In a surprising turn of events, an Ohio-based pension fund has brought a lawsuit against Amazon, alleging that the retail giant did not give fair consideration to SpaceX as a potential provider for its Project Kuiper satellite internet service. The Cleveland Bakers and Teamsters Pension Fund, which owns shares in Amazon, argues that Amazon’s board of directors, including its audit committee, failed to adequately fulfill their fiduciary duties when they selected three other providers—Blue Origin, the European Arianespace consortium, and United Launch Alliance—over SpaceX for the project. The lawsuit suggests that Amazon’s decisions were unduly influenced by the company’s founder, Jeff Bezos, who also owns Blue Origin.

The lawsuit further highlights the ongoing rivalry between Bezos and SpaceX CEO Elon Musk as well as touching on the setbacks encountered during the development of Blue Origin’s New Glenn rocket and ULA’s Vulcan rocket. The lawsuit questions Amazon’s ability to meet a federally mandated deadline to deploy half of its planned 3,236 satellites by mid-2026 and implies that the chances would have been better had Amazon struck a deal with SpaceX, which the lawsuit states "has by far the most proven launch track record in history." This case not only underscores the high stakes and intense competition in the burgeoning field of satellite internet services but also raises questions about potential conflicts of interest arising from Bezos’s dual roles as the founder of both Amazon and Blue Origin.

Ohio Pension Fund Sues Amazon over Project Kuiper Launch Decisions

Ohio pension fund, the Cleveland Bakers and Teamsters Pension Fund, has filed a lawsuit against Amazon, alleging that the company did not give proper consideration to SpaceX as a potential launch provider for Amazon’s Project Kuiper, a broadband internet satellite constellation. The lawsuit claims that Amazon’s board of directors acted in bad faith when they selected three other providers, including Blue Origin, a space venture owned by Amazon’s founder Jeff Bezos, without considering SpaceX.

Blue Origin and Others Preferred Over SpaceX

In 2020, Amazon’s board of directors chose Blue Origin, the European Arianespace consortium, and United Launch Alliance, which uses Blue Origin’s BE-4 engine on its Vulcan Centaur rocket, as launch providers for Project Kuiper. These contracts represent Amazon’s second-largest capital expenditure, after the $13.7 billion acquisition of Whole Foods in 2017. The lawsuit reveals that Amazon has so far spent nearly $1.7 billion on this deal, including a $585 million payment to Blue Origin.

Conflict of Interest Claims

The CB&T Fund, which owns shares in Amazon, suggests that the selection process was influenced by Bezos’ vested interest in Blue Origin. It alleges that Amazon’s decision-makers did not properly fulfill their fiduciary duties and that their decision not to consider SpaceX, which has a reliable and cost-effective launch track record, demonstrates conflicts of interest that negatively impact Amazon’s ability to protect the interests of the company and its stockholders.

Unspecified Damages Sought

The lawsuit seeks damages, legal costs, and the "immediate disgorgement of all profits, benefits and other compensation" obtained by the defendants due to alleged breaches of fiduciary duties. Amazon, however, has dismissed the claims as baseless and is looking forward to demonstrating this in court.

Takeaways

This case shines a spotlight on the potential conflicts of interest that can arise when company founders have multiple business ventures. While the lawsuit does not guarantee any changes in Amazon’s Project Kuiper decisions, it does raise questions about the integrity of the board’s decision-making process. Ultimately, the outcome of the lawsuit could have significant implications for Amazon and its shareholders, particularly if the court finds in favor of the CB&T Fund.