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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA (Alexandria Division)
HARALD MCPIKE,
Plaintiff,
v.
Case No. 1:17cv562-TSE/JFA ZERO-GRAVITY HOLDINGS, INC. f/k/a SPACE ADVENTURES, LTD., THOMAS SHELLEY and ERIC ANDERSON,
Defendants.
MEMORANDUM IN SUPPORT OF DEFENDANT’S MOTION FOR SUMMARY JUDGMENT
Pursuant to Local Rule 5, and this Court’s December 19, 2017 Joint Stipulated Protective Order, Defendant Zero-Gravity Holdings, Inc. provides notice that this filing refers to documents marked “CONFIDENTIAL” and therefore this public version has been provisionally filed with redactions to the Memorandum and Exhibits 7, 14, 16, 17, 18, 19, 21, 24, 25, 29, 30, and 31 with the designated “CONFIDENTIAL MATERIALS.” Unredacted versions have been filed contemporaneously UNDER SEAL.
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TABLE OF CONTENTS
TABLE OF CONTENTS ...... i
TABLE OF AUTHORITIES ...... ii
INTRODUCTION ...... 1
STATEMENT OF UNDISPUTED FACTS ...... 3
A. The Parties ...... 3 B. SA’s History of Arranging Orbital Flights and Agreements with Russian Space Partners for a Circumlunar Mission ...... 3 C. SA’s Agreement with Plaintiff...... 7 D. Plaintiff Stops Making Payments, and Space Adventures Terminates ...... 12
LEGAL STANDARD ...... 17
ARGUMENT ...... 17
I. There Is No Evidence That an Injury Was Caused by SA’s Lack of a Formal Contract Directly with Roscosmos Approving Plaintiff’s Space Flight ...... 19 II. SA Did Not Breach the Agreement ...... 23
A. It Is Clear From the Face of the Agreement That SA Represented It Had Rights To Provide Plaintiff’s Space Flight Experience ...... 24 B. The Undisputed Evidence Is That SA Had Rights to Provide Plaintiff’s Space Flight Experience – and Was Providing It Until Plaintiff Quit ...... 29
CONCLUSION ...... 30
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TABLE OF AUTHORITIES
CASES
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ...... 17
Autonomy, Inc. v. TASC, Inc., No. 1:15-cv-505 (AJT/TCB), 2015 WL 7313380 (E.D. Va. Nov. 19, 2015) ...... 20, 21, 22, 28
Babcock & Wilcox Co. v. Areva NP, Inc., 788 S.E.2d 237 (Va. 2016) ...... 24
Bernsen v. Innovative Legal Mktg., LLC, No. 2:11cv546, 2012 WL 3912759 (E.D. Va. Sept. 6, 2012) ...... 23
Collier v. Rice, 356 S.E.2d 845 (Va. 1987) ...... 19, 22
Design & Prod., Inc. v. Am. Exhibitions, Inc., 820 F. Supp. 2d 727 (E.D. Va. 2011) ...... 17
Drewitt v. Pratt, 999 F.2d 774 (4th Cir. 1993) ...... 17
Enomoto v. Space Adventures, Ltd., 624 F. Supp. 2d 443 (E.D. Va. 1999) ...... 20
Filak v. George, 594 S.E.2d 610 (Va. 2004) ...... 22
Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614 (4th Cir. 1999) ...... 21, 22
Lloyd v. Travelers Prop. Cas. Ins. Co., 727 F. Supp. 2d 452 (E.D. Va. 2010) ...... 24
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 (1986)...... 17
MCR Fed., LLC v. JB&A, Inc., 808 S.E.2d 186 (Va. 2017) ...... 22
Pocahontas Mining Ltd. Liab. Co. v. CNX Gas Co., 666 S.E.2d 527 (Va. 2008) ...... 29
Projects Mgmt. Co. v. Dyncorp Int’l, LLC, No. 1:13-cv-331, 2014 WL 1248075 (E.D. Va. Mar. 26, 2014) ...... 23
Quadros & Assocs., P.C. v. City of Hampton, 597 S.E.2d 90 (Va. 2004) ...... 24
Reed v. Beverly Hills Porsche, No. 6:17-CV-00059, 2018 WL 797444 (W.D. Va. Feb. 8, 2018) ...... 20
Shee Atika Languages LLC v. Glob. Linguist Sols., LLC, No. 1:13cv850 (LMB/TRJ), 2014 WL 11430922 (E.D. Va. Oct. 9, 2014) ...... 29
Shepherd v. Davis, 574 S.E.2d 514 (Va. 2003) ...... 23
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Sunrise Continuing Care, LLC v. Wright, 671 S.E.2d 132 (Va. 2009) ...... 22, 23
Waterfront Marine Constr., Inc. v. N. End 49ers Sandbridge Bulkhead Grps. A, B & C, 468 S.E.2d 894 (Va. 1996) ...... 20
Wright v. Eli Lilly & Co., No. 03-2891, 2004 WL 2656839 (Va. Cir. Ct. Nov. 15, 2004) ...... 19, 22
OTHER AUTHORITIES
Fed. R. Civ. P. 56(a) ...... 17
Oxford Living Dictionaries (“Opportunity”) ...... 25
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INTRODUCTION
Plaintiff entered into an agreement with Space Adventures, Ltd. (“SA”) in March 2013
for an opportunity to be a passenger on the first circumlunar mission arranged by SA using a
specially-modified Russian “Soyuz” spacecraft. Since 2005 SA had been working on a
circumlunar mission under agreements with its principal Russian suppliers, Energia and
Roscosmos, and early technical studies had shown the mission was theoretically possible. As of
2013, however, additional scientific and engineering analyses were required to iron out the
details of a mission, and the Plaintiff, SA, and the Russians recognized that it still entailed
significant risks of failure and was dependent upon numerous contingencies. Moreover, the
mission would require the parties to make large, up-front capital expenditures to manufacture a
specially-modified Soyuz spacecraft (with an enhanced heat shield for safer re-entry into the
Earth’s atmosphere, among other changes) and “Blok-DM” propulsion module to be joined to
the Soyuz spacecraft for the lunar journey. No person had circled the Moon since Apollo 17 in
the early 1970s, and the Russians had never performed a manned circumlunar mission.
Reflecting the costs and risks of this unique venture, Plaintiff agreed to pay $150 million
to SA prior to the launch date, broken down into six payments that coincided with important
project milestones. SA would use most of these funds to maintain its rights to offer this
opportunity, commission studies to determine if the mission were technically feasible and to
delineate the mission profile, arrange for a trajectory analysis, advance all of the other aspects of
Plaintiff’s mission, and pay its Russian suppliers. Plaintiff’s payment obligations included a $7
million non-refundable deposit, just under five percent of the total price, which Plaintiff paid
when he entered the agreement in March 2013, which secured for him something he valued
greatly: the opportunity to become the first private citizen to circle the Moon and enter the
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pantheon of memorable space firsts. The balance of the $150 million would be paid in five
tranches at critical junctures leading to the launch.
In early 2014, Plaintiff changed his mind and decided, notwithstanding the terms of the
agreement, that he would not release any further cash payments to SA or its Russian partners
prior to a successful launch. Instead, he asked SA to agree to an amendment under which he
would place the balance of the funds into escrow, and would make their release contingent on
attaining certain milestone events at and following the launch (e.g., performing a spacewalk,
successfully circumnavigating the Moon, etc.). The fundamental consequence of his proposed
amendment would have been to shift the up-front financial burden, and the many pre-launch
risks of the mission, from Plaintiff and place them squarely on the shoulders of SA and its
Russian suppliers and partners. Such a drastic reallocation of the financial burdens and risks was
not only unreasonable under the circumstances but was contrary to the basic bargain struck by
the parties and the clear terms of the agreement.
Plaintiff admitted during his deposition that SA had no obligation to agree to his
proposed amendment, and in fact had complied with all of its contractual obligations. Although
SA offered to defer some payments until after a successful launch, Plaintiff refused to budge
from his position that he would release no more cash payments before the launch. In light of
Plaintiff’s material breach, SA terminated the agreement in March 2015 and retained his $7
million non-refundable deposit, as the agreement expressly provided. Plaintiff accepted SA’s
termination notice and retention of the deposit as within its rights under the agreement.
