits or flaws, rested solely with the U.S. government.
In May, the appellate court agreed that responsibility for the design, and the liability for it, shifted to the government once the Pentagon approved Bell's blueprints--even though Bell retained an active patent on the rotor system at the time of the crash and therefore clearly still claimed the design as its own.
Deputy Secretary of Defense William H. Taft IV wasn't fazed by the ruling of the 4th Circuit. "There is a system of compensation for people in the service and their survivors that is designed to provide compensation for them,' Taft said the morning after the 4th Circuit's decision. "None of this is to say that the government doesn't have a remedy against a contractor for defective equipment.'
But the Pentagon rarely exercises its available remedies against contractors, including simply buying elsewhere; after two decades of accidents, the military is now paying Bell millions of dollars to reduce the chances of mast bumping--even though it knows that Bell's top lawyer urged his company to pay for the fixes itself years ago.
In addition, government compensation for accidents cannot serve as a spur toward safer designs since it is awarded regardless of fault and paid by unwitting taxpayers. The roughly $800 monthly that Mrs. Dowd and her children now receive from the government is not likely to prod Bell to correct design flaws; repeated multimillion dollar jury verdicts against Bell might.
Unfortunately, the 4th Circuit's decision to overturn the jury verdict isn't unprecedented. It traces a furrow plowed, with a strong push from the nation's defense contractors, by other federal appellate courts. With those courts' quiet but growing approval, the defense industry--in a torrent of seemingly mundane legal briefs staking out a novel legal theory--has shirked responsibility for what juries repeatedly have ruled are illdesigned weapons.
As a result of these new legal arguments, servicemen are on the verge of losing their right to sue contractors if they believe they have been injured by a poorly designed weapon. That doesn't mean they can turn around and sue the military: a 1950 Supreme Court decision prevents them from suing the government, primarily because of the corrosive effect such lawsuits could have on military discipline. The contractors' novel theories soon may be tested before the Supreme Court. If they're upheld, defense contractors rarely could be held responsible for their own design flaws.
Springing into inaction
Over the past three years, defense contractors have convinced five of the six appellate courts ruling on the issue that liability stemming from poor design of the nation's arsenal rests with the Pentagon once the government signs off on a contractor's blueprints.
The sole countrary decision is now before the Supreme Court. Last December, the 11th Circuit Court interpreted the evolving "government contractor defense' more narrowly than the other five courts and upheld an $841,000 jury award to the family of an aviator killed in the crash of a Navy A-6 plane designed by the Grumman Corporation. Later this fall, after all interested parties have filed briefs, the Supreme Court will decide whether to review the 11th Circuit's decision.
The chance that the Supreme Court might allow the 11th Circuit's decision to stand has electrified the nation's defense contractors. In April, more than 1,500 of them joined in a friend-of-the-court brief asking the high court's justices to affirm, once and for all, that defense contractors are not responsible for the design of their weapons once they receive the U.S. government stamp of approval. "If a manufacturer of a military weapons system can establish certain facts regarding the military's role in the design or approval of the weapons system, the federal courts must not second-guess the military's design decisions,' says the brief, which was drafted by the same four attorneys who wrote Bell's winning petition in the 4th Circuit appeal. The 11th Circuit's ruling, they wrote, "would endanger the close working relationship between the military and the manufacturers of weapons systems that is essential to the preservation and advancement of national defense.'
Joining the contractors in supporting a broader government contractor defense are their insurance underwriters, who stand to lose millions of dollars if the 11th Circuit's ruling is upheld, but who stand to reap a windfall if a risk for which they have already pocketed premiums is reduced.
Bell has long known that its teeter-rotor system is susceptible to mast bumping. The physics of helicopter flight requires Bell's see-saw design to have free-floating blades. Vigorous maneuvers, adverse weather, and mechanical problems can all trigger the excess "flapping' of the blades that slams the underside of the rotor hub into the mast, almost always snapping the mast and the blades off.
The first known mast-bumping accident occurred in 1965, when an Army pilot was killed shortly after he left the Bell plant aboard a new helicopter. In 1970, an El Paso, Texas jury found the company liable for its "unreasonably dangerous' rotor design and ordered Bell to pay the serviceman's family $600,000. The ruling was upheld by a state appellate court.
