Supreme Court Holds that Federal Contractors Cannot Immediately Appeal Denial of Derivative Sovereign Immunity

GEO Group, Inc. v. Menocal, No. 24-758

Today, the Supreme Court held in a unanimous decision that federal government contractors cannot seek immediate appellate review under the collateral-order doctrine of a district court’s denial of derivative sovereign immunity.

Background

Typically, a party may seek appellate review only after the district court enters final judgment. One exception is the collateral-order doctrine, which allows a party to immediately appeal an order that (1) conclusively determines the disputed question, (2) resolves an important issue completely separate from the merits of the action, and (3) is effectively unreviewable on appeal from final judgment. For example, the federal government may immediately appeal a denial of its assertion of sovereign immunity.

Plaintiffs challenged two policies that the GEO Group had in place at a detention facility it operated on behalf of the federal government. The GEO Group asserted a claim of derivative sovereign immunity—also known as the Yearsley defense (because it is based on Yearsley v. W. A. Ross Construction Co., 309 U.S. 18 (1940))—under which a federal government contractor cannot be held liable for its actions under a federal contract unless it exceeded its authority or its authority was not validly conferred. GEO Group argued that the federal government authorized and directed it to carry out the challenged policies. The district court disagreed. The GEO Group sought immediate appellate review, but the Tenth Circuit held that it lacked appellate jurisdiction.

Issue

Whether a denial of derivative sovereign immunity is immediately appealable under the collateral-order doctrine.

Court’s Holding

In an opinion written by Justice Kagan, the Supreme Court held that a denial of derivative sovereign immunity is not immediately appealable under the collateral-order doctrine. The Court concluded that an assertion of derivative sovereign immunity is in reality a merits defense. After all, the Court reasoned, sovereign immunity protects even unlawful conduct. By contrast, a federal government contractor that successfully invokes derivative sovereign immunity is not liable precisely because it complied with the law. As a result, derivative sovereign immunity operates as a merits defense, not a form of immunity. And because it operates as a defense, the Court added, the collateral-order doctrine does not apply. Instead, a federal government contractor asserting that defense can effectively obtain review following final judgment by seeking reversal from the court of appeals of any erroneous finding of liability.

Justice Thomas wrote separately to emphasize that the Court should not expand the collateral-order doctrine beyond its existing precedents.

Justice Alito concurred only in the judgment, arguing that the collateral-order doctrine should apply where deferral of an appeal imperils important constitutional and public-policy interests.

Mayer Brown filed an amicus brief in support of the GEO Group on behalf of the Coalition for Common Sense in Government Procurement.

Read the opinion here.