Hughes Communications Galaxy, Inc. v. U.S., No. 92-5137

• Decision Date: 07 July 1993
• Docket Number: No. 92-5137
• Citation: 998 F.2d 953
• Parties: 38 Cont.Cas.Fed. (CCH) P 76,535 HUGHES COMMUNICATIONS GALAXY, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

Page 953

998 F.2d 953

38 Cont.Cas.Fed. (CCH) P 76,535

HUGHES COMMUNICATIONS GALAXY, INC., Plaintiff-Appellant, v. The UNITED STATES, Defendant-Appellee.

No. 92-5137.

United States Court of Appeals Federal Circuit.

July 7, 1993.

Rehearing Denied; Suggestion for Rehearing In Banc Declined

Oct. 26, 1993.

Clarence T. Kipps, Jr., Miller & Chevalier, Chartered, Washington, DC, argued for plaintiff-appellant. With him on the brief were Robert K. Huffman, Kevin C. Dwyer and Paul L. Glenchur. Also on the brief were John J. Higgins, John T. Kuelbs, Jennifer Smolker, Scott B. Tollefsen and M. Keith Nocket, Hughes Aircraft Company, Los Angeles, CA.

Terrence S. Hartman, Dept. of Justice, Washington, DC, argued for defendant-appellee. Stuart M. Gerson, Asst. Atty. Gen., David M. Cohen, Director and Allen D. Bruns, Asst. Director, Commercial Litigation Branch, were on the brief for defendant-appellee. Also on the brief were June W. Edwards, Associate Gen. Counsel and William J. Bierbower, Sr. Atty., Nat. Aeronautics and Space Admin.

Before RICH, MAYER and LOURIE, Circuit Judges.

MAYER, Circuit Judge.

Hughes Communications Galaxy, Inc., appeals the judgment of the United States Court of Federal Claims, ¹ 26 Cl.Ct. 123 (1992), which held it could not recover damages under its contract with the National Aeronautics and Space Administration (NASA) when NASA's failure to launch Hughes' satellites was the result of the President's decision to stop launches of commercial satellites. We reverse and remand.

Background

On December 5, 1985, Hughes Communications entered into a contract with the United States, represented by NASA, in which NASA agreed to use its "best efforts" to launch ten of Hughes' commercial satellites through its Space Shuttle program. At that time, NASA operated a fleet of four manned shuttles. The United States government was then promoting commercial use of its shuttle fleet by private industry to offset the costs of its space program. To further this goal, NASA actively marketed its shuttles as launch vehicles for commercial payloads to both domestic and foreign users. ²

The contract executed between Hughes and NASA was, as the Claims Court recognized, unique. Labeled a Launch Services Agreement (LSA), the contract provided at the outset that "[a]ll Launch and Associated Services to be furnished by NASA to the Customer under this Agreement shall be so furnished by NASA using its best efforts." Art. I. ³ The contract included a cut-off date of September 30, 1994, at which time NASA's obligations under the contract would expire, whether or not Hughes' spacecraft had been launched. ⁴ The LSA also granted both parties termination rights. Hughes was given the right to terminate the contract at virtually any time, provided it pay NASA any costs actually incurred by NASA at the time of termination. Art. VII, p 2. NASA's right to terminate was somewhat more limited, and included the right to terminate "upon a determination in writing that NASA is required to Terminate such services for Reasons Beyond NASA's Control." Art. VII, p 1.a. (iv).

Article I of the contract designated a "Planned Launch Date" for each of Hughes' spacecraft. ⁵ Three of Hughes' spacecraft were designated as "Scheduled Launches" while the remaining seven were designated as "Standby Launches." Art. I, p 1.a. Standby Launches were subject to more uncertain launch dates, "with each launch to nominally occur within one year following its respective Planned Launch Date." Art. IV, p 1.b. (2). The "Firm Launch Date and Shuttle flight assignment for the Payload will be selected solely by NASA." Id. Scheduled Launches, however, were to be "implemented as set forth in Subparagraph 1.a...." Art. IV, p 1.b. (1). Subparagraph 1.a. of Article IV provided that for launches which are not Standby Launches, the Planned Launch Date would mark the beginning of a ninety-day launch period. About one year before this Planned Launch Date, NASA was to assign the payload to a shuttle and establish a Firm Launch Date by coordinating with Hughes and other customers scheduled to share the same shuttle launch. Despite these provisions, Article IV allowed both Hughes and NASA considerable flexibility in the actual launch date of the satellites by permitting both parties to delay or postpone a scheduled launch. Art. IV, pp 2-5.

