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IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

IN RE CBS CORPORATION : CONSOLIDATED


LITIGATION : C.A. No. 2018-0342-AGB

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Chancery Courtroom No. 12A


Leonard L. Williams Justice Center
500 North King Street
Wilmington, Delaware
Wednesday, August 8, 2018
10:02 a.m.

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BEFORE: HON. ANDRE G. BOUCHARD, Chancellor

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ORAL ARGUMENT ON THE CBS PARTIES' MOTION TO COMPEL


REVISED INTERROGATORY RESPONSES, TO STRIKE
VERIFICATION, AND IN LIMINE TO PRECLUDE TRIAL
TESTIMONY, OR, IN THE ALTERNATIVE, TO COMPEL
DEPOSITION, THE CBS PARTIES' MOTION TO COMPEL
PRODUCTION OF DOCUMENTS CONCERNING THE CONTROL OF NAI,
AND THE CBS PARTIES' MOTION TO COMPEL PRODUCTION OF
DOCUMENTS REGARDING NAI'S CONSENT ACTIONS AGAINST
VIACOM and RULINGS OF THE COURT

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CHANCERY COURT REPORTERS
Leonard L. Williams Justice Center
500 North King Street - Suite 11400
Wilmington, Delaware 19801
(302) 255-0522

CHANCERY COURT REPORTERS


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1 APPEARANCES:

2 BRADLEY R. ARONSTAM, ESQ.


GARRETT B. MORITZ, ESQ.
3 ROGER S. STRONACH, ESQ.
Ross Aronstam & Moritz, LLP
4 for CBS Corp., Gary L. Countryman,
Charles K. Gifford, Bruce S. Gordon,
5 Linda M. Griego, Martha L. Minow,
Leslie Moonves, Joseph A. Califano, Jr.,
6 William S. Cohen, Leonard Goldberg,
Arnold Kopelson, and Doug Morris
7 -and-
THEODORE N. MIRVIS, ESQ.
8 CECILIA A. GLASS, ESQ.
BRADLEY R. WILSON, ESQ.
9 of the New York Bar
Wachtell, Lipton, Rosen & Katz LLP
10 for CBS Corp. and Leslie Moonves
-and-
11 GREG A. DANILOW, ESQ.
JOSEPH S. ALLERHAND, ESQ.
12 STACY NETTLETON, ESQ.
of the New York Bar
13 Weil, Gotshal & Manges, LLP
for Gary L. Countryman, Charles K. Gifford,
14 Bruce S. Gordon, Linda M. Griego,
Martha L. Minow, Joseph A. Califano, Jr.,
15 William S. Cohen, Leonard Goldberg,
Arnold Kopelson, and Doug Morris,
16 -and-
CHAD GOLDER, ESQ.
17 Munger Tolles & Olson, LLP
for Leslie Moonves
18 -and-
BENJAMIN BRITZ, ESQ.
19 of the District of Columbia Bar
Hughes Hubbard & Reed LLP
20 for Joseph Ianniello

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22

23 (Continued) ...

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CHANCERY COURT REPORTERS


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1 APPEARANCES: (Continued)

2 MATTHEW E. FISCHER, ESQ.


J. MATTHEW BELGER, ESQ.
3 JACQUELINE A. ROGERS, ESQ.
CALLAN R. JACKSON, ESQ.
4 Potter, Anderson & Corroon LLP
-and-
5 MEREDITH KOTLER, ESQ.
VICTOR L. HOU, ESQ.
6 of the New York Bar
Cleary, Gottlieb, Steen & Hamilton LLP
7 for National Amusements, Inc., Shari Redstone,
Sumner M. Redstone, NAI Entertainment Holdings
8 LLC, Sumner M. Redstone National Amusements
Trust, Finsbury LLC, and Robert N. Klieger
9
CORINNE ELISE AMATO, ESQ.
10 Prickett, Jones & Elliott, P.A.
-and-
11 MICHAEL C. WAGNER, ESQ.
of the Pennsylvania Bar
12 Kessler Topaz Meltzer & Check, LLP
for Westmoreland County Employees' Retirement
13 System and Benjamin Lifshitz

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1 THE COURT: Good morning, Counsel.

2 MR. MORITZ: Good morning, Your Honor.

3 THE COURT: Just give me one second

4 here.

5 All right. Mr. Moritz.

6 MR. MORITZ: Good morning, Your Honor.

7 Following the Court's comments at the last hearing,

8 I'll dispense with introductions, with one exception.

9 And that is that I'm pleased to introduce Benjamin

10 Britz of Hughes Hubbard, who is appearing on behalf of

11 Joseph Ianniello, who has been newly added as a party

12 to the case in a recent pleading. And Mr. Britz has

13 been admitted pro hac vice.

14 THE COURT: All right. Welcome.

15 MR. MORITZ: Before the argument,

16 Mr. Belger and I conferred about the order of motions

17 and how we'll present them. If it's acceptable to the

18 Court, we agreed that we would proceed with presenting

19 argument on what I'll just -- not to read the whole

20 title -- refer to as the Sumner motion and our motion

21 to compel documents concerning control of NAI, those

22 two motions first combined. So the CBS parties will

23 argue, the NAI parties will respond, there will be a

24 reply, and then we move on to the next motion after

CHANCERY COURT REPORTERS


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1 that, which would be the CBS parties' motion to compel

2 regarding NAI's consent actions against Viacom. So if

3 acceptable to the Court, that's the order that the

4 parties have discussed proceeding in.

5 THE COURT: All right. That's fine.

6 MR. MORITZ: Thank you, Your Honor.

7 With that, I'll hand off to Mr. Allerhand for the

8 first set of motions.

9 THE COURT: Very well.

10 MR. MORITZ: Thank you, Your Honor.

11 MR. ALLERHAND: Good morning, Your

12 Honor. May it please the Court, for the CBS directors

13 in the case.

14 I'm going to try something a little

15 different this morning, which is to proceed somewhat

16 deliberatively, a little carefully, and for a bunch of

17 reasons that the Court is aware of. So bear with me

18 if I'm not my usual animated going 110 miles an hour.

19 I want to be careful here.

20 I think we should start with two

21 questions which will help the Court deal with some

22 very thorny issues which arise in the context of a

23 discovery motion, but really have so much more impact

24 than just the discovery ruling. And thank you, Your

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1 Honor, for making time to hear us.

2 So what I would like to do by way of

3 introduction is first telescope for the Court what do

4 we think on our side of the V is the state of play on

5 who is the controller of NAI and, therefore, the

6 controller of CBS. I would then like to explain by

7 way of introduction why we think that matters in this

8 case, and where does it leave us once we answer those

9 two questions. And I think the Court does have a

10 number of options here in how to address this issue

11 consistent with all due regard for sensitivities as to

12 age and medical conditions.

13 So here's our bottom line. And I'm

14 going to work back to the facts later, because I think

15 it's important. Two years ago, Your Honor, in this

16 very same courtroom, many of these issues were

17 addressed in the context of the Viacom coup d'etat.

18 And Your Honor posed some very pointed questions which

19 I don't believe were ever answered, which are now back

20 two years later, and I'm going to explain why.

21 So what's the bottom line as to who we

22 think is in control? As we understand it, based on

23 the papers submitted by NAI, their answers, the

24 amended answers, Sumner Redstone is the controller of

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1 NAI through his ability to vote those shares while he

2 is alive and competent under the terms of his trust,

3 his sole and exclusive power. He is the controller of

4 NAI.

5 Number two, based on the record as we

6 understand it, Mr. Redstone is involved, or capable of

7 being involved, according to the other side, in NAI

8 board meetings and participating and voting, including

9 in the meeting that took place the morning of the TRO

10 hearing where the 90 percent bylaw was approved by the

11 NAI board, and the minutes reflect that Mr. Redstone

12 participated by phone and voted.

13 We also know that Mr. Klieger obtained

14 an answer to more than 50 interrogatories from

15 Mr. Redstone and that Mr. Redstone submitted a sworn

16 verification with respect to those interrogatories.

17 But at the same time, we are told that

18 Mr. Redstone is medically unable to testify, that it

19 would be life-threatening in terms of a deposition.

20 And at the same time, Ms. Redstone and others on the

21 NAI side do intend to offer testimony, and will

22 testify, as to the intentions of NAI with respect to

23 the core issues in this case, the attempt to merge

24 Viacom and CBS, plans for the management of the

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1 company, views on the board of directors of the

2 company, et cetera.

3 Now, my friends on the other side

4 would say, why does any of this really matter? Why

5 does it matter? NAI is the record holder of the CBS

6 shares. NAI has a board. NAI acts. In fact, the

7 bylaw was -- the 90 percent bylaw was approved through

8 a unanimous vote of the NAI board. That's all you

9 need to know.

10 Well, we think it does matter, and we

11 think it matters a lot under Delaware law as to who

12 the controller is. And when you've identified the

13 controller, the ability of a party alleging abuse to

14 be able to get testimony from that controller,

15 assuming that's medically possible.

16 THE COURT: Can I just ask you a

17 narrow factual question before you go further.

18 MR. ALLERHAND: Sure.

19 THE COURT: Because you're using the

20 term NAI --

21 MR. ALLERHAND: Yes.

22 THE COURT: -- and it seems what you

23 are collapsing into that are both of the two NAI

24 entities: NAI Holdings, the LLC, as well as National

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1 Amusements, Inc. Is that right?

2 MR. ALLERHAND: Yes, Your Honor. It

3 came up two years ago, and the facts, luckily, on that

4 score are easy. NAI is a corporation. It has a board

5 of directors. It's the member of the NAI LLC. My

6 understanding is that the members and the directors

7 are the same, and that together they own the --

8 80 percent, approximately, of the voting shares of

9 CBS. So I do collapse them as the NAI parties.

10 THE COURT: Right. And National

11 Amusement, Inc. owns 100 percent of the LLC. Right?

12 MR. ALLERHAND: Correct, Your Honor.

13 THE COURT: Is it the case, do you

14 know one way or another, that that is the same voting

15 structure that exists on the Viacom side of the house?

16 MR. ALLERHAND: I believe so, but I am

17 not 100 percent sure.

18 THE COURT: Ms. Kotler.

19 MS. KOTLER: It is the same, Your

20 Honor.

21 THE COURT: I thought so. I was

22 trying to reconstruct it, but I couldn't find my notes

23 from last year, or two years ago.

24 MR. ALLERHAND: Two years ago.

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1 THE COURT: Okay.

2 MR. ALLERHAND: So I think, for ease

3 of reference, I am going to refer to the NAI parties,

4 because I think there is no practical difference

5 between control over the NAI corporate entity or

6 control over the NAI limited liability company.

7 So just by way of introduction, why do

8 we think it matters? Well, as we understand Delaware

9 law, the issue of who is the ultimate human controller

10 is really the appropriate inquiry, whether it's under

11 Feeley, EZCORP, or USACafes. You can't get to hide

12 behind a corporation and say it's the corporate acts

13 when there is an ultimate human controller.

14 Take the obvious example, Your Honor.

15 We have a public company, and a private equity firm

16 owns 60 percent of the public company. And the public

17 company's directors are accused of doing acts which

18 are in breach of fiduciary duties. I don't think

19 anyone would argue that unless the private equity

20 60 percent holder had disclaimed or abdicated any

21 involvement or any exercise of control, that they

22 would be an important witness in a case like that.

23 And I don't think anyone really argues here that

24 Mr. Redstone wouldn't be and is an important witness

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1 if he's able to testify.

2 Now, NAI recognizes that the Redstone

3 trust, which I'm shorthanding the name of the trust as

4 Sumner Redstone trust, same trust Your Honor dealt

5 with two years ago in Viacom --

6 THE COURT: Just there, just

7 factually, the Sumner trust owns 80 percent of NAI

8 Inc. Right?

9 MR. ALLERHAND: Right.

10 THE COURT: Is the other 20 percent

11 the Shari trust?

12 MR. ALLERHAND: Yes.

13 THE COURT: Okay. All right.

14 MR. ALLERHAND: So NAI itself

15 recognizes -- this is paragraph 19 of their opposition

16 papers -- after they go through a long litany that NAI

17 is a corporate entity, NAI has passed a bylaw, which

18 I'm going to come back and talk about, which was a

19 direct result, I believe, of Your Honor's questions at

20 the Viacom hearings in the summer of 2016. What are

21 you worried about? There's a corporate structure.

22 There's bylaws. Ms. Redstone is authorized to act.

23 Mr. Redstone can act. And that's all you need to

24 know.

CHANCERY COURT REPORTERS


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1 Well, the problem with that is

2 paragraph 19 of their own opposition papers admits,

3 and as we've seen in this case on the morning of the

4 TRO, the controller, assuming he's competent, he or

5 she is competent, can change the bylaws at a blink of

6 an eye. The controller can remove directors of NAI at

7 a blink of an eye if that controller is competent and

8 able to act.

9 Now, at the beginning of this case, we

10 had a very clear allegation that control had migrated

11 from Mr. Redstone to Ms. Redstone. And we had alleged

12 that control effectively was in the hands of

13 Ms. Redstone. Now we're told that that's not the

14 case. And that brings us back to the conundrum of

15 where we are on the discovery point.

16 And one other word by way of

17 introduction. And I want to be very careful here. An

18 additional layer of the puzzle of why we need the

19 controller's deposition or, in the absence of that,

20 relief from the situation that has been thrusted upon

21 us that we weren't looking for -- I mean, remember,

22 Your Honor, we came into this case saying she's the

23 controller. If they had come back and said she is the

24 effective controller, as they had originally done, and

CHANCERY COURT REPORTERS


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1 stipulated to that, this motion is moot.

2 It's almost exactly like, if you

3 remember, Your Honor, during the Viacom argument two

4 years ago, Mr. Klieger was standing in front of you,

5 and you said to him, "If you stipulate for purposes of

6 this fight about the validity of the consents that

7 Mr. Redstone is incapacitated, then all we need to do

8 then is look at the board action at the NAI, the

9 so-called ratification. We'll avoid the whole fight."

10 That stipulation was not proffered.

11 Today, if they would stipulate, as

12 they had actually alleged in this case, that

13 Ms. Redstone is the effective controller, we would not

14 need to have this motion. But they won't do it. I'll

15 come back to why. But they won't do it.

16 Now, the other layer of complexity

17 that's here today that Your Honor didn't have two

18 years ago -- and I want to be very careful here -- is

19 the issue of the Sumner Redstone trust, which I'll

20 short form, just call the trust. Your Honor and a

21 select group of 11, the gang of 11, which does not

22 include the general counsel of CBS or anyone who works

23 at CBS, only 11 outside counsel, have seen the full

24 terms of the trust. As we have said in our briefs, we

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1 believe there are terms in the trust which I think are

2 fairly described as bombshells, if the public knew

3 about them.

4 Very interesting. In a footnote in

5 response to that -- and the footnote is redacted, so I

6 want to be careful. I think Your Honor knows what

7 footnote I'm referring to -- the other side actually

8 says, "You know what? You may be right. You may be

9 reading this provision correctly," which is a huge

10 admission and a huge consequence to investors of this

11 company. "But don't worry about it, because there's a

12 mechanism," which I don't want to get into," under the

13 trust to deal with it."

14 Well, if the settlor of this trust was

15 able to testify, he would be the single-most important

16 person to ask whether or not his most explicit

17 instructions and wishes with respect to the only asset

18 of this trust, which was the Viacom stock and then

19 split into Viacom and CBS, could be dealt with after

20 his death and incapacitation in the way that's

21 suggested. I don't want to get into the specifics.

22 The implications of this actually, if

23 you step back, if we're interpreting this correctly --

24 and my friend, Mr. Mirvis, will address why we can't

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1 live with these restrictions on these trust provisions

2 anymore -- we have to let CBS's general counsel and

3 other people have access to this. These aren't

4 personal family issues. These are issues that go to

5 what happens to the CBS stock. People have to know

6 this. But if we're right about how we're reading

7 this -- and I think we had an implicit concession we

8 are -- I think it's Article G, Section 21, if we're

9 right about that, and if their supposed fix is not

10 doable, which we have pretty strong views on, then we

11 may have come across actually the most compelling

12 reason for the special dividend that could ever be

13 articulated. I don't want to get into the details of

14 that, but I think Your Honor will follow my drift if

15 our interpretation of what occurs after Mr. Redstone's

16 death or incapacitation is correct.

