R.A. Feuer v. Sumner M. Redstone ( 2018 )


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  •    IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
    R.A. FEUER, suing derivatively on         )
    behalf of CBS CORPORATION,                )
    )
    Plaintiff,                    )
    )
    v.                                  )   C.A. No. 12575-CB
    )
    SUMNER M. REDSTONE, SHARI                 )
    REDSTONE, DAVID ANDELMAN,                 )
    JOSEPH A. CALIFANO, JR.,                  )
    WILLIAM S. COHEN, GARY L.                 )
    COUNTRYMAN, CHARLES K.                    )
    GIFFORD, LEONARD GOLDBERG,                )
    BRUCE S. GORDON, LINDA M.                 )
    GRIEGO, ARNOLD KOPELSON,                  )
    LESLIE MOONVES, DOUG                      )
    MORRIS, and FREDERIC V.                   )
    SALERNO,                                  )
    )
    Defendants,                   )
    )
    and                                 )
    )
    CBS CORPORATION,                          )
    )
    Nominal Defendant.            )
    MEMORANDUM OPINION
    Date Submitted: January 16, 2018
    Date Decided: April 19, 2018
    Norman M. Monhait and P. Bradford deLeeuw of ROSENTHAL MONHAIT &
    GODDESS, P.A., Wilmington, Delaware; Richard D. Greenfield, Marguerite R.
    Goodman, and Ilene Freier Brookler of GREENFIELD & GOODMAN, LLC, New
    York, New York; Michael D. Donovan of DONOVAN AXLER, LLC, Berwyn, PA;
    Counsel for Plaintiff.
    Kurt M. Heyman, Patricia L. Enerio, and Melissa N. Donimirski of HEYMAN
    ENERIO GATTUSO & HIRZEL LLP, Wilmington, Delaware; Paul Vizcarrondo,
    Jonathan Moses, Lauren Kofke, and Courtney Heavey of WACHTELL, LIPTON,
    ROSEN & KATZ, New York, New York; Counsel for Defendants David Andelman,
    Joseph A. Califano, Jr., William S. Cohen, Gary L. Countryman, Charles K. Gifford,
    Leonard Goldberg, Bruce S. Gordon, Linda M. Griego, Arnold Kopelson, Leslie
    Moonves, Doug Morris, and Nominal Defendant CBS Corporation.
    A. Thompson Bayliss, Michael A. Barlow, and David A. Seal of ABRAMS &
    BAYLISS LLP, Wilmington, Delaware; Michael C. Tu of ORRICK,
    HERRINGTON & SUTCLIFFE LLP, Los Angeles, California; Robert N. Kliger of
    HUESTON HENNIGAN LLP, Los Angeles, California; Counsel for Defendant
    Sumner M. Redstone.
    Anne C. Foster, Lisa A. Schmidt, and Kevin M. Gallagher of RICHARDS,
    LAYTON & FINGER, P.A., Wilmington, Delaware; Elizabeth B. Burnett and
    Laurence A. Schoen of MINTZ, LEVIN, COHN, FERRIS, GLOVSKY AND
    POPEO, P.C., Boston, Massachusetts; Wynter L. Deagle of MINTZ, LEVIN,
    COHN, FERRIS, GLOVSKY AND POPEO, P.C., San Diego, California; Counsel
    for Defendant Shari E. Redstone.
    Edward B. Micheletti and Bonnie W. David of SKADDEN, ARPS, SLATE,
    MEAGHER & FLOM LLP, Wilmington, Delaware; Jay B. Kasner of SKADDEN,
    ARPS, SLATE, MEAGHER & FLOM LLP, New York, New York; Counsel for
    Defendant Frederic V. Salerno.
    BOUCHARD, C.
    This stockholder derivative suit alleges that Sumner Redstone, the controlling
    stockholder, former Executive Chairman, and now Chairman Emeritus of CBS
    Corporation, became incapacitated around the time he turned 91 years old in May
    2014 such that he could no longer provide any services of value for the company.
    According to plaintiff, CBS’s directors were aware of Redstone’s debilitated state
    and inability to make any substantive contribution to the company’s affairs, yet still
    approved over $13 million in cash compensation for him over the next few years.
    Plaintiff contends that these payments constitute a waste of corporate assets and were
    made in bad faith, and that Redstone has been unjustly enriched.
    This court has commented many times on the difficulty of pleading a viable
    claim for waste against a corporate director under our law. But the particularized
    allegations of the complaint here depict an extreme factual scenario—one
    sufficiently severe so as to excuse plaintiff from having to make a demand on the
    CBS board of directors to press claims concerning certain (but not all) of the
    challenged payments, and to permit plaintiff to take discovery so that an evidentiary
    record may be developed before the court adjudicates whether those payments were
    made in accordance with the directors’ fiduciary duties.
    For this reason, as explained in greater detail below, defendants’ motion to
    dismiss the complaint under Court of Chancery Rules 23.1 and 12(b)(6) is granted
    in part and denied in part.
    I.       BACKGROUND
    Unless noted otherwise, the facts recited in this opinion are based on the
    allegations of the Amended Verified Derivative Complaint (the “Amended
    Complaint”)1 and documents incorporated therein.2 Any additional facts are either
    not subject to reasonable dispute or subject to judicial notice.
    A.    The Parties
    Nominal defendant CBS Corporation (“CBS” or the “Company”) is a
    Delaware corporation headquartered in New York, New York. CBS is a mass media
    company with operations in entertainment, cable networks, publishing, and local
    broadcasting.
    Before 2006, CBS was part of the former Viacom Inc., a media conglomerate.
    In January 2006, that entity was split into two publicly traded companies: one
    retained the Viacom name and the other is CBS. CBS has two classes of stock,
    1
    Amended Verified Derivative Complaint (Dkt. 46).
