ECHOSTAR HIT WITH FEDERAL SANCTIONS FOR ‘FRIVOLOUS’ SUIT
Federal judge approved sanctions against EchoStar that could result in company’s being fined $300,000 for filing frivolous antitrust suit against aerospace insurer 3 years ago.
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U.S. Dist. Judge Marcia Krieger, Denver, ordered EchoStar to reimburse AXA Space Inc. for legal fees incurred in defending itself against antitrust allegations. Fine is designed to cover attorney fees AXA paid Hogan & Hartson law firm. In issuing ruling, Krieger also agreed to keep under seal federal magistrate’s recommendation in Nov. 2001 that EchoStar be punished for making bad-faith claims against AXA.
EchoStar withdrew suit against AXA and 12 other insurance underwriters in March 2001, 8 months after accusing companies of conspiring to deny property and business interruption coverage for 6 EchoStar satellites. Suit was dismissed in Aug. 2001, but AXA continued to pursue sanctions on its own against EchoStar Gen. Counsel David Moskowitz and board member Stanton Dodge. Case stemmed from $219.3 million insurance claim EchoStar filed in Sept. 1998 under launch policies covering EchoStar-4 satellite, which suffered reduction in capacity as result of solar arrays failing to deploy fully. As result, 38 of satellite’s 44 transponders have failed, EchoStar said. Insurance carriers offered to cover $88 million (40%) of policy amount, saying satellite wasn’t total loss and EchoStar hadn’t abided by exact terms of policy. EchoStar disagreed and filed arbitration claim for breach of contract that remains pending. EchoStar currently self-insures fleet of 8 satellites through reserve on balance sheet.
AXA’s Denver attorney, Kevin Evans, accused EchoStar of sloppy research and unprofessional conduct, Rocky Mountain News reported Fri. After reviewing case for more than year, U.S. Magistrate Patricia Coan sided with AXA, concluding EchoStar had brought antitrust suit against insurers as “leverage” to resolve disputed damage claim. Coan’s recommendation for sanctions was approved by Krieger last fall and remains confidential. But portions of Coan’s report were released in other court documents, Rocky Mountain News reported. For example, legal brief includes Coan’s finding that EchoStar’s suit was “overkill” aimed at forcing insurance companies to cover full policy.
EchoStar declined comment on Krieger’s finding but its attorney had filed motions to have her reject sanctions, saying Coan’s findings were erroneous. Krieger ordered EchoStar reimburse AXA last Sept., but company is contesting reimbursement figures.