Philippe P. Dauman, et al.
Submitted: August 1, 2017
Bradford deLeeuw, Esquire Rosenthal, Monhait & Goddess,
P.A., Anne C. Foster, Esquire Richards, Layton & Finger,
P.A., David A. Seal, Esquire Abrams & Bayliss LLP.
Abramczyk, Esquire Morris, Nichols, Arsht & Tunnell LLP,
Edward B. Micheletti, Esquire Skadden, Arps, Slate, Meagher
& Flom LLP.
letter constitutes the Court's decision on
defendants' motion to dismiss claims for breach of
fiduciary duty, waste, and unjust enrichment. Plaintiff
brought these claims derivatively on behalf of Viacom Inc.
challenging the company's payment of approximately $13
million of compensation to its founder and then-Chairman
Sumner Redstone from July 2014 to May 2016, when Viacom's
directors allegedly knew that he was incapacitated and
incapable of doing his job. For the reasons explained below,
the motion is granted and the complaint will be dismissed
with prejudice as to the named plaintiff because the claims
asserted in the complaint were released as part of a
settlement agreement Viacom entered in August 2016.
facts recited below are drawn from the Verified Derivative
Complaint filed on July 20, 2016, and certain facts of which
I may take judicial notice because they are not subject to
reasonable dispute. For the purpose of deciding this motion, I
assume the truth of all well-pled facts and draw all
reasonable inferences in favor of plaintiff.
defendant Viacom, Inc. is a Delaware corporation
headquartered in New York that owns various global media
brands. Plaintiff alleges he has been a stockholder of Viacom
at all relevant times.
Sumner Redstone served as Viacom's Executive Chairman
from January 1, 2006 until February 4, 2016, when he became
Chairman Emeritus. Sumner founded Viacom and has been its
controlling stockholder since 1986. He is the settlor of the
Sumner M. Redstone National Amusements Trust, which owns 80%
of National Amusements, Inc. ("NAI"), which in
turns owns (directly and indirectly through certain
subsidiaries) 79.5% of Viacom's Class A voting shares.
Defendant Shari Redstone is a Viacom director and
Sumner's daughter. She controls the remaining 20% of
complaint names as defendants nine other individuals in
addition to Sumner and Shari who were members of the Viacom
board at the times relevant to the allegations in the
complaint: George S. Abrams, Philippe P. Dauman, Thomas E.
Dooley, Blythe J. McGarvie, Deborah Norville, Charles E.
Phillips, Jr., Frederic V. Salerno, William Schwartz, and
Christiana Falcone Sorrell. Dauman had been Viacom's
President and Chief Executive Officer since September 2006.
He and Abrams also were directors of NAI until May 20, 2016.
Compensation Paid to Sumner from 2014 to
the times relevant to this action, Sumner was party to an
employment agreement with Viacom dated December 29, 2005,
which was amended on September 26, 2006. As amended, the
employment agreement set his base salary at $1 million per
year and entitled him to receive bonus compensation. The
employment agreement could be terminated at will by either
party. Effective January 1, 2014, Sumner's
base salary was increased to $2 million.
2014, Sumner turned 91. He was hospitalized several times
that year for pneumonia and, according to a lawsuit filed
against him by a former caretaker, suffered brain damage that
"severely compromised Sumner's ability to swallow
and to articulate speech." Beginning in July 2014, Sumner
allegedly ceased providing any services of value to Viacom.
Sumner was physically absent from a series of board meetings
through the summer and fall of 2014, by which point the
directors allegedly knew about his incapacitation. Viacom
paid Sumner $13.2 million in total compensation for the 2014
fiscal year, which ended on September 30, 2014, including
approximately $2 million in salary and a $10 million
2015, Sumner did not participate in any conference calls with
analysts and did not physically attend any Viacom board
meetings or the annual stockholder meeting. According to
sources quoted in a May 31, 2015 Vanity Fair article
entitled Who Controls Sumner Redstone?, "Sumner
(a) cannot speak and (b) hasn't had a meal since Labor
Day other than tubes." The article quoted an individual
who allegedly told one of Sumner's closest friends that
Sumner "looks like he's dead, " to which the
friend replied: "Well, you should see him in person-he
looks even worse." Viacom paid Sumner $2 million in salary
for the 2015 fiscal year but eliminated his cash bonus.
February 2016, with rumors circulating regarding his
condition, Sumner resigned as Viacom's Chairman and was
designated Chairman Emeritus. Nevertheless, on March 14,
2016, Sumner was reelected as a director after the rest of
the board recommended his reelection to the stockholders.
Sumner continued to receive a salary until May 2016, when
payments to him were stopped without public explanation.
According to Viacom's public filings, Sumner received
$1.3 million in salary during the 2016 fiscal
Turmoil in the Viacom Boardroom Leads to a
20, 2016, Dauman and Abrams were notified that Sumner
purportedly had removed them as trustees of his trust, as
directors of NAI, and as managers of NAI's subsidiaries.
These actions prompted Dauman and Abrams to file a lawsuit in
Massachusetts seeking to be reinstated to their positions,
and prompted Sumner to file a lawsuit in California affirming
their removals. In their Massachusetts complaint, Dauman and
Abrams alleged that Sumner "suffers from profound
physical and mental illness" and that he is afflicted
with a "subcortical neurological
16, 2016, NAI issued a written consent purporting to amend
Viacom's by-laws to permit vacancies on its board to be
filled by Viacom's stockholders, to remove five of the
defendants (Dauman, Abrams, McGarvie, Schwartz, and Salerno)
from the Viacom board, and to fill the resulting vacancies
with new directors. That same day, two lawsuits were filed in
this Court under 8 Del. C. § 225 seeking to
determine the proper composition of Viacom's board in
light of the written consent submitted by NAI. In one action
(C.A. No. 12472-CB), NAI sought a declaration that the
consent was valid. In the other action (C.A. No. 12473-CB),
Salerno accused Shari of exercising undue influence over
Sumner and sought to invalidate the consent. On June 24,
2016, these two actions were consolidated (hereafter, the
August 18, 2016, the 225 Action, the Massachusetts action,
and the California action were settled pursuant to a
Confidential Settlement and Release Agreement (the
"Settlement Agreement") that was signed by each of
the individual defendants in this action individually and in
their capacity as directors of Viacom. The
Settlement Agreement contains a general release of
Viacom's claims against its directors (the
"Release") up to its Effective Date, which is
defined in the agreement's preamble as August 18, 2016:
Each of Viacom, its subsidiaries, affiliates
under its control, predecessors, successors and assigns, and
the current and former directors, officers, employees,
agents, attorneys and representatives of each of them
(collectively the "Viacom Parties"),
hereby releases and forever discharges from all
liability . . . [Sumner and Sheri Redstone], . . . Dauman,
Abrams, Salerno, McGarvie, Schwartz, Phillips, Sorrell,
Norville, Dooley, and the agents, attorneys,
representatives, heirs, executors and assigns of each of them
. . . from any and all Claims (defined below) which
such Viacom Party ever had, now has or hereafter can, shall
or may have, for, upon or by reason of any matter, cause or
thing whatsoever from the beginning of the world to the
Effective Date of this Settlement, including, but
not limited to, any and ...