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Mobile Satellite Communications, Inc. v. Intelsat USA Sales Corp.

August 21, 2009

MOBILE SATELLITE COMMUNICATIONS, INC. D/B/A PITTSBURGH INTERNATIONAL TELECOMMUNICATIONS, INC., PLAINTIFF,
v.
INTELSAT USA SALES CORP., ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge

MEMORANDUM OPINION AND ORDER

Plaintiff Mobile Satellite Communications, Inc., d/b/a/ Pittsburgh International Telecommunications, Inc., has brought suit against Intelsat Sales Corp. and Intelsat Global Service Corp. for common law fraud and/or fraudulent inducement and tortious interference with contract. Defendants have filed a Joint Motion to Dismiss, or in the Alternative, Motion for More Definite Statement. For the reasons set forth below, the Court denies defendants' motion.

BACKGROUND

Defendants operate a fleet of telecommunications satellites in geostationary orbit on which they lease bandwidth to telecommunications and broadcast companies and other entities. (Compl. ¶ 6.) The companies lease the bandwidth in the form of a transponder - - a broadband channel that is part of the microwave repeater and antenna system housed onboard the operating satellite. (Id.) Plaintiff owns and operates a large, privately-owned satellite teleport facility through which it provides international access for video and data services. (Id. ¶ 7.) Plaintiff's facility operates on major domestic and international satellite systems in the C and Ku-bands.

(Id.) In order to serve its clients, plaintiff leases satellite transponder bandwidth from several providers, including defendants. (Id. ¶ 8.) Defendants lease this bandwidth on both a preemptible or non-preemptible basis. (Id. ¶ 9.) Non-preemptible service may not be interrupted to restore other services, while preemptible service may be interrupted in order to restore service to non-preemptible transponders. (Id.)

According to plaintiff, as a matter of corporate policy, it leases bandwidth only on a nonpreemptible basis unless "clear assurances are provided to guarantee that service would be functionally comparable to non-preemptible." (Id.) Beginning in 2001, plaintiff leased nonpreemptible service on two transponders on defendants' Galaxy 25 satellite. (Id. ¶ 10.) While Galaxy 25 had suffered solar array "string failures," causing power outages to several transponders, the satellite had a specific coverage area that was preferred by many of plaintiff's existing and potential customers. (Id.) Thus, in late 2006, plaintiff decided to lease a third transponder on Galaxy 25. (Id. ¶ 11.)

Defendants wanted to persuade plaintiff to enter into a preemptible lease for the new transponder (id. ¶ 12), and plaintiff's representatives and those of defendants had several discussions regarding this issue:

(1) On or about November 1, 2006, Floyd Ganassi, plaintiff's chairman; Michael Asti, its CFO; and Jeffrey Wateska, its Chief Sales Officer; met with defendants' agents, Ron Rosenthal, Regional Vice President of North American Broadcast Solutions; and Jay Norway, Senior Account Manager; to discuss the possibility of plaintiff leasing an additional transponder. (Id. ¶ 14.) Plaintiff alleges that during this meeting, Norway and Rosenthal stated that if plaintiff leased a preemptible transponder, it "would receive the highest priority service among the other Galaxy 25 preemptible transponders, using words to the effect that [plaintiff's] transponder would be 'last turned off and first turned on in the event of interruption.'" (Id.) Moreover, plaintiff alleges that Norway produced a "multi-color spreadsheet to illustrate [plaintiff's] priority as further assurance." (Id.) In the face of plaintiff's skepticism about signing a preemptible lease, defendants "persisted, offering extensive assurances that [plaintiff's] transponder would be the last to be preempted and the first to be restored in the event of preemption." (Id. ¶ 15.)

(2) On or about December 19, 2006, Norway, Rosenthal, and Kurt Riegelman, defendants' Senior Vice President of North American Sales, visited plaintiff's main facility. (Id. ¶ 16.) In response to plaintiff's concerns about a preemptible lease, Norway, Rosenthal, and Riegelman once again assured plaintiff that its transponder would be the last turned off and the first turned on in the event of preemption. (Id.)

