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Boeing Must Face Bankrupt Aircraft Co.'s $100M Suit

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Paullee   Thursday, 08/30/18 03:34:01 PM
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Boeing Must Face Bankrupt Aircraft Co.'s $100M Suit
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Law360 (August 16, 2018, 9:01 PM EDT) -- An Alabama federal judge has denied Alabama Aircraft Industries a quick win in its $100 million suit alleging Boeing put it out of business by pushing it out of a $1.2 billion U.S. Air Force contract, but also refused to clear the aerospace giant of the accusation, saying a jury will have to weigh the facts.

In a 47-page decision U.S. District Judge R. David Proctor on Wednesday denied AAI's motion for summary judgment and granted parts of Boeing Co.'s dueling bid, clearing it of certain claims that it breached parts of contracts for a joint bid for maintenance of the Air Force’s KC-135 tanker fleet. AAI has accused Boeing of gaining access to its trade secrets, wrongfully terminating the parties' agreement, and then using AAI’s confidential information to win the contract for itself.

But the judge ruled that it's up for a jury to decide if Boeing's actions caused AAI's business to hit rock bottom, saying that after careful consideration "Boeing’s argument that is it entitled to summary judgment due to AAI’s failure to prove damages caused by its breach is without merit."

The court likewise refused to settle whether Boeing's decision to terminate the work agreement was done in bad faith, saying it couldn't read into the company's actions because both parties "had competing interests and competing intents."

Judge Proctor found that Boeing did not breach a work share and teaming agreement with AAI, and said that even if it did run afoul of the parties' founding agreement to work together on the project, a clause in the contract limits the damages that AAI can seek for those breaches.

The court also did not come to a conclusion whether Boeing used AAI's proprietary information, as each side had presented plausible evidence. Judge Proctor said that even if a jury were to find against Boeing, AAI's argument that a clause limit liability did not apply in cases of bad faith "is without merit."

AAI initially sued Boeing in October 2007 after Boeing allegedly went back on its agreement to jointly bid on the Air Force contract after the military branch reduced the anticipated scope of the project. Both companies bid separately and Boeing was awarded the contract in May 2008, despite a submission from AAI that was about $15 million lower.

AAI eventually filed for Chapter 11 bankruptcy and received a final order from the federal bankruptcy court in Delaware on Sept. 6, 2011. AAI says Boeing was directly responsible for the bankruptcy, alleging its much-larger rival stole proprietary information and pulled strings with corrupt U.S. Air Force officials to cut AAI out of the $1.2 billion plane-servicing contract that its survival depended on.

The court has already found that Boeing destroyed certain evidence and Judge Proctor said Wednesday he would allow a jury to assume the information deleted could have hurt Boeing's case. However, the judge rejected AAI's contention that Boeing should have turned over certain pricing information.

"AAI knew that rather than suppressing the relevant information, Boeing flatly refused to provide the information requested," Judge Proctor wrote. "And, when AAI decided to act, it knew fully that it did not have the information it requested. On these facts, AAI has not presented evidence sufficient to create a genuine issue of material fact as to its suppression claim."

Counsel for Boeing did not immediately return a request for comment Thursday.

"AAI greatly appreciates the court's guidance and looks forward to establishing its rights of recovery at trial," AAI attorney Mike Redicker.

Boeing is represented by Craig S. Primis, Erin C. Johnston, Tia Trout-Perez and Alexia R. Brancato of Kirkland & Ellis LLP and R. Thomas Warburton and J. Thomas Richie of Bradley Arant Boult Cummings LLP.

AAI is represented by J. Michael Rediker, Joshua Lerner, R. Scott Williams, Peter J. Tepley, Meredith J. Lees and Rebecca A. Beers of Rumberger Kirk & Caldwell PC.

The case is Alabama Aircraft Industries Inc. et al. v. The Boeing Co. et al., case number 2:11-cv-03577, in the U.S. District Court for the Northern District of Alabama.

--Additional reporting by John Kennedy. Editing by Bruce Goldman.

Update and correction: A previous version of this article misstated the types of damages AAI could seek at trial. This story has also been updated with comment from AAI's counsel.

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