By Tommy H. Thomason

Friday, November 27, 2009

A-12, The Gift That Keeps On Giving II

A gift to lawyers, in this case.

Back in June, I wrote: "I was surprised when writing the chapter on the A-12 Avenger II program in Strike from the Sea to discover that its termination was still in dispute. Given that it had occurred in January 1991, almost two decades before, that seemed unlikely until I discovered that it involved a $2.3 billion claim by the Navy against GD and Boeing (which now owns McDonnell Douglas, GD's original partner in the ill-fated program). That sum consisted of a demand for the repayment of $1.3 billion in progress payments and $1 billion (and apparently still counting) in interest. Avoidance of the payment of that kind of money justifies the efforts of legions of lawyers.

There were eventually two trials. The contractors won the first in 1995, which the government successfully appealed, and the government won the second in 2001, which the contractors successfully appealed. (A 2002 settlement floundered because the contractors and the government couldn't agree on the value of the "in-kind payments", i.e. goods and services as opposed to cash, to be made by the contractors.) According to today's Wall Street Journal, the U.S. Court of Appeals for the Federal Circuit has finally ruled on the 2007 Claims Court ruling against the contractors, upholding it.

It's probably finally over but I wouldn't bet on it."

And a good thing that I didn't, assuming I could find anyone who would bet against. Here's the latest, from a General Dynamics press release dated 24 November 2009:

The U.S. Court of Appeals for the Federal Circuit today denied a request for a rehearing of the Federal Circuit's prior decision sustaining the government's default termination of the A-12 aircraft contract to which General Dynamics and The Boeing Company were parties with the Navy. General Dynamics disagrees with this most recent decision and continues to believe that the government's default termination was not justified. The company also believes that the ruling provides significant grounds for appeal, and intends to petition the U.S. Supreme Court for review.

Boeing's release was a bit longer:

J. Michael Luttig, Boeing executive vice president and general counsel, today said that the company intends to appeal to the Supreme Court after the U.S. Court of Appeals for the Federal Circuit refused to rehear the company’s appeal in the long-running A-12 case. "We are disappointed in today's decision. The Court of Appeals' decision is clearly wrong as a matter of law and it has broad implications for all forms of government contracting nationwide. As a consequence, I have directed that an immediate appeal be taken to the Supreme Court of the United States," Luttig said. At issue in this litigation, which has been pending over a decade, is the manner in which the Defense Department terminated the A-12 military aircraft program and whether the government owed Boeing (then McDonnell Douglas) and General Dynamics Corporation money for work in progress when the contract was terminated, as well as certain other expenses. The trial court originally ruled in favor of the contractors, but various appeals over the years have delayed a final decision.

As Yogi said, it ain't over 'til it's over.

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