A federal judge in New York has effectively revived a $2.3 billion whistle-blower lawsuit that alleges the former Hawker Beechcraft used defective parts in military trainers sold to the U.S. government.
The judge’s ruling in a case filed under the federal False Claims Act in 2007 by former employees of parts maker TECT Aerospace allows the lawsuit to move forward.
Donald Minge and David Kiehl allege in the suit that “fracture critical” wing spars made by TECT Aerospace at its Wellington facility for Hawker Beechcraft special mission King Air and T-6A trainers for the military did not comply with procedures and contractual requirements.
The judge’s decision, issued last week, says the bankruptcy court erred when it found that any damages and penalties that could stem from the case under the False Claims Act could be discharged during bankruptcy proceedings.
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He ruled that the bankruptcy court also erred when it found that the plaintiffs did not file the claim in a timely manner.
Hawker Beechcraft filed for Chapter 11 bankruptcy protection in May 2012. It emerged from bankruptcy in February 2013 as the smaller Beechcraft Corp. and was sold to Textron, Cessna’s parent company, in March.
U.S. District Judge P. Kevin Castel found that any damages or penalties emerging from the case should not discharged through bankruptcy, because “they plainly allege fraud by the debtor and associated entities in government contracting.”
Beechcraft can appeal the decision to the Second Circuit Court of Appeals.
The judge’s ruling is important, said Gaye Tibbets, a lawyer with Hite Fanning & Honeyman in Wichita who represents the plaintiffs.
Not many cases like this are involved in a bankruptcy proceeding.
The judge’s ruling clarified what can be discharged during bankruptcy and whether there is a deadline to do it. It’s the first major interpretation of the statute, Tibbets said.
The proceeding now goes back to the bankruptcy court for further proceedings “consistent with this opinion,” Castell wrote in the filing.
“Judge Castel’s decision only means that the Relators Minge and Kiehl did not miss a deadline for seeking to have their claims survive the bankruptcy,” Textron spokesman David Sylvestre said in an e-mailed statement. “The case is now remanded to the bankruptcy court where Beechcraft will be able to pursue its other defenses to the issue of whether the claims are non-dischargeable.”
Castel’s ruling also sends the case back to the U.S. District Court in Kansas, where the merits of the lawsuit could be argued.
The suit alleges that the wing spars, the main structure in the wing that provides its strength, were “hot formed,” a process that causes wrinkles in the metal, and that hammers were used to “bash” the wrinkles out.
It also alleges that TECT used hammers, pry bars and small grinders to force parts to fit a fixture used to gauge whether the part was the right size and shape.
The practices were against manufacturing specifications, the suit alleges, and that wrongdoing was covered up.
The suit seeks to recover triple the damages sustained by the government of about $2.3 billion and a civil penalty of $11,000 for each violation, totaling about $3.8 million plus attorney’s fees and costs.