Sumner Redstone Had Mental Capacity to Change His Estate, Judge Rules

Read on: TheWrapTheWrap.

A Los Angeles court ruled on Wednesday that Sumner Redstone had the mental capacity to make changes to his estate in 2015 and 2016.

The changes to the estate led to the then 92-year-old Redstone’s girlfriend at the time, Manuela Herzer, being removed as the person in control of his health care and getting kicked out of his mansion. Herzer and the Redstone family settled the three years’ worth of legal disputes that arose from that earlier this month.

Herzer argued that Redstone lacked the mental capacity to remove her and that his daughter Shari Redstone was making decisions on his behalf. As part of the settlement Herzer was ordered to pay back $3.25 million in gifts she received from Redstone during the course of their relationship.

Also Read: Sumner Redstone Family Settles Legal Dispute With Manuela Herzer

On Wednesday, L.A. Superior Court judge David Cowan formally put any question about Redstone’s mental capacity to bed.

“Mr. Redstone had sufficient capacity to execute the Fortieth Amendment to and Restatement of the Sumner M. Redstone 2003 Trust dated July 23, 2003 and the Forty-First Partial Amendment thereto on their respective dates of execution, October 16, 2015 and May 20, 2016,” Cowan wrote in his decision, adding that the changes to the estate “were not the product of undue influence, fraud, duress, or mistake.”

Herzer could not be reach for comment.

Shari Redstone has been fighting to retain control of her family’s estimated $40 billion media empire  for the last few years. Questions of Sumner Redstone’s mental capacity and Shari Redstone’s claim to control of the family’s holding company National Amusements, which controls roughly 80 percent voting power in CBS and Viacom, were constantly being asked.

Representatives for National Amusements declined to comment.

Also Read: Sumner Redstone’s Granddaughter Says in Email: ‘My Grandfather Is a Ghost’ (Exclusive)

Judge Cowan’s ruling doesn’t definitively prevent future fights over the direction of the Redstone media empire, but it does strengthen the actions Shari Redstone has taken in trying to ensure the future success of both CBS and Viacom. She had been pushing for a merger of the two companies, which experts believe is likely to happen this year.

“After three years of litigation, Mr. Redstone is grateful for today’s court confirmation of his capacity to execute his estate plan, and of his free will in doing so,” Redstone’s lawyer, Loeb & Loeb Trust & Estate Litigation co-chair Gabrielle Vidal, said in a statement. “Now all he needs is a [New England] Patriots win.”

Pamela Chelin and Itay Hod contributed to this report.

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A Delaware judge on Wednesday said that he had “great skepticism” about the mental condition of CBS chairman emeritus Sumner Redstone and ruled against having him deposed in an ongoing court case, according to the Wall Street Journal.

Even so, Judge Andre Bouchard ruled against public release of a videotape of Redstone made by CBS director Arnold Kopelson last January that the company has said shows the 95-year-old in poor mental and physical health.

Bouchard also ordered National Amusements Inc. — the Redstone family holding company that owns roughly 80 percent of CBS and Viacom and that has been in a pitched legal battle with CBS — is required to hand over documents that the media company suspects will help shine a light on who is calling the shots at NAI.

“We are very pleased with the court’s ruling today, which will now allow us to conduct appropriate discovery from NAI on the issue of who controls NAI, and will also give us a full opportunity to obtain highly relevant documents relating to NAI’s coup against the Viacom Board in 2016,” a CBS spokesperson said in a statement to TheWrap. “With respect to the videotape of Sumner that was submitted to the court under seal, we are pleased that the Court, while keeping the tape confidential, recognized today that the tape is relevant to the issues in this case.”

NAI declined to comment for this story.

Also Read: CBS Execs Accused of Destroying Evidence in Shari Redstone Legal Battle

The video of Redstone is the latest turn in CBS and NAI’s otherwise openly tense battle for control of the media giant.

Last week, CBS accused Sumner’s daughter Shari Redstone in a court filing of threatening to have CBS board member Arnold Kopelson removed after he recorded a January visit with 95-year-old Sumner Redstone in order to “memorialize Mr. Redstone’s physical state,” according to the Wall Street Journal.

The existence of the video was revealed after there were questions as to whether Sumner Redstone would be deposed in the legal battle between NAI and the CBS board — he won’t be. CBS had asked that either the judge allow Sumner Redstone to testify or otherwise nullify testimony on his behalf in order to prevent NAI from offering “self-serving testimony” about his or NAI’s intentions, the Journal reported.

