United States District Court, S.D. New York
Adversary Proceeding No. 13-1670.
For Lightsquared Inc., In re, Debtor (1:13cv8157): Eugene Frank Assaf, PRO HAC VICE, Kirkland & Ellis, Washington, DC USA.
For Lightsquared Inc., Plaintiff (1:13cv8157): Devin Allan Debacker, Nathaniel Dille Buchheit, PRO HAC VICE, Kirkland & Ellis LLP, Washington, DC USA; Kenneth Winn Allen, Rebecca Taibleson, PRO HAC VICE, Kirkland & Ellis LLP (Washington), Washington, DC USA.
For Lightsquared LP, Lightsquared Subsidiary Llc, Plaintiffs (1:13cv8157): Devin Allan Debacker, Nathaniel Dille Buchheit, PRO HAC VICE, Kirkland & Ellis LLP, Washington, DC USA; Eugene Frank Assaf, PRO HAC VICE, Kirkland & Ellis, Washington, DC USA; Kenneth Winn Allen, Rebecca Taibleson, PRO HAC VICE, Kirkland & Ellis LLP (Washington), Washington, DC USA.
For Deere & Company, Defendant (1:13cv8157): Alyssa Tami Saunders, Michael D. Hays, PRO HAC VICE, Cooley LLP (DC), Washington, DC USA; Kenneth Ian Schacter, Morgan Lewis & Bockius LLP (NYC), New York, N.Y. USA.
For Garmin International, Inc., Defendant (1:13cv8157): Alyssa Tami Saunders, Michael D. Hays, PRO HAC VICE, Cooley LLP (DC), Washington, DC USA; Ian Samuel, Paul Bartholomew Green, Philip Le B. Douglas, Jones Day (NYC), New York, N.Y. USA.
For Trimble Navigation Limited, Defendant (1:13cv8157): William A. Isaacson, PRO HAC VICE, Boies, Schiller & Flexner LLP (D.C.), Washington, DC USA.
For The U.S. Gps Industry Council, Defendant (1:13cv8157): Alyssa Tami Saunders, Michael D. Hays, PRO HAC VICE, Cooley LLP (DC), Washington, DC USA; Karen Marie Steel, Steven R. Schindler, Schindler Cohen & Hochman, New York, N.Y. USA.
For 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 U.S. GP Corp, Hgw U.S. GP Corp., Hgw U.S. Holding Company, LP, Credit Distressed Blue Line Master Fund, Ltd, Global Opportunities Breakaway Ltd., Plaintiffs (1:13cv5543): Daniel Mills Hinkle, Gary M. Elden, Jacob Warren Harrell, Todd Clark Jacobs, PRO HAC VICE, Grippo & Elden LLC, Chicago, IL USA; David A. Fleissig, Matthew Seldin Dontzin, Tibor Ludovico Nagy, Jr., Dontzin Nagy & Fleissig LLP, New York, N.Y. USA.
For Deere & Company, Defendant (1:13cv5543): Kenneth Ian Schacter, Mary Gail Gearns, LEAD ATTORNEYS, Ari Micah Selman, Morgan Lewis & Bockius LLP (NYC), New York, N.Y. USA; Stephen Matthew Medow, Bingham McCutchen LLP, New York, N.Y. USA.
For Garmin International, Inc., Defendant (1:13cv5543): Philip Le B. Douglas, LEAD ATTORNEY, Meir Feder, Paul Bartholomew Green, Jones Day (NYC), New York, N.Y. USA; Alyssa Tami Saunders, PRO HAC VICE, Michael D. Hays, Cooley LLP (DC), Washington, DC USA.
For Trimble Navigation Limited, Defendant (1:13cv5543): Abby Lauren Dennis, PRO HAC VICE, Scott Ronald Wilson, Boies, Schiller & Flexner LLP, Washington, DC USA; Jennifer Milici, William A. Isaacson, PRO HAC VICE, Boies, Schiller & Flexner LLP (D.C.), Washington, DC USA.
