Debevoise & Plimpton LLP has secured dismissal of stockholder litigation on behalf of the Special Committee of Sirius XM Holdings Inc. in connection with Liberty Media Corporation’s 2024 spin-off of SiriusXM.
The litigation, brought by minority stockholders, challenged the fairness of the transaction, which eliminated Liberty Media’s controlling stake in SiriusXM. Plaintiffs alleged that the spin-off disproportionately benefited Liberty by collapsing a multi-billion-dollar gap between the trading price of Liberty’s tracking stock and SiriusXM’s net asset value. They further advanced a “controlled mindset” theory, asserting that the Special Committee’s independent directors failed to negotiate effectively, allowed Liberty to dictate the terms of the transaction, and did not condition the deal on approval by a majority of the minority stockholders.
Debevoise, representing the Special Committee, moved to dismiss the claims, arguing that plaintiffs failed to plead any non-exculpated claim against the independent directors under Delaware law, including under Cornerstone Therapeutics Inc. v. Stockholder Representative LLC. Partner Maeve O’Connor argued the motion before Chancellor Kathaleen McCormick of the Delaware Court of Chancery.
The Court granted the motion to dismiss, holding that plaintiffs failed to allege the “extreme facts” necessary to support a reasonable inference of disloyalty by independent directors. The Court emphasized evidence of a robust and independent negotiation process and found no basis to infer improper influence or domination by Liberty or its controller.
The decision reinforces the high bar for pleading breach of fiduciary duty claims against independent directors and limits efforts to second-guess board decision-making based on transaction outcomes rather than well-pled facts. It also provides guidance on the structuring and documentation of special committee processes in controller transactions.
The Debevoise team was led by partner Maeve O’Connor and included associates Amy Zimmerman, Adriana Kranjac Rielly, Isabel Gutenplan, and Marieme Diallo.