Viacom Board Suit Against Redstone's Holding Company to Proceed
July 29 2016 - 02:56PM
Dow Jones News
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.
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