(3) During or around the week of April 9 -12, 2007, Wateska and Norway discussed the possibility of plaintiff leasing transponder K23 on Galaxy 25. (Id. ¶ 17.) In response to Wateska's preemption concerns, Norway again provided assurances that K23 would be the last turned off and the first turned on in the event of preemption. (Id.)

In reliance on these representations, plaintiff signed a preemptible Lease Service Order for K23, dated April 12, 2007 (the "K23 Lease"), which incorporates by reference the preexisting Nonexclusive Service Agreement No. 03445-000, dated October 1, 2003 (the "NESA") between the parties.*fn1 (Id. ¶ 18; see also Defs.' Mot. to Dismiss Exhs. A, B.) Moreover, plaintiff also (1) repeated defendants' representations to its own customers and structured its services to its customers based thereon; (2) placed high-credit-quality customers on K23; and (c) refrained from making arrangements that would have made it easier to transition customers between K23 and plaintiff's other transponders. (Compl. ¶ 19.)

The K23 Lease had an option to upgrade from preemptible to non-preemptible service at any time. (Id. ¶ 20.) However, to induce plaintiff not to exercise this option, defendants continued to assure plaintiff of the priority of K23. (Id..)

On or about September 18, 2007, Wateska contacted Norway regarding K23's priority as compared to K01, a preemptible transponder that had recently been leased to plaintiff's competitor, RRSat Global Communications Network Ltd. ("RRSat") (Id. ¶ 21.) Plaintiff alleges on information and belief that RRSat, a publicly-traded company, "generally receives favorable treatment [from defendants] compared to [plaintiff]." (Id.) Norway assured plaintiff that RRSat held the lowest priority, stating words to the effect that RRSat's K01 was "one second preemptible," meaning that K01 would be turned off on one second's notice, and plaintiff's K23 would be restored before K01 in the event of preemption. (Id.) At a dinner in New York on or about October 10, 2007, Norway again assured Wateska and Missy Gralish, another representative of plaintiff, that plaintiff had a higher priority transponder than RRSat and others. (Id. ¶ 22.)

On June 25, 2008, plaintiff entered into a contract with G.S.N. GoSat Distribution Network Ltd. ("GoSat") to provide Ku-band service to GoSat on the K23 transponder. (Id. ¶ 24.) That contract permitted GoSat to terminate the agreement in the event that the K23 transponder service was unavailable for a consecutive period of 24 hours. (Id.)

On September 26, 2008, the Galaxy 25 satellite experienced a solar array string failure. (Id. ¶ 25.) To conserve power, defendants took two Ku-band and two C-band transponders offline, including K23, which was taken down at 2:43 a.m. EDT. (Id.) Defendants did not restore K23 to partial power until October 1, 2008 at 4:00 p.m. EDT and did not restore the transponder to full power until October 9, 2008. (Id.) However, defendants restored service to RRSat's K01 on September 27, 2008 at approximately 11:23 a.m. EDT; thus, K01 suffered only about 24 hours of downtime. (Id. at ¶ 27.)

Due to the delay in restoration of K23's service, GoSat exercised its right to terminate service with plaintiff and moved its account to RRSat. (Id. ¶28.) Moreover, plaintiff alleges that it lost other customers as well, costing it $2 million in profits, and that it incurred the expenses of moving customers to other transponders in order to minimize the disruption. (Id. ¶¶ 27-28.)

Plaintiff alleges that defendants (1) intentionally misrepresented that K23 would have priority in the event of preemption in order to induce plaintiff to enter into the K23 Lease and to refrain from exercising its option to convert K23 to non-preemptible status so that defendants could obtain operational flexibility, secure revenue and profit by selling more space on existing bandwidth, and justify discrimination among preemptible lessees on the basis of favoritism and business needs and (2) intentionally took actions they knew would cause plaintiff's customers ...


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