Boeing, General Dynamics Find Favor in High Court After Navy Killed Contract

The Supreme Court unanimously overturned a lower court ruling that would have required Boeing and General Dynamics to repay billions in federal payment, instead sending the 20-year old case over the failed A-12 stealth fighter jet back for further litigation.

The main dispute centered on the technical language used by the government when it decided in 1991 to pull the plug on the multi-billion dollar contract.

The Federation of American Scientists described the A-12 as roughly similar to other Navy aircraft but its design featuring internally held ordinance would make it less susceptible to radar detection. The Pentagon said the contractors had missed several critical production deadlines, cancelled the contract for default and sought repayment of funds.

The companies argued that they're not at fault because the government never shared top secret information they needed to meet the contract's deadlines. The firms contend that the contract termination was convenient to the government and therefore they should not be held liable for damages. In turn, the companies contend, the government owes them money for its expenses shelled out prior to the cancellation.

But in order to assert that defense in court, the companies needed to access top secret information which the government refused to produce citing the so-called "state secrets" privilege, which is designed to keep sensitive information necessary for national security from being produced in an open courtroom. This put the contractors in the odd position of asserting a defense for which they could not access the evidence to back up their claims.

That conflict, the court noted, prevents a timely end to the case.

"Neither side will be entirely happy with the resolution we reach today," Justice Antonin Scalia wrote.

The court said the valid "state secrets" claim offered by the government prohibits a judicial determination on the financial claims from each party. They are now free to find other avenues to pursue their respective claims.