The Supreme Court kept alive a 20-year-old lawsuit over the Navy's cancellation of a $4.8 billion contract for an attack plane built by Boeing Co and General Dynamics Corp. The justices unanimously set aside a US appeals court ruling that the Navy had been justified in cancelling the contract for the A-12 radar-evading aircraft after it encountered serious technical difficulties.
-- 20-year-old case centres on radar-evading attack plane
Justice Antonin Scalia said in the opinion issued on Monday that a key issue in the case could not be litigated because it involved state secrets that could not be disclosed in court. But he said that does not mean the entire litigation will necessarily end, and he sent the case back to the appeals court to consider other issues, including other government justifications to cancel the contract.
The justices said that when state secrets must be protected and a court dismisses a contractor's defences 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 Cheyenne, who was then defence 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.
Scalier 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.
The government has said it has other legal arguments that support its decision to terminate the contract because of default by the companies. McDonnell Douglas, now owned by Boeing, and General Dynamics were initially awarded a contract in the late 1980s to build the attack jet, which was to fly off carrier decks, but it ran into significant technical difficulties.
The companies argued that the government knew the plane they had proposed to build would be too heavy, but did not give them the necessary stealth technology data from other programs in time to fix the problem and avoid the termination. The companies, besides seeking to keep the $1.35 billion, also have demanded $1.2 billion in additional claims against the government.
Scalia said neither the defence contractors nor the government will be entirely happy with the court's resolution of the case. Scalia refused to award the companies the $1.2 billion they sought. "The language of the A-12 agreement does not give us that option," he said, adding that amount could represent an "undeserved windfall." Scalia also refused to return the $1.35 billion that the government had paid the companies. He said the validity of that claim depended on whether they had defaulted on the contract. The Supreme Court cases are General Dynamics v. US, No 09-1298, and Boeing v. US, No 09-1302.