Humvee maker, defense giant BAE wrangle over $277M judgment

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A dispute over the true cost of Humvee body armor rushed to the battlefield in the deadliest days of the Iraq war has resulted in a court battle that includes suggestions that one of the world’s top defense contractors may have serious business problems as it argues against posting full security for a $277 million judgment.

British defense contractor BAE Systems Inc. has asked the Indiana Court of Appeals to stay execution of the judgment pending appeal. Mishawaka-based Humvee maker AM General LLC argues it’s entitled to the judgment and opposes BAE’s motion.

BAE argues in court filings this month that a ruling in St. Joseph Superior Court in November ordering it to post an appeal bond or irrevocable letter of credit in the amount of $290 million “effectively holds the bond cap statute unconstitutional.”

BAE argued it should only have to provide security in the amount of $25 million under I.C. 34-49-5-3, which BAE argues caps appeal bonds at that amount.

BAE supplied armor kits that could be installed on AM General’s Humvees. St. Joseph Superior Judge Michael Scopelitis in April ordered BAE to pay $277,939,519 to AM General, ruling BAE and predecessor companies were in breach of contract and violated most-favored customer clauses by overcharging for armor kits that troops used in the field to retrofit Humvees.

BAE appealed in October and earlier this month filed a motion to stay execution of judgment pending appeal.

“The trial court erroneously concluded that BAE Systems’ alternate form of security … was not sufficient,” the company’s brief says.

“There is simply no evidence that BAE Systems itself, or its parent company, present any risk of not complying with any final judgment in this case,” the company argues. Its filings say there is “virtually no chance” BAE will not satisfy a final judgment.

AM General argued in reply that BAE misreads the appeals bond statute, which allows discretion on when the cap may not apply, and that in any event, Trial Rule 62(D) governs a request to stay the trial court order.

“AM General received its judgment on April 2, 2013, and BAE has managed to avoid posting full security against the judgment as required by Trial Rule 62(D) for more than 37 weeks,” the Humvee maker argues. “AM General is entitled to protection of its very large judgment without further delay.”

“The trial court considered substantial evidence attached to AM General’s opposition brief about the state of BAE’s finances and serious problems facing its business,” AM General argues in its pleadings.

“No BAE officer or employee with knowledge affirmed the representations about the company’s financial condition,” according to AM General’s filing.

BAE says it recorded international sales of more than $27 billion in 2012, and its parent company, BAE Systems PLC, is rated as the world’s second-largest defense contractor, according to the Stockholm International Peace Research Institute.

No arguments before the Court of Appeals have been scheduled in the case.



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