Supreme Court Allows Construction to Proceed on Southern Border

On July 26, 2019, the U.S. Supreme Court ruled that the Trump administration can access $2.5 billion in Defense Department funds to replace and enhance sections of barrier along the southern border in Arizona, California and New Mexico. The Court’s 5-4 decision in Trump v. Sierra Club stayed an injunction and let the administration access funds that were frozen by decisions of a federal district court in California in May and the Ninth Circuit Court of Appeals (agreeing with the district court) on July 3. The significance of the decision is that the administration can now move forward with the work—for which contracts have already been awarded, but not finalized—while litigation brought by environmental groups proceeds in lower courts, a process that will take several months.

In challenging the Ninth Circuit’s ruling in an emergency filing, the Government asked the Supreme Court for a decision to be made by July 26 so that the Defense Department could finalize the contracts for border wall construction before the end of the fiscal year, September 30, after which funds not obligated would become unavailable. The contracts at issue are substantial, including a $789 million deal to replace 46 miles of barrier in New Mexico and a $646 million contract to replace 63 miles of barrier in Arizona.

The Supreme Court’s short opinion granted the stay because, among other unnamed reasons, the Government had made a sufficient showing that the environmental group plaintiffs did not have standing to challenge the legality of reallocating Defense Department funds for the barrier projects. Environmental and community groups have made clear that they are not deterred by the July 26 ruling, and if the Ninth Circuit grants the recent request for an expedited schedule in the Sierra Club matter, we could have a new decision with respect to the use of funds this fall.

It will be interesting to follow the progress of these and other border wall projects and, from a contract drafting and negotiation perspective, to learn how the looming threat of injunctions and decisions issued after the work begins factors into finalizing contracts for the work. For example, what are the conditions for payment of the full contract sum? What costs associated with the work being stopped by an injunction or adverse decision can the contractor recover? Given the protests that have taken place with respect to similar projects, who is responsible for providing security to protect the work and those performing it? In addition, and as noted by Justice Breyer (concurring in part and dissenting in part from the grant of stay in Trump v. Sierra Club), there is the question of who will pay for the removal of any constructed barriers should that be ordered after construction has commenced.