[caption id="attachment_2231" align="aligncenter" width="620"]
Shari Redstone, chairman and chief executive officer of Cinebridge Ventures Inc., speaks during The New York Times DealBook conference in New York, U.S., on Nov. 10, 2016. Photo Credit: Michael Nagle/Bloomberg LP[/caption] Shari Redstone and her family's National Amusements Inc. holding company cannot access privileged communications between a special committee of CBS directors and the company's Wachtell, Lipton, Rosen & Katz attorneys—in an ongoing dispute over control of the New York-based media giant, a Delaware Court of Chancery judge ruled on Friday. The ruling, from Chancellor Andre G. Bouchard, followed weeks of jockeying over corporate records as CBS and its controlling shareholder prepare for a high-stakes trial scheduled to begin in October. [caption id="attachment_2720" align="alignleft" width="115"]
Shari Redstone. Photo: David Paul Morris/Bloomberg[/caption] Related story: Trial Set for October in CBS, Redstone Battle for Control of Media Giant National Amusements argued it was entitled to the documents as a joint client of Wachtell Lipton, which has served as outside counsel to CBS and its directors since 2006. The materials, National Amusements said, were related to legal advice the firm gave to the two separate panels of CBS directors tasked with reviewing Redstone's proposed recombination of CBS and its sister media company Viacom Inc. Redstone, through National Amusements, holds the controlling voting stake in both companies, thanks to their dual-stock structure. A special committee of five independent directors rejected Redstone's proposal in May, reasoning that the deal was not in the best interest of CBS or its stockholders. But the two sides quickly landed in Chancery Court, amid fears that Redstone would overhaul the CBS board and force the merger anyway. The dispute centers on changes Redstone made to the CBS bylaws, just ahead of a May 17 board vote to issue a dividend that would dilute Redstone’s voting power from about 80 percent to 20 percent. The bylaw amendments, backed by Redstone, require 90 percent of CBS’ 14-member board to approve the dividend, effectively granting her a veto over any moves that would threaten her control of the broadcaster. CBS has said the board vote is conditioned on court approval, but the two sides differ over whether the new bylaws were in effect when the directors acted. In court papers, National Amusements argued it had a right to "unfettered access" to legal advice provided to the board, and that the documents were "central" to the case it plans to make at trial. "They will make clear what prompted the dilutive dividend, who orchestrated it, and the true motivations that drove its implementation," National Amusements' attorneys wrote in a June 29 brief. CBS countered that National Amusements had waived its right to privileged communications because it had put itself at odds with the company over the merger. In his ruling, Bouchard said National Amusements had positioned itself "across the negotiating table" from CBS in asking the board to consider a deal with Viacom, and thus could no longer expect to be a client of the special committee's counsel. "In short, given the adversity of interests that prompted the creation of the special committees and given the mandate they were provided as part of a transparent process, the [National Amusements] affiliated directors could not have had a reasonable expectation that they were clients of CBS counsel, insofar as CBS counsel was acting in aid of the process undertaken by either of the special committees," Bouchard wrote in a 19-page letter opinion. "To reach the opposite conclusion would undermine the legitimate expectation that the special committees’ deliberative processes would be held in confidence and would not be shared with designees of the party whose adverse interests necessitated their formation in the first place," he continued. A representative for National Amusements declined to comment, and a spokesman for CBS did not immediately respond Friday to a request for comment. A team of Wachtell Lipton attorneys is representing CBS in the case. The five special committee members—Gary L. Countryman, Charles K. Gifford, Bruce S. Gordon, Linda M. Griego and Martha L. Minow—are represented by attorneys from Weil, Gotshal & Manges in New York. Ross Aronstam & Moritz in Wilmington is acting as local counsel for the plaintiffs. The Redstones and National Amusements are represented by Cleary Gottlieb Steen & Hamilton in New York and Potter Anderson & Corroon in Wilmington. The case is captioned In re CBS Corp. Litigation.