Court puts off defense repayments of two companies

A federal court issued a stay Dec. 10, prohibiting the Pentagon from withholding payments on government contracts worth $2.3 billion from two major defense contractors.

The Boeing Co. and General Dynamics Corp. had requested a stay after the Defense Department announced that the Defense Finance and Accounting Office would begin offsetting payments on existing contracts against the disputed money. The dispute arose from the 1991 termination of the A-12 stealth attack aircraft contract.

"In reaching this decision, the court noted that collection of monies would not be in the national interest, particularly at this time," General Dynamics officials said in a prepared statement. "The court added that the issues on appeal are substantial, and the appeals court will want to closely examine a number of these issues."

"We have stated consistently that we feel we have a strong legal case in the A-12 litigation, and we are pleased that our focus can now shift to the merits of our case on appeal," said Doug Bain, Boeing senior vice president and general counsel.

The Court of Appeals is scheduled to hear arguments in the case Jan. 9, 2003, with a decision expected later in 2003.

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