A CBS stockholder group in Pennsylvania filed a class-action lawsuit in Delaware on Thursday, an attempt to open the legal floodgates in the bitter dispute between the venerable broadcasting company and its controlling shareholder family, the Redstones.
The lawsuit asks a judge to rule that nonvoting shareholders are entitled to a special dividend that would give them a voice in CBS’ affairs. CBS has two classes of stock, but only the Class A shares have a vote.
The Redstone family, which owns 10.3% of CBS, has 80% of the Class A voting shares. The Pennsylvania fund owns Class B stock.
The lawsuit also alleges that Shari Redstone, who serves as CBS’ vice chair, has breached her fiduciary duties to Class B shareholders.
The action was filed by the Westmoreland County Employees’ Retirement System against the Redstone family investment vehicle, National Amusements Inc., Shari Redstone and two board members who have been aligned with her.
“Defendants breached and continue to breach contractual, implied obligations and fiduciary duties that they owe to CBS’ Class B stockholders,” according to the suit filed by Michael Hanrahan of the Prickett, Jones & Elliott law firm in Delaware.
The latest lawsuit comes just two days after National Amusements sued CBS, arguing that the company’s board members are overstepping their authority. National Amusements believes the dispute is an illegal power grab by a board acting in lockstep with its longtime chief executive, Leslie Moonves, who has been chafing over Shari Redstone’s input in the company’s affairs.
CBS’ independent board members on May 17 unanimously voted for a measure that would dilute the Redstone family’s voting control of CBS to 17%. The New York company owns the nation’s most-watched television network, a chain of television stations and the Showtime premium network.
But a day before the CBS board members voted to issue the dividend that would give the Class B shareholders a vote, National Amusements abruptly amended CBS’ bylaws to require a 90% board vote for any dividends.
“The invalid bylaw amendments refute Ms. Redstone’s claims to be a strong voice for good corporate governance, to refrain from using her voting control to interfere with the management of CBS and to have an independent board at CBS,” the Westmoreland County employees’ fund said in the suit.
The lawsuit seeks to represent shareholders who own 341.5 million shares of CBS Class B stock.
National Amusements, in a statement, said it had the right to amend CBS’ bylaws.
“The efforts of the CBS directors to unilaterally dilute the voting rights of its controlling shareholder are extraordinary, unjustified and unlawful,” the statement said. “We are confident the court will uphold NAI’s action.”
The suit also names two board members — David Andelman and Robert Klieger — as defendants. Both are attorneys who have represented Sumner Redstone, who recently marked his 95th birthday and is in poor health. Shari Redstone is president of National Amusements, which controls CBS and Viacom Inc.
The current tensions have centered around Shari Redstone’s increasing involvement in CBS’ management and her desire to merge the two companies. CBS has resisted the effort, and a special committee of its board said the merger would not be in the interests of CBS shareholders.
National Amusements has said that Shari Redstone dropped her interest in the CBS-Viacom merger the week before CBS began its campaign to dilute the influence of the Redstones, a maneuver that analysts have called the “nuclear option.”