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Tilton bests Boeing in helicopter arbitration

July 25, 2013  By Carey Fredericks

July 24, 2013, Phoenix, Az. - Private-equity maven Lynn Tilton prevailed in a legal skirmish with Boeing Co. after the aerospace giant allegedly tried to block one of her companies from auditioning a helicopter for the U.S. Army.

A Phoenix arbitration panel earlier this month ruled against Boeing, clearing the way for Tilton’s company, MD Helicopters Inc., to try and win a contract for an “Armed Aerial Scout” program being run by the Army that could be worth billions of dollars, according to papers filed in federal court by MD Helicopters on Thursday.

The result comes after weeks of arbitration that had the potential to put MD Helicopters out of business, the court papers say. The papers, filed in federal court in Arizona, ask a judge to issue an order confirming and recognizing an award from the arbitration panel.

Citing contractual agreements between the companies struck in 2005, Boeing tried to prevent MD Helicopters from selling its MD540F helicopter, and at one point suggested the company couldn’t sell any “similarly configured” aircraft to any U.S. or foreign military organization, the court papers allege.

MD Helicopters feared the latter claim would bring its business to a halt, according to people close to the company. In the end, the arbitration panel rejected both of Boeing’s attempts to keep MD Helicopters from selling aircraft. The Army program, meanwhile, faces uncertainty amid budget cuts.


“It turned into a David and Goliath battle for survival,” Tilton, also MD Helicopters’ chief executive, said in an interview.

A Boeing spokesman declined to comment.

The legal victory is the latest for Ms. Tilton, the founder of private-equity firm Patriarch Partners LLC, one of the largest woman-run businesses in the U.S., managing some 75 companies with sales exceeding $8 billion. Ms. Tilton is also known for her platinum blond hair, flamboyant attire and penchant for off-color comments in an industry dominated by men.

Tilton in June won a financial-crisis era lawsuit filed by MBIA Inc over a disputed bond deal, beating back accusations her firm had breached a contract with the bond insurer.

The fight with Boeing arose from a complex web of corporate relationships that culminated with Tilton’s acquisition of MD Helicopters from a Dutch company in 2005. MD Helicopters these days sells aircraft to armed forces and governments in Japan, Jordan and Italy, as well as to U.S. special operations, and local U.S. police forces.

MD Helicopters traces roots back more than 50 years to a company founded by Howard Hughes that eventually ended up in the hands of a firm called McDonnell Douglas in 1984. In 1997, McDonnell Douglas merged with Boeing. Two years later, Boeing sold commercial helicopter lines to a subsidiary of a Dutch company. That business was purchased by Ms. Tilton’s firm in July 2005.

In 2004, Boeing and MD Helicopters partnered to bid a “Mission Enhanced Little Bird” helicopter for an Army program that aimed to replace Vietnam-era reconnaissance helicopters, according to court papers.

The bid failed, and the Army ended up canceling the program.

As part of the venture, MD Helicopters and Boeing agreed to contracts in 2005 related to intellectual property. MD Helicopters sold certain intellectual property related to the aircraft to Boeing and in return received a cross-license back of the intellectual property, court papers show.

In April 2012, MD Helicopters disclosed plans to compete for a new Army contract with its MD540F helicopter. Boeing, too, planned to compete for the contract with its own helicopter.

Boeing soon alleged to Tilton and others that the 2005 contractual agreements prevented MD Helicopters from auditioning the MD540 helicopter for the new Army program, according to the court papers and people familiar with the matter. The two sides exchanged letters back and forth but couldn’t resolve the dispute, according to court papers and people familiar with the matter. They ended up in arbitration, where MD Helicopters prevailed.


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