    2
    See Winshall v. Viacom Int’l, Inc., 
    76 A.3d 808
    , 818 (Del. 2013) (citations omitted) (“[A]
    plaintiff may not reference certain documents outside the complaint and at the same time
    prevent the court from considering those documents’ actual terms” in connection with a
    motion to dismiss). Plaintiff made a Section 220 demand on March 29, 2016, but the
    parties did not reach any understanding as to how the documents could be used if litigation
    ensued. Tr. 81-82 (Sept. 15, 2017) (Dkt. 80). Accordingly, I consider the actual terms of
    the documents produced in the Section 220 demand and referenced in the Amended
    Complaint, but do not consider those documents for the truth of the matters asserted therein
    unless such content is corroborative of a matter that is not subject to reasonable dispute or
    subject to judicial notice.
    2
    voting Class A shares and non-voting Class B shares, both of which trade on the
    New York Stock Exchange.
    Sumner Redstone is the controlling stockholder of CBS. His controlling
    interest can be traced to the Sumner Redstone National Amusements Trust, which is
    the controlling stockholder of National Amusements, Inc., which in turn owns 79.5%
    of the Class A shares of CBS.
    On July 20, 2016, when this action was filed, the CBS Board of Directors (the
    “Board”) consisted of thirteen directors, all of whom are individual defendants in
    this action:      David Andelman, Joseph Califano, Jr., William Cohen, Gary
    Countryman, Charles Gifford, Leonard Goldberg, Bruce Gordon, Linda Griego,
    Arnold Kopelson, Leslie Moonves, Doug Morris, Shari Redstone (Redstone’s
    daughter), and Redstone.3 The Amended Complaint also names as a defendant
    Frederick Salerno, who was a CBS director from 2007 until May 2016, during which
    period the payments challenged here were approved.4
    The Amended Complaint, which was filed on January 19, 2017, defines the
    period relevant to this action as the period “from approximately the end of May 2014
    through the present” (the “Relevant Period”).5 Four members of the Board were
    3
    Am. Compl. ¶¶ 20-32.
    4
    Am. Compl. ¶ 33.
    5
    Am. Compl. ¶ 2 n.1.
    3
    members of the Compensation Committee during the Relevant Period: Cohen,
    Gifford, Gordon, and Morris.6 Three members of the Board were members of the
    Nominating and Governance Committee during the Relevant Period: Califano,
    Countryman, and Gifford.7 Under its Corporate Governance Guidelines, CBS
    requires a majority of its directors to be independent under New York Stock
    Exchange listing standards, including all members of the Compensation and
    Nominating and Governance Committees.8
    The Board delegated responsibilities for certain compensation-related matters
    to the Compensation Committee. According to its charter, the “primary purpose” of
    the Compensation Committee “is to discharge the responsibilities of the Board
    relating to the compensation of the Company’s executive officers and other senior
    executives.”9 Throughout the Relevant Period, the Compensation Committee was
    responsible for setting the level of Redstone’s compensation as CBS’s Chairman of
    the Board.10 This is reflected in the Compensation Committee’s charter, which
    provides that the Compensation Committee shall:
    Review and approve corporate goals and objectives relevant to the
    compensation of the Chairman of the Board and the Chief Executive
    6
    Am. Compl. ¶¶ 24, 26, 28, 32.
    7
    Am. Compl. ¶¶ 23, 25, 26.
    8
    Transmittal Aff. of Jonathan Moses (“Moses Aff.”) Ex. 5 at 3-6 (Dkt. 56).
    9
    Moses Aff. Ex. 14 at 1.
    10
    Am. Compl. ¶¶ 5(b), (d), (e), (g), (n), 51-52, 72-73, 82-83.
    4
    Officer. Together with the Nominating and Governance Committee,
    evaluate annually the performances of the Chairman and the Chief
    Executive Officer in light of these goals and objectives and report the
    results of the evaluations to the non-management directors. The
    Committee shall set the compensation levels of the Chairman and the
    Chief Executive Officer taking into account the evaluations.11
    Plaintiff R.A. Feuer allegedly has been a stockholder of CBS continuously
    throughout the Relevant Period.12
    B.     Overview of Redstone’s Employment and Compensation at CBS
    Redstone was Chairman of the board of directors of the former Viacom from
    1987 through 2005 and its Chief Executive Officer from 1996 through 2005.13 After
    CBS split from the former Viacom, Redstone served as Executive Chairman of CBS
    from January 1, 2006 until February 4, 2016.14 Redstone also served during this
    period as Executive Chairman of the post-split Viacom. A challenge similar to the
    one made here has been made to the cash compensation Redstone received from
    Viacom after allegedly becoming incapacitated and unable to provide any services
    of value to that company.15
    Until his resignation as Executive Chairman in February 2016, Redstone’s
    employment at CBS was governed by an agreement dated December 29, 2005,
    11
    Moses Aff. Ex. 14 at 3 (emphasis added).
    12
    Am. Compl. ¶ 18.
    13
    Am. Compl. ¶ 20; Moses Aff. Ex. 3 at 26.
    14
    Am. Compl. ¶ 20.
    15
    See Feuer v. Dauman, 
    2017 WL 4817427
    , at *1 (Del. Ch. Oct. 25, 2017).
    5
    which was amended on March 13, 2007 and December 10, 2008 (collectively, the
    “Employment Agreement”).16             The Employment Agreement provides that
    Redstone’s employment could “be terminated by either party at will.”17
    As amended in March 2007, the Employment Agreement provided that
    Redstone would receive a base salary of $1 million per year and an annual bonus
    based on achievement of performance goals established by the Compensation
    Committee.18 The Compensation Committee was required to review Redstone’s
    base salary “at least annually” and was permitted to award “merit increases” but was
    not permitted to decrease Redstone’s salary, “including as it may be increased from
    time to time.”19 In other words, if Redstone’s $1 million base salary as March 2007
    subsequently was increased, the Compensation Committee did not have the authority
    to decrease it from that higher amount. In 2010, the Compensation Committee raised
    Redstone’s base salary to $1.75 million.20
    The Employment Agreement also entitled Redstone to receive cash bonuses
    in accordance with the Company’s Senior Executive Short-Term Incentive Plan (the
    16
    Am. Compl. ¶ 16.
