Hartleib Case Against Sirius XM Dismissed
The case naming Sirius XM Radio, the Board of Directors, and management of the company has had resolution. According to court documents:
“PROCEEDINGS: (IN CHAMBERS) ORDER GRANTING WITH LEAVE TO AMEND DEFENDANTS’ MOTION TO DISMISS [filed 11/17/08].
Having read and considered the papers presented by the parties, the Court finds this matter appropriate for disposition without a hearing. See FED. R. CIV. P. 78; LOCAL RULE7-15. Accordingly, the hearing set for Monday, December 8, 2008, at 1:30 p.m. is hereby vacated and off calendar.
Introduction
Defendants Sirius Satellite Radio, Inc. (“Sirius”), XM Satellite Radio Holdings, Inc. (“XM”), and Interoperable Technologies LLC, (“Interoperable”) and several officers and directors of the three companies (collectively, the “Defendants”) move to dismiss, pursuant to Federal Rules of Civil Procedure 12(b)(6), 23.1 and 12(b)(9), Plaintiff Michael Hartleib’s derivative claims for violations of the federal Racketeering and Corrupt Organizations Act (“RICO”), breach of fiduciary duty, and violations of the Sherman Act, and a direct claim for breach of fiduciary duty. For the following reasons, Defendants’ motion is GRANTED WITH LEAVE TO AMEND
Standard of Review
The issue on a motion to dismiss for a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the failure to state a claim is not whether the claimant will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims asserted. Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997). When evaluating a Rule 12(b)(6) motion, the district court must accept all material allegations in the complaint as true and construe them in the light most favorable to the non-moving party. Mayo v. Gomez, 32 F.3d 1382, 1384 (9th Cir. 1994). Rule 12(b)(6) is read in conjunction with Rule 8(a), which requires only a short and plain statement of the claim showing that the pleader is entitled to relief. FED. R. CIV. P. 8(a)(2). Dismissal of a complaint for failure to state a claim is not proper where a plaintiff has alleged “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1974 (2007). In keeping with this liberal pleading standard, the district court should grant the plaintiff leave to amend if the complaint can possibly be cured by additional factual allegations. Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995). Furthermore, Federal Rule of Civil Procedure 23.1 sets out the pleading requirements for a shareholder to file a derivative action on behalf of a corporation. It requires that a derivative plaintiff state with specificity either that he made a demand on the corporate defendant before filing suit or the reasons why he did not make such a demand. FED. R. CIV. P. 23.1.claims asserted in the complaint.
Background
This case arises from the competition, cooperation, and eventual merger of the two providers of satellite radio service in the United States: XM and Sirius. (First Amended Compl. (“FAC”) ¶ 6-10.) In February 2000, Sirius and XM formed a joint venture—Interoperable—to develop a radio that could receive either XM or Sirius signals. (FAC ¶ 31.) The Federal Communication Commission (“FCC”) prohibited them from simply merging their two allotments of the spectrum, instead requiring XM and Sirius to jointly develop and market an interoperable satellite radio receiver. (FAC ¶ 22.) Mr. Hartleib alleges that XM and Sirius developed an interoperable radio. (FAC ¶ 61.) Mr. Hartleib alleges that XM and Sirius fraudulently represented that they were planning to release an interoperable radio when they had no intention of doing so while concealing their true intention to merge the two companies to shareholders’ detriment. (FAC ¶¶ 7-10.) Despite this alleged wrongdoing, the Department of Justice approved the Sirius/XM merger, which went forward in June 2008. (FAC ¶ 69.)
Mr. Hartleib filed causes of action for violations of RICO and the Sherman Act, and for breach of fiduciary duty as a derivative suit on behalf of the shareholders of Sirius. He did not file a demand with the Sirius Board of Directors prior to filing his complaint. (FAC ¶ 11.) Mr. Hartleib also filed a direct cause of action against Sirius directors for breach of fiduciary duty. (FAC ¶¶ 202-205.)
Analysis
1. Derivative Claims Mr. Hartleib has not made any demand upon the Board of Directors of Sirius to obtain the relief he seeks in this lawsuit. He has also failed to allege with sufficient specificity the reasons that issuing such a demand on Sirius would have been futile. Mr. Hartleib has filed seven of his eight claims against Sirius as as shareholder derivative actions on Sirius’ behalf.
Federal Rule of Civil Procedure 23.1 sets out the pleading requirements for derivative actions such as Mr. Hartlieb’s action. It states that a complaint must:
(3) state with particularity:
(A) any effort by the plaintiff to obtain the desired action from the directors or comparable authority and, if necessary, from the shareholders or members; and
(B) the reasons for not obtaining the action or not making the effort.
