## Facts

- Hughes, a commercial satellite operator, contracted with NASA on December 5, 1985, under a Launch Services Agreement (LSA) for NASA to use “best efforts” to launch ten HS-393 satellites on the space shuttle.
- The LSA contemplated performance until all ten satellites were launched or September 30, 1994, whichever occurred first, and NASA scheduled payloads through shuttle launch manifests.
- After the January 1986 Challenger disaster, shuttle operations were suspended; in August 1986, the President announced NASA would no longer launch commercial satellites on the shuttle.
- NASA canceled Hughes’s scheduled shuttle launch slots and advised Hughes to seek alternate launch services.
- Hughes procured expendable launch vehicle (ELV) launches, including ELV launches for three HS-393 satellites and for six newer HS-601 satellites that Hughes treated as a commercially reasonable substitute better suited to ELVs.
- Earlier decisions resolved liability; the remaining dispute concerned the proper measure and amount of contract damages.
- After trial, the Court of Federal Claims awarded $102,680,625 in increased launch costs, using a five-satellite model (three HS-393 and two HS-601) based on evidence that, using best efforts, NASA could have launched five HS-393 satellites by the LSA cutoff date.

## Issues

1. Whether the Court of Federal Claims abused its discretion in determining the number of satellites NASA could have launched using “best efforts” during the contract term.
2. Whether the trial court permissibly measured expectation damages by the cost differential between shuttle-launch prices under the LSA and ELV launch costs for five satellites.
3. Whether including two HS-601 satellites in the damages model improperly awarded speculative or nonrecoverable losses rather than direct damages caused by the breach.

## Decision

- The Federal Circuit affirmed the judgment awarding Hughes $102,680,625.
- The trial court’s finding that NASA could have launched five satellites using best efforts by September 30, 1994 was supported by record evidence and was not clearly erroneous.
- The cost-differential methodology was a reasonable approximation of increased launch costs attributable to the breach and fell within the trial court’s discretion.
- Including two HS-601 satellites did not convert the award into speculative or consequential damages where the HS-601 program and associated ELV launches were found to be commercially reasonable mitigation and a direct result of the breach.

## Legal Principles

- Expectation damages may be proven through reasonable estimates; uncertainty as to amount does not bar recovery when the fact of damage is established.
- Appellate review of a trial court’s damages calculation is for abuse of discretion; supporting factual findings are reviewed for clear error.
- For breach of a services contract, a permissible measure of direct damages is the incremental cost of obtaining substitute performance compared to the contract price.
- Reasonable mitigation efforts, including substituting different but commercially reasonable products or services, may be compensated when they are a direct and foreseeable consequence of the breach and do not create a windfall.

## Conclusion

The Federal Circuit upheld a substantial expectation-damages award for NASA’s breach of a “best efforts” launch agreement, approving a five-satellite, substitute-performance cost-differential model and allowing recovery tied to commercially reasonable mitigation through substitute satellite launches.


Hughes Commc’ns Galaxy, Inc. v. United States, 271 F.3d 1060 (Fed. Cir. 2001)