    17
    Am. Compl. ¶ 16.
    18
    Moses Aff. Ex. 10 ¶ 1; Ex. 9 at Ex. 10.1 ¶¶ 2(a), (c). The base salary is payable “no less
    frequently than semi-monthly.” Ex. 9 at Ex. 10.1 ¶ 2(a).
    19
    Moses Aff. Ex. 10 ¶ 1.
    20
    Am. Compl. ¶¶ 50, 72; Moses Aff. Ex. 12 at 44.
    6
    “STIP”).21        The STIP required the Compensation Committee to make a
    determination about which senior executives would be eligible for the program and
    set performance goals based on financial targets.22
    C.     Redstone’s Compensation and Performance for 2014
    On February 20, 2014, about two months before Redstone would turn 91 years
    old,23 the Compensation Committee approved a set of goals for Redstone for 2014
    that included being “a sounding-board/counselor to [the] CEO on issues of strategic
    importance,” ensuring that “strategic plans are up-to-date” and “being executed on,”
    providing “effective communications with [the] Board,” and assisting “the Board in
    maintaining best governance practices.”24 Not long after these goals were set,
    beginning in the spring of 2014, Redstone suffered from “a precipitous decline in
    his physical health” according to a complaint in an elder abuse lawsuit filed on
    Redstone’s behalf in 2016 (the “Elder Abuse Complaint”).25 Redstone’s health
    problems included a bout with pneumonia and multiple hospitalizations.26
    21
    Moses Aff. Ex. 9 at Ex. 10.1 ¶ 2(c)(1); Ex. 4 at 44.
    22
    Moses Aff. Ex. 13 at Art. II §§ 2.1-2.2.
    23
    Am. Compl. ¶ 36.
    24
    Moses Aff. Ex. 21 at 2; Am. Compl. ¶ 52.
    25
    Am. Compl. ¶¶ 13, 95.
    26
    Am. Compl. ¶¶ 36, 41.
    7
    On May 22, 2014, Redstone briefly attended CBS’s annual stockholders’
    meeting, where he “called the meeting to order and welcomed the directors to the
    meeting” after being carried onstage in a chair.27 Redstone was not physically
    present for the July 29, 2014 Board meeting; rather, he called in telephonically.28
    Redstone’s verbal participation was limited to saying “Hello Everyone,” since, as a
    contemporaneous email sent to CBS’s President and CEO Moonves from a fellow
    CBS executive explained, “[you] can’t understand him!”29
    By early September 2014, two members of the Board, Moonves and
    Kopelson, were aware that Redstone had been hospitalized at the end of August with
    pneumonia.30 According to the Elder Abuse Complaint, by this point in time,
    “Redstone could not eat or drink, it became difficult for Redstone to initiate
    communication or articulate more than the most basic verbal responses,” and he
    “required around-the-clock nursing care, and any semblance of independence was
    lost.”31 Redstone did not physically attend the October 1, 2014 Board meeting, and
    only said “Hello Everyone” at the beginning of the session.32 His participation in
    27
    Am. Compl. ¶ 38.
    28
    Am. Compl. ¶ 40.
    29
    Am. Compl. ¶¶ 39-40.
    30
    Am. Compl. ¶¶ 41-42.
    31
    Am. Compl. ¶ 95 (internal quotations omitted).
    32
    Am. Compl. ¶ 44.
    8
    the Company’s November 5, 2014 quarterly earnings call amounted to Redstone
    saying “[t]his is Sumner. Welcome to the CBS Corp. event.”33 Redstone telephoned
    into a Board meeting on December 11, 2014, again only saying “Hello Everyone.”34
    On January 28, 2015, the Compensation Committee and the Nominating and
    Governance Committee held a joint meeting. According to minutes of the joint
    meeting, they discussed “the performance of the Executive Chairman . . . with
    respect to [his] previously established goals for 2014.”35 The minutes indicate that
    the joint committee reviewed “Mr. Redstone’s role as Executive Chairman of the
    CBS Board of Directors, noting that during this period, the Company had produced
    exceptional results.”36
    Later on January 28, the Compensation Committee met and discussed the fact
    that CBS had achieved the 2014 goals for payment of bonus compensation under the
    STIP.37      According to minutes of the meeting, the Compensation Committee
    discussed the “bonus[] to be paid . . . with respect to . . . the Executive Chairman”
    and “the future participation by Mr. Redstone in the Company’s bonus program.”38
    33
    Am. Compl. ¶ 47. A participant in a Viacom earnings call a few days later described
    Redstone’s speech as “faint, slurred, barely audible.” Am. Compl. ¶ 48.
    34
    Am. Compl. ¶ 49.
    35
    Moses Aff. Ex. 22 at 2; Am. Compl. ¶ 5(a).
    36
    Moses Aff. Ex. 22 at 2.
    37
    Am. Compl. ¶¶ 5(b), 51; Moses Aff. Ex. 23 at 1-2.
    38
    Moses Aff. Ex. 23 at 3.
    9
    The minutes note that the Compensation Committee was advised by an independent
    compensation consultant, Moonves, and CBS’s Chief Human Resources Officer
    during this meeting.39         At this January 28, 2015 meeting, the Compensation
    Committee approved a $9 million bonus for Redstone for 2014.40
    The following day the Board met.41 The meeting minutes state that Gifford,
    as chair of the Compensation Committee, apprised the Board of the prior day’s
    deliberations and the conclusions of the joint committee.42           All in, CBS paid
    Redstone $10.75 million of cash compensation for fiscal year 2014, of which $1.75
    million was his base salary and $9 million was a performance bonus.43
    D.     Redstone’s Compensation and Performance for 2015
    In 2015, Redstone did not participate in any conference calls with Wall Street
    analysts.      He also did not physically attend any Board meetings in 2015,
    participating instead by phone.44 The agenda for the January 29, 2015 Board meeting
    indicates that Redstone greeted the Board; at the other three Board meetings that
    year Redstone did not speak at all.45
    39
    Moses Aff. Ex. 23 at 1.
