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Supreme Court keeps alive Boeing and General Dynamics suit over canceled Navy jet contract

May 24, 2011

Washington — 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 U.S. appeals court ruling that the Navy had been justified in canceling the contract for the A-12 radar-evading aircraft after it encountered serious technical difficulties.

Justice Antonin Scalia said in the opinion issued 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 did not mean the entire litigation would 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 defenses 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 involves some $3 billion.

Boeing and General Dynamics argued that former Vice President Dick Cheney, who was then Defense 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.

J. Michael Luttig, Boeing's executive vice president and general counsel, said, "We are pleased with today's win in the Supreme Court and the court's unanimous decision to overturn the government's default termination of the A-12 program.

"It has always been our view that the default termination was improper," he said in a statement.

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 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.

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