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Delaware Judge: Sumner Redstone’s Mental Capacity Key to Legality of Board Oustings

UPDATED: A Delaware judge said Wednesday that the state of Sumner Redstone’s mental capacity is key to determining the legality of the move last week to replace five Viacom board members, including company chairman and CEO Philippe Dauman.

Chancellor Andre Bouchard of Delaware Chancery Court told lawyers representing Viacom and Redstone’s National Amusements that he would put a hold on discovery in the case while the issue of Redstone’s mental competency is sorted out in a related case pending in a Massachusetts probate court. Bouchard said he would not force a parallel process of evaluating Redstone in the Delaware court out of compassion for the 93-year-old mogul.

“There are questions of human dignity to a very elderly person,” said Bouchard. “That’s treacherous ground to dive into too quickly. And so I am going to be cautious in that respect, particularly in light of the other proceedings that are ongoing at this point.”

Viacom filed suit against National Amusements last week after the board replacements were unveiled. Viacom and Dauman have argued in both cases that Redstone is being manipulated by his daughter, Shari Redstone, and does not have the mental capacity to call the shots regarding his media empire.

Dauman and another ousted Viacom director, George Abrams, filed suit in Massachusetts last month after both were also removed from the board of National Amusements and the trust that will oversee Sumner Redstone’s holdings after his death.

The widening legal battle over control of Sumner Redstone’s $40 billion empire has the effect of pitting Viacom, of which Redstone is chairman emeritus, against Redstone’s private National Amusements holding company.

In the Delaware case, both National Amusements and Viacom last week asked the judge to affirm the fact that the existing Viacom board remains in place while the legal fight over the proposed replacements unfolds. The sides have been trying to negotiate a compromise agreement governing what the incumbent board can and cannot do until the legal fate of the replacements is settled. Bouchard said if the sides can’t reach an agreement by Friday he may call them back to the court for a hearing.

“The incumbent board is going to be in place in the interim period while this case works its way out,” he said.

The judge also said he would allow the Redstone camp to file a motion to dismiss the Viacom suit entirely. If that happens, a hearing would likely be set for July.

Bouchard’s focus on Sumner Redstone’s mental competency was seen as significant because National Amusements’ filing included a written declaration from the mogul. But the judge made it clear that Redstone’s capacity is a concern for him.

“The underlying issue of competency may well be relevant and, if it weren’t proceeding elsewhere, would be a legitimate issue here,” he said, adding that he wanted to be notified of developments in the Massachusetts and California cases.

“If discovery proceeds there, I want to know about it,” said Bouchard. “If discovery is shut down there, I want to know about it. I want to be kept abreast of what’s going on in the other litigations that bear on the status of competency issues in play.”

Redstone and National Amusements have argued that even if Redstone’s capacity was found to be compromised, the removals of Dauman and Abrams and the three other Viacom board members were valid because they were approved by a majority of the board of National Amusements, which include Sumner and Shari Redstone.

Lawyers for Redstone argue that, if the mogul is deemed incapacitated, authority over his controlling interest in Viacom shifts to the National Amusements board. And a majority of the board  — Shari Redstone, her son Tyler Korff and long-time family advisers Leonard Lewin and David Andelman — have already signed declarations saying they support the Dauman/ Abrams ouster. So even a finding that Redstone cannot control his own affairs would no alter the outcome, they believe.

The afternoon hearing lasted just over an hour.

James Rainey and Brent Lang contributed to this report.

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