Ohio Pension Sues Amazon for Snubbing SpaceX in Favor of Blue Origin

A Cleveland pension fund is suing Amazon, founder Jeff Bezos, the Amazon board of directors and several executives for allegedly “breaching their fiduciary duty” by not considering hiring Elon Musk’s SpaceX to launch a constellation of more than 3,000 satellites.

The lawsuit is centered on Amazon’s Project Kuiper, which aims to build a “mega-constellation” of satellites to provide global internet access. According to the complaint, Amazon plans to launch 3,236 satellites over the next decade at a cost of several billion dollars, and in 2020 the Federal Communications Commission gave Amazon six years to deploy half of the satellites and nine years to launch the entire constellation.

The lawsuit, filed by the Cleveland Bakers and Teamsters Pension Fund, claims SpaceX’s Falcon 9 rocket would have allowed Amazon to meet the 2026 deadline and argues the Musk-owned company should have at least been considered. However, Amazon ultimately selected Bezos-owned Blue Origin, allegedly snubbing SpaceX not only to benefit a fellow Bezos-owned business, but because SpaceX is owned by “longtime rival” Musk.

According to the complaint, Amazon’s directors and officers “consciously and intentionally breached their most basic fiduciary responsibilities” by approving contracts that “funnel” funds to Blue Origin. The amount of funds allegedly funneled to the company was redacted from court documents.

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“By approving the related-party contracts during two cursory meetings without having conducted any meaningful analysis, without having protected the negotiation process from Bezos’ glaring conflict of interest, and without having conducted any real scrutiny of the contracts, the Amazon board knowingly abdicated its fiduciary duties and acted in bad faith,” the complaint states.

The lawsuit alleges that “at exactly the same time that the FCC granted Amazon’s license in July 2020,” Bezos-led Amazon management informed the company’s audit committee that it was in discussions with Blue Origin and three other companies for contracts to launch the Project Kuiper satellites. “Inexplicably,” the lawsuit says, “the most famous, reliable and obvious launch provider in the world—SpaceX—was not among the four companies presented to the audit committee.”

The complaint describes SpaceX, “founded, owned, and managed by Bezos’ longtime rival, Elon Musk,” as having the most proven rocket launch track record by far. It adds that a “responsible board” would have engaged experts and advisers about the contract negotiations, “implement safeguards to insulate these negotiations from conflicts of interest, wall Bezos off from negotiations, and ensure that Amazon was conducting a full and fair procurement process that Bezos could not skew in favor of his personal rocket company.”

The complaint also alleges that shunning SpaceX made Amazon’s Project Kuiper program “critically dependent” on Blue Origin, relying on the Bezos-owned aerospace company for up to 78% of its total planned launches. However, the complaint notes, at the time of a decisive March 3, 2022, board meeting, Blue Origin’s New Glenn rocket was more than two years behind schedule, leading the complaint to conclude that “Amazon has hung Project Kuiper’s fate on BlueOrigin’s success.”

Representatives from Amazon did not immediately respond to a request for comment.