In re CBS Corporation Stockholder Class Action and..., Not Reported in Atl.... Esquire, Bruce Birenboim, Esquire, Jaren Janghorbani, Esquire and Alexia D. Korberg, Esquire of Paul, Weiss, 2021 WL 268779 Rifkind, Wharton & Garrison LLP, New York, New York, Only the Westlaw citation is currently available. Attorneys for Defendants Candace K. Beinecke, Barbara UNPUBLISHED OPINION. CHECK M. Byrne, Gary L. Countryman, Brian Goldner, Linda M. COURT RULES BEFORE CITING. Griego, Martha L. Minow, Susan Schuman, Frederick O. Terrell and Strauss Zelnick. Court of Chancery of Delaware. Robert A. Penza, Esquire and Christina B. Vavala, Esquire of IN RE CBS CORPORATION STOCKHOLDER Polsinelli PC, Wilmington, Delaware and Kevin T. Abikoff, CLASS ACTION AND DERIVATIVE LITIGATION Esquire, Benjamin Britz, Esquire, Stephen R. Halpin III, Esquire and Robby S. Naoufal, Esquire of Hughes Hubbard & CONSOLIDATED C.A. No. 2020-0111-JRS Reed LLP, Washington, DC, Attorneys for Defendant Joseph | Ianniello. Date Submitted: September 17, 2020 | Elena C. Norman, Esquire and Daniel M. Kirshenbaum, Date Decided: January 27, 2021 Esquire of Young Conaway Stargatt & Taylor, LLP, | Wilmington, Delaware and Jonathan K. Youngwood, Esquire, Corrected: February 4, 2021 Linton Mann III, Esquire and Sarah L. Eichenberger, Esquire of Simpson Thacher & Bartlett LLP, New York, New York, Attorneys and Law Firms Attorneys for Nominal Defendant ViacomCBS Inc. Michael Hanrahan, Esquire, Corinne Elise Amato, Esquire, Eric J. Juray, Esquire and Xi (Elizabeth) Wang, Esquire of Prickett, Jones & Elliott, P.A., Wilmington, Delaware; MEMORANDUM OPINION Michael J. Barry, Esquire, Christine M. Mackintosh, Esquire, SLIGHTS, Vice Chancellor John C. Kairis, Esquire and Rebecca A. Musarra, Esquire of Grant & Eisenhofer, P.A., Wilmington, Delaware; and Eric *1 The Beach Boys, in their original form, were L. Zagar, Esquire and Grant D. Goodhart III, Esquire, of quintessentially an “American Band.” 1 Their profound and Kessler Topaz Meltzer & Check, LLP, Radnor, Pennsylvania, lasting impact on American culture was recognized yet Attorneys for Plaintiffs. again in the fall of 2020, when Rolling Stone magazine Jeremy D. Anderson, Esquire of Fish & Richardson P.C., named their seminal album, Pet Sounds, the second Greatest 2 Wilmington, Delaware; and Gustavo F. Bruckner, Esquire, Album of All Time (of any genre). Almost exactly four Samuel J. Adams, Esquire and Daryoush Behbood, Esquire years earlier, in the fall of 2016, Rolling Stone contributing of Pomerantz LLP, New York, New York, Attorneys for editor, Rob Sheffield, wrote a review of two memoirs, Executive Committee of Additional Counsel for Plaintiffs. released weeks apart, from Brian Wilson and Mike Love, either or both of whom (depending upon who you ask) are Matthew E. Fischer, Esquire, Michael A. Pittenger, Esquire, regarded as the creative force(s) that drove the band to its Christopher N. Kelly, Esquire, J. Matthew Belger, Esquire, iconic status. 3 In his review, Sheffield observed that while Jacqueline A. Rogers, Esquire and Callan R. Jackson, Esquire Wilson and Love were in the same band, and presumably of Potter Anderson & Corroon LLP, Wilmington, Delaware shared the same band experiences, their recounting of and Victor L. Hou, Esquire, Rahul Mukhi, Esquire and Mark those experiences, colored by vastly different and, in some E. McDonald, Esquire of Cleary Gottlieb Steen & Hamilton respects, antagonistic perspectives, was remarkably different. LLP, New York, New York, Attorneys for Defendants According to Sheffield, this dynamic resulted in “very National Amusements, Inc., Sumner M. Redstone National 4 Amusements Trust, and Shari E. Redstone, also Attorneys for different takes on the Beach Boys story.” Defendant Robert N. Klieger. 1 The Beach Boys: An American Band (High Ridge Daniel A. Mason, Esquire of Paul, Weiss, Rifkind, Wharton Productions, 1985). & Garrison LLP, Wilmington, Delaware and Brad S. Karp, © 2021 Thomson Reuters. No claim to original U.S. Government Works. 1 In re CBS Corporation Stockholder Class Action and..., Not Reported in Atl.... 2 with loyalists. The CBS Board, still independent at the The 500 Greatest Albums of All Time, Rolling time, opposed the merger for several reasons, including that Stone (Issue 1344, Oct. 2020). the NAI Parties would not agree to allow CBS's minority 3 Rob Sheffield, Heroes and Villains, Rolling Stone stockholders to approve the merger, would not consider any (Issue 1271, Oct. 2016). merger partner other than Viacom and would not agree to allow a combined Viacom/CBS to be managed free of the 4 Id. NAI Parties’ control. Most troubling to the CBS Board, This Court recently considered the story of the well- however, was that the NAI Parties were attempting to thrust publicized merger of Viacom, Inc. and CBS Corporation, a floundering Viacom upon a thriving CBS in hopes that the two quintessentially American companies, as told from the combination would enhance the value of the NAI Parties as controlling stockholders of both companies. With the CBS perspective of displeased Viacom stockholders. 