17 THE COURT: I want to --

18 MR. ALLERHAND: Have I been too --

19 THE COURT: No, no, no. I mean, I

20 just have a couple of factual questions. Hopefully

21 they're narrow enough that they won't become

22 problematic. But the date of the provision in the

23 trust to which you are referring dates back to when?

24 MR. ALLERHAND: It's the original. We

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1 have it here. It's in the original trust. 2002.

2 THE COURT: 2002. Okay. And remind

3 me, the Viacom/CBS split is when?

4 MR. ALLERHAND: 2005, around.

5 THE COURT: All right. I was

6 inferring that from what you said. I just wanted to

7 make sure I understood.

8 MR. ALLERHAND: Right. So every time

9 you see -- and I don't think we have a dispute with my

10 friends at Cleary and Potter. Any time you see the

11 word Viacom in the trust, read that as a reference to

12 Viacom and CBS, because the definition --

13 THE COURT: Well, that's why I asked,

14 because it just, it wasn't clear to me. Okay. All

15 right.

16 MR. ALLERHAND: Your Honor, to remind

17 the Court again about the -- you know, the Viacom

18 situation two years ago, remember, Your Honor, that

19 there was initially consents executed by Mr. Redstone

20 and, ultimately, after that, an attempt to ratify the

21 consents through board action.

22 Your Honor had two hearings on that

23 matter before the case was settled. They were both

24 extraordinary. And I would encourage the Court to go

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1 back and take a look at the transcripts which were

2 provided.

3 First, it was probably, I think

4 Mr. Wolfe said, the most well-attended scheduling

5 conference in the history of Delaware when the case

6 first broke. And if you remember, the protagonists in

7 the case were the directors of Viacom had been removed

8 by way of Mr. Redstone's consent, and they were

9 arguing that Mr. Redstone's consent either had been

10 obtained through undue influence from Ms. Redstone or

11 that he lacked the mental capacity to execute the

12 consents knowingly and, therefore, the consents were

13 no good. I think Mr. Wolfe's colorful language was,

14 the other side's position is my client had to be

15 crazy, they had to be crazy to execute these consents

16 and remove his long-time friends.

17 During that hearing, Your Honor

18 directly asked Mr. Klieger, how does Mr. Redstone vote

19 the NAI shares or the Viacom shares? How does it all

20 work? And Mr. Klieger said, Mr. Redstone personally

21 votes the shares.

22 THE COURT: To be clear, you're

23 talking about the Viacom shares?

24 MR. ALLERHAND: Yes, at that time.

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1 And if you may remember, there was a back and forth,

2 it was a pretty good question: Well, does he do that

3 through a corporate authorization? Is there a

4 corporate resolution at NAI which gives Mr. Redstone,

5 as the CEO, the power to kind of do what he wants with

6 respect to the Viacom shares? And there was a whole

7 commotion in the courtroom. It never got produced at

8 the time. And then there was the motion to dismiss

9 that Potter Anderson filed, basically saying this is

10 too much for a 225 action. Your Honor can't get

11 behind the issue of the consents. They're validly

12 executed. That's all you need to know. It doesn't

13 matter whether or not -- the issue of mental capacity

14 or undue influence.

15 And at that hearing, at the very

16 beginning, if you may remember, you said to

17 Mr. Klieger, "I got bad information from you the last

18 time, because the power under the trust of

19 Mr. Redstone is to vote the NAI shares. The trust

20 controls the NAI shares. How does the voting occur

21 with respect to the underlying Viacom block that's

22 owned by NAI?"

23 And Mr. Klieger said, "Well, when I

24 said -- I meant personally, and he votes them

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1 personally as the CEO, essentially as the corporate

2 representative of NAI."

3 Many of these questions, by the way,

4 are floating around two years later in our motion.

5 How is control exercised? Who was making the

6 decisions? And what is Mr. Redstone's status?

7 Now, very interesting, Your Honor.

8 After the case was settled in September of 2016 -- and

9 I'm sure you're going to hear a lot about this -- NAI

10 passes a new bylaw. And the parties have attached the

11 bylaw to our motions. I believe it's one of the early

12 exhibits. I'll give Your Honor the number. And it's

13 a bylaw that impacts both the NAI corporate level and

14 at the limited liability company.

15 This bylaw is an extraordinary

16 corporate document which, if we had a witness in

17 Mr. Redstone who could testify, we would love to get

18 his testimony on this. And let me tell you why. I

19 have never seen a bylaw like this. Because what it

20 says is that Ms. Redstone singularly, quote,

21 singularly, can wake up tomorrow morning and say, I am

22 going to sell all of the CBS stock owned by NAI. I

23 could transfer all of the stock owned by NAI. I can

24 vote all of the stock owned by NAI singularly.

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1 Now, I think it's pretty obvious that

2 that bylaw, if we were able to get discovery and talk

3 to Mr. Redstone, was probably put in in order to avoid

4 ever having to be back before this Court on the issue

5 of Mr. Redstone's competency and his ability to be or

6 act as a controller. Because now the argument --

7 remember, the last time in Viacom, Your Honor said,

8 "Well, if there was a different set of facts, if,

9 instead of Mr. Redstone executing the consent

10 initially, we had had a corporate action, well, that

11 would be a different ball game." So now we have a

12 bylaw that purports to allow that to happen, and it's

13 exactly what we're being told in court. You don't

14 need any of this discovery, whether it's documents or

15 Mr. Redstone, if he's capable, because you have a duly

16 authorized bylaw. Which, by the way, interestingly,

17 why didn't they act under the bylaw? Why didn't

18 Ms. Redstone, if that bylaw is effective, why didn't

19 she act? Why did the full NAI board pass the

20 90 percent bylaw?

21 But more importantly -- and again, all

22 roads lead back to the trust -- it would be our

23 position, after talking with trust and estates

24 experts, who are prepared to testify, that there is no

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1 way that that bylaw read the way it's written can be

2 made consistent with the wishes of the settlor,

3 assuming he's alive and competent, under the terms of

4 the trust.

5 The notion that Ms. Redstone could

6 wake up tomorrow morning and actually sell the CBS

7 stocks under that bylaw, given the provisions of the

8 trust that Your Honor has, which set forth the

9 settlor's intent with respect to the stock, is

10 completely at odds with one another. And one of the

11 basic principles of trusts and estates, with respect

12 to a trust, is you can't undo willy-nilly the wishes

13 of the settlor of the trust.

14 Now, maybe they'll say, well,

15 Mr. Redstone wanted it that way. He agreed to the

16 bylaw. Really? Well, that goes back to the issue of

17 whether or not, in September 2016, he had the ability

18 to do that. I didn't see any changes in the trust,

19 which has very specific provisions.

20 So let's turn to -- and I will try to

21 bring this all together and not just simply dump on

22 Your Honor a series of facts and history and hope for

23 the best. Let me show Your Honor a chart we did,

24 which I think is helpful in terms of fast-forwarding

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1 from Viacom now to the proceedings before the Court

2 two years later.

3 I'm going to hand it up. It's Exhibit

4 4 to our reply affidavit. May I hand it up, Your

5 Honor?

6 THE COURT: You may.

7 MR. ALLERHAND: So let's fast-forward

8 to the present and where we were kind of in May 2018.

9 The first thing we put on the chart

10 was a February disclosure from the CBS 10-K. And

11 these disclosures, Your Honor, I will represent, were

12 reviewed and approved by NAI. They're sent in advance

13 to NAI to look at because they reference NAI's

14 position in the company. Want to make sure the

15 disclosures are accurate.

16 And this disclosure is the same

17 disclosure that had appeared for years and had been

18 reviewed and approved by NAI. Essentially, "NAI is

19 controlled by Mr. Redstone through the ... Trust ...

20 which owns 80% of the voting interest of NAI, and such

21 voting interest of NAI held by the ... Trust is voted

22 solely by Mr. Redstone until his incapacity or death."

23 I mean, I think that's out there in

24 the public, and I think that's accurate.

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1 Now, paragraph 9 of NAI's complaint,

2 dated May 29th, is the paragraph that states that

3 "... the exercise of such stockholder's control has

4 migrated from Sumner Redstone to his daughter,

5 Ms. Redstone." I don't think that's a confusing

6 sentence. I think it's pretty clear. And frankly,

7 it's what our committee thought when they were dealing

8 over the many months with the Viacom merger. We did

9 believe that Ms. Redstone effectively now controlled

10 NAI.

11 Now, in the answer to the NAI -- the

12 NAI's parties' answer, they again say, at paragraph

13 18, Ms. Redstone -- we allege Ms. Redstone effectively

14 controls NAI. And now we start to get a shifting

15 position. It says, "Defendants deny the allegations

16 of the fifth sentence ...." The fifth sentence is

17 that NAI -- is that Ms. Redstone controls NAI.

18 One other point, Your Honor. On the

19 May 29th NAI parties' complaint, we cited to you

20 paragraph 9, which is the one that has the migration

21 of control. Take a look, when you have a chance, Your

22 Honor, at paragraph 37. It's extraordinary.

23 Paragraph 37 in the May 29 complaint says, "... NAI

24 has never used its voting control to interfere with

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1 CBS's management. That was true of Sumner Redstone,

2 and ... is equally true of Ms. Redstone."

3 What is the implication of that

4 sentence? The implication of that sentence is

5 completely consistent with the allegation in paragraph

6 9 that before Mr. Redstone was in control of NAI, and

7 now Ms. Redstone is in control. I don't know any

8 other way to read paragraph 9 and paragraph 37 in the

9 English language other than that interpretation.

10 Now we move to the second page of

11 Exhibit 4, the June 15th NAI parties' amended

12 complaint. They amend the complaint to change one

13 word to paragraph 9 to say that the issue of migration

14 of control was only Mr. Moonves' perception and not

15 reality. So now we're back -- we're back to a place

16 where I started my argument, that the NAI parties'

17 position is that Mr. Redstone, as had been disclosed

18 for years, remains the controller.

19 And then most recently, we were trying

20 to get the language in our 10-Q filed with the SEC

21 cleared with NAI and we received from their lawyer,

22 Mr. Andelman, he struck language that appeared for

23 years in our disclosure. All of a sudden, he struck

24 the language NAI is controlled by Mr. Redstone through

CHANCERY COURT REPORTERS


25

1 the trust.

2 Well, I've got to tell you, if he's

3 not controlling the trust, I haven't the faintest

4 idea, then, who controls this trust, which actually

5 controls NAI, which controls CBS. And that's a pretty

6 scary position for a public company of $20 billion or

7 more making disclosure.

8 THE COURT: The last reference here to

9 the proposed change to the 10-Q --

10 MR. ALLERHAND: Yes.

11 THE COURT: -- is that reflected in an

12 actually filed 10-Q, or what's the status of that?

13 MR. ALLERHAND: The Q has been filed,

14 and we will hand it up.

15 THE COURT: And it reflects this

16 change?

17 Ms. Kotler.

18 MS. KOTLER: Your Honor, I'll address

19 -- I don't mean to speak too quickly, but I will

20 actually -- the CBS parties did not include a later

21 part of this email exchange. This was not a proposed

22 change to the disclosure.

23 What Mr. Andelman was doing was simply

24 saying, I'm going to only confirm for you facts.

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26

1 Because the CBS parties are making all sorts of

2 assertions about control in the context of the

3 litigation, I want to do that in an email exchange.

4 And he was right to do that because of exactly what is

5 happening. And I will hand that up to Your Honor.

6 THE COURT: I will obviously listen to

7 your argument in a minute. Let me just sort of finish

8 with Mr. Allerhand on this point.

9 I guess what I want to know, just a

10 simple question is --

11 MR. ALLERHAND: Yes.

12 THE COURT: -- the 10-Q now, is the

13 10-Q for -- what is this, for the second quarter?

14 MR. ALLERHAND: The 10-Q for the

15 quarter ending June 30, 2018, has now been filed with

16 the SEC.

17 THE COURT: In the manner that it's

18 filed with the SEC now, does it reflect the change

19 that you're showing me?

20 MR. ALLERHAND: It says as follows:

21 "Although the Company has previously disclosed, after

22 receiving confirmation from NAI, that NAI is

23 controlled by Mr. Redstone through the Sumner ...

24 Redstone National Amusement Trust ..., in connection

CHANCERY COURT REPORTERS


27

1 with this report, NAI declined the Company's requests

2 to confirm that NAI is currently controlled by

3 Mr. Redstone through the [Sumner] -- through the SMR

4 Trust."

5 I can hand that up, Your Honor. So we

6 essentially couldn't say what we had previously said,

7 and we disclosed to our shareholders what the current

8 state is.

9 May I hand this Q up?

10 THE COURT: You may. It's just a

11 publicly filed paper?

12 MR. ALLERHAND: Yes.

13 THE COURT: You can hand it up.

14 MR. ALLERHAND: Now, throughout the

15 NAI complaint that Your Honor will have to address,

16 and that we're responding to -- this is the complaint

17 when they sued -- essentially countersued all of the

18 directors -- there were repeated allegations in the

19 complaint: NAI and Ms. Redstone intend to do X, Y, and

20 Z. NAI and Ms. Redstone never intended to do X, Y,

21 and Z. Paragraphs 11, 44 to 46, paragraph 53, 60, 62,

22 65 to 66, 68, 75 to 76, 83, 88, 90, 94 to 95, 102 to

23 113, repeated statements about NAI and/or

24 Ms. Redstone's intentions. Mr. Redstone's name

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28

1 nowhere appears with respect to those allegations.

2 Again, it would seem to lead us to the conclusion that

3 she's calling the shots here.

4 Now, given NAI's position that

5 Mr. Redstone apparently is in control of the trust,

6 therefore, of NAI and of CBS, you know, there seems to

7 me to be -- that he is the ultimate human control.

8 There's only two options here for who controls the

9 trust, actually. It's either Mr. Redstone or, upon

10 his death or incapacitation, control passes to a new

11 group of trustees who actually have real power and

12 real responsibilities.

13 So one may ask themself, why is -- and

14 we call this a tragic game that's being played with

15 respect to Mr. Redstone's mental and physical

16 condition. We stand by that statement. So one may

17 ask themself, why is this going on? And you know

18 what's interesting? You remember the doctor report

19 that's been provided to Your Honor. I want to be

20 careful how deep I get into it.

21 THE COURT: Yes. So that is under

22 seal. Right?

23 MR. ALLERHAND: Yes. So I want to be

24 careful. But this is a doctor who sees him twice a

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29

1 week. When you read the report, take a look at the

2 paragraphs from the reports that deal with the ability

3 to communicate, and you'll notice a change in the last

4 report. You'll notice in the operative paragraph

5 something left out that appears in the prior

6 paragraphs in terms of the ability to provide answers,

7 yes or no.

8 And the other thing that's striking

9 when you read these doctor reports, you know, and we

10 obviously take it at face value -- they're very

11 serious illnesses that Mr. Redstone, unfortunately, is

12 dealing with -- what it -- what do you never see in

13 the doctor's report? There is never one word about

14 his cognitive abilities. Not a word. Talks about his

15 ability to communicate. The illnesses he has. The

16 impact of stress. But there's never a word about his

17 cognitive abilities, and abilities to

18 understand information -- process and understand

19 information never appears.

20 By the way, the last time we were

21 here --

22 THE COURT: Let's go back a paragraph

23 or so.

24 MR. ALLERHAND: Yes.

CHANCERY COURT REPORTERS


30

1 THE COURT: So what I heard you say a

2 little while ago was, upon Mr. Redstone's death, that

3 control of the trust doesn't go to Shari, it goes to a

4 new, what is it, set of trustees that govern the

5 trust?

6 MR. ALLERHAND: Yes. Because during

7 his lifetime -- and I think this has been publicly

8 disclosed. So I'm not treading on anything that isn't

9 public. During his lifetime, he has the sole and

10 exclusive power to control the vote of the NAI shares

11 held by the trust. Therefore, he's the controller of

12 NAI and ultimately the controller of CBS.

13 Upon his passing, or if he's mentally

14 incapacitated, then control passes to trustees. I

15 believe Ms. Redstone is one of the trustees. But

16 those trustees will have heavy fiduciary

17 responsibilities with respect to the assets of the

18 trust, with respect to the beneficiaries of the trust.

