Antitrust Law Daily Wrap Up, ANTITRUST—2ndCir: Settlement of Consumer Challenge to Sirius-XM Merger Confirmed, (Jan 4, 2013)

By E. Darius Sturmer, J.D.

The U.S. Court of Appeals in New York City has, in a not-for-publication opinion, affirmed the approval of a class action settlement resolving consumers’ claims that a merger between satellite radio programming providers Sirius and XM had unlawful anticompetitive effects (Blessing v. Sirius XM Radio Inc., December 20, 2012, Per Curiam). The settlement, which was approved by the federal district court in New York City in August 2011, required the merged entity—Sirius XM Radio Inc.—to forego approximately $180 million in fees by freezing its prices for five months. It also provided for a $13 million award to class counsel for attorney fees and expenses.

A group of objectors challenged the trial court’s approval of the settlement, alleging that the court had erred in: (1) finding the proposed settlement fair, reasonable, and adequate; (2) finding the attorney fees award reasonable; and (3) directing the sole candidate for class counsel to address diversity concerns in staffing the case.

The lower court did not abuse its discretion when it presumed the proposed settlement procedurally fair, in the appellate court’s view. Further, the record in the case supported a finding of substantive fairness, despite the settlement’s lack of any cash remedy to the class members. Although the objectors complained that the trial court did not thoroughly evaluate the value of the settlement, no one had requested an evidentiary hearing to ascertain the settlement’s value or to present any witnesses to testify as to that matter, the appellate court noted. Moreover, given that it had become apparent that “were the case to go to trial, plaintiffs’ likelihood of success was slim,” the Grinnell factors supported the determination of fairness.

The appellate court rejected a contention by the objectors that the $13 million fee award was unreasonable because of the clear-sailing and reversionary provisions written into the settlement, especially in light of the “limited recovery” to the class. To the extent that the provisions suggested improper collusion, the court noted that such provisions did not provide grounds for vacating the fee. The fee was negotiated only after the settlement’s terms had been decided and did not reduce what the class ultimately received. Moreover, it represented less than 60 percent of the figure arrived at by the trial court in a lodestar review it conducted before judging the reasonableness of the request, the appellate court observed.

An argument by the objectors that the price freeze offered in the proposed settlement should have been subject to the attorney fees provision applicable to coupon settlements under the Class Action Fairness Act of 2005 (“CAFA”) was without merit, in the appellate court’s view. Even assuming that CAFA’s coupon provisions were applicable, the court explained, approval of both the settlement and the fee award was appropriate because the fees were negotiated only after the terms of the settlement were reached and were paid directly by Sirius XM, rather than from funds earmarked for the class.

Finally, the appellate court found that the objectors lacked standing to challenge class counsel’s consideration of diversity when staffing the case. The mandate derived from a provision in the class certification order issued earlier in the case stating that class counsel “should ensure that the lawyers staffed on the case fairly reflect the class composition in terms of relevant race and gender metrics.” Although the objectors alleged that staffing a case with an eye to diversity “may interfere with [counsel’s] ability to provide the best representation for the class,” they never contended that that representation was actually inferior, the appellate court reasoned. Thus, they had not stated an injury-in-fact, a necessary requisite for standing.

The lead case in the consolidated class action is 11-3696-cv.

James J. Sabella (Grant & Eisenhofer P.A.) for plaintiffs-appellees. Todd R. Geremia (Jones Day) for defendants-appellee. Theodore H. Frank (Center for Class Action Fairness LLC) for objectors-appellants.

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