5 The story Board unwilling to negotiate, Ms. Redstone's first attempt to was presented in a putative class action complaint where cause a merger failed. Viacom stockholders alleged the Viacom/CBS merger was the product of actionable breaches of fiduciary duty by *2 Ms. Redstone was distressed but not deterred. Behind the Viacom fiduciaries and patently unfair. The Court found the scenes, she shared with confidantes her concern that Viacom allegations were well-pled and denied motions to dismiss the might not make it as a going concern without a Viacom/ 6 complaint. CBS combination. In a more public display of frustration, she threatened the CBS Board with retribution and pledged “the 5 See In re Viacom, Inc. S'holders Litig., 2020 WL merger would get done ‘even if [she had] to use a different 7711128 (Del. Ch. Dec. 29, 2020, revised Dec. 30, process.’ ” 7 She then emailed a trusted Viacom director 2020). seeking recommendations for CBS board nominees “whose 6 8 Id. loyalty to [NAI] I can trust.” In a rare, but not unheard of twist, the Court must consider the 7 same story, the story of the Viacom/CBS merger, but this time Verified Consol. Class Action and Deriv. Compl. as told from the perspective of displeased CBS stockholders (“Compl.”) ¶ 53 (Docket Item (“D.I.”) 38). who allege the merger was unfair to them and the product The Complaint integrates facts from documents of actionable breaches of fiduciary duty by CBS fiduciaries. produced by CBS to Plaintiffs under 8 Del. C. § Like Wilson and Love, the CBS and Viacom stockholders 220 (“Section 220 Documents”); citations to those offer very different takes on the same sensational story. documents are to “CBS ___.” 8 Compl. ¶ 31 (quoting CBS 00004214). As pled in a complaint comprising 267 paragraphs, Plaintiffs’ take is this: After Shari Redstone (“Ms. Redstone”) In January 2018, advisors warned Ms. Redstone that, absent consolidated control of both CBS and Viacom under her a Viacom/CBS merger, the NAI Parties may be left with a holding companies, defined collectively below as the NAI portfolio of assets burdened by Viacom's underperformance Parties, she thrice attempted to merge Viacom and CBS and and unattractive to suitors. Less than one month later, in twice was turned back by the CBS board of directors (the February 2018, Ms. Redstone returned to the boards of the “CBS Board”). The third try proved to be the charm, resulting two companies she controlled with directions that they again in a merger (the “Merger”) that spawned nominal Defendant, form special committees to consider a merger. And, once ViacomCBS. again, Ms. Redstone made clear that the NAI Parties would not agree to consider alternative transactions or to subject From Plaintiffs’ perspective, it is necessary to understand a Viacom/CBS merger to a majority-of-the-minority vote the history of Ms. Redstone's failed efforts to cause Viacom condition. and CBS to merge in order fully to appreciate the breaches of fiduciary duties within CBS that led to the consummated This time the CBS Board, through its special committee, Merger. By the time Ms. Redstone first attempted to cause determined that Ms. Redstone was likely to force a merger a Viacom/CBS merger in September 2016, she had already over the CBS Board's objection and that the NAI Parties packed the Viacom board of directors (“Viacom Board”) “presented a significant threat of irreparable and irreversible © 2021 Thomson Reuters. No claim to original U.S. Government Works. 2 In re CBS Corporation Stockholder Class Action and..., Not Reported in Atl.... harm to the Company and its stockholders” because they committees that, per the 2018 Settlement, should have met were seeking “to combine CBS and Viacom regardless of free of her influence. And she worked to impose her preferred the strategic and economic merits of the transaction.” 9 To terms on the deal with the aid of her new ally, Ianniello, whom protect CBS stockholders, the independent members of the she incentivized to do her bidding with a rich pre- and post- CBS Board took measures this Court has previously described merger compensation package. as “extraordinary”; they devised a special dividend that would dilute the NAI Parties’ voting control of CBS from 80% to The newly installed CBS directors acceded to Ms. Redstone's will at every turn. At her direction, they approved Ianniello's 17%, 10 and then filed preemptive litigation against the NAI amended employment agreement, increasing his guaranteed Parties in this Court where they sought a declaration that compensation despite knowing CBS would receive nothing the dividend was valid and asserted breach of fiduciary duty by way of services in return. They did nothing to seek claims against the NAI Parties. CBS executives, including protection for CBS's minority stockholders, such as pushing then-Chief Operating Officer Joseph Ianniello, supported the for a majority-of-the-minority vote condition or insisting independent board's effort to oust their controller.