Delaware judge rules legal challenge to Viacom board shake-up can move forward

A Delaware judge has cleared the way for a legal challenge of Sumner Redstone’s attempt to remake Viacom’s board of directors.

The ruling Friday by Judge Andre Bouchard also said an examination into Redstone’s mental capacity can help to determine whether the June 16 replacement of five board members was the result of manipulation by the mogul’s daughter, Shari Redstone.

Viacom’s independent board member Fred Salerno claimed in the suit that Shari Redstone has “pulled the strings behind the scenes to improperly seize control of Viacom.” Salerno said the attempt to replace the directors is inconsistent with the mogul’s past statements about the governance plan, which called for control independent of his family.

Redstone’s lawyers have denied Shari Redstone exerted undue influence, saying Redstone was capable of making the decision to replace the board members that included embattled Viacom Chairman Philippe Dauman.

The decision is the second legal setback in a week for the Redstone family, which controls 80% of the voting shares of Viacom. It also gives a boost to Dauman, who has fought dearly to hold on to to his position amid the turmoil over the future leadership of the company that owns Paramount Pictures and the Comedy Central and Nickelodeon cable channels.

The ongoing conflict over control of Redstone’s media empire has also impeded strategic moves such as the possible sale of a stake in Paramount.

A Massachusetts judge ruled Thursday to uphold a suit by Dauman and longtime Redstone associate George Abrams that said Shari Redstone was behind the decision to force them out of their positions on the trust that will govern National Amusements Inc., the entity that holds Redstone’s controlling stakes in Viacom and CBS.

The suit will now go to trial in October, as will the Delaware case. Both cases revolve around the basic question of whether Redstone was in charge of his faculties when he moved to oust the men from their positions.

“We are pleased the court has recognized the need to swiftly proceed to determine the serious issues of undue influence and Mr. Redstone’s capacity,” a Viacom spokesman said after the Delaware decision. “This is the second court in two days that has refused to dismiss the matter and ruled that discovery will go forward. We look forward to revealing the truth as we prepare for trial in both Massachusetts and Delaware in October.”

A spokeswoman for National Amusements said in a statement the Delaware decision is not a judgment in the case and maintained that the company acted properly.

“National Amusements exercised its indisputable rights as Viacom’s majority shareholder to make changes to Viacom’s board,” the spokeswoman said. “We look forward to demonstrating the integrity of these changes, which were ratified unanimously by National Amusements’ board and would be approved again by a majority regardless of the outcome of this case.”