LightSquared investor loses appeal of GPS fraud complaint dismissal

By Caroline Salls

Pittsburgh, Dec. 7 ¨C LightSquared Inc. investor Harbinger Capital Partners LLC¡¯s appeal of a district court ruling related to global positioning system (GPS) manufacturer ¡°overload interference¡± fraud allegations was denied Monday by the U.S. Court of Appeals for the Second Circuit.

The appeals court said Harbinger appealed a judgment entered on Feb. 10, 2015 by the U.S. District Court for the Southern District of New York, dismissing Harbinger¡¯s third amended complaint. The complaint raised allegations of securities fraud against several GPS manufacturers and sellers.

According to Monday¡¯s ruling, LightSquared sought to develop a new wireless broadband communications network.

In its complaint, Harbinger alleged that the manufacturer defendants deliberately designed their GPS receivers to experience ¡°overload interference¡± from out©\of©\band receptions (OOBR) that would render the receivers ineffective and that defendants fraudulently concealed and misrepresented this fact even though they were aware that LightSquared¡¯s plan to develop its new wireless network would cause the same OOBR interference.

The district court dismissed Harbinger¡¯s complaint in its entirety, saying the connection between the defendants¡¯ omissions and Harbinger¡¯s investment was ¡°too remote to sustain an action.¡±

Harbinger argued that because ¡°[d]efendants¡¯ omissions directly concerned LightSquared,¡± there is a direct causal link between the fraud and the investment.

¡°Harbinger was not engaged in business negotiations with any of the defendants, and defendants had no obligation to disclose information regarding OOBR inference on the basis of their purported superior knowledge,¡± the appeals court said in Monday¡¯s ruling.

¡°We agree with the district court that Harbinger has failed to state a claim for securities fraud under ¡ì 10(b) or Rule 10b©\5, or a state law claim under New York law for fraud.¡±

LightSquared is a Reston, Va.-based wholesale-only 4G-LTE network integrated with satellite coverage. The company filed for bankruptcy on May 14, 2012 in the U.S. Bankruptcy Court for the Southern District of New York under Chapter 11 case number 12-12080.

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