A number of small U.S. cellular companies have been hit with lawsuits from the government of Alberta, Canada, which is charging the companies breached contracts by not purchasing cellular equipment from NovAtel.
One of the companies, Dial Two Inc. of Santa Rosa, Calif., is fighting a $600,000 lawsuit. Dial Two is accused of breaching a contract to purchase a complete cellular system from the old NovAtel Communications Ltd. of Canada, a Crown Holding company that manufactured equipment for cellular systems. The company 475342 Alberta Ltd.-formed by the Alberta government a few years ago to settle NovAtel’s alleged losses-is suing the California operator for $100,000 in liquidated damages and $525,000 for unjust enrichment, said Dial Two. Dial Two maintains the charges are unqualified. Trial is set for Dec. 18.
Dial Two was a partnership between Joan Linney and Tolbert Moore that operated a rural service area cellular license, Illinois-3, sold to Cellular One two years ago. The partners currently operate a 220 MHz specialized mobile radio business, Wireless Plus Inc. Prior to Federal Communications Commission licensing of RSA cellular operators, Dial Two agreed it would purchase equipment from NovAtel when it received its license. NovAtel pledged up to $1.5 million to Dial Two in a 1988 financial commitment letter for equipment, network construction and first-year operation costs, said Dial Two. Similar deals were made between NovAtel and 38 other RSA operators, said Tim McAlister, who is administrating the case for Dial Two.
The catch: A provision in the NovAtel letter stated Dial Two must construct its systems using “cellular system equipment and ancillary equipment and services supplied by NovAtel.” If Dial Two referred to the purchase agreement, in connection with network construction, in any FCC filing or application but then failed to purchase NovAtel equipment, Dial Two would be assessed a fee of $100,000, the letter said.
NovAtel’s lawsuit claims Dial Two did not abide by the letter that NovAtel claims required Dial Two to purchase a NovAtel system. Dial Two said it purchased 16 NovAtel radios supplied by Nortel, which had an original equipment manufacture agreement with NovAtel at the time, but not an entire system.
Dial Two asserts that purchase of the radios does fulfill obligations to NovAtel as specified in the financial commitment letter.
Once Dial Two won its RSA license, it submitted a request for proposal to NovAtel, as well as Northern Telecom Ltd., Motorola Inc. and L.M. Ericsson, the company said. NovAtel offered no clear response, said Warren Linney, a consultant to Dial Two and husband of Joan Linney. Warren Linney said he telephoned Dell Lippert, then NovAtel’s chief executive officer and a signatory of the financial commitment letter in April 1990. “He [Lippert] said it was a financial problem that they hoped to get out of,” Linney recalled.
By June 1990, Dial Two had its construction permit and needed to begin system buildout because the permit expired in January 1991. One more phone call to NovAtel and again Lippert denied Dial Two the loan, Linney said. Nortel was chosen as Dial Two’s supplier and loaned the company about $1 million in equipment and financing for network upstart, said Dial Two.
Despite disagreement over what Dial Two was or was not required to purchase from NovAtel, Dial Two contends NovAtel denied it the loan necessary for equipment and system construction in the time frame specified by the FCC. If not on the air by January 1991, Dial Two would have defaulted on its license, said McAlister.
NovAtel’s attorney, Linda Hendrix McPharlin of McPharlin & Sprinkles, said an RFP was never submitted by Dial Two to NovAtel. “They reneged,” said McPharlin, and chose Nortel instead. She also denied that Lippert or NovAtel turned down funding to Dial Two.
Dial Two has no proof Lippert denied funds to the company. Lippert is not available to testify because his present whereabouts purportedly are unknown, said Dial Two. However, added Dial Two, McPharlin noted Lippert is a current shareholder in NovAtel, which now is a privately owned company. McPharlin told RCR she did not know whether Lippert was a current shareholder.
Three other similar cases brought by NovAtel have been dismissed, McAlister said.
Today NovAtel Communications Ltd. continues to operate as a privately held company. Horst Pudwill in 1992 purchased from the government the wireless access products, global positioning systems and cellular products divisions of NovAtel. The Alberta government no longer has an investment in the company. 475342 Alberta Ltd. was formed to settle past NovAtel loans that remained with the government when NovAtel was sold. Japan Radio Corp. purchased the cellular products group last year and Harris Corp. earlier this month announced buying the wireless access products division.