19 And I would suggest that those fiduciary duties and

20 responsibilities will be very different than the

21 freedom of maneuver that apparently Ms. Redstone

22 believes she has under the September 2016 bylaw,

23 which, according to my friends on the other side,

24 allows her even to sell the CBS stock notwithstanding

CHANCERY COURT REPORTERS


31

1 paragraph 21 of Article G, which I don't want to get

2 into.

3 I mean, talk about all the issues in

4 this case and all the reasons that my clients acted to

5 try to remove control and issue the dividend. One of

6 the issues that we spotted and raised was the ability

7 of CBS to access a once-in-a-lifetime M&A market,

8 once-in-a-lifetime M&A market for media companies.

9 Their allegation is, "Well, if you did the Viacom deal

10 first, we would then be willing to relinquish control

11 in a second larger transaction." Question whether

12 that's actually possible today. It depends. I don't

13 want to get into the specifics, but it depends.

14 I mean, that goes directly to the

15 heart of one of the core factual issues in this case.

16 Who better to ask than the settlor whether he really

17 intended that after his death or incapacitation his

18 wishes with respect to the CBS stock could just be

19 undone? I don't even think that's right as a matter

20 of trust and estates law, but I would be very

21 surprised to hear any settlor say that that's what he

22 expected would happen upon his death or

23 incapacitation.

24 So let me conclude, Your Honor, with

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32

1 just a series of questions that I would hope get

2 answered today, if possible. And we couldn't provide

3 the answers because we just don't have the

4 information. Perhaps my colleagues on the other side

5 will.

6 What is the current state of

7 Mr. Redstone's cognitive abilities? The Dr. Gold

8 affidavit does not address it, even though he sees him

9 twice a week.

10 Two, what is the current state of

11 Mr. Redstone's ability to communicate? How does he do

12 so?

13 Three, in light of the Gold

14 affidavits, how did Mr. Klieger read and obtain

15 informative responses that he could translate into a

16 verification with respect to over 50 interrogatories?

17 Four, if the Klieger method is one

18 that doesn't jeopardize the health and safety of

19 Mr. Redstone, can it be used under Rule 31? And we

20 would allow Mr. Klieger to ask the questions as long

21 as it's videotaped. And Rule 31 is clearly a

22 mechanism which could be used.

23 THE COURT: How does that actually

24 work?

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33

1 MR. ALLERHAND: So, again, it's funny,

2 I read -- I was looking for --

3 THE COURT: I'm not sure I've ever

4 actually seen it happen.

5 MR. ALLERHAND: I was looking for

6 articles. I found some old Jerry Solovy article from,

7 like, 2002. And it's funny. He says the reason you

8 should use it, because you could save a lot of money.

9 Like if you have a witness in Hawaii and you have a

10 couple questions you need to ask, you have to

11 literally write the questions out in advance, you give

12 them to your adversary. They have a right to ask

13 their questions. You then have a court officer or

14 court reporter swear in the witness. In our case, the

15 video would roll. We have no objection to Mr. Klieger

16 being the questioner. And he would just read the

17 questions. And you get the answers, and there is no

18 cross-examination. That's how it would work.

19 We would write up questions. The

20 other side would write up questions. Mr. Klieger can

21 ask them under videotape. Excuse me, with the video,

22 so we have a record of what's actually occurred.

23 Now, if that can't be done --

24 THE COURT: Just so I'm clear --

CHANCERY COURT REPORTERS


34

1 MR. ALLERHAND: Let me stop.

2 THE COURT: I may have drifted in the

3 middle of your explanation, so I just want to be

4 clear. This isn't like an interrogatory, where your

5 lawyer typically drafts something and then you verify

6 it?

7 MR. ALLERHAND: No.

8 THE COURT: You're saying you get a

9 verbatim response from the witness?

10 MR. ALLERHAND: Yes. That's how

11 Rule 31 works. Yep. If the witness is capable.

12 THE COURT: Right.

13 MR. ALLERHAND: And remember, I want

14 to be very clear, we didn't come in saying do that,

15 because, frankly, we really don't believe it can be

16 done. But then we saw the interrogatory response, and

17 Mr. Klieger apparently has an ability to communicate

18 on the most sophisticated issues, including the bylaw

19 amendment, et cetera. So if he can do that, why can't

20 he read 10 or 15 questions? And maybe we can get to

21 the bottom of Article G, paragraph 21. Maybe we can

22 get to the bottom of who is actually controlling the

23 company.

24 Now, the motion, as we see it, can be

CHANCERY COURT REPORTERS


35

1 resolved. The motion to compel the deposition under

2 Rule 31 or, in the alternative, to preclude testimony

3 by others about NAI's intention, we think it can be

4 resolved in essentially three ways. We only see three

5 paths. Perhaps the Court will find another path.

6 If NAI concedes that Ms. Redstone is

7 effectively in control, as they had initially alleged,

8 we believe our motion would be moot and we could

9 proceed in the litigation knowing that she is the

10 effective controller, and that would be the end of it,

11 I believe.

12 Two, if they won't make that

13 concession and walk back their current position, and

14 if it's safe, then we would ask that Mr. Klieger use

15 the same method he employed to review the

16 interrogatories and ask written questions under oath

17 under video under Rule 31.

18 THE COURT: The questions you haven't

19 propounded yet. Right?

20 MR. ALLERHAND: Right. And we would

21 agree to do it in multiple sessions, whatever would be

22 consistent with the witness's medical health.

23 Three, if Mr. Redstone cannot be

24 deposed, even using the Klieger method and Rule 31,

CHANCERY COURT REPORTERS


36

1 then we do believe the NAI parties must be precluded

2 from having anyone else testify about the intentions

3 and plans of NAI, because we just can't be put in this

4 box. I mean, if you think about it, they say

5 Ms. Redstone is going to testify at the very end of

6 discovery. I get it. Most important witness will go

7 at the end. Same thing, I think, for Mr. Moonves.

8 That's pretty fair game in litigation.

9 But we can't be in a position where

10 others can testify as to what NAI's intentions and

11 plans are while they're still maintaining that the

12 person who actually has control of NAI is off limits.

13 And even worse, they're going to offer testimony about

14 what Mr. Redstone's actual views and plans were.

15 THE COURT: Well, on that issue, isn't

16 this rather premature? People ask questions, elicit

17 hearsay all the time in discovery. I have no context.

18 And you can bring a motion in limine if you think some

19 of that's improper. And, of course, there's always a

20 weighing that goes on, my assessment of the

21 credibility or the weight any of those kind of

22 comments would carry at the end of the day.

23 Because if Mr. Redstone, indeed, can't

24 testify, oh, it's so convenient for a witness to then

CHANCERY COURT REPORTERS


37

1 be able to say A, B, C, or D. I'm not oblivious to

2 reality here. Why isn't that part of your motion just

3 something that sort of works itself out as we go

4 through things?

5 MR. ALLERHAND: Again, Your Honor, we

6 knew you would ask that question, and it's a fair one,

7 and it's very similar to the question Your Honor posed

8 to us in the privilege dispute when we were here a few

9 weeks ago and the Court was saying it's difficult to

10 set these ground rules kind of in the abstract without

11 seeing the documents and without dealing with the

12 reality of it.

13 But here, the issue is so central to

14 this case as to who the controller is. I mean, we

15 need to get to the bottom of that. I haven't talked

16 about the document side of our motion, which I think

17 should be easy. The second motion that's on at the

18 moment is just give us the documents that we've asked

19 for, which will shed light on who actually exercises

20 control.

21 THE COURT: Just put that aside for a

22 second, because let me broaden it.

23 MR. ALLERHAND: Sure.

24 THE COURT: I'm going to call this the

CHANCERY COURT REPORTERS


38

1 Sumner motion, all right, as opposed to the NAI

2 control motion. I had understood the Sumner motion to

3 be seeking, number one, you wanted them to -- I'm

4 trying to reconstitute how I had sort of broken this

5 down. You wanted them to revise their interrogatory

6 responses to strike Sumner as a person with knowledge.

7 Two, you wanted to strike his

8 verification to the interrogatory responses.

9 Three, you wanted what we just

10 discussed, this prohibition on what witnesses could

11 testify concerning any comments Mr. Redstone may have

12 made in the past concerning his or NAI's intention.

13 Then fourth, alternatively, you wanted

14 this deposition on written question.

15 Isn't that how your motion was framed?

16 MR. ALLERHAND: That's how it was

17 framed. And I would say on our reply we have kind of

18 refocused a little bit, because, remember, we didn't

19 have the information going in as to how the

20 interrogatory responses were prepared. We were only

21 told after we filed our motion that, in fact,

22 Mr. Klieger is able to sit and communicate with

23 Mr. Redstone and obtain information.

24 THE COURT: And Dr. Gold doesn't speak

CHANCERY COURT REPORTERS


39

1 to whether that methodology would be --

2 MR. ALLERHAND: No.

3 THE COURT: -- feasible?

4 MR. ALLERHAND: Right. The question,

5 it's one --

6 THE COURT: I will let you have your

7 turn in a minute, Ms. Kotler.

8 Okay. Anything else, Mr. Allerhand?

9 MR. ALLERHAND: I think on that

10 motion, no.

11 And I would just very briefly, on the

12 document side, because it's really the flip, I think

13 it's the -- in a sense, it's the flip side of what we

14 have been arguing -- I don't think there's any issue

15 about the relevance of who the controller is -- and

16 what we've been met with in response to our document

17 requests, where we would like to see emails and other

18 documents relating to how control from the trust is

19 exercised to NAI and ultimately from NAI.

20 Now, the paragraphs in particular in

21 Exhibit A of our document requests that are at issue,

22 so the Court doesn't have to hunt and peck for this,

23 is 41, 42, 47, and 48.

24 THE COURT: Those are the

CHANCERY COURT REPORTERS


40

1 interrogatories. Right?

2 MR. ALLERHAND: No.

3 THE COURT: You want the documents

4 responsive to those?

5 MR. ALLERHAND: Yes. Those are

6 document requests, paragraphs 41, 42, 47, 48. And

7 it's Exhibit A to the transmittal affidavit of our

8 motion to compel the control documents.

9 THE COURT: Okay. Sorry.

10 MR. ALLERHAND: That's okay. And

11 basically what we're being told is, one, you don't

12 need it because you have the organizational documents

13 of the company. You have the bylaw. You have the

14 certificate. And a group of 11 people have the trust.

15 Two, you will get documents if they

16 mention the word CBS. If it's directly related to

17 CBS, we'll give it to you.

18 And three, otherwise, you're just not

19 entitled to it. We just don't understand why this is

20 not akin to, although not exactly the same as Your

21 Honor's ruling on the Finsbury documents, it's really

22 a form of self-selection. I mean, this is discovery.

23 I don't think anyone could say that how the trust

24 exercises control over NAI and NAI control over either

CHANCERY COURT REPORTERS


41

1 Viacom or CBS is not at least relevant to the issues

2 that are going to be presented to this Court.

3 I mean, what if there was an email

4 from Ms. Redstone to Mr. Andelman or Mr. Klieger

5 saying, "You know what? This bylaw amendment is a

6 pretty good gig. Let's operate under the bylaw

7 amendment because we have a lot of flexibility."

8 Never says the word "CBS." You know, I think we would

9 like to see that and understand this.

10 I mean, at the bottom, this is a case

11 about a controller. They're playing hide the

12 controller. They have shifted their position. And we

13 think we're entitled to see any documents that relate

14 to the issue of control from the trust to NAI.

15 Thank you, Your Honor.

16 THE COURT: Ms. Kotler.

17 MS. KOTLER: Thank you. Good morning.

18 May it please the Court, Meredith Kotler from Cleary.

19 Thank you, Your Honor, for your

20 patience and your time. I know it's already been a

21 while. I have a lot to say, and I will do my best to

22 answer different questions, clear things up. I am

23 intending to address the actual discovery requests

24 that were heard, and you hear a lot about that this

CHANCERY COURT REPORTERS


42

1 morning.

2 But I do want to start by unpacking a

3 number of incorrect statements that were just made by

4 my friend, Mr. Allerhand, and then turn to the

5 specific discovery requests that were asked. And I

6 understood them in the way that Your Honor laid them

7 out.

8 It is just simply not true -- and we

9 keep saying this. There's just ships passing in the

10 night or people aren't listening, but we don't know

11 what else to do. It is simply not true that the NAI

12 parties have said that Mr. Redstone is NAI and NAI is

13 Mr. Redstone, or only Mr. Redstone can speak for NAI

14 or its intentions, or that only Mr. Redstone can make

15 decisions regarding CBS. We have repeatedly stated

16 the following. Hopefully I can get through it all,

17 but if Your Honor has questions, please stop me.

18 It is true that Mr. Redstone's trust

19 owns 80 percent of the NAI stock. But it is also true

20 that NAI -- and I will use NAI, if it's okay, in the

21 same way Your Honor noted NAI and Holdings. They own

22 and hold the stock. That's admitted. They admit it

23 in their reply papers on the control docs motion,

24 paragraph 4.

CHANCERY COURT REPORTERS


43

1 And it is true that there is an NAI

2 board, that they don't challenge it is properly

3 constituted, and it is fully authorized to vote the

4 stock that NAI holds, whether CBS or Viacom. The NAI

5 board is authorized to do that. And it has always had

6 that inherent authority.

7 We heard a lot about the hearing two

8 years ago. I don't remember everybody in the room now

9 who was there, but I was there, Your Honor. And Your

10 Honor may recall that I made a little cameo

11 appearance, and I stood up and I said that the board

12 has -- at the time, while there was no written bylaw

13 or written operating agreement that we could point to

14 to show that the board always had that authority, of

15 course the board always had that authority. And I

16 said that, and that's in the transcript. For some

17 reason, it's not attached or referenced in their

18 motion. But we made that very clear.

19 And while Mr. Klieger was focused

20 primarily on the fact or the issues with respect to

21 Mr. Sumner's authority to act as CEO of NAI at the

22 time, he was also saying to Your Honor, as you

23 remember, that the board had also taken ratifying

24 actions. But it was an entirely different procedural

CHANCERY COURT REPORTERS


44

1 matter, because in the Viacom case it was Mr. Redstone

2 who had executed the written consents to do the

3 actions at issue, and then the board had ratified

4 them.

5 This is entirely different, and

6 there's no dispute about that. It wasn't Mr. Redstone

7 as the CEO who acted. And frankly, it wasn't

8 Ms. Redstone as the president, although she also

9 expressly had that authority, who took the action.

10 And fully consistent with the fact, as we keep saying,

11 and the reason we're denying it is because it's not

12 true, she doesn't effectively control NAI. It was the

13 full board that took the action here. Mr. Redstone

14 was part of that board. He was one of seven board

15 members. But it was the full board members, the full

16 board that did it.

17 And frankly, Your Honor, we have two

18 board members who are going to be deposed next week.

19 We have the president who is going to be deposed in

20 about three weeks. The president who, by the way,

21 could have taken that action on her own, but she

22 didn't. The full board did it. So why it is that we

23 need testimony from all seven board members when,

24 let's ask ourselves, what is the act that the board,

CHANCERY COURT REPORTERS


45

1 the NAI board took here that's remotely relevant to

2 this case?

3 One might forget what lawsuit we're

4 here on. The lawsuit we are here on is the lawsuit my

5 friends on the left brought. It is a lawsuit about

6 the validity of a dilutive dividend that they proposed

7 and passed. And it's a lawsuit about their reasons

8 for acting, their justifications for acting, the

9 proportionality of their actions.

10 THE COURT: There are claims in this

11 case of breach of fiduciary duty against the

12 controller, aren't there?

13 MS. KOTLER: Well, the claims are --

14 THE COURT: Are there or aren't there?

15 MS. KOTLER: There are claims, yes,

16 that are based on threats and interference. Your

17 Honor --

18 THE COURT: Just to be clear, though,

19 my understanding -- and I know we have, like, three

20 different pleadings floating around here -- but there

21 is a pleading that asserts breach of fiduciary duty

22 claims against, I guess, the NAI entities, or whoever

23 is controlling CBS. Right?

24 MS. KOTLER: That's correct.

CHANCERY COURT REPORTERS


46

1 THE COURT: Okay.

2 MS. KOTLER: There is. And the

3 allegations specific are that there was interference

4 and there was threats. There is not a single

5 allegation in any of those pleadings that it was

6 Mr. Redstone who played any role, or Mr. Redstone's

7 trust that played any role in that interference or

8 those threats. In fact, the reason, as Mr. Allerhand

9 noted --

10 THE COURT: I haven't surmised why

11 that might be the case. Are you suggesting it's

12 something other than what may be obvious?

