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Boeing Appeal May Create S-Band Application Timetable Problems for ICO

By | November 3, 2008

      [Satellite News 11-03-08] While ICO Communications may win up to a total of $707 million in a lawsuit judgment it won against Boeing Satellite Services International and parent company, Boeing Co., an appeal from Boeing could drag out the legal process as long as 759 additional days according to Barry Lee, ICO’s Lead Legal Counsel.
          In a conference call with reporters, ICO CEO Tim Bryan said an extension of the legal process by that amount of time could affect the timetable of his company’s S-band mobile satellite spectrum application filed with the European Union (EU) in early October. “We have missed our timeframe as far as ICO expecting certain elements of this case to be settled,” he said. “As a consequence, we will see whether or not the Boeing ruling will affect the outcome of our application with the EU.”
          Bryan added that ICO has not yet ordered a ground spare satellite, an element that its application competitors have said is essential to the mobile spectrum award. “I do not think a ground spare satellite is as necessary of an element as other technical factors which we are well prepared and equipped to deal with,” said Bryan, who added he did not have enough information available to him to speculate on further details about how the judgment may affect the company’s S-band application process.
          Boeing spokeswoman Diana Ball told Satellite News that her company plans to appeal the Oct. 21 decision by the jury to award ICO $370.6 million in compensatory damages as well as an Oct. 31 add-on of $236.1 million in punitive damages plus interest. “Boeing believes there were fundamental flaws throughout this trial that provide significant grounds for appeal,” said Ball. “We will seek an appeal after the final judgment is filed with the court, and we expect that the appeal may well take several years to run its course. We continue to believe that we conducted ourselves in accordance with the law and our contracts."
          Lee said he expects an appeals process to last 759 days based on statistics from the Second District Los Angeles Superior Court, where the suit was filed.
          When asked whether ICO would settle with Boeing for a quicker award, Bryan said he would not reveal any details regarding a settlement but said his company would be able to ride out a lengthy appeals process throughout 2009 and 2010. “Our operating plan for the next year revolves around fiscal restraints as it has for the past few years,” said Bryan. “We can adjust our buildout for 2009 and 2010 according to these restraints.”
          Bryan provided some insight on how his company would utilize the award. “Once the final result is achieved, we will commence discussions on possibly refinancing our indebtedness for our North American operations,” said Bryan. “We have had a long time to think about it, but we have not made a concrete decision on how that money will be spent.”
          ICO’s litigation stems from when Hughes Electronics Corp. signed a contract with ICO in 1995 to build and launch 12 satellites. Boeing inherited the contract when it acquired Hughes in 2000. At the time, only two of the satellites were completed. Less than a year later, one of the satellites was lost due to a failure aboard a Sea Launch rocket. Four years later, Boeing filed suit against ICO, which filed a countersuit over breach of contract after Boeing allegedly demanded ICO pay another $400 million to finish the job. The court has ruled in favor of interest between 7 percent and 10 percent, which, according to Lee, will total approximately $100 million. Lee added that 10 percent interest would be applied to the breach of contract award.
          Both companies are due in court Nov. 12. From that date, Boeing will have 25 days to appeal the verdict.
          Lee said that he and his client feel confident that the verdict will hold through an appeals process. “In the Los Angeles Court’s second district, 75 percent of all appeals do not result in a reversal.”

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