7:13am PT by Eriq Gardner
Leslie Moonves Could Still Fight CBS for His $120 Million Severance
The situation no doubt looks bleak for Leslie Moonves at the moment, as CBS weighs whether it had cause to fire him and deny him a $120 million severance package. As reported by The New York Times, investigators believe the former CBS CEO "engaged in multiple acts of serious nonconsensual sexual misconduct in and outside of the workplace," deliberately lied during the course of the investigation and even destroyed evidence in an attempt to preserve his reputation.
But if CBS does in fact decide to leave its former leader out in the cold, Moonves could launch a counterattack and possibly walk away with a substantial payment with few knowing about it.
First, though, would Moonves actually exercise the clause in his separation agreement that provides him the right to challenge the investigators' findings and board's conclusion in arbitration?
Typically, a high-profile corporate executive would be concerned about going through a legal process that might expose his bad deeds. Moonves, who has earned more than $1 billion as a television executive, may decide that even $120 million isn't enough to let this situation drag on. Additionally, while everyone is focused on $120 million as the monetary figure at stake, that ignores the possibility that CBS could attempt to claw back past compensation from him or aim to hold him financially responsible for legal claims asserted by shareholders and others.
But the risks of suffering unflattering media reports upon a declaration of war is perhaps lessened by at least three factors.
First, Moonves already has endured a wide-ranging investigation into his sexual conduct, as well as news stories about what lawyers turned up. Second, arbitration is typically a confidential process and his separation agreement (read here) promises confidentiality. While CBS' board may have left itself a little bit of wiggle room to publish investigators' findings with discussion in the agreement saying confidentiality would have to be "consistent with fiduciary duties of directors," there's a strong argument that CBS would be waiving attorney-client privilege if it discloses even a little bit of the investigatory report. That comes into play for the third factor (but we'll get back to this later in the analysis).
The Hollywood Reporter consulted with many attorneys about what Moonves could do legally to attempt a run at the $120 million or a share of it, and most take the conventional wisdom that he's screwed and shouldn't challenge a denial of his severance package. But if Moonves does, here's what the counterattack would look like...
Moonves' employment agreement premises "cause" for termination, in part, on "willful" conduct.
"Willfulness is a high standard," says Ann Fromholz, a Pasadena-based employment attorney who handles workplace investigations representing companies and executives. "Unless there’s an enforced prohibition on executives having sexual relations with subordinates, if the contact is welcome, that’s not going to be willful misconduct."
Moonves' behavior as unearthed by investigators will be key to this analysis. "He can say, 'I intended to cooperate fully,' but if it’s found that he destroyed documents or told someone not to be truthful or there were some emails to the contrary, some of his actions might be determined to show intent," says El Segundo-based lawyer Lisa Von Eschen, who is an expert in entertainment law compliance issues. Nevertheless, she adds, "I would expect his lawyers will zero in on the willfulness component of the cause provision."
Challenging the willfulness component of the allegations isn't the only line of attack. There's also the issue of whether CBS' investigatory review amounted to a fair and impartial review of Moonves' behavior.
As previously detailed, this probe was handled by two prestigious New York law firms — Debevoise & Plimpton and Covington & Burling — that had a history of representing CBS in past matters. Moonves could thus challenge any professed neutrality.
What's more, the stories this past week by The New York Times could be used by Moonves in an attempt to salvage his exit package.
"He may make accusations that he has been railroaded through this process," says Quinn Emanuel litigator Diane Doolittle, who handles white-collar cases. "For example, the leaking of the investigation report so undermined the process that he couldn't have fair adjudication." (According to The New York Post, Moonves is threatening to sue CBS over the leaks.)
Finally, Moonves could look to exert pressure on CBS by probing in arbitration the sexual misconduct by others at the company and complicity on the part of other executives and board members. Already, it's been reported that Arnold Kopelson, who joined CBS' board in 2007, was told that Moonves once tried to kiss a woman and masturbated in front of her only to respond, "We all did that."
This raises the point how it may be in CBS' mutual interest to keep its legal fight with Moonves as quiet as possible. (The third factor referenced earlier.) The company is already facing a shareholder lawsuit for not disclosing that enforcement of its harassment policies was inadequate. Any further revelations could bolster more litigation from current and former female employees at the company alleging negligence. Doolittle considers these dirty secrets to be "grist for the plaintiffs' bar." Further, CBS may have to consider whether to risk investigations from law enforcement or regulators. In the past, CBS has been inclined to settle. The investigatory report detailed more than $5 million in payments from a 1990s settlement regarding 60 Minutes creator Don Hewitt. And on Friday, three women suing with allegations against Charlie Rose filed a notice of discontinuation in their case against CBS News. The discontinuation was made with prejudice, meaning the claims can't be reprised later and typically a strong sign of settlement.
If the Moonves case makes its way to arbitration, reporters will undoubtedly continue to be interested in detailing what's happening, but the parties may become extra sensitive about talking publicly. Reporters will be diligent but confront no easy channel for exposing any filings and findings. If Moonves and CBS were to then settle, word would probably leak out about this event, but the Securities & Exchange Commission lacks clear guidance on whether the company would have to disclose the exact financial considerations. Those in litigation with CBS could attempt to compel that information, but plaintiffs' lawyers often take the exit ramp to settlement in lieu of getting to trial and exposing this stuff.
In sum, while the situation may appear dire for Moonves (who is being represented by Andrew Levander, who handled many of the Roger Ailes-related sexual misconduct claims on behalf of Fox News), he could very well choose to make this situation quite painful for CBS and in doing so, be rewarded handsomely for acts that many find to be outrageous.