13 MS. KOTLER: I'm sorry?

14 THE COURT: Which is that he didn't

15 have the capacity to play that role?

16 MS. KOTLER: No, Your Honor.

17 THE COURT: So what's the reason?

18 Here's the problem I'm having. There is a real "we

19 want it both ways" quality to everything that I'm

20 hearing from your side of the case. It's sort of

21 like, "Oh, he's in control, you know, but then he

22 can't be deposed because, you know, you can't get any

23 information from him, but he's really the guy

24 that's in control."

CHANCERY COURT REPORTERS


47

1 MS. KOTLER: I want to clarify that.

2 We're not saying that. We're not saying he's the guy

3 who is really in control. The CBS stock is owned and

4 held by NAI, and the only actions that NAI has taken,

5 the only actions that have been taken with respect to

6 CBS here, have been taken by the full board.

7 Mr. Redstone has not taken, other than being one of

8 seven board members to vote on the bylaw amendment,

9 which was only done in response, he hasn't taken

10 action.

11 THE COURT: But forget about the bylaw

12 amendment for a second and how that actually went

13 down, which obviously will be the subject of

14 discovery. How about who can just make decisions now

15 on what to do with CBS stock?

16 MS. KOTLER: That's answered, Your

17 Honor. CBS Exhibit 2, and we put --

18 THE COURT: Let me shorten my

19 question. Wouldn't it be very reflective of who can

20 do that to see who has done it in the past?

21 Practically speaking, who really is calling the shots.

22 Did they go through the board on past occasions when

23 somebody took action on behalf of CBS stock or, for

24 that matter, for Viacom stock? Why isn't it relevant

CHANCERY COURT REPORTERS


48

1 to know who really called the shots when the consents

2 were executed in 2016?

3 MS. KOTLER: Because -- respectfully,

4 Your Honor, because it has nothing to do with the

5 question of the dilutive dividend and the actions that

6 were taken.

7 By the way, there is no claim in their

8 complaint that their justification for taking that

9 action had anything whatsoever to do with the trust or

10 Mr. Redstone or who is really in control of NAI. That

11 was never said as a rationale for passing the dilutive

12 dividend. There were essentially two rationales for

13 passing the dilutive dividend: threats that the board

14 was going to be fired and interference.

15 THE COURT: Right.

16 MS. KOTLER: And in context, Your

17 Honor --

18 THE COURT: Which would be future

19 events, threats of those future events.

20 MS. KOTLER: No, Your Honor. It was a

21 threat that, specifically for them, Ms. Redstone was

22 threatening to fire the CBS board in order to force a

23 deal. And that was the threat. That was the threat

24 articulated.

CHANCERY COURT REPORTERS


49

1 Just so Your Honor knows --

2 THE COURT: Right. But isn't that a

3 continuing threat?

4 MS. KOTLER: So Your Honor knows, when

5 we pressed that in discovery and we said, what is

6 the -- what was the basis for this supposed

7 justification --

8 THE COURT: Right.

9 MS. KOTLER: -- the threats were

10 supposedly in the press. We said, "Well, where were

11 these threats written?"

12 And they said, "Yes, there were

13 threats sourced to Ms. Redstone or those close to

14 her."

15 And we said, "Which ones? Where were

16 they?"

17 It took us a month, meet and confers,

18 letters, we sent them an interrogatory, which they

19 refused to answer. "Where are the articles? Just

20 show them to us."

21 They finally gave us a nonexhaustive

22 list of 19 articles. Well, we read those articles.

23 Not a single one has that threat in it sourced to

24 Ms. Redstone or people close to her.

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1 But my point is, and then this motion

2 comes. It's completely predictable. We are looking

3 into what is the justification, as they put it, in

4 their own complaint to start out. They started this,

5 they filed a complaint, they said what their actions

6 were based on.

7 And by the way, they didn't say a

8 word, other than in the caption, about Mr. Redstone or

9 the trust or anything about the worries about who has

10 control at the stockholder level or anything. It was

11 about Ms. Redstone is threatening to fire us and

12 Ms. Redstone is threatening to interfere in certain

13 ways.

14 And just for a little color, Your

15 Honor, one of the other things that we heard up at the

16 TRO hearing was, "Ms. Redstone is out interviewing CEO

17 replacement candidates." If you remember, I said to

18 Your Honor, "Where? How? When?" We also said to

19 them, for weeks before this motion was filed, "Which

20 candidates? Who? When?" We sent interrogatories.

21 They didn't answer. Meet and confers, letters. None.

22 Can't say a single one.

23 But it's all divorced from

24 Mr. Redstone and the trust. This is all a diversion

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1 tactic and, from our perspective, Your Honor,

2 respectfully, it's really an awful one to try to bring

3 in questions of health. Now we're hearing physical.

4 Now we're hearing mental competency questions.

5 And to be clear, he has not ever been

6 found to be incompetent, mentally incompetent. He is

7 competent. He participates in board meetings. He --

8 as CBS knows, but --

9 THE COURT: You're making some pretty

10 strong representations there.

11 MS. KOTLER: Well, the representation

12 I am making, Your Honor, is that under the provisions

13 of the trust, which Your Honor has said, there are

14 certain ways that he would be found to be mentally

15 incompetent. Those provisions -- he has not been

16 found to be mentally incompetent under those

17 provisions. That is what I'm saying. They have never

18 once alleged in their complaint that he's mentally

19 incompetent.

20 And the fact of the matter is, this

21 has nothing to do with why we are here. What were the

22 justifications for the dilutive dividend? What were

23 they worried about? What did they say at the time?

24 What was the basis? What were the threats? None of

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1 them had anything whatsoever to do with Mr. Redstone

2 or the trust.

3 And the mere fact that Mr. Redstone

4 owns 80 percent of NAI and, therefore, has the power

5 to vote and control the vote when there is a matter

6 that requires stockholder approval doesn't change

7 anything. What does that mean? Corporations 101: if

8 you're going to replace directors, you need a

9 stockholder vote. If you're going to have some type

10 of change-of-control action at the NAI level, you need

11 a stockholder vote. There is no issue of a

12 change-of-control transaction involving NAI here.

13 So, yes, Mr. Redstone could

14 theoretically change the directors of NAI. But there

15 is no claim, nor could there be, that other than with

16 respect to what happened in 2016, totally unrelated,

17 having nothing to do with CBS, that he has ever

18 thought about or is going to or that folks were

19 worried that he was going to replace the directors of

20 NAI.

21 So the fact that he has voting control

22 with respect to the NAI stock does not in any way

23 vitiate or change what Your Honor has right in front

24 of you. CBS Exhibit 2, opposition Exhibit 8. The

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1 board of NAI, which is the entities that own the

2 stock, of course they have the authority and the

3 ability, and now it's express, to vote the stock that

4 they own.

5 And, in fact, Your Honor, although

6 this was not mentioned, when you look at that, the

7 board's power, the CEO and the president, which also

8 have that power, cannot, quote, limit or exclude the

9 power and authority of the company's board to vote the

10 stock. And if the board votes the stock, quote, such

11 action shall be valid and effective action of the

12 company and may not be reversed or limited by action

13 of the CEO or president.

14 It's really remarkable that we're

15 sitting here with valid corporate documents of a

16 Maryland corporation and a Delaware limited liability

17 company duly constituted -- there's no challenge to

18 that. We know who the board members are -- duly

19 authorized to vote the stock. And, indeed, there's no

20 question here, other than, unlike what happened two

21 years ago, it was this full board that voted that

22 stock. And they will have full opportunity to ask all

23 the questions they want about that voting of the

24 stock, which by the way, as Your Honor noted, was an

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1 issue that took place within just a two-day period and

2 only after the dilutive dividend came down. Right?

3 This wasn't an action that anybody was planning to

4 amend the bylaws, the CBS bylaws. It was done only to

5 protect NAI's control in response to the dilutive

6 dividend that my friends on the left passed.

7 And there is no hide the controller

8 here, Your Honor. The controlling stockholder of CBS

9 is NAI and NAIEH. We've been saying that from day

10 one. And we certainly intend --

11 THE COURT: Can he be deposed on

12 written questions?

13 MS. KOTLER: I'm sorry?

14 THE COURT: Can he be deposed on

15 written questions?

16 MS. KOTLER: No, he cannot. So let me

17 turn to that, Your Honor. And I'll explain why.

18 And let me maybe -- to answer that,

19 let me back up and explain this Klieger method or the

20 questions. As Your Honor noted, when a client

21 verifies interrogatories, the way it's done is the

22 lawyer drafts them up, the lawyer goes over them with

23 the client, and if the client has any changes or has

24 any problems, it notes it; or if there are none, the

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1 client verifies it. That's exactly what we described

2 in our opposition. And if there were any question

3 about what -- how this granularly worked out, we

4 didn't think it was necessary to clog the record with

5 granular details.

6 But one can imagine, Mr. Klieger says,

7 "Mr. Redstone, I'm going to read you these

8 interrogatory responses right now. Stop me if

9 anything is wrong or inaccurate." And then he reads a

10 few, stops. "Is there any problem?" The person can

11 either indicate yes or no. Reads a few more, stops.

12 "Any problem?" Reads a few more, stops. "Any

13 problem?" Continues on to the end. And at the end

14 says, "Is all of this accurate?" Mr. Redstone can

15 indicate yes or no.

16 This is not complicated. You can call

17 it the Klieger method, but it's exactly what, as Your

18 Honor indicated, one always does. But it's also

19 entirely different from what has been proposed, which

20 is forcing someone, compelling someone to answer

21 questions, open-ended questions that would require the

22 formulation of words, which if you look, Your Honor,

23 in both declarations --

24 THE COURT: Can he type?

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1 MS. KOTLER: No, he cannot. What he

2 has is an iPad, where he can indicate, as the

3 declaration says, yes or no.

4 Just so we can be clear, both Gold

5 declarations already say, paragraphs 14, he cannot

6 clear him for a deposition, regardless of length or

7 other conditions.

8 And to be certain, I went back to

9 Dr. Gold, once the reply was filed, and I described

10 what they were asking for. Multiple time-limited

11 sessions of a deposition. Could he do that? And

12 Dr. Gold said no. As I've already explained, no

13 conditions. And for three reasons that I'll try to

14 sort of oversimplify because I'm not a doctor.

15 But sitting and listening to questions

16 and then indicating -- excuse me. Sitting and

17 listening to prepared responses to interrogatories and

18 then not indicating a problem or saying yes, accurate,

19 is entirely different from having to sit in a room

20 under the force and pressure of having to answer

21 questions, the stress of that, in an adversarial

22 context and being videotaped for others to see him,

23 which adds to the stress, and having to articulate the

24 words, because these are not yes-or-no questions. All

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1 three of those reasons is exactly what is the problem.

2 And frankly, I was surprised, given the statements

3 that were in their own motion and their concern for

4 his health, that they're really pressing for this.

5 My surmise is that the main reason

6 this motion has been made is for precisely the other

7 type of relief that they're seeking and which Your

8 Honor noted is entirely premature, which is to

9 basically not hide the controller, but gag the

10 controller. To say to Your Honor, there is a duly

11 constituted, duly authorized board that -- of an

12 entity that owns and holds these shares that took the

13 action, and that they can't put on testimony from any

14 witness to describe their views, their conduct, their

15 intentions. That is a remarkable request, Your Honor.

16 The sheer breadth of it is astounding.

17 And again, there is no allegation

18 about Mr. Redstone or the trust or any act that he

19 took as the controlling stockholder of NAI. The only

20 action he took here, which they don't even note in

21 their complaint, was as one of seven directors of the

22 NAI board to vote on the bylaw amendment. That's it.

23 And so why this deposition is so critical doesn't make

24 any sense. We're not trying to play a game of hiding

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1 or not.

2 And I know it's -- I haven't gone on

3 as long as Mr. Allerhand, but I know it's been a long

4 morning. I did want to walk you through their chart.

5 THE COURT: Sure.

6 MS. KOTLER: Because none of this,

7 none of these positions are inaccurate. They're, in

8 fact, all consistent with what we've been saying.

9 THE COURT: I must say, I think I

10 actually relied, in one of my letter decisions, on the

11 proposition that Ms. Redstone effectively controlled

12 CBS. I think I actually recited it in one of my

13 letter decisions based on some papers you had

14 previously submitted to me. So I was very surprised

15 to see you amend this pleading.

16 MS. KOTLER: So I apologize, Your

17 Honor. I don't recall what you might have in mind.

18 But I don't recall --

19 THE COURT: I issued two letter

20 decisions recently. One concerned the whole

21 90 percent bylaw issue.

22 MS. KOTLER: Right.

23 THE COURT: And the other -- now it's

24 escaping me. What the heck was it about? It was

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1 discovery related.

2 MS. KOTLER: Yes.

3 THE COURT: And in the background

4 section, I think I recited she effectively controls.

5 Maybe I'm misremembering it, but I was sort of relying

6 on your own papers, so I was a little surprised to see

7 this change.

8 MS. KOTLER: I don't recall us ever

9 saying that, and we have denied it, and the reason is

10 because she is the president, she has the powers that

11 the president has, which, by the way, are coextensive

12 with the powers that the CEO has. But the board also

13 has those powers.

14 So the point of the 10-K, all this

15 line that they have highlighted, is to say, NAI --

16 Mr. Redstone has -- he owns the 80 percent voting

17 interest. So in an SEC context, is that control in

18 the sense that he has the voting interest? If there

19 are actions that require stockholder consent, he does

20 have the power to control that particular vote. But

21 we are not talking about any action here that required

22 NAI stockholder consent. There is no claim that he

23 was replacing NAI directors here.

24 That's what makes this case so

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1 different from the Viacom situation, when, indeed,

2 there was a change at the trust level, and

3 Mr. Redstone did that through his trust. There was a

4 change at the NAI director level. Mr. Redstone did

5 that through his work at the trust. And then there

6 was a change at the Viacom board level. And again,

7 Mr. Redstone, as CEO of NAI, did that.

8 That's not -- none of that happened

9 here. The only action -- and by the way, I should

10 say, even though that was happening --

11 THE COURT: Right. But when you say

12 none of that happened here, you're focusing

13 specifically on the adoption of the 90 percent bylaw.

14 Right?

15 MS. KOTLER: Correct. But, Your

16 Honor --

17 THE COURT: Just hold on. But that's

18 not the only thing that's at issue. If the perceived

19 threat is offing board members, the threat looms. So

20 I'm not sure I understand, just because that's the way

21 things, you are representing to me, and I'll accept it

22 as true, went down for the approval of the 90 percent

23 bylaw, that negates the relevance of how control may

24 otherwise be exercised. And looking at how it's been

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1 handled in the past could be very relevant to that.

2 MS. KOTLER: But you don't have to

3 look further than their own pleading. They don't

4 claim that Mr. Redstone was interfering. They don't

5 claim that the trust was interfering.

6 THE COURT: I think they were claiming

7 Ms. Redstone was. And they viewed it as a conceded

8 fact she had that type of control, which you're now

9 saying that's not the case.

10 MS. KOTLER: But what does it matter

11 if they viewed it as a conceded fact that she had the

12 control? They're saying as a factual matter --

13 THE COURT: Then we know what the

14 target is. Right? Then we know, if there's

15 controller liability, who's ultimately responsible or

16 not. Then we know actually what the narrative of this

17 case is or not. That's why it matters.

18 MS. KOTLER: With all due respect,

19 Your Honor, I think that is not what their pleading

20 is. The directors took action, the directors of CBS

21 took action based on what they claimed were perceived

22 threats as of the date that they voted on the

23 dividend.

24 THE COURT: I understand.

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1 MS. KOTLER: They did not in any

2 way --

3 THE COURT: What was that threat?

4 MS. KOTLER: And they have identified

5 --

6 THE COURT: No; what was the threat?

7 That board members would be removed. Right?

8 MS. KOTLER: No. That's right, that

9 CBS board members would be removed.

10 THE COURT: Exactly.

11 MS. KOTLER: By Ms. Redstone. That

12 was the claim, by Ms. Redstone. So my point is, in

13 saying, so why are we looking at Mr. Redstone?

14 THE COURT: Because you're contending

15 now, all of a sudden, that she didn't have that

16 ability. So who does?

