I have had 5 or 6 360s (I lost count) and every time it was replaced with no questions asked. The one time it happened before MS had extended the warrenty to 3 years and after the 1 year warrenty had expired and I was supposed to pay $100 to get it fixed but they fixed it for $50. Then when MS extended the warrenty, everyone that paid got a refund. I ended up getting a refund for $100 instead of the $50 I paid so I made money on the deal. It is definitely unfortunate that it happeend and that MS did not immediately fix the problem but other than that they did everything they could to keep people happy. I'm not exactly sure what basis there is for a lawsuit.