The current litigation involving billionaire media magnate Sumner Redstone illustrates the point. Mr. Redstone, age 93, owns about 80 percent of CBS and Viacom—reportedly a $40 billion media empire. In November 2015, Mr. Redstone’s former “companion,” Manuela Herzer, challenged Mr. Redstone’s mental capacity in Los Angeles Superior Court. Ms. Herzer alleged that Mr. Redstone lacked the mental capacity to remove her as his agent for health care decisions. In response to these allegations, and to bolster their position that Mr. Redstone had capacity, his legal team obtained a declaration from Mr. Redstone’s longtime associate, attorney Philippe P. Dauman, in which Mr. Dauman stated that Mr. Redstone was “engaged, attentive, and as opinionated as ever.”
Dauman Statement Explained
It is understandable that Mr. Dauman, when asked by Mr. Redstone’s legal team to come to his defense, would give an old friend and colleague the benefit of the doubt. It’s also possible that Mr. Dauman had additional reasons for proclaiming Mr. Redstone’s mental capacity: Mr. Dauman was one of seven trustees of a trust that Mr. Redstone established to benefit his grandchildren. At Mr. Redstone’s death, the trustees will control both CBS and Viacom. Whatever the motivation, Mr. Dauman unequivocally used one edge of the capacity sword—that Mr. Redstone had capacity—to cut off a potential threat.
Ms. Herzer’s case was dismissed, and all seemed well for Mr. Redstone, and also for Mr. Dauman, who received total compensation of $54 million in 2015, and who in February 2016 was chosen as Mr. Redstone’s successor as chairman and CEO of Viacom. Until…
Until May 2016 when Mr. Redstone removed Mr. Dauman as trustee of the trust, allegedly at the urging of his daughter, Sheri Redstone. According to Mr. Dauman, “After years of estrangement, she has inserted herself into his home, taken over his life and isolated him from anyone not under her control, including longtime business colleagues…Shari’s actions amount to an unlawful corporate takeover, and if effectuated, could have far-reaching consequences for thousands of shareholders and employees of Viacom.”
Mr. Dauman sued in Massachusetts to invalidate his ouster, alleging that Mr. Redstone now suffers from “profound physical and mental illness” and is subject to the undue influence of his daughter.
Mr. Redstone’s attorneys immediately responded with the other edge of the capacity sword. According to Mr. Redstone’s attorneys:
“It is telling that Mr. Dauman is raising the question of mental capacity for the first time after he’s been removed when, just months ago in court documents, he pronounced Mr. Redstone ‘engaged, attentive, and as opinionated as ever.”
A Cautionary Tale Meant for Hollywood
The New York Times reports that this is “a story line that some Hollywood executives deemed too implausible for a movie or television series.” On the contrary, this storyline—an older man caught between a younger paramour and his children, with money on the line—is commonplace in our practice.
What’s illuminating here is how well the Redstone drama demonstrates the unintended consequences of asserting the capacity (or lack thereof) of an individual at the center of a trust or conservatorship dispute when that individual is still alive and capable of changing what’s left of his or her mind.
“All they that take the sword shall perish with the sword.” Not all, but many, particularly in trust disputes.
This article is derived from these two stories in the New York Times:
- Redstone and Viacom Executives Go to Court Against Each Other
- Power Struggle at Viacom as New Leader Is Named
This photo is derived from this story in the New York Times: