A Florida police pension fund is suing Sirius XM Radio Inc’s board of directors for allowing John Malone’s Liberty Media Corp take over the satcaster without a fight and without paying a premium. Reuters reports the City of Miami Police Relief and Pension Fund filed suit in Delaware Chancery Court following Liberty informing the FCC on Friday that Liberty planned to take full control of Sirius XM by increasing its stake to more than 50%. Provisions under which Liberty invested in Sirius XM in 2009 prohibit the company from fighting off a Liberty takeover, and the police pension fund says this constituts a breach of the board’s fiduciary duties. As part of its investment, Liberty loaned Sirius XM $530 million to help the satcaster avoid bankruptcy. Terms of the loan stipulated that Sirius’ board agreed not to adopt a poison pill or any defense measures against a Liberty takeover after a three-year standstill, which expired in March. Since then Liberty has been buying Sirius shares in the open market to boost its stake above 50%.
The pension fund faces an uphill battle, according to a legal expert on Delaware corporate governance. “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. Sirius’ 13-person board includes five members who are representatives of Liberty. The pension fund seeks compensatory damages and asks Liberty to stop buying Sirius shares on the open market. The fund is also seeking class action status.