Motorola wins Iridium ruling

Motorola Inc. didn't knowingly mislead investors about the prospects of its failed Iridium LLC satellite unit, a bankruptcy court judge ruled Friday.

It couldn't be proven that Iridium was insolvent prior to its 1998 launch, U.S. Bankruptcy Judge James Peck in New York said in a written ruling. His finding will prevent Iridium creditors from recovering at least some of the $3.45 billion they claim Motorola owes them under a theory that it was liable for Iridium's collapse because it saddled the unit with debt and a poor business plan as consumers shunned its bulky, expensive phones.

"The fact that Iridium failed in such a spectacular fashion stands out as a disturbing counterpoint to the market's optimistic predictions of present and future value," Peck wrote in his decision, which closes the first phase of a six-year-old case.

Peck dismissed two theories from Iridium creditors, saying they failed to prove their theories that Motorola was either insolvent or had "unreasonably small capital" during the four years leading up to its bankruptcy.

"The outcome of the solvency phase of the trial is due to the committee's failure, despite diligent effort and passionate, effective advocacy, to carry its burden of proof," Peck wrote.

He noted that proving Motorola misled investors about Iridium may have been impossible no matter how hard the creditors tried, given the strong evidence that the market "synthesized and distilled what all the smart people of the era knew or believed to be true about Iridium."

Peck's ruling that Iridium may have been solvent -- or, able to meet its financial obligations -- will block creditors from making certain legal claims.

Motorola said in May that it hadn't set aside reserves for liability related to the Iridium creditors' case.