Defense Contractors Catch Break in Court

Judge Stays Ruling on Gov't Contractors

AP Business Writer

FALLS CHURCH, Va. (AP) — A federal judge stayed his ruling granting the Pentagon a $2.3 billion judgment against two defense contractors in a long-running dispute over the canceled A-12 radar-evading Navy jet.

The decision Tuesday by U.S. Court of Federal Claims Judge Robert H. Hodges may prevent the government from following through on a plan announced earlier this month to collect the judgment from General Dynamics and Boeing by docking payments on other government contracts.

In 1991, then-Defense Secretary Dick Cheney canceled the contract to build eight of the stealth jets. By then the government had already poured $3 billion into the project.

The Pentagon contends the contractors were at fault, forcing the government to cancel the contract. General Dynamics and Boeing dispute the claim.

In 1996, Hodges ruled in favor of the contractors, but an appeals court overturned the ruling and sent the case back to Hodges. In August 2001, he ruled in favor of the government.

But on Tuesday he stayed his 2001 ruling, saying significant issues must be settled on appeal.

"That's what we've said all along, that we have a strong case on appeal,'' said General Dynamics spokesman Kendall Pease.

A federal appeals court is scheduled to hear argument on the appeal Jan. 9.

Last week, the Pentagon said it planned to collect the $2.3 billion, roughly half of which is interest payments, by docking the companies $128 million a month for 18 months on other government contracts.

Pease said the stay means the government technically has no money to collect, so it cannot continue with its collection plan.

Pentagon spokesman Maj. Ted Wadsworth disputed that interpretation.

"The court did not expressly direct the government to refrain from collection pursuant to the deferment agreement,'' Wadsworth said. "The government is reviewing today's court proceedings and is considering all available options.''

Falls Church-based General Dynamics stock finished up 26 cents, at $80.36, in trading Tuesday on the New York Stock Exchange. Boeing shares finished down 15 cents, at $32.25 a share, on the NYSE.