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Complex Litigation (Defense & Aerospace)
For several decades, Jenner & Block has represented defense clients in their most complex and challenging litigation matters. As a result of our long experience representing defense clients, our litigators understand the defense and aerospace business, including all aspects of government contracts, and the applicable law, including the Federal Acquisition Regulations. We understand the terms of art in the defense industry and regularly grapple with issues that arise in defense-related litigation, including cost allowability and allocability issues and issues relating to recovery of legal costs. In many of our cases, we also regularly team with our government contract lawyers.
We regularly defend and prosecute claims against the United States government. We have represented our defense clients in connection with allegations of procurement fraud and false claims, including qui tam lawsuits brought by whistleblowers seeking treble damages. We have also represented defense clients in matters relating to the Foreign Corrupt Practices Act, as well as the Federal Tort Claims Act.
In recent years we have also been regularly involved in litigated matters resulting, either directly or indirectly, from the consolidation of the defense industry. We have represented both buyers and sellers in disputes resulting from the acquisition or disposition of defense businesses. We have represented clients in complex accounting disputes, and in disputes over representation and warranties, arising from the sale or purchase of defense business. We have also represented defense clients in multi-million dollar litigation surrounding complex tax controversy issues. We have represented defense clients in litigation surrounding the protection and commercial utilization of technology and trade secrets, as well as issues that may implicate national security interests, such as ITAR. We have also been involved in litigation and counseled clients on issues relating to teaming agreements, confidentiality agreements, and non-solicitation agreements.
We have regularly litigated labor, employment and benefits issues on behalf of defense clients, including issues under the FLSA and ERISA. We have represented defense clients in litigation stemming from plant closures and RIFs.
We understand that many defense clients face various long-tail risks such as pollution, asbestos, toxic tort and silica, and we have represented these clients both in the underlying toxic tort litigation as well as related insurance coverage litigation. We understand that underlying long-tail risks raise complex issues relating to the amount of insurance available as well as issues concerning which insurer or insurers are responsible for paying the claims. As a result, we regularly counsel defense clients on issues related to insurer insolvencies, including insurance buy-backs and issues related to EQUITAS and the London market.
We have represented defense clients in state and federal courts throughout the country, as well as in the Supreme Court, the Federal Circuit, the Court of Federal Claims and the Armed Services Board of Contract Appeals. In recent years, we have also handled domestic and international arbitrations on behalf of defense clients. Our litigators have demonstrated the ability to meet the challenges faced by our defense and aerospace clients every day in court rooms and boardrooms throughout the country.
Government Contracts (Defense & Aerospace)
Jenner & Block counsels defense and aerospace companies on the full range of legal issues encountered by companies doing business as contractors with the federal government. Our representation of government contractors extends from pre-award and source selection, throughout the wide range of contract performance and compliance issues, to the post-termination and contract close-out process. Our practice encompasses counseling, litigation, and alternative dispute resolution.
The Firm's government contracts group has substantial breadth and depth in the defense and aerospace industry, as we provide government contracting legal services on a daily basis to many of the largest defense and aerospace companies in America, including General Dynamics, Lockheed Martin, General Electric, and Honeywell. Our areas of activities encompass traditional protest, audit and claims, contract terminations, teaming and subcontracting, commercial items, FOIA, complex cost accounting, defective pricing, technical data and technology rights, "other transactions," and ethics and compliance issues. On an inter-disciplinary basis, our government contracts attorneys provide extensive support to the Firm's Corporate Practice for due diligence and other transaction-related activities involving the acquisition of government contractors. We also work regularly on fraud/false claims investigations and defenses, and conduct internal investigations for clients in connection with voluntary compliance reviews and disclosures.
Beyond our breadth of experience in all aspects of government contracting law, we have particular capabilities in developing areas of the law that are relevant to the defense and aerospace industry. Such areas include: (a) litigation and ADR to recover improperly capped executive compensation under cost-based federal contracts; (b) counseling and litigation to overcome jurisdictional and Anti-Deficiency Act traps regarding the government's indemnification of federal contractors ("DuPont" issues); (c) counseling and litigation for companies engaged in highly classified contracts with the federal government; (d) counseling related to the new statutes and regulations on homeland security; (e) international compliance (e.g., ITAR, BAA/TAA, FMS/FMF, FCPA) counseling and investigations; (f) fraud/false claims act litigation and counseling with respect to complex government contracting issues; and (g) proper use of and accounting for independent research & development (IRAD) funding.
