Supplier Extorted NASA Contractor, Court Rules

(CN) - A Florida appeals court upheld a $57,781 judgment against the primary contractor of NASA's space-shuttle program, but allowed the United Space Alliance to escape a contract its parts supplier secured through extortion.

United Space had a longstanding relationship with Hi-Shear Technology Corp., its shuttle-part supplier. In 2000, Hi-Shear grew nervous that United Space was looking for other suppliers and decided to withhold a shipment of reefing line cutters until United Space awarded it a contract for bonnet thrusters. Because United Space was relying on a timely shipment, it conceded and signed the contract. But as soon as Hi-Shear delivered the reefing line cutters, United Space terminated four contracts, including the bonnet thruster contact, which it claimed Hi-Shear won through extortion.

Hi-Shear filed suit, alleging breach of contract, fraud in the inducement, theft and misappropriation of trade secrets.

United Space countered that Hi-Shear violated the Hobbs Act, a federal anti-extortion law. It also filed a counterclaim for breach of contract and conversion.

After a nine-week trial, the jury awarded Hi-Shear $57,781 for one of the contracts, but found for United Space on the others. United Space was awarded nothing on its counterclaim.

The appeals court voted 2-1 to affirm the partial denial of a directed verdict on United Space's Hobbs Act defense. Hi-Shear wasn't entitled to the bonnet thruster contract, Judge Cohen wrote, because it "was awarded based on Hi-Shear's extortionate behavior."

Judge Torpy dissented, saying "United got the product it contracted for but avoided payment by its creative assertion of the Hobbs Act as a defense to payment."

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