    40
    Am. Compl. ¶¶ 5(b), 55; Moses Aff. Ex. 23 at 3, 11-12; Ex. 24.
    41
    Am. Compl. ¶ 5(c).
    42
    Am. Compl. ¶ 5(c).
    43
    Am. Compl. ¶ 50.
    44
    Am. Compl. ¶ 56.
    45
    Am. Compl. ¶¶ 5(i), (j), 56.
    10
    At a February 19, 2015 meeting, the Compensation Committee addressed
    Redstone’s compensation for 2015.46             The meeting minutes indicate that the
    Compensation Committee discussed “changes in the goals and objectives from the
    prior year and the status of the participation of the Executive Chairman in the
    Company’s 2015 bonus program,” as well as Redstone’s annual base salary.47 The
    Compensation Committee ultimately did not establish goals for Redstone in 2015,
    determined that he would not receive a bonus that year, and kept his base salary at
    $1.75 million.48 The Board later decided to re-nominate Redstone to be a director.49
    In the spring of 2015, Redstone’s failing health became a subject of tabloid
    intrigue. On May 20, 2015, The Hollywood Reporter published an article entitled
    “Sumner Redstone’s Two Girlfriends Throwing Him 92nd Birthday ‘Passion to
    Party’ Bash Amid Viacom Intrigue.” It reported that Redstone’s “health is said to
    have declined considerably since his last in-person interview, which [The Hollywood
    Reporter] published in January 2014 . . . Now sources say his speech is all but
    unintelligible.”50 Leah Bishop, Redstone’s estate attorney, acknowledged in the
    46
    Am. Compl. ¶¶ 5(d), (e).
    47
    Am. Compl. ¶¶ 5(d), (e), 54, 57; Moses Aff. Ex. 25 at 5.
    48
    Am. Compl. ¶¶ 5(d), (e), (g), 72; Moses Aff. Ex. 25 at 5.
    49
    Am. Compl. ¶ 60.
    50
    Am. Compl. ¶ 59.
    11
    article that Redstone’s speech was “severely impaired” and that he “no longer can
    be understood on the phone.”51
    On May 31, Vanity Fair published an article entitled “Who Controls Sumner
    Redstone?” One person who saw Redstone in person stated in the article: “Sumner
    (a) cannot speak and (b) hasn’t had a meal since Labor Day other than tubes. I think
    there’s a big charade going on that Sumner’s doing fine . . . I think he’s pretty out of
    it . . . He can’t speak, and I don’t know how much he knows what’s going on.”52 The
    article also reported that a person visiting with Robert Evans, one of Redstone’s
    closest friends, said “[h]e [i.e., Redstone] looks like he’s dead,” to which Evans
    responded, “[w]ell, you should see him in person—he looks even worse.”53
    In October 2015, two CBS directors, Goldberg and Kopelson, each met
    separately with Redstone at his home. During these meetings, Redstone was
    “especially vacant and absent,” and “appeared out of touch, remote and non-
    responsive to the people around him.”54 Scrutiny of Redstone’s health further
    intensified after Manuela Herzer, Redstone’s former caretaker, filed a petition in
    51
    Am. Compl. ¶ 59.
    52
    Am. Compl. ¶ 62.
    53
    Am. Compl. ¶ 62.
    54
    Am. Compl. ¶¶ 66-67.
    12
    California state court on November 24, 2015 claiming that Redstone did not have
    the capacity to revoke her status as his healthcare agent (the “Herzer Action”).55
    On December 2, 2015, Moonves received an email from a fellow director
    stating: “The recent legal actions and continuing questions regarding Sumner
    Redstone’s health create an environment of uncertainty that could distract investors
    from focusing on the operational performance of the company. We want our
    shareholders to be totally confident that CBS is being managed and governed at the
    level they expect.”56
    According to the Amended Complaint, the Compensation Committee decided
    at its January 27, 2016 meeting that Redstone “would not receive a bonus for fiscal
    year 2015” but “approved the continued contractual salary compensation payable
    to” Redstone of $1.75 million for 2016.57        The only reference to Redstone’s
    compensation in the minutes of that meeting, by contrast, states simply that “the
    Committee noted that the Executive Chairman would not be receiving a bonus for
    55
    Am. Compl. ¶¶ 7-8.
    56
    Am. Compl. ¶ 70. The Amended Complaint states that the email was sent from “Bruce
    Goldberg,” which appears to be a mistake, as that name is a combination of the names of
    two different CBS directors: Leonard Goldberg and Bruce Gordon. I infer that the email
    came from one of these two directors.
    57
    Am. Compl. ¶¶ 72-73.
    13
    2015.”58 Two days later, Redstone was present telephonically for the Board meeting
    but did not speak at all.59
    E.     Redstone Becomes Chairman Emeritus of CBS
    In early February 2016, the California court in the Herzer Action ordered an
    examination of Redstone by a geriatric psychiatrist.60 According to an article in The
    New York Times, the geriatric psychiatrist “found that [Redstone] lacked mental
    capacity.”61
    On February 2, 2016, Redstone tendered his resignation as Executive
    Chairman of CBS.62 The next day, on February 3, the Board held a special meeting
    and discussed Redstone’s resignation.63           Redstone attended this meeting by
    telephone but did not speak.64 The Board accepted his resignation and unanimously
    appointed Redstone as Chairman Emeritus.65 According to a Board resolution
    adopted on February 3, 2016, the appointment was made “in view of [Redstone’s]
    many years of leadership as Executive Chairman and his significant historical
    58
    Moses Aff. Ex. 26 at 3-4.
