Broadband services provider Winstar Communications Inc. said Wednesday that it is filing for bankruptcy protection and blamed Lucent Technologies Inc. for the move in a lawsuit claiming breach of contract.

The two companies entered into an agreement in 1998 under which Lucent would provide Winstar with financing and equipment. But Winstar claims that Lucent has not lived up to its side of the bargain, in part by refusing to provide $90 million due March 30 as part of the financing agreement. According to a Winstar spokesman, the subsequent cash shortfall caused the company to miss a number of cross payments and default on a $75-million interest payment, forcing it to file for Chapter 11 bankruptcy protection. The lawsuit seeks $10 billion in damages and injunctive relief to force Lucent to specifically perform its contractual obligations, including issuing the disputed $90-million payment.

A spokeswoman for Lucent rejected the claims, and said Lucent has not breached any of its obligations to Winstar. "Clearly their contention that Lucent caused $10 billion in damages is ridiculous." She says the agreement specifically prohibits such claims.

Winstar faces an uphill battle proving its case, says Amelia Boss, a law professor at Temple University and chair of the American Bar Association's Business Law section. It has to prove not only that Lucent breached a contract, but that it knew of the damage that'd be caused, and that the breach directly caused the financial difficulties that followed. "They need to prove that but for Lucent's acts, they would not be in such financial shape," she says.

Winstar says it will continue to provide service to customers and that day-to-day operations will be unaffected by the Chapter 11 filing or the lawsuit. The company has arranged for debtor-in-possession financing from a group of banks including CIBC and Citicorp, with an initial commitment of $75 million that may increase to as much as $300 million.

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