17 MS. KOTLER: That's also -- with all

18 due respect, Your Honor, we're not saying that she

19 didn't have that authority. We're saying she is not

20 the only controller of NAI. She is the president, and

21 she's authorized to do --

22 THE COURT: This is a discovery

23 motion. We are in discovery. So why can't somebody

24 inquire into these facts?

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1 MS. KOTLER: Your Honor, we're not

2 saying that they can't. And she's going to be

3 deposed, and they can ask all those questions.

4 What I thought you and I were talking

5 about is this separate request they have today in the

6 guise of a discovery motion to seek to preclude us

7 from putting on testimony from any witnesses about

8 NAI.

9 THE COURT: Look, I have the

10 extraordinary nature of that request. Believe me, I

11 understand that. But obviously, I'm looking at the

12 bigger picture.

13 MS. KOTLER: Then I apologize, Your

14 Honor. I don't mean to be disagreeing with you. My

15 view is we expect that they're going to ask those

16 questions. We expect that they're going to ask

17 questions of her. We expect that they're going to ask

18 questions of the other directors.

19 THE COURT: The real rub is, by any

20 measure, somebody who, if we were five years ago,

21 would be the absolute most crucial witness, probably

22 in the entire case, will be unavailable, essentially.

23 That's a reality we're in. Right? You would agree

24 with me, if this happened, let's say, 10 years ago, so

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1 we're in a totally safe comfort zone, Mr. Redstone

2 would be the single-most important witness probably in

3 this case? Wouldn't you agree with me on that?

4 MS. KOTLER: Your Honor, I would. And

5 if we could put him on, we wouldn't be here today.

6 Let's be clear. So we wish that that were the case,

7 too. But it's not.

8 THE COURT: Exactly. So we are sort

9 of where we are, where maybe he is the most important

10 person in the room, but nobody can ask him questions

11 about it.

12 MS. KOTLER: So with all due respect,

13 I can't necessarily agree to that. We don't agree

14 with that characterization that on these facts, with

15 respect to the dilutive dividend, he is the most

16 important person in the room.

17 Our point is only, given the actions

18 that have taken place, his deposition -- and given the

19 medical evidence, which is uncontroverted, and I don't

20 think they dispute it, they don't dispute it in any

21 way, and what you have, he can't be deposed. But the

22 response is, then, to not say NAI, with a duly

23 constituted, duly authorized board that can vote the

24 stock, now can't put on any witness to talk about its

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1 intentions or its actions. But I won't retread sort

2 of the extraordinary nature of that.

3 THE COURT: I have that point. I

4 mean, in terms of the motion that was actually

5 presented to me, there is a request to strike his

6 verification.

7 Why should I have any confidence in

8 this Klieger method, given the state of the record in

9 front of me?

10 MS. KOTLER: Your Honor, again, I

11 think the verification was with respect to the

12 responses that simply say he's somebody who has the

13 information.

14 THE COURT: How many interrogatories

15 did he verify again? There's, like, 60 or something?

16 How many was it?

17 MS. KOTLER: With respect to him,

18 there were only two, by the way, that said he had

19 discoverable information.

20 THE COURT: How many did Mr. Klieger

21 review with him?

22 MS. KOTLER: He went over all of them.

23 He did read all of them.

24 THE COURT: How many are there?

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1 MS. KOTLER: Sorry, Your Honor.

2 That's exhibit -- let me give you the exact number.

3 THE COURT: Right. Do you know the

4 length of time Mr. Klieger took to go through this

5 process?

6 MS. KOTLER: So the -- 46

7 interrogatories.

8 THE COURT: 46. And how long did it

9 take Mr. Klieger to do this?

10 MS. KOTLER: I don't know the answer

11 to that, Your Honor. But, again, I have explained --

12 THE COURT: Nobody has inquired as to

13 that question?

14 MS. KOTLER: That particular question

15 I did not inquire. I could find out if Your Honor

16 found it meaningful. But again, I have explained the

17 process, which is really no different --

18 THE COURT: I got the process. How

19 many breaks did he take when he did it?

20 MS. KOTLER: I didn't ask that

21 question either, Your Honor. Again, if you would like

22 me to, I would be happy to ask.

23 But he sat, he read them. In a way,

24 it's no different than a lawyer sitting down with a

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1 client and going over the interrogatory responses, and

2 all that was -- you know, do you have questions? Is

3 there anything problematic? And continue on --

4 continuing on, which is entirely different from, for

5 the reasons I said, having to answer questions.

6 So back to your question, Your Honor,

7 about the verification. What he verified was he's

8 somebody with knowledge. That's not in dispute. He

9 is somebody with knowledge. And if Your Honor reads

10 them -- and I would encourage Your Honor, if you

11 wanted to read through it, if you look at the

12 interrogatories, most of the requests were simply

13 asked who had -- who are witnesses with information.

14 And we identify, in some cases, a hundred people, in

15 some cases fewer, although he was always identified

16 along with all of the other board members. And he

17 verified that those were accurate. And by the way, he

18 had to verify that because he is a party and he

19 received -- the interrogatories were served on him.

20 Just backing up, though, the first

21 request was to strike the two interrogatory responses,

22 as I read it, the two that say -- on the grounds that

23 they were somehow inaccurate because we listed

24 Mr. Redstone as somebody who had discoverable

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1 information.

2 We did that, Your Honor, because we

3 thought we had to. If we didn't list him, we would

4 have faced a very different motion. Frankly, you

5 didn't even hear anything about that from

6 Mr. Allerhand, so I don't think that's something that

7 they're seriously pursuing. The verification he had

8 to sign. We went through a procedure to get him to do

9 it that shouldn't be particularly surprising to

10 anybody, and he verified that he is somebody who has

11 information.

12 The third piece of it was the

13 deposition, which I think you and I have now

14 discussed. And then we discussed briefly the issue

15 with respect to this sweeping request at this

16 premature phase to preclude information, which I -- if

17 Your Honor has questions about that, I'm happy to go

18 into it, but I think it is entirely premature either

19 to make rulings preventing NAI from putting on

20 testimony about its corporate acts through other

21 directors and the president of NAI, or, if you want,

22 I'm happy to talk about the rules of hearsay and what

23 past statements of Mr. Redstone would be, indeed,

24 admissible.

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1 THE COURT: Maybe.

2 MS. KOTLER: We can brief it for Your

3 Honor. But I have to say, there's a reason they want

4 --

5 THE COURT: I know you're going to say

6 state of mind, state of mind, state of mind until the

7 cows come home about what people can say about what

8 Mr. Redstone may have communicated to them. Maybe.

9 MS. KOTLER: But we agree, Your Honor,

10 it's for another day. And it's state of mind with

11 respect to both those that heard it -- so, for

12 instance, Mr. Moonves and how that motivated him -- or

13 with respect to Mr. Redstone's state of mind when --

14 THE COURT: Those are the issues that

15 will be interesting to sort out. I haven't thought

16 through them very deeply.

17 MS. KOTLER: Sure. No problem, Your

18 Honor. Under 803(3). But as we have said, Your

19 Honor, it's entirely premature to do that now.

20 The last thing I would want to say,

21 Your Honor, a bit out of order, but you've heard some

22 things about the trust. And again, I think you get

23 our -- it's all tied into our notion that the trust --

24 there are no allegations regarding the trust. There's

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1 no allegation that the trust interfered in some way or

2 was the basis for the perceived threats. You can look

3 through their complaints. There's not a single

4 mention of the trust. The trust is literally a

5 document. It holds NAI stock. It does nothing else.

6 Mr. Redstone has never taken action through the trust

7 with respect to CBS. That's not disputed.

8 Undisputed.

9 THE COURT: I'm sorry, was that Mr. or

10 Ms.?

11 MS. KOTLER: Mr. Redstone. But

12 neither of them have ever taken action through their

13 trust with respect to CBS. Nothing has been done at

14 the trust -- Your Honor, it's true, nothing has been

15 done at the trust level with respect to CBS.

16 THE COURT: No; but if I go back to

17 Viacom, it all happened through the NAI board. Right?

18 MS. KOTLER: That is true with respect

19 to a dispute that had to do with removing Mr. Dauman

20 and Mr. Abrams from the trust and the NAI board.

21 THE COURT: Wasn't it, like, five

22 directors of Viacom?

23 MS. KOTLER: At the trust level on the

24 NAI board, it was just the two of them. And then at

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1 the Viacom board level, it was more of them.

2 But, again, that had absolutely

3 nothing to do with CBS. In fact, after that -- CBS

4 was not involved in that dispute in any way, except

5 that afterward --

6 THE COURT: I'm trying to remember. I

7 know there was this whole issue about Paramount back

8 then. But was there no discussion in that 2016 period

9 about a combination between Viacom and CBS?

10 MS. KOTLER: No, none. The

11 combination wasn't even proposed until months later,

12 after the settlement of the litigation. In fact, the

13 only connection that CBS had in connection with the

14 dispute was that Mr. Moonves issued a statement

15 afterwards in support of Ms. Redstone and what had

16 happened. But it did not at all have to do with CBS,

17 and the trust has never -- Mr. Redstone through the

18 trust has never taken action with respect to the CBS

19 stock that is owned and held by NAI. There's no

20 dispute of that. There couldn't genuinely be a

21 dispute about that.

22 I will say that there was a request

23 from Mr. Allerhand that the document be opened up for

24 further -- circulated more broadly. With all due

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1 respect, Your Honor --

2 THE COURT: I don't really have that

3 in front of me. You're talking about the trust

4 document?

5 MS. KOTLER: Oh, the trust document?

6 THE COURT: Which document are you

7 referring to?

8 MS. KOTLER: The trust.

9 THE COURT: That's what I thought. I

10 don't think I have a motion in front of me to do that,

11 so I'm not going to rule on that.

12 MS. KOTLER: That's where I was going

13 to go. That was put in a footnote.

14 The other thing I would say is we did

15 not admit something or drop some bombshell in a

16 footnote of our opposition brief. All we said was,

17 after all this emphasis and focus on the trust, what

18 have they really come up with about it?

19 There were two things. One, the false

20 assertion that it, quote, seemingly gives Mr. Redstone

21 the sole and exclusive authority to vote CBS stock.

22 That's just plainly not true, Your Honor. You can

23 look in the trust. The sole and exclusive authority

24 for voting stock is with respect to the NAI stock.

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1 That's what the trust says. That's Article G-21 and

2 Article A-4(c). It does not in any way talk about his

3 sole and exclusive authority to vote CBS stock, or it

4 would be called Viacom stock. The "sole and exclusive

5 authority" language is with respect to voting "the

6 stock," which is expressly defined as NAI stock. So

7 that's just a false statement that they made for that.

8 And then they've come up with this

9 other provision that they noted for Your Honor. It

10 was they that mentioned it in paragraph 19 of their

11 moving papers. And what we said in our footnote is

12 that's actually wrong. If they think that that

13 provision would preclude the trustees after

14 Mr. Redstone's lifetime from doing something, they're

15 wrong about that, because the trustees can amend it.

16 That's all we said. And that's on the face of -- it's

17 on the face of the trust. It's Article H, paragraph

18 7. There's no bombshell, nothing big, nothing

19 special. We weren't even going to raise it, but they

20 had raised to you this question: does the trust allow

21 this? And how important this is. And all we said is,

22 no, it doesn't preclude it. No bombshell.

23 By the way, you heard this morning

24 that that would be the most compelling reason for the

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1 dilutive dividend. I don't need to say anything more

2 other than it wasn't the reason for the dividend. The

3 dividend needs to be addressed based upon what the

4 directors were talking about and thought and believed

5 at the time. There wasn't a single mention of the

6 trust or any particular provision of the trust.

7 I will just quickly -- I hadn't

8 finished this -- No. 4. Look, on the migration-of-

9 control point, I don't know how to -- we tried to make

10 this very clear. Maybe hindsight is 20/20 and you

11 wish that you had phrased your language a little

12 differently. But we had always intended this sentence

13 to mean from Mr. Moonves' perception. And, in fact,

14 we wrote it from his perception, because we were

15 saying the only cogent, but improper, explanation for

16 their conduct is that Mr. Moonves has tired of dealing

17 with NAI's -- with having a controlling stockholder of

18 CBS, meaning NAI. And then we continued on with the

19 wording. And we thought that made clear that this was

20 all in his view; that in his view, there was a

21 migration. And what we have been saying over and over

22 again was there was no migration.

23 NAI's control over CBS, its ability to

24 vote the CBS stock has always been, one small note,

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1 the same thing. The board has always had that power.

2 The CEO has always had that power. And since

3 September of 2016, the president has had that power.

4 Long before any of the issues or facts at issue in

5 this case that they claim led to the dividend. And

6 that's all that that sentence was. And we only

7 amended it because we kept telling them that's what

8 that sentence means. They kept mischaracterizing it.

9 They put their mischaracterization in a public filing.

10 THE COURT: You're referring to the

11 CEO and the president of NAI. Right?

12 MS. KOTLER: The CEO and president of

13 NAI, that's correct.

14 THE COURT: And identify for me, just

15 so it's super clear for the record, who those people

16 are.

17 MS. KOTLER: Mr. Redstone is the CEO,

18 and Ms. Redstone is the president. And then, again,

19 there's the express authority of the board.

20 We've talked about the denial with

21 respect to Ms. Redstone's effective control.

22 And the last thing I will say is this

23 last piece, where they describe this as a proposed --

24 the NAI's proposed change to the related-party

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1 disclosure. This wasn't a proposed change to the

2 disclosure. What had happened was CBS sent the

3 footnote, asked us to -- asked Mr. Andelman to confirm

4 it. What Mr. Andelman said ultimately was, "Look,

5 this is your disclosure. And given all the broad

6 statements and assertions that you're making about

7 control, we don't feel comfortable in this email

8 context of doing anything other than confirming the

9 facts. And so here are the facts in this paragraph,

10 and those are all the facts that I'm confirming."

11 So the only thing that was struck out,

12 not because we were asking them to change the

13 disclosure, but was just to say these are the facts,

14 other than what's struck out are not facts, and I'm

15 confirming all those.

16 And, in fact, that email was sent.

17 Your Honor, I would be happy to hand it up, if you

18 would allow me to.

19 THE COURT: You may.

20 MS. KOTLER: Thank you. What he says

21 is this, given the broad assertions that CBS has been

22 making regarding "control," this email exchange is not

23 the appropriate forum in which to resolve the debate.

24 "I can confirm that the revised draft I sent you on

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1 Friday," which is what appears in the appendix, "...

2 is a correct statement of the facts." Meaning that's

3 what he's confirming in response to their request.

4 He's only going -- we were going to confirm facts

5 because we didn't want to be caught in some kind of

6 admission or statement. And frankly, we were right to

7 be concerned about that because, lo and behold, a part

8 of the email exchange showed up as exhibits to the

9 motion, but not this email.

10 THE COURT: Is Mr. Andelman one of the

11 trustees? I'm doing this from memory.

12 MS. KOTLER: He is both an NAI

13 director, and will be deposed next week, and also a

14 trustee.

15 THE COURT: And does he serve in a

16 legal capacity for the trust or NAI?

17 MS. KOTLER: He is also -- yes, he is

18 also counsel to Mr. Redstone and has been -- has

19 provided legal advice to NAI as well. But CBS -- and

20 CBS went to him and asked him to confirm facts, and

21 all he said was, "I'm only going to confirm the facts

22 because I don't want to make some kind of admission.

23 We're not going to make some kind of admission that

24 you're going to use against us. So here are the facts

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1 that we can confirm for you."

2 There's no statement that this is now,

3 as this chart seems to imply, this is the disclosure

4 that you need to put in your Q.

5 I think I've covered everything,

6 unless Your Honor has questions, on the Sumner motion.

7 I want to quickly, just very quickly, talk about the

8 control docs.

9 THE COURT: All right.

10 MS. KOTLER: Putting aside, Your

11 Honor, that we have produced all the governance docs

12 and the ownership docs, they still complain that we

13 need to produce some kind of documents about control

14 of NAI, some types of emails or communications.

15 We, frankly, don't even know exactly

16 what that means. But what I can tell you is there are

17 no -- with one exception, that I will get to in a

18 moment -- with one exception, that I will get to in a

19 moment --

20 THE COURT: There are no what?

21 MS. KOTLER: There are no such general

22 documents talking generally about the control of NAI,

23 just -- without reference to either CBS or the stock

24 that it owns. And we agreed, as they don't dispute,

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1 that if there are any of these documents that talk

2 about the ownership of either CBS or Viacom -- excuse

3 me. The ownership of CBS or taking action with

4 respect to CBS, we'll produce them, which we did.