Also Read: What Are CBS CEO Les Moonves and Shari Redstone Even Fighting About?

CBS said in that filing that the video shows that Sumner Redstone is “incapable of communicating his views on this case,” according to the Journal.

NAI, on the other hand, has questioned the legality of the recording — a question on which Brouchard has not yet ruled.

This latest squabble arises from the larger battle, in which the CBS board is pushing to dilute the 80 percent voting power NAI and Shari Redstone has in the company. CBS has accused NAI of shirking its fiduciary responsibility to shareholders by attempting to force a merger between CBS and Viacom. NAI has rebuked these claims on numerous occasions.

But CBS is challenging whether Shari Redstone or her father is in charge.

Also Read: Shari Redstone Denies ‘Malicious Insinuation’ That She Is Behind Accusations Against Les Moonves

In a filing in May, CBS CEO Les Moonves expressed concern that control of NAI had “migrated” to Shari Redstone, ostensibly giving her control over CBS’ future.

A person close to NAI told the Journal that control never migrated to Shari Redstone, but that the NAI board has always had the power to vote the controlling CBS and Viacom stakes.

Sean Burch contributed to this reporting.

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Shari Redstone has urged for the recombination of CBS and Viacom — the two media empires her family owns — for the better part of two years.

Redstone’s on-again, off-again desire for a merger took another turn on Tuesday, with National Amusements, her family’s holding company, saying in a court filing she “no longer supported” the recombination.

This came after Redstone snatched back control of Viacom in 2016, following a messy year-long trench war with former CEO Philippe Dauman, and almost immediately turned her attention to protecting the company from an uncertain future.

The courting has been tumultuous, to say the least, and in recent weeks Moonves’ opposition to the deal has seemingly strained relationships and possibly changed the direction of the two companies.

Also Read: CBS Amends Lawsuit in New Attempt to Dilute Shari Redstone’s Voting Power

Here’s an in-depth look back at how CBS, Viacom and the Redstone empire got here.

September 2016: 

Fresh from wresting away control of Viacom earlier in the year, Shari Redstone and National Amusements proposed a plan for Viacom and sister company CBS to merge.

“We believe that a combination of CBS and Viacom might offer substantial synergies that would allow the combined company to respond even more aggressively and effectively to the challenges of the changing entertainment and media landscape,” Redstone wrote in a letter to National Amusements shareholders on Sept. 12. “As a result, we would like both companies’ boards to consider a potential combination of the companies.”

Also Read: Les Moonves Jokes About Messy Legal Drama at CBS Upfront: ‘How’s Your Week Been?’

Meanwhile, Viacom was in the midst of a game of CEO musical chairs; interim President and CEO Tom Dooley stepped down on Sept. 21, just weeks after taking over for the ousted Philippe Dauman.

Things started trending in Redstone’s favor toward the end of the month, with both CBS and Viacom forming special committees to look at a potential merger.

October 2016: 

Viacom named longtime exec Bob Bakish as chief executive on Halloween.

Bakish had been with Viacom since 1997, and was bumped up from head of its international media networks. The move wasn’t an immediate panacea for Viacom shareholders, though, with the company’s stock falling 9 percent in the two months to follow.

November 2016: 

CBS continued its exploration of a potential merger, retaining Goldman Sachs and Moelis & Co. to advise the network, according to the Wall Street Journal.

Also Read: Stephen Colbert Mocks CBS’ Reboot Fever, Ugly Legal Battle With Viacom at Net’s Upfront

December 2016: 

After push-back from CBS boss Les Moonves, and with Viacom in need of an overhaul, Redstone pumped the brakes and asks CBS and Viacom to stop pursuing a merger on December 12. Redstone pointed to Bakish’s “forward-looking thinking and strategic plan” to get Viacom back on track as a reason to hold off. Moonves got his kudos, too.

“We know Viacom has tremendous assets that are currently undervalued, and we are confident that with this new strong management team, the value of these assets can be unleashed,” said Redstone in a National Amusements letter to shareholders. “At the same time, CBS continues to perform exceptionally well under Les Moonves, and we have every reason to believe that momentum will continue on a stand‐alone basis.”

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July 2017:

Concerns about consumer cord-cutting regained steam around the media industry and companies began considering mergers and partnerships to help protect against the impact. The Wall Street Journal reports July 25 that Bakish was making a play to acquire Scripps Networks.

