
Viacom Falls as Lawsuit Challenging Redstone's Competency Is Dismissed
Shares in Viacom (VIAB) - Get Report fell on Monday as the Los Angeles judge in a case challenging billionaire media mogul Sumner Redstone's mental competency to oversee controlling interests in Viacom and CBS (CBS) - Get Report threw the proceedings out of court.
The decision removes at least one aspect of the tug-of-war over Redstone's ability to make decisions concerning Viacom and CBS, an uncertainty that has plagued both stocks, though arguably much more for Viacom, which has struggled in recent years.
Shares in the New York owner of MTV, Nickelodeon and Comedy Central fell 2.2% to $40.43 on Monday afternoon, while CBS tumbled 2.9% to $56.
The case had been brought by Redstone's longtime companion, Manuela Herzer, who charged that the 92-year-old wasn't mentally fit when he kicked her out of his estate in Beverly Park in October and removed her from overseeing his medical care.
Los Angeles County Superior Court Judge David J. Cowan, however, ruled that Redstone's testimony, made last week in a 18-minute videotaped deposition, demonstrated the billionaire was competent and that Herzer's claims were unfounded. Redstone repeatedly referred to Herzer in the video as a "f---ing bitch," underscoring his reputation for saucy language.
"How can I sit here and say after listening to that video, 'No, you can't have what you want,'" Cowan said. "That's a tough call."
The decision was a blow to activist investors who have put pressure on the media conglomerate to conduct a thorough review of alternatives for its Paramount Pictures unit. Under pressure from activist investors Mario Gabelli and SpringOwl's Eric Jackson, Viacom in February hired PJT Partners to help it consider selling a minority stake in Paramount to the Chinese Internet marketplace platform Alibaba (BABA) - Get Report or Amazon (AMZN) - Get Report .
Sumner Redstone-controlled National Amusements, Inc. owns 79.8% of Viacom's Class A common stock.
Had the California judge challenged Redstone's mental competency it would have set in motion a potential transfer of his controlling stake in the media company to a seven-member trust that includes his daughter, Shari Redstone and Viacom CEO Philippe Dauman. Shari Redstone and Dauman have been at odds over the future of the media giant and likely would have clashed over Viacom's strategic review.
As it is, they may still have opportunities to knock heads. Shari Redstone was the lone director at Viacom's board who didn't vote to make Dauman the company's chairman.
SpringOwl's Eric Jackson, who is a columnist at TheStreet, said in an interview Monday that shareholders are disappointed that the court didn't make a decision in the case that might have triggered a change in Viacom's management. Viacom shares have fallen 39% over the past 12 months.
- Ronald Orol contributed to this story









