ICO Global Communications (Operations) Ltd. (“ICO”), a subsidiary of Pendrell Corporation, filed a petition today with the California Supreme Court seeking review of a recent decision by the California Court of Appeal that overturned a 2008 Superior Court judgment against The Boeing Company and one of its subsidiaries (“Boeing”). The judgment had awarded ICO $603 million, including punitive damages, after a jury found Boeing liable for fraud, tortious interference and breach of contract. ICO’s petition details how ICO’s constitutional due process rights were violated because two Court of Appeal justices who recused themselves more than two years after the appeal was filed had participated in deliberations for an extended period during which the appellate panel reviewed the record, prepared memoranda about the case, held an oral argument, and began drafting an opinion. A third justice who was appointed after the two conflicted justices had both withdrawn joined the panel only 12 business days before the panel held a second oral argument. The petition contends that the Court of Appeal should have been reconstituted with three unbiased justices who had not deliberated with the conflicted justices. No reason for the recusals has been given, although state records reflect that one justice owned as much as $1 million in Boeing stock, and a second justice acquired Boeing stock while the case was pending before the court. In response to a records request submitted by ICO seeking access to the court’s internal documents and correspondence relating to the recusals, the court declined to provide any internal records despite ICO’s belief that the Court of Appeal is required to do so under California law. “If this were a jury trial, and two jurors were found to have engaged in deliberations while they had a conflict of interest, there is no doubt a mistrial would have been declared, and the process would have started over. The same fundamental due process concerns exist now given the last minute recusals,” commented Barry Lee, a partner at Manatt, Phelps and Philips who has served as ICO’s lead counsel through the lower court and appellate process. “This isn’t just a case where the justices recused themselves at the 11 th hour -- the clock had already struck midnight. The damage resulting from extended participation by two conflicted justices had already been done.” The petition also asks the Supreme Court to correct the Court of Appeal’s fundamentally flawed legal conclusions relating to waiver and forfeiture of contract rights, which conflict with existing California case precedent. Those conclusions disregarded evidence supporting the jury’s explicit finding that ICO had not waived its breach of contract claim.
The $603 million verdict was based on extensive evidence and more than 42,000 pages of record, resulting from a trial that lasted almost three months, with more than 32 witnesses testifying and more than 400 exhibits submitted to the jurors for review. The jury deliberated for almost five weeks, after having been given 133 individual jury instructions and a 30 page special verdict form proposed by Boeing that contained 131 separate questions for the jury to answer. After hearing about Boeing’s efforts to put ICO out of business and take ICO’s most valuable assets, including an internal Boeing document stating “we’d like to put a knife in ICO,” the jury concluded that there was “clear and convincing evidence” that Boeing had engaged in intentional misconduct with “malice, oppression or fraud.”“The Court of Appeal handling of this case and the errors in the opinion issued by the court have raised serious issues of due process and California substantive law that merit Supreme Court review,” commented Jerome Falk, a partner at Arnold & Porter who is leading the appellate team for ICO. He added: “The due process issue is particularly troubling. Justices who have conflicts that disqualify them from participating in a case were engaged in all the important phases of the appellate process, including an oral argument. When they withdrew, the appellate panel should have been reconstituted with three justices who had not deliberated together with justices who had a conflict of interest. This due process issue is a fundamental one.” A copy of ICO’s Petition for Review and related appellate motions can be found at investor.pendrell.com. About Pendrell Corporation Pendrell is headquartered in Kirkland, Washington. For more information about Pendrell, visit www.pendrell.com.