Wireless Investors Sue GPS Makers for $1.9B

     (CN) – Garmin and other GPS makers bankrupted the wireless company LightSquared by knowingly building devices that interfered with signals from the company’s multibillion-dollar mobile network, investors claim in a $1.9 billion federal lawsuit.
     Harbinger Capital Partners, HGW GP Ltd. and other investors say they poured “billions of dollars” into LightSquared’s new wireless network in 2010. The network, had it gone live, would have created significant competition for entrenched competitors like AT&T and Verizon, according to the lawsuit filed Friday in Manhattan Federal Court.
     The Federal Communications Commission said the network would provide a “significant public benefit,” investors say, because it would have lowered prices and provided better coverage in underserved areas.
     The FCC allegedly authorized the necessary electromagnetic spectrum for the LightSquared network in 2003, 2004 and 2005, “and explicitly reaffirmed” its authorization in 2010.
     Investors say they went out of their way to resolve any interference issues caused by their authorized use of the spectrum. Global positioning system (GPS) makers even commended them for this, the lawsuit states, calling them “good spectrum neighbors.”
     But the GPS makers were not good neighbors, according to the lawsuit against GPS makers Deere & Company, Garmin International Inc. and Trimble Navigation Ltd., and industry groups the U.S. GPS Industry Council and the Coalition to Save Our GPS.
     In 2011 and 2012, the defendants revealed that they had designed their navigation devices “to use the very same spectrum the FCC assigned to plaintiffs, and that plaintiffs’ authorized use of that spectrum would cause defendants’ GPS products to malfunction,” the lawsuit states.
     “As FCC officials put it, it was as if the defendants had been authorized to drive only in the right lane but insisted in also ‘driving in the left lane with impunity … but now that it looks like the left hand lane might actually have traffic in it, the GPS community is yelling bloody murder (literally). … The GPS community feels that they should be able to drive their double-wide trailer down the middle lane and left lanes without regard to [plaintiffs’] longstanding right to be in the left lane,'” the lawsuit states.
     The defendants allegedly continued to build GPS receivers that they knew were susceptible to interference.
     “Defendants could have manufactured new receivers that did not ‘listen in’ on the Harbinger spectrum or that filtered out LightSquared signals,” investors say, but they did not. “This was done to increase defendants’ profits,” investors claim.
     “Defendants also belatedly disclosed that a small percentage of these poorly designed, cost-cutting GPS receivers were embedded in critical safety devices,” the lawsuit states. “According to defendants, this meant that, if plaintiffs’ new network were allowed to go live, GPS products could fail in a way that caused catastrophes such as plane crashes.”
     Recalling or retrofitting the devices would have been impossible at that point, investors say, because GPS makers “sold millions of products with these vulnerabilities” since 2003.
     Jim Kirkland, vice president and general counsel of GPS maker Trimble, said GPS design is not to blame.
     “The Harbinger lawsuit is an attempt to avoid responsibility for the consequences of LightSquared’s plan to build a high-powered mobile network in spectrum adjacent to GPS, despite prior FCC restrictions,” he said in a statement.
     He said LightSquared’s network “would have interfered with millions of GPS devices used for a wide variety of critical purposes.”
     “This interference resulted from the characteristics of LightSquared’s new plan for use of satellite spectrum, not the design of GPS devices. The responsibility for Harbinger’s losses rests squarely with Harbinger,” Kirkland said.
     “The lawsuit is lacking in merit and we will vigorously defend it,” he added.
     Though the defendants “never substantiated their alarmist claims” about their devices malfunctioning, according to the lawsuit, the FCC blocked the high-speed network from going live.
     “As a result, numerous lucrative contracts were canceled and plaintiffs’ company LightSquared descended into bankruptcy in May 2012,” the lawsuit states.
     The plaintiffs say they never would have invested in the company had they known the truth earlier. They demand at least $1.9 billion to recoup their losses, and are suing for alleged securities violations, fraud, negligent misrepresentation, equitable estoppel and deceptive business practices.
     They are represented by Matthew Dontzin of Dontzin Nagy & Fleissig LLP in Manhattan.
     The full list of plaintiffs are: Harbinger Capital Partners LLC, Harbinger Capital Partners II LP, Harbinger Capital Partners Master Fund I Ltd., Harbinger Capital Partners Special Situations Fund LP, Harbinger Capital Partners Special Situations GP LLC, HGW GP Ltd., HGW Holding Company LP, HGW US GP Corp., HGW US Holding Company LP, Credit Distressed Blue Line Master Fund Ltd., Global Opportunities Breakaway Ltd. and Sol Private Corp.

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