Viacom Top Lawyer's Fate Highly Uncertain After Months of Corporate Infighting

2012-25 FEA Lawyers Michael Fricklas P

Billion-dollar piracy suits and satirical presidential bids are all in a day's work for Viacom's top lawyer.

It was supposed to be a fabulous trip to Italy in May for Michael Fricklas and his wife Donna to celebrate their 20th anniversary when word came down that the Redstones had removed Philippe Dauman and George Abrams from a Trust that holds a controlling voting stake in Viacom. Barely off the plane, the Viacom general counsel wouldn't get to tour the ancient Roman ruins nor have a romantic gondola ride in Venice. Fricklas had to turn around immediately and return to New York to take care of an escalating dispute that would roil Viacom over the following months.

Now, after a settlement has been crafted that will mean the departure of Dauman from the company that oversees Paramount Pictures, MTV, Comedy Central and other media properties, Fricklas finds his own job hanging by a thread. Although his role in the drama has largely been overshadowed by other key players, his fate deserves some attention. Besides consistently ranking as one of the country's top paid lawyers, Fricklas has been one of the entertainment industry's most influential. For example, the 56-year-old Boston University law grad helped shape the rules of the road in posting online content as the architect of Viacom's $1 billion lawsuit against YouTube.

Fricklas has been at Viacom since 1993, long enough to survive the leadership tenures of Frank Biondi, Mel Karmazin, Tom Freston, Dauman and, of course, Sumner Redstone. Now, uncertainty reigns as to whether Fricklas will be given the treatment afforded Tom Dooley (serving as interim CEO on a prove-your-worth assignment) or whether he'll suffer a punishment similar to the one handed to Carl Folta (the chief spokesman ousted after having been viewed as too closely aligned with Dauman these past few months.) A settlement between Viacom and Redstone's National Amusements, resolving Dauman's lawsuit, allows Fricklas to resign with "good reason" if he's not serving under Dauman or Dooley, and insiders say it's likely he'll exit if Dooley does at the end of September when Dooley's interim term is up and the board picks him or someone else to lead the company. But even if Dooley survives, it's hardly certain that Fricklas will, too.

To figure this out might require a trip into Shari Redstone's mind.

If Fricklas' future has not yet been written in stone, it could partly be a function of the uneasy, loyalty-testing tasks he faced these past few months. To be a top in-house lawyer means to exercise judgment about what's best for the client, namely the company, but that's a nebulous duty when a top shareholder is attempting a board makeover. Although this particular situation — Dauman gripping his seat of power by casting doubts on the mental capacity of 93-year-old Sumner Redstone — is certainly unusual, other general counsels have in the past had to navigate hostile takeovers and other events that have put them in the corporate equivalent of a pressure-cooker.

"There are two ways to go when something like this happens," says Ben Heineman Jr., a former general counsel at General Electric and author of The Inside Counsel Revolution: Resolving the Partner-Guardian Tension. "One is to try to ensure procedural fairness. The other, if you believe one side is right, is to fight for them and risk going down with the ship. It's hard to generalize, but I believe we need a lawyer-statesman who speaks up when necessary."

How did Fricklas handle the situation?

There are some who believe that Fricklas put his loyalties with Dauman and should suffer the consequences as a result. In particular, law professor Steven Davidoff Solomon (a former corporate attorney at Shearman & Sterling, where both Fricklas and Dauman once worked) wrote a column earlier this week for The New York Times that was titled "Lessons From the Viacom Dispute," with a pretty harsh assessment of Fricklas. Putting him in the same bucket as Folta and telling readers not to cry for Fricklas because of his high pay, Solomon wrote, "One wonders if they should not have better advised their client and represented the company."

The column was received with a mixture of horror and antipathy among Fricklas' supporters, who believe Viacom's top lawyer hardly did anything to receive such nasty scorn. Instead, some in Fricklas' camp suggest that he performed the best he could under trying circumstances and obeyed the directive, as Heineman put it, to ensure procedural fairness in the process. One example given is Fricklas' advice to everyone involved — including Dauman and Viacom's independent board directors — that they retain their own attorneys. Nearly three dozen lawyers showed up in Massachusetts probate court and Delaware Chancery Court, and for that, give Fricklas some credit. Another example is what happened in Delaware after Viacom's lead independent director Frederic Salerno filed a lawsuit premised on the allegation that Shari was manipulating her father in an improper takeover of the company. Viacom was named as a defendant, which gave Fricklas an opportunity to put forward the company's official position in a court of law. Viacom answered the lawsuit, but did so in a cursory fashion.

Then again, under a more critical eye, Fricklas oversaw some moves that could certainly lead the Redstones to a more severe reckoning. One insider, while expressing sympathy for Fricklas' unenviable position, points to the way the company decided to cover Dauman's legal costs in the Massachusetts fight over the Trust. And even in the instances where Viacom took a position that could be characterized as passive-aggressive, such as when it filed notice of "purported" amendments to bylaws in an 8-K filing with the SEC, it could be argued that Fricklas was enabling Dauman's hard stance.

Ultimately, Dauman and the Redstones did come to a resolution — one that in some respects was an abrupt about-face for Dauman given a judge's green light and a beckoning trial that theoretically could have preserved the chief executive's power to the Redstones' consternation. Insiders say that the deal happened after top Viacom executives took stock of the situation and realized that even had they prevailed, there would still be months and even years of litigation and that it would be nearly impossible to run the company and set budgets under such circumstances. 

Will Fricklas get any credit for such resolution? If the job of a general counsel is to be a statesman amid corporate infighting and guide the company to a better place, then maybe he deserves some kudos, if not for being a true neutral, then at least for any role in ensuring the dispute didn't cripple Viacom. As the lawyer who also held a front-row seat to this drama, and one with a hand in most of the company's most sensitive affairs for the past two decades, he also knows where the bones are buried. That's a potentially strong pitch he could make to the Redstones in an effort to keep his job.

At the moment, though, his tenure at the company is tenuous. Apologies to his wife for aborting their Italian anniversary trip may not be the only atonement at hand.