December 2017: 

Emails made public through Sumner Redstone’s suit with two former female companions revealed insights into his strained relationship with daughter Shari. As The Journal reported, Shari Redstone feared her father would ensure her and her family “are all left with nothing and that his little sluts get it all with no interference from us.”

Disney announced a blockbuster move to buy the bulk of Fox’s entertainment assets for $52.4 billion.

Also Read: Shari Redstone Says CBS Board Member Grabbed Her Face in ‘Intimidating’ Manner

January 2018: 

New year; new merger?

TheWrap reported Shari Redstone was once again pursuing a recombined CBS-Viacom, but this time Moonves appeared to be on board.

“With the Hollywood landscape quickly shifting, Redstone, president of the privately-held National Amusements that controls both media companies, has concluded that a bigger footprint is necessary for the companies to thrive,” reported TheWrap. “CBS’ core business is broadcast television along with multiple digital properties, while Viacom holds cable channels like Nickelodeon and Comedy Central along with the Paramount movie studio.”

Reports surfaced that Lionsgate was looking for a potential suitor in Amazon, Verizon and even a potentially recombined CBS-Viacom.

February 2018: 

All seems well with Redstone and Moonves, as they both sit in the CBS box at the Super Bowl in Minnesota on February 2. Both Moonves and Redstone were cheering for the Patriots.

Also Read: National Amusements Says It ‘No Longer Supported’ CBS-Viacom Merger Before CBS’ ‘Unlawful’ Move

April 2018: 

CBS extended an offer to buyout Viacom below its market value on April 3, with plans for Moonves and CBS Chief Operating Officer Joe Ianniello to run the new mega-company.

Viacom countered the following week, with a $14.7 billion all-stock offer — worth nearly $3 billion more than CBS’ offer. Viacom also pushed for Bakish to supplant Ianniello as the combined company’s chief operating officer and Moonves’ successor.

National Amusements shot down chatter that Shari Redstone was considering removing Moonves in favor of Bakish. “National Amusements has tremendous respect for Les Moonves and it has always been our intention that he run a combined company,” a rep told TheWrap.

Redstone began reaching out to members of Viacom’s special committee, doubting the validity of a potential merger.

Also Read: CBS Sues Parent Company to Dilute Shari Redstone’s Voting Power, Stop Viacom Merger

May 2018:

Redstone and Moonves met to discuss Bob Bakish’s role in a combined company and whether Charles Gifford should continue to serve on the company’s board of directors following an “intimidating” moment in which Redstone said he grabbed her by the face to get her attention.

CBS announced on May 14 that it ws ending any pursuit of a merger with Viacom and filed a lawsuit against Redstone and National Amusements claiming NAI had shirked its responsibility to shareholders. CBS also filed for a temporary restraining order, voicing concerns Redstone might do more harm by replacing board members.

CBS deployed an unprecedented and nuclear option, announcing a plan to issue dividends to dilute NAI’s nearly 80 percent controlling stake in the company to 17 percent.

Two days later, Redstone and National Amusements change the CBS bylaws to prevent the board from diluting her stake, requiring a 90 percent “supermajority” vote for the board to make any dividend-related move.

Also Read: Is Les Moonves Done as CBS CEO?

Hours after a Delaware court denied CBS a temporary restraining order on May 17, the CBS board voted, without the support of the three members aligned with Redstone, to dilute Redstone’s voting power — but the decision awaits court approval in light of NAI’s change to the bylaws.

The following week, CBS amended its original complaint filed with the court, challenging Redstone’s bylaw changes.

National Amusements fired back in a court filing on May 29, saying CBS had made an “unlawful” maneuver to dilute its voting rights. National Amusements added that Redstone “no longer supported” a merger before CBS moved to dilute her shares.

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Shari Redstone has pushed for the removal Charles Gifford from CBS’s board of directors  after she said Gifford acted “in an intimidating and bullying manner” on two occasions in the last two years, according to a new court filing from the Redstone family company, National Amusements.

According to the new complaint, filed with a Delaware court on Tuesday, Gifford in one instance grabbed Redstone by the face and directed that she listen to him.

Gifford, chairman emeritus of Bank of America since 2005, joined the CBS board in 2006.

Also Read: National Amusements Says It ‘No Longer Supported’ CBS-Viacom Merger Before CBS’ ‘Unlawful’ Move

The jarring claim stood out in the filing, which pushed back against CBS’ effort to dilute NAI’s nearly 80 percent control of the company.