5 And by the way, that swept in, even

6 though it didn't mention CBS on its face, all the

7 documents leading to the September 2016 bylaw

8 amendment. And we told them we were giving them that,

9 even though that was not acknowledged today. And we

10 construed that very broadly. Anything that we could

11 find, any communication about control of NAI with

12 respect to the stock that it owns, with one exception

13 that I'll get to, we told them we'd produce and we did

14 produce. There just aren't documents about some power

15 struggle or discussion of how things worked at NAI.

16 They just don't exist, and we can't produce

17 communications that don't exist.

18 THE COURT: Why the limitation to CBS?

19 MS. KOTLER: Well, we thought it made

20 sense, Your Honor, since this is a case about CBS.

21 THE COURT: But the issue is, or at

22 least the issue for discovery -- forget about whether

23 or not it ultimately becomes relevant at a trial --

24 is, in sort of basic terms, who is really calling the

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1 shots at NAI.

2 Now, if that's true, at least that's

3 something people had a legitimate right to inquire

4 about. And the structure is essentially the same on

5 the Viacom side of the house as on the CBS side of the

6 house. Right? Shouldn't they be able to inquire into

7 how that's gone down in the past?

8 MS. KOTLER: Your Honor, my answer is

9 we looked for those, too. And the only exception, the

10 only time we withheld documents, which is what we told

11 them we would withhold, are the documents about the

12 written consent and the dispute that had to do with

13 Viacom in May and June of 2016.

14 THE COURT: Why should that be an

15 exception?

16 MS. KOTLER: Well, Mr. Hou will argue

17 that point. But those were the only documents that we

18 withheld for particular reasons. But otherwise,

19 documents about control of NAI, if they existed -- and

20 there were none that were sort of generally about

21 NAI -- we produced them. We cannot create

22 documents --

23 THE COURT: Did you tell them you

24 produced the Viacom ones, if there were any, other

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1 than the ones that concerned the consent in 2016?

2 MS. KOTLER: Your Honor, we told them

3 we would apply generally for anything that talked

4 about control -- by the way, Your Honor, we asked

5 them, "What do you mean by this? What does that mean,

6 control of NAI? We don't see any, but we'll look."

7 THE COURT: Right. The reason I'm

8 confused is because in your -- or in the papers on

9 this motion, as I understood it, the position that you

10 were asserting, or at least the way it was

11 characterized in the papers, as I read it, is you were

12 only willing to produce documents in response to these

13 four requests that touch on or relate to CBS.

14 But you seem to be telling me that,

15 no, we actually did it for Viacom, with this exception

16 that Mr. Hou is going to talk about. Right?

17 MS. KOTLER: So the reason I'm

18 struggling, Your Honor, is because the documents don't

19 -- there aren't also documents speaking generally

20 about NAI with respect to Viacom, other than outside

21 of the Viacom dispute. There just -- what I'm telling

22 you now is, and what I thought we communicated to

23 them, is we're going to apply broadly our review.

24 It's got to have some connection to voting or

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1 potential action for CBS.

2 We actually, though, in fact, went

3 further. And if there was anything that -- we read it

4 broadly. They have accused us of reading it narrowly,

5 but we read it broadly. And if the documents talked

6 about how things work at NAI that could be construed

7 in any way that could apply equally to CBS or Viacom,

8 just like the September 2016 bylaw amendment, which

9 doesn't mention CBS by name, communications about

10 that, we did, indeed, produce those. And that fell

11 within what we said we were producing.

12 The only category of documents that we

13 told them we would withhold are those with respect to

14 the dispute that involved replacing a trustee and --

15 the two trustees, the two NAI directors, and some

16 Viacom directors, all related to a specific Viacom

17 dispute. That's it.

18 And they have not -- it's their

19 burden. They have not been able to show that, other

20 than those documents which we withheld, there's

21 anything else out there, or that we withheld anything,

22 because we didn't.

23 And that's what I thought we said in

24 our papers in response. And if we didn't make that

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1 clear, Your Honor, I apologize. But I want to be very

2 clear. We looked very broadly, and if the document

3 talked about control of NAI with respect to the stock

4 that it holds, which -- we produced it, other than

5 with that one exception concerning the consents in

6 2016.

7 THE COURT: Which just to give it a

8 label, I'm just going to call it the 2016 Viacom

9 dispute. Is that a fair way that people understand

10 what we're talking about?

11 MS. KOTLER: Fair enough, Your Honor.

12 Yes.

13 THE COURT: All right. Did you have

14 anything else, Ms. Kotler?

15 MS. KOTLER: I don't, unless Your

16 Honor has any questions for me.

17 THE COURT: No. But what we're going

18 to do at this point, I think, is take about a 10- or

19 15-minute break, and then we can resume.

20 I apologize, because I know I asked

21 you before if it's Mr. Hou or Mr. Hou, and I always

22 get it mixed up.

23 MR. HOU: You nailed it, Judge. It's

24 Hou. Thank you.

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1 THE COURT: Thanks.

2 (A brief recess was taken at 11:33

3 a.m.)

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1 THE COURT: Ms. Kotler, I do have a

2 few more questions for you.

3 All right. I just want to get some

4 facts straight in my head here. So I'm looking at the

5 affidavit that was submitted with your papers, which

6 has the 2016 bylaw attached to it, this September 26,

7 2016 bylaw amendment.

8 MS. KOTLER: So, Your Honor, actually,

9 the CBS parties submitted it with their papers for

10 NAI. We submitted the signed copy for NAIEH with our

11 papers. Do you have a particular one in mind that you

12 want to hear about?

13 THE COURT: That may be part of my

14 question. I just want to make sure I understand the

15 facts here.

16 So the one I'm looking at, which was

17 with the Jacqueline Rogers affidavit, I think is a

18 bylaw amendment for Holdings, if I'm reading it

19 correctly. And that is one of my questions. Does

20 this same bylaw provision exist at National

21 Amusements, Inc. as at Holdings?

22 MS. KOTLER: Correct, Your Honor. And

23 I'm glad we talked about this. The Exhibit 2 to the

24 CBS moving papers has, in fact, the board -- it starts

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1 with the minutes of a special meeting of the full

2 board --

3 THE COURT: Right.

4 MS. KOTLER: -- to approve the

5 resolutions both for NAI and NAIEH. And because what

6 they did was they did not submit a signed version of

7 the NAIEH one, we just gave Your Honor the signed

8 version of NAIEH as an exhibit to our papers. But the

9 NAI ones had the exact same language that I read to

10 you. It's at the bottom, and the page is Bates

11 stamped NAI 115.

12 THE COURT: Okay.

13 And when you say "NAIEH," you're

14 referring to Holdings, what I've been calling

15 Holdings, the LLC.

16 MS. KOTLER: Yes, Your Honor.

17 THE COURT: Okay. So through this

18 bylaw, at least since 2016, there can be three ways

19 that somebody could vote the CBS shares to take

20 action. One could be through the NAI board, for

21 example. The second would be a unilateral action of

22 Mr. Redstone, if he were competent to take such

23 action. And the third would be a unilateral action of

24 Ms. Redstone. Is that right?

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1 MS. KOTLER: Of Ms. Redstone, that's

2 correct, Your Honor.

3 THE COURT: So, for example, if

4 Ms. Redstone wanted to remove directors of the CBS

5 board, she could do it unilaterally, at a meeting

6 or -- I don't know what the situation is with written

7 consents, whether CBS allows written consents.

8 Do they? Does CBS permit action by

9 written consent?

10 MS. KOTLER: Yes, Your Honor. She

11 could do it or the board could do it. She didn't, but

12 yes.

13 THE COURT: She could do it

14 unilaterally, without the board, under this bylaw.

15 MS. KOTLER: Yes, Your Honor.

16 Although I want to answer, I think what you may be

17 getting at is something that Mr. Allerhand said or a

18 claim that that's somehow inconsistent with the trust.

19 We don't believe --

20 THE COURT: I'm not implying any

21 inconsistency. I'm just trying to understand what the

22 consequence of this bylaw is. That's what I'm trying

23 to understand. Maybe people have arguments that it's

24 not a permissible bylaw, that there's an

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1 inconsistency. I'm really not focusing on that.

2 Just taking it at face value, this

3 means those three sources, the NAI board, writ large,

4 by board action of the NAI board; Mr. Redstone

5 individually, unilaterally; or Ms. Redstone,

6 individually unilaterally, could remove CBS directors.

7 MS. KOTLER: That's correct, although

8 the only thing I'll add is if you look at the

9 paragraph that talks about the board, it says that if

10 the board takes that action, the CEO and the president

11 cannot limit it or change it or affect it.

12 THE COURT: Okay. Now, next question

13 I have is what happens if the CEO -- let's say the

14 president took such action, removed a bunch of CBS

15 directors, and the CEO, assuming he was competent to

16 make this judgment, disagreed with the taking of that

17 action. What happens then?

18 MS. KOTLER: I'm only pausing, Your

19 Honor, because it's a hypothetical. There's no claim

20 it took place or was going to take place.

21 THE COURT: Right. But is there a

22 mechanism that addresses that?

23 If you don't know, that's okay.

24 MS. KOTLER: I don't know that I can

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1 give the answer to that.

2 THE COURT: I'm surmising there's

3 probably not.

4 MS. KOTLER: I would have thought that

5 the board probably had inherent authority if it wanted

6 to disagree, but I don't know the answer to that.

7 THE COURT: I'm just trying to

8 understand.

9 MS. KOTLER: The only reason I'm

10 delayed, Your Honor, or don't know the answer is

11 because there is no dispute here, she didn't take that

12 action. We may have a dispute over whether there was

13 a threat that she was going to take that action, and

14 we dispute that --

15 THE COURT: Got it.

16 MS. KOTLER: -- but no.

17 THE COURT: Next question.

18 This bylaw, can you put it in a

19 sequence of time for me relative to the 2016 Viacom

20 consent dispute?

21 MS. KOTLER: Sure.

22 THE COURT: Did this come in the

23 middle of it? At the beginning of it? After it

24 settled? Where did it come?

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1 MS. KOTLER: After it settled, Your

2 Honor. The settlement was in August, and this was

3 adopted in September. But again, Your Honor, what

4 it -- a big part of what it did was there were

5 questions, maybe not to us directly, but as I had said

6 at the July hearing back in 2016, the board also

7 always has authority to vote the stock, although that

8 was never written anywhere down. It was an inherent

9 authority.

10 And so one of the things that was done

11 through this bylaw amendment was simply to make

12 express the authority of the board to take the action

13 to vote either the Viacom or CBS stock.

14 THE COURT: All right. Those are the

15 questions I had.

16 Mr. Hou, were you going to address

17 something now or do you have the other motion?

18 MR. HOU: I'm happy to address it

19 later when we discuss the Viacom, because that's --

20 THE COURT: Okay. All right.

21 MR. ALLERHAND: I just have two

22 issues, Your Honor.

23 THE COURT: You may.

24 MR. ALLERHAND: Your Honor, just

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1 following up on the Court's question on the bylaw, we

2 think Your Honor has it exactly right. There were

3 three groups who can act. And I think it's pretty

4 clear, since there's singular power to act, whoever

5 acts first, it becomes a fait accompli.

6 If Mr. Redstone acted pursuant to this

7 power -- he has the power anyway by his control over

8 NAI -- his act would control. If Ms. Redstone acted

9 first, it says she has the singular authority. It

10 doesn't say it's subject to the board. And then if

11 the board acted on its own, it would have the power.

12 But there's no veto. Whoever acts first under any one

13 of these three prongs, it seems to me, would have the

14 power. That's how we read the document. What it

15 means, I don't know, but that's how I think -- I think

16 Your Honor is correct, that's what the document says.

17 THE COURT: Okay.

18 MR. ALLERHAND: Just three points.

19 On the Dr. Gold reports, without

20 getting into the details, if you look at our moving

21 papers on the Sumner motion, and that would be Exhibit

22 3, Your Honor, when the Court has time to, please go

23 back and look at paragraph 12.

24 THE COURT: Tell me again where it is.

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1 MR. ALLERHAND: Sure. Exhibit 3 is

2 the earlier Dr. Gold report that had been provided to

3 us by our adversaries.

4 THE COURT: All right.

5 MR. ALLERHAND: And in particular, if

6 you look at paragraph 12, lines 3 and 4, then you'll

7 see information about the ability of Mr. Redstone to

8 communicate in a certain method, and difficulty.

9 THE COURT: Right.

10 MR. ALLERHAND: I'm not going to --

11 THE COURT: I'm reading the lines. Is

12 there something you want me to compare that to?

13 MR. ALLERHAND: Yes. If you then turn

14 to the more recent Dr. Gold report which we

15 received --

16 THE COURT: Where is that?

17 MR. ALLERHAND: And that is NAI

18 parties' opposition papers, the transmittal affidavit.

19 And that would be Exhibit 6 to the transmittal

20 affidavit.

21 Do you have that, Your Honor?

22 Jacqueline Rogers.

23 THE COURT: I'll find it again. You

24 said Exhibit 6. Right?

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1 MR. ALLERHAND: Yep.

2 THE COURT: Yes, I do have it.

3 MR. ALLERHAND: And if you turn to

4 paragraph 13, you'll see in the penultimate sentence

5 of that paragraph, the doctor is reporting on

6 Mr. Redstone's ability to communicate. And I had

7 previously drawn the Court's attention --

8 THE COURT: The sentence that begins

9 "at this point"?

10 MR. ALLERHAND: Yes. And you'll

11 notice that something is left out at the end of that

12 sentence which had appeared in the prior report -- I

13 believe the earlier report was from January -- in

14 terms of his ability to communicate.

15 I had referenced that during my

16 argument and I wanted to make sure the Court had it.

17 So you'll compare the difference between the two.

18 You'll see there's a difference with respect to

19 Mr. Redstone's ability to communicate, according to

20 Dr. Gold in the earlier report, and where we are

21 today.

22 In that regard, we are going to notice

23 the deposition of Dr. Gold. We've heard statements

24 today by counsel that are not in his reports about the

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1 ability of Mr. Redstone to communicate in certain

2 matters. And I just wanted to alert the Court that

3 we're going to do that.

4 And I would hope there won't be

5 opposition, given the representations that are being

6 made. But I'm pretty sure if there will be, we'll be

7 bringing it back to Your Honor's attention.

8 THE COURT: For another day.

9 MR. ALLERHAND: For another day.

10 Enough on the plate. I understand.

11 Importantly, during the argument,

12 counsel for NAI said that Mr. Redstone is not

13 incompetent. And then Your Honor said, That's pretty

14 strong. That's a pretty strong statement. And then

15 it was walked back to a statement, He has not been

16 found to be incompetent under the terms of the trust.

17 This is a game that's been going on

18 now for easily more than two years. You can't be

19 found to be incompetent under the trust unless someone

20 triggers the provisions of the trust which require an

21 examination by a number of doctors, et cetera.

22 Obviously, if the settlor is

23 incompetent, then you wonder who is going to pull that

24 trigger.

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1 And the last time you heard this

2 argument, two years ago, Mr. Klieger said to you that

3 Dr. Gold, under his Hippocratic oath, has a

4 responsibility when he examines Mr. Redstone twice a

5 week to bring to someone's attention if there are

6 cognitive ability impairments and he can't make

7 decisions, because it might implicate health care

8 directives, et cetera.

9 Number three, we thought it was

10 self-evident from our opposition papers and from our

11 reply that we were going to be pursuing a Rule 31

12 deposition on written examination as an alternative.

13 And I thought it would have been

14 reasonable to expect that our adversaries would have

15 had information as to how Mr. Klieger was able to read

16 interrogatories that would have taken more than an

17 hour, what process was used, so the Court could have

18 assessed whether that process would be available for a

19 lesser-intrusive deposition under Rule 31.

20 Next to last, if you look at Footnote

21 3 in NAI's opposition to this motion -- and that

22 footnote is partially redacted; it goes to the Article

23 G, Section 21 -- it's critical. This is not a small

24 issue. It is a bombshell. They don't disagree with

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1 our interpretation of the provision. It has real

2 impact for people investing in the stock today and for

3 the importance of the dilutive dividend.

