Boeing Can't Nix Maintenance Co.'s $2M Jury Trial Win
By Hannah Albarazi
Law360 (May 11, 2020, 10:45 PM EDT) -- An Alabama federal judge on Monday denied Boeing's request to toss a now-defunct maintenance company's $2.1 million breach-of-contract win against the defense contractor, saying jurors saw sufficient evidence to reasonably conclude that Boeing breached their deal by bidding solo on a $1 billion-plus Air Force contract.
U.S. District Judge R. David Proctor shut down The Boeing Co.'s bid for judgment as a matter of law, finding there to be sufficient evidence for a reasonable jury to find in favor of Alabama Aircraft Industries Inc., which sued Boeing in 2011 alleging that it caused AAI to go belly up by stealing trade secrets and pulling strings with corrupt Air Force officials to cut it out of a major plane servicing contract that its survival depended on.
Judge Proctor said a reasonable jury could conclude that Boeing breached both the memorandum of agreement and the nondisclosure agreement it entered with AAI — formerly known as Pemco.
The judge said a reasonable juror could also conclude "that Boeing's evidence that it could not have used AAI's information was not credible, and in preparing its solo bid, Boeing in fact used Pemco's proprietary information to compete with AAI."
The judge agreed with AAI that the verdict should not be disturbed.
AAI launched its legal battle against Boeing in 2011 shortly after it filed for Chapter 11 bankruptcy. AAI claimed it provided Boeing with proprietary information under a 2005 agreement to jointly bid on a contract, only to have Boeing pull out of the deal and win the contact on a solo bid. AAI alleged that Boeing cheated to get the contract and pointed to a DOJ investigation as proof.
In 2006, Boeing agreed to pay $615 million to settle U.S. Department of Justice probes into allegations of a yearslong arrangement between Boeing and former Deputy Assistant Secretary of the Air Force for Acquisition and Management Darleen A. Druyun. The DOJ accused Boeing of illegally obtaining and using competitors' information to win contracts worth billions of dollars from NASA and the Air Force.
Druyun, who eventually pled guilty and served nine months in prison, repeatedly made decisions on behalf of the USAF that overwhelmingly favored Boeing, then left to take a $250,000-per-year job at Boeing.
One of the deals Druyun allegedly skewed in favor of Boeing while at the USAF was the 1998 contract for maintenance of the Air Force's KC-135 tanker fleet. Those contracts have been AAI's lifeblood going back to 1969, but for the 1998 contract Druyun allegedly arranged to have the KC-135 maintenance work bundled with maintenance for the A-10 Warthog, with which AAI had no experience.
That led to the 1998 contract going to Boeing, but just a few years later the USAF ordered Boeing to hire AAI as a subcontractor to perform the work on the KC-135 tankers. The two companies teamed up to submit a bid on the next contract in 2005, but Boeing canceled their agreement to jointly bid on the contract for maintenance of the Air Force's KC-135 tanker fleet after the military branch reduced the anticipated scope of the project, AAI said.
Both companies ended up bidding separately, and Boeing was awarded the contract in May 2008, even though AAI's submission was about $15 million lower, according to AAI.
In 2017, Judge Proctor sanctioned Boeing, finding that its employees destroyed documents related to its long-running dispute with AAI over the $1 billion-plus U.S. Air Force contract, and said he would allow a jury to assume the information deleted could have hurt Boeing's case.
After nearly a decade of litigation, in March a jury awarded AAI nearly $800,000 for a violation of the bidding agreement and another $1.3 million for a violation of a nondisclosure agreement. The award was far less than AAI's 2011 estimate that the damages exceeded $100 million.
Boeing argued that the jury's verdict had been based on improper jury instructions, inadmissible evidence and "claims on which Boeing is due judgment as a matter of law."
Boeing argued that AAI failed to present sufficient evidence from which a jury could find that Boeing breached either the memorandum of agreement or a nondisclosure agreement
On Monday, Judge Proctor noted in his opinion that AAI had presented sufficient evidence to the jury that Boeing's termination of its memorandum of agreement with AAI was a breach of contract because Boeing's participation in the program with AAI was still practical and financially viable.
The judge also concluded that Boeing's arguments that AAI failed to prove that it misused any of AAI's proprietary information and that its alleged conduct caused it damages are without merit.
Representatives for Boeing and AAI did not immediately respond to requests for comment Monday.
AAI is represented by J. Michael Rediker, Joshua D. Lerner, Peter J. Tepley, Meredith Jowers Lees and Rebecca A. Beers of Rumberger Kirk & Caldwell PC and Laurie Webb Daniel of Holland & Knight LLP.
Boeing is represented by R. Thomas Warburton and J. Thomas Richie of Bradley Arant Boult Cummings LLP and Craig S. Primis, Erin C. Johnston, Kasdin Miller Mitchell and Alexia Brancato of Kirkland & Ellis LLP.
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 Ryan Boysen and Rick Archer. Editing by Emily Kokoll.
