NavCom Defense Electronics, Inc. v. Ball Corporation

NavCom Defense Electronics, Inc. (NavCom) (defendant) entered into a contract with the United States Air Force to produce a radar altimeter system. The contract involved the design and manufacture of antennas, which NavCom subcontracted to Ball Corporation (Ball) (plaintiff). The contract specifications required the antennas to pass a salt-fog test meeting Air Force requirements; the Air Force determined that NavCom’s test was compliant. Ball submitted antennas to NavCom for testing, and NavCom failed Ball’s antennas. NavCom demanded a redesign. Ball objected, arguing that Ball’s antennas only failed because NavCom’s test was more rigorous than required by the Air Force’s salt-fog testing requirements. Ball demanded an equitable adjustment for the redesign costs. NavCom’s subcontract with Ball stated that (1) any decisions made by the Air Force’s contracting officer (CO) about NavCom’s contract would be binding on Ball; and (2) unresolved disputes between Ball and NavCom would be subject to arbitration. NavCom raised Ball’s testing requirements dispute with the Air Force CO, claiming that the Air Force should pay Ball’s equitable-adjustment claim because the Air Force’s testing requirements were ambiguous. The CO denied NavCom’s claim. Ball then filed a demand for arbitration to resolve its dispute with NavCom. NavCom filed in district court for a preliminary injunction to prevent the arbitration, arguing that the terms of Ball’s subcontract stated that Ball’s dispute with NavCom must be resolved by the Air Force CO. The district court granted the preliminary injunction. Ball appealed.