4 And we are telling the Court that

5 their supposed fix is absolutely prohibited under

6 trusts and estates law based on the experts we are

7 consulting with. Of course, Your Honor will do his

8 own research whether or not a settlor's intent can be

9 so easily undone.

10 Finally, on the control document

11 motion, it's hard to understand how we ended up here

12 fighting about this if there's no dispute.

13 When you look at their opposition

14 papers, it's kind of different than what we heard here

15 today. The second sentence of paragraph 1 -- excuse

16 me -- third sentence of their opposition says "Any

17 incremental discovery regarding control of NAI

18 generally would be irrelevant to this litigation and

19 unlikely to lead to admissible evidence."

20 That's an objection that they're not

21 going to provide documents that relate in any way to

22 control over NAI other than, as I understood it when

23 we had our back and forth, if it directly mentioned

24 CBS.

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1 So I think they should be ordered to

2 produce the documents. If there are no documents,

3 then there are no documents. But there was an

4 objection, Your Honor.

5 THE COURT: I'm trying to understand

6 that these -- two of these motions overlap that I

7 thought may not have been overlapping.

8 The motion concerning Document

9 Requests 41, 42, 47, and 48, if I granted your motion,

10 as you understand it, do you get the Viacom consent

11 documents?

12 MR. ALLERHAND: Well, I think that's

13 been carved out as a separate piece.

14 THE COURT: So that's carved out. I

15 want to be sure --

16 MR. ALLERHAND: If you grant those

17 three paragraphs, that would resolve the motion with

18 respect to the control documents.

19 THE COURT: Right.

20 MR. ALLERHAND: And then all you would

21 be left with is this separate sliver or slice of

22 documents relating to what happened back in 2016 with

23 the consents.

24 With that, I'm done. Thank you for

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1 your patience, Your Honor.

2 MS. KOTLER: Your Honor, just two

3 minutes.

4 THE COURT: Yes.

5 MS. KOTLER: Mr. Allerhand has pointed

6 out a difference between the Gold affidavits. I'm

7 going to try to speak about this generically. There

8 was a reason for it.

9 The ability to articulate the

10 responses that are noted in the first is no longer

11 there, but there are other ways to articulate those

12 words, exactly what I said before, using an iPad that

13 has a yes or a no.

14 There is no mystery. There was no

15 game playing. We weren't trying to hide anything.

16 With respect to what I said before,

17 Your Honor, with respect to competency, I'm not a

18 doctor, and that's why I needed to sort of be careful

19 with my words. You were right to call me out on that.

20 And I didn't mean to convey anything differently other

21 than he hasn't been found through those procedures to

22 be found incompetent.

23 And the only other thing I will say

24 with respect to the control docs point, Your Honor, is

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1 they are correct. We asserted an objection. And then

2 we had meet and confers. And we told them what we

3 would be willing to agree to, and we told them we

4 would apply it broadly.

5 So, again, I can underscore, there's

6 nothing further to produce other than with respect to

7 the single category that we identified on the Viacom

8 consents.

9 THE COURT: Thank you.

10 I'm going to deal with these two

11 motions right now. I understand there's timing

12 importance, so you're going to get this while it's

13 fresh in my mind.

14 I'm going to start with the motion to

15 compel the production of documents in response to

16 Requests 41, 42, 47 and 48. And as I understand it,

17 that is to require that documents be produced in

18 response to those requests, overruling the relevancy

19 objection and having the documents produced in

20 accordance with the NAI parties' search protocol.

21 The ruling on this motion will not

22 impact the next motion we're going to hear about,

23 which concerns the Viacom consents.

24 With those caveats and that

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1 explanation in mind, I'm going to grant the motion in

2 the way it was phrased and enter the order in the form

3 that was submitted with the motion.

4 To state the obvious, it's important

5 to remember that this is a discovery motion, and the

6 operative standard of review is not whether certain

7 evidence is going to be ultimately admissible at trial

8 but whether the documents are reasonably calculated to

9 lead to the discovery of admissible evidence.

10 And I'm going to grant the motion

11 because, in my opinion, these requests are reasonably

12 calculated to lead to the discovery of admissible

13 evidence concerning who effectively or actually

14 controls NAI, which I think is important to this case

15 as a factual matter and potentially as a legal matter.

16 I think it's important as a factual

17 matter because, when I have to write an opinion, I'm

18 going to need to be able to make practical sense about

19 who is calling the shots at NAI to explain the

20 narrative of what occurred here, which may or may not

21 be consistent with how control has occurred in the

22 past, or how it might occur in the future.

23 And I think it's potentially important

24 as a legal matter to this case, because there are

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1 breach of fiduciary duty claims against the NAI

2 entities, as CBS's controlling shareholder, that are

3 at issue, which means there could be, at least

4 theoretically, liability for the ultimate individual

5 who is in control, if there is such a person.

6 And nobody has suggested to me,

7 frankly, that the control structure of NAI operates

8 differently for Viacom than it does for CBS. So I do

9 not think it's appropriate to impose the limitation

10 that was referenced in the papers that these documents

11 have to be somehow limited to have some direct

12 connection with CBS.

13 So I'm going to enter the order

14 granting this motion in the form it was submitted.

15 I'm going to go now to the next

16 motion. The next motion I've referred to colloquially

17 as the Sumner motion, and I'm going to address it,

18 frankly, as it was presented to me.

19 There's been a lot of discussion today

20 about much broader things, but I'm going to address

21 the discovery motion. And there were four parts to

22 that discovery motion. I'm going to go through those

23 four parts.

24 Part one was a request that the NAI

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1 parties be ordered to revise the interrogatory

2 responses to strike references to Mr. Redstone having

3 discoverable information.

4 I'm going to deny that request. I

5 think Mr. Redstone may well have discoverable

6 information. Whether he's competent to discuss it,

7 explain, do anything with it, is a wholly different

8 subject. But I don't think it's inappropriate to list

9 him as one of many, many people who could have

10 discoverable information where it is listed in the

11 relevant interrogatory responses.

12 That brings me to item two. There was

13 a request to strike the verification to the

14 interrogatory responses.

15 I'm going to grant that. And this

16 will go hand-in-hand with how we're going to handle

17 the written deposition issue in a moment. I have

18 great skepticism that goes back, frankly, to two years

19 ago, about whether, as a practical matter -- and I'm

20 not making any ruling about competency formally, but

21 just as a practical reality, I have great skepticism

22 that those verifications could have been done in an

23 informed, deliberative way. And I've certainly been

24 given no specifics beyond a general methodology of how

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1 they were elicited to get me comfortable with that.

2 I'm not even sure what good these

3 interrogatory responses would do. They would be

4 hearsay, ultimately, at trial, I think. If somebody

5 is going to try to submit them as Mr. Redstone's

6 testimony or something of that nature, well, they're

7 not going to be used for that purpose because I just

8 don't have confidence, frankly, that he actually

9 engaged and was able to verify them in a substantive

10 way.

11 And I'll jump over the third item to

12 say I'm not going to order at this time a deposition

13 on written questions of Mr. Redstone.

14 You know, there are some tensions in

15 all sides' positions about these issues, but I do take

16 seriously the affidavit that was submitted to me by

17 Dr. Gold. I believe I saw an affidavit from him two

18 years ago, but I may be having a memory lapse on that.

19 But in any event, whether I did or

20 didn't, I take seriously the concerns about the

21 imposition on his medical situation that a deposition

22 can impose, and so I'm not going to order that the

23 deposition move forward on written questions.

24 That brings me to the last component

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1 of the motion, which, as I understand it, was a

2 request to prohibit witnesses from testifying, either

3 in discovery or at trial, regarding Mr. Redstone's or

4 NAI's intentions with respect to NAI or CBS.

5 And I'm not going to grant that

6 relief. I think that's highly premature. Discovery

7 proceeds all the time with people testifying about

8 hearsay matters that may not be matters that

9 ultimately can be admitted into evidence. They often

10 are not, but they can be relevant to lead to

11 discoverable information.

12 Of course, this is without prejudice

13 to the right of the CBS parties to seek, at an

14 appropriate time down the road in the context of

15 pretrial proceedings, a motion in limine, when I have

16 context to specific testimony that may have been

17 elicited, as to whether or not it ought to be

18 precluded at trial.

19 On this one, the Sumner motion, I do

20 not have a handy order that I can enter, so if

21 somebody could please prepare one consistent with what

22 I just said, that revolves that motion for today.

23 So why don't we go to the next one.

24 MR. MIRVIS: Good morning, Your Honor.

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1 Ted Mirvis of Wachtell Lipton for CBS.

2 Just one postscript to the Sumner

3 motion. There was a footnote in our reply brief about

4 seeking relief from the restrictions that had been

5 imposed on the trust. And we proposed, as we

6 understood Your Honor to indicate, to do that by a

7 separate formal motion.

8 It may, in fact, expand upon the

9 sections that were listed in Footnote 4, given the

10 liberty that has been taken here today by counsel for

11 NAI to pick and choose about sections of the trust to

12 be talked about publicly. The sections obviously have

13 nothing to do with personal family issues, which was

14 the basis on which we accepted the document with those

15 restrictions.

16 If I could turn briefly to the motion

17 to compel documents about the 2016 Viacom consents,

18 which was blocked by relevancy objection, in a single

19 sentence, no one gets to plead and present its own

20 narrative and avoid the test of discovery. No one.

21 Not even a dual-class controller. But I might say a

22 bit more.

23 I think it's fair to say --

24 THE COURT: It's all downhill from

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1 here, Mr. Mirvis.

2 MR. MIRVIS: I was just about to talk

3 about how the ball started rolling. And the ball, we

4 think, did start rolling with the 2016 Viacom consents

5 and the sequence that brings us here today.

6 First, June 2016, to block the Viacom

7 board's business decision to sell Paramount, by how?

8 By imposing a supermajority board vote bylaw. Sounds

9 familiar. I've heard the word "horse choker" invoked

10 in that regard. Ten days later, to replace Viacom

11 directors who disagreed with NAI.

12 And then -- and the sequence was

13 pointed out earlier today -- in September 2016, after

14 the August 2016 settlement, what happens? NAI makes

15 its proposal for the self-dealing merger of CBS and

16 Viacom to the very Viacom board that had just been

17 reconfigured to its liking.

18 THE COURT: What was the date of that?

19 MR. MIRVIS: Excuse me?

20 THE COURT: What was that date?

21 MR. MIRVIS: September.

22 September 2016.

23 And then what happened? Then we had

24 the refusal of the first CBS special committee to

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1 accede to the same Viacom merger, an idea that never

2 went away, that was formally renewed in 2018 by NAI.

3 And now we also have the allegation in

4 NAI's countersuit here that the Viacom merger, putting

5 Viacom into CBS, is not some on-again-off-again thing.

6 They've alleged in words of one syllable in paragraph

7 68 that that idea, that self-dealing idea, is the

8 first step "in NAI's long-term plans for CBS,"

9 "focused on a two-step process starting with a merger

10 with Viacom," "continuing thereafter with a sale or

11 merger of the combined entity."

12 And then, but only then, only if

13 Viacom is first stuck into CBS, then, "with NAI open

14 to the possibility of relinquishing its voting control

15 as part of the second transaction."

16 Now, we are met with a relevance

17 objection. The 2016 coup at Viacom is not a sideshow.

18 It's central to what brought us here today. It's in

19 paragraph 2 of our complaint. It's alleged in detail

20 as a prime concern of the CBS special committee in May

21 of this year, which faced a situation nearly identical

22 to what NAI and Ms. Redstone executed at Viacom. It

23 came up sua sponte at the May 16th hearing here on the

24 TRO, when Ms. Kotler mocked -- mocked -- the special

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1 committee's concern about NAI replacing directors.

2 She said, "There is literally no evidence." She said

3 it was all media pundit speculation of what other

4 people are saying we're going to do.

5 To which the Court observed, "I've

6 seen this story before ... dropping consents in the

7 dark of night in the Viacom matter."

8 And then we saw the new narrative, to

9 which counsel retorted, Oh, no, Viacom was very

10 different. That was just a controller trying to

11 "steer that ship in the right direction."

12 And then in the countersuit, they, our

13 friends to the right -- I don't know about the left,

14 but to the right --

15 THE COURT: I drew no political

16 inference.

17 MR. MIRVIS: Indeed.

18 NAI squarely put the 2016 coup at

19 issue, and that's really all that matters for this

20 motion. Because they alleged that the directors of

21 CBS were dead wrong, objectively wrong, in viewing the

22 Viacom coup as "evidence that NAI supposedly has a

23 history of running roughshod."

24 Why were we dead wrong? Because they

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1 alleged, this is in paragraph 11, that NAI intervened

2 there, in Viacom, only when faced with underperforming

3 leadership that had failed to formulate or execute a

4 long-term strategic plan.

5 They alleged that it was "appropriate

6 to throw the directors out on Viacom." Why? Because

7 NAI believed that Viacom's leadership was destroying

8 short- and long-term value. And here's the punchline.

9 They said, and they pleaded in paragraph 6, "no

10 truth" -- "no truth" -- "to the imagined threats."

11 That's the very foundation of their

12 claim that the stock dividend, leaving the charter

13 issue aside for a minute, that the stock dividend was

14 a breach of fiduciary duty, because they say that the

15 CBS directors "responded to unreasonably perceived and

16 nonexistent threats."

17 This motion to seek discovery is

18 really Pleadings of Discovery 101.

19 I think that's all we need. But if

20 you want to read cases, we all talk about Clabir and

21 its progeny. Clabir and its progeny are perfectly

22 consistent with this.

23 As Vice Chancellor Jacobs put it in

24 Clabir itself, directors are entitled to discovery to

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1 rebut a claim that their perceptions were "objectively

2 incorrect." And that's why in Clabir, the Court

3 ordered that the directors got discovery and

4 "... would be entitled to test what Clabir's true

5 intentions were ... to test the validity or the truth

6 of what Clabir has claimed that its intentions

7 were ...."

8 Vice Chancellor Parsons I think put it

9 quite well and quite bluntly in Third Point when he

10 said, "I'm not going to listen to testimony of

11 somebody if they precluded the other side from getting

12 access to the documents that would refute what they're

13 saying."

14 There's no such thing as cake and eat

15 it too.

16 And Vice Chancellor Laster said

17 virtually the same thing in Eminence; that the rise

18 and fall idea -- and we heard some of it this

19 morning -- the rise and fall idea, that the directors'

20 decision has to rise and fall with what they knew at

21 the time, he said that does not mean that directors

22 get no discovery if their actions are claimed to be

23 unreasonable.

24 NAI could have stood down. NAI could

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1 have said, Okay. It was reasonable for the CBS

2 directors to believe that by rejecting the

3 self-dealing transaction they were pressing for, to

4 merge Viacom into CBS, that that might very well have

5 led to a repeat of the Viacom coup, kind of a sequel.

6 If they had chosen to stand down, we wouldn't be here

7 today. But no one --

8 THE COURT: So if they give you a

9 stipulation saying, "Your perception of the threat

10 that Ms. Redstone would remove CBS board members if

11 you didn't proceed to ultimately do a deal with Viacom

12 was reasonable," you wouldn't need this discovery.

13 MR. MIRVIS: That's correct. And in a

14 way, all the papers talk about Clabir. It's really,

15 in some ways, just -- it's a nice thing, sometimes,

16 when the doctrine and common sense sort of fit

17 together. And this is one of those examples.

18 If directors think they faced a

19 danger, Danger X, they can show that they perceived

20 Danger X in good faith, and they can seek to show that

21 Danger X really did exist. And that confirms the

22 directors' perception.

23 And if the discovery shows that the

24 danger was really worse than the directors thought,

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1 that it was 2X or 3X or 4X, if the NAI consents that

2 were ready to go weren't just to throw out the special

3 committee but to throw out the whole board, that's not

4 just good discovery. That's great discovery.

5 And that's why we think to try to

6 block us on discovery on the 2016 Viacom consents is

7 just beyond the pale. As Your Honor pointed out,

8 we're not talking about admissibility. We're talking

9 about discovery.

10 So where do they end up? Their last

11 refuge is to say, Well, if you grant the motion, that

12 would push the trial into 2019. Really? Really? The

13 discovery should be denied by someone taking an

14 obviously aggressive position on a central issue?

15 We're not talking about a curlicue

16 like search terms or proximity indicators, whatever

17 those are. A party should not be allowed to reward

18 itself with a free pass by making that kind of interim

19 threat.

