By Peg Brickley and Joe Flint 

An effort to overhaul Viacom Inc.'s board of directors has hit a roadblock and will be headed to trial.

A Delaware judge is seeking to determine whether 93-year-old Sumner Redstone, who controls Viacom through his holding company National Amusements, had the competency to make the decision to replace five board members at the media company.

At a Friday hearing, Judge Andre Bouchard indicated he is taking seriously arguments from Viacom's current board and management that Mr. Redstone is being unduly influenced by his daughter Shari Redstone, vice chair of Viacom and a member of National Amusement's board. She has denied the charge.

"What's at stake here, of course, is nothing less than the governance of a multibillion-dollar company," Judge Bouchard said. "My focus will be on whether a 93-year-old man who apparently is in declining health had the capacity...to make the decisions that are attributed to him."

A trial has been set for October.

Lawyers for Mr. Redstone have argued the decision to remove Viacom Chairman and Chief Executive Philippe Dauman from the board, along with four other directors, was the act of a person of sound mind.

"You know what? I get that and if you prove that up, game over," Judge Bouchard said.

The decision to allow the board dispute to proceed comes a day after a judge in Massachusetts also set an October trial date in a related legal battle between Mr. Dauman and the Redstones. In that case, Mr. Dauman and fellow Viacom board member George Abrams are fighting their removal from the board of National Amusements and the trust that will oversee Mr. Redstone's $40 billion media empire of Viacom and CBS Corp. after he dies or is determined to lack capacity.

As was the case in Massachusetts, Judge Bouchard was dismissive of National Amusements' arguments that Mr. Redstone's mental state is irrelevant. Even if Mr. Redstone was found incompetent, his lawyers argue there were enough votes at National Amusements to make the changes to Viacom's board.

"There could be total exploitation of somebody who had no desire to do this, and it would be totally unreviewable," Judge Bouchard said. Earlier, after National Amusements' lawyer Donald Wolfe pointed out that Delaware law allows shareholders to "vote whimsically, fancifully," Judge Bouchard responded: "Not incompetently."

Edward Micheletti, a lawyer for Frederic Salerno, Viacom's lead independent director who brought the Delaware suit, said National Amusements is desperate to keep the court from "learning the truth about Mr. Redstone." If he was in fact a "vibrant person making these sophisticated business decisions," access to him would be granted, Mr. Micheletti said.

The uncertainty around Viacom's board and management is causing disruption inside the company, Mr. Micheletti added, noting that employees are leaving and the issue is stalling a potential sale of a stake in the company's Paramount Pictures movie studio.

Write to Peg Brickley at peg.brickley@wsj.com and Joe Flint at joe.flint@wsj.com

 

(END) Dow Jones Newswires

July 29, 2016 14:41 ET (18:41 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
CBS (NYSE:CBS)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more CBS Charts.
CBS (NYSE:CBS)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more CBS Charts.