May 21, 2018

Controllers: Delaware Tells CBS “That’s the Way It Is” (At Least for Now)

Last week, Chancellor Bouchard issued a letter ruling in CBS v. National Amusements, (Del. Ch.; 5/18), denying CBS’ efforts to enjoin the Redstone family, its controlling shareholder, from interfering with the board’s consideration of a dividend that would deprive them of voting control over the Company. This Morris James blog summarizes the Chancellor’s ruling.  Here’s an excerpt:

In this letter decision, the Court declined to restrain the Redstones at this time. While plaintiffs had shown a colorable claim for breach of fiduciary duty, they failed to show threatened, imminent irreparable injury absent the restraints. Rather, the Court relied on its extensive power to provide redress if the Redstones ultimately decided to take some action inconsistent with a controlling stockholder’s fiduciary obligations with respect to the dividend plan. Also notable is the Court’s balancing of the equities and its discussion of the apparent tension in Delaware law between a controlling stockholder’s right to protect its control position and the right of independent directors to respond to the threats posed by a controller, including through possible dilution.

If you’re looking for a deep dive on the case, check out this blog from Prof. Ann Lipton.

John Jenkins