Appeals court sides with Lockheed in contract dispute

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When a jury awarded a small software company a $24.8 million judgment against weapons giant Lockheed Martin in 2013, it seemed like a massive victory for every small business that had ever wanted to stand up to its behemoth competitors.

But when Lockheed appealed the case in trial court, the judge overturned the jury’s decision and granted Lockheed a judgement, notwithstanding the verdict. On Oct. 27, the Maryland Court of Special Appeals upheld the trial court’s decision, solidifying that verdict.

The lawsuit from Connecticut-based Command Technologies stemmed from its unsuccessful attempt to get a contract with the U.S. Air Force to supply a software system related to F-16 aircrafts made by Lockheed.

Command’s lawsuit had a range of claims against Lockheed, including tortious interference with business relations, unfair competition, misappropriation of trade secrets and breach of contract. The tortious interference and unfair competition claims went to the Montgomery County jury.

The trial judge later ruled that that no reasonable juror could have concluded that Lockheed had a duty to supply technical data formatted to certain specifications during an Air Force test of Command and other rival bidder’s software.

Command won a contract with the Air Force to provide its C2Web software. That software was supposed to be tested on Lockheed’s F-16 aircraft as part of a pilot project, according to the opinion, written by Judge Daniel A. Friedman.

“The understanding was that if Command’s software could be successfully deployed for use with the F-16, it could potentially be purchased for use with other Air Force aircraft as well,” said Friedman.

However, the software was not compatible, and while a Command employee testified that the company was working on fixing the problem, Lockheed licensed a rival software it had been developing with one of Command’s competitors. Command alleged that Lockheed deliberately sabotaged them because of their “direct financial interest” in that rival software.

Despite the ruling, the appeals court opinion recognized that these business practices make for harsh environment for competition.

“The issues in this case give us chance to stress that competition amongst business rivals can be aggressive and harsh. Aggressive and harsh business tactics alone, however, will not make a business liable to a spurned competitor unless the intentionally-stringent legal standards for establishing these business tort and contract claims are satisfied,” the opinion said.

While the trial court recognized that Lockheed may have intentionally interfered, there was no evidence that its actions were against the law, the opinion said.

Command Technology’s lead lawyer was Jeffrey Longsworth, partner at Barnes & Thornburg LLP in Washington D.C. Lockheed’s lead lawyer was Charles Claxton, head of litigation at Garson Claxton in Bethesda. Both lawyers could not be reached for comment.

This case wasn’t the first time or last time the government handed a defense contract that required collaboration between multiple companies. In July, the Department of Defense awarded an electronic health record system contract, the largest of its kind in history to Cerner, Leidos and Accenture for $4.3 billion, according to Healthcare IT News.

The Department of Defense prefers to pick readily available software made by the private sector that requires minimal modification before it’s put to use. The race to create ready-made products has driven down prices for these projects.

“Competition has worked for us,” Department of Defense Under Secretary for Acquisition, Technology and Logistics Frank Kendall, told Healthcare IT News.