Court must revisit contract interpretation question

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Where the bankruptcy court erroneously concluded that a contract was unambiguous, and failed to thoroughly consider extrinsic evidence, it erred.

Background

This matter is before the court on SES Americom Inc.’s appeal of the bankruptcy court’s denial of SES’s claim for $421 million in Intelsat US LLC’s bankruptcy proceeding.

Independent judgment

At the conclusion of the evidentiary portion of trial, the bankruptcy court ordered both parties to submit proposed findings of fact, which they did. SES argues that the bankruptcy court failed to exercise independent judgment because it adopted Intelsat’s proposed findings of facts and conclusion of laws. The court disagrees.

When determining whether a trial court that has adopted findings submitted by a party “exercised judicial discretion,” courts consider various factors including: (1) if both parties had an “opportunity to respond at length to the proposed findings”; (2) to what degree the final order varies “in organization and content” from the findings submitted by counsel and (3) if the findings are supported by citations to the record. All three element are satisfied here.

Contract interpretation

The next issue is whether the bankruptcy court erred in holding that a Sept. 27, 2018, consortium agreement between SES and Intelsat was unambiguous. This issue actually encompasses two questions: (1) whether the contract terms are ambiguous and (2) the assessment of the extrinsic evidence.

An examination of the several contractual terms which the bankruptcy court recited, but did not discuss, when it found that the consortium agreement’s purpose and reach was unambiguous teaches that, at least in defining the key term “Project,” the consortium agreement is actually a model of ambiguity. And, without doubt it is likewise ambiguous as to whether the undertakings within the consortium agreement are limited to the private market-based approach to clearing the c­Band (as Intelsat argues and as the bankruptcy court held).

When one party presents significant extrinsic evidence, the finder of the fact is obligated to confront that evidence head­on and in its entirety. SES says that was not done here and that the extrinsic evidence supporting its position was not accorded any consideration by the bankruptcy court. The court agrees.

The simple fact is that there is very strong extrinsic evidence favoring SES’s position, and the amended opinion does not reflect that it was considered. Although the bankruptcy court, as a finder of fact, was not required to accept that evidence, it was required meaningfully to salute it and to explain its reason for disregarding it. By not addressing this evidence, the bankruptcy court committed clear error. It is necessary to remand the case for reassessment in perspective of the decision that the contract is  ambiguous and that the extrinsic evidence must be thoroughly and independently considered.

Unjust enrichment

In its amended opinion, the bankruptcy court found that “SES’s unjust enrichment claim fails [because it] … arises out of the same subject matter as the Consortium Agreement and is thus barred as a matter of law.” The court agrees.

If the parties dispute “the meaning of certain terms” of the contract but “do not deny its existence” or dispute its validity, the unjust enrichment claim must be dismissed. Here, there is an undisputed valid, enforceable contract. Neither party questions this fact nor that they had a “contractual relationship.” Nor do they dispute that this relationship continued up to and including February 2020. Furthermore, the contract covers the “subject matter” of this dispute (i.e. clearing the C-Band).

Finally, even if the contract did not govern the subject matter of the unjust enrichment claim, SES’s claim still fails. SES argues that it remains entitled to the 50/50 split but the only grounds for the entitlement come from the contract itself. Thus, SES “finds itself in a ‘catch 22’ with this claim. If a valid enforceable contract existed between the parties, then [SES] cannot recover under a theory of unjust enrichment.” But “if no valid contract was in place, [SES] has failed to state a claim for relief under the theory of unjust enrichment because, absent a contract,” it had no right to a 50/50 split.

Bankruptcy court opinion affirmed in part, reversed in part.

SES Americom Inc. v. Intelsat US, Case No. 3:22-cv-668, June 22, 2023. EDVA at Richmond (Payne). VLW 023-3-368. 57 pp.