Meta-backed Scale AI is taking the Department of Defense to court. Some docs are expected to be classified.

Scale AI, an artificial intelligence training firm backed by Meta, has initiated legal proceedings against the Department of Defense (DoD). The specifics of the conflict and the company's objectives remain ambiguous, as the majority of the court documents, including the formal complaint, were submitted on January 30 and are sealed from public view. This lawsuit, previously unreported, may involve classified materials marked at the 'secret/no foreign' level, as indicated in one of the few documents that have been unsealed. The United States government is the sole defendant named in this case, while another AI company, Enabled Intelligence, has stepped in as an intervenor defendant to safeguard its interests. In the previous fall, Scale AI lost a bid for a substantial contract valued at up to $708 million from the National Geospatial-Intelligence Agency (NGA), a division of the DoD, to Enabled Intelligence. This contract, which could extend for as long as seven years, represented the agency's most significant data-training agreement to date and is linked to the Pentagon's prominent AI initiative, known as Maven. Following the bid loss, Scale AI filed a protest with the Government Accountability Office (GAO) concerning the NGA's decision. However, this protest was dismissed just two days prior to the launch of the lawsuit in the Court of Federal Claims. It's worth noting that the GAO typically does not disclose details regarding standard protest dismissals. In a turn of events, Scale AI later secured a one-year contract worth $24 million from the NGA to assist with data labeling for the Maven project. A spokesperson for Scale declined to provide comments regarding the lawsuit, merely indicating that it pertains to a recent procurement choice. The spokesperson also emphasized Scale AI's commitment to supporting Secretary Hegseth and the Department of War in integrating advanced AI capabilities for military personnel, asserting the importance of high standards in the procurement process for crucial AI initiatives. Legal representatives for Enabled Intelligence and the DoD have not responded to inquiries from Business Insider regarding the lawsuit. Since its inception in 2020, Scale AI has engaged in numerous multimillion-dollar contracts with the DoD. In March, the startup revealed collaborations with defense technology firm Anduril and Microsoft to implement AI agents within the U.S. military under a DoD initiative called 'Thunderforge.' Additionally, in August, Scale announced a $99 million contract to create AI tools for the Army. Scale AI is primarily recognized for its data labeling services, which have aided major tech giants like Google and Meta in enhancing their AI chatbots. In June, the company garnered a significant $14.3 billion investment from Meta, which resulted in a 49% stake acquisition in the startup. Following this investment, Scale's former CEO, Alexandr Wang, who has since transitioned to Meta's Superintelligence Labs as chief AI officer, had previously outlined proposals to President Donald Trump aimed at advancing AI initiatives in the U.S. government. Recently, Scale has faced challenges, including a workforce reduction of 200 employees, which accounts for 14% of its staff, the loss of key clients like Google and xAI, and increased competition from newer companies attempting to attract its clients and employees.