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Thursday, January 20, 2011

Supreme Court Hears A-12 Dispute Arguments

U.S. Supreme Court justices sharply questioned a government lawyer Jan. 18 about why the government should be able to hold contractors for the canceled U.S. Navy A-12 stealth aircraft in default but still claim a privilege to withhold state secrets when the contractors tried to defend their work in court.
The court’s ruling, which is due before the 2010-11 term ends in June, could have broad implications for any company working for the U.S. government on classified technologies.
Boeing and General Dynamics argue that the government withheld critical information about stealth technologies and that led to schedule delays and cost overruns. Then-Defense Secretary Dick Cheney effectively canceled the $4.8 billion project in December 1990.
The program could be canceled legally, the contractors concede, but not with the penalties the government is seeking to apply to them. Such a cancellation is said to be for the “convenience” of the government. The difference between that and a default cancellation could amount to $3 billion or more when interest is figured in after nearly two decades of legal wrangling (Aerospace DAILY, Sept. 30, 2010).
“They seemed sympathetic,” Carter Phillips, the lawyer representing the contractors in oral arguments, told Aviation Week after the hour-long argument before the nine justices.
Indeed, at least two, Chief Justice John Roberts and Associate Justice Antonin Scalia, seemed to suggest that the law might require that when fault cannot be determined in court because of the withheld secrets, neither side should have a monetary claim on the other.
“Why don’t we call the whole thing off and say nobody’s at fault,” Roberts asked.
“It’s the ‘go-away principle’ of our jurisprudence,” Scalia quipped.
Acting U.S. Solicitor General Neal Katyal said it would be fine with the government if the case were thrown out, but that would mean the government’s determination would stand that the contractors were at fault because they did not do the work as promised. The contractors never delivered a prototype airplane, even after the government extended contract deadlines.
But Phillips had argued it should be illegal for the government to decide contractors are at fault if the basis for that determination could not be disputed in court.
“Suppose state secrets had kept you from proving default [in court],” the newest justice, Elena Kagan, said to Katyal. Katyal replied that the contract allows a finding of default without having to prove it in court. Kagan said that amounts to “tails you win, heads you win.”
But other justices seemed sympathetic to the government’s argument that even if secret information could not be brought up in court, the government contracting officer’s determination of default must stand. Otherwise, briefs for the government suggest, contractors could simply seek disclosure in court of secrets to force the government to back off a default finding.
Speaking of the possibility that the court would rule that any contract dispute involving state secrets being withheld in court would automatically be deemed for convenience, Justice Stephen Breyer said, “We are not just throwing a monkey wrench into the gears of government contracting, we’re throwing in the whole monkey.”
Justice Sonia Sotomayor suggested sophisticated companies like major defense contractors should realize that forcing secrets into the open to defend their work would not be an option.
“You always knew the government could do this,” she told Phillips of the default finding.
If oral arguments are any indication, the court will not venture into questions of how courts should determine the validity of government assertions of a privilege to withhold state secrets. Rather, the questioning seemed to indicate the justices will concern themselves with the proper effect of withholding secrets on the resolution of contract disputes.

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