Gifford’s continued presence on the CBS board was a “principal open issue” when Redstone met with CBS CEO Les Moonves earlier this month to discuss a potential CBS-Viacom merger, according to the filing.

Redstone had raised concerns about Gifford on  multiple occasions, according to the filing, and his presence on the board of a combined CBS-Viacom was a linchpin issue.

“Ms. Redstone again reiterated her discomfort with Mr. Gifford’s continuing service on the CBS Board. Ms. Redstone explained that, on two occasions in 2016 and 2017, Mr. Gifford had acted in an intimidating and bullying manner, including on one occasion by grabbing her face and directing her to listen to him,” National Amusements said in the filing.

“Ms. Redstone proposed that the matter be handled privately and discreetly by not nominating Mr. Gifford to the board of the new combined company or, in the event of no merger, by not including him in the CBS- recommended slate.”

In the filing, National Amusements said that upon hearing Redstone was upset by his conduct, Gifford told her that was how he treats his daughters when he wants their attention and that he meant no offense. Redstone clarified she was not his daughter, but instead the vice chairwoman of CBS.

Also Read: CBS Amends Lawsuit in New Attempt to Dilute Shari Redstone’s Voting Power

CBS, in its lawsuit against Redstone and National Amusements, has voice concerns that Redstone would move to replace members of the CBS board in order to push through a merger with Viacom. It’s unclear whether any of those concerns stem from conversations around tensions with Gifford.

The media company responded to Redstone’s claim, calling it a baseless personal attack simply attempting to rid ownership of a director it disagrees with.

“Ms. Redstone’s issue with Mr. Gifford is that he has always operated by an entirely different definition of what it means to be an independent director — namely to act in the best interest of all CBS shareholders,” CBS said in an emailed statement to TheWrap. “As a result of Mr. Gifford’s steadfast belief in good corporate governance, it is unfortunate and revealing that NAI has resorted to baseless personal attacks that are clearly tied to the execution of Mr. Gifford’s duties in this matter.”

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Shari Redstone said on Tuesday that she and her family’s company, National Amusements Inc., “no longer supported” a Viacom-CBS merger and communicated that to the Viacom board before CBS’ board made an “unprecedented” move to strip her of her voting power over the media giant.

In a new complaint in the muddy battle for power at CBS, Redstone said that National Amusements had advised Viacom’s special committee that it “no longer supported” a merger between the two companies. And that this was before CBS filed a lawsuit against Redstone and attempted to dilute NAI’s voting power from nearly 80 percent to roughly 80 percent.

The basis for CBS’ suit against Redstone and National Amusements, which has voting control of both CBS and Viacom, is the concern that Redstone would go to what it deems harmful lengths, such as replacing board members, in order to force a merger with Viacom.

“Today’s reactive complaint from [National Amusements] was not unexpected,” CBS said in a statement. “The amended complaint filed last week by CBS and its special committee details the ways in which NAI misused its power to the detriment of CBS shareholders, and was submitted after careful deliberation by all involved. We continue to believe firmly in our position.”

Also Read: How Big Is CBS CEO Les Moonves’ Golden Parachute – and Will He Get It All If He’s Fired?

CBS has said that a merger would not be in the fiduciary interest of shareholders. Redstone has deemed the board’s concerns unfounded — and that its move to issue dividends to dilute NAI’s control was “unprecedented, unjustified and unlawful.”

“[National Amusements] and Shari Redstone did not, and do not, intend to force a recombination of CBS and Viacom, whether by removing and replacing CBS directors or otherwise,” National Amusements said in a statement on Tuesday. “In fact, prior to CBS’s action, Shari Redstone had already determined and advised a special committee of Viacom’s board that NAI no longer supported a merger.”

In National Amusements’ complaint, filed in Delaware court on Tuesday, the company said that as merger talks began to break down toward the end of April, Redstone reached out to members of Viacom’s special committee to tell them she was questioning the viability of and continuing rationale for a CBS-Viacom merger.

CBS CEO Les Moonves’ reluctance to carve out a role for Viacom head Bob Bakish in the combined company coupled with press reports that inside CBS sources were disparaging Viacom gave Redstone doubts about the merger. Viacom’s special committee, however, told her a recombination still made sense, according to the complaint.