For The U.S. Gps Industry Council, Defendant (1:13cv5543): Karen Marie Steel, Steven R. Schindler, Schindler Cohen & Hochman, New York, N.Y. USA.
DECISION & ORDER
RICHARD M. BERMAN, UNITED STATES DISTRICT JUDGE.
Before the Court is the joint motion of Defendants Deere & Company (" Deere"), Garmin International, Inc. (" Garmin"), Trimble Navigation Limited (" Trimble"), and The U.S. GPS Industry Council (" USGIC, " and collectively, " Defendants") to dismiss two related actions brought against them by LightSquared, Inc. (" LightSquared"), a mobile telecommunications company currently in Chapter 11 proceedings in the United States Bankruptcy Court for the Southern District of New York (" Bankruptcy Court"), and Harbinger Capital Partners LLC (" Harbinger"), a hedge fund which has invested in LightSquared.
In its Amended Complaint, dated March 18, 2014, LightSquared alleges that between 2001 and 2010 " Defendants repeatedly led LightSquared to believe that . . . [LightSquared's] nationwide wireless network could coexist with [Defendants'] GPS products" but that, in September 2010, " Defendants reneged on their prior contracts, broke their prior promises, and disavowed their prior representations" by " disclos[ing] that they had designed and manufactured their GPS receivers to 'listen in' on the same spectrum that the [Federal Communications Commission (" FCC")] has licensed to LightSquared (not Defendants)."  (Am. Compl., dated March 18, 2014 (" LS Compl."), ¶ ¶ 4, 7.) According to LightSquared, " as a direct and foreseeable result of Defendants' actions, the FCC sought to block the launch of LightSquared's network by suspending its authority for terrestrial operations, " which in turn " caused lucrative business contracts with LightSquared to be cancelled, multiple prospective business relationships with LightSquared never to be consummated (or, if consummated, never realized), and forced LightSquared to file for bankruptcy in May 2012." (LS Compl. at ¶ 11.) LightSquared asserts state common law claims of promissory estoppel, quantum meruit, breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, negligent misrepresentation, constructive fraud, tortious interference with existing and prospective business relationships, and civil conspiracy.
Harbinger filed its Third Amended Complaint on March 18, 2014. Harbinger asserts substantially the same allegations and operative facts as LightSquared. Harbinger also alleges that it invested " billions of dollars" in LightSquared in March 2010 in reliance upon Defendants' " represent[ations]--sometimes through affirmative misstatements, sometimes through deliberate omissions--that they were not going to raise the objections [to LightSquared's network] they ultimately asserted [to the FCC]." (Third Am. Compl., dated Mar. 18, 2014 (" Harb. Compl."), ¶ ¶ 1, 7.) According to Harbinger, after Defendants disclosed issues of incompatibility of their products with LightSquared's planned network, " numerous lucrative contracts were cancelled and [Harbinger's] company LightSquared descended into bankruptcy in May 2012." (Id. ¶ 6.) Harbinger asserts federal claims of securities fraud under Section 10(b) of the Securities Exchange Act of 1934 (" Exchange Act"), Securities and Exchange Commission Rule 10b-5 (" Rule 10b-5"), and Section 20(a) of the Exchange Act; state common law claims of fraud, negligent misrepresentation, constructive fraud, and equitable estoppel, and deceptive business practices in violation of Section 349 of the New York General Business Law.
