Federal Court Reverses Dismissal of SES Suit Over C-Band Alliance Collapse

Contrary to what the U.S. Bankruptcy Court decided, SES and Intelsat's C-Band Alliance agreement "is certainly not a model of clarity," U.S. District Judge Robert Payne for the Eastern District of Virginia ruled Friday as he reversed the Bankruptcy Court's denial of SES' $421 million claim against Intelsat for the collapse of the CBA. In his 57-page decision Friday (docket 3:22-cv-00668),Payne remanded the case to Bankruptcy Court. SES sought damages from the CBA's collapse as part of Intelsat's now-concluded Chapter 11 bankruptcy (see 2007140029). At oral argument in March, Payne was critical of the CBA agreement (see 2303200062).

SES called it "a major appellate victory in its commercial contract case against Intelsat over the latter’s refusal to honour its promise to evenly split billions of dollars the parties received" for clearing the lower C band for 5G use, in an email. "We disagree with Judge Payne’s decision on the contract, but we do not believe that this will change the ultimate decision in this case," Intelsat emailed. U.S. Bankruptcy Judge Keith Phillips "heard all of the evidence in the case as the trier of fact, and we remain confident that he will come to the same conclusion as he did in his original opinion on the merits of SES’s claims," it said.

Labeling some CBA agreement definitions confusing and some textual provisions contradictory, Payne said the federal bankruptcy court clearly erred when it said the CBA agreement plainly applied only to the private, market-based approach to clearing the C band that the two satellite operators had championed. He said it's reasonable to read the CBA agreement as covering any collaboration between the two to maximize C-band clearing proceeds regardless of what approach the FCC ordered, including the public auction approach the agency ultimately adopted. He said it's "of great significance" that Intelsat continued to tell investors they should rely on a 50-50 proceeds split with SES when doing their financial modeling.

Payne said evidence is ample the two companies still collaborated on maximizing proceeds for reallocation of their spectrum rights after the FCC announced it was going with the auction. The two continued to split costs of CBA-hired lawyers and lobbyists, he said. He called it "of great significance" that after the FCC opted for a public spectrum auction approach, Intelsat continued to tell investors to use a 50-50 proceeds split with SES for their financial modeling.

Several pages of the decision recapped a flurry of activity by and between SES and Intelsat in early 2020 as they pushed the FCC on potential proceeds and then Intelsat began negotiating separately with the commission. Payne said the fact that the Bankruptcy Court didn't consider much of the "extensive and significant" extrinsic evidence offered by SES that leaned toward SES' position was a "clear error."

The lack of consideration for the extrinsic evidence, coupled with the ambiguity in the decision, necessitates remand, Payne said. He did affirm the Bankruptcy Court's rejection of SES' unjust enrichment claim.

The District Court decision follows SES confirmation last week that acquisition talks with Intelsat ceased (see 2306220002).