Becker Et Al. v. Philco Corp.

Background

A group of workers sued their employer, a private defense contractor, after the company sent a report to the Department of Defense. The workers say the report contained false and malicious statements that led to the loss of their security clearances and, as a result, their jobs. The District Court granted the company summary judgment, holding the report absolutely privileged, and the Court of Appeals for the Fourth Circuit affirmed that ruling.

Reasoning

The central question raised is whether a private contractor and its employees get an absolute privilege when reporting loss or suspected compromise of classified information under a security agreement with the Government. The Supreme Court denied review, so it left the Fourth Circuit’s ruling in place without deciding the issue on the merits. Two Justices dissented: the Chief Justice argued there is no authority for giving a contractor broader defamation immunity than private citizens and noted the Secretary of Defense’s manual and the security agreement do not themselves grant immunity; another Justice urged the Court to examine the growing overlap between large corporations and the state.

Real world impact

Because the Court refused to hear the case, the appeals court result stands and workers who say they were defamed by corporate reports to the Defense Department face a significant obstacle to suing for damages. The case was decided on summary judgment, so the workers’ allegations are treated as true for now. The denial is not a final nationwide ruling on the legal principle, and the issue could be raised again in a future case that the Court might choose to hear.