While Paramount Global stock is up nearly 30 percent over the past month, Shari Redstone, the company’s controlling owner, is facing not one but two advanced shareholder lawsuits over how she melded CBS and Viacom a few years ago. This past Wednesday, the four dozen or so lawyers involved agreed on a schedule for the home stretch: Pending a Delaware Court of Chancery judge’s blessing, it will all culminate in a six-day trial for CBS shareholders in late June, followed by another six-day trial for Viacom shareholders in early July. There are no signs of any peaceful resolution.
These suits are remarkable for many reasons. While it used to be extremely common for shareholders to sue over M&A, that’s become a much rarer phenomenon thanks to obscure developments that have made it tougher for class action lawyers to collect attorneys’ fees for this type of litigation. But some march on regardless, and those that do are less likely to settle.
Paramount’s attorneys unsuccessfully tried to get the suits dismissed. Recently, the plaintiffs said there was a “mountain of evidence”—get it, like the Paramount mountain—that ex-CBS C.E.O. Joseph Ianniello was essentially paid millions “to do nothing” as part of “an effort to make it appear as though CBS senior executives would remain at the Company to lead CBS’s valuable assets after the Merger.” Vice Chancellor Sam Glasscock said he’d rule after trial. (Ianniello’s lawyer has yet to respond or offer comment.)
The trials should provide an inside look at how Redstone engineered the merger—the subject of James B. Stewart and Rachel Abrams’s upcoming Unscripted: The Epic Battle for a Media Empire and the Redstone Family Legacy, which comes out next week—and also whether other media giants kicked the tires on CBS and Viacom at the time. But the exact extent of the disclosures is still being litigated. Over the past few months, the two sides have waged holy war over evidence including a mysterious email that was sent by Redstone to her lawyers a few months before the merger was officially announced. That private email (which the company wants to claw back and is currently under seal) was accidentally copied to former CBS News president David Rhodes, so the parties have been arguing extensively over whether the message is privileged. Intriguingly, the plaintiffs say Redstone’s email and text message practices were “extremely careless.” Hopefully we’ll soon learn more.
The dual trials could also shed some light on the future of Paramount, which is the subject of near-constant deal speculation, including possibly selling the combined company and/or spinning off CBS. This past week, Paramount C.E.O. Bob Bakish hired two powerful new lobbyists ostensibly to advise the company on tax issues, but also, presumably, to grease other wheels in Washington. The F.C.C., after all, has just begun its quadrennial review of media ownership rules. On the table is the “dual network” rule, which prohibits a merger between any two of the four major TV broadcasters.
Redstone has said repeatedly that she’s not a seller, but there’s no doubt that she would appreciate the optionality. Getting rid of the “dual network” rule would, after all, open up the possibility of a CBS acquisition by Disney, which owns ABC, or Comcast, which owns NBC, unlocking more possibilities than if the company was sold in parts. A rethink of the rule is probably overdue, anyway, given the diminished importance of the “Big Four” in the streaming era. If that restriction is lifted, it’s off to the races for Wall Street.