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Defense firm appeals $277M verdict for Humvee maker

October 21, 2013

A defense contractor is appealing an Indiana judge’s order that it pay $277 million to the Mishawaka-based manufacturer of Army Humvee military vehicles. The contractor overcharged for armor kits to retrofit the vehicles during the bloodiest days of the Iraq war, the judge ruled.

United Kingdom-based BAE Systems Inc. and its subsidiary firms last month filed notice with the Indiana Court of Appeals that it would appeal rulings by now-retired St. Joseph Superior Judge Michael P. Scopelitis, who awarded damages to AM General LLC.

Attorneys from Washington, D.C.-based Covington & Burling LLP, an American Lawyer A-List firm, last week applied for temporary admission to represent BAE. No attorneys have appeared on the appellate docket for AM General, which had its own high-powered Washington counsel in the trial court from the firm of Williams & Connolly.

Scopelitis in April issued a series of rulings including a 194-page order that BAE Systems pay AM General judgments totaling $277,939,519 for breach of contract and violations of most-favored customer clauses. 

The notice of appeal indicates it follows denial of a motion to correct error in the trial court. No further proceedings have been scheduled in the case and the trial court transcript has not yet been completed, according to case filings.

Scopelitis’ findings painted a picture of rampant overcharges from BAE and its predecessor companies that AM General passed on to the Army, even as AM General sought to determine true costs. Armor Holdings, which developed the retrofit armor kits, was purchased by BAE, and Armor Holdings’ executives received multi-million-dollar payments and retention bonuses, Scopelitis noted.

But Scopelitis wrote that “BAE was concerned … that disclosing its costs data would reveal excessive profits,” including markups on armor kits of 36 to more than 44 percent, well above the 5 percent to 15 percent profit the Army typically deems reasonable for tank and vehicle purchases.

BAE noted its intent to appeal after the ruling and disagreed with the findings in what it called an “extremely complex contract dispute.”

“BAE Systems is firmly committed to the principles of fair contracting and providing both value and performance in support of its many government and commercial customers,” the company said after Scopelitis’ ruling.

 

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