Finally, our attorneys are very active in industry and bar associations that are important to the defense and aerospace community, such as the Public Contract Section of the ABA, the National Defense Industrial Association and the Court of Federal Claims Bar Association. In those roles, we are able to help shape the development of industry responses to government policy and stay ahead of developing issues. Our attorneys also regularly provide in-house training to our defense and aerospace clients on all aspects of the government contracting process, and speak at industry conferences on topics of interest to the aerospace and defense community.
Corporate (Defense & Aerospace)
Jenner & Block serves the interests of defense and aerospace clients across a wide range of strategic business transactions and counseling matters. During the past several years, we have represented clients in connection with more than thirty acquisitions, dispositions or restructurings in these industries, ranging in size from several million dollars to more than $4 billion. These transactions involved businesses that range from heavy manufacturing of weapons, aircraft and related components, to cutting edge information technology providers that contract with various agencies of the United States government. Our transactional lawyers regularly monitor developments in these industries and understand the intricacies associated with successfully operating businesses in these sectors. The depth of our practice in these areas has allowed us to assemble a group of lawyers who are not only conversant in terms such as FCS, UAVs, JTRS and JSF, but who also understand the nuances associated with government contracting matters. Various of our clients also have extensive international operations and we are therefore sensitive to the issues associated with ITAR, FCPA and other compliance matters relevant to these industries.
In addition to consummating M&A transactions, our corporate lawyers also routinely represent the Firm's defense and aerospace clients in financing their various initiatives. Whether in the form of traditional bank debt, public equity or debt offerings, or Rule 144A offerings, we are able to provide our defense and aerospace clients with a seamlessly integrated team of professionals. Our finance lawyers have also counseled various aerospace industry leaders on the restructuring of leveraged leases and the perfection of security interests in engines and other equipment.
In addition to industry-specific skill and experience, a number of our partners have served, either full-time or in an outside capacity, as general counsel or as executive officers or board members of publicly-held corporations. These experiences reinforce the values that we share with many of our corporate clients, including commitments to best practices, efficiency and workplace diversity. These common values serve as a basis for the development of close partnering relationships with many of our clients within the defense and aerospace community.
Employee Benefits and Executive Compensation (Defense & Aerospace)
Jenner & Block's Employee Benefits and Executive Compensation Practice has a depth and breadth of experience in the defense and aerospace industry.
ERISA Counseling We work on a daily basis with General Dynamics as its primary counsel for employee benefits and executive compensation matters, including design, compliance (ERISA, tax, securities, government contracting/CAS, etc.) and implementation of benefit programs and strategies ranging from pension and 401(k) to equity compensation and employment and separation agreements for senior executives.
Industry Consolidation On behalf of our defense and aerospace clients, we have been, and continue to be, active in the industry consolidation that started in the early 1990s.
- We have been involved in more than 30 acquisitions, sales and divestitures of defense and aerospace businesses, ranging in size from small privately held firms to multi-billion dollar public companies. Deals include businesses in information technology, combat vehicles, munitions and weapons, business jet manufacturing and service, and the purchase or divestiture of three of the six largest private shipyards in the country (a fourth shipyard, has been, and remains, a client).
- As part of these transactions, we have negotiated and otherwise been involved with the transfer (incoming and outgoing) of more than $3 billion of ERISA plan assets and liabilities, with no significant IRS, DOL or PBGC challenges and only one significant challenge by a government customer, which was favorably resolved with the Navy for a fraction of the disputed amount.
Government Contract Issues in Employee Benefit Plans The benefits group is experienced with the cost accounting standard (CAS) issues involved in pensions and other employee benefit plans. In deals, we have negotiated and documented many large ERISA asset transfers designed to comply with CAS 413 and reduce exposure to government customer requests for credits or adjustments. In our counseling role, we understand that CAS touches nearly every aspect of the government contractor's business, including benefits and executive compensation, and we are constantly aware of, and ready to raise, government contract issues, including CAS compliance, effects on forward pricing disclosures, allowability and recoverability. The benefits group works closely on these issues with lawyers in Jenner & Block's Government Contracts, Corporate and Litigation Practices.
