Judge Rejects CBS Move to Strip Shari Redstone’s Control of Company

A Delaware judge on Thursday handed a victory to Shari Redstone in her dispute with CBS, the television network controlled by her family, but left the door open for further courtroom battles in a bitter, and unusually public, boardroom feud.

The decision was a blow to CBS’s chief executive, Leslie Moonves, a highly paid and well- respected media mogul who has long resisted Ms. Redstone’s quest to merge his company with its corporate sibling, Viacom. Still, the decision left a door open for CBS to challenge future moves by its main shareholder.

The ruling, by Chancellor Andre G. Bouchard of Delaware’s Court of Chancery, denied CBS’s request for a temporary restraining order against Ms. Redstone. CBS had sought to prevent her from interfering with a board meeting scheduled for 5 p.m. Thursday at which board members were to vote on a special stock dividend that would have reduced her voting stake to 17 percent from 79 percent.

In suing Ms. Redstone, her father, Sumner M. Redstone, and their company, National Amusements, which owns CBS and Viacom, CBS argued that Ms. Redstone could seek to replace the company’s current directors with her allies in a maneuver similar to one she previously executed at Viacom. (Ms. Redstone, through her family’s holding company, denied considering such a move at CBS.)

Chancellor Bouchard’s ruling came amid a whirlwind week when the tension between CBS and its owner erupted into all-out war. On Monday, CBS sued Ms. Redstone, asking the court for the temporary restraining order. On Wednesday, less than an hour before the hearing in Delaware was to begin, Ms. Redstone moved to amend CBS’s bylaws to effectively give her control of the board.

In his decision, the judge wrote that CBS would have other legal avenues to challenge Ms. Redstone if the network believed that she had violated its independence.

“I am not convinced that the harm plaintiffs fear would be irreparable,” Chancellor Bouchard wrote. “To the contrary, the court has extensive power to provide redress if Ms. Redstone takes action(s) inconsistent with the fiduciary obligations owed by a controlling stockholder.”

In a statement, National Amusements said, “We are pleased by the court’s decision to deny CBS and its special committee’s unprecedented motion to try to deprive a shareholder of its fundamental voting rights. The court’s ruling today represents a vindication of National Amusements’ right to protect its interests. As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors.”

CBS, in its own statement, said that although it was disappointed by the outcome, “the ruling clearly recognizes that we may bring further legal action to challenge any actions by N.A.I. that we consider to be unlawful, and we will do so. We remain confident that we will prevail in the lawsuit previously filed by CBS and the members of its Special Committee.

As for the board meeting scheduled for Thursday, CBS said it would proceed as planned.

https://www.nytimes.com/2018/05/17/business/media/cbs-shari-redstone-les-moonves.html?partner=rss&emc=rss

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