Measat Lawsuit Alleges Breach of Contract, Collusion by Intelsat in 2009 Launch

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PARIS — Satellite fleet operator Measat of Malaysia is suing fleet operator Intelsat for at least $29 million in a U.S. District Court, alleging breach of contract and collusion in Intelsat’s handling of the launch of a Measat satellite in 2009.

The lawsuit alleges that Washington- and Luxembourg-based Intelsat knowingly mishandled a contract to launch the Measat-3a telecommunications satellite aboard a Sea Launch/Land Launch rocket from Russia’s Baikonur Cosmodrome in Kazakhstan.

The satellite’s launch was delayed for months following two accidents involving cranes that were maneuvering the satellite at the Baikonur spaceport. The accidents, in August and November 2008, forced the satellite to be returned to the manufacturer, Orbital Sciences Corp. of Dulles, Va.

Measat’s lawsuit, filed April 27 in the U.S. District Court for California’s Central District, says Intelsat did not use the same care in overseeing launch preparations as it would for its own satellites despite contract obligations to do so.

The launch delays forced Measat to forgo revenue from Measat-3a customers, sending the company’s finances into a tailspin as it missed debt service milestones. The company says it was “teetering on financial disaster” and, in this condition, fell prey to what it alleges were illegal Intelsat demands in the ensuing months leading to the eventual launch date.

At the time, Intelsat had several launch contracts with Sea Launch left over from Intelsat’s purchase of satellite fleet operator PanAmSat. Intelsat used some of these contracts for its own satellites, but sold one — for $40.25 million — to Measat.

Starting in late 2008, Sea Launch and its affiliate, Land Launch, came under financial pressures of their own, ultimately forcing Sea Launch into Chapter 11 bankruptcy. Launch obligations on its books during this time were under threat, and it was unclear whether Sea Launch, Land Launch and its subcontractors would be able to perform the contracted launches.

During this period, the lawsuit says, Intelsat asked Measat for an additional $11 million to secure an early launch date, threatening that if the additional cash was not forthcoming, Measat might need to find other launch arrangements that would double the launch costs and take up to 18 months to secure.

Measat resisted the demand for $11 million, and Intelsat returned with a new offer of $7.5 million, saying Intelsat itself would pay $3 million of this. Intelsat said it was paying additional money beyond the original contracted launch cost for its own satellites as well, a fact that later surfaced in Intelsat’s quarterly financial statements.

Intelsat officials said at the time that they were trying to keep Sea Launch/Land Launch afloat to maintain diversity in the global launch service sector and to protect their initial investments in launch contracts that, as the years passed, were far below prevailing market rates.

Measat says it resisted the demand for $4.5 million and Intelsat responded by saying it would take payment in Measat equity, or in free access for Intelsat to Measat satellite capacity. Measat says Intelsat was in collusion with Sea Launch to threaten launch delays in an attempt to secure the additional payment.

As weeks passed and the situation remained blocked, the lawsuit says Measat agreed to pay the original $7.5 million demanded of it but would reserve its right to take Intelsat to court for redress.

Intelsat’s response, Measat says, was to insist that Measat sign a waiver of liability release for Intelsat, “making clear that without the full and complete release, the satellite would not be launched.”

Intelsat further threatened to use the Measat launch slot for one of Intelsat’s own satellites unless Measat signed the liability release, leaving Measat to find a launch elsewhere.

Under this pressure, Measat buckled, it says. “Measat would not have survived as a ‘going concern’ if it had to wait another 18 months to launch its satellite,” the lawsuit says. In April 2009, Measat paid $4.5 million in additional launch charges and signed the liability release.

Measat-3a was successfully launched June 21, 2009.

The Malaysian operator says that the successive delays from the two crane incidents — which it says Intelsat could have prevented if it had conducted correct oversight — cost Measat $25 million. The company is seeking reimbursement of the $4.5 million in extra launch fees it paid, plus court costs and interest.

In response to Space News inquiries, Intelsat Vice President Dianne J. VanBeber on May 10 issued the following statement: “We are still in the initial stages of reviewing the claim, but we do not believe the litigation will be material to our business.”

Measat says that, since it was signed under duress, the liability release should be considered as null and void.

As of May 14 Intelsat had not submitted to the court a formal response to the lawsuit.