* Court says Navy was justified in scrapping A-12
* Boeing, General Dynamics to appeal (Adds Boeing appeal, paragraphs 3,4)
WASHINGTON, June 2 (Reuters) - Boeing Co. (BA.N) and General Dynamics Corp (GD.N) must pay the U.S. government $2.8 billion to settle a Navy contract for an attack plane that was canceled in 1991, a U.S. appeals court ruled on Tuesday.
An appeals court in Washington ruled that the Navy was justified in canceling a $4 billion contract for the A-12 stealth attack aircraft after it encountered serious technical difficulties.
Both Boeing and General Dynamics said they would appeal the ruling.
“Today’s decision, which awards no amount of damages to either the contractors or the government, is but the next step in this regrettable litigation that is now in its 18th year,” Boeing general counsel J. Michael Luttigner said in a statement.
General Dynamics said it remained convinced that the government’s termination decision was not justified.
Judge Robert Hodges wrote in a 29-page opinion that the government had good reason to worry that General Dynamics and McDonnell Douglas, since bought by Boeing, would not complete the A-12 project on time, according to the Justice Department.
Under the court’s ruling, the two companies are required to pay back the $1.35 billion they were awarded along with $1.45 billion in interest that has accrued while the contract was tied up in litigation for 18 years.
Further appeals will delay any payments ordered by the court.
The case underscores the difficulties the government faces in canceling big-ticket weapons programs at a time when Defense Secretary Robert Gates has announced plans to cancel several other large programs. (Reporting by Andy Sullivan and Andrea Shalal-Esa; Editing by Gary Hill)