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Humvee maker wins $277M

April 24, 2013
In 2008, the Army ordered AM General to seek an $84.5 million price reduction from BAE, according to the findings, but AM General continued to be denied access to BAE’s cost data. Scopelitis wrote that BAE declined to cut prices on its armor units sold to AM General and instead, “sought to trade the inevitable price reduction for contractual concessions from AMG.”

But AM General’s contract with BAE required BAE to supply AM General with certified cost or pricing data on request, and it required BAE to indemnify AM General, Scopelitis wrote.

By April 2012, the military informed AM General that the government had been overcharged more than $410 million due to BAE’s pricing for armored parts, according to the findings. A military review board later reduced that amount significantly, and AM General agreed to settle.

Under the settlement, the military would continue to withhold payment of more than $62 million from AM General due to BAE’s overcharges, and AM General would pay the government half of the net most-favored contractor judgment it might receive in its litigation against BAE. Scopelitis awarded $113,673,152 under that claim, so the government’s share is more than $56.8 million.

“Under Indiana law, BAE is required to indemnify AMG for the amounts that AMG reasonably agreed to give (the government) to settle its pricing claim,” Scopelitis wrote.

Meanwhile, BAE failed to persuade the court to find in its favor on claims that AM General misappropriated trade secrets when it decided to make the armored parts itself and used components from BAE and materials that the company claimed were trade secrets to reverse-engineer and manufacture the armor panels and kits.

Scopelitis ruled that the materials AM General used to develop its own armor were readily available and were not trade secrets. “Reverse engineering is lawful under trade secrets law so long as the product was obtained lawfully,” he wrote. “BAE has not established damages.”

Scopelitis ruled after a three-week trial in October in South Bend that attracted high-powered, connected legal firms on both sides.

AM General was represented by LaDue Curran Kuehn LLC of South Bend with backing from Washington powerhouse Williams & Connolly LLP. The Vault.com 2013 Law Firm Rankings based on nationwide associate surveys places Williams & Connolly as the nation’s No. 1 white-collar defense firm and No. 2 Washington, D.C., firm.

“All I’m authorized to say is the company has no comment beyond what is actually in the (court) papers,” said Paul E. Harold of LaDue Curran Keuhn, who with John LaDue represented AM General as local counsel. Williams & Connolly partner David Kendall said in an email, “We will let the decision speak for itself.”

BAE was represented by Taft Stettinius & Hollister LLP of Indianapolis and the Washington firm WilmerHale, rated the No. 3 Washington, D.C., firm in the Vault survey. William C. Wagner of Taft declined to comment. Juanita Crowley, the attorney of record for WilmerHale, has retired.

According to the Federal Contractor Misconduct Database maintained by the Project on Government Oversight at www.contractormisconduct.org, BAE is the ninth-largest U.S. government contractor with contracts worth more than $6.87 billion in fiscal year 2011. The database records 13 instances of misconduct by BAE since 1995 totaling more than $588 million.

BAE recorded international sales of more than $27 billion in 2012, according to company financial information.

An AM General spokesman said the company would not comment beyond the ruling.•
 

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