Intellectual Property and Technology Law (Defense & Aerospace)
Jenner & Block has a sophisticated intellectual property practice, including sub-practices focusing on intellectual property and technology litigation, licensing and transactional representation, and patent and trademark prosecution. Many of our attorneys are admitted to practice before the United States Patent and Trademark Office, and many hold degrees in electrical engineering, mechanical engineering, physics, computer science and other technical fields.
Our experience includes litigating cases involving patents, trade secrets, copyrights, trademarks, unfair competition, proceedings in federal courts and before the Board of Patent Appeals and Interferences, proceedings before the Trademark Trial and Appeal Board, and proceedings before the International Trade Commission. We are also involved in every aspect of patent prosecution -- from drafting patent applications to ensuring that patents awarded receive the full protection of the law. Our patent prosecution experience extends to a wide range of fields relevant to the defense and aerospace industry, including electronics, semiconductors, telecommunications, aerospace, manufacturing equipment and methods, machine tools, and computer hardware and software. In trademark matters, our experience includes counseling clients prior to the adoption of new marks and obtaining trademark registrations in the United States Patent & Trademark Office and abroad.
Environmental, Energy and Natural Resources Law (Defense & Aerospace)
Jenner & Block has one of the largest and most dynamic environmental practices in the country. We represent clients in regulatory matters, permit proceedings, due diligence investigations, audits, insurance recovery proceedings, a variety of corporate transactions, and in litigation. Of particular interest to companies in the defense and aerospace industry, which may be litigation targets based on current or historic operations, Jenner & Block represents clients in toxic tort litigation, including: mass tort litigation, toxic tort actions alleging contamination by underground facilities, toxic tort actions involving alleged exposure to chemical plant omissions and toxic tort allegations involving property damages claims.
In addition to our general environmental experience, we have significant experience representing defense and aerospace clients in a wide variety of litigated, regulatory and transactional matters. Our environmental group has represented General Dynamics and its subsidiaries in connection with numerous complex Superfund matters, including the Tucson Airport site and the Crab Orchard NPL site in Marion, Illinois. We have represented Gulfstream in air emissions matters before the South Coast Air Management District. We have been significantly involved in helping defense industry clients in restructuring and exiting facilities, including developing strategies for minimizing long-term environmental exposure. Similarly, we have worked closely with clients on site selection for proposed new facilities. We have worked with industry clients, as well as with our government contract group, to ensure that the costs defense contractors incur to cleanup a site or respond to an environmental problem are allowable, and to maximize permissible recovery from the government. We also know that our defense and aerospace clients often have historical insurance policies that may provide a vehicle for additional recovery, and we aggressively pursue that recovery whenever possible.
We are working closely with defense and aerospace companies on cutting edge issues, including perchlorate contamination, natural resource damage issues and toxic tort concerns. The lawyers in our environmental group believe it is critical to stay current with developments in the defense and aerospace industries so we can continue to provide excellent representation and be proactive in protecting the clients' interests.
Labor and Employment (Defense & Aerospace)
Jenner & Block provides labor and employment law advice and representation to major corporations in widely different industries, including the defense and aerospace industry. Because of the depth of our employment law and employment litigation experience, the Firm is uniquely positioned to successfully represent clients on highly complex labor and employment law issues. Our experience includes:
- Successful representation of clients in the defense and aerospace industry in complex employment litigation, including class action litigation. Recent successes in include a ruling in favor of General Dynamics Land Systems by the United States Supreme Court in General Dynamics Land Systems v. Cline, an age discrimination case in which younger employees claimed that General Dynamics discriminated against them in favor of older employees.
