Supreme Court orders more hearings on Navy jet contract

Reuters News
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Posted: May 23, 2011 1:33 PM
Supreme Court orders more hearings on Navy jet contract

WASHINGTON (Reuters) - The Supreme Court sent back on Monday for further proceedings a 20-year-old lawsuit over the Navy's cancellation of a $4.8 billion contract for a fighter jet built by Boeing Co and General Dynamics Corp.

The justices unanimously set aside a U.S. appeals court ruling that the Navy had been justified in canceling the contract for the A-12 radar-evading attack plane after it encountered serious technical difficulties.

The justices sent the case back to the appeals court to consider other issues.

The justices said that when state secrets must be protected and a court dismisses a contractor's defenses to government allegations of contract breach, the proper remedy is to leave the parties where they were on the day they filed suit.

The companies had argued that they could not defend against the decision to terminate the contract for default because the government refused to give details of its stealth technology under the state-secrets privilege that allows the withholding of information that threatens national security.

Although the contract was for $4.8 billion, the parties have said the legal battle now involved some $3 billion.

Boeing and General Dynamics argued that former Vice President Dick Cheney, who was then defense secretary, unfairly terminated the contract in 1991, and that they should not have to repay $1.35 billion they received, plus $1.65 billion in interest that accrued during the two-decade legal battle.

Writing the court's opinion, Justice Antonin Scalia said neither the defense contractors nor the government will be entirely happy with the court's resolution of the case.

Scalia also said the ruling probably would not have significant impact in future cases, except to make the law more predictable and more subject to accommodation by contracting parties.

He said both parties must have understood that state secrets would prevent courts from resolving many possible disputes under the A-12 agreement.

(Reporting by James Vicini and Andrea Shalal-Esa, Editing by Gerald E. McCormick and Tim Dobbyn)