FED. R. CIV. PRO. 23.1. Because Sirius is incorporated in Delaware, the Court will use that state’s law to determine whether Mr. Hartleib has adequately pleaded the reasons that filing a demand with Sirius would have been futile. Kamen v. Kemper Fin. Servs., 500 U.S. 90, 108-109 (1991).
The Delaware Supreme Court’s ruling in Rales v. Blasband provides the standard for determining whether a plaintiff has satisfied the requirements of pleading that it would have been futile for the plaintiff to issue his demands to a corporation. Rales applies when, as in the present case, “a business decision was made by the board of a company, but a majority of the directors making the decision have been replaced.” Rales v. Blasband, 634 A.2d 927, 933-944 (Del. 1993). In this case, the actions at issue began in 2002 and culminated in June 2008, when Sirius and XM merged. (FAC ¶¶ 25, 68.) However, seven of Sirius’ twelve board members were seated in August 2008. (Def.’s Brf. at 4; Def.’s Req. for Judicial Notice Ex. A.) Therefore, Rales provides the correct rule to use:
[It] is appropriate in these situations to examine whether the board that would be addressing the demand can impartially consider its merits without being influenced by improper considerations. Thus, a court must determine whether or not the particularized factual allegations of a derivative stockholder complaint create a reasonable doubt that, as of the time the complaint is filed, the board of directors could have properlyexercised its independent and disinterested business judgment in responding to a demand. If the derivative plaintiff satisfies this burden, then demand will be excused as futile.
Rales, 634 A.2d at 934. To show futility, the plaintiff must meet a higher burden than he must on a typical motion to dismiss under Rule 12(b)(6). “Mere notice pleading is insufficient to meet the plaintiff’s burden to show demand excusal in a derivative case.” Guttman v. Huang, 823 A.2d 492, 499 (Del. Ch. 2003.)
Mr. Harteib marshals several arguments in an attempt to create reasonable doubt about the current board’s ability to exercise independent judgment in this case: (1) Sirius’ non-responsiveness to his shareholder activism before the merger took place shows that making a formal demand to the current, post-merger board would have been futile; (2) all of Sirius’ board members knew of, benefitted from, and participated in efforts to conceal the alleged racketeering activity associated with Sirius, XM and Interoperable and, therefore, breached their fiduciary duties, making them subject to criminal and civil liability if their misdeeds came to light; (3) each board member authorized or permitted false statements to be disseminated on their behalfs; (4) each board member would be forced to sue him or herself if he or she allowed this action to go forward; (5) Mel Karmazin, board member and chief operating officer of Sirius, received and continues to receive substantial monetary compensation and other benefits from Sirius, making him biased; (6) Sirius board member Gary Parsons was board chairman and chief executive officer of XM before the merger, so he cannot possess disinterested business judgment about the merger; (7) board members Joan Amble, Eddy Hartenstein, James Holden, and James Moone are members of Sirius’ audit committee and, therefore have a conflict of interest; and (8) current board members have failed to take the necessary actions to rectify the harm allegedly inflicted on the shareholders by the wrongdoing asserted in this case. (FAC ¶¶ 108-158.) These arguments do not create a reasonable doubt that a majority of the current board of directors would not be able to respond disinterestedly to a demand from Mr. Hartleib.
The majority of Mr. Hartleib’s arguments to show the futility of making a demand on the current Sirius board are based on generalized, not specific allegations. Although the complaint identifies alleged fraud and wrongdoing committed by Defendants, it does not state how each specific Sirius director was responsible for those actions. For instance, it would be helpful if Mr. Hartleib could show how a majority of the current directors, as individuals, approved of an allegedly fraudulent statement or action or committed some wrongdoing that would make them unable to exercise independent judgment in this case. Generalized statements alleging that “each board member” knew of some wrongdoing will not suffice to meet the heightened standards of Rule 23.1. See Guttman v. Huang, 823 A.2d 492, 503 (Del. Ch. 2003) (finding that “particularized allegations of fact detailing the precise roles that these directors played at the company, the information that would have come to their attention in those roles, and any indication as to why they would have perceived the accounting irregularities” would help support a finding of futility). Such generalized allegations are even more ineffective in situations, like this one, where the majority of the board was not empanelled at the time of the alleged wrongdoing. The changeover in board membership further undermines the relevance of Mr. Hartleib’s argument that Sirius’s lukewarm response to his shareholder activism before the merger shows that its current board cannot be trusted to exercise independent judgment. The Court also fails to see the relevance of directors’ membership on the audit committee. Furthermore, Mr. Hartleib cannot escape the demand requirement simply by asserting that the a majority of the board bears liability in the action because a majority of board members are named as defendants in his suit.11
Because Mr. Hartleib has not sufficiently pleaded that making a demand upon the Sirius board would be futile, it is unnecessary for the Court to rule on whether Mr. Hartleibs’ pleadings otherwise state claims upon which relief could be granted. However, Mr. Hartleib should not construe this as the Court’s tacit approval of the sufficiency of the pleadings. Mr. Hartleib would be well advised to further review his pleadings, taking Defendants’ arguments into account, if he chooses to amend and re-file his claims.