More than two years later, however, Plaintiff filed this action alleging breach of warranty
and seeking to recoup his $7 million non-refundable deposit. The undisputed facts developed in
discovery reveal that Plaintiff’s claim is meritless. Any alleged harm Plaintiff suffered was
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because he abandoned the contract, not because of anything tied to an alleged breach of the
contractual warranty, and his alleged damages—the full measure of his one and only installment
payment—are eclipsed by the value of SA’s performance. In any event, SA did not breach its
contractual warranty. Judgment in SA’s favor should be entered as a matter of law.
STATEMENT OF UNDISPUTED FACTS
A. The Parties
1. Plaintiff Harald McPike is a citizen of the Republic of Austria, is domiciled in the
Commonwealth of the Bahamas, and is a billionaire investment fund owner, adventurer, and
casino-banned card counter. Dkt. 51 (Am. Compl.) ¶¶ 2, 13; Ex. 1 (McPike Dep.) at 39:22–24,
35:8–22; Ex. 2 (Mawdsley Dep.) at 123:18–124:9.
2. Defendant Zero-Gravity Holdings, Inc., known during the relevant period as
Space Adventures, Ltd. (“SA”), was in the business of providing space flight experiences that
included space flight training and opportunities to participate in private orbital space flights.
Ex. 3 (Answer ¶ 3).
B. SA’s History of Arranging Orbital Flights and Agreements with Russian Space Partners for a Circumlunar Mission
3. SA is the only private company in the world to have arranged for private citizens
to fly to orbit. Ex. 4 (Shelley Decl.) ¶ 3. Between 2001 and 2009, SA and its Russian suppliers,
Rocket and Space Corporation Energia (“Energia”) and the Russian Federal Space Agency, later
re-organized as Roscosmos State Corporation for Space Activities (“Roscosmos”), successfully
organized and conducted eight commercial space flights aboard a Soyuz spacecraft for seven
different private citizens to visit the International Space Station (“ISS”) and return safely to
Earth. Id.; Ex. 3 (Answer ¶ 3).
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4. As of March 2013, when it entered into the subject contract with Plaintiff, SA had
previously entered into numerous agreements concerning space flights with both Energia and
Roscosmos. Ex. 5 (Anderson’s Second Supp. Resps. to Pl.’s First Interrogs.), Resp. 1. As the
“prime organization for manned space systems” and “prime contractor for the Russian segment
of the ISS,” Energia was both the Russian manufacturer and operator of the Soyuz-TMA
spacecraft and was responsible for providing all flight services, including launching and landing
Soyuz spacecraft. Ex. 6 (Energia Annual Report, Excerpted) at 20 & 24; Ex. 7 (Anderson Dep.)
at 104:24–105:1, 106:14–19 & 113:24–114:4. Accordingly, Energia was the entity that would
manufacture and launch the specially-modified Soyuz-TMA and the specially-developed Lunar
Complex (a Blok DM launched by a Proton rocket) that would propel the spacecraft around the
Moon for Plaintiff’s mission. Ex. 7 (Anderson Dep.) at 90:1–3, 106:14–19. Roscosmos was the
Russian space agency responsible for medical screening, training, licensing of space flights, and
operating the Russian government’s launch facility, the Baikonur Cosmodrome, in Kazakhstan.
Id. at 90:3–5. According to Energia’s 2016 Annual Report, Roscosmos holds a 58.8%
controlling interest in Energia; seven of eleven members of Energia’s board of directors are
affiliated with Roscosmos. Ex. 6 (Energia Annual Report, Excerpted) at 11; Ex. 8 (Energia
Board of Directors) at 1; Ex. 9 (Sadeh Dep.) at 246:7–251:20, 263:21–24.
5. In the early 2000s, SA, Energia, and Roscosmos began planning to offer a
circumlunar mission to private citizens, and as of March 2013, SA had entered into a series of
agreements with Russian entities for a circumlunar mission. Ex. 10 (Space Adventures, Inc.
(“SAI”) 30(b)(6) Dep.) at 88:12–123:22, 140:13–149:13; Ex. 7 (Anderson Dep.) at 86:8–127:5,
178:12–181:23; Ex. 5 (Anderson’s Second Supp. Resps. to Pl.’s First Interrogs), Resp. 1.
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6. In 2005, SA, Energia, and Roscosmos entered into a Memorandum of
Understanding (“2005 MOU”), stating their intent “to continue collaboration in designing,
marketing, and implementing until 2010 a commercial space project” that “would include
circumnavigation of the moon (with a possibility of docking with the ISS) onboard the
modernized Soyuz space vehicle with a crew consisting of one professional cosmonaut and two
space flight participants [i.e., private citizens or ‘space tourists’] (SFP) (SFP Moon Project).”
Ex. 11 (2005 MOU) at 1. SA was to “have exclusive worldwide marketing rights for the SFP
Moon Project” for the first year of the contract. Id. at 2. A contemporaneous letter from
Roscosmos confirmed that Roscosmos was “ready to begin negotiations with Space Adventures,
Ltd. concerning our further joint actions within the framework of realization of this project.”
Ex. 12 (July 21, 2005 Letter from Roscosmos to SA) at 2–3; see also Ex. 13 (Oct. 30, 2006
TASS Article).
7. On September 11, 2009, Energia entered into an agreement with Orbital
Technologies (“Orbital”), a Russian company owned by an entrepreneur and engineer who has
worked with SA for 20 years, granting Orbital the “exclusive right” to conclude preliminary
agreements with private citizens for a circumlunar space flight as a “commercial project.”
Ex. 14 (Sept. 11, 2009 Agreement No. 1146/53EE09.440); Ex. 7 (Anderson Dep.) at 80:16–81:6.
The agreement recited Energia’s opinion that the project was “technically feasible.” Ex. 14 at 1.
A contemporaneous letter from Energia confirmed that “co-operation between RSC Energia and
Orbital Technology to realize the new commercial project will be carried out in consideration of
and coordination with Roscosmos.” Ex. 15 (Oct. 20, 2009 Letter from Energia to Orbital).
8. Two months later, on November 11, 2009, SA and Orbital entered into a
Marketing Agreement (“2009 Agreement”). The 2009 Agreement recited Orbital’s September
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11, 2009 contract with Energia regarding circumlunar flights and Energia’s intention “to develop
and offer such flights to the public.” Ex. 16 (2009 Agreement), at 1. Under the 2009
Agreement, SA obtained Orbital’s “exclusive worldwide marketing rights for Energia’s
Circumlunar Space Flight program,” which Orbital had acquired from Energia, in exchange for
annual payments by SA to Orbital. Id. In 2012, SA and Orbital entered into another Marketing
Agreement (“2012 Agreement”), by which SA purchased Orbital’s “rights to conclude
preliminary agreements with [space flight participants]” between 2012 and 2015 in exchange for
further payments by SA to Orbital. Ex. 17 (2012 Agreement).
9. Prior to entering the Agreement with Plaintiff, SA paid to Orbital to
maintain these rights. Ex. 18 (Summary of Certain Payments Made by SA).
10. In 2010, Roscosmos and Orbital entered into a Memorandum of Understanding
(“2010 MOU”) to cooperate on projects including, “implementation of the Lunar flyby project
on a modernized Soyuz,” by attracting private investment. Ex. 19 (2010 MOU), at 1. The 2010
MOU recited “the existing work [Orbital] has done to promote these projects on the Western
market, as well as the existing agreements on these projects with Russian space sector
enterprises.” Id. Under the 2010 MOU, Roscosmos agreed to support “the Projects” and
Orbital’s “marketing activities” to promote the projects. Id. §§ 4–5.
11. In 2010 and 2011, SA, Roscosmos, and Energia entered into agreements allowing
SA to purchase private Soyuz missions and market additional space flights containing two space
flight participants each to the Russian segment of the ISS, where Plaintiff’s circumlunar mission
was anticipated to dock before embarking on its voyage around the Moon. Ex. 20 (Oct. 30, 2010
Agreement No. 1146/53/EE 10.450). These agreements permitted medical screening, training,
launch from the Baikonur Cosmodrome, and visits to the ISS. Id. SA and Energia also entered
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into an agreement affirming SA’s marketing rights and pricing for “the entire scope of activities,
including the activities of Roskosmos, Energia, their contractors and subcontractors.” Ex. 21
(Oct. 30, 2010 Agreement No. 1146/53/EE 10.449).
