Viacom Director Wants Redstone Examined by Doctor

  • Fred Salerno asks Delaware judge to have billionaire evaluated
  • Chancery Judge Bouchard declines to fast track Delaware cases

Ousted Viacom Inc. director Fred Salerno wants a Delaware judge to make controlling shareholder Sumner Redstone undergo a physical and mental examination to determine whether he was lucid when he removed five board members last week. He may be out of luck.

Delaware Chancery Judge Andre Bouchard said during a hearing on Wednesday that he won’t fast track lawsuits filed over the Viacom fight, indicating that questions about Redstone’s mental health are already being addressed in a Massachusetts case brought by Viacom Chief Executive Officer Philippe Dauman. Salerno, who is also suing over his removal, filed his request for the examination just before the hearing.  

Bouchard said an evaluation of Redstone’s capacity to sign off on corporate consents removing the directors would be a key issue in the Delaware cases. Because such examinations already are the focus of litigation in other courts, Bouchard said he wanted to see how the other cases progressed before ordering another one.

‘Human Dignity’

"There are questions of human dignity to a very elderly person," he said during the hearing. "I’d be very cautious in that respect."

The 93-year-old billionaire’s health is at the center of litigation in three states over his ability to make decisions about his $40 billion media empire. Dauman and another director, George Abrams, are suing Redstone over his decision to remove them from a trust that controls Viacom. A California judge also is studying whether Redstone was capable of deciding who should make his medical decisions.

Viacom spokesman Jeremy Zweig said the company had no immediate comment on Bouchard’s decision to rebuff calls to speed up the Delaware cases. Nancy Sterling, a spokeswoman for Shari Redstone, and Mike Lawrence, Redstone’s spokesman, declined to comment on the decision.

Redstone moved to oust Dauman, Salerno and other directors as part of the growing battle for control of the media company. The mogul, through his holding company National Amusements Inc., filed his own lawsuit in Delaware seeking court confirmation of the decision.

Delaware Expertise

It’s no surprise that Bouchard would defer to judges in other states because mental acuity is not a typical corporate-law issue, said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

“Our judges don’t typically defer on issues that implicate Delaware law, but mental capacity is not a particular area of Delaware expertise,” Elson said.

Bouchard is likely to order that Redstone keep Dauman and other ousted directors on Viacom’s board while he decides the legality of their removal, Elson added. Such a decision may be months or years away if the judge waits for a ruling on Redstone’s mental capacity from his colleagues in Massachusetts and California. Bouchard also refused Wednesday to allow pre-trial evidence gathering to begin, slowing down the process even further.

Shares of Viacom, which owns Comedy Central, Paramount Pictures and the CBS television network, have declined almost 40 percent during the past year. They’ve rallied in recent weeks as Redstone began reasserting control over a company that reaches more than 700 million consumers, according to Viacom’s website.

Undue Influence

The ousted directors contend Shari Redstone, the billionaire’s daughter, has unduly influenced her infirm father into forcing the board members out so she can take control of the media giant’s assets. Redstone’s lawyers have scoffed at those claims in the Massachusetts case, arguing his move was sparked by a growing distrust of board members including Dauman.

Redstone’s competency is also at issue in California where the billionaire’s former girlfriend, Manuela Herzer, is seeking a new trial after losing a case in May to have him declared incompetent and to be reinstated as his health-care guardian. Herzer claims Shari Redstone has been scheming for two years to take control of her father’s life and businesses.

Salerno’s lawyers echoed those sentiments, arguing that Shari is launching a power play for control of Viacom. The billionaire “cannot initiate or participate in conversation, including about his business or personal affairs,” the attorneys said in the evaluation request.

Shari’s Plan

“We think she’s behind this," Edward Micheletti, one of Salerno’s lawyers, said of Shari Redstone during Wednesday’s hearing. "She told Mr. Salerno this was her plan several months ago. It’s one of her ‘are-you-behind-me or are-you-against-me’ routines.” 

Robert Klieger, one of Redstone’s lawyers, said Shari Redstone isn’t making health-care decisions for her father and would only get that authority if he loses the ability to decide such questions for himself.

“No doctor -- and he sees a lot of doctors -- has come to the conclusion that he lacks the capacity to make his health care decisions," Klieger said.

Redstone’s status as Viacom’s controlling shareholder gives him the power to decide who should fill director’s seats, his lawyers said. They urged that his case seeking court confirmation of his decision should proceed without delay.

"Quite frankly our friends are interested in a circus and we would like a backyard barbecue," said Donald Wolfe Jr., one of Redstone’s lawyers. "And I’d like to get going before the calliope gets started.” 

The case is Frederic Salerno v. National Amusements Inc., CA12473, Delaware Chancery Court (Wilmington).

(Corrects spelling of lawyer’s name in story that appeared June 22.)
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