As in his first complaint, Mr. Hartleib’s claim directly against the officers and directors fails because he has not alleged harm to himself outside of the injuries suffered by all shareholders. See Feldman v. Cutaia, 951 A.2d 727 (Del. 2008) (holding that a claim that the plaintiff is harmed in the same way that all other shareholders are harmed is a derivative, not a direct, claim). Those actions alleged in ¶¶ 87-94 of the FAC—that Defendants delayed the deployment of an interoperable radio and trading on that information—are not actions aimed at or suffered by Mr. Hartleib as an individual, rather, they are actions suffered identically by all shareholders. (FAC ¶¶ 87-94.) The only damages Mr. Hartleib points to as result of these actions are Mr. Hartlieb’s loss of value in his Sirius stock. This is identical to the loss suffered by all other shareholders. Because Feldman requires that a plaintiff in a direct suit show that he has “suffered someindividualized harm not suffered by all of the stockholders at large,” and Mr. Hartleib has failed to show that he has suffered special losses beyond a reduction in the value of his stock, Mr. Hartleib’s direct claim fails. Feldman, 951 A.2d at 733.
Conclusion
For the foregoing reasons, Defendants’ motion to dismiss Mr. Hartleib’s claims is GRANTED WITH LEAVE TO AMEND. Mr. Hartleib has twenty days leave to amend its complaint consistent with this order. Defendants have twenty days thereafter to file a responsive pleading.
Tyler
problems
ummmmmm.how/why did this law suit get heard so quickly? that is impossible in our court system
timing of initial judgement ummmmmmmm Dec 18th is what date??
ummmmmm ya think the guy is dead set against sirius?
he will be back before Dec 18th
all too fishy
Hmmm, another lawsuit with absolutely no proof, taking up corporate time and dollars.
I wander if Hartlieb will amend his suit… (of course he will)
It is already in the works, We are waiting to hear from the new board as to our demands!It is also time for shareholder resolutions!
Newman,
What frosts my butt about this suit, is Michael used the Preliminary Proxy Statement to further his original case of FCC interoperability compliance. He took a group of shareholders vulnerable because of the SP’s precipitous decline since the merger, now facing a request for further dilution of shares and a RS, and twisted them into his conspiracy of management impropriety.
His twist combined his claims of a management conspiracy to not bring forward to market an interoperable radio pre merger, with the intentional common share holder equity destruction post merger, to bring the company private at some time in the future at these low levels in SP.
As you say no proof, just a good conspiracy, diverting company resources and shareholder’s attention from the real focus of the company, which is trying to execute on its business plan. Thankfully the shareholder meeting is only a little over a week away, and can soon be put behind us, with outcomes certain.
I posted this on SaveSirius Lets hope this wakes up the blind masses of morrons that Mr. Hartlieb screwed over and I hope he gets sued for defrauding people with basic lies (Watch his Fox interviews where he said he had no prior experience with Sueing Sirius)
Can we get a suit against Hartleib for prolonging the merger process based on knowingly using false information. The money he may have cost the company and the stockholders could be hundreds of millions. If he’s going for an appeal he’s causing more harm financially and putting the reputation of Sirius Xm under more unnecessary public negative exposure.
I wish someone would, Neal
Michael,
I had asked you why you hadn’t had your shareholder resolutions and counterpoints submitted and included in the Proxy Statement for the meeting or at least have had a denial of your requests. You told me you called Sirius IR and they said it would be too late for inclusion and asked me if that was true.
You are becoming very annoying with your ineptness, while calling management incompetent. It is your right and that is all I will respect about the process. You must be so proud that now you can say “We” as opposed to “I” in your efforts. …. we are waiting to hear from the new board as to our demands…. please michael.
Cos1000, you know that this wasn’t even posted on the SaveSirius site until, I posted it! He doesn’t want his crew to know about it!
cos 1000 here is the email chain from IR!!
