Court won't help either side in fight over plane

AP News
|
Posted: May 23, 2011 4:31 PM
Court won't help either side in fight over plane

The Supreme Court refused on Monday to take sides in a long-running billion-dollar dispute between two defense contractors and the government over a cancelled contract for a Navy plane.

The high court unanimously threw out court decisions that would have helped both the federal government and Boeing Co. and General Dynamics, the companies that were supposed to build 850 A-12 Avenger attack planes for the military.

"Neither side will be entirely happy with the resolution," said Justice Antonin Scalia, who wrote the opinion for the unanimous court.

The A-12 Avenger attack plane was canceled by the Pentagon in 1991 based on claims that the companies failed to meet the terms of the contract. The A-12, designed with stealth technology to help it evade radar, was more than 18 months behind schedule and at least $1 billion over budget when it was canceled. The government and the contractors disagreed over who was responsible for the delays and cost overruns.

For the past 20 years, the government has been demanding repayment of money spent on the plane's development and the companies have been resisting, filing a lawsuit in federal court to block the Pentagon from collecting.

But the government asked for the lawsuit to be thrown out because classified secrets were being leaked during the discovery process.

The Supreme Court was being asked to settle the issue of whether the government's refusal to turn over classified information, thus preventing the companies from defending themselves, should bar the government from recovering the money.

The state-secrets privilege, on which the government relied to shut down the companies' lawsuit, typically arises in national security and terrorism cases. Invoking the privilege, which the Supreme Court ratified in the 1950s, the government tells a court that allowing a case to go forward would force the disclosure of information that could damage national security.

The court agreed that the litigation could not go forward if state secrets were going to be spilled, but also that the government could not use a defense that included classified information. The justices decided the best thing to do is to send both sides back to where they were when the case started.

"The traditional course is to leave the parties where they stood when they knocked on the courthouse door," Scalia said.

That basically means Boeing Co. and General Dynamics don't immediately have to repay the government $1.35 billion, plus more than $2.5 billion in accumulated interest, after the Pentagon declared the companies in default on the contract of the canceled attack plane.

But it also means that companies won't immediately get $1.2 billion awarded to them by the Court of Federal Claims when it decided the government's termination for default instead was a termination for convenience. The U.S. Court of Appeals for the Federal Circuit had already thrown out that award, but the companies were hoping to get it reinstated by the Supreme Court.

Boeing called it a victory. "It has always been our view that the default termination was improper," said J. Michael Luttig, Boeing executive vice president and general counsel.

The high court sent the case back to the lower courts to see if other issues involving the contract can be resolved in court.

The consolidated cases are General Dynamics v. U.S., 09-1298, and Boeing v. U.S., 09-1302.