ICO Global Cites Denial Of Due Process Resulting From Justices’ Recusals, Substantive Errors In Appellate Decision In Petition For Rehearing

Citing procedural irregularities and the participation in deliberations of two California appellate court justices who later determined they were required to recuse themselves, ICO Global Communications (Operations) Ltd. (“ICO”), a subsidiary of Pendrell Corporation, filed a petition yesterday seeking a rehearing of the decision of Division 8 of the California 2nd District Court of Appeal (the “Court”) that overturned one of the largest jury verdicts in the state’s history.

The motion, filed as part of ICO’s ongoing litigation with The Boeing Company and certain of its affiliates (“Boeing”), contends that ICO’s rights to due process were violated by the participation of two justices who determined that they were required to recuse themselves late in the appellate process, after oral argument had already occurred. The motion also asserts that the Court erred in substituting its own interpretation of the evidence for the jury’s conclusions.

On April 13, the Court issued an unpublished opinion overturning a 2008 California Superior Court jury verdict in the case. The jury had found Boeing liable for fraud, breach of contract and tortious interference, and after finding that Boeing engaged in “malice, oppression or fraud,” they also assessed punitive damages against Boeing. The jury’s verdict—the largest in the nation that year―was entered as a final judgment in the amount of $603 million, after extensive post-trial practice in the trial court. With interest, the award had grown to nearly $800 million over the three years that the appeal has been pending. The jury reached its verdict after twelve weeks of trial and four weeks of deliberation, which included a review of testimony and evidence reflected in thousands of pages of records and testimony from many witnesses. Notably, the Court did not overturn the jury’s conclusion that Boeing had engaged in fraud, but rather it determined that a reasonable jury could not have concluded that Boeing’s fraud caused damage to ICO.

ICO had paid Boeing more than $2 billion dollars to construct and launch a next generation communications satellite constellation consisting of twelve medium earth orbit satellites. A rocket carrying the first satellite exploded shortly after launch, destroying the payload. A second satellite reached orbit, but the remaining satellites were never completed and litigation ensued.

At trial, the jury heard evidence of a multi-faceted plan on the part of Boeing and its subsidiaries to drive ICO out of business. The evidence presented at trial included efforts by Boeing to capture ICO’s S-band radio spectrum to support Boeing’s own competitive satellite program, efforts to damage ICO’s prospects by lobbying regulatory authorities, and secret agreements among vendors intended to coerce ICO to abandon certain rights.

California law requires that the Court issue a decision within 90 days of the submission of the case, which typically occurs at the conclusion of oral arguments. Because of this requirement, the practice in California is that appellate decisions are largely developed and drafted prior to oral argument. In the ICO case, two of the four justices serving on the Court, including the Presiding Judge, recused themselves after oral argument without explanation.

After the two highly unusual recusals, a third justice from a different division was appointed, and was given just 12 business days to review the appellate record containing more than 55,000 pages before a second round of oral argument took place. The written decision was issued seventy business days after the new justice had been appointed – giving little time for the new justice to digest the extensive record and materially participate in the decision-making process.

“Our petition for rehearing raises several serious issues about the process by which this case was resolved and the decision reached by the appellate court,” stated Jerry Falk, a partner at Arnold and Porter who is leading the appellate team for ICO. “We believe the court misapprehended key facts and reached erroneous conclusions of law in deciding to overturn the jury’s verdict. We are hopeful that upon further consideration the court will correct the mistakes we identified and reach a different result.”

In addition to the due process issues raised by ICO, ICO is seeking rehearing of the Court’s conclusion that ICO had waived its right to recover for Boeing’s breach of contract, and the Court’s conclusion that the jury’s decision to award ICO damages for Boeing’s fraud was not supported by substantial evidence.

Separately, ICO has filed a Public Records Act request under California law seeking records that might shed light on the reasons for the justices’ recusals. Given ICO’s substantial concerns that opinions may have been influenced by justices who were later compelled to recuse themselves, ICO is seeking a new panel of justices to hear its case.

A copy of ICO’s petition can be found at www.investor.pendrell.com.

Information regarding the Court proceedings can be found on the Court’s website, case number B214659: http://appellatecases.courtinfo.ca.gov/search/case/disposition.cfm?dist=2&doc_id=1559734&q=163673&f=163799054

Copyright Business Wire 2010

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