From: Blalock, Paul [mailto:PBlalock@siriusradio.com]
Sent: Monday, June 02, 2008 9:04 AM
To: Michael Hartleib
Subject: RE: Stockholder Proposals
No
Paul Blalock
SVP, Investor Relations
SIRIUS SATELLITE RADIO
1221 Ave of the Americas
New York, NY 10020
tel: 212.584.5174
fax: 212.584.5252
http://www.sirius.com
——————————————————————————–
From: Michael Hartleib [mailto:michaelhartleib@cox.net]
Sent: Monday, June 02, 2008 12:03 PM
To: Blalock, Paul
Subject: RE: Stockholder Proposals
Has that deadline changed since meeting is postponed?
——————————————————————————–
From: Blalock, Paul [mailto:PBlalock@siriusradio.com]
Sent: Tuesday, May 27, 2008 12:15 PM
To: michaelhartleib
Subject: Stockholder Proposals
Michael,
Page 95 of the merger proxy shows a December 24, 2007 deadline for proposals to be submitted for the SIRIUS meeting.
Regards,
Paul
Paul Blalock
SVP, Investor Relations
SIRIUS SATELLITE RADIO
1221 Ave of the Americas
New York, NY 10020
tel: 212.584.5174
fax: 212.584.5252
http://www.sirius.com
Michael.
I honestly have no idea who is right and who is wrong here.
But if Georgetown Partners can completely destroy the FCC process by delaying the entire decision by months of needless meetings.
Than I say, anyone who feels compelled to see their convictions out, should do so.
Socal
if institutions only own 39% of shares how can the vote possibly pass for reverse split and dilution ?
Tyler are you voting for or against ?
Good question GS. But Tyler hasn’t been wrong on these things, ever……………
vote for the split please use your head….please
Tyler if you are going to report on something try uncovering and revealing the cause of these bogus trading patterns and expose those involved…Do you believe the reverse split and dilution are being used as scare tactic to shake lose retail shares ? The street knows the price should not be under a buck. You say you are long, so how are you voting ?
ok michael I’ll change my vote if you convince me how it benefits you and yours
socal its not a good sign when you answer for someone else..i can wait for Tylers answer
gs….
FIrst
each share gets a vote. What happens in most cases is that most shareholders do not bother to vote at all. When this happens, the BOD gets to vote those shares. I would be stunned if more than 20% of retail shareholders actually vote. Thus, all of the non-voted shares become the decoision of the BOD.
Second
I am not a fan of reverse splits, and would rather not see one. However, I am also not a fan of the pink sheets, and neither are the banks Sirius needs to do business with. I would rather authorize the reverse split and not have to use it than not have it and need it. Ifg I was loaning money to Sirius XM, I would want a comfort level that the stock price is not going to be here where it is. I would also want to know that the company will still be listed.
Some say that the vote can be done later. It can. It will cost more $$$ yet again, and will take time and latitude away from the company as they try to renegotiate debt. While NASDAQ did change the rules to forego delisting until January, there is no guarantee that they will do so again. Thus I would rather be prepared and have the ability to reverse split in my back pocket.
As a shareholder that is an uncomfortable position to be in. It means that you have to trust that the only reason for the revers split is for delisting purposes. If someone does not have that level of trust, than I would suggest that they reconsider their investment decdision in the company and speak to a financial advisor.
While things surrounding the debt issue have not gone swimmingly, the management (the current, or any other) would need some latitude to work a deal. I think that handcuffing them would exaserbate the situation.
On the additional shares. They may need them, but would likely prefer not to use them. When Mel came, he made it a point to avoid dilution. He was successful in that task up until the merger, and we all knew he would need that dilution for the merger to happen.
Again, I would rather not see the potential of these new authorized shares, but also see that the company needs some latitude. I fully realize that some of these shares, and perhaps as much as all, will be needed to get the refinancing done. I hope they are not needed, but we have to realize that the potential exists…particularly in the current market.
Thus, I am voting with the Board on these issues. However, I have the luxury of not having my Sirius shares impact my livlihood one way or another no matter what transpires. This means that the level of trust I need to put into the company differes from what others may have to do.
I can understand why different people will vote different ways, and support that process.
Tyler, I believe the proxy says that not voting means a “NO” vote for the RS and extra shares. Which would mean that 50.1% would have to vote “YES” for passage. This may be a tough sell.
Michael your “E-mail chain” is begins in May, 08 and ends in June 08, addressing Sirius as a standalone company, having annual meetings in April. It is irrelevant to the merged entity and its annual meeting schedule, but you know that.
cos1000:(posted to the forum) 10-25-2008, 09:25 AM
Here is a question. Why hasn’t Michael submitted “Proposals Of Security Holders” under rule 14a-8 to be included in the Preliminary Proxy Statement submitted by the company under rule 14a-6??? I am not a lawyer, but if you or I were involved in ongoing litigation with the company during the merger, during the merger appeal period, and after, wouldn’t you follow Proxy Statement Rules and assure that your concerns could be included in a timely filing to the company so that all shareholders would have access to the information when the company files its Proxy Statement.
