The US Supreme Court on Tuesday takes up a case examining whether the government properly invoked the state-secrets privilege to dismiss a civil lawsuit in a multibillion dollar defense contract dispute.

The case is being closely followed because it could result in the high court clarifying the scope of the executive branch’s power to side-step the court system whenever officials claim sensitive national security information is at risk.

The dispute dates to 1991 when the US Navy terminated a defense contract to develop a carrier-based stealth jet fighter. The Navy claimed the contractors were behind schedule and had thus defaulted.

Fighting back, the contractors argued that the government itself had caused the contract delays in part by failing to share highly-classified stealth technology.

Contractors General Dynamics Corporation and The Boeing Company took the issue to court, asking a judge to reinstate the contract and award $4 billion in damages.

Government lawyers countered by invoking the state-secrets privilege – arguing that the case must be immediately thrown out of court to avoid the unauthorized disclosure of sensitive national security information.

The maneuver effectively pulled the rug out from under the defense contractors, making it impossible for them to confront government allegations that they had defaulted on their contract requirements. The courts complied with the government’s request, dismissing the lawsuit.

Was government playing fair?

On Tuesday, the 20-year-old dispute arrives at the Supreme Court where the justices will examine whether the government violated constitutional requirements of fundamental fairness when it used the state-secrets privilege in a way that prevented the contractors from presenting their side of the dispute in court.

“Neither the due process clause nor basic principles of fairness permit the government both to assert a claim and then to ensure its own victory by invoking the state-secrets privilege to preclude its opponent from interposing such a defense,” wrote Charles Cooper in his brief on behalf of Boeing.

“The government holds the unique power both to wield the sword of its claim and to simultaneously deprive its opponent of the shield of its defense,” Mr. Cooper wrote.

At the center of the case is the so-called state-secrets privilege. The privilege, established by the Supreme Court in a 1953 decision, authorizes the dismissal of certain court cases when evidence revealed in those cases might lead to disclosure government secrets.

Both the Bush and Obama administrations have invoked the privilege to dismiss litigation that the government claimed would threaten national security. In one case the US government was accused of kidnapping and torturing terror suspects; another involved charges of unlawful electronic surveillance of individuals inside the US.

How the state-secrets privilege started

In 1953, the high court ruled in a case called US v. Reynolds that judges should bar the release of evidence in a pending legal case if the government claimed the release would reveal sensitive information. In that case, family members of a civilian scientist killed during a research flight sought to learn the cause of the plane crash.

The scientist had been working on a cutting-edge military project and defense officials urged the court to dismiss the case to keep the scientist’s work secret. The court complied. The lawsuit was dismissed.

In the 1953 case, the government was a defendant in a civil lawsuit filed by the scientist’s surviving family members. The invocation of the state-secrets privilege forced the family to bear the burden of the government’s secrecy claim.

But the high court stressed that it would be different if the government had brought the lawsuit itself or was attempting to prosecute someone for alleged wrongdoing. The justices said it would be “unconscionable” for the government to criminally prosecute an individual while at the same time invoking the state-secrets privilege in a way that withheld evidence that would assist his defense.

The same could happen in a civil lawsuit with the government’s claim of privilege preventing an opposing party from effectively defending themselves from government allegations.

That’s what the defense contractors claim is happening in the defense contract dispute now at the high court.

'An instrument of unjustice'

The contractors are asking the Supreme Court to establish a clear rule that when the government is a defendant in a lawsuit and claims the state-secrets privilege the underlying lawsuit may be dismissed. But when the tables are turned and it is the government that initiates the legal action, any invocation of the state-secrets doctrine by the government should not benefit the government. Such an opportunity would allow the government to manipulate the judicial system and make the court “an instrument of injustice,” wrote Paul Smith in his brief on behalf of General Dynamics.

“The court should rule that no moving party can proceed with a claim for relief if the privilege entirely prevents litigation of a significant defense,” Mr. Smith wrote.

Acting Solicitor General Neal Katyal is urging the justices to reject the contractors’ suggested rule. He said in his brief that such a rule would be expensive for the country “by allowing money judgments against the government on claims that have not been proved.”

“Neither precedent nor logic supports petitioners’ contention that the courts below were required to dispose of this case as though petitioners had proved their … claim,” he said.

He added that no court in a civil case has ever entered a judgment against the government following an assertion of the state-secrets privilege.

A decision is expected by late June.