- National Labor Relations Board proceedings, labor injunctions, union avoidance counseling and programs, collective bargaining, and labor arbitrations
- Employment litigation and defending charges of employment discrimination before administrative agencies
- Investigating internal harassment claims
- Employee terminations and reductions-in-force counseling
- Americans with Disabilities Act compliance, Family Medical Leave Act compliance, wage and hour laws compliance, and employee handbooks and policies
- Drafting and litigating non-competition agreements and other restrictive covenants
- Labor and employment aspects of mergers and acquisitions
- OFCCP audits and proceedings, and affirmative action plans
Tax (Defense & Aerospace)
Our tax attorneys have extensive knowledge and experience in federal and state tax matters. We have used this background to provide well-reasoned counsel to our defense and aerospace clients that may face unique issues such as accounting for long-term contracts, research and development tax credits, and international transactions. Our state tax practice is national in scope and encompasses all forms of state and local taxes including, income, franchise, sales/use, property and a variety of miscellaneous state and local taxes. In the area of tax litigation, our tax attorneys work closely with the Firm's unparalleled litigation practice to provide dispute resolution strategies and, if necessary, representation at trial in federal and state courts or before administrative agencies.
Representative Engagements
- Counseled General Dynamics concerning federal and state tax issues arising in connection with its 2001 acquisition of Integrated Information Systems Group from Motorola, Inc.
- Representation of General Dynamics in connection with change of accounting issues and the loss disallowance rules under Treasury Regulation section 1.1502-20.
- Advised General Dynamics with respect to debt defeasance issues in connection with debt restructuring and consulted with the Company on the tax issues arising in connection with a debt offering under section 144A of the Internal Revenue Code.
- Worked with General Dynamics Land Systems on the tax issues arising in connection with joint venture agreements.
- Counseled both General Dynamics and its subsidiaries with respect to whether certain business operations may or may not create nexus and strategies to minimize nexus; unitary apportionment analysis including proper composition of the unitary group and "instant" unity issues; calculation of apportionment factors (including items to be included in the factors) and throwback issues; business income and non-business income determinations and extraordinary items; state tax consequences of federal RAR adjustments; and the applicability of and proper operation of state tax credits.
- Counseled General Dynamics and its subsidiaries on the availability and applicability of sales and use tax exemptions; application of nexus principles with respect to imposition of sales and use taxes; application of the Buck Act to federal enclaves with respect to sales and use tax liability; and how operations may be structured to minimize sales tax exposure generally and with respect to contract bids.
- Representation of General Dynamics and its subsidiaries in connection with state tax audits, state tax administrative proceedings and in state court litigation matters. We have worked with General Dynamics in drafting tax protests and drafting and negotiating private letter rulings requests. We are currently involved in litigation on behalf of Electric Boat and Bath Iron Works, and consulting in litigation on behalf of General Dynamics, to establish the availability of state sales and use tax exemptions for overhead material purchased for use in government contracts under the resale theory developed in Aerospace v. SBE.
- Prosecuted claims for the refund of sales and use tax paid by National Steel and Shipbuilding Company (NASSCO) on overhead material purchased for use in connection with its government contracts. The California State Board of Equalization (SBE) had denied the refund claims taking a narrow view of the applicability of Aerospace v. SBE, 218 Cal. App 3d 1300; 267 Cal. Rptr. 685 (1990). The SBE argued that Aerospace (and thus its own regulations) did not support the refund claims because the title passage clauses in NASSCO's government contracts were not identical to those at issue in Aerospace and the title passage clauses in NASSCO's contract did not in fact pass title to the overhead material to the government as required by Aerospace. Before the SBE on rehearing for the refund claims denial, it was successfully established that the title passage clauses in NASSCO's government contracts were substantially similar to those in Aerospace, that the clauses did pass title to the government, and that NASSCO's purchases were exempt from California sales and use tax.
- Representation of General Dynamics in Tax Court litigation involving various issues raised by its 1985 and 1986 federal corporate income tax returns. One of the issues addressed was whether General Dynamics could properly claim tax credits for certain research and engineering expenses. Another issue concerned whether General Dynamics' multi-year contracts with the Air Force for the F-16 aircraft could be properly accounted for under the completed contract method of accounting. The credit issue was settled on favorable terms, while the method of accounting issue was decided in favor of General Dynamics after a trial. As a result of our successful representation in this matter, the Company received more than half a billion dollars in tax benefits.
