9:56am PT by Eriq Gardner
Philippe Dauman Gets Judge's Go-Ahead in Lawsuit Over Removal from Sumner Redstone Trust
Viacom chief executive Philippe Dauman and George Abrams received welcome news on Thursday from Massachusetts probate judge George Phelan, who is allowing the duo to move forward in their lawsuit contesting removal from the seven-member Sumner M. Redstone National Amusements Trust.
In May, Dauman alleged in a complaint that Shari Redstone is manipulating her father to wrest control of his media empire, beginning with the Trust that exerts its influence over National Amusements, owning 80 percent of both Viacom and CBS' stock.
"The plaintiffs have alleged, with sufficient particularity and not just speculatively, claims that Sumner's intent, as creator, in the administration of the Trust was subverted or affected by a mistake of fact induced by representations about the removed plaintiffs made fraudulently, as plaintiffs allege, by Shari to Sumner," Phelan states Thursday in his opinion.
The Redstones have thus fallen short in arguments that Redstone's authority is suspended only if he is deemed "mentally incapacitated" — which he has not been by any court — and that any dispute should occur in California where he currently resides and administers the National Amusements Trust. Additionally, the Redstones fail in objecting to Dauman's standing to contest trustee removal.
The judge writes, "Given the allegations of undue influence, given the circumstances of Sumner's living conditions and the people around him as described not only in the various declarations but within the transcript of the California Healthcare litigation hearing, and noting especially the verbal stipulation memorialized in that transcript itself that Sumner was susceptible to undue influence, the court for the purposes of the motion to dismiss cannot give great weight to or even begin to assess the probative value of Sumner's 'declaration' under oath submitted in connection with plaintiffs' Massachusetts lawsuit."
"Further indicia suggest that this is a Massachusetts trust whose ongoings should be judicially scrutinized here," he writes. "Not only is this a Massachusetts created trust and not only are most of the trustees located in Massachusetts, but all except one of the disinterested trustees live and work in Massachusetts, the alleged wrongdoer and primary protagonist Shari resides in Massachusetts, and the only asset of this Massachusetts trust is the stock of NAI, a company with its principal business office in a physical location, not a post office box, in Massachusetts."
On the other hand, Dauman has been pushing for expedited review and an immediate mental examination of the 93-year-old Redstone. Phelan has ruled that the media mogul "need not be subject to any more medical examination, intrusive or brief." The judge goes on to say whether Shari unduly influenced her father requires an inquiry into whether the removal of Dauman and Abrams was in "good faith." The judge, however, will defer for now a request on whether to enjoin Shari from further actions wtih regard to the trust and its assets.
In reaction to the ruling, Redstone's camp issued a statement calling the case a "disingenuous, self-interested effort" by Dauman and Abrams "to hold on to their power," while thanking the court for protecting Redstone's privacy and dignity.
"When deciding whether to dismiss this complaint, the court was required by law to assume all of Mr. Dauman and Mr. Abrams’ allegations as true, including those which we will prove false as this case progresses," continued the statement from Redstone's spokesperson. "We look forward to exposing this specious and malicious attack on the Redstones, and we believe that Mr. Dauman and Mr. Abrams will be no more successful at thwarting Sumner’s wishes in Massachusetts than Manuela Herzer was in California."
A spokesperson for Dauman and Abrams said, "We are grateful that Judge Phelan’s thoughtful opinion removes yet another of defendants’ efforts to block an investigation into the merits and, in particular, an independent determination of Mr. Redstone’s capacity and the question of undue influence. Judge Phelan acknowledges the seriousness of the allegations and the need for a speedy trial in Massachusetts. We also appreciate that he is allowing prompt access to medical records and immediate discovery. We welcome the opportunity to prove the facts at trial.”
Thursday's ruling comes before a hearing in Delaware on Friday, where a judge there is scheduled to take up a motion to expedite Viacom's lead independent director Frederic Salerno's own lawsuit over the Redstones' decisions regarding the company. There, the court has already entered a stipulated status quo order.
If Dauman and Abrams are to separately challenge their removal from the Viacom board of directors, it would likely happen in either New York or Delaware as Judge Phelan as part of Thursday's ruling declines to exercise jurisdiction over that element of the dispute.