Santa Ana Group Files $25-Million Suit; Claims Northrop Reneged on Settlement

A small Santa Ana medical group has filed a $25-million damage suit against Northrop Corp. and several of its attorneys, claiming that the giant Hawthorne-based aerospace firm reneged on an out-of-court settlement reached in another lawsuit last year.

In the suit, filed in U.S. District Court in Santa Ana last week, Pan American Medical Group Inc. claims that Northrop and the other defendants violated the federal Racketeer-Influenced and Corrupt Organizations Act of 1970.

The suit argues that Northrop’s refusal to honor the out-of-court settlement was part of an organized effort to harm Pan American, which originally sued Northrop for selling it a faulty computer system that botched Pan American’s financial records.

Named as defendants in Pan American’s new suit are Northrop and its now-defunct commercial computer division, Northrop Data Systems Inc.; Northrop staff attorneys Ralph Blair and William Elliott; the Los Angeles law firm of Cutler & Cutler, and Felice Cutler, a member of that firm.

Pan American’s federal suit follows last month’s announcement of an arbitrator’s award of $18.3 million to a Wisconsin medical group that also sued Northrop over a computer system.

The Santa Ana medical group accuses the defendants of breach of contract, fraud and obstruction of justice. The suit claims that Northrop refused to honor a $62,500 out-of-court settlement reached April 18 with the doctors’ group, according to Robert Kilborne, a Claremont attorney representing the purchasers.

Attorney Felice Cutler, in a brief telephone interview Monday, said she had not seen the suit and could not comment on it. She said her firm represented Northrop in the original suit by Pan American and claimed that the official judgment in that suit was in favor of Northrop and did not award any payment to Pan American. She would not comment, however, on Pan American’s claim that Northrop had agreed to the $62,500 payment.

Officials at Northrop declined comment Monday, and physicians affiliated with Pan American could notbe reached.

Pan American is one of 24 purchasers who have accused Northrop of selling untested computers that fouled up their financial records. Of the 24 cases, about 18 still are pending, according to a staff attorney at Kilborne’s offices. Kilborne’s firm, the Law Offices of Herbert Hafif, is representing all the companies suing Northrop.

The new Pan American suit charges that after Northrop agreed to settle with the medical group last year, Pan American’s attorneys dismissed their witnesses and subpoenaes, believing that Northrop and NDSI would honor the agreement. But Northrop later refused to honor the agreement and insisted on a trial, a decision that would have cost Pan American thousands of dollars in new legal fees, Kilborne said.

The suit seeks $25 million in punitive damages, plus legal costs and prompt payment of the original $62,500 settlement, Kilborne said.