12. According to Energia’s 2016 Annual Report, “a framework of cooperation” has
existed “[s]ince 2010” between Energia, on the one hand, and SA and Orbital, on the other hand,
with respect to ongoing work on “flying around the Moon in a Russian manned spacecraft.”
Ex. 6 (Energia Annual Report, Excerpted) at 34; Ex. 9 (Sadeh Dep.) at 264:14–267:25.
13. Thus, since the early 2000s, SA, OT, Energia, and Roscosmos have partnered
pursuant to “a host of written documents, contracts, agreements, and memoranda of
understanding,” “oral agreements and understandings,” and “more than a decade-long course of
dealings” between and among SA, Energia, Roscosmos, and Orbital. Ex. 5 (Anderson’s Second
Supp. Resps. to Pl.’s First Interrogs.), Resp. 1.
C. SA’s Agreement with Plaintiff
14. On March 20, 2013, SA and Plaintiff entered into a Circumlunar Space Flight
Purchase Agreement (the “Agreement”) under which SA would provide Plaintiff with a “Space
Flight Experience” consisting of “an opportunity to participate in the first circumlunar space
flight arranged by SA . . . .” Ex. 22 (Agreement) § 3.01. The flight was “intended to be aboard a
specially-modified Soyuz-TMA derivative spacecraft launched to the ISS [International Space
Station] on a Soyuz-FG rocket and thence by means of a specially-developed Lunar Complex
[the Blok DM] intended to propel the specially modified Soyuz-TMA around Earth’s Moon and
back to Earth . . . .” Id. The Agreement contained an integration clause. Id. § 8.11.
15. The Agreement contained a representation and warranty, repeating a clause in the
“Recitals” of Article 1, which stated: “SA has reserved and owns the rights to provide a
circumlunar space flight, after having obtained such rights from [Energia], the official operator 7
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of the Soyuz-TMA spacecraft and from [Roscosmos], the official entity designated by the
sovereign government of the Russian Federation to operate human space flights via [Energia’s]
Soyuz-TMA spacecraft and Soyuz-FG launch vehicles.” Ex. 22 (Agreement) §§ 1, 3.09. In an
email dated December 19, 2012, which contained “rats and mice comments”—changes he
viewed as “not necessarily significant in the context of the document”—Plaintiff’s advisor, Craig
Mawdsley, who negotiated the Agreement on Plaintiff’s behalf, asked that this recital be
repeated as a representation and warranty in Section 3.09 of the contract. Ex. 23 (Dec. 19, 2012
Email from Mawdsley to Shelley) at 1; Ex. 2 (Mawdsley Dep.) at 286:20–288:5. Mawdsley did
not discuss the change with SA, Ex. 2 (Mawdsley Dep.) at 292:25–293:24, and did not recall
discussing it with Plaintiff, id. at 204:5–10, 220:17–21, 290:10–14, 302:9–18, 321:16–323:22.
Plaintiff did not “question the language” or recall discussing it with Mawdsley. Ex. 1 (McPike
Dep.) at 502:16–503:1. Plaintiff understood the language to mean that SA was “legally entitled
to -- to do what they promise.” Id. at 502:11–14; see also Ex. 2 (Mawdsley Dep.) at 219:24–25
(“To sell us what they were selling us, that’s right.”).
16. Plaintiff and his advisor, Mawdsley, recognized that SA’s rights to offer the Space
Flight Experience described in the Agreement could be evidenced in a variety of different ways,
including formal contracts, other agreements, course of dealing, or informal understandings. See
Ex. 1 (McPike Dep.) at 176:11–18, 502:3–4; Ex. 2 (Mawdsley Dep.) at 409:1–15 (SA’s rights
“[c]ould have” been “captured in written contracts, oral agreements, course of dealing,
understandings of the parties,” and Mawdsley “had no idea what contractual framework was in
place between [SA], Energia and Roscosmos, be it written, oral or otherwise”). Before entering
into the Agreement (and continuing through termination of the Agreement in March 2015),
Plaintiff never asked to see any contracts between SA and Russian entities entitling SA to
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provide the Space Flight Experience. Ex. 1 (McPike Dep.) at 177:1–178:3, 500:24–501:15,
504:4–6.
17. Before the Agreement was executed, SA had informed Plaintiff that preliminary
studies had shown the mission to be theoretically feasible but that a more thorough study and an
unmanned test flight would have to be undertaken to prove that the mission could safely be
accomplished before Plaintiff could fly. Ex. 1 (McPike Dep.) at 507:15–509:13, 519:7–19,
520:12–16, 552:16–19, 657:8–13. Plaintiff knew that if “technical issues cannot be overcome,
then the mission will not be possible.” Id. at 508:11–12. But it was important to Plaintiff to be
the first private citizen to fly around the Moon. Ex. 1 (McPike Dep.) at 150:21–151:4; Ex. 2
(Mawdsley Dep.) at 190:17–193:6, 247:23–248:21. Sections 3.01 and 3.01.03 of the Agreement
provided for the creation of a Lunar Systems Design Review (“LSDR”), which was intended to
advance the technical feasibility and details of Plaintiff’s potential circumlunar mission, which
Plaintiff understood he was funding as the “first step” toward his mission. Ex. 1 (McPike Dep.)
at 159:1–161:10, 507:15–509:13; see also Ex. 9 (Sadeh Dep.) at 31:21–36:21. Prepared by
Energia with input from Orbital, a portion of the LSDR was delivered to Plaintiff and presented
to him in Russia by Energia in January 2014, see Ex. 24 (Jan. 30, 2014 Email from Shelley to
McPike), and the remainder of the LSDR was completed and a report thereof delivered to
Plaintiff, which was likewise accompanied by an Energia presentation. See Ex. 25 (LSDR), at
42–203; Ex. 26 (July 21, 2014 Email from Shelley to McPike). The 162-page LSDR report
delineated the plans for the circumlunar mission and specified the details of the mission profile,
the spacecraft modifications, and other technical and mission-specific design elements, features,
and characteristics. See Ex. 25 (LSDR), at 42–203. SA paid Orbital to fulfill its
obligation to provide the LSDR to Plaintiff. See Ex. 18.
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18. In addition to technical issues to be addressed by the LSDR, SA disclosed other
contingencies to Plaintiff before the Agreement was executed, such as the possibility of Plaintiff
failing space flight training, Plaintiff being disqualified by Russian authorities for medical or
other reasons, Plaintiff failing to enter into a “legally binding document” with Roscosmos and
other international partners, Roscosmos failing to certify a launch date or Russian or
international partners changing the launch date, Roscosmos failing to perform or materially
defaulting, and the possible occurrence of various “Force-Majeure” events. See Ex. 1 (McPike
Dep.) at 506:13–514:25, 532:13–544:22; see also Ex. 2 (Mawdsley Dep.) at 218:14–219:25;
Ex. 22 (Agreement) §§ 3.03.1, 4.02.06, 7.03.02, 8.03, 8.07.01.
19. In addition, before the Agreement was executed, SA provided Plaintiff a summary
of “certain major risks,” which included the risk of “Russian default” by Roscosmos, the risk of
“technical failure” including “technical feasibility of the LSDR,” and the risk of “medical
disqualification.” Ex. 27 (Feb. 10, 2013 Email from Shelley to McPike & Mawdsley) at 2. SA
stated that this summary “was not a warranty that other risks do not exist,” and that Plaintiff
“must make his own assessment of the risk he is undertaking.” Id.
20. In preparation for Plaintiff’s anticipated space mission, SA arranged for Plaintiff
to take three trips to Russia to meet with Russian engineers, scientists, and suppliers, familiarize
himself with the Space Flight Experience, and be briefed on technical details of the mission. In
Plaintiff’s first trip in September/October 2013, SA arranged for him to obtain access to
Roscosmos’s Cosmodrome facility to observe a Soyuz spacecraft launch. Ex. 28 (Oct. 2, 2013
Email from McCarthy). In Plaintiff’s next trip in January 2014, SA arranged for Plaintiff to tour
Roscosmos’s facilities at Yuri Gagarin Cosmonaut Training Center (“CTC”), also known as
“Star City,” meet with executives at Energia, and review a portion of the LSDR. Ex. 1 (McPike
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Dep.) at 211:16–213:11, 213:22–214:7, 248:13–249:3; Ex. 18 (Summary of Certain Payments
Made by SA); Ex. 24 (Jan. 30, 2014 Email from Shelley to McPike). In a third and final trip in
June/July 2014, SA arranged for Plaintiff to attend Energia’s presentation of the completed
LSDR. Ex. 1 (McPike Dep.) at 239:6–9; see Ex. 25 (LSDR), at 1–41.
