CBA Agreement Language Clear, Judge Says, Dismissing SES Claim Against Intelsat
SES said it's reviewing its options with outside counsel for a possible appeal after a U.S. Bankruptcy Court judge last week threw out its $1.8 billion complaint against Intelsat for supposedly reneging on the C-Band Alliance (CBA) agreement between the two. Satellite business experts said the loss means one fewer reason for SES and Intelsat to do a takeover deal quickly, before the ruling. SES reportedly has approached Intelsat about an acquisition. The trial was in February with closing arguments in April (see 2204190037).
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"Under the plain language of the Consortium agreement and the evidence in the record, SES has failed to carry its burden of establishing by a preponderance of the evidence that Intelsat is liable to SES under any theory of recovery set forth by SES," Judge Keith Phillips ruled in the 45-page docket 20-32299 memorandum opinion. The CBA agreement between the two clearly involved a private, market-based approach for clearing part of the C band for 5G, and that approach is "fundamentally at odds" with the direction the FCC ultimately adopted, Phillips said. He said SES' argument that it and Intelsat intended for revenue from that spectrum clearing to be shared regardless of whatever approach the FCC took "is found nowhere in the Agreement." "Given the sophistication of the Parties, if SES really wanted 'Project Gross Proceeds' to encompass any proceeds that could possibly be generated from the NPRM’s proposed provisions, SES should have included that in the Agreement," he said. "It cannot now rely on the Court to read it into the Agreement through a convoluted process that requires supposition and a tortured reading of the provisions of the Agreement."
SES argued the CBA agreement language was ambiguous, but New York state law, which governs the agreement, "appl[ies] a high bar respecting ambiguity," Phillips said. He said the agreement's plain language makes clear that such issues as "project gross proceeds" apply only in the case of a private, market-based approach. He said SES' argument that the amendment provision of the CBA agreement requires amending the agreement to encompass a public auction fails because the parties would have said there "shall" be amendments, as they did in other areas of the agreement, instead of saying the agreement "may be amended."
Phillips dismissed SES' argument Intelsat breached the CBA agreement before it was terminated, saying Intelsat's independent lobbying of the FCC before the C-band draft order was issued, and its rejection of the consortium agreement during its Chapter 11 reorganization, didn't constitute material breaches.
Intelsat emailed it's "pleased to have resolved this matter with a ruling in our favor based on the clear and convincing evidence presented."
Both companies have replacement satellite launches scheduled for this week as part of the C-band clearing. SES' SES-20 and SES-21 satellites, which are being launched as part of the C-band clearing (see 2108130012), are scheduled to go up Tuesday, said it and United Launch Alliance. Intelsat's Galaxy 33 and 34 geosynchronous communications satellites are to launch Thursday from Kennedy Space Center in Florida, the company said.