A New York judge ruled Monday that Viacom shareholders may proceed with a lawsuit against company directors who they claim overpaid chairman Sumner Redstone and his top lieutenants Tom Freston and Les Moonves while Viacom lost money.
It was a move reminiscent of Michael Ovitz and the drawn-out trial over his $140 million severance package.
Judge Charles Ramos in New York state Supreme Court declined a Viacom request to throw out the suit, which alleges the directors approved “excessive and unwarranted” compensation for the three execs in 2004. That year the media conglom reported a record net loss of $17.4 billion, according to the lawsuit.
“Plaintiffs have alleged the necessary facts to support a claim that the enrichment of Freston, Moonves and Redstone resulted in the unjust impoverishment of Viacom,” Ramos wrote in a 19-page opinion, filed June 23 and made public this week.
Redstone received cash compensation of $21.5 million and options valued at $34.4 million, for total compensation of $56 million, according to the suit.
The so-called derivative lawsuit was filed by shareholders against Viacom directors on behalf of the company. Any money received as a result of the litigation is returned to the company, minus attorney’s fees.
Ramos said his ruling is based on the law of Delaware, where Viacom is incorporated. Earlier this month, the Delaware Supreme Court upheld a lower court’s rejection of claims in a similar derivative shareholder lawsuit against Disney directors seeking to recover a $140 million severance package paid to former company president Ovitz.