20 There is no explanation given for that

21 delay. Surely they could and should and presumably

22 did gather the documents. There are no new

23 custodians.

24 They say there was delay on our part.

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1 The meet and confer letters on this didn't end until

2 July 3rd. We were in the midst of briefing motions to

3 compel. Five days after the decision, we filed this

4 motion. We don't think that's a delay at all. But at

5 most, what, five, ten days? It doesn't put a trial

6 off for four months.

7 We worked hard, and we have worked

8 hard, to resolve disputes wherever we can and to limit

9 the motions that we have to bring.

10 And then we get to the very end of

11 their reply, of their opposition. And they say that

12 if discovery is granted, NAI, they -- they -- will

13 need extensive additional document testimony in

14 discovery.

15 Into what? According to what they

16 wrote in their brief, they will need discovery into

17 "the restructuring of NAI's own board as well as the

18 trustees of the Sumner Trust." They will need

19 discovery into those subjects. And the decade-long

20 history of the new directors and trustees and those

21 who were removed. What does that mean? I have no

22 idea. I literally have no idea. It's hard to

23 understand.

24 They say that the CBS directors were

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1 dead wrong about what happened at Viacom; that there

2 was no -- that it was unreasonable to look at what

3 happened in Viacom and think it could happen at CBS.

4 Dead wrong. But they can't show that we were dead

5 wrong unless they get mountains of additional

6 discovery. It's just odd. I don't get it.

7 We submit, Your Honor, that the motion

8 to compel on the 2016 consents should be granted.

9 Thank you.

10 THE COURT: Thank you.

11 Mr. Hou.

12 MR. HOU: Thank you, Your Honor. May

13 it please the Court, victor Hou for the NAI parties.

14 The CBS parties seem like they want to

15 try every other case except for the one that they

16 brought. Now that we're finally getting tens of

17 thousands of documents, literally weeks after the

18 substantial completion date, we understand why.

19 The CBS parties have provided us now

20 with a 502-page privilege log, some pretty eye-opening

21 stuff. And what can we glean from this tome? We

22 gleaned that the CBS parties, management, hatched this

23 plan, this dilutive dividend plan, with my creative

24 colleagues at Wachtell Lipton, as early as 2012, some

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1 six years ago.

2 They even drafted a complaint against

3 NAI to address so-called threats by the controlling

4 stockholder, so the privilege log entry says, against

5 CBS in 2013, five years ago. Three years ago, before

6 these 2016 consents ever happened, Your Honor, they

7 were already plotting.

8 So this committee process that was

9 used to really put forth management's plan to usurp

10 power, that's really the coup that we're talking

11 about.

12 And the ball that got rolling that

13 Mr. Mirvis talks about got rolling in 2012, well

14 before the 2016 consents issue, which was the subject

15 of litigation that some of us were before Your Honor

16 on in 2016.

17 In 2018, in April, this discovery

18 shows that management started plotting this coup once

19 again. They dusted off this plan that they had

20 hatched back in 2012 and talked about in 2013, and

21 then a full month before it was ever considered by the

22 special committee, this board of very august board

23 members, independent board members, we're told,

24 management had decided they were going to use this

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1 opportunity to finally make this plan a reality.

2 So make no mistake, you'll soon be

3 hearing about our motions on those documents that we

4 withheld. This was a highly orchestrated scheme, and

5 they saw the right opportunity to achieve their goals.

6 *

7 And as Your Honor is now aware, senior

8 management at CBS used TigerText, ephemeral text

9 messaging, self-exploding, self-destructing messages,

10 to hide their tracks, literally and figuratively,

11 telling each other to go off email systems and to go

12 to TigerText in order to discuss this plan to unseat

13 and usurp power from the controlling stockholder.

14 While many relevant texts have been

15 destroyed, document holds were able to -- we're

16 understanding just now the full scope of what is left

17 in terms of remnants. And what we can piece together

18 is that they declared war on Ms. Redstone, on the

19 Redstone legacy, NAI, years ago. And they took the

20 gloves off, in their words, to kill NAI, literally

21 their words, to kill the controlling stockholder.

22 So it's no wonder they use every form

23 of distraction to say, It's not our fault. It's

24 theirs. Don't look at what we did.

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1 The threats that we talked about, the

2 threats that really formed the basis of their action,

3 what they knew at the time that they brought the

4 dilutive dividend actions, was important. Those

5 threats, we respectfully submit, are as ephemeral as

6 the TigerText they used to cover their tracks.

7 So what are we talking about here when

8 we're talking about the 2016 Viacom consents? They

9 contend that it's important for us to relitigate this

10 issue that was settled in 2016 because it bears on

11 important issues.

12 And let me be very, very clear. What

13 we told the CBS parties in those long meet and

14 confers, which were very painful, what we told them

15 was, We're only making three claims from the Viacom

16 consents.

17 We understand what our complaint says.

18 What we made was a stipulation to them. We said,

19 number one -- there are only three things we want.

20 Number one, we will contend, really,

21 that the NAI board, the NAI actors in that case,

22 replaced five members of the board of directors,

23 including two that were associated and affiliated with

24 NAI.

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1 Number two, that they replaced those

2 five directors, including the two formerly

3 NAI-affiliated directors, with independent directors.

4 Number three, that out of those five

5 independent directors at Viacom, Ms. Redstone knew

6 only one.

7 That's it. That's what we told them.

8 As much as we'd like to say and

9 justify why we did it, we understand that is a

10 superfluous issue to what happened here. We don't

11 think it's important to relitigate that case that was

12 settled two years ago to talk about the merits of

13 whether or not there was justification for us to take

14 the actions that our clients took at that time, to

15 remove directors, to talk about whether or not the

16 Paramount deal was imminent, and whether it was

17 appropriate for the CEO to pursue that action without

18 the consent of the controlling stockholder. That is

19 irrelevant, and we know it's irrelevant to the issues

20 here.

21 Even if you were to grant that motion,

22 what would that mean for this trial? We have an

23 expedited schedule. We're talking about this case and

24 their actions in this case and the dilutive dividend

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1 in this case. It has nothing to do with Viacom.

2 Even if we were to say, you know,

3 let's have at it, let's have the full-on discovery --

4 and that's what the requests are saying. They said,

5 We want everything related to the 2016 Viacom

6 consents. That's essentially a whole 'nother case.

7 And they say, from the NAI parties, from Viacom, from

8 Finsbury, from Mr. Klieger, they want all this

9 discovery about Viacom consents in 2016.

10 Even if you gave it to them and they

11 were able to litigate that issue, that would not move

12 this ball forward one inch. And that's what we're

13 trying to do here, on an expedited basis. What we

14 contend is what's important and what the case law that

15 my colleague referenced, including the Atlantic

16 Research case, among many others, is --

17 THE COURT: Just so we're clear,

18 though, you're not willing, at least to date, to

19 stipulate -- your side is not willing to stipulate

20 that the CBS directors' concern that there was a

21 threat that Ms. Redstone would remove board members if

22 they didn't acquiesce to undertaking a CBS-Viacom

23 combination wasn't reasonable. You're not willing to

24 stipulate to that. Right?

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1 MR. HOU: No, because it's

2 inconsistent with the discovery, Your Honor.

3 THE COURT: Right. And whether it's

4 inconsistent or not inconsistent, you're just not

5 willing to give that stipulation.

6 MR. HOU: Because the -- and I'll try

7 to explain why, Your Honor.

8 THE COURT: Is it a yes or no? And

9 then you can give me as long an explanation as you

10 want.

11 MR. HOU: Thank you.

12 No, we're not ready to stipulate to

13 it.

14 And the reason for that is simple.

15 Because the directors that claimed that they had these

16 reasonable perceptions, their subjective state of mind

17 at the time that this Viacom consents issue occurred

18 in the litigation, they were supportive of

19 Ms. Redstone, as my colleague Ms. Kotler said.

20 Mr. Moonves wrote a supportive letter

21 praising Ms. Redstone during this exact time frame,

22 saying she took courageous actions to support Viacom,

23 and look at the turnaround happening at Viacom.

24 A board member wrote Ms. Redstone and

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1 said, You did a terrific job at Viacom.

2 Even in TigerText, Mr. Moonves and

3 Joseph Iannielo, his number two, were talking about

4 how Viacom is completely different than CBS; that the

5 controlling stockholder as well as Ms. Redstone had

6 nothing to do with CBS like she does with Viacom.

7 So in their own mind, they know that

8 that wasn't reasonable. So that's the only reason why

9 we're not willing to entertain that, because it's

10 inconsistent with the facts.

11 And even if we were to concede that

12 they had this view that there might be some risk, of

13 course, it's this propensity argument that we've

14 talked about. And I understand Your Honor says and

15 the case law is very clear that discovery doesn't have

16 to be admissible. But that's really what this is:

17 propensity evidence.

18 And what we have, we think,

19 demonstrates very clearly that, in fact, the directors

20 did not perceive that threat in this case, and that

21 wasn't reasonable in this case, subjectively.

22 So the only way that evidence, sort of

23 the truth, if you will, behind the consents is at all

24 relevant -- and we mention this in our papers; the

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1 case law is clear -- it only is relevant if it's

2 contingent rebuttal.

3 If we, the NAI parties, were to elicit

4 on direct testimony before Your Honor to say that we

5 thought those consents were a great idea in 2016 and

6 we did it for the right reasons, we're making that

7 representation here right now that we're not doing it.

8 That's the same representation that we made to them in

9 the meet and confers.

10 We are not going to put that at issue.

11 I understand it was in our complaint. It's not

12 necessary to the issues we're trying to decide in this

13 expedited proceeding. We took it off the table.

14 So the only marginal relevance all of

15 this 2016 litigation file could possibly relate to is

16 a contingent one. And that's what the Atlantic

17 Research case does. It's contingent. And if we're

18 not raising it, there's nothing for them to rebut.

19 And we're saying that right now. The

20 only things we're going to elicit are those three

21 things that I talked about, which are really not

22 seriously in dispute: that there were five independent

23 directors that were replacing five directors,

24 including two that were formerly affiliated with NAI;

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1 and that they're independent; and only one person knew

2 Shari Redstone before service on the board. That's

3 it.

4 So we don't see that there's any

5 relevance. And, instead, what we see is burden. What

6 we see is burden on third parties like Viacom that are

7 dragged into this. We see burden on third parties

8 like Finsbury, which is dragged into this. As well as

9 the burden on the NAI parties.

10 But we get it. It's big-time

11 litigation, as Your Honor has pointed out to us. And

12 we'll do our very best to press forward if we're

13 forced to do it.

14 But our position is very clear: Given

15 our proffer and our limited use of the Viacom consents

16 issue, we're not putting forward anything about

17 whether that was a good idea or a bad idea. And

18 without that, all they're asking for is rebuttal

19 evidence for an argument we're not going to make.

20 So with that in mind, Your Honor, we

21 urge you to deny the motion to compel on the Viacom

22 consents.

23 THE COURT: All right. Thank you,

24 Mr. Hou.

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1 Mr. Mirvis, did you have anything

2 else?

3 MR. MIRVIS: Your Honor, I have even

4 less than I had before, which is, during the meet and

5 confers, in which I did not personally participate,

6 and I thank my --

7 THE COURT: You have the gray hair to

8 show that. It means you're off the hook.

9 MR. MIRVIS: There's some advantages

10 to aging.

11 We specifically asked them to give us

12 a stipulation if they thought it would moot this

13 motion, and they refused. And you heard today, they

14 will not stipulate that our responses were reasonable.

15 Propensity, we've dealt with that in

16 the brief. We've cited State versus Tice. I have

17 nothing else. Thank you.

18 THE COURT: All right. Thank you.

19 I did read the papers carefully

20 beforehand. I'm going to address this motion right

21 now as well.

22 With one caveat I'll get to in a

23 second, I am going to grant the motion in the form it

24 was submitted.

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1 I think, fundamentally, this is,

2 again, a discovery motion where people are allowed to

3 elicit information that is reasonably calculated to

4 lead to admissible evidence. This is not a question

5 of what is ultimately going to be admissible.

6 By way of disclosure, I actually

7 worked on the Atlantic Research case way back when.

8 It brought back fond memories when I saw it cited.

9 But I think the logic of that decision by Vice

10 Chancellor Jacobs is pertinent here.

11 As everyone knows, the subject of that

12 case was Atlantic Research, which was the target of a

13 not-so-friendly takeover proposal, and was

14 contemplating implementing a rights plan. Atlantic

15 Research wanted to take discovery of the financing

16 sources of the proposed acquirer, Clabir.

17 And Vice Chancellor Jacobs, in

18 addressing that argument, very much like NAI contends

19 here, said that the documents that are relevant to the

20 Atlantic directors' decision to deploy defensive

21 measures really does rise and fall on what the

22 directors knew at the time. But -- and the "but" was

23 very significant -- he permitted the discovery to go

24 forward because Clabir in that case would not rule out

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1 challenging the reasonableness of the directors'

2 decision-making process and whether their beliefs may

3 have been mistaken or not objectively reasonable.

4 I think that same analysis is

5 pertinent here. Absent a clear stipulation that is

6 acceptable to resolve this -- which does not exist,

7 from the question I asked Mr. Hou and what I

8 understand the other parties are contending -- the

9 discovery sought may be of only conditional or

10 contingent value, but it is certainly something that

11 is discoverable for purposes of where we are in the

12 case at this point.

13 And so I am going to permit the

14 discovery that's been sought.

15 I was looking at the form of order,

16 and I'm fine with paragraph 2 of the order, which is

17 the guts of it. I'm not going to enter a five-day

18 requirement for the production. I'm going to do this

19 on the computer when I go downstairs. But I'll enter

20 a modification that the parties should meet and confer

21 on a reasonable time for the production schedule. I'm

22 not going to impose arbitrarily that time period.

23 So that is my resolution of that

24 motion. Is there anything else we need to cover

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1 today?

2 All right. So I am going to cover one

3 other thing today concerning the Kopelson video.

4 The bottom line is I'm going to

5 maintain that in camera. It is not going to be made

6 available publicly.

7 I think there is a question as to

8 whether or not 5.1 technically applies to something

9 submitted in camera. I'm not going to sort that out

10 today. I don't need to. Even if it did apply, I

11 think there's good cause to keep the video

12 confidential and intend to do so.

13 In balancing the considerations of

14 what is clearly sensitive information concerning

15 somebody's personal medical condition and personal

16 privacy against the public interest, particularly when

17 we're in discovery -- we're not even at a trial yet;

18 maybe trial is different in that regard, because

19 things become extremely open at trial -- but at least

20 for discovery purposes, I think that the personal

21 privacy interests clearly outweigh the public need for

22 that information.

23 My reasoning for the motions that I've

24 ruled on today is apparent from the record. And

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1 candidly, my concerns about the issues concerning

2 Mr. Redstone's competency predated seeing that video.

3 I articulated that previously. I think some of that

4 was expressed on the record during the Viacom hearings

5 in 2016.

6 Nobody has formally made a competency

7 determination. But I had concerns and I've had

8 concerns for some time about that. It permeated the

9 Viacom case. It has permeated these compensation

10 cases that I've also been dealing with on the Viacom

11 and the CBS side.

12 But to be clear, I'm not going to

13 strike the video. I do think the video is relevant,

14 actually, to the motion that was brought. It's

15 perhaps just cumulative of other information,

16 including the affidavit that has been submitted to me

17 from Dr. Gold, or the two affidavits that have been

18 submitted to me from Dr. Gold. But I'm not going to

19 do anything with the video in terms of publicly

20 opening it to inspection or anything of that nature.

21 So it will stay where it is, which is it's submitted

22 on an in-camera basis.

23 All right. With that, I wish everyone

24 a good day.

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1 (Court adjourned at 12:36 p.m.)

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1 CERTIFICATE

2 We, JEANNE CAHILL and DEBRA A.

3 DONNELLY, Official Reporters for the Court of Chancery

4 of the State of Delaware, do hereby certify that the

5 foregoing pages numbered 3 through 129 contain a true

6 and correct transcription of the proceedings as

7 stenographically reported by us at the hearing in the

8 above cause before the Chancellor of the State of

9 Delaware, on the date therein indicated.

10 IN WITNESS WHEREOF we have hereunto

11 set our hands at Wilmington, this 8th day of August,

12 2018.

13

14
/s/ Jeanne Cahill
15 ------------------------
Official Court Reporter
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/s/ Debra A. Donnelly
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Official Court Reporter
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