General Dynamics To Appeal A-12 Decision In Supreme Court - Update

Tuesday, the U.S. Court of Appeals for the Federal Circuit denied a request for a re-hearing of the Federal Circuit's prior decision sustaining the government's termination of the A-12 aircraft contract between General Dynamics (GD), the Boeing Co. (BA) and the U.S. Navy.

General Dynamics said it disagrees with the recent decision and continues to believe that the government's default termination was not justified. The company also believes that the ruling provides significant grounds for appeal, and intends to petition the U.S. Supreme Court for review.

In 1988, McDonnell Douglas and General Dynamics won a $4.83 billion U.S. Navy Advanced Tactical Aircraft contract to develop the A-12 Avenger II, a stealthy, carrier-based, long range flying wing attack aircraft.

Technical issues, development cost overruns, growing unit costs and continuous delays led to the Department of Defense's refusal to approve extra funding, effecting the termination of the contract in 1991.

McDonnell Douglas merged with Boeing in 1997 in a $13 billion stock-swap to create The Boeing Company.

In 2007, the U.S. Court of Federal Claims ruled that the navy had properly terminated the contract for default. In June 2009, the U.S. Court of Appeals for the Federal Circuit sustained the government's decision to terminate the contract. The court also ruled that the contractors would have to refund the government more than $1.35 billion plus the accrued interest since 1991, a total of approximately $2.8 billion.

GD closed Monday's regular trading session at $67.32, down $0.20 or 0.30% on the NYSE, while BA closed at $51.97, down $0.66 or 1.25% on the NYSE. During after-market hours, GD shares fell further by $0.07 or 0.11% to $67.24.

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