Also Read: CBS Amends Lawsuit in New Attempt to Dilute Shari Redstone’s Voting Power

On May 14, along with filing a lawsuit against Redstone, CBS said it had decided to longer pursue a merger with Viacom. This came after the two sides had agreed to go “pencils down,” putting a pause to merger talks due to busy schedules that included the CBS network’s upfront presentation to advertisers, the complaint says.

“As [National Amusements’] complaint makes clear there was no ‘threat’ or ‘interference,’ and indeed there was no action that could possibly warrant the CBS directors’ unprecedented, unjustified, and unlawful efforts to unilaterally dilute NAI’s voting rights,” National Amusements said in its statement. “Unlike CBS’ complaint, NAI’s complaint is based on actual facts.  Those facts demonstrate that CBS’ allegations are false, and that the CBS board and special committee took their actions not in response to any genuine threat, but instead because Les Moonves has tired of having a controlling shareholder.

“While Les Moonves is an extremely capable television executive, neither he, nor the board acting at his behest, is entitled to strip NAI of its voting control.”

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CBS and its Chief Executive Les Moonves have gone to the mattresses in an effort to subvert the control Shari Redstone and her family’s holding company National Amusements has over the media company.

But if this skirmish doesn’t go the way Moonves and CBS hope — and some analysts don’t think it will — the company’s leadership could be trouble.

“I think Les Moonves is done,” Ross Gerber, CEO of investment firm Gerber Kawasaki, told TheWrap. “I don’t think this ends well for Les or CBS. It’s not his company. He doesn’t own it, and I think he’s going to learn the hard way.”

Also Read: CBS Board Votes to Dilute Shari Redstone’s Controlling Interest

Redstone, despite public pushback from Moonves, has been pressing for CBS and sister company Viacom to merge for the better part of two years.

The CBS board, arguing that Redstone’s pressure has hurt the company and shareholders, voted on Thursday to dilute Redstone’s voting power to 20 percent from nearly 80 percent.

The decision was made, CBS said, in a unanimous vote of the company’s directors who are not affiliated with National Amusements. That is important because the vote isn’t final.

Redstone changed the company bylaws ahead of the board meeting on Thursday, requiring CBS have a 90 percent “supermajority” vote to approve diluting her stake. Redstone effectively controls three seats on the board, which would have made a CBS supermajority vote next to impossible.

Also Read: Inside CBS CEO Les Moonves’ ‘Nuclear Option’ Court Battle Today With Shari Redstone

CBS is set to challenge the validity of the bylaws change and is awaiting a court’s approval on the special dividend that would dilute Redstone’s control. CBS said on Thursday that it doesn’t believe the changes are valid or effective.

There’s no legal precedent for the CBS board is doing, so how the court will rule isn’t clear.

“It’s hard to imagine Les Moonves being in that job much longer now, unless CBS comes out on top, and the odds, in my perspective, seem to be in National Amusements’ favor,” media analyst Tuna Amobi, of investment research firm CFRA, told TheWrap.

Moonves’ current contract runs through 2021, and if he’s removed before then, the company could be on the hook to pay him more than $184 million.

But Redstone also isn’t afraid to go to war with her company’s leadership and oust a CEO. Just ask Philippe Dauman, who Redstone pushed out at Viacom in a messy tug-of-war for control back in 2016.

Needham analyst Laura Martin wrote in a note to investors on Friday that any scenario where Moonves leaves would be the worst case for CBS shareholders, predicting shares dropping 14 percent if that happens. That would be a $10 billion  swing of total value across all the company’s shareholders, compared to the perceived value were CBS to be acquired by a telecom company like Verizon, she said.

National Amusements will want to find a resolution that is in the interests of all shareholders, a person familiar with the situation told TheWrap.

Also Read: Les Moonves Jokes About Messy Legal Drama at CBS Upfront: ‘How’s Your Week Been?’

“[Moonves] is a great executive and he’s done a great job leading that company, but now Les and Shari have both hurt the company,” Gerber said. “Her request to remerge the two companies is not a crazy request and after all this I think it’s still not going to be his company.”

Gerber said that if National Amusements comes out on top, he expects Redstone to take a similar approach she did at Viacom in 2016: Remove the CEO and call a shareholder vote to replace the board.

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CBS Corporation’s board of directors voted on Thursday to dilute controlling shareholder Shari Redstone’s interest to 20 percent from roughly 80 percent.

The company said in a statement that the symbolic decision was made in an unanimous vote of the board’s directors not affiliated with National Amusements.

