3:46pm PT by Eriq Gardner
Shari Redstone Accused of Breaching Fiduciary Duties in Viacom Board Upheaval
In the land of Sumner Redstone, it's V-Day, the time when Viacom CEO Philippe Dauman and four fellow board members were possibly hoisted from their seats at the entertainment conglomerate. As every action prompts an equal and opposite reaction, Viacom's lead independent director Frederic Salerno has filed a lawsuit in Delaware Chancery Court seeking to preserve the status quo.
Lawsuits challenging the competency of the 93-year-old Redstone are multiplying these days like iterations of MTV, but what makes this one different from the probate cases in Massachusetts and California is the direct allegation that Shari Redstone is breaching her fiduciary duties via the alleged manipulation of her father and attempt to take control over Viacom.
Salerno's complaint makes the case that she has disrupted decades' worth of estate planning to insinuate herself when her father's mental condition is most fragile. According to the filings, she "seeks to become Mr. Redstone's puppet master," and fueled by animosity with Dauman, "has favored her personal interests and undertaken a scheme to attempt wrongfully to obtain control of Viacom."
The lawsuit also accuses National Amusements directors David Andelman (on the board of CBS, too) and Leonard Lewin (the divorce lawyer for Sumner Redstone's first wife) of not honoring their own fiduciary duties "to act in a disinterest and fully informed manner for the exclusive benefit of the beneficiaries of the Trust, rather than to further Shari's self-interested quest for control."
Undoubtedly, the response will be that Redstone is competent enough to change his mind about Shari — they've publicly feuded over the years —and that shareholders beyond Redstone have made their own statement by sending Viacom's share price up nearly seven percent since the announcement of a board overhaul.
It will be up to a judge to decide whether to accept Salerno's proposed status quo order and enjoin any further disruption. If so, the Viacom board shake-up won't become effective.
A couple of interesting notes from Thursday's complaint.
Salerno alleges that he recently got on the phone with Shari, who told him about the plan to remove Dauman from Viacom's board and "indicated that if Mr. Salerno supported her efforts, she would not undertake to remove him."
Instead, he ratted on her.
Also, a couple of weeks ago, National Amusements (from which Dauman was ousted, too) amended bylaws in an effort to prevent any sale of Paramount Pictures. Nearly, a week ago, Viacom filed those changes with the SEC, albeit with some careful language.
In a footnote to Salerno's complaint, the bylaw amendments are argued to be invalid and unenforceable "because they conflict with Delaware law, are unreasonable and inequitable on their face, and are the product of NAI's wrongful conduct."