    59
    Am. Compl. ¶ 76.
    60
    Am. Compl. ¶ 77.
    61
    Am. Compl. ¶ 77.
    62
    Am. Compl. ¶ 5(n).
    63
    Am. Compl. ¶¶ 5(m), 79.
    64
    Am. Compl. ¶ 79.
    65
    Am. Compl. ¶¶ 5(n), 80; Moses Aff. Ex. 27 at 1-3.
    14
    contributions to the Company.”66 Minutes of a February 3, 2016 Board meeting
    reflect that Redstone “indicated that he would continue to be available for
    consultation and to attend Board meetings.”67
    On February 18, 2016, the Compensation Committee considered Redstone’s
    compensation as Chairman Emeritus.68         Minutes of the meeting state that the
    Compensation Committee took “into account his reduction in responsibilities
    following his resignation as the Company’s Executive Chairman on February 2, and
    his continuing employment with the Company as an at-will employee.”69 The
    minutes also state that the Compensation Committee discussed Redstone’s
    “significant historical contributions to the Company during his previous executive
    positions with the Company, including his status as a renowned leader in the
    entertainment industry and his leadership on the Company’s Board of Directors, and
    his continuing availability for advice and consultation and continuing participation
    on the CBS Board of Directors as Chairman Emeritus.”70 The Compensation
    66
    Moses Aff. Ex. 27 at 3.
    67
    Moses Aff. Ex. 27 at 1.
    68
    Am. Compl. ¶ 5(n).
    69
    Am. Compl. ¶ 5(n).
    70
    Am. Compl. ¶ 5(n).
    15
    Committee approved annual compensation of $1 million for Redstone in his role as
    Chairman Emeritus.71 In this role, Redstone was not eligible for a bonus.72
    On April 15, 2016, the Company disclosed in a proxy statement that the Board
    had nominated Redstone for re-election as a director.73
    On May 9, 2016, the Herzer Action was dismissed when the California court
    determined that Redstone “was sufficiently competent to terminate Ms. Herzer as
    his caretaker.”74 The California court reasoned that “Redstone is presumed to have
    capacity and Herzer’s expert did not establish that he lacked capacity to change his
    agent.”75 The court also emphasized that it was “not making any ultimate finding
    related to Redstone’s mental capacity.”76
    On May 20, 2016, Philippe Dauman (the CEO and a director of Viacom) and
    George Abrams (a Viacom director) were informed that Redstone had removed them
    as trustees of the Sumner Redstone National Amusements Trust and as directors of
    National Amusements, Inc., the entities through which Redstone maintains his
    controlling interest in CBS.77 In response, Dauman and Abrams filed a lawsuit in
    71
    Am. Compl. ¶ 83.
    72
    Moses Aff. Ex. 19.
    73
    Am. Compl. ¶ 81.
    74
    Am. Compl. ¶¶ 8, 84; Moses Aff. Ex. 17 at 1.
    75
    Moses Aff. Ex. 17 at 17.
    76
    Id. at 11 (emphasis in original).
    77
    Am. Compl. ¶¶ 89-90.
    16
    Massachusetts state court, seeking to be reinstated.78 Relevant to this action,
    Dauman and Abrams alleged in their complaint that Redstone:
    suffers from profound physical and mental illness. In particular, he is
    afflicted with a “subcortical neurological disorder” that can be
    characterized by dementia, impaired cognition, a slowness of mental
    processing, a loss of memory, apathy, and depression. Because of his
    diminished physical and mental health, Mr. Redstone is unable to
    initiate or participate in meaningful conversation, including
    communications concerning his business or personal affairs. In court
    proceedings earlier this year, lawyers representing Mr. Redstone appear
    to have agreed [that] Mr. Redstone is subject to mental impairment and
    stipulated that he is susceptible to undue influence.79
    Redstone did not attend CBS’s annual stockholders meeting on May 26,
    2016.80 On June 14, 2016, Redstone was taken by car to visit CBS, where he met
    with Moonves for approximately ten minutes but did not leave the car.81
    On October 25, 2016, the Elder Abuse Complaint was filed on Redstone’s
    behalf against Herzer and other defendants, alleging elder abuse, breach of fiduciary
    duty, constructive fraud, and intentional infliction of emotional distress.82 Among
    other things, the Elder Abuse Complaint describes Redstone’s extreme decline in
    health since the spring of 2014, his inability to communicate orally, his complete
    78
    Am. Compl. ¶ 91.
    79
    Am. Compl. ¶ 91.
    80
    Am. Compl. ¶ 86.
    81
    Am. Compl. ¶ 93.
    82
    Am. Compl. Ex. B.
    17
    reliance on nursing care, and a mental state where he was “easily duped, confused
    and manipulated.”83
    The Board did not nominate Redstone for re-election as a director at CBS’s
    May 19, 2017 annual meeting.84 It appears that Redstone continues to hold the title
    of Chairman Emeritus,85 but it is unclear from the record how much compensation
    he has received from the Company since the Compensation Committee set his salary
    for that position in February 2016 at $1 million annually.
    II.      PROCEDURAL HISTORY
    On March 29, 2016, plaintiff made a Section 220 demand on CBS.86 On July
    20, 2016, plaintiff filed this action derivatively on behalf of CBS. Plaintiff did not
    make a pre-suit demand on the Board, alleging that demand would be futile.
    On January 19, 2017, after defendants filed a motion to dismiss the original
    complaint, plaintiff filed the Amended Complaint, which asserts two claims. Count
    I asserts a claim for breach of fiduciary duty for waste of corporate assets against all
    the individual defendants, except Redstone, with respect to the compensation he
    83
    Am. Compl. ¶ 95.