By 1973, the Army had noticed a trend in the way Bell helicopters kept plummeting from the skies over Vietnam and elsewhere. Despite Bell's claim that pilot shenanigans were causing most mast bumping, an Army study revealed that more than half of the mast-bumping accidents occurred when the helicopters were in "normal cruise flight.' A top Army safety official issued a written recommendation urging that no more Bell teeter-rotor helicopters be bought by the military. "The manufacturer has committed an error in design,' he asserted. Bell protested, insisting that so long as pilots flew the helicopters properly, such accidents would not happen. The head of Army aviation, General William J. Maddox Jr.--who in 1983 went to work for Bell-- bought the company's explanation and overrode the concerns of his safety experts.
Agreeing that mast bumping just might be the result of pilots pushing their helicopters beyond their designed capabilities, Bell and the Army toyed for the next few years with several fixes that would protect Army pilots and their passengers from mast bumping--for which Bell accepted a string of lucrative Pentagon contracts. As the number of mast-bumping accidents mounted, Bell engineers designed a hub spring that could help prevent the problem and applied for a patent for the device in 1978.
A year later, George Galerstein, Bell's top lawyer, told his company's top executives in a one-page internal memo that they should push for the hub spring's installation aboard all UH-1 Huey helicopters in the Army fleet. "I consider this matter to be very serious and, if we do nothing about it, very likely to be the subject of attempts at punitive damages,' Galerstein wrote. "The purpose of this memo is to encourage management to actively support the rapid development of this invention into production and retrofit on the UH-1 fleet; preferably, of course, with Army funds. . . . I am as sure as one can be in the product liability field that such a course of action will be of considerable benefit to us. We should immediately file an ECP for this purpose.'
An ECP is an "engineering change proposal' that must be submitted to and approved by the military before any changes in its equipment can be made. Yet despite the urgent tone of Galerstein's memo, Bell's management ignored his plea. "As far as I'm concerned, the company listened to me and did what they could,' Galerstein said in 1984. However, he acknowledged that Bell never filed an ECP to correct the problem--the sole recommendation in his memo.
In the summer of 1983, 18 years after the first recorded Bell mast bumping accident, a respected pilot, Major Larry B. Higgins, lived through a crash--the first ever to survive. His story, that neither he nor his fatally-injured co-pilot were doing anything wrong when the rotor blade slashed through their cockpit, gave the Pentagon the first and only eyewitness challenge to Bell's longstanding claim that pilot error usually triggers mast bumping. His statements focused attention on the mast bumping problem, and led the press to conclude that both Bell and Army had failed to deal adequately with it.
That uproar sparked an independent Army investigation. In July 1984, the investigators recommended nearly two dozen changes to help curtail mast bumping. The Army chief of staff grounded hundreds of helicopters until stronger masts were installed. Immediate production of the hub spring that Galerstein had secretly urged five years earlier was the central recommendation, yet production of the springs has only just started.
Since losing the 1970 jury verdict, Bell and its insurance carrier, a syndicate at Lloyd's of London, had avoided juries by paying handsome out-of-court settlements in an unknown number of other cases. But the publicity kicked up by the Army probe compelled Bell to stop settling out of court, as plaintiffs started demanding larger out-of-court settlements.
So the Dowd-Ellis case, mentioned above, led to the first mast-bumping trial in 15 years in January, 1985. Arguing Bell's side as the case would its way through the trial and appellate courts was a corps of Bell attorneys led by Galerstein, as well as a heavy-hitting roster of outside legal talent: the Fort Worth firm of Brown, Herman, Scott, Dean & Miles; the Baltimore firm of Semmes, Bowen & Semmes; the New York City-Los Angeles firm of Mendes & Mount; and the Atlanta firm of King & Spaulding.
Presenting the widows' case was John H. Green, an Odessa, Texas attorney who was selected because the sister of one of the widows had worked as his secretary.
Bell's argument that there was nothing wrong with its helicopter design and that the accident was the pilots' fault didn't sway the jury. Nor did its arcane legal theorizing that the company wasn't responsible for its own design.
Bell's "government contractor defense' had been built on a 1983 landmark decision by the 9th Circuit Court, which held that servicemen require less safe equipment than the public they protect. "Their reasonable expectations of safety are much lower than those of ordinary consumers,' that court had ruled in a 2-to-1 decision. "To regard them as ordinary consumers would demean and dishonor the high station in public esteem to which, because of their exposure to danger, they are justly entitled.'