Rule 14a-8 provides shareholders who disagree, or agree but want other considerations voted on at the annual meeting, a way to have those issues included in the Proxy Statement.
Hartlieb1: (reply) 10-25-2008, 04:51 PM
I was told it was too late. Was that another lie.
Michael, all your email chain shows me is that you were well aware of the process when you wrote your “befuddled” response as though you had been lied to by Sirius’ IR. Your May and June requests were either premature for the merged entity or late for a meeting that never took place.
Demonat0ku,
I am not at all surprised….. good job on keeping those folks up to date.
Tyler, I’ve made plenty of money on pink sheet stocks. In my opinion we actually have a better chance of getting the stock price back above $1 by going the pink sheet route with current dilution rather than R/S (add dilution) and get shorted back down.
The end result with the R/S will be much lower existing shareholder value.
BTW – There are plenty of Pink Sheets trading above $1.
GS.
If you follow the history on socalrunningfool. You will find that I frequently answer for others, and quite often answer myself.
In fact I have I’m quite sure posted, post after post to myself. Lighten up big boy. It’s a nice venue for everyone to engage each other and discuss what’s on their mind.
Again, I will say. Tyler had is finger on the pulse in these matters. Sorry man, I am certain at this age/point, I will remain quite consistent in my inconsistencies.
Take Care,
Social
Tyler
how long after the shareholders meeting will we know the results of the vote?
spanyo…
Good eyes. I stand corrected. The non-votes are counted against for the RS and authorized count issues. A non-vote on the BOD, etc, is voted by the BOD.
Even with that, the measures will still pass IMO. There are simply too many shares that will vote for the measures. Additionally, like anything, if the company feels they need this, they can extend the meeting and keep collecting votes until they get what they need.
Everyone here talks about RS, pink sheet, dilution, etc. Does anyone care to know HOW we got here? I think that’s much bigger question that anything else. Why the long term shareholders got wiped out? PPS 0.15? why the shareholders has to be put in this situation? Why?
SiriusHope…..
We will know on these two issues as soon as 50.1% of the shares are voted in favor of, or against the issues.
The BOD wants these measures. If there are not enough votes yet to pass it, they will simply extend the meeting and keep plugging away until they get the 50.1% and win, or 50.1% and lose.
IMO the measures will all pass. The meeting may need to be extended, but they will pass nonetheless.
Tyler, its my feeling longs are being trashed by Mel. Siri shareholders voted 98% for the merger because Mel said vote for it, then f’ed us with the ugly bank deal, siri retail voters are very aware they own radios too, the vote will not pass, insiders are not buying stock at these prices which is very fishey, the vote cost is BS, the pinks are BS, BK is BS, this company is making lots of $$….I say expose the thugs holding this stock down..Tyler your reporting is to passive, get to the real issues..but then again why should you, you made your money with siri…
GS…..
I think you should prepare yourself for the vote passing.
How much stock do you think insiders should be buying?
This company brings in a lot of revenue, but as yet, they are not making money.
The “thugs” are not identifiable, and frankly, I do not have the time to dedicate to trying to identify hundreds of traders that whack the bid down each day.
I guess no one here is serious enough to talk about the real issues which the value of this stock/company, fraud and how the shareholders are getting screwed. Obviously most working for SIRI. Waste of time!!!! “The “thugs” are not identifiable” Yeh, Right!!
Sirius000….
Tell you what. You step up to the damn plate, name names and deliver the friggn proof of something.
Allegations and theories can be bandied about all day long, but accomplish NOTHING.
Me working for SIRI…..Sorry, but it simply is not the case. Yet another baseless theory.
So get off your damn ass, put up the names and specific proof. If you have none of that, then profer a well reasoned opinion with specifics. Generalized comments mean nothing as well.
Tyler why not be the hero, identify a few bring them to the light, your reporting would be much more exciting, and you would even make the evening news. Sirius (BOD) knows who and why but are doing nothing about it, why ?
I wonder if Sirius employees are still getting stock with their 401K plan…that would say alot.
Tyler,
Stop the BS. You dam well know all the issues and problems with SIRI. Off course if it was so easy that any individual could go after them, there would be no way of them being able to do what they do. It’s not that easy to make billions of dollars vanish over night in the public trading company. You have to walk on the border of the law and step over it few times. You are looking for facts: How about having 17 months and not look for proper financing and then do a toxic financing that brought the stock from $3 to 0.15, who benefited from that? I own this stock for the past 4.5 years and had all the respect and trust in Mel, that’s why I bough it. We the long shareholders have been destroyed. PPS=0.15, RS and dilution coming, pathetic.
