High-price expert out of his depth in LightSquared bankruptcy

In re LightSquared Inc., 2014 Bankr. LEXIS 2984 (July 11, 2014)

The lure of the lucre. In the latest stage of a complex bankruptcy case involving the satellite industry and spectrum rights, the debtors asked the court for confirmation of their amended reorganization plan. All major parties in interest voted in favor of the plan, except for Charles Ergen, who owned LightSquared's biggest competitor, DISH, and who had acquired a major part of LightSquared's prepetition secured debt by way of a special-purpose entity. Ergen and the claim-holding entity alleged the plan was not fair and equitable and discriminated against them. The parties' arguments centered on the valuation of the collateral securing the claims.

Ergen retained an expert who had no experience in the industry and only had about three weeks to prepare a valuation of LightSquared's assets. On the upside, he received $1.25 million for his rush job. At trial, the debtors raised a a Daubert challenge, arguing the expert failed the Rule 702 qualification requirement. The court dismissed the argument finding: (1) there had been no prior notice of such challenge; and (2) a Daubert exclusion was inappropriate on the merits.

But the expert was hardly in the clear. In its final ruling on the plan confirmation, the court did not mince words about what it thought of the million-dollar expert's work product.

Find out more about the expert testimony and outcome of the case here.