Shareholders of a pension fund that holds Amazon stock have filed a lawsuit against the company, its founder Jeff Bezos, and its board of directors. The lawsuit claims that these parties breached their fiduciary duty in relation to a contract for acquiring launch services for the Project Kuiper mega constellation.
The lawsuit, which was recently reported by the Delaware Business Court Insider, alleges that Amazon failed to consider SpaceX and its Falcon 9 rocket when selecting launch services for Kuiper. According to the lawsuit, choosing SpaceX would have been the most sensible decision to ensure that Amazon could meet its goal of launching half its constellation by 2026.
The plaintiffs argue that Falcon 9 is more cost-effective and offers immediate availability compared to other options. However, the lawsuit claims that SpaceX was not considered due to a personal rivalry between Elon Musk, the founder of SpaceX, and Bezos, who also owns a competing rocket company called Blue Origin.
The lawsuit states, “Given these factors, Amazon’s persistent refusal to even consider SpaceX—and the Board’s failure to question its exclusion—lays bare the extent to which Bezos’ personal rivalry influenced Amazon’s procurement process.”
The controversy surrounding Amazon’s 2022 mega-award of launch contracts is also highlighted in the lawsuit. The deal involves contracts with three companies: Blue Origin, United Launch Alliance, and Arianespace. Notably, SpaceX was excluded from this agreement despite being a direct satellite competitor.
While the exact value of the contract remains undisclosed, the lawsuit describes it as the second-largest capital expenditure in Amazon’s history. The lawsuit also points out that Amazon has already paid $1.7 billion to the three launch providers, including $585 million to Blue Origin.
The primary contention raised by the lawsuit is that Amazon’s board of directors failed to consider SpaceX as a potential launch contractor and instead favored companies associated with Bezos. It is worth noting that Blue Origin has a contract to supply rocket engines for United Launch Alliance’s Vulcan rocket.
The lawsuit emphasizes the delays in Blue Origin’s New Glenn rocket and the Vulcan booster, which led to the decision to exclude SpaceX from the launch contracts for Project Kuiper. The plaintiffs argue that these delays jeopardize the entire Kuiper program and highlight the board’s failure to fulfill its fiduciary duties.
The plaintiffs are seeking compensation and coverage of attorney’s fees as remedies. However, Amazon has dismissed the lawsuit’s validity, stating that the claims are without merit.
Project Kuiper, Amazon’s broadband satellite Internet network, has been subject to regulatory requirements set by the Federal Communications Commission. Amazon is mandated to launch half of its proposed satellites by 2026, with the remaining half to be launched within three years.
The legal dispute surrounding this matter has attracted attention due to the rivalry between Elon Musk and Jeff Bezos. Amazon’s decision not to consider SpaceX for launch services could be seen as a strategic move to avoid financially supporting its chief competitor in the space-based Internet sector.
The central issue in the lawsuit revolves around whether Amazon’s board of directors adequately considered the potential benefits of indirectly supporting a rival company’s business. The lawsuit alleges that the meetings to approve the launch contracts were brief and superficial, raising questions about the board’s evaluation process.
Overall, the lawsuit sheds light on the controversy surrounding Amazon’s launch contracts for Project Kuiper and the alleged influence of personal rivalries on the procurement process.