GS Says: Tyler why not be the hero, identify a few bring them to the light, your reporting would be much more exciting, and you would even make the evening news. Sirius (BOD) knows who and why but are doing nothing about it, why ?
GS: Why don’t YOU be the hero? You said it is obvious, so why not come up with a little proof and make the acuasations? YOU would be the hero and it would make you famous. Why depend on Tyler or anyone else to save you? You said: “The “thugs” are not identifiable – yeh,Right!!” If it is so obvious, why are you not submitting your proof? Or are you another one of the classic X Generation “GIVE ME NOW, GIVE ME NOW, GIVE ME NOW, because I cant and wont do it myself.”?
We are all waiting…
Sirius000: How do you know that nothing was set up for financing? How do you know that Mel did not have an “agreement in principal” with a bank back in October of 07? You do realize that when shit starts to hit the fan, it is known within a company before it is known outside of a company, right? Well, the same holds true for banks. It is absolutely possible that Sirius had an agreement in principal, but after an UNPRECEDENTED delay in the merger process, the bank had to pull out of the deal because they knew that the shit was hitting the fan in the banking biz… You have absolutely no proof that Mel did nothing about financing the entire 17 months…
GS….
I do not have the time to chase what at this point are ghosts.
I do not care to make the evening news.
You allege that the BOD knows who and why, but again, offer nothing to substantiate it.
Some are running around cast aspesions, and not bringing anything beyond an opinion to the table.
Sirius000….
I am stopping the BS. That is why I asked for specifics instead of generalizations. The generalizations are the BS here.
You say, “It’s not that easy to make billions of dollars vanish over night in the public trading company.”
Look at about any equity out there. Billions upon billions have vanished. Is it your opinion that Sirius has been immune to the current situation in the financial sector?
You say, “You are looking for facts: How about having 17 months and not look for proper financing and then do a toxic financing that brought the stock from $3 to 0.15”
Do you really thisnk that is a fact? Do you really think that everyone sat on their hands and did nothing? Do you really think that Mel can arrange financing on the debt of a company that he has not even aquired yet? Do you really think a bank is going to loan money to a company that as yet did not exist? There was only so much “pre-discussion” that could happen, and as the merger delay continued, the odds of favorable traditional financing got worse. By the time the merger was approved, the financial institutions already knew they were in trouble themselves but had not yet made it public. If they had a signed sealed and delivered financing deal, someone would have then charged collusion!
Convert deals are standard deals. What happened here was that there were no shares available to short. Thus taking any profit out of the deal for the financer. Thus the company had to supply the shares.. In return, they got a commitment for long positions for each short position.
Was it the best deal? no. Was it the best deal they could get in the circumstances? Yes
Newman: It’s VERY SIMPLE; all you have to do is look at the PPS, period. If the deal after 17 months was not a good thing for shareholders, then it should not have been done!!! Is that makes sense to you? Why do Toxic financing. For once put yourself in the position of long shareholders, the one who believed and INVESTED in SIRI.
How about SIRI bringing in a professional plaintiff and law firm to bring a class action lawsuit against Sirius (Sued themselves) and agree in an iron clad protection settlement that prevented additional stockholders from suing. Why would they do that?
When I INVESTED in SIRI with my life saving, I was not expecting these types of behavior from this company.
So I’m disappointed and frustrated and feel stupid for Trusting based on previous records. I guess its sign of the times! Sad!
Tyler,
Why would SIR provide the share to be shorted? I could never understand that. Why could not they just walk away? Why not make them cover? I think PPS would have been above 0.15 now.
Over 4 Billion dollars of write off?
Sirius000….
More generalized allegations with nothing to substantiate them.
You say, “How about SIRI bringing in a professional plaintiff and law firm to bring a class action lawsuit against Sirius (Sued themselves) and agree in an iron clad protection settlement that prevented additional stockholders from suing. Why would they do that?”
1. Can you substatiate that Sirius brought in a professional plaintiff and law firm to bring on the suit?
2. You can not blame the company for having a settlement agreement. Ultimately the suit was dismissed.
sirius000…..
1. Walk away from the deal? Pay millions and millions to XM to walk away? Where would SIRI be now. Their biggest OEM contributer is Chrysler, who is a shadow of their former selves, and might as well be writetten off at this point. Do you think walking away was preferable to merging? Sorry, but I simply do not agree.
2. Make who cover their short position? You can’t make someone cover.
Convert deals happen because the lender shorts one share for each convert share they have. This locks in their profit. There were no shares to short!
Tyler,
You well know the law firm and the professional individual’s name. Michael hartleib has already provided that information to you and to a lot of other people.
