GEORGETOWN, Del. – Delaware Court of Chancery Vice Chancellor Joseph Slights sided with the Bucks County Employees Retirement Fund in a case against CBS Corp.
After CBS and Viacom announced a merger in August, the retirement fund requested to inspect books and records under state law to investigate any possible mismanagement or wrongdoing related to the merger, according to the Nov. 25 opinion. The retirement fund is a beneficial owner of CBS Class B nonvoting common stock.
The opinion notes that CBS provided some of the requested documentation, but not all of it, which is why the retirement fund filed a complaint against CBS shortly after that.
Slights found that the plaintiff "demonstrated a credible basis to suspect wrongdoing" and that he believed some, but not all, of the requested documents were essential to the investigation.
"Moreover, plaintiff has presented some evidence to support a credible basis to infer actionable fiduciary duty breaches, satisfying its low burden," Slights wrote.
Slights noted that there were several proven facts that crossed the low threshold of proving a credible basis of suspected wrongdoing.
"This, coupled with the fact that the 2019 merger is a conflicted controller transaction that likely will be subject to entire fairness review if challenged, more than adequately supports plaintiff’s proffered purpose for inspection," Slights wrote.
The plaintiff showed "credible basis" and is "entitled to inspect a narrow set of electronic documents" and is also entitled to inspect non-privileged electronic communications.
"In order to investigate this alleged wrongdoing further, plaintiff is entitled to electronic communications between (National Amusements Inc. President) Shari Redstone and the members of the nominations and governance committee 14 days before and after that meeting," Slights wrote.
National Amusements controls both CBS and Viacom.
Slights also noted that the plaintiffs could see non-privileged electronic communications to and from CBS Executive Vice President and Chief Legal Officer Lawrence Tu for the same time.
"Plaintiff has met its burden of showing these documents are necessary and essential to its stated purpose," Slights wrote.
Slights ordered the parties to arrange a conference to discuss how to appropriately implement the order.
Delaware Court of Chancery case number 2019-0820-JRS