When Northrop decided in the 1970s that it could apply weapons technology to build a better computer system for doctors, it discovered that expanding a military aircraft contractor into commercial electronics had some unexpected pitfalls.
The venture was shut down after several years when physicians all over the United States began filing lawsuits, claiming that their Northrop computers had failed to perform adequately and had lost patients' medical records.
In a confidential multimillion-dollar agreement earlier this year, Northrop settled two dozen of those lawsuits in Los Angeles Superior Court. Just one of the lesser cases cost the company $1.3 million, recently obtained court records show.
The settlement was won by Herbert Hafif, a powerful and combative Claremont attorney who has become no pal to Northrop Chairman Thomas V. Jones. Hafif once said of Jones: "I'm going to make him chopped liver."
Now Hafif has sunk his teeth into one of Northrop's key defense programs, the MX missile, playing an important role in embarrassing the Los Angeles-based aerospace firm in front of Congress and the Pentagon in four days of hearings on the MX held last month by the House Armed Services Committee.
The two men are formidable adversaries. Both are politically well-connected, adamant in their opposing ideologies, and financially powerful. They are nonconformists in their fields but are so successful that nobody is likely to rein them in. Above all, Hafif and Jones have proven through the years that they have staying power in tough times.
In the current battle, Hafif (pronounced like the word half ) represents more than a half-dozen current and former Northrop employees who have alleged, among many other things, that Northrop's electronics division sold the Air Force defective guidance equipment for the MX missile system. Northrop calls the charge "unadulterated nonsense" and says that "there have been 17 out of 17 successful test flights and all the operational reliability data has been better than predicted."
So far, however, two cases have been filed by engineers on behalf of the federal government under a law known as the False Claims Act, which allows the employees to share in any recovery of government funds. The law's ramifications only now are being fully explored, but they could ultimately play havoc with the defense industry.
The first suit, filed last October, alleges that Northrop's guidance system contains a number of technical flaws. The second, filed in May, claims that the firm set up fictitious businesses to buy MX parts when its own purchasing department could not supply them and then threw away MX parts into a garbage dumpster to hide its management problems from the Air Force.
A Northrop spokesman said the fictitious businesses were legal but were "unnecessary, and that when the corporation learned about them, it shut them down and changed the management that instituted them and improved the division's basic procurement procedures."
The allegations against Northrop represent exactly the sort of legal challenge upon which Hafif has built his success. And only an attorney with Hafif's financial resources could take on the case.
Hafif, at 57 the sole owner of a practice that employs 15 attorneys around California, has already spent a half-million dollars on the Northrop cases, according to Robert S. Kilborne, one of Hafif's attorneys in charge of the Northrop cases.
A private investigating firm working for Hafif has obtained hundreds of internal Northrop documents leaked through an elaborate network of unidentified Northrop employees, Kilborne said, adding that the investigative and legal costs "ultimately will be in the millions."
Although he declines to say how much money he has made in recent years, Hafif works only for contingency fees that can amount to 40% of court awards. The large awards he has won, some of which are still subject to appeal, indicate that his gross fees in recent years approach $100 million. In some years, the Law Offices of Herbert Hafif, as they are known, have been more profitable than Northrop--a major defense contractor.
Hafif won a $541-million verdict in 1985 in a dispute over the ownership of the Computerland retail chain. He won $45 million in 1987 for residents of West Covina from the BKK toxic waste dump. He won $6.2 million from the city of Newport Beach when a swimmer broke his neck on a sand bar and became a quadriplegic.
In what may be his most bizarre case, he won a jury award of $1.1 million for a woman who was struck by a falling tree during a gale-force windstorm. Hafif sued the city of Ontario, alleging that the tree was unsafe.
Litigation involving defense contracts under the False Claims Act is a new area of law, but Hafif believes that a private trial lawyer can do better than the Justice Department has done in pressing cases against defense contractors.