* Florida pension fund sues Sirius board in Delaware
* Liberty loan to Sirius in 2009 had anti-takeover
* Fund says provisions breached board's fiduciary duty
* Liberty filed with FCC for control of Sirius last week
By Liana B. Baker
Aug 22 A police pension fund is suing Sirius XM
Radio Inc's board of directors for letting Liberty
Media Corp take over the company without a fight and
without paying a premium.
The lawsuit, filed in the Court of Chancery in Delaware by
the City of Miami (Florida) Police Relief and Pension Fund on
Tuesday, comes just days after Liberty said it planned to take
full control of Sirius and its board by increasing its stake in
the satellite radio operator to more than 50 percent.
At a hearing Wednesday, Chancellor Leo Strine, the court's
chief judge, refused to set a schedule on the pension fund's
request for a temporary restraining order, which would have
blocked Liberty Media from increasing its stake in Sirius, said
Stuart Grant, a lawyer for the plaintiff. Strine gave the
defendants 20 days to respond to the complaint, Grant said.
Liberty, a media holding company, filed an application on
Friday with the U.S. Federal Communications Commission to take
control of Sirius.
Liberty, led by billionaire Chairman John Malone, acquired
its initial stake in Sirius in 2009 as part of a deal in which
it loaned the satellite radio provider $530 million to help it
stave off bankruptcy.
As part of the loan, Sirius' board agreed not to adopt a
poison pill or any defense measures against a Liberty takeover
after a three-year standstill. Since the standstill expired in
March, Liberty has been buying Sirius shares in the open market
to boost its stake above 50 percent.
Sirius Chief Executive Mel Karmazin previously said Liberty
could not take over the company without paying a premium, but he
downplayed the conflict with Liberty on a conference call on
At least one legal expert on corporate governance said
cases brought against a company's board are tough to win.
"Ultimately, unless you have some serious conflicts of
interest on the part of the directors, the Delaware courts are
typically protective of the decisions the directors make," said
Charles Elson, director of the John L. Weinberg Center for
Corporate Governance at the University of Delaware.
The pension fund alleges that the provisions that prohibit
Sirius from fighting off a Liberty takeover constitute a breach
of the board's fiduciary duties. The provisions prevent the
directors from taking any action to hurt Liberty's ability to
continue acquiring Sirius stock, "regardless of whether
Liberty's acquisition poses a threat to Sirius' non-Liberty
shareholders," according to the lawsuit.
"Put simply, a board cannot tie its own hands, or the hands
of successor boards, in ways that constitute an abdication of
their fiduciary duties," it said.
Sirius' 13-person board includes five members who are
representatives of Liberty.
The plaintiff is seeking compensatory damages and asks
Liberty to stop buying Sirius shares on the open market. The
pension fund is also seeking class action status in the case
against Sirius' board.
Both Sirius and Liberty did not respond to requests for
comment on Wednesday.
Sirius shares closed flat at $2.56 while Liberty ended down
43 cents at $103.89.
The case is City of Miami Police Relief and Pension Fund v.
Sirius XM Radio Inc, Delaware Chancery Court, No 7800