Dish Network Corp. Chairman Charlie Ergen on Friday asked a New York federal court for leave to appeal an order that excluded certain testimony from an impending trial on LightSquared Inc.’s strategy to emerge from bankruptcy protection, saying the last minute ban has left him sidelined.
U.S. Bankruptcy Judge Shelley Chapman on Wednesday barred a witness versed in wireless spectrum valuation from testifying on behalf of Ergen’s investment vehicle, SP Special Opportunities LLC, and precluded another SPSO expert, Millstein & Co. CEO James Millstein, from relying on the first witness’s report.
Ergen, LightSquared’s largest single creditor, contends that by excluding the report by Tom Peters, a former chief engineer for the Federal Communications Commission’s Wireless Telecommunications Bureau and any testimony by Millstein based on that report, SPSO could be severely prejudiced.
“The bankruptcy court compounded that error by ignoring the obvious solution: The court declined to allow Mr. Peters to be deposed and testify, despite SPSO’s repeated offers to make him available to testify,” SPSO said in a motion. “If there ever were a paradigmatic example of a ruling that would materially affect the litigation, this is it.”
The time to decide the issue is now, according to Ergen, because if Judge Chapman’s order is later reversed on appeal, the parties will be forced to go through the whole trial process again, in a case where LightSquared has already burned through over $130 million in professional fees.
An attorney for LightSquared did not immediately respond to a request for comment on Friday.
The upcoming trial, which centers on the hotly disputed question of how much LightSquared is worth, features a familiar rematch of Harbinger Capital Partners, LightSquared’s controlling shareholder, versus Ergen, whom Harbinger has been at odds with from the beginning of the now 22-month-old bankruptcy.
Backed by LightSquared, Harbinger is pushing a proposal to retain a 44 percent equity stake while handing the rest to co-proponents Fortress Investment Group LLC, Centerbridge Partners LP and SIG Holdings Inc., a JPMorgan Chase & Co. affiliate.
With Ergen staunchly opposed, winning confirmation was hard enough. But late last month LightSquared creditor and preferred stockholder Solus Alternative Asset Management LP floated a rival reorganization plan designed to compete with Harbinger’s along with a $742 million financing commitment.
Under Solus’ plan, which includes a separate $1.25 billion backstop commitment, the hedge fund would partially convert its bankruptcy financing into preferred shares of the debtor’s LightSquared LP unit and a majority stake in the parent company’s stock.
Pursuant to a toggle provision, SPSO can receive a $500 million cash payment for about $800 million in asserted prepetition claims if it supports the plan. SPSO would also receive $500 million in replacement debt in satisfaction of its claims that would have priority prepayment rights over Solus’ own take-back paper.
At the last scheduled pretrial hearing Wednesday, Judge Chapman rebuffed pleas from SPSO lawyer Tariq Mundiya of Willkie Farr & Gallagher LLP for “the court’s indulgence,” saying that SPSO inexcusably failed to offer Peters for deposition until after a court-imposed deadline.
“You made a litigation strategy decision to not offer him, and now you've thought better of it,” the judge said from the bench.
LightSquared filed for Chapter 11 in 2012 after the U.S. Federal Communications Commission refused to approve its proposed nationwide launch over concerns about interference with global positioning system technologies.
SPSO is represented by Rachel C. Strickland, Tariq Mundiya, James C. Dugan and Norman P. Ostrove of Willkie Farr & Gallagher LLP.
LightSquared is represented by Matthew S. Barr, Alan J. Stone, Michael L. Hirschfeld and Andrew M. Leblanc of Milbank Tweed Hadley & McCloy LLP. LightSquared’s special committee is represented by James H.M. Sprayregen, Paul M. Basta and Joshua A. Sussberg of Kirkland & Ellis LLP.
The case is In re: LightSquared Inc., case number 1:12-bk-12080, in the U.S. Bankruptcy Court for the Southern District of New York.
REPRINTED WITH PERMISSION FROM THE MARCH 6, 2015 EDITION OF LAW360 © 2015 PORTFOLIO MEDIA INC. ALL RIGHTS RESERVED. FURTHER DUPLICATION WITHOUT PERMISSION IS PROHIBITED