Supreme Court Overturns A-12 Ruling Against Contractors

23 May 2011 By MARCUS WEISGERBER DefenseNews

The U.S. Supreme Court vacated a federal appeals court ruling that defense contractors General Dynamics and Boeing owed the Pentagon billions of dollars stemming from the cancellation of a Navy stealth aircraft program.

The ruling is the latest chapter in a more-than-two-decade saga involving the cancellation of the program and the disclosure of state secrets.

The Navy awarded General Dynamics and McDonnell Douglas - now Boeing - a $4.8 billion fixed-price contract to develop the A-12 Avenger, a carrier-based stealth aircraft. After falling years behind schedule and exceeding costs, the government terminated the contract for default in January 1991.

The companies challenged the termination, claiming the government did not share its extensive stealth knowledge, which was used to previously build the Air Force F-117 Nighthawk fighter and B-2 Spirit bomber.

Subsequently, a federal claims court ruled General Dynamics and McDonnell Douglas did not default on the contract, and ordered the Pentagon to pay them $1.2 billion in expenses. However, a federal appeals court overturned the decision and ordered a new trial. DoD prevailed in that trial, which "reaffirmed that petitioners' superior-knowledge affirmative defense could not be litigated," due to state secrets.

The Pentagon wants a return of the $1.35 billion it paid petitioners for work never accepted, plus interest.

But the Supreme Court on March 23 vacated the appeals court ruling and sent the case back to the federal circuit.

"Whether the Government had an obligation to share its superior knowledge about stealth technology is left for the Federal Circuit to address on remand," Supreme Court Justice Antonin Scalia wrote in the court's opinion, which ruled unanimously.

A Boeing spokesman in Chicago said the company was reviewing the ruling. DoD and General Dynamics officials were not immediately available for comment.