Lawsuit Magnet Sirius XM Wins One Ruling, Loses Another

A federal judge in New York dismissed one derivative action against Sirius XM while allowing a parallel one to proceed. Under this type of lawsuit, a shareholder asks to step into the shoes of the board of directors in order to sue someone when the board will not.

In the two New York cases, the plaintiffs sought the right to sue various directors and officers at the company for botching the merger process and for enriching themselves when the company was rescued by Liberty Media tycoon John Malone during its darkest days in 2009. Although the New York judge has yet to issue his reasons, he likely tossed out the first suit because the plaintiff did not hold shares in the company -- a standard requirement for derivative suits. In the other second suit, he permitted some but not all of the claims to go forward. Significantly, he allowed an unjust enrichment claim against Liberty’s Malone to go forward. If successful, the claim could force Malone to hand over profits he made as a result of acquiring 40% of the company at a bargain price. Meanwhile, in California federal court, Sirius XM moved to dismiss a class-action suit that claims it lied to consumers about prices for its 2 year Family Friendly plan. The suit is very similar to one Sirius settled last week for $180 million. The difference is that the California suit is based on state law not federal law. The company’s prospects look a little brighter this time around, however, as similar state law claims have failed in the past.