Supreme Court to Consider Former LightSquared CEO's Petition
Former LightSquared CEO Sanjiv Ahuja's legal challenge to the company's Chapter 11 bankruptcy reorganization will be considered at the Supreme Court's conference Friday, after the petition's distribution Sept. 28, according to the court's docket. But odds of the court granting it review are long, said American University Professor of Practice in Constitutional Law Stephen Wermiel, with the court receiving upwards of 7,000 petitions for writ of certiorari each session and accepting a low single-digit percentage of them.
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The LightSquared reorganization is "an ideal vehicle for this Court to reaffirm and expand its prior rulings disapproving" bankruptcy reorganizations that divert excess value to the pre-bankruptcy's controlling shareholders at the expense of other shareholders, Ahuja said in the petition. The legal fight is over equity in reorganized LightSquared that went to hedge fund Harbinger Capital, which was majority shareholder in pre-bankruptcy LightSquared, in exchange for the company receiving Harbinger's rights in an array of lawsuits (see 1603230021). The 2nd U.S. Circuit Court of Appeals in May denied his petition for rehearing (see 1605120001).
Alleging the bankruptcy reorganization plan circumvented requirements of equal treatment for minority shareholders such as himself, Ahuja said it "will create horrible systematic incentives and reward insiders for filing dubious, if not vexatious litigation in order to create bargaining chips they can then give up to justify their own overcompensation in chapter 11 plans." Ahuja also argued "threats to the 'fair and equitable' principle are recurrent and ... eternal," with new loopholes emerging as others are closed.
Ligado, the reorganized LightSquared, didn't comment Wednesday. LightSquared, Harbinger Capital and Fortress Credit Opportunities -- also a shareholder in reorganized LightSquared -- waived their right to respond to the Ahuja petition.
Wermiel said the LightSquared case will likely be among as many as 150 other cases that could be considered at Friday's conference, though only 15-20 make it onto the "discuss list" put together by the chief justice and his staff, the other petitions being automatically denied. Whether a case makes it onto the discuss list and is "cert worthy," Wermiel said, depends first on whether it presents a matter of federal or constitutional law over which lower courts have divided. He said a case could also make the discuss list if it deals with an important issue of federal or constitutional law that has to be decided even if there isn't Circuit Court conflict.
Beyond LightSquared -- now known as Ligado -- at least one other telco industry legal fight could see Supreme Court review this term, with a petition for writ of certiorari filed last month appealing the 3rd Circuit's dismissal (see 1606270047) of most parts of a class action lawsuit that accused Google and Viacom of illegally collecting personal data of children. Counsel for the petitioners -- several minor children and their families -- didn't comment. The Supreme Court last week ordered a time extension to Nov. 17 for respondents to file comments.