## Facts

- Western Union (later New Valley Corp.) entered a 1984 Launch Services Agreement (LSA) with NASA under which NASA promised to use “best efforts” to launch two commercial communications satellites on the Space Shuttle.
- NASA launched one satellite and set a firm launch date in 1986 for the second (Westar VI‑S).
- After the 1986 Challenger disaster, NASA suspended commercial launch planning and shifted policy away from commercial payloads.
- NASA notified Western Union it would not be able to launch Westar VI‑S within the LSA’s contract period, prompting breach/repudiation litigation.
- During this period Western Union experienced severe financial distress and sold assets, including Westar VI‑S (built at substantial cost and sold for a much lower amount in 1989).
- New Valley sued the United States in the Court of Federal Claims asserting contract and takings theories; the case proceeded to a damages phase after liability was resolved against the government.
- The LSA limited recovery to “direct damages” and excluded consequential damages and lost profits.
- In the damages phase, the parties filed cross-motions for summary judgment over whether claimed losses were direct damages (recoverable) or consequential/lost profits (barred).

## Issues

1. When a launch-services contract is assignable, can the promisee recover as direct damages the market value of the contract right (measured by a hypothetical sale) minus the contract price?
2. Is the “gain” on a hypothetical sale of the launch right barred as “lost profits” under a no-profits/no-consequential-damages limitation?
3. Is the diminution in value of the unlaunched satellite itself a direct damage from breach of the launch contract, or a consequential damage barred by the LSA?
4. Were either party entitled to summary judgment on the amount and characterization of damages based on the existing valuation record?

## Decision

- The court held that the holder of an assignable launch-services contract may seek direct damages equal to the contract’s hypothetical market sale value minus the holder’s contract price.
- The court held that the “gain” in such a hypothetical sale is part of the promised performance’s value, not excluded “profit” in the sense barred by the LSA.
- The court held that diminution in value of the satellite resulting from the breach constitutes consequential damages, not direct damages.
- The court denied the government’s motion for summary judgment because not all claimed damages were categorically barred as consequential damages or lost profits.
- The court denied New Valley’s cross-motion for summary judgment because material fact issues remained regarding contract valuation and the allocation of claimed amounts between direct and consequential components.

## Legal Principles

- Direct damages for breach are measured by the value of the performance promised; for an assignable contract right, this may be shown by the contract’s fair market value in a hypothetical sale, less the price required under the contract.
- A “gain” reflecting the spread between market value and contract price may be treated as part of the contract right’s value rather than “lost profits,” where it represents the intrinsic value of the promised performance rather than returns from a separate business venture.
- Losses tied to the dependent value of other assets affected by breach (such as the reduced value of a satellite because launch services were not provided) are consequential damages when they arise from the asset’s reliance on contract performance.
- Summary judgment is inappropriate where the record does not conclusively establish the contract’s market value at breach or cleanly separate recoverable direct damages from barred consequential damages.

## Conclusion

The Court of Federal Claims ruled that breach of an assignable launch-services agreement can support direct damages based on the market value of the contract right itself, but that reduced value of the associated satellite is consequential and excluded by the contract’s limitation of liability; unresolved valuation and allocation disputes required denial of both sides’ summary judgment motions.


New Valley Corp. v. United States, 72 Fed. Cl. 411 (2006)