21. SA also paid to Orbital to commission special studies to address
Plaintiff’s diabetes. The study was conducted pursuant to agreements Orbital entered into in
2013 with the Yuri Gagarin Cosmonaut Training Center (“CTC”), which is part of and controlled
by Roscosmos, on behalf of SA. Ex. 29 (June 10, 2014 Contract); Ex. 30 (2013 Agreement No.
1146/53EE 13.480); Ex. 18 (Summary of Certain Payments Made by SA). SA paid another
for Plaintiff to undergo initial medical testing required by Roscosmos for the mission,
carried out in February 2014 in Houston, Texas, by a NASA physician. See Ex. 1 (McPike Dep.)
at 228:6–25, 236:13–237:21; Ex. 18.
22. SA further paid for an astrodynamics scientist to complete a trajectory
study in order for Plaintiff to better understand some of the risk factors, particularly those
associated with the trajectory of the mission’s circumlunar portion (including the periodic
windows of access to circumlunar trajectories from the orbital inclination of the ISS), which
study was delivered to Plaintiff in February 2014. See Ex. 1 (McPike Dep.) at 225:23–226:24;
Ex. 18 (Summary of Certain Payments Made by SA); Ex. 31 (Trajectory Study).
23. SA also arranged for Plaintiff to meet and question three of SA’s former clients
who had successfully flown to the ISS aboard a Soyuz vehicle: Anousheh Ansari, Charles
Simonyi, and Richard Garriott. Ex. 1 (McPike Dep.) at 219:6–16. In addition, SA repeatedly
fielded technical and risk-related questions from Plaintiff and his advisors. See, e.g., Ex. 32
(Dec. 6, 2013 Email from Shelley to McPike & Beirl); Ex. 33 (Jan. 31, 2014 Email from Shelley
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to Anderson); Ex. 34 (Mar. 19, 2014 Email from Anderson to McPike); Ex. 35 (Mar. 29, 2014
Email from Shelley to McPike).
24. As of March 2015, SA had paid more than $8 million to third parties to maintain
its rights and provide Plaintiff’s Space Flight Experience. Ex. 18 (Summary of Certain Payments
Made by SA); see Ex. 16 (2009 Agreement); Ex. 17 (2012 Agreement). SA’s expenditures
included payments of more than to Orbital for the exclusive rights it had purchased
from Energia and approximately for technical, medical, and other costs specifically
related to Plaintiff. Ex. 18.
D. Plaintiff Stops Making Payments, and Space Adventures Terminates
25. As consideration for the Space Flight Experience, and to fund development of the
project, Plaintiff was obligated to make pre-launch payments totaling $150 million, which were
divided into six tranches, starting with three deposits: (i) $7 million initial deposit, which was not
refundable under any circumstance; (ii) $8 million second deposit, to be paid one year from the
execution date, and (iii) $15 million third deposit, to be paid one year from the execution date or
within ten days of the delivery of the LSDR to Plaintiff, whichever was later. Ex. 22
(Agreement) § 5.02. The remaining payments, totaling $120 million, were to be made upon the
receipt of written confirmation from Roscosmos that the mission would go forward and Plaintiff
would be part of the crew ($60 million), id. § 5.02.02, the start of space flight training ($30
million), id. § 5.02.03, and 90 days prior to the planned launch date ($30 million), id. § 5.02.04.
26. The Agreement allowed SA to terminate in the event of Plaintiff’s non-payment
or material breach, in which case SA was entitled to retain all payments Plaintiff had made, id.
§§ 7.02.01, 7.02.02, and in the event of Plaintiff’s medical disqualification, in which case SA
would retain the first installment of $7 million and refund all other payments Plaintiff had made
toward the Contract Deposit, id. § 7.02.03. The Agreement allowed Plaintiff to terminate if he 12
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experienced “change of thoughts or change of heart,” or if his mission “had not been initiated by
December 1, 2020 due to SA’s or [Roscosmos’s] non-performance or material default,” but in
both cases, Plaintiff would forfeit the first installment of $7 million. Id. §§ 7.03.01, 7.03.02.
27. In March 2013, Plaintiff paid the first $7 million installment of the Contract
Deposit, $7 million to SA, in accordance with Section 5.02.01(i) of the Agreement, which was
not refundable under any circumstance. Id. §§ 5.03, 7.02.03, 7.03.01, 7.03.02.
28. In early 2014, however, Plaintiff changed his mind. The second installment of the
Contract Deposit, in the amount of $8 million, was due on March 20, 2014. Id. § 5.02(ii).
Shortly beforehand, Plaintiff proposed to SA that the Agreement be amended to substitute
escrow arrangements (later, letters of credit) in lieu of contractually-required cash payments and
to defer the release of any further payments until after the launch. See Ex. 36 (Mar. 19, 2014
Email from McPike to Anderson); Ex. 37 (May 12, 2014 Email from McPike to Anderson);
Ex. 38 (July 1, 2014 Email from Mawdsley to Shelley & Anderson); Ex. 1 (McPike Dep.) at
316:7–318:2, 319:6–13, 332:5–333:2, 345:1–9, 346:6–15. As written, the Agreement required
Plaintiff to make payments totaling $150 million prior to launch. The effect of Plaintiff’s
proposals would have been to reduce his pre-launch payments available to SA and its Russian
partners from $150 million to $7 million (which Plaintiff had already paid) and to release all
other payments only in installments upon or after launch, contingent on the successful attainment
of various milestone events in the mission (e.g., docking with the ISS, performing a spacewalk,
circumnavigating the Moon, etc.). Plaintiff’s proposal was a fundamental change in the balance
struck between the parties regarding the allocation of the financial burdens and risks of the
mission, which was, at its essence, a customer-funded “development project.” Ex. 1 at 552:16–
19; see also id. at 519:16–19.
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29. As the explanation for his proposed amendment, Plaintiff pointed to Russia’s
invasion of the Ukraine and occupation of the Crimean peninsula. See Ex. 36 (Mar. 19, 2014
Email from McPike to Anderson); Ex. 1 (McPike Dep.) at 296:6–297:20, 316:7–318:2, 543:5–
544:22, 592:10–18, 595:18–596:18. As Plaintiff stated in his deposition, in March 2014 he
“want[ed] to amend the contract because Russia invaded the Ukraine,” and decided he would not
release his second or third installment payments totaling $23 million unless his demands to
amend the Agreement were met. See Ex. 1 at 316:13–14, 625:17–629:17. In a May 2014 letter,
Plaintiff stated that “my concerns to date all relate to risk allocation,” and “I should not
ultimately bear the risk of factors that are outside of my control.” Ex. 37 (May 12, 2014 Email
from McPike to Anderson) at 1. Plaintiff continued: “I cannot allow myself to be put in a
position where it is possible for me to have paid $150,000,000 and yet, for whatever reason, no
space flight experience is provided and I am not refunded my contractual payments.” Id.
30. To accommodate Plaintiff, SA offered to delay by several months the due date for
the second installment of the Contract Deposit (which would otherwise fall due on March 20,
2014), and also delay the due date for the third installment (which would otherwise fall due in
mid-July 2014), so that both payments would become due on July 30, 2014. Ex. 34 (Mar. 19,
2014 Email from Anderson to McPike), at 2–3. Plaintiff continued to propose an amendment,
Ex. 38 (July 1, 2014 Email from Mawdsley to Shelley & Anderson), and did not acknowledge
SA’s efforts to compromise on other terms or to provide him with references to insurance
providers and engineering firms that could perform risk assessments, Ex. 39 (Apr. 1, 2014 Email
from Anderson to McPike).
31. SA conveyed Plaintiff’s escrow arrangement proposal to the CEO of Energia, but
in the summer of 2014, Energia indicated that such an arrangement would not be possible. Ex. 7
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(Anderson Dep.) at 245:22–247:12, 253:23–256:19. SA informed Plaintiff that his proposed
escrow arrangements, which would defer release of all further payments until after launch, were
not acceptable to the Russian parties, but expressed a willingness to consider a letter of credit
arrangement for certain payments while insisting that the two other contractually-required cash
payments on Plaintiff’s Contract Deposit be made as required by the Agreement. See Ex. 1
(McPike Dep.) at 347:6–20, 349:15–20; Ex. 40 (Oct. 11, 2014 Email from Anderson to McPike).