On May 28, 2014, Defendants filed a joint motion to dismiss the LightSquared and Harbinger Complaints. (Mem. of Law in Supp. of Defs.' Mot. to Dismiss, dated May 28, 2014 (" Defs.' Mem.").) With respect to the claims asserted by LightSquared, Defendants argue, among other things, that (1) LightSquared's breach of contract claim should be dismissed because alleged July 17, 2002 and August 13, 2009 letter agreements among the parties plausibly could not and " plainly do not contain the far-reaching promises and forbearances claimed by Plaintiffs" and because LightSquared " fail[s] to identify in detail the substance of any specific promises purportedly made during the negotiations [preceding the letter agreements]"; (2) " LightSquared does not allege, even in conclusory terms, any promise to take or refrain from taking any specific future action, as promissory estoppel requires"; (3) " the quantum meruit and unjust enrichment claims are precluded by LightSquared's claims alleging enforceable contracts"; (4) LightSquared's misrepresentation claims should be dismissed because LightSquared is " [u]nable to allege--much less describe with particularity--a single false statement" and " do[es] not identify any circumstances in 2002 and 2009 putting the GPS Council on notice of LightSquared's plans, let alone any legal basis for a duty to disclose any resulting interference problems"; (5) LightSquared's tortious interference claims should be dismissed because LightSquared " fails to plead facts demonstrating that each Defendant had actual knowledge of [LightSquared's business] relationship[s]"; (6) LightSquared's conspiracy allegations " are entirely conclusory, with no details regarding who, where, or when"; and (7) LightSquared's claims of quantum meruit, breach of contract, breach of implied covenant, and unjust enrichment are barred by the applicable statute(s) of limitations. (Defs.' Mem. at 10-11, 15, 18, 25, 43, 44-46.)
With respect to the claims asserted by Harbinger, Defendants argue, among other things, that (1) Harbinger's federal and state law fraud claims should be dismissed because " Harbinger lacks standing to assert a Rule 10b-5 claim" because " Defendants' alleged omissions affected not Defendants' own securities, but those of a different company"; Harbinger's allegations " run afoul of the heightened pleading requirements of Rule 9(b) and the Private Securities Litigation Reform Act"; and Harbinger " cannot establish . . . a duty to disclose"; (2) " [S]ection 349 [of the New York General Business Law] does not apply to securities transactions"; (3) " Harbinger's equitable estoppel claim . . . fails because there is no such cause of action in Virginia or New York"; and (4) Harbinger's claims of securities fraud, common law fraud, negligent misrepresentation, constructive fraud, and equitable estoppel are barred by the applicable statute(s) of limitations. (Defs.' Mem. at 24, 33, 35-38, 41, 46-47.)
Defendants also argue that (1) " [t]he Noerr-Pennington doctrine . . . bars Plaintiffs' tort claims" because " LightSquared and Harbinger. . . improperly seek to penalize the Defendants for petitioning the FCC"; and (2) " LightSquared's and Harbinger's claims are also preempted by the Federal Communications Act (" FCA") because the . . . Complaints ask the Court to interpret and determine the basis for the market entry decisions of the FCC." (Defs.' Mem. at 18, 22.)
On August 4, 2014, LightSquared filed an opposition to Defendants' motion to dismiss. (LightSquared's Mem. of Law in Opp'n to Defs.' Mot. to Dismiss, dated Aug. 4, 2014 (" LS Opp'n.").) LightSquared argues, among other things, that (1) " the full contracts [presumably among LightSquared and Defendants] are not (and were not intended to be) reflected in the [2002 and 2009] FCC letters, " and " [t]he complaint alleges in great detail the . . . the agreements reached . . . [and] the specific promises that defendants made"; (2) " [t]he complaint . . . unequivocally states that defendants promised that 'all relevant issues' concerning knowable sources of interference had been addressed and that future GPS operations would coexist with LightSquared's network"; (3) " LightSquared's quantum meruit and unjust enrichment claims are not precluded by its contract claims at this stage"; (4) " The complaint . . . specifically identifies [Defendants'] misrepresentations" and " LightSquared has also more than adequately alleged that defendants tortiously failed to disclose their faulty receiver design (and thus the potential for GPS receiver overload), despite having an obligation to do so"; (5) " 'actual knowledge' is not required" to state a tortious interference claim; and (6) LightSquared's claims are not time-barred because " [n]one of the contract or quasi-contract claims accrued until September 2010." (LS Opp'n. at 10, 13, 17, 20, 23, 25.)
