NOVEMBER 1, 2008 Boeing Hit With Penalty in Suit Over Satellites
By ANDY PASZTOR Wall Street Journal http://online.wsj.com/article/SB122548019660688725.html?mod=googlenews_wsj LOS ANGELES -- Boeing Co. and its satellite operations were hit with $236.1 million in punitive damages, ending a protracted lawsuit in state court in Los Angeles that featured allegations of fraud and breach of contract by ICO Global Communications Holdings Ltd., a former Boeing customer. The jury agreed on the damages less than two weeks after awarding ICO at least $370 million in compensatory damages. In all, Boeing faces potentially more than $700 million in total damages, depending on interest and other issues. Boeing previously said it will appeal the verdict, contending that the judge in the case made legal errors during the course of the trial But the size of the latest verdict, coupled with previous statements in court by a Boeing lawyer about high-level management focus on the trial, highlight the importance of the case for the Chicago aerospace giant. ICO, a startup communications firm that fell on hard times when the Internet bubble burst years ago, is controlled by cellular phone pioneer Craig McCaw. The jury decided in favor of ICO's claims that Boeing breached a contract to provide a fleet of satellites for ICO and illegally demanded hundreds of millions of dollars in extra payments to complete and launch the proposed satellite-telephone project. In awarding the punitive damages, the jury also agreed with ICO's allegations that Boeing misrepresented certain issues to ICO and that the satellite-maker's actions years ago were motivated, at least in part, by Boeing's interest in potentially competing with ICO in some segments of the satellite-services market. A Boeing spokeswoman reiterated that the company "believes there were fundamental flaws throughout this trial that provide significant grounds for appeal. 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." More than $177 million of the punitive damages were awarded against Boeing, the parent company, reflecting the jury's conclusion of high-level corporate responsibility and Boeing's arguments to the jury that its commercial satellite-making unit is shrinking and has been slightly in the red for both 2007 and 2008. Before the punitive award, Boeing's lead lawyer, Brad Brian, told the jury it already had awarded compensatory damages that exceeded "the net worth" of the satellite unit. In his argument for punitive damages, Barry W. Lee, ICO's lead lawyer, told the jury that "no piece of evidence was more telling" of Boeing's mindset than a handwritten note by an official of the satellite unit. The note, Mr. Lee reminded the jurors, read: "Yes, we would like to put a knife into ICO." The suit had been closely watched by many in the satellite industry partly because ICO's claims came to about $2 billion, but also due to the nature of the allegations. For Boeing, which acquired the satellite-making operations eight years ago from what was then Hughes Electronics Corp., Friday's verdict is a blow to its reputation. In the trial's opening statement, ICO's lead lawyer told the jury that Boeing's "fraudulent and wrongful conduct" resulted in the project's demise. ICO's lawyers argued that Boeing had "conflicts of interest" because at one point it had its own plans to try to enter the same business segment. Boeing's defense was that it resolved disputes with ICO in July of 2003, and that ICO retroactively wanted to convince jurors that "somehow it was tricked into" signing those agreements. The project fell apart, the original company was reorganized under federal bankruptcy court protection and only one ICO satellite is currently in orbit. ICO also introduced evidence that allegedly showed that some inside Boeing were interested in using ICO's satellite-broadcast spectrum for Boeing's own potential project or projects. ICO's lawyer told the jury that a punitive award would send a message to Boeing executives and board members "that it's not okay to engage in fraud, it's not okay to conceal material information and it's not okay to interfere with your customer's business and contracts." Boeing initially sued ICO after the mobile-phone company terminated its contract for the satellites. ICO countersued, alleging that Boeing misrepresented or concealed information and charged excessive prices to complete the project. ICO, which now intends to provide television programming to cars and mobile devices in the U.S., also is battling to acquire some satellite spectrum in Europe. With 10 of its satellites still in storage, ICO officials have said a final judgment could help pay for international expansion plans. ICO had sought up to $2.4 billion in total damages. Ending with what is believed to be the largest such jury award involving a commercial-satellite contract dispute in U.S. courts, the trial lasted more than three months and altogether the jury deliberated for more than 23 days. ICO's lead lawyer, with the law firm of Manatt, Phelps & Phillips LLP in Los Angeles, said after Friday's verdict that "this was not a case of an isolated incident" intended to damage and interfere with ICO's business plans. Rather, Mr. Lee said the evidence showed Boeing engaged in "a series of steps" over a number of years, adding that the "verdict at least demonstrates" the jury's belief that improper activities occurred throughout Boeing's executive ranks. -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
