Global Crossing Ltd. (Nasdaq: GBLX) was down 8 percent Tuesday after it announced its subsidiary, South American Crossing (Subsea) Ltd., filed a lawsuit against Tyco Submarine Systems Ltd., a subsidiary of Tyco International Ltd. (NYSE: TYC).
Global Crossing alleges Tyco stole trade secrets to develop a rival business building and operating undersea fiber-optic telecommunication networks. The lawsuit, filed in the United States District Court for the Southern District of New York, is seeking damages in excess of $1 billion.
The complaint alleges "tortious conduct and breach of contractual obligations" related to Tyco's agreements to install the South American Crossing fiber-optic cable system.
Global Crossing provided Tyco Submarine Systems (TSSL) with trade secrets to build what would have been the largest fiber-optic network circling South America. Instead of keeping a promise not to reveal the secrets, Tyco shared documents with Global Crossing's rival, Telefonica SA, according to a Bloomberg report.
Bloomberg also reported Tyco claims the announcement is part of an ongoing effort by Global Crossing to avoid payment of outstanding balances due as a result of work performed by TSSL.
Global Crossing's subsidiary, Atlantic Crossing Ltd., together with certain of its affiliates, also filed arbitration claims against Tyco for breaches of its obligations in connection with contracts for the another development.
"We deeply regret having to resort to litigation with Tyco, our vendor for a number of our early systems,'' said of Global Crossing CEO Leo Hindery, Jr. in a company statement. ``But after spending nearly a year seeking unsuccessfully to resolve our differences, we have no alternative to legal action in order to enforce our rights and protect our shareholders.''
While Global Crossing's shares were down 2 9/64 to 25 7/8, Tyco's shares dropped 1 5/8 to 42 3/8, or 4 percent. Global Crossing topped estimates in its latest quarterly report.
Global Crossing's competitors include AT&T (NYSE: T) and WorldCom (Nasdaq: WCOM).