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Commitments and Contingencies
6 Months Ended
Jun. 30, 2017
Commitments and Contingencies [Abstract]  
Commitments and Contingencies

13. Commitments and Contingencies



Financial Matters



In the fourth quarter of 2012, we sold our former subsidiary, SSL, to MDA pursuant to the Purchase Agreement. Under the terms of the Purchase Agreement, we are obligated to indemnify MDA and its affiliates from (1) liabilities with respect to certain pre-closing taxes; and (2) certain litigation costs and litigation damages relating to the ViaSat Suit. Our consolidated balance sheets include an indemnification refund receivable of $2.4 million as of June 30, 2017 and December 31, 2016. This receivable represents payments to date net of the estimated fair value of the liability for our indemnification for our obligation with respect to certain pre-closing taxes. The final amounts for indemnification claims related to pre-closing taxes have not yet been determined. Where appropriate, we intend vigorously to contest the underlying tax assessments, but there can be no assurance that we will be successful. Although no assurance can be provided, we do not believe that these tax-related matters will have a material adverse effect on our financial position or results of operations. For a discussion of the ViaSat Suit and our indemnification obligations related thereto, see Legal Proceedings, below.



In connection with the sale in 2008 by Loral and certain of its subsidiaries and DASA Globalstar LLC to Globalstar Inc. of their respective interests in GdB, the Globalstar Brazilian service provider, Loral agreed to indemnify Globalstar Inc. and GdB for certain GdB pre-closing liabilities, primarily related to Brazilian taxes. Our condensed consolidated balance sheets include liabilities of $0.3 million and $0.4 million as of June 30, 2017 and December 31, 2016, respectively, for indemnification liabilities relating to the sale of GdB.



See Note 14 — Related Party Transactions — Transactions with Affiliates — Telesat for commitments and contingencies relating to our agreement to indemnify Telesat for certain liabilities.



 

Legal Proceedings

   

ViaSat



Under the terms of the Purchase Agreement, Loral agreed to indemnify MDA and its affiliates from certain damages in the ViaSat Suit brought in 2012 by ViaSat against Loral and SSL.  In September 2014, Loral, SSL and ViaSat entered into a settlement agreement (“the Settlement Agreement”) pursuant to which the ViaSat Suit and an additional patent infringement and breach of contract lawsuit brought by ViaSat against SSL in September 2013 were settled. Loral was also released by MDA, MDA Holdings and SSL from indemnification claims relating to the ViaSat lawsuits under the Purchase Agreement.



The terms of the Settlement Agreement provide, among other things, for payment by Loral and SSL to ViaSat on a joint and several basis of $100 million, $40 million of which was paid in September 2014 in connection with entering into the Settlement Agreement, with the remaining $60 million payable with interest in ten equal quarterly installments of $6.9 million from October 15, 2014 through January 15, 2017.  



Following a mediation session held on December 1, 2014, Loral and MDA entered into an agreement titled “MDA/Loral Dispute Resolution” dated December 1, 2014 (the “Allocation Agreement”), pursuant to which Loral and MDA agreed that Loral will be responsible for $45 million, and MDA and SSL will be responsible for $55 million, of the $100 million litigation settlement with ViaSat.

   

Pursuant to the Allocation Agreement, Loral paid ViaSat the final installment of $2.8 million in January 2017. Our condensed consolidated balance sheets as of June 30, 2017 and December 31, 2016 include indemnification liabilities related to the ViaSat Settlement Agreement of nil and $2.8 million, respectively.

 

Joint Venture Arbitration 



In connection with a joint venture that serves as the service provider for Globalstar service in Russia in which Loral held an indirect ownership interest, the Russian joint venture partner commenced in the fourth quarter of 2016 an arbitration against Loral in the London Court of International Arbitration seeking, among other things, to recover (i) losses it claimed it suffered in defending legal proceedings in Russian state courts brought by Loral seeking to collect certain payments owed to Loral and (ii) costs of the arbitration. In June 2017, we entered into a settlement agreement with the Russian joint venture partner pursuant to which, among other things, the arbitration and the Russian legal proceedings were settled and the parties released each other from all claims either party had or may have against the other relating to the dispute, our investment and their relationship. The settlement, which is subject to Russian court approval, will not have a material adverse effect on our financial position or results of operations.



Other Litigation



We are not currently subject to any legal proceedings that, if decided adversely, could have a material adverse effect on our financial position or results of operations. In the future, however, we may become subject to legal proceedings and claims, either asserted or unasserted, that may arise in the ordinary course of business or otherwise.