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Firm Seeks to Recover $24 Million It Spent on Northrop Court Fight : U.S. Asked to Pay McDonnell Bills

March 20, 1985|Associated Press

WASHINGTON — McDonnell Douglas Corp., locked in a court fight with Northrop Corp. over which firm builds the F-A-18 jet fighter for export, has tried to bill taxpayers for more than $24 million of its legal expenses, according to government documents obtained Tuesday.

In response, the Navy has vowed to block any such payments because "this litigation provides absolutely no benefit to the Navy's F-A-18 program."

Moreover, the Navy is warning that, if the two firms persist in fighting out their dispute in court, it will be prepared to bill both contractors for all expenses--both direct and indirect--incurred by the government.

The Navy's hard line, and a directive from Navy Secretary John F. Lehman Jr. blocking the payment of legal bills submitted by McDonnell Douglas, were disclosed in documents obtained from several Pentagon sources, who provided the documents on condition they not be identified.

When asked about the documents late Tuesday, Navy officials confirmed their authenticity but declined comment.

Gerald Meyer, a spokesman for McDonnell Douglas, said the company will continue to fight the Navy over payment of its legal expenses but will refund roughly $17 million it has already received until the dispute over legal bills is settled.

The court fight dates to October, 1979, when Northrop filed a $700-million antitrust suit against McDonnell Douglas in Los Angeles.

St. Louis-based McDonnell Douglas is the prime contractor for the Navy's F-A-18, a high-performance fighter and attack jet designed for operation aboard aircraft carriers. Northrop, headquartered in Los Angeles, is a prime subcontractor on the plane.

In the lawsuit, Northrop claims it entered into a "teaming agreement," under which it was supposed to serve as the prime contractor for any land-based version of the F-A-18 sold to foreign allies. Instead, the suit claims, McDonnell Douglas has continued to monopolize that business.

According to the Navy, 285 of the planes have been sold to date to Canada, Spain and Australia.

McDonnell Douglas, in a countersuit, dismissed Northrop's claims, saying it has done nothing to interfere with Northrop's foreign sales efforts. McDonnell Douglas has also accused Northrop of unsatisfactory performance as a subcontractor, as well as misappropriating technology in building Northrop's F-20 fighter.

The suit and countersuit are currently scheduled for trial late this year.

"Since 1979, we have been defending ourselves against this lawsuit. This defense is a cost of doing business. Federal Acquisition Regulations state such legitimate costs are allocable to government programs. The Navy disagrees. So we have filed an appeal," said Meyer of McDonnell Douglas.

On Feb. 3, 1984, Vice Adm. J. B. Busey, the commander of the Naval Air Systems Command, said in a letter to Sanford N. McDonnell, president of McDonnell Douglas:

"I am writing to you to reiterate and make sure that you understand the Navy's position with respect to the litigation expenses being incurred by both corporations. As this litigation provides absolutely no benefit to the Navy's F-A-18 program, the Navy will accept no responsibility to reimburse either McDonnell Douglas or Northrop for any such expenses."

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