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Makers Of Agent Orange Denied Federal Reimbursement

March 4, 1996

WASHINGTON (AP) _ The Supreme Court today said the government need not pay two Agent Orange makers who settled a lawsuit with Vietnam veterans over the defoliant’s alleged effects on health.

In a 6-2 ruling, the court said the federal government did not promise reimbursement to defense contractors for any monetary damages they paid in personal-injury lawsuits.

Two chemical companies had argued that their contract with the government must be read to include an implied agreement to protect them and indemnify their losses. ``We cannot agree,″ Chief Justice William H. Rehnquist wrote for the court.

The federal Defense Production Act does not promise such reimbursement, he said.

``Congress does not implicitly agree that if liability is imposed ... the government will reimburse the unlucky defendant,″ Rehnquist said.

Hercules Inc. of Wilmington, Del., and the now-defunct William T. Thompson Co. made Agent Orange for the Pentagon during the 1960s under the federal Defense Production Act, a law that allows the government to order companies to make needed military products.

Agent Orange was used to clear dense jungle growth in Vietnam. Years later, veterans filed a class-action lawsuit against Agent Orange manufacturers, saying exposure to the defoliant caused health problems _ including cancer and birth defects.

Members of the armed services cannot sue the government directly over injuries they suffer in connection with their service.

Hercules, Thompson and other companies agreed in 1984 to pay the veterans $180 million. Hercules’ share of the settlement was $18.7 million and Thompson’s share was $3 million. Their legal fees totaled $9 million.

Thompson’s lawyers said the company stopped operating because of the threat of additional liability.

The two companies sued the federal government in 1990, seeking reimbursement for their settlement costs and legal fees.

The companies said the government violated its contract by failing to disclose that Agent Orange would include toxic dioxins. They also said the Defense Production Act promised that companies would not be held liable for following government orders.

A U.S. Claims Court judge ruled against the companies, as did the U.S. Court of Appeals for the Federal Circuit.

In today’s ruling, Rehnquist wrote that the U.S. comptroller general ``has repeatedly ruled that government procurement agencies may not enter into the type of open-ended indemnity for third-party liability″ that Thompson said it was promised.

Rehnquist’s opinion was joined by Justices Antonin Scalia, Anthony M. Kennedy, David H. Souter, Clarence Thomas and Ruth Bader Ginsburg.

Justices Stephen G. Breyer and Sandra Day O’Connor dissented. Writing for the two, Breyer said the court should have returned the case to the lower court for further consideration of the companies’ argument that the government promised to pay damages.

Justice John Paul Stevens did not participate in the case for unspecified reasons.

The case is Hercules vs. U.S., 94-818.

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