Unsecured Creditors of Iridium v. Motorola, Inc.
Retained by Kirkland & Ellis
In litigation arising from the high-profile bankruptcy of Iridium, a global provider of satellite telecommunications services, plaintiffs alleged that the more than $2 billion that Iridium paid Motorola to design, develop, and launch 66 satellites and related ground equipment was avoidable as a fraudulent conveyance under bankruptcy law and should be returned to the estate.
Counsel for Motorola retained Cornerstone Research and Professor Paul Pfleiderer of Stanford University to analyze whether Iridium was solvent and adequately capitalized at various times prior to its bankruptcy. After carefully analyzing the public and private information available about Iridium and evidence provided by the prices of securities and the ability of Iridium and its competitors to raise capital, Professor Pfleiderer testified that Iridium was solvent and adequately capitalized during the relevant timeframe. He also showed that the failure of plaintiffs’ experts to account for contemporaneous market information led to severe hindsight biases in their assessment of Iridium’s historical viability.
After a trial lasting several months, U.S. Bankruptcy Judge James M. Peck found that plaintiffs had failed to meet their burden of proving Iridium’s insolvency and unreasonably small capital at the times of the contested transactions. Relying significantly on Professor Pfleiderer’s analysis, Judge Peck dismissed plaintiffs’ fraudulent conveyance and other bankruptcy claims, noting that he was “an especially credible witness” of “great candor.”