Boeing Says $300M Claim Should Block Energia Spinoff Plan
Boeing Co. implored a California federal court Friday to stop a Russian aerospace giant from selling its California-based spacecraft launch business, contending the sale is part of a scheme by Energia to avoid paying its share of $300 million in claims by Boeing over their failed joint venture.
If Energia sells its Sea Launch business just as Boeing appears about to secure final judgment in its breach of contract suit, the Russian company will probably put the proceeds of the sale outside of the court’s reach and make it impossible for Boeing to collect what Energia owes, Boeing said.
“Energia’s bid to sell the business … on the eve of final judgment is just its latest gambit in a seven-year campaign of deceit and evasion," Boeing said in asking the court to halt the sale or freeze its proceeds.
Boeing said such actions are justified because it already won summary judgment in its 2013 suit, which claims RSC Energia and Ukrainian state-owned KB Yuzhnoye and PO Yuzhnoye Mashinostroitelny Zavod broke contracts by failing to reimburse it following the default and bankruptcy of Sea Launch in 2009. Boeing had funded the joint venture and guaranteed $450 million in third-party loans, according to the complaint.
Boeing said it learned from Russian news media reports that Energia plans to sell the company, citing March 30 articles quoting Igor Komarov, chairman of Energia’s board of directors and head of Roscosmos, the Russian government agency that Boeing says owns and controls Energia. Boeing insists that Energia owns and controls Sea Launch through alter ego companies, while Energia has disputed Boeing’s claims about its ownership of companies from which Boeing has sought sanctions.
“Once Energia does this [sells Sea Launch], it will presumably direct the proceeds beyond this court’s jurisdiction,” Boeing said. “Energia should not be allowed to direct the sale of this business and assets essential to the business in order to thwart collection efforts against Energia.”
Boeing argued that California law entitles it to an attachment on the assets of a company in a breach of contract claim if it can show the claim has “probable validity,” and that it met that test by winning summary judgment. Even if the court determines that Sea Launch is owned by other companies in which Energia has a stake or control, state law allows the court to freeze the assets of those alter ego companies, Boeing said.
Boeing asked for a preliminary injunction barring Energia or its subsidiaries from selling Sea Launch or its assets, or a preliminary injunction preventing Energia or its subsidiaries from transferring the proceeds of any sales without first paying court-ordered debts to Being
Boeing said it is entitled to $142 million for breach of contract and that the Boeing Commercial Space Co. is entitled to at least $158 million for the breach of the loan guarantee it provided.
The suit stems from the 1995 Sea Launch joint venture between RSC Energia and Boeing that aimed to provide sea- and land-based launch sites for satellites. The joint venture filed for Chapter 11 protection in June 2009, listing more than $1 billion in debt and citing credit constrictions, a weakened commercial satellite industry, the effects of a failed launch and the global economy for its failure.
U.S. District Judge Andre Birotte Jr. granted Boeing's motion for an automatic win on its breach-of-contract claims against the Yuzhnoye companies and RSC Energia in September. The judge found that before Boeing issued the roughly $450 million in loan guarantees to get commercial banks to issue loans to Sea Launch, the defendants had expressly affirmed their obligations to share the costs of any guarantees issued by the venture.
Judge Birotte found that Boeing was entitled to collect on $355 million from the defendants, $111 million of which is apportioned to RSC Energia because of its quarter-share in the joint venture. Boeing is seeking to collect that judgment from RSC Energia's subsidiaries.
Attorneys for Boeing declined to comment and attorneys for Energia did not respond to requests for comment.
Boeing is represented by Xanath McKeever, Michael B. Slade, Sasha K. Danna, Alec Solotorovsky and Michael E. Baumann of Kirkland & Ellis LLP.
The Energia companies are represented by Rita M. Haeusler, Gaurav Reddy and John M. Townsend of Hughes Hubbard & Reed LLP.
The case is The Boeing Co. et al. v. KB Yuzhnoye et al., case number 2:13-cv-00730, in the U.S. District Court for the Central District of California.