New Valley Corp. v. United States

72 Fed. Cl. 411 (2006)

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Nature of the Case

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Facts

Western Union was in financial difficulty and began to sell off assets. The company’s communications satellite division, Westar Division had the Westar VI-S, a communications satellite built at a cost of $32.2 million and acquired by Hughes Communications, Inc., in January 1989 for $20.5 million. When Western Union contracted for the construction of the Westar VI-S, it expected to launch that satellite aboard the Space Shuttle pursuant to a contract executed with NASA in 1984. This contract was disavowed by NASA related to the loss of the Shuttle Challenger in January 1986. Western Union eventually went into bankruptcy and following its reemergence sought damages for NASA’s breach of contract. In the initial trial, the ruled that it was irrelevant whether or not P had the financial capacity to launch the satellite in its own right because “the breach must be seen as the proximate cause of injury to plaintiff.” The court left for later consideration the question of how much more Hughes Communications would have paid for the Westar assets had they included a NASA launch contract. Under the contract, it is clearly stated that any award for a breach of contract must be restricted to direct damages and may not include lost profits or other consequential damages. D maintains that the damages contemplated in the court’s earlier opinion constitute consequential damages and lost profits and are not recoverable. D asserts that P did not sell the Westar Division assets because of the breach but rather because it was confronting a liquidity crisis that left it without sufficient funds to satisfy its day-to-day operations and also meet its debt service obligations. D contends that P’s damages are the result of a collateral undertaking and therefore constitute consequential damages.