Posted on Tue, Jan. 18, 2011
last updated: January 18, 2011 07:41:19 PM
WASHINGTON — Supreme Court justices seemed inclined Tuesday to split the money difference and avoid serious questions about state secrets in a multi-billion-dollar contract dispute that pits the Boeing Co. against the Pentagon.
In a highly anticipated oral argument that quickly turned technical, the justices sounded prepared to let Boeing keep the money it's already been paid for the canceled A-12 Avenger warplane. At the same time, they seemed skeptical about Boeing being paid more.
"It's the 'go-away' principle of jurisprudence," Justice Antonin Scalia explained, adding, "It means that everybody keeps the money he has."
There's a lot of money involved. Boeing and General Dynamics want to retain $1.35 billion already paid for the A-12, an ill-fated stealth aircraft whose contract was canceled in 1991. The Pentagon wants the money back.
In addition to keeping the $1.35 billion, the defense companies want to be paid an additional $1.2 billion for work they've done. Judging from the questions asked during the hourlong argument, that position seems a stretch.
"You are being greedy," Justice Sonia Sotomayor told attorney Carter Phillips, who's representing the giant defense companies.
But while the monetary stakes are high for Boeing, General Dynamics and the U.S. taxpayer, the case's potential constitutional consequences seem to have shrunk. No justice Tuesday seemed prepared to dig deeply into the underlying notion of state secrets, a controversial doctrine used by presidents of both parties to thwart lawsuits.
By invoking state secrets, the Bush and Obama administrations have succeeded in frustrating certain challenges to war-on-terrorism tactics. Last September, notably, the 9th U.S. Circuit Court of Appeals invoked state secrets in affirming the dismissal of a lawsuit against a company that was accused of flying CIA prisoners to overseas prisons as part of the agency's controversial "rendition" program for suspected terrorists.
The 9th Circuit decision, in the case called Mohamed v. Jeppesen DataPlan, has been appealed to the Supreme Court. The justices haven't yet decided whether they will hear it.
Jeppesen DataPlan, as it happens, is a Boeing subsidiary, but it has nothing to do with the case that involves the A-12 Avenger. Neither the justices nor the attorneys who argued Tuesday made any reference to the CIA rendition case or to broader national security concerns in general.
"Since 2009, the government, altogether in civil court, has invoked the state-secrets privilege a whopping two times, to my knowledge," Acting Solicitor General Neal Katyal told the court.
Instead, the arguments boiled down to the best way to resolve a rather dry contract disagreement, albeit a particularly long-running and expensive one.
In 1988, the Pentagon awarded McDonnell Douglas Corp. and General Dynamics Corp. a contract for the aircraft carrier-based A-12. The companies were to be paid a fixed price of $4.7 billion.
The companies struggled to meet deadlines and control the weight of the aircraft. In January 1991, the Pentagon — then under Defense Secretary Dick Cheney — concluded that the companies had defaulted, canceled the contract and demanded back the $1.35 billion it had already paid.
"We have an absolute right to that money, right now," Katyal said Tuesday.
The defense contractors argue that they couldn't meet the contract's requirements because the Pentagon refused to share certain information about the highly secret stealth technology.
"If the government has information available to it, then ... it has to be forthcoming with the information with the contractor," Phillips argued.
But when the defense companies sued, the Bush administration — and now the Obama administration — contended that the state secrets doctrine allows the lawsuit to be dismissed so the stealth technology isn't made public.
Justice Stephen Breyer, echoing a point that several justices made, stressed Tuesday that "sophisticated contractors" such as Boeing are capable of negotiating a deal they can live with. Like other justices, he seemed leery of making sweeping new rulings that might disrupt other federal contracts.
"We are not just throwing a monkey wrench into the gears of government contracting, we're throwing the whole monkey," Breyer warned.
A court decision is expected by the end of June.
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