Student Blog – Boeing Must Pay $462 Million in Damages to Satellite Firm ICO

By Dawn Moffit

The Star Tribune is reporting:

A jury ordered the Boeing Co. to pay $236 million in punitive damages Friday for breaching a contract to build and launch satellites for a company headed by cellular phone pioneer Craig McCaw.  Boeing now owes at least $607 million to ICO Global Communications, including $371 million in compensatory damages the jury awarded last week.  The total could top $700 million after the court adds interest, ICO said.


The jury’s decision follows a four-week trial in which Reston, Va.-based ICO accused the aerospace giant of hindering the launch of its satellite network by fraudulently raising prices for the project.  Boeing “was extremely hurtful and harmful to the company and almost destroyed ICO,” said ICO attorney Barry W. Lee.

Boeing spokeswoman Diana Ball said the company will appeal the case, citing “fundamental flaws throughout this trial.” She said the process could take several years.
ICO’s lawsuit, filed in 2004 in Los Angeles County Superior Court, stems from the company’s decade-old plan to launch a fleet of satellites that would broadcast video and other services to mobile device users around the world.

ICO contracted with El Segundo-based Hughes Electronics Corp. in the mid-1990s to build and launch 12 satellites. Boeing acquired Hughes in 2000 and inherited the ICO contract, but only finished two satellites — one of which was lost because of a failure aboard a Boeing Sea Launch rocket.  ICO sued Boeing and its satellite division four years later over breach of contract after Boeing allegedly demanded ICO pay another $400 million to finish the job.  Ball said costs of producing the satellites increased as ICO tried to delay the project during a major slump in the telecommunications sector.

ICO attorneys argued during trial that once Boeing got into the satellite communications business, its former customer became a competitor. Boeing’s attorneys argued the aerospace company attempted to keep the deal alive and accused ICO of canceling the contract for convenience.

The jury found Boeing acted with fraud and malice and awarded ICO $59 million from Boeing Satellite Systems, which is based in El Segundo, and $178 million from the Chicago-based parent company.  The judge will determine whether $91.6 million in compensatory damages related to a separate contract with the parent company is already included in the $371 million award or should be added to the total.


This is just an example of how slow the justice system works and how long it actually takes to settle a case and how much can happen in the meanwhile.  The case filed in 2004, brought to trial in June and the jury finally finished the damages’ verdict this past week.

ICO probably used anticipatory breach to sue Boeing since Boeing didn’t complete performance on the contract and demanded $400M more to finish the project.  Since this is a sale of goods agreement, the UCC would apply.  ICO also claimed Boeing didn’t fulfill the K since Boeing now considered them a competitor not a customer in the satellite communication business.

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