    84
    Moses Aff. Ex. 35 at 3.
    85
    Sumner M. Redstone, CBS CORP., https://www.cbscorporation.com/people/sumner-m-
    redstone/ (last visited Apr. 18, 2018).
    86
    Am. Compl. ¶ 2 & Ex. A.
    18
    received from CBS during the Relevant Period. Count II asserts that Redstone was
    unjustly enriched by the receipt of this compensation.
    On February 2, 2017, defendants filed a motion to dismiss the Amended
    Complaint under Court of Chancery Rules 23.1 and 12(b)(6) for failure to plead
    demand futility and failure to state a claim upon which relief may be granted,
    respectively. After initial briefing, the court heard oral argument on the motion to
    dismiss on September 15, 2017. On December 22, 2017, the court requested
    supplemental briefing concerning who (i.e., the Compensation Committee or the
    Board) was empowered to terminate the Employment Agreement, and the legal
    implications of the answer to that question on the pending motion. Briefing on this
    issue was completed on January 16, 2018.
    III.     ANALYSIS
    Plaintiff challenges three categories of cash payments that CBS made to
    Redstone during the Relevant Period, namely the payment of (1) a $9 million bonus
    for 2014, (2) his annual base salary of $1.75 million as Executive Chairman from
    late May 2014 until his resignation from this position in February 2016, and (3) his
    annual base salary of $1 million as Chairman Emeritus beginning in February
    2016.87 These categories are depicted in the chart below:
    87
    Am. Compl. ¶¶ 50, 72, 83.
    19
    is futile when the directors upon whom the demand would be made “are incapable
    of making an impartial decision regarding such litigation.”90
    Because plaintiff did not make a demand on the Board before initiating this
    action, he must allege with particularity that his failure to make such a demand
    should be excused.91 In this analysis, I accept as true plaintiff’s particularized
    allegations of fact and draw all reasonable inferences that logically flow from those
    allegations in plaintiff’s favor.
    Under Delaware law, depending on the factual scenario, there are two
    different tests for determining whether demand may be excused: the Aronson test
    and the Rales test.92 The test articulated in Aronson v. Lewis93 applies when “a
    decision of the board of directors is being challenged in the derivative suit.”94 The
    test set forth in Rales v. Blasband, on the other hand, governs when “the board that
    would be considering the demand did not make a business decision which is being
    90
    Rales v. Blasband, 
    634 A.2d 927
    , 932 (Del. 1993).
    91
    Ct. Ch. R. 23.1.
    92
    Both tests boil down to the same inquiry: whether “the derivative plaintiff has shown
    some good reason to doubt that the board will exercise its discretion impartially and in
    good faith.” In re infoUSA, Inc. S’holders Litig., 
    953 A.2d 963
    , 986 (Del. Ch. 2007).
    93
    
    473 A.2d 805
    .
    94
    Rales, 
    634 A.2d at 933
     (emphasis in original).
    21
    challenged in the derivative suit,” such as instances “where directors are sued
    derivatively because they have failed to do something.”95
    “A decision approved by at least half of the corporation’s directors who would
    consider a demand, even when acting by committee, can be imputed to the entire
    board and thus triggers the Aronson test. . . . By contrast, the Rales test applies
    where a derivative plaintiff challenges a decision approved by a board committee
    consisting of less than half of the directors who would have considered a demand,
    had one been made.”96 Under either test, plaintiff “must impugn the ability of at
    least half the directors in office when it initiated [its] action . . . to have considered
    a demand impartially.”97
    B.      Demand Futility is Governed by the Rales Test
    Plaintiff’s breach of fiduciary duty and unjust enrichment claims are governed
    by Rales. The Amended Complaint and the materials it incorporates by reference
    show that Redstone’s compensation during the Relevant Period was determined by
    the Employment Agreement and the four-member Compensation Committee. More
    specifically, Redstone’s $1.75 million base salary for 2014 and 2015 was set by the
    terms of the Employment Agreement entered into before the Relevant Period and
    95
    
    Id.
     at 933-34 & n.9.
    96
    Teamsters Union 25 Health Servs. & Ins. Plan v. Baiera, 
    119 A.3d 44
    , 56-57 (Del. Ch.
    2015) (citations omitted).
    97
    Id. at 57 (citation omitted).
    22
    could only be reduced by terminating the Employment Agreement, which did not
    occur until Redstone resigned in February 2016. Thus, any challenge to these
    payments is based on inaction and subject to Rales.98 Challenges to Redstone’s $9
    million bonus in 2014 and the setting of his $1 million annual salary in 2016 as
    Chairman Emeritus also are analyzed under Rales because they were decisions made
    by the four-member Compensation Committee, which comprised a minority of the
    full thirteen-member Board.
    Plaintiff argues that the Aronson test should apply because a majority of the
    directors reviewed Redstone’s performance and “the full CBS board was aware that
    Sumner was incapacitated and essentially went along with the decision purportedly
    made by” the majority of directors regarding Redstone’s compensation.99 I disagree
    for two reasons. First, reviewing performance is distinct from setting specific
    amounts to be paid.       It is indisputable that the four-member Compensation
    Committee, which had the fully-delegated authority to set the level of Redstone’s
    compensation under its charter, made the decisions establishing the amount of
    98
    In re Goldman Sachs Grp., Inc. S’holder Litig., 
    2011 WL 4826104
    , at *6 (Del. Ch. Oct.
    12, 2011).
    99
    Pl.’s Answering Br. 24, 26 (emphasis added) (Dkt. 65). According to plaintiff, “two
    committees (comprised of 6 directors), along with defendant Moonves” made the
    compensation decisions. Id. at 26. This assertion is incorrect because the Compensation
    Committee’s charter clearly states that the Compensation Committee is vested with the full
    authority to “set the compensation level[] of the Chairman.” Moses Aff. Ex. 14 at 3.
