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Motorola wins dismissal of some Iridium claims

NEW YORK
Fri Aug 31, 2007 7:07pm EDT
A worker prepares the Motorola booth for 2007 International CES (Consumer Electronics Show) in Las Vegas, Nevada January 7, 2007. A U.S. judge on Friday dismissed some claims brought by unsecured creditors of Iridium against Motorola Inc, saying the market had not been misled about valuation of the failed satellite phone venture. REUTERS/Rick Wilking

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NEW YORK (Reuters) - A U.S. judge on Friday dismissed some claims brought by unsecured creditors of Iridium against Motorola Inc (MOT.N), saying the market had not been misled about valuation of the failed satellite phone venture.

U.S. Bankruptcy Judge James Peck dismissed four counts of the complaint by Iridium's Committee of Unsecured Creditors, which sued Motorola on behalf of the Iridium estate to recover billions of dollars from the mobile phone maker.

The four counts were dismissed as they depended upon a showing Iridium was insolvent or had unreasonably small capital during the four-year period before its bankruptcy, according to the 114-page ruling.

The creditor committee had not "carried its burden of proof in establishing that," Peck wrote.

Motorola established that "when it came to valuation, market participants had not been misled about the expected performance of the Iridium system and were reasonably well versed regarding its capabilities," Peck wrote. "The capital markets synthesized and distilled what all the smart people of the era knew or believed to be true about Iridium."

Iridium was the pioneer of satellite-based mobile phone services, which allowed users to communicate anywhere in the world via a satellite connection. The company was formed in 1992 and began launching satellites for its service in 1997.

But the company was forced to file for bankruptcy protection in 1999 after it failed to attract customers willing to pay as much as $7 a minute to make phone calls with bulky Iridium phones.

"The fact that Iridium failed in such a spectacular fashion stands out as a disturbing counterpoint to the market's optimistic predictions of present and future value for Iridium, but in the end, the market evidence could not be denied," Peck wrote.

Peck set a hearing for September 12 regarding the remaining four claims in the case.

(Reporting by Paritosh Bansal)



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