Judge Arthur L. Alarcon dissented bitterly from his colleagues' opinion, warning that their decision would lead inevitably to less safe military equipment. He charged that responsibility for safe weapons must be shared by the Pentagon and its contractors, and, if necessary, enforced by the courts. "Just as the military can make any parachute packer take one that he has just folded and make him jump with it, (I) would require that (the contractor) stand behind the products for which it voluntarily contracts and provides at a profit,' he wrote.
Despite Alarcon's arguments, the majority held a defense contractor could be immune from suit if four conditions, all of them highly subjective, were met: the government is immune from suit (as it almost always is under the 1950 Supreme Court ruling); the government established or approved "reasonably precise' specifications for the weapon's design; the weapon conformed to those specifications; and the contractor warned the government about dangers associated with the weapon's use.
Bell argued that in its case all four conditions had been met. Though it had never given the government Galerstein's warning and had never filed an ECP, Bell maintained that the fourth condition was fulfilled because the crashes themselves constituted sufficient warning to the government that there were dangers associated with the helicopter's use.
But the jury disagreed. Following the decision, a juror said the panel had searched in vain for a clear and unmistakable warning of the mast bumping problem from Bell to the Army. "We really did try to give Bell the benefit of the doubt,' she said. "We were looking for something to exonerate them.'
But Bell also had a different, more subtle defense to test, a defense it emphasized when it filed a motion with trial Judge Edward S. Northrop to overturn the jury's verdict and $3.65 million damage award. The company said the troublesome parts on the Dowd-Ellis helicopter--the main rotor blades, hub, and mast--had been installed aboard the 10-year-old aircraft when it was overhauled by Bell 12 days before the accident. Those parts had been installed, Bell said, precisely as its overhaul contract had specified; under its 1978 overhaul contract with the Army, Bell was simply required to requisition a Bell-designed rotor system from Army storage and install it atop the modified chopper. "In this case, Bell clearly modified the helicopter in strict conformity to the contract and the law, and had absolutely no choice but to do so,' Bell's lawyers said.
The design of the parts that failed, on the other hand, was done under an earlier design contract, for which Bell was not responsible under the overhaul contract, according to Bell. Bell argued that the extent of the liability was confined to the specifications of the overhaul contract under which the helicopter had been modified. "The rotor system was designed by Bell in the early 1960s; the mast was designed by Bell in the mid-1960s,' Bell said. "These particular parts were not designed pursuant to this [overhaul] contract,' they added. "The contract exempts the rotor hub assembly from Bell responsibility.' In fact, the overhaul contract doesn't deal with the system's design.
Bell sought immunity despite the fact that it had designed the rotor system and still held a valid patent on the design at the time of the crash, a patent from which it could still get licensing fees from anyone seeking to use it; despite the fact that Bell had originally built both the rotor system and helicopter; and despite the fact that Bell had long known about the design flaw, knew how to fix it, but didn't file a formal request with the Army to do so.
Judge Northrop dismissed Bell's claims in a strong rebuke and upheld the jury's action. The company's legal woes, he said, stemmed from the original design of the helicopter and were not eased either by the passage of time or the modification contract.
So, Bell appealed to the 4th Circuit Court, where it again pressed its claim that while Bell had designed the original Cobra helicopter, it was not responsible for the modified version in which Dowd and Ellis died. "While Bell could design and manufacture parts, it could not displace the Army's authority to choose the configuration of its helicopter,' Bell told the circuit court. "Thus, the Army was the designer of the modified helicopter.'
Green, the widows' attorney, disagreed. "The installing of the rotor system is not the issue,' he insisted in his reply brief. "The issue is the defective design of the rotor installed and Bell's negligence in designing such a rotor.'
Last May, a three-member panel of the 4th Circuit overturned the findings of the jury and Judge Northrop and ruled in Bell's favor. "The decision of the United States Army to contract with Bell for a helicopter rotor system with which the Army had extensive familiarity and field experience operates to shield defendant from any liability for alleged design defects in that system,' the court held. Responsibility for a design shifts to the Pentagon the moment it approves a contractor's blueprints, the court said. "Government approval of specifications, not design or dictation of them, is all that is required.'
