The shareholder class action that challenged Liberty Media’s takeover of satellite radio provider SiriusXM has been dismissed by Delaware Chancery Court Judge Leo Strine.
The judge agreed with the defendants’ contention that the plaintiffs’ claims…
The shareholder class action that challenged Liberty Media’s takeover of satellite radio provider SiriusXM has been dismissed by Delaware Chancery Court Judge Leo Strine.
The judge agreed with the defendants’ contention that the plaintiffs’ claims are time-barred and that they did not provide a good reason why they did not make their claim beforehand.
In his summation, Judge Strine stated: “The statute of limitations for breach of fiduciary duty is three years. The plaintiffs filed their claims more than three years after the Investment Agreement was signed and publicly disclosed. Reasonable Sirius stockholders were on full notice in 2009 that Liberty Media would be able to acquire majority control without interference from the Sirius board after the standstill period expired in 2012.
“The plaintiffs have identified no reason why they did not challenge the Investment Agreement within the required limitations period, nor have the plaintiffs identified any action the board could have taken to block Liberty Media that was not specifically foreclosed by the Investment Agreement.”
The lawsuit was filed in August 2012 by the City of Miami (Florida) Police Relief and Pension Fund following Liberty’s application with the FCC to take ‘de jure’ control of the satellite radio provider.
The complaint alleged that the provisions in the February 2009 Investment Agreement prevented the Sirius board from taking any action to block Liberty taking control of the company breached its fiduciary duties to the minority shareholders.
Liberty secured such provisions due to the parlous state of SiriusXM in 2008 and 2009. The company was loss-making, its share price trading below US$0.15 per share and it was on the verge of defaulting on its convertible notes. Liberty acted as the satellite radio provider’s white knight, providing a US$530m capital infusion in return for preferred stock convertible into a 40% stake.
However, as part of the deal, Liberty stipulated that once an agreed 3 year standstill period expired, the SiriusXM board could not attempt to prevent Liberty from purchasing further stock.
As Judge Strine surmised: “Thus, under the Investment Agreement, Liberty Media secured the practical ability to take control of Sirius in 2012 without paying a premium to Sirius stockholders by purchasing the additional shares needed to obtain control in the market.”
Grant & Eisenhofer, Chimicles & Tikellis and Bernstein Litowitz Berger & Grossmann represented the plaintiffs. Potter Anderson & Corroon, Baker Botts, Richards Layton & Finger and Simpson Thacher & Bartlett the denfendants.
