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CBS and Viacom are no longer facing a shareholder lawsuit over decisions related to their 92-year-old controlling stockholder Sumner Redstone.
In January, both companies were hit with a complaint in Delaware Chancery Court targeting bonus payouts and claiming that the company’s top executives, including Viacom CEO Philippe Dauman and CBS CEO Leslie Moonves, and board members “put their personal loyalty to Mr. Redstone (in particular, and secondarily to [Shari] Redstone) well ahead of their loyalty and respective fiduciary duties they owe and owed to Viacom and/or CBS and their respective shareholders.”
The Hollywood Reporter has learned that this shareholder lawsuit was dropped earlier this month. According to Richard Greenfield, the attorney representing the plaintiffs, “We have pursued another course of action, dealing with CBS and Viacom through other means.”
Just two weeks after the shareholder lawsuit was filed, Redstone resigned as executive chairman of both CBS and Viacom, with Moonves and Dauman stepping up, respectively.
The shareholder lawsuit came in the wake of a petition in Los Angeles Superior Court made by Manuela Herzer, Redstone’s longtime companion, seeking to be reinstated as his healthcare agent. In November, she claimed that Redstone was “a living ghost,” being manipulated by those around him. His lawyers paint her claims as being financially motivated, but a judge refused to dismiss the lawsuit and scheduled a trial for May.
Before that happens, if the case isn’t settled soon (and there is at least some chatter about the prospect of a deal), Dauman and Shari Redstone will give testimony under oath. He is scheduled to undergo a deposition in New York on Tuesday, while hers is set for Wednesday.
The Herzer litigation has caused some unease for Viacom, which has seen its share price crater around 20 percent since November, and the company faces the prospect that there will be some talk of leadership battles at the coming trial.
The task of making healthcare decisions for Redstone was formerly earmarked for Herzer, but in November, thanks to a new healthcare directive, that responsibility fell to Dauman.
In deciding not to dismiss the Herzer case, Los Angeles Superior Court judge David Cowan wrote that it was “perplexing” and “unusual” that Redstone put Dauman ahead of his own daughter Shari, who also holds a stake in the family business. Referring to media accounts of a disagreement between Dauman and Shari Redstone related to business issues, Cowan added, “To the extent those accounts have any truth to them, the Court does not know if, with those seemingly strained relations, they can or do work together on the pressing issue of Redstone’s present medical needs.”
The judge also was dubious that someone in charge of a public company in New York had the time or ability to look after Redstone.
These are topics that figure to be addressed in Dauman’s deposition, as well as what the Viacom chief said in a declaration concerning a visit last autumn to Redstone’s home. “I found him to be engaged and attentive,” stated Dauman. “Sumner and I spoke about business matters, including the upcoming Viacom board meeting.”
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