SA’s proposal would have reduced the total payments released pre-launch from $150 million to
$50 million. Id.
32. Plaintiff had decided, however, that he would not make any further cash payments
under the Agreement. See Ex. 1 (McPike Dep.) at 349:15–20. Plaintiff thus failed to make the
second installment payment of $8 million or the third installment payment of $15 million, either
by the original deadlines set in the Agreement (March 20, 2014, and mid-July 2014,
respectively), or by the extended date SA offered (July 30, 2014). Plaintiff threatened SA that if
it were “unable to accept” his proposed amendments to the Agreement by October 24, 2014,
Plaintiff would unilaterally “pursue [his] space adventure via alternative means and avenues.”
Ex. 41 (Oct. 10, 2014 Email from McPike to Anderson & Shelley).
33. In light of Plaintiff’s material breaches, SA terminated the Agreement on
March 24, 2015, see Ex. 42 (Mar. 24, 2015 Email from Henke to McPike), and retained
Plaintiff’s $7 million non-refundable first installment payment of the Contract Deposit, in
accordance with Sections 5.02.01, 5.03, and 7.02.01 of the Agreement.
34. In his deposition, Plaintiff admitted that the reason “the whole agreement with –
Space Adventures failed [was] because I did not want to keep paying up to maybe $100 million
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and then find out that I couldn’t fly because the United States doesn’t allow to have business
with Russia.” Ex. 1 (McPike Dep.) at 296:21–297:1.
35. In his deposition, Plaintiff admitted that SA had “no obligation” to agree to his
proposed amendments for an escrow or letter of credit arrangement in lieu of cash payments. Id.
at 319:14–17, 344:12–16. Plaintiff agreed that “whether the Russians decide to abort the mission
for political or other reasons” was “outside of [SA]’s control.” Id. at 328:2–9.
36. In his deposition, Plaintiff admitted that SA had fulfilled all of its obligations
under the Agreement at the time of termination. Id. at 333:15–16 (“I think they fulfilled the
contract, so there’s nothing I can do.”).
37. In his deposition, Plaintiff admitted that at the time the contract was terminated in
March 2015, he owed $23 million to SA but was willing to pay “probably nothing” in cash to
keep the contract alive and preserve the possibility of a space mission. Id. at 349:17 –350:10.
Plaintiff acknowledged that he received and accepted the notice of termination without protest
“because I did not come up with the money so I had to accept it.” Id. at 356:7–8.
38. On November 21, 2017, this Court dismissed Counts IV (Conversion) and V
(Unjust Enrichment). Dkt. 34 (Mem. Op.), at 18. The Court declined to construe Count I
(Breach of Contract) as a breach of warranty claim. Id. at 17 n.19.
39. On December 13, 2017, Plaintiff filed an Amended Complaint striking Counts IV
and V and adding Count VI, styled “Breach of Contractual Warranty under Virginia Law.”
Dkt. 51 (Am. Compl.) ¶¶ 105–115.
40. On March 12, 2018, the parties filed a Stipulation of Dismissal of Counts I, II,
and III of the Amended Complaint, leaving only Count VI for breach of contractual warranty.
Dkt. 146 (Stip. & Order of Dismissal of Counts I, II & III With Prejudice).
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41. The harm Plaintiff claims to have suffered is the loss of his $7 million first
installment payment toward the Contract Deposit. See Ex. 1 (McPike Dep.) at 76:5–7; Dkt. 51
(Am. Compl.) ¶¶ 115, 117(f).
LEGAL STANDARD
Summary judgment is appropriate when the pleadings and the record demonstrate that
“there is no genuine issue as to any material fact and that the moving party is entitled to
judgment as a matter of law.” Fed. R. Civ. P. 56(a). The nonmoving party must “go beyond the
pleadings and by its own affidavits, or by the depositions, answers to interrogatories, and
admissions on file, designate specific facts showing that there is a genuine issue for trial.”
Design & Prod., Inc. v. Am. Exhibitions, Inc., 820 F. Supp. 2d 727, 735 (E.D. Va. 2011).
“Where the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party, there is no ‘genuine issue for trial.’” Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587–88 (1986) (citation omitted). “The mere existence of a scintilla
of evidence in support of the [non-moving party’s] position will be insufficient; there must be
evidence on which the jury could reasonably find for the [non-moving party].” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). Moreover, “‘[o]nly disputes over facts that might
affect the outcome of the suit under the governing law will properly preclude the entry of
summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.’”
Drewitt v. Pratt, 999 F.2d 774, 778 (4th Cir. 1993) (quoting Anderson, 477 U.S. at 248).
ARGUMENT
Count VI asserts a claim for “Breach of Contractual Warranty.” This claim is predicated
on Section 3.09 of the Agreement, under which SA “represents and warrants that it has reserved
and owns the rights to provide a circumlunar space flight, after having obtained such rights from
[Energia], the official operator of the Soyuz-TMA spacecraft, and from [Roscosmos], the official
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entity designated by the sovereign government of the Russian Federation to operate human space
flights via [Energia’s] Soyuz-TMA spacecraft and Soyuz-FG launch vehicles.” Plaintiff would
read this section as representing and warranting that as of March 20, 2013, (1) SA had a legally
enforceable formal contract directly with Roscosmos pre-approving Plaintiff’s space flight, and
(2) Roscosmos was legally obligated to include Plaintiff as a passenger on that mission. In the
words of the Amended Complaint, SA allegedly “sold Mr. McPike something it did not own—a
seat on a Russian circumlunar space mission.” Dkt. 51 (Am. Compl.) ¶ 73. Plaintiff contends
that SA breached that representation and warranty because, three years later—and more than two
years after Plaintiff stopped making contractually required payments to SA—the Deputy
Director General of Roscosmos sent Plaintiff two letters1 asserting that “[n]owadays, . . . there is
no valid document containing legal obligations of Roscosmos to S.A.,” Ex. 43 (July 25, 2016
Letter from Saveliev) at 4, and that the Russian space program never “envisaged implementation
of projects associated with manned missions to the Moon,” although Roscosmos declined to
provide “information on relationships with ‘Space Adventures’” on confidentiality grounds,
Ex. 44 (Dec. 26, 2016 Letter from Krikalev) at 9; Dkt. 51 (Am. Compl.) ¶ 67.
SA is entitled to summary judgment dismissing this warranty claim for two separate
reasons. First, even under Plaintiff’s flawed reading of SA’s representation and warranty,
Plaintiff cannot prove the causation element of his contract claims because no damages flowed
from any alleged breach. The sole injury Plaintiff claims in this case—his non-refundable $7
million payment toward a Contract Deposit—occurred as a direct result of Plaintiff’s unilateral
1 Defendant is moving in limine to exclude these letters and related out-of-court statements, which a Roscosmos employee made in an effort to sell Plaintiff on a different space flight, as, inter alia, inadmissible hearsay. SA quotes them here not for the truth of the matter stated (which is denied by SA and directly contradicted by the documentary record and official statements by the Russians), but only to illustrate Plaintiff’s stated position.
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refusal to make any further payments under the Agreement. Plaintiff’s disavowal of the
Agreement is demonstrated by his refusal to perform the clearest and most basic of his
obligations: to make timely payments of the amounts he promised to pay. The Agreement
specified that “Client’s Failure to Make Payments” would allow SA to terminate while “entitled
to retain all payments that the Client had made prior to such termination as liquidated damages
and not as a penalty.” Ex. 22 (Agreement) § 7.02.01.
Second, Plaintiff cannot prove a breach by SA. Plaintiff’s claims are based on a
misinterpretation of Section 3.09, which, reasonably read in context, means simply that SA had
the rights to provide the “Space Flight Experience” described in Article 3 of the Agreement and
the ability to fulfill its obligations and responsibilities under the Agreement—when examined at
deposition, Plaintiff and his principal advisor agreed with Defendant on this point. As Plaintiff
admitted in his deposition, SA did in fact perform its end of the bargain, and “fulfilled the
contract” by, among other things, commissioning through Roscosmos a specialized analysis of
how Plaintiff’s diabetes might affect his flight, facilitating meetings between Plaintiff and other
space flight participants, and providing him with medical screening by a NASA physician in
Houston, trajectory analyses, meetings with Energia, tours of Roscosmos facilities, a trip to
Russia and Kazakhstan to view a launch, and Energia’s extensive Lunar System Design Review.