“The board of directors has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders’ interests and would unlock significant stockholder value,” CBS said in a statement. “If consummated, the dividend would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives.”

The board’s vote to pay out a dividend to shareholders, is effectively also the board’s way of challenging a change to the bylaws Redstone made earlier this week. The board’s decision will require a final determination by a Delaware court, and there’s time for National Amusements to file an appeal on whether CBS’s move is permissible.

Also Read: CBS Shares Sink 5 Percent After Court Blocks Attempts to Stop Shari Redstone’s Involvement

All week CBS has been trying to claw its way out from under the control of Redstone and her family’s holding company National Amusements.

CBS has argued that Shari Redstone’s pressure on the company to merge with Viacom, which has resulted in uncertainty surrounding the company’s future amid threats to replace board members and leadership, has done the media company and its shareholders a disservice.

Redstone also owns a controlling interest in Viacom

“As National Amusements has repeatedly stated, it has no intention of forcing a merger that is not supported by both CBS and Viacom,” National Amusements said in a statement. ” Today’s board vote, while couched as an effort to prevent such a transaction, was pure pretext.  CBS management and the special committee cannot wish away the reality that CBS has a controlling shareholder.  NAI yesterday exercised its legal right to amend the company’s bylaws to require a supermajority vote on certain board actions with respect to dividends, effective immediately.  In light of the Board’s action today, that action was plainly necessary, and it is valid.”

Also Read: Shari Redstone Changes CBS Bylaws to Prevent Board From Diluting Her Control

CBS doesn’t believe that National Amusements’ change to the company bylaws were neither valid nor in effect.

With litigation looming, CBS has also postponed its annual shareholder meeting, which was scheduled for Friday. The company said it will announce a new date and time later.

For the better part of two years Redstone has all but demanded the two companies come to terms on a merger. CBS and chief executive Les Moonves have openly opposed joining up with Viacom.

The drama between CBS, National Amusements and Viacom intensified earlier this week after CBS filed for a temporary restraining order to block Redstone’s involvement in the company’s board, while also saying it wouldn’t consider a merger with Viacom.

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The move, along with initial plans to issue a dividend that would have diluted Redstone’s stake to 17 percent from close to 80 percent, was unprecedented and the court deemed it an “extraordinary measure.”

But Delaware Chancery judge Andre Bouchard rejected CBS’s motion for a restraining order on Thursday ahead of the company’s meeting. And Redstone changed the CBS bylaws, making it necessary for CBS to have her approval and the approval of her family lawyers who also sit on the board, in order to issue the dividend that would dilute her control.

CBS touts having an independent board, but for all intents and purposes it is still a controlled company where Redstone holds the power, for now.

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A judge has denied CBS’ request for a temporary restraining order against Shari Redstone’s National Amusements, Inc., which has made one of the two parties very happy.

“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,” NAI said in a statement on Thursday. “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.”

During the hearing on Wednesday, Judge Andre Bouchard had issued a temporary protective order to give him time to fully consider the arguments heard and make a final ruling, and that’s what the two sides received today.

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The ruling comes ahead of the network’s scheduled board meeting set for Thursday evening, during which it plans to decide what course of action to take in an attempt to subvert Shari Redstone and National Amusement’s control over the company.

“Today’s ruling does not alter in any way the unyielding commitment of CBS and its Board of Directors to continue to act in and to protect the best interests of all CBS shareholders,” CBS said in a statement. “Notably, the ruling clearly recognizes that we may bring further legal action to challenge any actions by NAI that we consider to be unlawful, and we will bring such action if needed to protect the interests of all shareholders. We remain confident that we will prevail in the lawsuit previously filed by CBS and the members of its Special Committee.

“As previously announced, the CBS Board will hold a meeting at 5PM today to consider declaring a dividend of shares of Class A common stock to all of the Company’s Class A and Class B stockholders, as is permitted under CBS’ charter. This dividend would more closely align economic and voting interests of CBS stockholders without diluting the economic interests of any stockholder.”

Also Read: Shari Redstone Changes CBS Bylaws to Prevent Board From Diluting Her Control

CBS later said in an updated statement that despite the decision not to grant the temporary restraining order, the company plans to bring further legal action against National Amusements and Redstone for anything they consider unlawful.

CBS initially planned to issue a dividend to shareholders that would dilute Redstone’s 79 percent controlling interest in the company to 17 percent.

