Creditors of Iridium to sue Motorola Inc for several billion dollars
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7-3-2001, New York
A bankruptcy court yesterday cleared the way for creditors of Iridium to sue Motorola Inc for several billion dollars, the New York Times reported in its online edition, citing lawyers at the hearing.
Creditors of Iridium, which went bankrupt in 1999 after failing to find a market for its mobile phone handsets serviced by an expensive network of satellites, have contended that Motorola kept control of Iridium even after it went public in 1997, and that it effectively operated the company to Iridium's detriment.
Pursuit of those contentions was delayed by a dispute between Iridium's bank lenders and its other creditors in part over who could sue Motorola, according to court documents.
But at yesterday's hearing in lower Manhattan, United States Bankruptcy Judge Cornelius Blackshear approved a settlement of that dispute.
The settlement provides for the creation of a company with a war chest of approximately 47 mln usd to manage litigation seeking more than 2 bln usd in damages from Motorola.
Creditors of Iridium contended in court filings made last year that the money they lent to Iridium was actually funneled to Motorola, and should be returned. The creditors are seeking more than 2 bln usd in damages from Motorola for Iridium and another 3.5 bln for damages they suffered as investors in Iridium.
The NYTimes said litigation would come at a bad time for Motorola, which recently announced that it anticipates its first quarterly loss in 15 years and that it is closing plants and laying off workers to lower its costs.
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