Despite the appellate court's decision, Mrs. Dowd remains firm in her conviction that Bell is responsible for her husband's death. "I lost all my hopes, all my dreams, and all my plans that day,' she said. "I suffered a loss because of a defective helicopter designed, built, and sold by Bell Helicopter, and to my dying day, whether I win or lose, I will believe that.' The widows are now appealing the 4th Circuit's reversal of their jury award to the Supreme Court.
In August, Bell filed a claim with the trial court seeking $46,879.53 from the Dowd and Ellis widows for expenses incurred during the trial, including a $9,000 hotel tab racked up by Bell's top three attorneys. Among other claims, Bell asked the court to order the widows to pay more than $17,000 in fees and expenses to assorted experts who testified on Bell's behalf, including those of ten Bell employees. It also seeks reimbursement for more than $10,000 it spent on audio-visual gear, photographic enlargements, and for the shipment of a copy of the rotor system involved in the accident to the courtroom. Bell officials declined to say why their Fortune 500 company, which was paid more than $500 million by the Pentagon last year, would file such a motion. The court clerk will hold a hearing on Bell's demand for payment later this fall.
An unlikely relationship
Meanwhile, back in Fort Worth, Texas a hometown judge was helping Bell nail shut its "don't blame us' defense. Two widows had sued Bell after the deaths of their husbands in a 1982 accident in West Germany in which a key bolt in their helicopter's rotor system failed and caused mast bumping.
In a brief submitted to Federal District Court Judge Eldon B. Mahon, following the January 1986 non-jury trial, Bell boldly advanced its claim that the government is responsible for the design of Bell military choppers. Its reasoning was simple: A suit alleging poor design can only be filed when a serviceman is injured or killed while aboard a helicopter that has been built under a production contract. Servicemen never fly--or are killed--in helicopters built under design contracts; helicopters are merely designed, not built, under design contracts. "Once design specifications have been accepted by the government, the government alone is responsible for any design errors, omissions, or defects' because Bell simply followed government blueprints when it built the choppers, Bell said. "It makes no difference that the contractor manufacturing the equipment was the original party who created the design specifications.' Bell was essentially arguing that it could never be liable for any design defects.
In May, Mahon issued a ruling that embraced Bell's key points. "The fact that Bell was involved in the design . . . has no relevance on Bell's liability in this case,' he said. "Under the production contract in issue, Bell's sole obligation was to strictly comply with the terms of the procurement contract in manufacturing the requested product.' Mahon's ruling may be appealed by the widows.
Defense contractors have sought to convince the courts that the Pentagon knowns as much, if not more, about weapons design as they do. "The Pentagon has vast bureaucratic staffs that scrutinize these things to great length,' says Fred S. Souk, a Washington, D.C. attorney who represents defense contractors. "If the government approves something, and it later turns out to have harmed somebody, then it's the government's fault for having wanted that system and approving the specifications.'
There have been reports that the Pentagon has been so specific about what it wanted in a design that the contractor would up making unworkable weapons. But in recent year the Pentagon has routinely issued performance requirements allowing contractors the freedom to decide how best to meet those goals. Even the contractors' allies acknowledge the Pentagon's role in weapons design is marginal. "Too often there's an unholy relationship between the manufacturer and the Pentagon and there's really not that much oversight,' says Thomas O'Day of the Alliance of American Insurers.
"Sometimes you get a government bureaucrat rubber-stamping government approval on something he's never even heard of,' adds Dennis Connolly, who heads the liability section of the New York-based American Insurance Association.
Two years ago, the Reagan administration told Congress that responsibility for a weapon's design rested squarely with the industry. "The F-18 was not designed in great detail by a gnome in the Pentagon with the blueprints then handed out to see whatever contractor wanted to bid on them,' said Richard K. Willard, the Justice Department's assistant attorney general for the civil division.
"Many of these sophisticated procurement matters are primarily, if not entirely, a result of designs developed by contractors.' Bell's design of the rotor system had been just that.
Defense contractors do have their allies in Congress and the Reagan administration; together they justify their efforts to push their design responsibility onto the government by claiming that an avalanche of frivolous lawsuits from injured servicemen or their survivors may drive the contractors from the defense business. They have used that argument not just to limit contractor liability in the courts, but also to justify pressing Congress and the administration to cap damage awards and indemnify contractors legislatively.
