Continuing Orrick’s successful representation of Sumner Redstone in securities and corporate governance matters concerning Viacom, Inc., a Delaware Chancery Court today dismissed with prejudice a shareholder derivative action that challenged the company’s compensation to Mr. Redstone over a two-year period.
In the decision, the court dismissed with prejudice putative derivative claims alleged by a Viacom shareholder that Mr. Redstone, Executive Chairman and later Chairman Emeritus of Viacom, was improperly paid compensation for his service to the company. The lawsuit alleged Mr. Redstone was unjustly enriched by the compensation package that was approved by Viacom’s directors.
Today’s dismissal of the derivative action is the latest in a string of successful representations of Mr. Redstone in securities and corporate governance matters relating to Viacom. The dismissal of the derivative claims follows Orrick’s representation of Mr. Redstone last year in connection with the much-publicized corporate dispute over Viacom, in which the board of directors and management actively resisted actions by Viacom’s controlling shareholder to change the governance of the multi-billion dollar entertainment company. That conflict was resolved in an August 2016 settlement in which Mr. Redstone prevailed in obtaining key changes to Viacom’s board of directors, senior management, strategic direction and the dismissal of four lawsuits over the matter. A description can be found here.
The Delaware Chancery Court found that the settlement’s terms from that prior litigation barred the derivative claims against Mr. Redstone and Viacom. On May 18, 2018, the Delaware Supreme Court upheld the lower court decision, agreeing with the judge’s conclusion.
Led by former partner Michael Tu, our team not only argued that the settlement foreclosed the derivative claims, but also, as the court noted, that “the lion’s share of the challenged compensation” occurred during a period in which there was no claim he had not performed his services.
The court’s order today also follows the Orrick team’s representation of Mr. Redstone in obtaining a partial dismissal in May of a securities class action that had been brought against Mr. Redstone, Viacom and other current and former directors and officers. That class action alleged that Viacom’s directors breached their fiduciary duties in connection with Mr. Redstone’s service as a director. Following that ruling and with our motion to dismiss still pending, the plaintiffs agreed to drop their remaining claims and the court entered a dismissal with respect to all counts of the class action complaint on July 7, 2017.
The Orrick team continues to represent Mr. Redstone in shareholder derivative litigation relating to CBS Corporation.
In addition to Michael, the Orrick team included partner Bill Molinski and associates Kevin Askew and Greg Beaman. Orrick also worked closely with co-counsel from Hueston Henningan LLP and Abrams & Bayliss LLP to jointly represent Mr. Redstone.