- Representation of General Dynamics in a $103 million tax refund lawsuit pending in the United States Court of Federal Claims. The litigation challenges the validity of the Treasury Department's loss disallowance regulations, Treas. Reg. 1.1502-20, and involves the standards under which a long term contract will be deemed completed under 26 U.S.C. § 460 using the completed contract method of accounting. Finally, the lawsuit challenges the Service's refusal to allow the taxpayer to account for certain procurement contracts under its normal method of accounting, as opposed to the percentage completion method of accounting as if the procurement contracts were qualified long term contracts under 26 U.S.C. § 460.
- Assisted Ordnance and Tactical Systems with its Illinois Franchise Tax filings after its acquisition by General Dynamics.
- Assisted Land Systems in claiming and settling claims for refund with Alabama for the state's imposition of an unconstitutional franchise tax.
- Assisted Land Systems in filing property tax returns.
- Assisted Defense Systems and Advanced Technology Systems with the acquisition of direct pay permits in several states.
- Assisted Advance Technology Systems and IT International Telecom USA in qualifying their private disability plans in New Jersey thereby exempting each entity from the state's mandatory disability premiums.
- Worked with National Steel and Shipbuilding to determine calculation of state income tax credits.
- Worked with American Overseas Marine Corporation in analyzing the availability of sales and use tax credits on the purchase of vessels used in interstate commerce.
- Worked with General Dynamics and General Dynamics Shared Resources on state employment tax issues and the coordination of federal employment and state employment tax systems.
- Regularly participate in General Dynamics' in-house tax seminars by making presentations on and discussing new developments in federal, state and local tax and tax issues of relevance to the Company and its subsidiaries.
Bankruptcy and Corporate Restructuring (Defense & Aerospace)
Our bankruptcy attorneys represent defense and aerospace clients in workouts, acquisitions, bankruptcies, reorganizations and insolvency-related litigation of every size and complexity. We provide counseling on bankruptcy and corporate restructuring issues frequently confronted by companies in the defense and aerospace industry, including collecting on secured and unsecured claims from entities in bankruptcy, counseling clients on subcontractor and supplier insolvency and litigating preferential and fraudulent transfer actions involving such issues as long-term contracts for the purchase of aircraft. We also represent the interests of defense and aerospace clients in connection with insolvency proceedings pending in countries other than the United States, including Japan and Canada.
Representative Engagements
- Representation of General Dynamics in connection with the Adelphia and Devon Mobile Communications Chapter 11 cases. The claims totaled approximately $33 million. We assisted in representing the client on the Devon creditors committee, in negotiating protection for its secured claim and selling its claim.
- Representation of General Dynamics Corp. in connection with collecting its unsecured claims from Metricom, Inc. The claims total approximately $26 million. We assisted in negotiating a proposed pre-bankruptcy agreement to resolve the amounts owed to General Dynamics. After the bankruptcy filing we have represented General Dynamics on the unsecured creditors committee appointed by the United States Trustee's Office.
- Representation of Electric Boat Corporation in a Chapter 7 proceeding in which the bankruptcy trustee alleged that Electric Boat breached a contract to sell certain assets to Marine Energy Systems Corporation. We have defended this lawsuit and also represented Electric Boat generally in this bankruptcy case.
- Representation of a subsidiary of General Dynamics collecting unsecured claims and in asserting mechanics liens against Cellnet Data Services Inc.'s customers. As a result, the client collected its pre-petition claim in full while other creditors were paid less than twenty-five per cent of their claims. We also represented the client on the unsecured creditors committee appointed by the United States Trustee's Office.
- Representation of Gulfstream in an adversary proceeding in bankruptcy. The unsecured creditors of Okura (America), the bankrupt American subsidiary of a bankrupt Japanese trading company, sued Gulfstream in bankruptcy court, alleging that Gulfstream had been the beneficiary of fraudulent transfers by Okura. The lawsuit was resolved by a settlement approved by the bankruptcy court which was highly favorable to Gulfstream. Under the terms of the settlement, all of Gulfstream's legal fees, costs and the costs of the settlement itself were covered by a third-party, Marubeni Aerospace Corporation.
- Representation of General Dynamics in connection with claims arising from a contract to build the computer system for a low-orbiting satellite.
- Representation of a subsidiary of the General Dynamics in a Canadian CIIAA proceeding (the Canadian equivalent of a chapter 11 case).
- General representation on issues involving credit issues with suppliers and subcontractors in financial difficulty, including issues regarding intellectual property agreements and executory contracts.
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