On July 29, 2014, Harbinger filed an opposition to Defendants' motion to dismiss. (Harbinger's Resp. to Defs.' Mot. to Dismiss, dated July 29, 2014 (" Harb. Opp'n.").) Harbinger argues, among other things, that (1) its federal and state law fraud claims should survive because " [n]o case requires the security to be issued by defendants"; and " [u]nder New York law [and Rule 10b-5], Defendants had a duty to disclose though [they were] not in privity with [Harbinger]"; (2) " [t]here is a split in authority over whether Section 349 covers securities transactions"; (3) equitable estoppel " can form the basis of a claim, or it can serve as a defense"; and (4) Harbinger's state and federal law claims were timely filed. (Harb. Opp'n. at 6, 8, 13, 17, 19, 22-24.)
In their oppositions, LightSquared and Harbinger also argue that (1) the Noerr-Pennington doctrine is inapplicable because all of LightSquared's claims " arise from private communications and conduct between the parties, not from any party's petitioning of the government, " and (2) the FCA does not preempt LightSquared's claims because " [n]othing in LightSquared's complaint . . . asks this Court to overrule or second-guess any FCC decision regarding LightSquared's authority to offer [telecommunications] services." (LS Opp'n. at 5, 8-9; see Harb. Opp'n. at 20-22.)
On September 15, 2014, Defendants filed a reply. (See Reply Mem. in Supp. of Defs.' Mot. to Dismiss, dated Sep. 15, 2014 (" Defs.' Reply").) Oral argument was held on January 20, 2014. (See Hr'g Tr., dated Jan. 20, 2014 (" 1/20/14 Tr.").)
For the reasons stated below, Defendants' motion to dismiss is granted in part and denied in part.
For the purposes of this motion, the Court accepts the following allegations in the LightSquared and Harbinger Complaints as true. See, e.g., Aguas Lenders Recovery Grp. LLC v. Suez, S.A., 585 F.3d 696, 697 (2d Cir. 2009).
LightSquared's FCC-licensed Spectrum
" Spectrum" consists of the range of electromagnetic radio waves used to carry sound, images, and data information wirelessly. Information is sent through the spectrum in the form of " signals." Each signal travels from a " transmitter" to a " receiver." (LS Compl. ¶ 28.) Transmitters can be physically located on space-based satellites (" satellite transmitter") or on the ground (" terrestrial transmitter"). (Id. ¶ 28.)
In the United States, the FCC and the National Telecommunications and Information Administration (" NTIA") share responsibility for managing spectrum use which is finite. The NTIA manages spectrum used by the federal government, while the FCC is responsible for spectrum used by private sector companies. (Harb. Compl. ¶ 36.) Pursuant to its authority under Section 303(y) of the Communications Act of 1934, the FCC allocates available spectrum to specific private users. (Id. ¶ 37) These allocations are granted (licensed) in sections of contiguous spectrum that are typically referred to as " bands." (Id. ¶ 38.)
In 1989, the FCC authorized LightSquared (i.e., its predecessor entities) to operate within two non-adjacent (spectrum) bands--i.e., 1525 MHz to 1559 MHz and 1626.5 MHz to 1660.5 MHz--which the LightSquared and Harbinger Complaints refer to as the " LightSquared Band." (LS Compl. ¶ 29; see also Ex. 5 to Decl. of William A. Isaacson in Supp. of Defs.' Mot. to Dismiss, dated May 28, 2014, at 15 n. 8.) Located in between the two portions of the LightSquared Band is the 1559 MHz to 1610 MHz spectrum band, which the LightSquared and Harbinger Complaints refer to as the " GPS Band." (LS Compl. ¶ 30.) The GPS Band is utilized by Defendants Deere, Trimble and Garmin, who manufacture receivers of GPS Band signals from a government-owned satellite system. (Id. ¶ ¶ 31-32.)