Ex. 1 (McPike Dep.) at 333:15–16. As noted, SA spent over $8 million to facilitate Plaintiff’s
Space Flight Experience. Ex. 7 (Anderson Dep.) at 215:19–216:13; see also Ex. 18.
I. There is No Evidence That an Injury Was Caused by SA’s Lack of a Formal Contract Directly with Roscosmos Pre-Approving Plaintiff’s Space Flight
To establish a breach of warranty, Plaintiff bears the burden of proving that the damages
he seeks to recover were actually caused by the alleged breach. See Collier v. Rice, 356 S.E.2d
845, 846–47 (Va. 1987); Wright v. Eli Lilly & Co., No. 03-2891, 2004 WL 2656839, *18 (Va.
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Cir. Ct. Nov. 15, 2004) (observing that “the Supreme Court of Virginia recognized that the
plaintiff must show that the breach of warranty caused the damage complained of”); see also
Autonomy, Inc. v. TASC, Inc., No. 1:15–cv–505 (AJT/TCB), 2015 WL 7313380, *5 (E.D. Va.
Nov. 19, 2015) (dismissing breach of warranty claim, citing plaintiff’s failure to establish
causation). Accordingly, a breach of contractual warranty claim requires the same proof as a
substantively similar breach of contract claim. See Waterfront Marine Constr., Inc. v. N. End
49ers Sandbridge Bulkhead Grps. A, B & C, 468 S.E.2d 894, 904 (Va. 1996) (“Labeling the
claim a breach of warranty rather than a breach of contract does not alter the nature of the
claim.”); see also Reed v. Beverly Hills Porsche, No. 6:17-CV-00059, 2018 WL 797444, *5
(W.D. Va. Feb. 8, 2018) (“[T]he Supreme Court of Virginia has employed a functional approach
to the relationship between breach of warranty and contract, and when the substance of the two is
the same, the difference in nomenclature is immaterial.”) (citing Waterfront Marine, 468 S.E.2d
at 904).
Plaintiff’s loss of his $7 million deposit was not caused by any breach of Section 3.09 or
the lack of a formal contract directly with Roscosmos pre-approving Plaintiff’s space flight.
Plaintiff’s loss occurred when he failed to make two installment payments due under the
Agreement. As Section 7.02.01 specifies, Plaintiff’s non-payment entitled SA to terminate the
Agreement and retain all payments made prior to termination. Accordingly, Plaintiff lost his
“opportunity to participate in the first circumlunar space flight arranged by SA” because of his
own failure to make payments—not because of the absence of any formal contract between SA
and Roscosmos for Plaintiff’s space flight. Cf. Enomoto v. Space Adventures, Ltd., 624 F. Supp.
2d 443, 452 (E.D. Va. 1999) (finding, in the context of SA’s agreement with another customer,
that SA’s contractual relationship with Roscosmos “was irrelevant to Plaintiff’s failure to fly”).
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This Court recently dismissed at summary judgment a warranty claim alleging that a
contractor misrepresented its relationship with the government to a software company in a
procurement contract. Autonomy, Inc., 2015 WL 7313380, at *5. At summary judgment, Judge
Trenga concluded that no causal relationship existed between the alleged breach of warranty and
the plaintiff’s alleged injury, for “had the representations been as Plaintiffs claim they
understood them to be, the commitment Plaintiffs believed they had from the federal government
was subject to obtaining the required appropriated funds.” Id. “Nor are there any facts sufficient
to establish that the federal government would have been able to obtain the required funding had
it committed to the Contract in the way that Plaintiffs allegedly believed that it had.” Id.
Here, Plaintiff has testified that he failed to make the second and third deposit installment
payments not because of any concerns over SA’s ability to perform (in fact, he admits that SA
had fulfilled its obligations under the agreement at the time he quit), but because he wanted to
renegotiate the Agreement to reduce his risks by eliminating the release of cash payments and
deferring any further payments until launch or post-launch milestones were achieved, claiming
he was concerned about the geopolitical situation in Russia. Ex. 1 (McPike Dep.) at 595:18–
596:18, 645:19–647:25. His position had nothing to do with whether SA had a formal contract
directly with Roscosmos pre-approving Plaintiff’s space flight, or owned Plaintiff’s seat on a
circumlunar space mission guaranteed by Roscosmos. Nor can Plaintiff show that the existence
of such a contract, or ownership of such a guaranteed seat, would have made any difference in
the outcome of future performance under the Agreement. The lack of any causal relationship
between the alleged breach and claimed damages warrants dismissal as a matter of law.
At the motion to dismiss stage, Plaintiff mistakenly interpreted the Fourth Circuit’s
decision in Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 624 (4th Cir. 1999), as
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implying that a plaintiff “need not plead causation” for a breach of warranty claim. Dkt. 28
(Opp’n to Mot. to Dismiss), at 12. But causation was not at issue in Hitachi, the Fourth Circuit
repeatedly referred to the breach of warranty claims before it as “breach of contract” claims,
Hitachi, 166 F.3d at 623–24, 629, and the court cited the Supreme Court of Virginia’s decision in
Collier v. Rice, holding that proof of causation is required, Hitachi, 166 F.3d at 624.
In Collier, which involved a defendant’s unconditional warranty for car engine repairs
that led to litigation when the car engine block froze, expanded, and cracked during the next
winter, the Supreme Court of Virginia observed that “[o]ne who complains of the breach must
show the breach,” and even an “unconditional” warranty “is not insurance against all
contingencies.” 356 S.E.2d at 847 (internal quotation marks omitted). Because plaintiff offered
no evidence “to explain the actual cause of the damage,” and “the only evidence in the record is
that the engine block failed, . . . due to an extraneous cause for which the [defendant] who
installed it was not responsible,” the court entered judgment for the defendant. Id. at 846–47.
Collier remains good law. See Wright, 2004 WL 2656839, at *18; see also MCR Fed.,
LLC v. JB&A, Inc., 808 S.E.2d 186, 195 (Va. 2017) (applying four-part breach of contract test to
claim for breach of contractual warranty). And this Court has not hesitated to dismiss breach of
warranty claims at summary judgment when “there are no damages caused by any alleged
misrepresentations.” Autonomy, Inc., 2015 WL 7313380, at *5. Accordingly, Plaintiff’s sole
remaining claim in this action fails.
As a related point, Plaintiff has adduced no evidence of his alleged damages. As in the
breach of contract setting, failure to prove damages “warrants dismissal of the claim.’” Sunrise
Continuing Care, LLC v. Wright, 671 S.E.2d 132, 136 (Va. 2009) (citing Filak v. George, 594
S.E.2d 610, 614–15 (Va. 2004)). Plaintiff “also has the ‘burden of proving with reasonable
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certainty the amount of damages and the cause from which they resulted; speculation and
conjecture cannot form the basis of the recovery.’” Sunrise Continuing Care, LLC, 671 S.E.2d at
136 (internal quotation marks omitted) (quoting Shepherd v. Davis, 574 S.E.2d 514, 524 (Va.
2003)); see also Projects Mgmt. Co. v. Dyncorp Int’l, LLC, No. 1:13-cv-331, 2014 WL 1248075,
at *9 (E.D. Va. Mar. 26, 2014) (granting summary judgment on contract claim when plaintiff
sought as damages all monies paid, and failed to offer any evidence of the difference between the
value contracted for and the value received), sustained on reconsideration, 17 F. Supp. 3d 539
(E.D. Va.), aff’d, 584 F. App’x 121 (4th Cir. 2014) (per curiam); Bernsen v. Innovative Legal
Mktg., LLC, No. 2:11cv546, 2012 WL 3912759, at *4 (E.D. Va. Sept. 6, 2012).
Plaintiff seeks to recover $7 million in damages—the full extent of the funds he paid SA
as the first part of his Contract Deposit. Dkt. 51 (Am. Compl.) ¶¶ 115, 117(f). The Agreement
expressly precludes Plaintiff from recovering that amount in any event—even in the case of SA’s
non-performance or material default. Ex. 22 (Agreement) §§ 5.03, 7.02.03, 7.03.01, 7.03.02.
