On November 10, 2025, the U.S. Supreme Court heard oral arguments in GEO Group Inc. v. Menocal (Case No. 24-758), a case whose outcome will have an outsize impact on many federal government contractors’ exposure to litigation risk moving forward, as will another derivative sovereign immunity case heard by the Supreme Court one week earlier. The GEO Group Inc. case, which stems from allegations of forced labor and unjust enrichment, was originally filed with the U.S. District Court for the District of Colorado, and was appealed to the U.S. Court of Appeals for the Tenth Circuit, will determine whether government contractors’ derivative sovereign immunity claims are reviewable prior to courts’ reaching final judgments under the collateral-order doctrine or, instead, must wait until after final judgments are reached.

Despite appearances, this question is far from academic; many contractors rely on derivative sovereign immunity to shield themselves from liability when hired by the U.S. Government to perform actions for which the U.S. Government itself would enjoy sovereign immunity, and any disruption to this would have significant ramifications for the industry, including the following:

A ruling against GEO Group could reshape the government contracting landscape in three critical ways:

  • Lengthier, Costlier Litigation Likely: Typically, only “final judgments” may be appealed, foreclosing “interlocutory” appeals. However, the collateral order doctrine operates as an exception to this general rule, permitting litigants to appeal certain interlocutory (i.e., non-final) decisions. Government contractors facing litigation currently may use this doctrine to appeal adverse findings of derivative sovereign immunity without first having to wait for courts to reach final determinations. Should the Supreme Court find that derivative sovereign immunity claims are not reviewable under this doctrine, however, litigants would be required to wait, potentially costing them months or even years and substantially greater legal fees.
  • Risk Shifting: If unable to immediately appeal an unfavorable derivative sovereign immunity finding, government contractors could be compelled to seek settlements, even when their derivative sovereign immunity claims would have been found meritorious if litigated fully.
  • Imperiled Business Models: Government contractors that depend on derivative sovereign immunity and that can ill afford the cost of lengthy litigation before federal courts—especially smaller or mid-sized firms—may find themselves between a proverbial rock and a hard place. Faced with the choice to either attempt to negotiate significantly increased rates in future contracts with the U.S. Government, which the U.S. Government could very well reject in favor of lower bids, to compensate for the increased litigation risk or restrict or abandon their riskiest portfolios.

In light of the skepticism that a majority of Supreme Court justices evidenced during the November 10 oral arguments, a ruling curbing the appealability of derivative sovereign immunity for government contractors appears likely, portending major consequences for government contractors across a variety of industries. Fluet’s Government Contracts Practice, with deep experience advising clients on risk assessment and mitigation, is well-positioned to help the clients navigate the difficult choices that any new paradigm in this area will present.

Government contractors should waste no time in taking the following actions:

  1. Identify which services they currently offer the U.S. Government that are most vulnerable to tort litigation;
  2. Assess whether continuing to offer these services would continue to be profitable if the risk of lengthy litigation increases;
  3. Reevaluate pending bids to provide these services, including whether to raise rates charged to the U.S. Government; and
  4. Monitor closely the outcome of the GEO Group Inc. v. Menocal. 

In addition, contractors facing the prospect of costlier, lengthier litigation should consider engaging counsel for an honest assessment of vulnerabilities. Fluet’s Government Contracts team continues to monitor GEO Group Inc. v. Menocal and related developments. Check back for updates as this case progresses and its impact on contracting operations unfolds.