In addition, Article XV, entitled "Services Consistent with United States' Obligations, Law and Published Policy" provided that, "NASA shall provide Launch and Associated Services under this Agreement to the extent consistent with the United States' obligations (including any intergovernmental memorandum of understanding entered into by NASA and the Customer), United States' Law and United States' Published Policy." Article IV also addressed NASA's obligation to provide launch services, and provided in relevant part, "With respect to launch priority and scheduling, NASA will provide Launch and Associated Services in accordance with the United States policy governing launch assistance approved by the President of the United States on August 6, 1982. Consistent with this policy, NASA will generally treat all comparable payloads on the same basis." The referenced policy was issued by President Reagan on August 6, 1982, and was entitled "Space Assistance and Cooperation Policy." It provided:

With respect to the priority and scheduling for launching foreign payloads at U.S. launch sites, such launchings will be dealt with on the same basis as U.S. launchings. Each launching will be treated in terms of its own requirements and as an individual case. Once a payload is scheduled for launch, the launching agency will use its best effort to meet the scheduling commitments. Should events arise which require rescheduling, the U.S. will consult with all affected users in an attempt to meet the needs of users in an equitable manner. ⁶

NASA compiled a list of all scheduled payloads to be launched, including Hughes', into a "manifest." The manifest listed commercial payloads in order of their Planned or Firm Launch Dates, and indicated which payloads were to be launched on which shuttle. Hughes' spacecraft were assigned specific slots on this manifest. However, on January 28, 1986, the Shuttle Challenger exploded shortly after takeoff from the Kennedy Space Center at Cape Canaveral, Florida. None of Hughes' spacecraft had been launched at this point, less than two months after Hughes and NASA executed the LSA.

As a consequence of the Challenger tragedy, NASA's shuttle fleet was reduced to three craft. Also, NASA immediately initiated an investigation to determine the cause of the accident. Ultimately, following extensive evaluation of space policy by various governmental entities, the President issued an order on August 15, 1986, in which he announced that NASA would no longer be in the business of launching commercial spacecraft. However, the government was left with the question of how best to handle the remaining 44 commercial payloads it had contracted to launch.

In response to this problem, the government grouped the remaining payloads into four categories--"Shuttle Unique," "National Security and Foreign Policy," "Costly to Retrofit," and the "Remainder." The "Shuttle Unique" category included payloads which could not be launched using an expendable launch vehicle (ELV) but require a manned vehicle launch. The "National Security and Foreign Policy" category included those payloads which were designated as having national security or foreign policy implications. The third category referred to payloads which could be launched by an ELV, but with considerable additional expense. Three of Hughes' satellites fell into this category, while the other seven were included in the "Remainder" category.

Based on these categories and the President's revised policy, NASA announced a new manifest for its shuttle fleet. This manifest included only those payloads which fell into the "Shuttle Unique" and "National Security and Foreign Policy" categories. Accordingly on October 30, 1986, NASA issued a letter to Hughes informing it that the new manifest did not include Hughes' spacecraft. The letter also stated:

It appears almost certain you will not be provided launch services either prior to or after your current contract expires. At the very least, it can be said with absolute certainty that your payloads will be delayed far in excess of the nine-month period described in Article VII, sub-paragraph 2.b. of Parts II and III of your Launch Services Agreement (LSA). Thus, should you wish to terminate your LSA prior to expiration, Article VII provides you may do so based on these delays. Upon termination, your payments to NASA will be refunded in accordance with the terms of the LSA.

Hughes filed suit in the United States Claims Court claiming that NASA breached the LSA and that Hughes' contract rights were taken in violation of the Fifth Amendment. On cross motions for summary judgment, the court granted the government's motion and held that Hughes could not recover under either of its claims.

With regard to the first claim, the Claims Court held that there was no breach of the LSA. Initially, the court determined that in spite of its "unusual features," the LSA was a binding contract because the government was obligated to use its best efforts to launch Hughes' spacecraft. 26 Cl.Ct. at 134. The court declined to determine whether or not the combined effect of the government's actions operated to invoke the contract's termination clause. Id. at 136. Instead, the Claims Court determined that the new manifest, and the exclusion of Hughes' spacecraft, were the result of a valid sovereign act--a policy decision issued by the President with proper authority. The court reasoned that Article XV of the contract incorporated the sovereign act defense by its terms and that the LSA was therefore explicitly made subject to changes in policy. Id. at 140. The Claims Court...