Boeing 2010 Annual Report Download - page 115

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BSSI/Telesat Canada
On November 9, 2006, Telesat Canada (Telesat) and a group of its insurers served BSSI with an
arbitration demand alleging breach of contract, gross negligence and willful misconduct in connection
with the constructive total loss of Anik F1, a model 702 satellite manufactured by BSSI. Telesat and its
insurers initially sought over $385 in damages and $10 in lost profits, but revised their demand to $263.
BSSI has asserted a counterclaim against Telesat for $6 in unpaid performance incentive payments
and also a $180 contingent counterclaim on the theory that any ultimate award to reimburse the
insurers for their payments to Telesat could only result from Telesat’s breach of its contractual
obligation to obtain a full waiver of subrogation rights barring recourse against BSSI. We believe that
the claims asserted by Telesat and its insurers lack merit, but we have notified our insurance carriers
of the demand. The arbitration was stayed pending an application by Telesat to the Ontario Superior
Court on a preliminary issue. On July 16, 2010, the court denied Telesat’s request to exclude certain
evidence, but granted its alternative request to remove the Chairperson from the arbitration panel. A
new Chairperson was appointed on August 19, 2010, and the stay has been lifted. The arbitration
hearing has been rescheduled for April 16, 2012.
On April 26, 2007, a group of our insurers filed a declaratory judgment action in the Circuit Court of
Cook County, Illinois asserting certain defenses to coverage and requesting a declaration of their
obligation under our insurance and reinsurance policies relating to the Telesat Anik F1 arbitration. On
June 12, 2008, the court granted the insurers’ motion for summary judgment, concluding that our
insurance policy excluded the kinds of losses alleged by Telesat. On January 16, 2009, the court
granted Boeing’s motion for reconsideration, ruling in favor of Boeing to require the insurers to provide
insurance coverage to defend the claim. The case has been stayed pending completion of the
underlying arbitration.
Civil Securities Litigation
On November 13, 2009, plaintiff shareholders filed a putative securities fraud class action against The
Boeing Company and two of our senior executives in federal district court in Chicago. This lawsuit
arises from our June 2009 announcement that the first flight of the 787 Dreamliner would be postponed
due to a need to reinforce an area within the side-of-body section of the aircraft. Plaintiffs contend that
we were aware before June 2009 that the first flight could not take place as scheduled due to issues
with the side-of-body section of the aircraft, and that our determination not to announce this delay
earlier resulted in an artificial inflation of our stock price for a multi-week period in May and June 2009.
In March 2010, we filed a motion to dismiss the complaint for failure to state a cognizable claim, and,
on May 26, 2010, the Court granted the motion and dismissed the complaint in its entirety. On June 22,
2010, the Court accepted the plaintiff’s amended complaint, which we moved to dismiss. On
August 10, 2010, the Court denied the motion and on August 30, 2010, we answered the amended
complaint. On September 24, 2010, we moved to strike the portions of the amended complaint
attributed to a confidential source and to dismiss the complaint with prejudice. On October 14, 2010,
the Court denied our motions. On December 10, 2010, we moved for reconsideration of the Court’s
order denying our motion to dismiss. Discovery has commenced.
In addition, plaintiff shareholders have filed three similar shareholder derivative lawsuits concerning the
flight schedule for the 787 Dreamliner that closely track the allegations in the putative class action
lawsuit. Two of the suits were filed in Illinois state court and have been consolidated. The remaining
derivative suit was filed in federal district court in Chicago. No briefing or discovery has yet taken place
in any of these lawsuits. We believe the allegations in all of these cases are without merit, and we
intend to contest the cases vigorously.
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