LightSquared, the company that was supposed to revolutionize internet access in the United States, has filed a lawsuit against DISH Network Corp (NASDAQ:DISH) and its chairman Charles Ergen. The lawsuit alleges that Dish attempted to take control of the company’s spectrum by improperly taking control of the firm’s debt. Lightsquared is currently in the midst of bankruptcy.
The lawsuit seeks compensatory and punitive damages against Charles Ergen and several entities he has a controlling hand in, including DISH Network Corp (NASDAQ:DISH). The major goal, however, is to prevent Mr. Ergen’s entities from claiming anything in the Lightsquared bankruptcy process. If the company succeeds in that, it may manage a much easier bankruptcy than previously thought.
LightSquared goes bankrupt
The spectrum that LightSquared planned to revolutionize the wireless carrier world with was ruled unusable last year by the Federal Communications Commission. The frequencies utilized by the company were believed to present some threat to the security of signals used in GPS devices. The company filed for bankruptcy in May of last year, but the process is still ongoing.
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According to the lawsuit against Mr. Ergen and associated entities, the executive masterminded the purchase of blocks of Lightsquared debt and interfered with the company’s restructuring process in order to force LightSquared into bankruptcy. The intended effect was supposed to leave DISH Network Corp (NASDAQ:DISH) with much greater control over an auction to sell the company’s assets. That auction is due in December.
Dish Network fights on
LightSquared has just about one asset that anybody cares about. The company is sitting on a length of the wireless spectrum that could be worth billions. Legal troubles prevented the company from using that spectrum and led directly to bankruptcy, but few companies are willing to leave any part of the spectrum on the table, even if it may be difficult to utilize.
In a Reuters report on the lawsuit, a spokesperson for DISH Network Corp (NASDAQ:DISH) said that the lawsuit was a “desperate measure,” designed by management at LightSquared to help the company keep some of its assets.
DISH Network Corp (NASDAQ:DISH) is clearly going to defend itself against the allegations, and LightSquared is facing an uphill battle. The company is beholden to those it owes money to unless it figures out how to pay them back. If a court blocks the DISH Network Corp (NASDAQ:DISH) claims, it would return power to LightSquared equity holders, but the outcome of litigation is difficult to predict.