Delaware Court Rejects CBS Restraining Order Against National Amusements
The Delaware Court of Chancery denied a request from CBS and a special committee of its board for a temporary restraining order, said an order issued Thursday, the day the board voted later on a proposal to dilute the voting…
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interest of controlling stockholder National Amusements Inc. “We are pleased by the court’s decision to deny CBS and its special committee’s unprecedented motion to try to deprive a shareholder of its fundamental voting rights,” said NAI. The Shari Redstone-controlled National Amusements also owns Viacom, and the dispute with the CBS board stems from that body’s rejection of a Redstone-backed combination with Viacom. Wednesday, NAI amended CBS bylaws (see 1805160037) so dividends such as the proposed dilution have to be approved by 90 percent of the 14 member board, three of which are NAI designees. In a release Thursday, CBS said directors will still consider a dividend redistributing the stock to “more closely align economic and voting interests of CBS stockholders without diluting the economic interests of any stockholder.” CBS remains confident it will “prevail” in the lawsuit against NAI that accompanied the motion for a temporary restraining order. The court said Thursday that CBS’ allegations about Redstone and National Amusements “are sufficient to state a colorable claim for breach of fiduciary duty” but rejected the restraining order. “No precedent has been identified, however, in which the court has ever entertained, much less sanctioned, the type of request for relief that plaintiffs make here,” said the order. “A truly extraordinary set of circumstances would be necessary.” Those circumstances aren’t present because board decisions aren’t irreversible and CBS has recourse in court, it said. Judicial review “can afford full relief” to “vindicate the interests of CBS and its stockholders,” the court said. “The ruling clearly recognizes that we may bring further legal action to challenge any actions by NAI that we consider to be unlawful, and we will,” CBS said. “As we intend to demonstrate as the case proceeds, the actions of CBS and its special committee amount to a grievous breach of fiduciary duties and show no regard for the significant risk posed to CBS and its investors,” said NAI.