But even if it did not, Plaintiff must do more than submit a bill for the sole payment he made to
SA to sufficiently prove his alleged damages. Plaintiff has done nothing to account for the value
he unquestionably received in return for that payment. Plaintiff admitted that SA “fulfilled [its]
contract” with him, Ex. 1 (McPike Dep.) at 333:15–16, and cannot now claim he received no
value from SA, see, e.g., Bernsen, 2012 WL 3912759, at *4 (“[G]iven the undisputed fact that
‘[counterclaim defendant] performed as required’ . . . it is beyond the pale to suggest that [his]
services were utterly devoid of value to [plaintiff] because of the alleged violations.”).
II. SA Did Not Breach the Agreement
Plaintiff’s claim also should be dismissed because the undisputed facts show that SA did
not breach the Agreement. To the extent Plaintiff argues otherwise, Plaintiff’s interpretation of
the Agreement is unreasonable as a matter of law. 23
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A. It Is Clear From the Face of the Agreement That SA Represented It Had Rights To Provide Plaintiff’s Space Flight Experience
Determining the meaning of Section 3.09 requires consideration of the entire contract.
“[W]hen considering the meaning of any part of a contract, we will construe the contract as a
whole, striving not to ‘place emphasis on isolated terms’ wrenched from the larger contractual
context.” Babcock & Wilcox Co. v. Areva NP, Inc., 788 S.E.2d 237, 244 (Va. 2016) (citation and
internal quotation marks omitted); see, e.g., Lloyd v. Travelers Prop. Cas. Ins. Co., 727 F. Supp.
2d 452, 460 (E.D. Va. 2010) (Ellis, J.) (refusing to adopt plaintiff’s interpretation that “inflexibly
applies technical rules of contract construction to an unambiguous insurance policy provision,
while ignoring the context in which these clauses appear”) (citing Quadros & Assocs., P.C. v.
City of Hampton, 597 S.E.2d 90, 93 (Va. 2004)).
Here, Section 3.09 must be read in the context of all of the sections of the Agreement,
and particularly Article 3 (“Obligations and Responsibilities of SA”). Article 3 specifies the
services that SA actually undertook to provide. The basic obligation of SA was to provide
Plaintiff with “the Space Flight Experience,” which was defined in Section 3.01 to include pre-
flight training, a post-flight program, and the “Space Flight” itself, which was “an opportunity to
participate in the first circumlunar space flight arranged by SA, intended to be aboard a specially
modified Soyuz-TMA derivative spacecraft launched to the ISS on a Soyuz-FG rocket and
thence by means of a specially developed Lunar Complex intended to propel the specially
modified Soyuz-TMA around the Earth’s Moon and back to the Earth, all pursuant to
specifications set out in the Lunar System Design Review (“LSDR”) prescribed by Section
3.03.03 below.” Ex. 22 (Agreement) § 3.01.
Read in this context, Section 3.09 means that SA had the rights to offer the opportunity to
participate in the circumlunar space flight described in Section 3.01. Through SA’s agreements
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with Orbital, which had agreements with both Roscosmos and Energia, SA had the rights to offer
that opportunity. SA also had its own agreements with Roscosmos allowing it to market Soyuz
missions to the ISS, a foundational component of the “Space Flight” defined in Section 3.01
(which in turn, is the “circumlunar mission” to which Section 3.09 refers), see Ex. 20 (October
30, 2010 Agreement No. 1146/53/EE 10.450), and a course of dealings by which Roscosmos
approved SA offering and providing eight successful space flights for seven private citizens, all
of which were accomplished with Roscosmos’s involvement and cooperation, see Ex. 10 (SAI
30(b)(6) Dep.) at 88:12–123:22; Ex. 7 (Anderson Dep.) at 86:8–127:5, 178:12–181:23.
The Agreement, read as a whole, also belies the notion that SA represented in
Section 3.09 that it “owned” a “seat” for Plaintiff on a circumlunar mission that it had “sold” to
Plaintiff, or that SA could guarantee Roscosmos’s approval through a legally enforceable
document. Dkt. 51 (Am. Compl.) ¶ 72. Reflecting the uncertainties innate to a development
project aimed at designing and performing the first crewed circumlunar flight in more than four
decades (many of which are reflected on the face of the Agreement, as described below), the
Agreement makes clear that SA offered Plaintiff an “opportunity”—not a certainty.
“Opportunity” means “[a] set of circumstances that makes it possible to do something.”
Oxford Living Dictionaries, available https://en.oxforddictionaries.com/definition/us/opportunity
(last visited Mar. 13, 2018). Providing “favorable” circumstances for a space flight does not
constitute a guarantee, or even an assurance of a likelihood. Moreover, Section 3.01.01 of the
Agreement specifies that the bargained-for opportunity for the “Space Flight” would be provided
“within the framework of the Russian Federal Space Program and the ISS Program”—which,
just like the Soyuz spacecraft, rocket, Lunar Complex, ISS, and Russian training and launch
facilities, SA neither owned nor controlled. See, e.g., Ex. 1 (McPike Dep.) at 121:1–5 (“I don’t
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think [SA] said the word ‘guarantee,’ but they said they have delivered in the past; everybody
who wanted to fly flew. It’s in the interest of Russia. They have the technology.”). SA did not
represent in Section 3.09 that SA could compel the space agency of a sovereign foreign
government to approve a circumlunar space mission (for anyone, much less specifically for
Plaintiff) and permit access to government facilities, either contractually or otherwise. Section
3.09 represented simply that SA had the rights to provide the “Space Flight Experience”
described in Article 3 of the Agreement. Id. at 502:13–14 (“[T]o me it means . . . they’re legally
entitled to -- to do what they promise.”); see Ex. 22 (Agreement) § 3.01.
SA purchased the right to offer an opportunity for a Space Flight Experience from
Energia—the manufacturer, owner, and operator of the Soyuz spacecraft, the prime contractor
for the Russian segment of the ISS where Plaintiff’s Soyuz was anticipated to dock, and an
organization in which Roscosmos held an ownership interest. SA paid millions to maintain those
rights to its corporate partner, Orbital, which had contracted directly with Energia and
Roscosmos, both before and after SA entered into the Agreement with Plaintiff. Roscosmos, as
the government regulator responsible for conducting training, supervising medical clearance, and
controlling access to government facilities like the Baikonur Cosmodrome and the Russian
segment of the ISS, did not design, build, own, operate, or launch the spacecraft needed for the
circumlunar mission. Nevertheless, SA’s partner Orbital had an agreement with Roscosmos to
pursue a circumlunar mission, see Ex. 19 (2010 MOU), and SA had direct agreements with
Roscosmos to conduct space flights to the ISS, an essential portion of the circumlunar mission,
see, e.g., Ex. 20 (Oct. 30, 2010 Agreement No. 1146/53/EE 10.450), as well as a lengthy course
of dealings that included obtaining from Roscosmos access to the Baikonur Cosmodrome for
Plaintiff when he visited Russia in 2013, see Ex. 28 (Oct. 2, 2013 Email from McCarthy), and
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arranging for successful training, clearance, and space flights to the ISS for private citizens in
eight prior missions, Ex. 3 (Answer) ¶ 3.
The contract specifies that the mission was dependent on numerous contingencies,
including the successful completion of the LSDR showing that the mission was conceptually and
technically feasible. See Ex. 22 (Agreement) § 3.03.03. The Agreement also makes clear that
Roscosmos’s direct involvement would come later in the project. Any launch date was subject to
the scheduling and logistical requirements of Roscosmos and the ISS Partners and Roscosmos’s
confirmation of a launch notice, and SA itself “reserve[d] the unconditional right to change the
Planned Launch Date as conditions warrant.” Id. §§ 3.03.1, 7.01. Roscosmos would conduct a
rigorous medical screening of Plaintiff before flight, see, e.g., Ex. 20, and Plaintiff understood
that he could be disqualified by the Russian authorities for any “medical or other reasons,” id.
§§ 7.02.03, 8.03; Ex. 1 (McPike Dep.) at 532:13–537:17. Plaintiff could fail space flight
training, which also would be provided by Roscosmos. Ex. 22 (Agreement) § 3.01.03; Ex. 1
(McPike Dep.) at 506:16–507:12. Plaintiff could fail to enter into the requisite “legally binding
document” with Roscosmos and other international partners. Ex. 22 (Agreement) § 4.02.6; Ex. 1
(McPike Dep.) at 513:18–514:5. The contract also had a broad Force-Majeure clause, covering
“any . . . event or action outside the reasonable control of the appropriate Party or consequences
thereof, which prevent performance of its responsibilities . . . .” Ex. 22 (Agreement) § 8.07.01.