However you did not answer my first question:
Why would SIRI provide the share to be shorted?
How about the PPS after the merger and all this nonsense?
After all this, I still pray that I’m wrong and that SIRI and its shareholders will come ahead.
Again, I do not like to bash a company and the CEO that I truly believed in and had the most respect for and am fully invested in, but RESPECT is a two way thing!! I did my part and now it’s time for SIRI management show the shareholders that they work for us and that the shareholders interest is on their mind! Thank You!
Sirius000: Sirius provided the shares to be shorted against the XM convert deal in order to get it down.
Here is how it works: XM issued a convertible bond. Most investors will not buy a convertible bond unless they can hedge against it by shorting an equal ammount of stock, thereby locking in the interest rate and what ever conversion percentage as profit.
As soon as the financing was complete, XM would no longer exist. Because of this, they could not short XM stock. In order for the financers to agree to the convertible bond, they had to be LOANED the Sirius shares in order to short, to lock in their profit. Mel is a smart man, contradictory to what Hartlieb and many others may think. He knows if he lends all these shares the stock price goes down, but then it comes to the issue of does he tell them no and look for more financing, while the rest of the financial world is collapsing? Does he risk delaying the merger and allowing someone else (Hartlieb, FCC, anyone else) to then step in and challenge the merger and have the ruling overturned? Does he sit on his hands and have everyone ask him why after 17 months he is given approval and does not consumate the merger? Or does he then turn around and walk away, and have everyone complain that he worked for 17 months on this merger and then walk away with nothing?
No, he did the deal that he had to do to get it done. It was not favorable, but it got it done. If we can survive 2009, we will be smooth sailing for a long time to come. There is no debt due in 2010, 2011, or 2012.
As for the 4 billion dollar write off? It is all numbers. I means jack crap. That doesnt mean they paid someone 4 billion, it means something that they had previously valued at a larger number, they now valued less. To shareholders and private folk, it means absoolutely nothing.
You sound like a Hartlieb follower (if not Hartlieb himself, under an assumed name as he has done before).
You are also echoing some very ignorant commenters on other threads saying that nothing matters other than the PPS. The fact that ALL companies are getting hit hard right now means absolutely nothing to you. The fact that EVERY metric in Sirius has improved except the PPS means nothing to you. Do you not understand that we are in one of the largest economic depressions that we will likely see in our lifetimes? Everything is going to hell. It just hurts you more because, as you said, you “INVESTED in SIRI with my life saving.” You took too big of a risk, Plain and simple. Did you get professional financial advice before you did that? I doubtit, and if you did, you surely did not follow that advice.
Sirius000: Tyler did a very good expose peice on the lawsuit, thank you very much.
Yes, we know the plaintiff, we know the law firm, we know the background, and we know the outcome of that lawsuit.
Now, what proof do you have that Sirius instigated the lawsuit?
Knowing that these guys are professional litigants and professional plaintiffs, knowing that they have sued hundreds of other companies in an identical fashion, why do you feel that THIS INSTANCE was perpitrated by Sirius?
Like I said… sounds like another Hartlieb drone, blindly following without asking for any proof.
sirius000….
I know who the law firm is. I know who the plaitiff is. I asked you to substantiate that Sirius hired them. To my knowledge, and I am very familiar with the case, there is NOTHING whatsoever that ties Sirius and XM to the suit otherthan the fact that they were named in it.
Please, show the proof that Sirius brought on this case against themselves. Otherwise, it is an opinion based on nothing.
I did answer your question, but will do so again.
The financing deal was a convert deal. This gives the lender convert shares in exchange for dollars and interest. Think of the converts as a long position. The lender who does the loan will immediately initiate a short position for each convert share they have. This locks in their interest as profit regardless of what happens to the stock.
So far everything is standard procedure here.
Now, if you recall, the short interest on Sirius was huge. In fact, those that wanted to play the arbitrage of the merger were having trouble doing so because there were no shares available to short.
If you recall, brokerages like Schwab were offering to PAY long shareholders money to borrow their shares to short. If you recall, the SEC was in the midst of a huge witch hunt on naked shorting.
So here we are. A company in Sirius’ position can only really do a convert deal. The banks can lock in profit, and if things go great, they have shares that have more value later on when they close the short side.
The institutions for quite some time have had heartache over any deal because there was no ability to short.
The merger happens.
Mel can close the deal right away or risk the NAB getting an injunction. Which move is best?
He sits in an office with lenders, and all of them say that thgey will do the deal, but onl;y if they can short thus locking in profit.
Mel agrees to loan the shares, but gets a stipulation that the institutions will go long one share for each share shorted.
Of course he did not want to loan shares to be shorted, but was given little chjoice. The fact that he got them to agree to a long position was above and beyond what typically happens.
