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By Shannon Henson, shannon.henson@portfoliomedia.com
Portfolio Media, New York (June 20, 2007)

Subscribers seeking class action status have filed a lawsuit against XM Satellite Radio Inc., accusing it of negligence and breach of contract for an outage in May

The suit, which was filed Monday in the U.S. District Court for the District of New Jersey, seeks damages for breach of contract, unjust enrichment and negligence against XM and its parent holding company, XM Satellite Radio Holdings Inc. The suit maintains that it is the first of its kind brought over the outage.

The named plaintiffs are Paul Von Nessi, Lainie Geary and Jeffrey Meiskin, all of whom live in New Jersey and were unable to receive radio broadcasts on May 21 and 22 because XM couldn't transmit its signals through its terrestrial repeater network.

The suit is seeking class action status for all commercial and non-commercial subscribers within the U.S. who were entitled to receive radio transmissions on those days. Canadian subscribers and those who work with the plaintiffs' law firms or XM are not included in the class, the suit said.

For the first quarter this year, XM has said it has a subscriber base of more than 7.9 million, and anticipates having between 9 and 9.2 million subscribers during the calendar year.

After the outage, XM publicly said that the problem was caused by an alleged software problem resulting in one of the company's satellites being rendered useless and unavailable to subscribers, the suit said.

The lawsuit alleges that XM negligently failed to maintain and monitor its software, satellites and componentry, a move that caused the outage and interruptions. The company also failed to install or monitor or activate necessary backup systems controlling the radio signals in a timely fashion.

The suit says that quality in some metro areas and markets has been reduced because terrestrial repeaters have not been built in specified locations with uniform antenna heights, power levels or antenna characteristics. As an interim measure, XM has had to turn down the power amplification on its terrestrial repeaters and/or discontinued operation of some repeaters, resulting in the reduction or degradation of the quality of its service, including more frequent interruptions and/or outages.

XM hasn't prorated service charges or remitted class members' service fees, which would amount to approximately 7 million, for the outage.

Consumers pay $12.95 per month basic charge and can get a discounted rate of $6.95 per month for each additional satellite radio under XM's family plan subscribers. Commercial subscribers pay more. Subscribers also pay for each additional radio capable of receiving the signal, as well as additional activation fees and taxes.

XM did not respond to a request for comment Wednesday.

The plaintiffs are represented in this matter by Shapiro & Sternlieb LLC and Tobin, Koster, Oleckna, Reitman, Greenstein & Konray PC. Counsel for XM was not immediately available.

The case is Nessi et al. v. XM Satellite Radio Holdings Inc., et al., case number 2:07-cv-02820 in the U.S. District Court for the District of New Jersey.