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Later this week, Viacom CEO Philippe Dauman and George Abrams will attempt to convince a Massachusetts probate judge to allow them to move forward in a lawsuit that challenges the way in which they were removed from the Sumner Redstone National Amusements Trust, the entity that will control the fate of Viacom and CBS. Given that judges don’t usually reject claims at such an early phase, they might find certain advantages in their complaint contending that Shari Redstone is manipulating her father to wrest control of his media empire. However, it’s also not a fait accompli that the duo will get Judge George Phelan to sign off on expedited discovery, like a new examination of 93-year-old Sumner Redstone.
On one hand, after some prompting from the judge, Dauman and Abrams argue that issues related to the trust, including the question of undue influence, must be adjudicated in Massachusetts because that is where the trust was set up, that’s where it is administered, and that’s where the records are kept.
On the other hand, Dauman and Abrams acknowledge that the trust doesn’t address the subject of undue influence and “would not and could not govern wrongful acts of undue influence.”
Are these conflictory? If a judge is not being asked to interpret the trust, does that negate the basis for jurisdiction? The trust does deal with what needs to happen for Redstone to be found “mentally incapacitated,” but in response to a judge’s question, Dauman and Abrams also say an individual can be subject to undue influence without being mentally incapacitated. What’s more, they submit that Redstone’s alleged mental incapacity should be interpreted under California law while Shari’s alleged undue influence should be interpreted under Massachusetts law.
What’s the impact of all of this?
When Phelan hears arguments at an oral hearing on Thursday, these tricky spots will likely command the judge’s attention rather than the specific allegations of how Redstone set up the trust to cut out his children and that recent moves in Shari’s favor like firing Dauman from Viacom’s board cut against his long-established wishes.
Redstone’s lawyers are telling the judge that if there is to be a dispute, it should take place in California, where Redstone is located. Dauman’s attorneys, in papers filed on Monday, aim to navigate a tight path on why this should not happen. They both look to hold up the trust as determining forum while suggesting that common law rather than the trust determines the outcome.
“So, while the Trust instrument here or trust instruments elsewhere are silent on the subject of undue influence, the common law is not,” they write. “And the common law, of course, does not respect actions or decisions procured by improper means. It could not be otherwise. If Defendants’ position was accepted, someone could hold a gun to Mr. Redstone’s head and force him to change trustees, and that action — according to Defendants — could not be challenged because the Trust instrument itself does not reference the subject of undue influence.”
Judge Phelan will have to decide.
The decision could be important as Dauman hints at a move on the chessboard down the line.
Redstone’s side has argued that even if Dauman prevails in the action, it won’t change his fate because Dauman will still be outvoted by the other trustees.
The new papers respond: “Defendants’ contentions completely ignore the implications if this Court were to rule that the removal of Plaintiffs as trustees and directors and managers was infected by Shari Redstone’s undue influence and her and others’ improper acts allegedly in Sumner Redstone’s name. None of the trustee or director votes taken on or after May 20, 2016 would be valid, and, in fact, they would be tainted by the absence of two persons wrongfully removed and the actions of those individuals who engaged in improper and potentially illegal conduct. Indeed, if Plaintiffs’ allegations are proven correct, individuals who have taken part in the scheme alleged here may well be adjudicated unqualified to continue serving as trustees.”
In support of this theory, Dauman points to Massachusetts law.
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