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Russian Co. Says Boeing's Spinoff Objection Unfounded

Russian aerospace giant Energia on Monday slammed Boeing Co.’s contention that it’s selling its spacecraft-launch business to avoid paying $111 million in claims by Boeing over their failed joint venture, telling a California federal judge that sale reports are false and it doesn’t actually own the business.
Energia asked U.S. District Judge Andre Birotte Jr. to deny Boeing’s bid to halt the purported sale of Energia’s California-based Sea Launch business, which was aimed at providing sea- and land-based launch sites for satellites, or freeze its proceeds, “because there is nothing to enjoin,” saying that Boeing inferred the sale based on “notoriously inaccurate” Russian news reports. Boeing also can’t freeze the launch business’s assets because it licenses them from two nonparty companies, Energia said.
“It appears that plaintiffs’ true motivation in seeking a writ of attachment is to continue a pattern of trying to drive [subsidiary Energia Logistics Ltd.] and Sea Launch SA out of business by seeking to attach assets,” Energia said in Monday’s redacted filing.
Boeing moved to stop the sale earlier this month, saying that if Energia sells Sea Launch just as Boeing appears to secure final judgment in its breach of contract suit, the company will probably move the proceeds out of the court’s reach and thwart Boeing’s efforts to collect $111 million from the company.
Boeing said the sale should be blocked until it is paid 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 the Sea Launch joint venture in 2009. Boeing had funded the joint venture and guaranteed $450 million in third-party loans, according to the complaint.
Boeing said it is entitled to $142 million from all members of the venture for breach of contract and that the Boeing Commercial Space Co. is entitled to at least $158 million for the alleged breach of the loan guarantee it provided. Boeing is seeking to collect RSC’s portion of that from its subsidiaries.
However, the sale at the crux of Boeing’s injunction and asset freeze bid is not even happening, according to Energia. The Russian aerospace giant said that while English and Russia media have widely reported on numerous discussions with several potential investors and buyers, none of them has resulted in a finalized transaction.
Energia said Boeing has also failed to prove it owns and controls Sea Launch through its alter ego companies, which prevents Boeing from targeting the launch business’s assets, including a launch platform and an assembly and command ship.
According to Energia, two nonparty vessel entities have owned Sea Launch’s assets before the joint venture’s Chapter 11 reorganization. Energia does not own any shares in Sea Launch or the vessel entities, but rather, its subsidiary — Energia Logistics — operates the launch platform and ship under licenses from the U.S. government and contracts with Sea Launch, Energia said.
“Plaintiffs fail to demonstrate alter ego at each link in the corporate downstream subsidiary chain between RSC Energia and either Energia Logistics of the vessel entities, and have failed to comply with the prerequisites for obtaining a writ of attachment under California law,” Energia said.
The suit stems from the 1995 Sea Launch joint venture between RSC Energia and Boeing. 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.
Judge Birotte granted Boeing's motion for summary judgment on its breach of contract claims against the Yuzhnoye companies and RSC Energia in September. The judge found that the defendants had expressly affirmed their obligations to share the costs of any guarantees issued by the venture.
Attorneys for both parties did not respond Tuesday 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.