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May 14th, 2012

UPDATE: MEASAT vs. Intelsat Dispute... In The United States District Court...(Legal)

[SatNews] Filed on April 27, 2012, in the United States District Court, Central District of California, Los Angeles, is a lawsuit by...

MEASAT Satellite Systems BHD against Intelsat Corporation. The Case Number is VC12-03702.The complaint lists breach of contract that was memorialized on or about March 9, 2006, when MEASAT and Intelsat entered into the written contract for Land Launch and Program Management Services relating to the launch of the MEASAT 1R satellite, which was to cost $40,250,000, which MEASAT contests was the flat and fixed and total fee due, witih no additional funds due prior to or after the launch.

Launch services were to be provided by Sea Launch as a subcontractor to Intelsat; however, there were then issues regarding launch delays—MEASAT contends they were unable to secure a launch date due to an insufficient number of rocket motors available to meet the government launch requirements and its commercial schedule. As a result, Sea Launch experienced delays in the conversion of its rocket control systems from a sea launch vehicle to the land launch vehicle.

In January 2008, the two companies negotiated and agreed to a revised launch slot from August 1st through the 31st, 2008.

MEASAT caused the satellite's manufacturer, Orbital Sciences, to deliver the satellite to the Baikonur Launch Facility, on or about July 23, 2008, for combined launch operations to start August 6; however, just days before the scheduled launch, MEASAT's launch was derailed when a subcontractor struck the satellite with a crane, which caused extensive damage to the satellite. Hence, the satellite was returned to the manufacturer for repairs and testing.

In order to repair the damage, MEASAT arranged to have the satellite transported back to its manufacturer for repairs and tests. Incredibly, the satellite was damaged again, when Sea Launch and/or an SIS subcontractor dropped the satellite six feet while trying to load the satellite into the airplane cargo hatch using a crane.

The race was on to return the satellite to Orbital for testing, repair and return in order for the process to start again for a launch. Subsequently, MEASAT incurred financial issues wherein the loan facilities' agreement were not in compliance with an acceptable debt ratio.

MEASAT contests that the delays each month cost them millions of dollars in lost revenues. Additionally, MEASAT was unable to meet the capacity growth requirements for its C- and Ku-band customers, forcing them to prioritize its limited capacity allocation to low-rate paying Malaysian telecom customers.

This is an abbreviated timeline condensed from the complaint document that is available for public review. The remainder of the issues are primarily focused around accusations of delays and expenses that were not part of the original agreement.

MEASAT is suing for economic duress, unjust enrichment, breach of the convent of good faith and fair dealing, and, lastly, a violation of California Business and Professions Code §17200. There is also a demand for a jury trial. Referred to as the causative reason for the lawsuit is a breach of satellite launch contract for MEASAT 1R, with Sea Launch named as a co-conspirator. Being sought are damages in the amount of $29,000,000 as well as punitive damages, attorneys' fees and costs of the suit, and other relief as the "Court will deem just, equitable and proper."

According to the filing, Intelsat had been fully paid for the launch by MEASAT; however, the filing states that Intelsat demanded MEASAT make an additional $4.5 million payment as well as a release of all claims associated with the damage to the MEASAT satellite and the resulting launch delays. If such was not to be approved by Intelsat, the filing states no launch of the MEASAT satellite would occur and Intelsat would acquire the launch slot for its own uses. The complaint then stipulates MEASAT paid the $4.5 million under duress and provided the demanded releases in order to ensure the Company secured the already paid for launch slot. MEASAT paid a firm fixed price of $40,250,000 as the total amount due for the bargained-for satellite launch, and there were no terms within the agreement to pay any additional funds, either preceding, or after, the launch.

Various other incidents caused damage to the MEASAT satellite and are addressed in the filing papers. Requests for comments on this filing were placed at both the plaintiff's legal offices of Jones Day in Los Angeles, California, and with Intelsat's legal department in Washington, DC.

Calls to both Jones Day and Intelsat required voicemail messages be left. As of this writing, no comments from the parties have been received. We shall update this news item when, and if, such are received.

UPDATE: Intelsat's Dianne VanBeber, Vice President of Investor Relations and Corporate Communications returned our call and stated, "We're still in the early stages of reviewing the claim, but we do not presently believe that a litigation will be material to our business."