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Sirius XM Subscribers Seek to Overturn ‘Unfair’ Settlement

Some satellite radio subscribers asked an appeals court to overturn a class-action settlement between Sirius XM Radio Inc. and its customers, claiming that the class won too little while lawyers were awarded too much.

Attorneys for dissenting members of the class argued before the U.S. Court of Appeals in Manhattan today, seeking the rejection of a lower court’s approval of the settlement valued at $180 million. The judges said they would rule later.

“This settlement has no meaningful value,” Paul Rothstein, a lawyer for the dissenting members, told the three appeals judges.

Subscribers sued Sirius XM Radio in 2009, claiming that it violated antitrust law when it raised prices after Sirius Satellite Radio acquired its only competitor, XM Satellite Radio, in 2008. They said Sirius broke promises it made in order to win merger approval from the Federal Communications Commission.

Sirius XM argued that the price increases were justified to cover higher costs.

In August 2011 Sirius XM won approval of the settlement from U.S. District Judge Harold Baer in Manhattan before a trial was to take place. The settlement provided that the subscription price remained unchanged for a five-month period ended Dec. 31, 2011, and subscribers who canceled their plans could reconnect without a fee. The deal was valued at $180 million, although no subscriber received money.

Lawyers’ Fees

The lawyers who represented the class received $13 million in fees in a “flagrantly unfair settlement,” opposing class members said in a brief. “The award of attorneys’ fees should be reversed,” they added.

The $180 million figure was “pulled out of the air” and that $13 million should be distributed to class members, Rothstein told the judges today.

Dissenting class members, which include the investment adviser Asset Strategies Inc., also said that “the $180 million figure put forth and accepted by the district court as the settlement value is grossly inflated.”

James Sabella, a lawyer for the class, said the $180 million was based on what subscribers would have paid during the five-month price freeze.

“They really just don’t want the lawyers to be paid,” Sabella said to the judge today about the dissenting class members.

‘Expensive’ Trial

Those who accepted the settlement argued in their brief that there were only 85 objectors out of a class of 15.7 million members.

“A long and expensive trial would have been necessary,” class members said in a brief, and winning the case would have been difficult because the U.S. Justice Department had concluded that the merger wasn’t likely to harm competition.

“Judge Baer was thinking a little something was better than nothing,” U.S. Circuit Judge Denny Chin today told a lawyer for the objectors, noting that two federal agencies had agreed the merger was fair. “If it had gone to trial, the most likely result at the end would be zero. How was there an abuse of discretion when there was a likelihood, a significant chance, of a recovery of zero?”

Sirius XM, based in New York, argued in its brief that the objectors hadn’t sought to put the settlement on hold pending the outcome of the appeal and the price freeze went into effect.

In January 2012 Sirius XM raised its basic monthly subscription price to $14.49 from $12.95. The company said it had 23.4 million subscribers at the end of September. Sirius XM broadcasts music and sporting events and talk shows, including one hosted by Howard Stern.

The case is Blessing v. Sirius XM Radio, 11-3696, U.S. Court of Appeals for the Second Circuit (Manhattan). The lower-court case is Blessing v. Sirius XM Radio, 09-10035, U.S. District Court, District of New York (Manhattan).

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