One defense contractor recently denounced an "astronomical increase' in such lawsuits. The administration earlier this year declared in a bill it drafted that defense contractors are facing a "rapid expansion' in their liability that has made it more difficult and expensive for the Pentagon to buy what it needs. But evidence of such problems is lacking. "It's hardly a tidal wave of trouble,' said a top Pentagon lawyer who asked to remain anonymous. He belittled the claim of a litigation avalanche, saying, "In the past year or so I've heard of maybe two or three machine shops having trouble getting insurance.'
Officials in the Justice Department, which proposed legislation to Congress earlier this year to cap jury awards against government contractors, could produce no evidence to support their claim that legislation is needed to prevent lawsuit-crazed servicemen or their widows from driving contractors out of the defense business. Pressed to explain how the Justice Department has tracked the increase in such lawsuits, Robert L. Willmore, a deputy assistant attorney general in the civil division, could only say: "One way to measure it, which is in my opinion the best way--but it's totally subjective and therefore not very useful-- is just to talk to the lawyers and judges.'
Suing for safety
Some legal theorists contend a nation's unencumbered ability to wage war must infringe on a serviceman's rights, even in peacetime. "If the soldier has the duty to serve, then in fairness he should have the corresponding right to hold a manufacturer accountable for injuries caused by its product,' William J. Blechman noted in the University of Miami Law Review. But such a right, Blechman said, would lead to military decisions driven by legal considerations instead of military strategy: "This unilateral restriction on the use of weapons is philosophically inconsistent with the rules of war.'
Theoretically, a serviceman ought to be able to trust the military and the contractors to guard his right to use safe equipment. The contractors who build the weapons and the military decision-makers who supervise their deployment are the first to notice a common thread in a series of accidents. Their institutional knowledge, and the power to act on it, ought to guarantee quick corrections of flaws in the design of military gear. But Bell officials knew years ago that their helicopters had a dangerous flaw, and they knew eight years ago how to reduce the problem. The Army also knew there was a problem. Neither fixed it.
If neither the military nor its contractors would correct such a problem, then who is now ensuring the safety of the equipment the nation's servicemen must use? The military brass is immune. And the contractors are on the verge of being sheltered from liability. The only one with any real incentive left to save the fighting man's neck is the fighting man--or his survivors.
Defense contractors and their allies bristle at the claim that the threat of legal damages against them can improve weapons design by spurring contractors to press the Pentagon to make changes in weapons when potentially hazardous problems surface. "That's dead wrong,' asserted James M. Fitzsimons, a Los Angeles lawyer who represents Lloyd's of London. "That's a fiction in the mind of the plaintiffs' bar.'
But top Reagan administration officials from the Defense and Justice Departments disagreed with Fitzsimons and his clients and made their views clear in 1984 when defense contractors, then concerned that their government contractors' defense wouldn't survive appellate court scrutiny, sought legislation that would indemnify them by shifting their liability to the government. "Indemnification removes the safety incentive created by the tort system,' Richard Willard of the Justice Department told a Senate committee. "To the extent liability can be passed on to the government, neither the contractors nor the insurers have a financial interest in ensuring that a product is designed and made with the safety of the user in mind.' In its testimony, the Pentagon agreed. "We prefer to contract in an environment similar to the commercial marketplace where companies must take all the steps that would be required by a prudent businessman in order to ensure the safety of the company's product,' said Mary Ann Gilleece, then a top Pentagon acquisition official.
Such testimony generated howls of indignation from the contractors. "I find it incredible that somebody would say that as a result of indemnifying (us) at this point in time that we are now going to furnish less than our best products,' fumed James A. Kane, the top lawyer with the Eaton Corporation's government division. "Such a statement besmirches the whole government contractor community.'
But Donald Salem, who, though he now represents injured servicemen, also represented Bell for two years, acknowledges that the profit motive that drives contractor choices also dictates--in the form of potential liability-- pressures for improved designs. "I've been on both sides, and I know the lawsuits have had a tremendous effect on safety,' he said. He recalled a redesign effort the company took to lessen the chance of fire aboard its civilian helicopters. "Bell didn't do that because they had a charitable instinct. Bell did it because they were damned scared about the product liability implications. They fixed something they may not even have considered a problem until litigation started.'