On Wednesday, Redstone and National Amusements moved to change the CBS bylaws in such a way that would prevent the board from subverting her control without her approval.

Also Read: CBS Sues Parent Company to Dilute Shari Redstone’s Voting Power, Stop Viacom Merger

According to Jill Fisch, a law professor at the University of Pennsylvania, shareholders have the right unilaterally to amend the bylaws under Delaware law. And unless the corporation has some sort of restriction in the charter or bylaws regarding timing or advance notice the changes take effect immediately.

The CBS board said that it was also open to other options to permanently resolve its Redstone problem, and it will likely address those during it board meeting.

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Inside CBS CEO Les Moonves’ ‘Nuclear Option’ Court Battle Today With Shari Redstone

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The showdown between CBS CEO Les Moonves and Shari Redstone, whose National Amusements has a controlling stake in the media giant, heats up today as both sides’ lawyers head into a Delaware courtroom.

The high-stakes hearing could determine who controls the company and whether CBS’ board has the authority to reject Redstone’s push for a merger with National Amusements’ other media giant, Viacom.

The feud between the two sides heated up this week when CBS and its independent board members filed a lawsuit seeking to restrain NAI from interference in its operations — including a planned special meeting of the board on Thursday in which they have threatened to dilute NAI’s voting power from 79 percent to 17 percent.

“This is definitely not something you see everyday. It’s a nuclear option,” CFRA Research media analyst Tuna Amobi told TheWrap.”Who knows what private conversations have happened between Les and Shari, but it’s impossible to imagine there are constructive negotiations going on now.”

Also Read: CBS Sues Parent Company to Dilute Shari Redstone’s Voting Power, Stop Viacom Merger

Amobi expects that the parties will try to expedite the proceedings, otherwise things could get ugly fast.

“It is only a matter of time before Ms. Redstone will attempt to replace the independent directors at CBS who do not agree with her positions,” the company said in a complaint filed with the court on Monday.

For its part, NAI said in a court filing on Wednesday it has “absolutely no intention of replacing the CBS board or forcing a deal that was not supported by both companies.”

In a court filing on Wednesday, National Amusements said it tried to negotiate detente with CBS as long as it adjourned the board meeting on Thursday, but CBS rejected the offer.

NAI also noted that any efforts it takes to prevent dilution of it stake “might trigger the departure of (and payment of massive parachute payments to) key management and directors of the Company” — a clear reference to Moonves himself, who stands to earn a nine-figure exit fee should he leave the company before the scheduled end of his current contract in 2021.

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It’s possible CBS is simply trying to gain leverage. Jill Fisch, a law professor at the University of Pennsylvania, told TheWrap that she wouldn’t just assume CBS’ suit will lead to a trial.

The point of filing for a temporary restraining order, Fisch said, is to have the court weigh in on the case early. Delaware Judge Andre Bouchard will give both parties a sense of how the case could play out, which would give CBS and Redstone’s National Amusements a chance to negotiate.

But there’s no legal precedent for a board of directors trying to use a charter provision to wrangle control of a company from a majority shareholder, Fisch said.

“Nobody has tried this before,” she told TheWrap. “From the language used in the charter, it’s not clear what kind of legal standard the court would even use to make a decision. It’s going to propose some tough questions for the court.”

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The main questions facing the court right now are: Is the board within the scope of its rights, gifted by the charter, to consider offering a dividend to dilute Redstone’s power? And if the board is within its rights, would this course of action be permissible given the circumstances?

In its complaint filed with the court, CBS argues that the pressure Redstone has put on CBS to merge with Viacom, and the uncertainty surrounding the company as a result, has hurt CBS and its stockholders.

“CBS’s stock price has dropped from nearly $70 per share to nearly $50 per share since merger talks were reinstated — a loss of approximately $7 billion in market cap suffered by the Class B stockholders,” CBS said in its complaint. “This loss of market value has occurred despite management consistently delivering excellent results.”

In a statement following CBS’s filing, National Amusements called the move “outrageous,” and said it plans to “vigorously” defend its position in court.

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Viacom Shares Plummet After CBS Sues to Block Merger

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Shares of Viacom Inc. fell nearly 7 percent on Monday after sister company CBS Corp. filed a lawsuit against parent company National Amusements Inc. in an attempt to block a forceful merger.

National Amusements President Shari Redstone has pushed for CBS and Viacom to recombine for since she wrestled control of a struggling Viacom from former CEO Philippe Dauman back in 2016. CBS, and chief executive Les Moonves, however, have been staunchly against such a merger.