Does this make sense now?
Tyler/Newman,
I’m not M. Hartlieb. As I told you and you have my real e-mail that I used to sign in here, am a long share holders and INVESTED in SIRI not until Mel came over. I neither am nor ready to get wiped out with RS and more dilution. I just think this whole thing was about one thing, the spectrum and nothing else, I mean nothing else mattered including the shareholders value. This is not something I have to learn from Hartlieb. I’m 52 years old and have been in the market for past 25 years and never seen anything like this. I do not want to compare SIRI to all other bogus financial institution. I did invest in those phony companies; I INVESTED in SIRI because of its management. That should have made a difference. I do not like what’s on the horizon for the shareholders. You guys may have more information and that’s why you do not feel the same way as the longs that lost their fortune, you may never owned SIRI, I do not know.
Newman, What “sirius000” is talking about is the case that happen well before the SIRI case even happen. I believe this because this “markbmark” guy was talking about the same thing and added that the law firm was not allowed to practice in the state for five years (he was a save sirius groupy also). Hear is the post I reposted from Seeking alpha it is a repost of what Micheal H. posted here about that case.
Just to clear things up this was posted by Micheal Hartleib at Sirius Buzz. If you read it you will see the case that “markbmark” is talking about were the judge said the lawers could not practice in the state for 5 years was well before the case against SIRI. So one has to ask how a judge would even bring up SIRI at that time, almost 2 years before the SIRI case came in.
hartleib1
Senior Member
Join Date: Mar 2008
Posts: 131 Friday, February 22, 2008
Judge to California lawyers: Don’t come backTriangle Business Journal – by Chris Baysden
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: Don’t come back [02/22/2008]
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RALEIGH – North Carolina public companies have one less law firm to worry about when it comes to shareholder lawsuits filed in the state.
North Carolina Business Court Judge Ben Tennille has barred the San Diego, Calif., firm of Robbins Umeda & Fink from practicing in the state for five years on a pro hac vice basis. The Latin phrase, which means “this time only,” allows an out-of-state lawyer to appear in court for a particular trial even though the lawyer isn’t licensed in that state.
The order came as something of a coda to a shareholder lawsuit, Egelhof v. Szulik, filed on behalf of a former Red Hat shareholder against members of the technology company’s officers and board of directors.
Shareholder lawsuits are the bane of many public corporations since there are a host of law firms that specialize in filing them on word of bad news from a company.
In 2004, Robbins Umeda & Fink represented a plaintiff in a shareholders derivative case involving Chapel Hill-based Pozen. That lawsuit was dismissed in November 2005.
Press Millen, a Womble Carlyle attorney who helped defend Red Hat’s management in the Egelhof v. Szulik case, hopes the victory his side scored will have a positive impact for corporations beyond the case.
“I think it’s pretty serious,” Millen says of the sanctions. “It’s definitely a warning shot over the bow of out-of-state counsels about filing meritless lawsuits in North Carolina.”
Sanctions against plaintiff
The order, which was issued Feb. 4, prohibits Robbins Umeda & Fink’s lawyers from appearing in the state’s courts for five years. It also bars Andrew Egelhof, the plaintiff in the case, from acting as a shareholder derivative plaintiff or a class-action representative in North Carolina litigation for five years.
The Egelhof v. Szulik complaint, which originally was filed in Wake County Superior Court in 2004, included allegations of insider trading and gross mismanagement at Red Hat. Defendants included Red Hat Chairman Matthew Szulik and board members Marye Anne Fox, former chancellor of North Carolina State University, and retired Army Gen. Hugh Shelton.
Tennille dismissed the plaintiff’s claims in March 2006 due in part to Egelhof’s loss of standing as a stockholder. The defendants later asked that they be awarded attorneys’ fees. Though that motion was not granted, it prompted Tennille to examine actions taken by the plaintiff and the law firm.
Tennille asserts that the lawsuit was filed in a “needless rush to court” just 31 days after Red Hat restated its earnings on July 19, 2004. He wrote in his order that the case was filed without an inspection of the company’s books and records, and many of the allegations relied on media reports and published analyst opinions.
Tennille also took exception to Egelhof being the fiduciary standard bearer. According to court documents, Egelhof was a 24-year-old Kansas resident when he responded to an Internet solicitation seeking a plaintiff.
While he had a degree in business administration, Egelhof had worked in information technology jobs at Kansas State University. His holdings in Red Hat amounted to 28 shares of stock worth $710.50 that he bought in 2004.
markbmark, Dhaaa, facts are hard to get around aren’t they. By the way go ahead and keep posting the lies. Tell me when you have enough rope.