The 2002 Out-of-band Emissions Issue
Initially, the FCC permitted only satellite transmissions in the LightSquared Band. (Id. ¶ 29.) " In the late 1990s, LightSquared began developing plans to build and deploy an integrated satellite and terrestrial network." (Id.) In 2001, LightSquared petitioned the FCC to authorize terrestrial operations within the LightSquared Band. (Id. ¶ 47; Harb. Compl. ¶ 106.) Defendants lodged objections with the FCC and also expressed concern directly to LightSquared contending that terrestrial operations in the LightSquared Band " could potentially cause interference with GPS products." (LS Compl. ¶ ¶ 48, 57; Harb. Compl. ¶ 109.) Defendants stated to LightSquared that their concern was " out-of-band emissions, " i.e., that the radio signals emitted by LightSquared's terrestrial transmitters could " bleed over" into the adjacent GPS Band and negatively impact the functioning of Defendants' GPS receivers. (LS Compl. ¶ ¶ 49-50.) To resolve Defendants' concern, in 2001 and 2002 LightSquared entered into " direct negotiations" with Defendants, both individually and through the USGIC (a trade association whose members include Deere, Garmin, and Trimble and whose conduct is allegedly controlled by those Defendants). (Id. ¶ ¶ 19, 51; Harb. Compl. ¶ ¶ 30-33.)
LightSquared and Harbinger allege, and Defendants do not dispute, that the 2002 negotiations resulted in a " mutual agreement" between LightSquared and Defendants " to protect GPS devices from out-of-band-emissions" (" 2002 Agreement"). (Id. ¶ 52; Harb. Compl. ¶ 111; Defs.' Mem. at 5, 10.) Pursuant to the 2002 Agreement, LightSquared agreed to limit out-of-band emissions from its terrestrial transmitters in exchange for Defendants' promise " to withdraw their pending objections" to LightSquared's 2001 request for FCC authorization of terrestrial operations. (LS Compl. ¶ 57.) The 2002 Agreement is alleged by Harbinger to have been reflected in a July 17, 2002 joint letter to the FCC from LightSquared and Defendant USGIC, pursuant to which the parties " agreed on specific out of band emission ('OOBE') limits . . . for the . . . base stations and terminals that [LightSquared] will deploy." (Harb. Compl. ¶ 111.) LightSquared, on the other hand, alleges that the July 17, 2002 letter " summarized many, but not all, of the provisions of the 2002 Agreement." (LS Compl. ¶ ¶ 53-54.) According to LightSquared, Defendants also " promised that, given LightSquared's concessions, their own continuing operations would coexist with LightSquared's network" and also " promised that further objections to the FCC would be unwarranted based on LightSquared's operations as authorized in the 2003 ATC Order."  (Id. ¶ 57.) LightSquared alleges that the 2002 Agreement was " memorialized . . . in writing through an exchange of correspondence" among LightSquared and Defendants, and is " reflected in the terms agreed upon through emails, negotiations, and other communications between Defendants and LightSquared."  (Id. ¶ 158.)
The FCC's 2003 ATC Order authorized terrestrial operations within the LightSquared Band, " subject to various rules pertaining to the licensing and operation of those terrestrial services." (Id. ¶ 59; Harb. Compl. ¶ 113.) In November 2003, LightSquared applied for the licenses that would allow it to deploy and operate its terrestrial network. (LS Compl. ¶ 62.) The USGIC supported LightSquared's November 2003 applications, stating " [w]e believe that [LightSquared] is to be commended for its proposal to use its spectrum in a responsible manner that ensures the continued utility of GPS Receivers." (Id. ¶ 63.) In November 2004, the FCC granted LightSquared's license applications, authorizing LightSquared to deploy over 12, 000 terrestrial base stations nationwide. (Id.) Over the next several years, ...