In the United States v. Glenn L. Martin Co., 1939, the Supreme Court was tasked with determining whether or not a contractor could be held liable for damages caused by faulty equipment provided to the U.S government during World War I. The Glenn L. Martin Company had supplied seaplanes that were found to have defective pontoons, leading to several crashes and loss of life among Navy pilots who were training on these planes in preparation for war service. The case hinged on whether or not a clause in their contract exempted them from liability due to negligence; this clause stated that they would only be responsible if defects arose out of bad faith or gross neglect rather than ordinary negligence. The court ruled against Glenn L. Martin Co., stating that such clauses did not absolve contractors from responsibility when it came to providing safe and effective equipment for use by military personnel, especially during times of war where lives are at stake.

In the dissenting opinion for United States v. Glenn L. Martin Co., Justice McReynolds argued that the majority's decision to allow a government contractor to be sued by an injured third party was inconsistent with previous rulings and principles of sovereign immunity. He contended that if a private individual or corporation, while performing duties under contract with the U.S. Government, commits a tortious act causing injury to another person, it is not justifiable for such person to sue them directly without making the government itself liable in damages as well. The justice emphasized that this ruling could potentially expose contractors working on behalf of the federal government to significant financial risk and liability which they had no way of foreseeing when entering into their contracts.