On Wednesday, a Delaware judge overseeing a battle to control CBS struggled to find the right way to preserve a status quo for independent directors on the company's board and Shari Redstone.
Chancellor Andre Bouchard hasn't made up his mind, but promises to do so by early Thursday before a planned meeting by the network's board. In the meantime, he is temporarily granting CBS' request for a restraining order to protect jurisdiction and make sure nothing new happens.
"I've never seen anything like what's transpired here in terms of moving parts," said Bouchard at the close of the hearing.
For months, Redstone has been pushing for a merger between CBS and Viacom to achieve scale and better compete with digital giants. CBS argues that its shareholders would be hurt by a merger with the weaker Viacom.
Because Redstone controls National Amusements Inc., which has a 79 percent voting interest in each company if only a 10 percent economic stake, she's been able to get both companies to the negotiating table to discuss a second marriage. (The companies split from each other in 2005.)
With an eye toward blocking a reunion, CBS filed a surprise lawsuit early Monday. The broadcaster, led by a special committee of its board of directors, accused Redstone of breaching fiduciary duties. The board wanted to consider issuing a dividend to Class B stockholders that would dilute Redstone's NAI voting interest from 79 percent to 17 percent. With the expectation that she would interfere with a planned meeting Thursday, CBS asked for a restraining order.
In response, Redstone and NAI argued there was no emergency and that it wasn't attempting to force a merger of any kind even though it was their understanding of a provisional agreement between CBS and Viacom on everything but the future role of Viacom CEO Bob Bakish. What's more, the opposition said there was no intention to remove directors. But if the board was allowed to adopt resolutions diluting voting power, Redstone's camp asserted, this would be "extraordinary both in scope and finality" and represent an "unprecedented usurpation of a controlling stockholder's voting power."
Redstone called the TRO motion an "ambush" and offered a standstill that basically amounted to not asserting her voting power so long as CBS didn't make a move to take away that voting power. CBS replied it merely wanted to consider what course to take but needed assurance of noninterference and the preservation of independence.
Just before the hearing began, National Amusements amended CBS' bylaws to require the board's supermajority consent to prevent what it said was "unlawful action" by CBS and the special committee from derogations of fiduciary obligations to shareholders.
That was the dynamic headed into Wednesday's hearing in Delaware Chancery Court.
Right away, David Ross, one of the attorneys for the CBS side, attacked the bylaw change as an "attempt to subvert the power of the court" with promises to amend pleadings to address the validity of the amendment.
Indeed, Bouchard openly questioned how Redstone's self-help remedy may have changed the stakes.
"Given what happened today, you've given yourself relief," noted the judge. "Why not concede the point and let the meeting happen? What is your client afraid of?"
Redstone's side insisted NAI had done nothing wrong and that a restraining order still be denied.
"My client has the right to get in front of the train and prevent what's happened," said NAI attorney Meredith Kotler, and, referring to the planned meeting and CBS lawsuit, she added, "It was an ambush."
The judge later joked the right to get in front of a train wasn't the best metaphor.
NAI also attempted to refocus the judge's curiosity. "We proposed a standstill," said Kotler. "Real question is why must this meeting go forward?"
The judge will now take it all under advisement.