Delaware judge proposes October trial over removal of Viacom directors

[July 30, 2016]  By Tom Hals and Jessica Toonkel

(Reuters) - A Delaware judge on Friday ruled that Sumner Redstone's lawyers must defend in a trial his move to oust five directors from Viacom Inc's board and suggested that he wants to get a better picture of the 93-year-old media mogul’s mental capacity.

Judge Andre Bouchard proposed Oct. 17 for the beginning of the trial.

In June, Redstone, through his National Amusements Inc holding company, removed five of Viacom's directors, including Chief Executive Philippe Dauman, from the company's board.

National Amusements owns 80 percent of voting shares of Viacom and CBS Corp. The move was the latest in the wrangling for control of the media mogul's $40 billion media empire, amid questions over whether Redstone is making his own decisions or is even of sound enough mind to do so.

When they made the move, Redstone and National Amusements sought the approval of the Court of Chancery in Delaware, where Viacom is incorporated. Viacom's lead independent director, Frederic Salerno, filed a lawsuit in the same court seeking to block the move, and the ruling on Friday denied a motion to dismiss Salerno's case.

In Friday’s hearing, the judge said he expected the parties to discuss the possible role of an independent medical examination of Sumner Redstone, but cautioned they were dealing with "issues of human dignity."

"My focus will be whether a 90-year-old man in a rapidly declining state of health had the mental health and capacity to make the decisions attributed to him," said Bouchard.

Bouchard said discovery could begin immediately and expected medical records to be made available to Salerno.

The judge also said he expected the parties to coordinate with a similar case in Massachusetts involving the governance of National Amusements and Redstone's competence.

A security guard speaks into a microphone in his sleeve as he stands outside the Viacom Inc. headquarters in New York in this April 30, 2013 file photo. REUTERS/Lucas Jackson/File Photo

That case, also scheduled to go to trial in October, centers on whether Redstone knew what he was doing when in May he removed Dauman and Viacom board member George Abrams from the seven-person trust that will control Redstone's holdings when he dies or is incapacitated.

The trust, officially called the Sumner M. Redstone National Amusements Inc Trust, owns about 80 percent of National Amusements.

In a statement, a representative for Viacom applauded the judge's ruling. "We look forward to revealing the truth as we prepare for trial in both Massachusetts and Delaware in October,” Viacom said in the statement.

"Today's ruling does not constitute a judgment on the merits of this case," a spokeswoman for National Amusements said in a statement. "National Amusements exercised its indisputable rights as Viacom's majority shareholder to make changes to Viacom's board."

After their removal from the trust, Dauman and Abrams claimed in a lawsuit in the Massachusetts court that Redstone suffers from dementia, impaired cognition, a slowness of mental processing, a loss of memory, apathy, depression and has been manipulated by his daughter, Shari Redstone. Sumner Redstone has denied that in court filings.

(Reporting By Jessica Toonkel; Editing by Nick Zieminski)

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