After accusing them of stealing trade secrets, Leidos Inc. has settled a lawsuit against a group of former employees it claimed had bolted to start their own firm and snatch away a lucrative federal highway contract.
Lawyers for the big, Reston, Va.-based government contractor and ITS Roads, the new firm formed by the breakaway Leidos engineers, filed a settlement agreement in federal court in Alexandria, Va. on June 29.
While terms were not disclosed, the deal came just 10 days after Leidos took its former employees to court, seeking an emergency injunction that would stop ITS Roads from competing on a $75 million federal highway contract.
“It’s over – it’s behind us,” said Khalid Ahmad, director of engineering for ITS Roads, declining to discuss the terms of the settlement.
Based on 2014 revenue, Leidos is number 40 on ENR's ranking of the Top 500 Designers. The dispute began brewing this spring when the Federal Highway Administration’s Saxton Transportation Operations Laboratory announced plans to open bidding up on a new, $75-million contract for outside engineering services. Leidos is currently the lead contractor at the lab, providing management and technical support for “transportation operations research and development.”
Leidos argued that a group of four engineers working on its main Saxton contract began planning to leave Leidos, form a new company and bid for the Saxton contract against Leidos.
The engineers ramped up the pressure on Leidos, threatening to team with rival Booz Allen Hamilton to bid on the contract, the company argued in its complaint.
On their way out the door in May, the engineers took “business sensitive, proprietary information” by “forwarding Leidos' proprietary information to their home email addresses, or by copying this proprietary information onto personal storage devices,” the company stated.
The former employees helped craft Leidos’ “capture strategy” to compete for the contract and so possessed the inside knowledge “that would place Leidos at a substantial competitive disadvantage,” the complaint reads.
But the former Leidos employees offered a much different picture.
In a rebuttal filed in federal court in Virginia, they argued they were simply trying to pursue the “American Dream” and launch their own engineering firm.
The ex-Leidos engineers argued they were encouraged by their supervisors at the company to strike out on their own as a subcontractor, something other employees had done in the past.
“Leidos begged the individual defendants to stay, agreed that a viable “win-win” for all parties was to negotiate an independent contractor relationship,” lawyers for the engineers argued.
But Leidos executives, according to the ex-employees, dragged their feet all spring processing the paperwork needed for their new venture, ITS Roads, to work as a subcontractor. The former employees say they signed “teaming agreements” and shelled out $3,000 for business insurance at Leidos’s insistence.
However, when the group left Leidos in May to launch their new venture, Reston-based ITS Roads, they were then given a cold shoulder by their former Leidos bosses.
“After receiving no response whatsoever, the defendants became concerned that they had been misled, and were now unemployed as a direct result of Leidos’ broken commitment,” the engineers argued in their court filing.
It was only after being given the runaround by their former Leidos bosses that the engineers say they agreed to lend their resumes to a bid by consulting firm Booz Allen for the contract. its bid on the $75 million contract.
Award Due Later in 2015
Still, the FHA will have the last word on the dispute. The agency put out a call for bids on June 16, with a July 17 deadline, and expects to pick a winner later this year.
It is the second major suit legal battle involving Leidos’ engineering operations and former employees in the last few months.
The company also recently settled a $45 million lawsuit by its former engineering and health division chief that he was fired after he informed his superiors he had Parkinson’s.
In a complaint filed in federal court in March, Joseph Craver III argued he was terminated despite years of award-winning performances as president of the Leidos’ engineering and health division and his assurances to his superiors that he was still capable of carrying a full load.
Leidos denied the charges, arguing Craver was dismissed after “abysmal financial performance” in the third quarter of 2014.
The two sides filed a settlement in federal court in late May.