The lawsuit alleges that Amazon’s board of directors erred in awarding Kuiper launch contracts to Blue Origin and others

WASHINGTON — A pension fund has filed suit against Amazon’s board of directors, claiming they “acted in bad faith” in approving launch contracts for the Project Kuiper broadband constellation that awarded billions of dollars to Blue Origin, the company founded by Amazon’s Jeff Bezos. .

The lawsuit, a public version of which was filed in a Delaware court on Aug. 28, alleges that Amazon’s board of directors and one of its committees spent “barely an hour” reviewing contracts with Blue Origin and United Launch Alliance, whose Vulcan Centaur rocket uses engines. From Blue Origin, prior to approval in March 2022. Delaware Business Court Insider I first reported the lawsuit.

Filed by the Cleveland Bakers & Teamsters Retirement Fund, an Amazon shareholder, the lawsuit sheds new light on how Amazon selected Blue Origin and ULA, along with Arianespace, for contracts announced in April 2022 to launch its 3,236 satellite constellation. satellite. He also points out that a personal feud between Bezos and Elon Musk, the founder of SpaceX, prevented Amazon from considering SpaceX for those contracts.

Amazon board review of Kuiper contracts

According to the suit, Amazon management told the board’s audit committee in July 2020 that it was considering Arianespace, Blue Origin, ULA and a fourth company whose names were redacted in the public version of the complaint for launch contracts. The lawsuit stated that the committee “did not take any Steps to supervise the negotiation process or to insulate the process from conflicts of interest. (emphasis in original) Bezos was, at the time, CEO of Amazon and remains its largest shareholder, while also owning Blue Origin.

The board was fully briefed in November 2020 on Project Kuiper’s plans, including consideration of Blue Origin and ULA, among others, for launch contracts, which the lawsuit said did not result in the board taking any action on potential conflicts of interest: “There is no No guidelines, no censorship, no expression of concern.

Although the identity of the potential fourth launch provider was not made public in the lawsuit, it states that Amazon’s board of directors was informed that SpaceX was not under consideration. This included not only the overall launch contracts, but also a smaller interim contract that Amazon announced in April 2021 for nine ULA Atlas 5 launches. While the value of the Atlas launch contract was redacted in the lawsuit, it says SpaceX’s list price for Falcon 9 launches was significantly lower.

By January 2022, Amazon management had provided the board’s audit committee with summaries of the contracts it planned to sign with Blue Origin and ULA to launch Kuiper. The committee did not spend “more than a few minutes” discussing the contracts, based on the length of the meeting and the number of items on the agenda, before approving them and referring them to the full board, the suit says.

The full board met in March 2022 to consider the three launch contracts. The suit alleges that the board received no expert review of the contracts or other information, including whether the final price was fair to Amazon and whether other launch providers were taken into account, beyond a 2.5-page summary of the proposed contracts. The board approved the contracts in a 40-minute meeting.

The lawsuit argues that the contracts are unfair to Amazon, in part because SpaceX did not take them into account: “Despite being the launch provider with the best track record and lowest prices in the industry, SpaceX appears not to have taken them into consideration.” Complaint states. “By excluding SpaceX, Bezos and his management team reduced the competition in bids for launch agreements and potentially committed Amazon to spending hundreds of millions of dollars more than it otherwise should have.”

The lawsuit concluded that Bezos was able to negotiate on both sides given his roles at Amazon and Blue Origin. “For a year and a half, Bezos was free to identify and negotiate with Amazon’s launch service providers, while also being free to negotiate against Amazon on behalf of Blue Origin.”

The rivalry between Musk and Bezos

The lawsuit strongly suggests that SpaceX was excluded from competing in the Kuiper project because of the rivalry between Bezos and Musk. A section of the 77-page complaint is devoted to outlining the history of the billionaires’ rivalry between SpaceX and Blue Origin, which included Blue Origin’s protest of NASA’s moon landing contract that SpaceX won in 2021. That section contains screenshots of what appear to be tweets Musk mocks Bezos and Blue Origin.

“Given their acrimonious record, Bezos had every reason to exclude Musk’s company SpaceX from the process entirely,” the lawsuit said. “It must be assumed that Bezos could not swallow his pride and asked for his arch-rival’s help in launching satellites for Amazon.”

The second largest contract with Amazon

The public version of the complaint redacts many details about the launch contracts, including specific dollar values. However, it states that the combined contracts were “the second-largest capital expenditure in Amazon’s 25-plus-year history” after its $13.7 billion acquisition of grocery company Whole Foods. Amazon’s second-largest acquisition, MGM Studios in 2021, was worth $8.5 billion.

While the lawsuit redacts the contract values, it states that approximately 45% of its total value goes to Blue Origin, either through the direct contract between Amazon and Blue Origin or ULA’s purchase of BE-4 engines from Blue Origin to satisfy its own Amazon. launch contract. Amazon has spent about $1.7 billion on the three launch contracts so far, including $585 million directly to Blue Origin.

None of the three companies have launched any operations under those contracts so far. The first launch of ULA’s Vulcan Centaur has been delayed until the last quarter of this year, while the first flights of Blue Origin’s Arianespace’s Ariane 6 and New Glenn have been pushed back to 2024. None of the three companies has said when they will launch. . Beginning the launch of Kuiper satellites.

Amazon announced on August 7 that it will use one of the nine Atlas 5 launches it purchased in 2021 to launch a pair of test satellites in late September. Originally intended to be launched on ABL Space Systems’ RS1 rocket, these satellites moved on to the inaugural launch of the Vulcan Centaur which it would have shared with Astrobotic’s Peregrine lunar lander.

Amazon is facing a crisis in the launch schedule of the Kuiper satellites. The FCC license requires the company to have half the constellation, or more than 1,600 satellites, in orbit by July 2026, and the full constellation in orbit by July 2029.

An Amazon spokesperson did not answer specific questions about the lawsuit in a statement to SpaceNews on August 31: “The claims in this lawsuit have absolutely no merit, and we look forward to demonstrating that through the legal process.”

The suit seeks unspecified damages and legal fees in addition to the “immediate deduction” of profits, benefits and other compensation the defendants received as a result of the contracts.

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