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SATCOM INTERN. GROUP v. ORBCOMM INTERN. PARTNERS

May 27, 1999

SATCOM INTERNATIONAL GROUP PLC, PLAINTIFF,
v.
ORBCOMM INTERNATIONAL PARTNERS, L.P., DEFENDANT.



The opinion of the court was delivered by: Cote, District Judge.

  OPINION AND ORDER

This case involves the termination of a series of licensing agreements between plaintiff SATCOM International Group PLC ("SATCOM") and defendant ORBCOMM International Partners, L.P. ("ORBCOMM"). Under their agreements, the parties had the option either to arbitrate or to litigate certain claims. On December 23, 1998, the plaintiff filed this action seeking damages and a permanent injunction as well as interim injunctive relief. On March 18, the Court denied the motion for a preliminary injunction. SATCOM has now filed a motion to stay proceedings before this Court pending arbitration. ORBCOMM has filed a cross-motion to stay the arbitration. For the reasons stated, SATCOM's motion is denied and ORBCOMM's motion is granted.

BACKGROUND

1. Licensing Agreements

ORBCOMM is a Delaware limited partnership with its principal place of business in Virginia. It is the licensor of the ORBCOMM system, a network of low-Earth orbit satellites that has communications applications. SATCOM is a corporation organized under the law of England and Wales with its principal place of business in England. SATCOM is the successor in interest to a series of licensing agreements for the ORBCOMM system that cover a vast territory in the Middle East and Central Asia. For each territory, those agreements are as follows: a Service Licensee Agreement ("SLA"), a Ground Segment Procurement Contract ("GSPC"), and an ORBCOMM Gateway Software License Agreement ("Software Agreement") (collectively, "Licensing Agreements").

Each of these agreements was heavily negotiated by ORBCOMM and SATCOM. Both the SLA and the GSPC contain nearly identical provisions that permit the parties to choose either litigation or arbitration under certain circumstances. Section 15(a) of the SLAs reads in pertinent part as follows:

  Subject to the provisions of Section 18(n), in the
  event of a claim or controversy regarding any matter
  covered by this Agreement, ORBCOMM and Licensee shall
  use all reasonable efforts to resolve such claim or
  controversy within 60 calendar days of receipt by
  either party of notice of the existence of any

  such claim or controversy. In the event the parties
  are unable to agree on the resolution of such claim
  or controversy within such period of time, either
  party may remove the claim or controversy for
  settlement by final and binding arbitration in New
  York, NY, in accordance with the then existing
  United States domestic rules of the American
  Arbitration Associations ("AAA") (to the extent not
  modified by this Section).

(Emphasis supplied.) The second relevant section, Section 15(c), reads as follows:

  Except with respect to the application of Section
  18(n) hereof, the rights of the parties under this
  Section 15 shall be the exclusive method of dispute
  resolution with respect to any claim or controversy
  regarding any matter covered by this Agreement.

(Emphasis supplied.) The final relevant section is Section 18(n), entitled "Equitable Relief," and reads as follows:

  Each of the parties acknowledges that the ORBCOMM
  System and the ORBCOMM Services provided pursuant to
  this Agreement are unique and recognizes and affirms
  that in the event of any breach of this Agreement by
  it, money damages may not be adequate and the other
  party may have no adequate remedy at law.
  Accordingly, each of the parties agrees that the
  other party shall have the right, in addition to any
  other rights and remedies existing in its favor, to
  enforce its rights and the other party's obligations
  hereunder not only by an action for damages but also
  an action or actions for specific performance,
  injunctive relief and/or other equitable relief.

(Emphasis supplied.) SATCOM and ORBCOMM agree that the comparable sections of the GSPCs, located at Sections 10 and 11(o), are not materially different from the quoted provisions.

When read together, these provisions provide that arbitration is — with one exception — the exclusive method of resolving disputes with respect "to any claim . . . regarding any matter covered" by the Licensing Agreements. When the claim is to enforce a party's rights or obligations under the agreements, however, the parties have the option of bringing an action in court for damages as well as equitable relief.

On October 16, 1998, ORBCOMM sent letters to SATCOM notifying SATCOM of its intent to terminate the Licensing Agreements in sixty days. On December 18, 1998, at the end of the sixty day period, ORBCOMM sent a second letter terminating the Licensing Agreements.

