U.S. Space sues Orbital ATK over ViviSat venture
WASHINGTON — Orbital ATK is facing a lawsuit from its former partner in the ViviSat satellite servicing venture, claiming Orbital improperly shut down the joint venture to pursue the servicing business on its own.
In a suit filed April 29 with the Supreme Court of the State of New York, U.S. Space LLC alleges that Orbital ATK violated the terms of a management agreement regarding operations of ViviSat to take control of the company and dissolve it in April, a maneuver U.S. Space called in court filings “a double-cross of cosmic proportions.” The lawsuit was first reported by the legal publication Law360.
U.S. Space and ATK Space Systems created ViviSat in 2010 to develop and commercialize a satellite servicing system later known as the Mission Extension Vehicle (MEV). Under the original teaming agreement, ATK was primarily responsible for technical development of the MEV, while U.S. Space was responsible for financing and business development.
ATK supplied about $3 million through March 2013 to fund ViviSat’s operations, according to court papers. However, when ViviSat said in late 2012 that it needed an additional $200,000, ATK requested an amendment to the management agreement that would tie the funding to business development milestones.
The revised agreement, signed in April 2013, included an “amendment trigger” that would effectively give control of ViviSat to ATK, including three of four seats on its board of directors, if ViviSat didn’t achieve those milestones. That agreement also allowed the ViviSat board to dissolve the company by a majority vote.
Under that agreement, the amendment trigger would go into effect on December 1, 2013, unless ViviSat won a satellite servicing contract and also obtained sufficient outside financing to continue development of the MEV. ATK extended that deadline several times, according to the court filing, until September 30, 2015.
U.S. Space argues in its suit that it met both requirements of the agreement to prevent the amendment trigger from going into effect. In August 2015, ViviSat signed a contract with Intelsat with an initial value of $65 million for satellite servicing. ViviSat stated it also had memoranda of understanding with four other operators — Asia Broadcast Satellite, Hispasat, Measat and SES — that, coupled with the Intelsat deal, had a combined potential value of nearly $300 million.
U.S. Space claimed it had several offers from investment firms, submitted between late 2014 and early 2016, to raise as much as $480 million to fund development of one or more MEVs and thus meet the other requirement regarding the amendment trigger. Orbital ATK, however, either rejected those proposals or ignored them, according to the suit.
While the deadline for the amendment trigger passed in September, U.S. Space states in the suit that Orbital ATK took no action to enforce that provision until March 4, when Orbital ATK notified U.S. Space it was assuming control of ViviSat. U.S. Space protested the move, arguing it met the contract and funding requirements of the 2013 agreement. However, on April 5 the new ViviSat board, with three members selected by ATK, voted to dissolve the company.
U.S. Space suggested in its filing that, after ATK merged with Orbital Sciences Corp. to become Orbital ATK, it became less interested in supporting ViviSat. “Orbital ATK believed that on-orbit servicing could be the source of tremendous new growth,” the suit states. “Further, as Orbital ATK assumed control over ATK, ATK’s support for US Space’s financing efforts began to diminish.”
Orbital ATK announced April 12 that it was pursuing satellite servicing through a new wholly-owned subsidiary, Space Logistics LLC. Orbital announced its first contract, with Intelsat, for an MEV mission scheduled to launch in 2018.
“The ViviSat joint venture was dissolved because it was unable to obtain market financing,” said Tom Wilson, president of Space Logistics, when asked about the status of ViviSat during an April 12 press conference at the 32nd Space Symposium in Colorado Springs, Colorado. “Orbital ATK has decided to fully fund this new strategic venture.”
Orbital ATK spokeswoman Sean Wilson said May 3 that the company does not comment on pending litigation, but added, “we believe the suit is without merit.”
U.S. Space states in the suit it seeks “compensatory and punitive damages and other relief” from Orbital ATK, including a declaration that the amendment trigger did not go into effect. The suit did not state a specific dollar value in damages U.S. Space is seeking.