    23
    Redstone’s bonus and his salary as Chairman Emeritus.100 Plaintiff does not dispute
    this point.101 Second, the fact that the Board and the Nominating and Governance
    Committee were aware of the Compensation Committee’s considerations in setting
    Redstone’s compensation does not mean that the Nominating and Governance
    Committee affirmatively made the decision to pay Redstone those amounts.102
    C.     Demand is Partially Excused under the Rales Test
    Under Rales, plaintiff’s claims should be dismissed under Rule 23.1 unless
    the particularized allegations of the Amended Complaint “create a reasonable doubt
    that, as of the time the complaint is filed, the board of directors could have properly
    exercised its independent and disinterested business judgment in responding to a
    demand.”103 The demand futility analysis “is conducted on a claim-by-claim basis”
    under Delaware law.104 “Independence means that a director’s decision is based on
    100
    See Calma v. Templeton, 
    2015 WL 1951930
    , at *6 (Del. Ch. Apr. 30, 2015) (holding
    that Rales applied where a dully authorized compensation committee, and not the entire
    board, approved a restricted stock grant).
    101
    Tr. 51 (Sept. 15, 2017) (“Q: Do you agree that the four members of the compensation
    committee had plenary authority to make each of the decisions that you’re challenging
    . . . ? A: I think that’s supported by the organic documents that were produced in response
    to the 220 and, in particular, the compensation committee charter.”).
    See Baiera, 119 A.3d at 57 (“The inference of full board approval . . . amounts to little
    102
    more than speculation.”).
    103
    
    634 A.2d at 934
    .
    104
    Cambridge Ret. Sys. v. Bosnjak, 
    2014 WL 2930869
    , at *4 (Del. Ch. June 26, 2014)
    (citing Beam ex rel. Martha Stewart Living Omnimedia, Inc. v. Stewart, 
    833 A.2d 961
    , 977
    n.48 (Del. Ch. 2003), aff’d, 
    845 A.2d 1040
     (Del. 2004); Needham v. Cruver, 
    1993 WL 179336
    , at *3 (Del. Ch. May 12, 1993)).
    24
    the corporate merits of the subject before the board rather than extraneous
    considerations or influences.”105 “A director is considered interested where he or
    she will receive a personal financial benefit from a transaction that is not equally
    shared by the stockholders.          Directorial interest also exists where a corporate
    decision will have a materially detrimental impact on a director, but not on the
    corporation and the stockholders.”106 Accordingly, a director can be rendered
    “interested” with respect to whether litigation should be brought when the director
    would face a substantial threat of personal liability.107
    Here, it bears emphasis that plaintiff has not argued that any of the directors
    were not independent.108 Plaintiff instead contends only that the Board was not
    “disinterested” because its members face a substantial threat of personal liability on
    the theory that the decision to continue paying Redstone throughout the Relevant
    Period “simply cannot be a decision made in good faith and constitutes waste.”109
    Consistent with the approach of analyzing demand futility claim-by-claim, I address
    below the alleged threat of personal liability to the directors arising from plaintiff’s
    105
    Aronson, 473 A.2d at 816.
    106
    Rales, 
    634 A.2d at 936
     (citation omitted).
    107
    Kohls v. Duthie, 
    791 A.2d 772
    , 782 (Del. Ch. 2000).
    108
    See Tr. 52 (Sept. 15, 2017); Emerald Partners v. Berlin, 
    726 A.2d 1215
    , 1224 (Del.
    1999) (“Issues not briefed are deemed waived.”).
    109
    Pl.’s Answering Br. 31.
    25
    claims related to three challenged categories of cash payments to Redstone: (1) the
    $9 million bonus paid for 2014, (2) the Executive Chairman salary ($1.75 million
    annually) paid from late May 2014 until Redstone resigned from that position in
    February 2016, and (3) the Chairman Emeritus salary ($1 million annually)
    beginning in February 2016. I begin with a brief discussion of the legal standards
    for bad faith and waste.
    1.    Legal Standards for Bad Faith and Waste
    As general matter, “bad faith will be found if a fiduciary intentionally fails to
    act in the face of a known duty to act, demonstrating a conscious disregard for his
    duties,”110 or if “the decision under attack is so far beyond the bounds of reasonable
    judgment that it seems essentially inexplicable on any other ground other than bad
    faith.”111 “Good faith is presumed and the party challenging director action bears
    the burden of rebutting that presumption.”112 “The proper inquiry is not whether a
    director neglected to do all that [he] should have . . . but rather whether the director
    knowingly and completely failed to undertake [his] responsibilities.”113
    110
    Lyondell Chem. Co. v. Ryan, 
    970 A.2d 235
    , 243 (Del. 2009) (citation and internal
    quotations omitted).
    111
    Crescent/Mach I Partners, L.P. v. Turner, 
    846 A.2d 963
    , 981 (Del. Ch. 2000) (citation
    and internal quotations omitted).
    112
    McGowan v. Ferro, 
    859 A.2d 1012
    , 1036 (Del. Ch. 2004) (citation omitted).
    113
    DiRienzo v. Lichtenstein, 
    2013 WL 5503034
    , at *13 (Del. Ch. Sept. 30, 2013) (citation
    and internal quotations omitted).
    26
    “The Delaware Supreme Court has implicitly held that committing waste is
    an act of bad faith.”114 In order to make out a waste claim, a plaintiff needs to show
    that the corporation has entered into a transaction in which it received consideration
    “so inadequate in value that no person of ordinary, sound business judgment would
    deem it worth what the corporation has paid.”115 In the context of employee
    compensation, courts afford great deference to a board’s decision,116 since “[t]he
    decision as to how much compensation is appropriate . . . is a core function of a
    board of directors”117 and “[c]ourts are ill-fitted to attempt to weigh the ‘adequacy’
    of consideration.”118
    As the above formulations demonstrate, the “standards for corporate waste
    and bad faith by the board are similar” in that, to prevail on either theory, “the
    plaintiff must overcome the general presumption of good faith by showing that the
    board’s decision was so egregious or irrational that it could not have been based on
    114
    In re Walt Disney Co. Derivative Litig., 
    907 A.2d 693
    , 749 (Del. Ch. 2005) (citing White
    v. Panic, 
    783 A.2d 543
    , 553-55 (Del. 2001)).