2. Procedural History

Exercising its right to litigate under Section 18(n) of the SLAs, SATCOM filed this action on December 23, 1998. The complaint seeks to recover on two causes of actions: (1) breach of contract on the ground that ORBCOMM wrongfully terminated the Licensing Agreements, and (2) tortious interference by ORBCOMM with SATCOM's prospective business relations with a company called Keppel Communications that had considered buying SATCOM prior to termination of the Licensing Agreements. In the last paragraph of each cause of action, SATCOM seeks damages "in an amount to be determined at trial." SATCOM's request for relief at the end of the complaint reads as follows:

  SATCOM respectfully requests that this Court enter an
  order: (a) granting SATCOM a preliminary and
  permanent injunction enjoining ORBCOMM . . . (b)
  granting SATCOM final judgment against ORBCOMM for
  all actual and punitive damages determined at trial
  of this action to have been sustained, together with
  prejudgment interest; (c) granting SATCOM final
  judgment against ORBCOMM for all allowable costs,
  attorneys' fees and other litigation expenses to the
  extent recoverable under applicable law; and (d)
  granting SATCOM such other and further relief

  as to the Court may be just and equitable.

(Emphasis supplied.)

On the same day, plaintiff moved by order to show cause for a temporary restraining order ("TRO") pending a preliminary injunction. The Court declined to enter a TRO because of plaintiff's delay in seeking a TRO after the expiration of the contractual notice period, and scheduled a preliminary injunction hearing for February 8, 1999. At the initial conferences with the Court, the Court stated its view that if an arbitration clause existed and arbitration would ultimately take place, discovery should be limited.*fn1 Neither party informed the Court of an intent to arbitrate or a desire to have a limited hearing for a preliminary injunction in aid of arbitration. Each party pressed for full discovery from the other side. The Court restricted discovery to that appropriate to a preliminary injunction motion, but allowed sufficient discovery to develop the merits of every issue in the lawsuit. For instance, the Court permitted full document discovery of the relationship between the plaintiff and the defendant, but restricted each party to two depositions of the other side, and to minimal discovery of the defendant's relationships with its other licensees.

During the intervening two months, the parties engaged in vigorous discovery. The Court held a number of conferences with the parties to resolve discovery disputes, and issued one opinion addressing ORBCOMM's assertion of the attorney-client privilege over communications at an ORBCOMM Executive Committee meeting. At both parties' request, the hearing date was adjourned by over a month until March 15, 1999. By the time of the hearing, ORBCOMM had produced roughly 9,000 pages of documents. In addition, discovery during this time was carried out with an eye toward litigation after the preliminary injunction hearing. For example, SATCOM served a second set of document demands on February 19, 1999, that were returnable after the date of the hearing.*fn2

As noted, the hearing began March 15, 1999. Without objection by the parties, the direct testimony of all witnesses had already been presented according to this Court's customary practice, that is, by affidavit. SATCOM submitted direct testimony from the Chairman, Chief Executive Officer, Chief Operating Officer, and Director of Middle East Operations, as well as from two directors and a shareholder. ORBCOMM submitted direct testimony from the Director of Space and Operations of its parent company, its Chief Financial Officer, and the two Vice Presidents and the Regional Director in charge of the Middle East and Central Asian regions. Both sides also submitted an extensive documentary record. At the hearing, all witnesses but one were cross-examined. The hearing lasted 3 days. At the end of the hearing, the Court read a fifty-nine page opinion containing findings of fact and conclusions of law based on the pre-hearing submissions, the arguments of counsel, the extensive documentary evidence, and the testimony of the witnesses. The Court denied plaintiff's motion for a preliminary injunction.

After delivering its opinion on March 18, 1999, the Court indicated its view that "[t]he next stage in this litigation may be the scheduling of the completion of discovery in this case, scheduling of summary judgment motions and the setting of a trial date." The Court instructed the parties "to spend the next week reflecting on a proposed schedule and talking with each other, and then to advise me in writing by no later than March 26 of your proposal for such a schedule." On March 26, 1999, the Court granted a request by SATCOM to extend "the date by which a proposed scheduling order will be submitted until March ...


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