R.A. Feuer v. Philippe P. Dauman
CA 12579-CB
| Del. Ch. | Oct 25, 2017Background
- Plaintiff filed a derivative suit on behalf of Viacom challenging roughly $13.2 million in compensation paid to founder/chairman Sumner Redstone from 2014–2016, alleging he was incapacitated and provided no valuable services after July 2014.
- Sumner’s compensation included a $10 million bonus for FY2014; smaller payments continued in 2015–2016. He resigned as Chairman in Feb. 2016 and payments stopped in May 2016.
- Corporate control disputes followed: removals and lawsuits by/against directors and trustees (Dauman, Abrams, others) led to consolidated litigation under 8 Del. C. § 225 and related actions in Massachusetts and California.
- On August 18, 2016 the parties executed a Confidential Settlement and Release Agreement (Effective Date Aug. 18, 2016) containing a broad general release by Viacom of claims against its directors/officers up to the Effective Date, including claims for breach of fiduciary duty and unjust enrichment.
- Plaintiff did not amend his complaint to challenge the validity/enforceability of the Release after defendants relied on it in a motion to dismiss; he conceded that a valid Release would bar his claims.
- Chancellor Bouchard dismissed the derivative complaint with prejudice as to the named plaintiff, holding the Release unambiguously barred the asserted claims and the plaintiff failed to plead facts to invalidate the Release.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Viacom’s Settlement Agreement Release bars the derivative breach/waste/unjust-enrichment claims | Release is ineffective because fiduciary duties cannot be contracted away; release is self-interested | Release unambiguously covers "any and all Claims" through Aug. 18, 2016, including fiduciary-breach and unjust-enrichment claims | Held: Release is valid on its face and bars the claims; dismissal warranted because plaintiff failed to plead facts to invalidate the Release |
| Whether the Release impermissibly limits future fiduciary duties (contractual limitation) | Relies on principle that fiduciary duties cannot be prospectively contracted away (citing QVC) | Release does not prospectively limit duties; it extinguishes past claims only | Held: QVC inapposite; Release extinguishes past liability and does not prospectively limit fiduciary duties |
| Whether plaintiff adequately pleaded demand futility or other merits to survive dismissal | Alleged directors knew of Sumner’s incapacity and approved excessive payments | Defendants argued payments justified by historical role and prior service; also that Release bars suit | Held: Court did not decide demand futility or merits—dismissal rested solely on the Release’s application |
| Whether dismissal should be with prejudice and whether it has preclusive effect on other stockholders | Plaintiff sought to proceed derivatively; did not move to amend to challenge Release | Defendants sought dismissal as to plaintiff | Held: Dismissed with prejudice as to the named plaintiff only; decision not intended to have preclusive effect on other Viacom stockholders |
Key Cases Cited
- Savor, Inc. v. FMR Corp., 812 A.2d 894 (Del. 2002) (pleading standard for motion to dismiss: accept well-pleaded facts and draw inferences for non-moving party)
- Paramount Communications, Inc. v. QVC Network Inc., 637 A.2d 34 (Del. 1993) (contract terms cannot prospectively redefine or limit directors’ fiduciary duties in a sale context)
- Deuley v. DynCorp. Int’l, Inc., 8 A.3d 1156 (Del. 2010) (Delaware recognizes validity of general releases executed in settlements)
- Orman v. Cullman, 794 A.2d 5 (Del. Ch. 2002) (leave to amend complaint and procedure when allegations are inadequate to support a claim)