How active should a pension fund be in the independent business decisions of the companies it invests in? In the case of a recent lawsuit filed against Sirius XM Radio by a Florida police pension fund, the answer seems to be "as much as they want to be," though it still may not help matters.
Reuters reports that the City of Miami Police Relief and Pension Fund has launched a suit against the satellite broadcasting company's board of directors for not taking a more defensive stance during the company's recent takeover by Liberty Media Corp.
The suit alleges that Sirius' actions breached the board's fiduciary duties and that the broadcaster failed to put up much of a fight or ask for a premium during negotiations to be taken over by Liberty.
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Liberty purchased a portion of the embattled Sirius back in 2009, providing a $530 million loan to keep the company from going bankrupt, but an agreement not to pursue further ownership expired in March and Liberty has been making stronger overtures since.
Liberty filed with the FCC last Friday in an application to take a majority ownership in the company; in a hearing in Delaware's Court of Chancery on Wednesday, the court's chief judge refused to schedule a hearing based on the Florida fund's request to file a temporary restraining order against the transaction.
The pension fund says that provisions which prevented Sirius from battling the Liberty takeover violate the board's fiduciary duties.
Legal experts suggest that the Florida fund has a tough chance of winning the case.
"Ultimately, unless you have some serious conflicts of interest on the part of the directors, the Delaware courts are typically protective of the decisions directors make," Charles Elson, head of the University of Delaware's school of corporate governance, told Reuters.
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