Why It Matters

A recent CRS report published on August 14 examines the Supreme Court's April 22 decision in Hencely v. Fluor Corp., which fundamentally reshapes the legal landscape for military contractor liability. The 6-3 ruling eliminates a decades-long shield that had protected defense contractors from state tort lawsuits in combat zones, creating immediate policy questions for Congress and the Pentagon about how to proceed.

At stake is whether contractors will face expanded litigation exposure, potentially driving up insurance costs and complicating military operations. The decision also forces Congress to decide whether to restore contractor immunity through new legislation, accept the Court's narrower liability framework, or push it further by constraining legal preemption even more.

The Big Picture

The case centered on whether to extend Boyle v. United Technologies Corp. to allow federal interests emanating from the Federal Tort Claims Act's (FTCA) combatant activities exception to preempt state tort claims against a government contractor for conduct that breached its contract and violated military orders. Fluor employed an individual who carried out a suicide-bomb attack that wounded the plaintiff. Hencely sued under South Carolina state tort law, alleging Fluor negligently supervised the bomber.

The Fourth Circuit reasoned that Boyle stands for the proposition that FTCA exceptions can preempt claims against federal contractors. The Supreme Court reversed, holding that Boyle does not extend to situations where a contractor fails to follow government instructions. The majority found that Boyle involved a special circumstance where state law was preempted because the contractor was being sued for something the government directed it to do. Fluor's conduct was not authorized by the military and violated direct instructions given to Fluor as a condition of operating on the base.

The Court determined that Boyle cannot be read to protect a contractor from liability resulting from the contractor's violation of federal policy. This distinction between contractors following government orders, which remain preempted, and contractors violating their contracts or government instructions, which are not, creates a narrower authorization-based test replacing the broad, combat-zone-based preemption that previously shielded military contractors from virtually all tort liability in war zones.

The dissent, authored by Justice Alito and joined by Chief Justice Roberts and Justice Kavanaugh, warned that the ruling could substantially interfere with the government's ability to wage war by subjecting military decisions in combat zones to judicial scrutiny. The dissenters also cautioned that the decision could force litigation evaluating how the federal government assessed risks of contractor personnel decisions, require discovery of sensitive combat-related documents and depositions involving national security information, and undermine the government's use of contractors for combat-related tasks by exposing them to state-law liability.

Prior appellate court interpretations of the combatant activities exception by the D.C. Circuit and Third Circuit are now abrogated by Hencely.

The Bottom Line

Congress faces three distinct paths forward. It could take no action and allow courts to develop the law further. It could enact broad preemption legislation to expressly overrule the decision and reinstate something like the command-authority test, drawing on precedent like atomic weapons testing contractor legislation. Congress could codify Hencely with modifications, legislating that contractors violating their contractual obligations are not preempted, while adding further limitations. Congress could also foreclose preemption entirely by constraining or eliminating the combatant activities exception's application to contractors. The ruling leaves Congress with clear options to either restore contractor immunity through explicit legislation or further limit it.

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