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Huge Lawsuit Settled

April 9, 1985 GMT

WASHINGTON (AP) _ One month after the Navy warned it might start billing them for its expenses, two of the nation’s largest defense contractors have settled a private antitrust suit over who will build the F-A-18 jet fighter for the export market.

The McDonnell Douglas Corp. and the Northrop Corp. released identical press statements Monday announcing they had settled their 51/2 -year-old suit and that ″all claims of the two companies ... will be dismissed.″

The settlement includes a $50 million payment by McDonnell Douglas to Northrop, along with a new partnership contract that makes it clear McDonnell Douglas will serve as the prime contractor for all F-A-18′s, including those built for export.

Northrop had contended in the suit that under its original contract with McDonnell Douglas, it was supposed to serve as the prime contractor for any of the planes sold to foreign governments.

The settlement comes less than a month after Navy Secretary John F. Lehman Jr. issued an order blocking McDonnell Douglas from trying to bill the government for its legal expenses in connection with the suit. The Navy had discovered that as of last October, McDonnell Douglas had submitted roughly $24.3 million in legal fees to the Pentagon.

Under pressure from the Navy, McDonnell Douglas last month refunded roughly $17 million in legal fees for which it had already received payment, while vowing to press an appeal of the determination that the claims weren’t proper.

Lehman, meantime, warned both companies that if they persisted in fighting out their dispute in court, the Navy was prepared to begin billing both companies for ″all expenses (to the government,) both direct and indirect″ because ″this litigation provides absolutely no benefit to the Navy’s F-A-18 program.″

John L. Cooke, a spokesman for McDonnell Douglas, said Monday he could not discuss how the $50 million settlement payment was calculated. He also declined comment on whether the Navy’s hard-line position on the litigation fees had played a role in forcing a settlement.

Cooke did say, however, that McDonnell Douglas had not dropped its appeal of the Navy decision to prevent the company from billing taxpayers for its litigation expenses.

″The status there has not changed,″ the spokesman said.

John R. Thorn, a spokesman for Northrop, also declined to discuss how the settlement was reached.

″But I think we’re happy with this, just to get the matter behind us,″ he added.

Cooke said McDonnell Douglas intended to make the $50 million payment to Northrop ″promptly,″ adding the payment would have ″no effect on earnings for the current period because we’ve already made allowances for resolving these contractual uncertainties.″

The court fight between the two companies dates to October 1979, when Northrop filed a $700 million antitrust suit against McDonnell Douglas in Los Angeles. The St. Louis-based McDonnell Douglas is the prime contractor for the Navy’s F-A-18, a high-performance fighter and attack jet designed for operation aboard aircraft carriers. Northrop, headquarted in Los Angeles, is the prime subcontractor on the plane.

In the lawsuit, Northrop claimed it entered into a ″teaming agreement″ under which it was supposed to serve as the prime contractor for any land- based version of the F-A-18 sold to foreign allies. Instead, the suit claims, McDonnell Douglas had continued to monopolize that business.

According to the Navy, 285 of the planes have been sold to date to Canada, Spain and Australia.

McDonnell Douglas, in a counter suit, dismissed Northrop’s claims, saying it had done nothing to interfere with the latter’s foreign sales efforts. McDonnell Douglas also accused Northrop of unsatisfactory performance as a subcontractor, and charged it with misappropriating technology in building Northrop’s F-20 fighter.

The suit and courter suit were scheduled for trial late this year.

In their announcement, the two companies described the settlement as providing ″a sound and effective working relationship for the continued development and production of F-18 aircraft ...″