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Saturday, June 28, 2003
Supreme Court rejects Boeing appeal of suit
Company is liable for $19 million in 1991 crash of Army Chinook helicopter
The Boeing Co., the second-largest U.S. defense contractor, lost a U.S. Supreme Court bid to avoid paying $19 million over the 1991 crash of an Army helicopter in Saudi Arabia.
The court refused to hear Boeing's argument that a contract clause shielded it from having to pay damages for product defects. The government blamed a defective gear for the Chinook helicopter's crash. Boeing earlier paid about $41 million to resolve other claims.
The government sued under the Civil War-era False Claims Act. Boeing said a contract clause required by U.S. Defense Department rules protects defense contractors in most cases from having to pay damages for defects in high-cost items, such as helicopters.
"The government generally bears the risk of loss of high-value items" to keep contractors from having to buy insurance that would raise costs, Boeing's lawyers said in court papers. An appeals court ruling "immediately shifts billions of dollars of risk from the government to private industry."
The Defense Department hired Boeing during the late 1980s to upgrade existing Chinook helicopters for the Army. One of the helicopters crashed in Saudi Arabia, and while nobody was killed, the helicopter was destroyed. The government said the crash was caused by a defective transmission gear.
The lawsuit was first filed by Brett Roby, a former employee of a Boeing subcontractor who accused Boeing of installing the defective gears without adequate inspection and of falsely stating that the helicopters met contract requirements.
Boeing is the second-largest U.S. defense contractor after Lockheed Martin Corp. and the world's biggest maker of commercial jets.
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