Sumner Redstone Doesn't Have to Face Deposition in CBS Fight
(Bloomberg) -- Billionaire Sumner Redstone won’t have to face questioning from lawyers representing directors at CBS Corp. over his role in fighting their efforts to strip his family of its controlling interest in the media company.
A Delaware judge Wednesday concluded the 95-year-old Redstone doesn’t need to be questioned due to his health issues, but ordered National Amusements Inc. to turn over documents related to the billionaire’s control of the company and CBS.
"I need to know who is calling the shots at NAI," Delaware Chancery Court Judge Andre Bouchard told the company’s lawyers, who sought to withhold files detailing Redstone’s power to decide how his company’s CBS controlling position is handled.
Bouchard rejected CBS’s request to bar NAI officials from having anyone other than Redstone testify about his intentions to fight a dilution plan designed to slash the Redstones’ family’s voting control of the media company from 79 percent to 17 percent.
He also refused to allow CBS to depose the ailing billionaire through written questions. Redstone is said to communicate mostly through grunts and an iPad pre-programmed with his voice to say yes, no and a profanity.
A trial is set for Oct. 3 in Wilmington focusing on whether the CBS directors had the power to approve a dividend designed to dilute the Redstone family’s control of the media company and whether the Redstones’ move to change the company’s bylaws to stymie the effort was proper.
Sara Evans, an NAI spokeswoman, declined to comment on the judge’s decision.
Kelli Raftery, a CBS spokeswoman, said the company’s was pleased with Bouchard’s ruling. The decision “will now allow us to conduct appropriate discovery from NAI on the issue of who controls NAI,” Raftery said in an emailed statement.
Redstone moved into a nonvoting role on CBS’s board in 2016 and was succeeded by Chief Executive Officer Les Moonves. Shari Redstone, Sumner’s daughter, has taken over day-to-day control of NAI and also holds a CBS board seat.
She and Moonves have battled for months over whether CBS should merge with Viacom Inc. NAI officials have said in court filings they wouldn’t force a merger over CBS’s and Viacom’s objections.
CBS directors argue Redstone’s health woes are so acute, he’s “incapable" of communicating his views about the dilution plan and the bylaw change. This view of Redstone’s condition is based, in part, on a company director’s secret recording of a conversation with the billionaire in January, according to court filings. Bouchard said he has reviewed the video behind closed doors.
In his ruling, Bouchard also rejected a request to have the video made public, citing Redstone’s privacy rights.
However, Bouchard did throw out Redstone’s verification of NAI’s responses to CBS board members’ claims about the dilution plan. The judge said he had a “great deal of skepticism” about whether Redstone was able to verify the accuracy of the responses “in a substantial way.”
CBS officials said they sought files on Redstone’s control of NAI because of confusion about who was in control of the holding company given the billionaire’s health issues. Redstone serves as NAI’s chief executive while his daughter, Shari Redstone, serves as its president.
“They are playing hide the controller,” CBS’s lawyer Joseph Allerhand told the judge. Meredith Kotler, NAI’s attorney, countered that it was clear from court filings that NAI’s board had the power to decide what to do with the CBS controlling interest. Redstone is board chairman.
“Mr. Redstone is competent,” Kotler told the judge.
“That’s a pretty strong statement,” Bouchard replied.
The case is CBS v. National Amusements Inc., No. 2018-0342, Delaware Chancery Court (Wilmington).
©2018 Bloomberg L.P.