Indeed, if the U.S. Government had imposed an embargo or boycott in response to Russia’s
invasion of the Ukraine (which Plaintiff cited as his alleged concern), it likely would have been a
Force-Majeure event and the fulfillment of the parties’ obligations might have been extended,
“for a period of time during which such condition of Force-Majeure lasts.” Id. § 8.07.02.
Plaintiff himself admitted that the entire venture was a “development project,” Ex. 1 (McPike
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Dep.) at 552:16–19, and that his payments were needed to help fund development of the
circumlunar mission and the specially modified spacecraft itself, id. at 519:7–19, 520:12–16; as
Plaintiff conceded “the rockets cost money” and “someone had to pay,” id. at 657:8–13. And
most critically, Section 7.03.02 specifically addresses “non-performance or material default” by
Roscosmos or SA that results in Plaintiff not being provided a space flight by December 1, 2020.
In such an event, Plaintiff could terminate the Agreement and receive a refund of all of his prior
payments—except for his initial installment payment of $7 million:
If the Circumlunar Mission has not been initiated by December 1, 2020 due to SA’s or [Roscosmos’s] non-performance or material default (provided that the Client is not in material breach or default of this Agreement), then the Client may at his option terminate this Agreement without further obligation by giving notice in writing. In the event of termination pursuant to this Section 7.03.02, the Client will receive a full refund of all payments, with the exception of Seven Million US Dollars [US$7,000,000] of the Contract Deposit required by Section 5.02.01.
Ex. 22 (Agreement) § 7.03.02; Ex. 1 (McPike Dep.) at 543:22–544:22. In other words,
Plaintiff’s remedy for non-performance or material default was not a lawsuit against SA, but a
partial refund of everything other than the non-refundable $7 million payment that Plaintiff now
seeks as damages for a fictional breach. See, e.g., Autonomy, Inc., 2015 WL 7313380 at *5
(record insufficient to establish government contractor’s alleged contractual misrepresentation to
a software provider that the government had agreed to list software as a “contract line item
requirement,” when contract clarified procurement was “subject to an appropriation of funds”).
Nowhere does Section 3.09 state that SA was representing that it had a formal contract
directly with Roscosmos pre-approving Plaintiff’s space flight. In fact, Sections 5.02.02 and
7.01 reflect the parties’ agreement that written notice that Roscosmos had approved McPike’s
mission would not issue until as late as December 2018. The word “contract” does not appear in
Section 3.09. Nor does the section indicate how SA acquired its rights or whether it did so by
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dealing directly with Roscosmos or indirectly through others (such as Orbital). Moreover, the
Agreement demonstrates that the parties knew what language to use if they intended to require a
formal contract directly with Roscosmos to approve Plaintiff’s space flight. Section 4.02.06, in
particular, provides that the “Client [Plaintiff] agrees to sign a legally binding document directly
with and for [Roscosmos] . . . confirming the Client’s undertaking to be bound by the provisions
of Article 4” and other related provisions “required by [Roscosmos]” (emphasis added). “[T]he
omission of a particular term from a contract is evidence that the parties intended to exclude that
term.” Pocahontas Mining Ltd. Liab. Co. v. CNX Gas Co., 666 S.E.2d 527, 531 (Va. 2008)
(concluding that disputed lease provisions were unambiguous because the parties “selectively
identif[ied] certain rights as ‘exclusive,’ while omitting any reference to the term ‘exclusive’ in
describing other rights,” which “signifies the parties’ clear intention that only some, rather than
all, the stated rights are exclusively granted”); see also Shee Atika Languages LLC v. Glob.
Linguist Sols., LLC, No. 1:13cv850 (LMB/TRJ), 2014 WL 11430922, at *2 (E.D. Va. Oct. 9,
2014) (“including a clause in one part of a contract but excluding that clause in a second part
provides strong evidence that the parties did not intend to include the clause in the second part”).
B. The Undisputed Evidence Is That SA Had Rights To Provide Plaintiff’s Space Flight Experience – and Was Providing It Until Plaintiff Quit
The purpose of Section 3.09 was to assure Plaintiff that SA could perform its obligations
under the Agreement and provide Plaintiff “an opportunity to participate in the first circumlunar
space flight arranged by SA.” Ex. 22 (Agreement) § 3.01. There is no question that SA had the
rights to perform all of the contractual obligations it undertook, and in fact, performed them. As
Plaintiff testified, when he unsuccessfully attempted to renegotiate the contract with SA in
October 2014, “I think they fulfilled the contract, so there’s nothing I can do.” Ex. 1 (McPike
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Dep.) at 333:15–16. When Plaintiff received his notice of termination for failing to pay, he
admitted that “I did not come up with the money so I had to accept it.” Id. at 356:7–8.
In fact, SA did perform all of its contractual obligations up until the termination date of
March 24, 2015. By the termination date, SA had: (1) paid over for rights from
Energia to provide an opportunity for a circumlunar space flight; (2) paid for
completion of the LSDR, the highly technical design and concept analysis required for
determining the feasibility of the mission, and arranged for Plaintiff to attend two LSDR
presentations by Energia officials and engineers in Russia; (3) paid for medical
research assessing the consequences of Plaintiff’s diabetes in space, which was performed by the
Yuri Gagarin Cosmonaut Training Center, one of “[Roscosmos’s] partner organizations within
Russia” whose “required participation” SA would coordinate, see Ex. 22 (Agreement) § 3.01.01;
(4) paid for Plaintiff to undergo medical evaluation by a NASA physician; (5) paid
for a trajectory study by an astrodynamics scientist tasked with identifying risks
associated with the intended flight trajectory; and (6) arranged for Plaintiff to meet three former
space flight participants, obtain access to Energia’s facilities at “Star City” and Roscosmos’s
Baikonur Cosmodrome facility in Kazakhstan, and observe a Soyuz launch at the Cosmodrome.
All told, SA had spent more than $8 million to third parties for the space flight opportunity that
Plaintiff purchased. SA’s representations in Section 3.09 were accurate, and SA did not breach
any obligation or warranty under the Agreement.
CONCLUSION
For the foregoing reasons, Defendant respectfully requests that this Court dismiss
Plaintiff’s sole remaining claim as a matter of law and award summary judgment to Defendant.
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Respectfully submitted,
/s/ R. Kennon Poteat III /s/ Kevin Quilty Edward J. Bennett (Va. Bar No. 40118) Deborah Baum (pro hac vice) R. Kennon Poteat III (Va. Bar No. 73324) Kevin Quilty (Va. Bar No. 89501) WILLIAMS & CONNOLLY LLP PILLSBURY WINTHROP SHAW PITTMAN LLP 725 Twelfth Street, N.W. 1200 Seventeenth Street, N.W. Washington, DC 20005 Washington, DC 20036 (202) 434-5000 (202) 663-8000 (202) 434-5029 [email protected] [email protected] [email protected] [email protected]
Counsel for Defendant Zero-Gravity Holdings, Inc.
March 13, 2018
Case 1:17-cv-00562-TSE-JFA Document 190 Filed 03/13/18 Page 36 of 36 PageID# 4861
CERTIFICATE OF SERVICE
I hereby certify that on this 13th day of March 2018, I will electronically file the
foregoing with the Clerk of Court using the CM/ECF system, which will then send a notification
of such filing (NEF) to the following:
Thomas A. Clare Megan L. Meier Dustin A. Pusch CLARE LOCKE LLP 10 Prince Street Alexandria, VA 22314 (202) 628-7400 [email protected] [email protected] [email protected]
Bruce G. Paulsen Mark D. Kotwick Jeffrey M. Dine SEWARD & KISSEL LLP 1 Battery Park Plaza New York, NY 10004 (212) 574-1200 (T) [email protected] [email protected] [email protected]
/s/ R. Kennon Poteat III R. Kennon Poteat III (Va. Bar No. 73324) WILLIAMS & CONNOLLY LLP 725 Twelfth Street, N.W. Washington, DC 20005 (202) 434-5000 [email protected]