Hughes Communications Galaxy, Inc. v. The United States
1993 WL 242670, 998 F.2d 953 (1993)
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Rule of Law:
When a government contract contains both a specific clause incorporating a dated government policy and a general clause subjecting the contract to all U.S. law and policy, the specific clause controls. A subsequent change in government policy that prevents performance under the specific clause may constitute a breach of contract, making the government liable for damages.
Facts:
- On December 5, 1985, Hughes Communications Galaxy, Inc. (Hughes) entered into a Launch Services Agreement (LSA) with the National Aeronautics and Space Administration (NASA) for NASA to use its 'best efforts' to launch ten of Hughes' commercial satellites.
- Article IV of the LSA specified that launch priority and scheduling would be governed by a policy approved by the President on August 6, 1982.
- Article XV of the LSA stated that NASA would provide services to the extent consistent with general 'United States' Law and United States' Published Policy.'
- On January 28, 1986, the Space Shuttle Challenger exploded. At this time, none of Hughes' satellites had been launched.
- Following the disaster, on August 15, 1986, the President announced a new policy that NASA would no longer be in the business of launching commercial spacecraft.
- Based on the new policy, NASA created a new launch manifest that did not include any of Hughes' ten satellites.
- On October 30, 1986, NASA formally informed Hughes that it was 'almost certain' that Hughes' satellites would not be launched before the contract's expiration date in 1994.
Procedural Posture:
- Hughes filed suit against the United States in the United States Claims Court (now the Court of Federal Claims), a trial-level court.
- Hughes asserted claims for breach of contract and a Fifth Amendment taking.
- The parties filed cross-motions for summary judgment.
- The Claims Court granted the government's motion, holding that the change in launch policy was a valid sovereign act that did not constitute a breach of contract because of the general language in Article XV.
- Hughes, as the appellant, appealed the judgment of the Claims Court to the United States Court of Appeals for the Federal Circuit, an intermediate appellate court.
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Issue:
Does the U.S. government breach a launch services contract by changing its launch priority policy when the contract explicitly incorporates a specific, dated policy for scheduling, even if the contract also contains a general clause making it subject to U.S. law and published policy?
Opinions:
Majority - Mayer, Circuit Judge.
Yes. The U.S. government breached the LSA because the specific contract terms governing launch policy control over the general terms. The court reasoned that Article IV, which identified and incorporated the specific and dated August 6, 1982 policy for launch scheduling, was manifestly more specific than the general language in Article XV, which subjected the contract to unspecified U.S. policy. Citing the rule of contract interpretation that specific terms control over general terms, the court found that Article IV allocated the financial risk of a policy change to the government. This interpretation does not render Article XV superfluous, as it could apply to other laws or policies not related to launch scheduling. The court held that by using such specific language, the government waived its sovereign act defense in 'unmistakable terms' regarding financial liability for changing the launch priority policy.
Analysis:
This decision is significant for government contracting law, clarifying how courts resolve conflicts between specific and general policy clauses. It establishes that the government, when acting in its contractual capacity, can be held financially liable for its sovereign acts if the contract allocates that risk in 'unmistakable terms.' The ruling limits the scope of the sovereign act defense, preventing the government from using a general 'subject to future policy' clause to override a specific, bargained-for promise. This provides greater certainty for private entities contracting with the government, ensuring that specific commitments are not easily undone by subsequent policy shifts without compensation.