On Monday the company put its foot down, suing to ultimately dilute the voting power of Redstone, who serves as both companies’ vice chairwoman and controls roughly 79 percent of the voting power.

Also Read: CBS Sues Parent Company to Dilute Shari Redstone’s Voting Power, Stop Viacom Merger

CBS shares rose more than 4 percent after the news of the suit. In the last year, CBS shares of declined nearly 12 percent.

Viacom, as its tried to turn its business around, has seen shares drop more than 16 percent in the last 12 months.

CBS is arguing that by trying to force the two companies together, Redstone and National Amusements has failed to meet its fiduciary duty to shareholders.

The special committee CBS formed to explore the potential merger decided over the weekend, after a public back-and-forth with Viacom and National Amusements, that a deal would not be in the best interest of CBS and its shareholders.

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“The special committee believes that the company and its public stockholders face a serious threat of imminent, irreparable harm in Ms. Redstone’s potential response to the special committee’s unanimous decision yesterday, May 13, 2018, that the proposed Viacom transaction is not in the best interests of CBS stockholders,” the company wrote in a filing for a temporary restraining order on Monday.

CBS wants to declare a dividend to shareholders that, if issued, would dilute National Amusements’ voting interest to 17 percent from about 79 percent. The dividend would not dilute the economic interests of any CBS stockholder, the company said.

“The Special Committee has taken this step because it believes it is in the best interests of all CBS stockholders, is necessary to protect stockholders’ interests and would unlock significant stockholder value,” the company said in a statement. “If consummated, the dividend would enable the company to operate as an independent, non-controlled company and more fully evaluate strategic alternatives.”

CBS will hold a special board meeting on Thursday, May 17 to discuss the dividend and other “ways in which the Board may protect the Company against Ms. Redstone moving forward.”

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Viacom CEO Calls MTV US Strategy a ‘Mistake’

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Good news for those who want their MTV the way it used to be, with actual music: parent company Viacom does too.

During a Monday afternoon session at the 44th annual UBS Global Media & Communications Conference in New York, Viacom Acting President & CEO Robert Bakish — who formerly ran the media giant’s European operations — acknowledged flaws in the recent programming strategy of MTV, Viacom’s erstwhile flagship.

“On the U.S. side, they strayed a little bit away from music,” Bakish said. “That was a mistake.”

Also Read: Viacom Names Robert Bakish Acting President, CEO

Bakish said MTV’s European channels consciously opted out of the reality and scripted television-heavy diet the U.S. network chose — with self-evident results.

“We’ve grown share three years running,” he said. “You’ve seen what happened in the U.S.”

He added that he expects MTV’s audience “story” to turn positive by next spring, and credited new “Daily Show” host Trevor Noah with building some momentum for Comedy Central.

Also Read: Here Are All the Pros and Cons of a CBS-Viacom Merger

But Bakish didn’t shy away from identifying weaknesses in Viacom’s TV properties, and the disappointing two-year performance from Viacom’s movie studio, Paramount Pictures. And in a year full of executive turmoil — Bakish is the third Viacom CEO since August — he hinted at more C-suite changes to come.

“There’s an opportunity to change the conversation,” he said, mentioning Viacom’s recent changing of its U.S. distribution head. “I think leadership will be part of changing the conversation.”

Bakish also waded into the TV executive topic du jour: the rise of over-the-top streaming services, both “skinny bundles” like AT&T’s DirecTV Now and niche, direct-to-consumer offerings like Time Warner’s HBO Now. Viacom has in fact launched its own direct-to-consumer products, namely BET Play, which allows BET fans not in the U.S. to access content including the network’s TV series and awards shows.

Also Read: Viacom Stock Surges 4 Percent on CBS Merger Call by National Amusements

And while Bakish said BET Play was a success in reaching overlooked fans of the network, which isn’t the mass-audience product that Viacom networks like MTV are in most international markets, he prefers working with other distributors as part of a “skinny bundle”

“My own personal view is in terms of new tech distribution, I favor the virtual MVPD play,” he said, using a technical term for an internet-based multichannel streaming service. “When at all possible I much prefer to work with them in partnership than a direct-to-consumer play.”

And while he didn’t provide much on merger discussions between Viacom and CBS, Bakish did make it clear that one rumored transaction wasn’t going to happen.

“We’re not doing a Vice deal,” he said.

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