    115
    Grobow v. Perot, 
    539 A.2d 180
    , 189 (Del. 1988) (quoting Saxe v. Brady, 
    184 A.2d 602
    ,
    610 (Del. Ch. 1962)), overruled on other grounds by Brehm, 
    746 A.2d 244
    .
    116
    See Brehm, 746 A.2d at 263 (“[A] board’s decision on executive compensation is
    entitled to great deference.”).
    117
    In re Goldman Sachs, 
    2011 WL 4826104
    , at *14.
    118
    Brehm, 746 A.2d at 263 (citation omitted).
    27
    a valid assessment of the corporation’s best interests.”119 In short, it takes an extreme
    factual scenario for a plaintiff to state a claim for bad faith or waste.
    2.    The 2014 Bonus
    “The Delaware General Corporation Law (DGCL) expressly empowers a
    board of directors to appoint committees and to delegate to them a broad range of
    responsibilities, which may include setting executive compensation.”120 When a
    committee, rather than the board of directors, has plenary power to fix an executive’s
    compensation, then it is the committee that legally determines the amounts to be paid
    to that executive.121
    At CBS, the responsibility for setting Redstone’s compensation as Executive
    Chairman of the Company during the Relevant Period validly and solely laid with
    the four-member Compensation Committee.                   As mentioned above, the
    Compensation Committee’s charter provides that its “primary purpose . . . is to
    discharge the responsibilities of the Board relating to the compensation of the
    Company’s executive officers and other senior executives” and expressly states that
    119
    White, 
    783 A.2d at
    554 n.36 (citation omitted).
    120
    In re Walt Disney Co. Derivative Litig., 
    906 A.2d 27
    , 54 (Del. 2006) (citing 8 Del. C. §
    141(c)).
    121
    Id.
    28
    the Compensation Committee “shall set the compensation level[] of the
    Chairman.”122
    At the beginning of 2014, before Redstone allegedly became incapacitated in
    late May 2014, the Compensation Committee decided to include Redstone in the
    bonus pool for 2014 and set the 2014 performance criteria that CBS would have to
    achieve in order for Redstone to be entitled to a bonus.123 After the Company
    reportedly achieved its performance goals, the Compensation Committee awarded
    Redstone a $9 million bonus.124
    Relevant to the demand futility analysis, the decision to award this $9 million
    bonus was an exercise of discretion made solely by the four members of the
    Compensation Committee.             This means that, putting the members of the
    Compensation Committee and Redstone aside, eight members of the thirteen-
    member Board did not participate in making the decision to award the $9 million
    bonus and thus would not face a substantial threat of personal liability for that
    decision. Accordingly, because these eight directors constitute a majority of the
    Board and their independence is not questioned, demand on the Board is not excused
    122
    Moses Aff. Ex. 14 at 1, 3.
    123
    Moses Aff. Ex. 20 at 10.
    124
    Am. Compl. ¶¶ 5(b), 55; Moses Aff. Ex. 23 at 3, 11-12; Ex. 24.
    29
    with respect to plaintiff’s breach of fiduciary duty claim challenging Redstone’s
    2014 bonus.
    3.     The Executive Chairman Salary Payments
    Unlike the 2014 bonus, payment of Redstone’s $1.75 million annual salary as
    Executive Chairman from the end of May 2014, when he allegedly became
    incapacitated, through early February 2016, when he resigned as Executive
    Chairman, was not the product of an affirmative decision of the Compensation
    Committee. Rather, the salary compensation Redstone received during this period
    was set by default in the Employment Agreement that was entered into before the
    Relevant Period. As discussed above, under the Employment Agreement, the
    Compensation Committee could only increase, and not decrease, Redstone’s salary,
    which was set at $1.75 million annually in 2010. Thus, the only way for CBS to
    reduce or eliminate this annual salary obligation would have been for the Company
    to terminate the Employment Agreement, which could be “terminated by either party
    at will upon receipt of notice to the other party.”125
    The parties disagree whether the Board alone, or also the Compensation
    Committee, was empowered to terminate the Employment Agreement. Plaintiff
    argues that the Board alone had this authority. Defendants, on the other hand, argue
    that the Compensation Committee was empowered to terminate the Employment
    125
    Moses Aff. Ex. 9 at Ex. 10.1 ¶ 9.
    30
    Agreement “without further Board approval” pursuant to the authority delegated to
    it under its charter, but they concede that the “Board could also have terminated the
    agreement pursuant to its inherent ability to manage and direct the affairs of the
    Company.”126
    I need not decide whether the Board alone had the authority to terminate the
    Employment Agreement because, as defendants acknowledge, the Board retained
    the concurrent power to do so.127 Thus, it would not be appropriate to limit my
    inquiry solely to the members of the Compensation Committee when considering
    which directors potentially face a substantial threat of personal liability for failing to
    terminate, or failing to at least consider terminating, the Employment Agreement.
    Put differently, given the full Board’s conceded inherent ability to terminate the
    Employment Agreement, all of its members could face a sufficiently substantial
    threat of liability if it would have been wasteful or an act of bad faith not to at least
    consider doing so.
    A central tenant of our corporate law is that the “business and affairs of every
    corporation . . . shall be managed by or under the direction of a board of directors.”128
    126
    Defs.’ Suppl. Br. 1 (Dkt. 86).
    127
    Indeed, before the court asked for supplemental briefing concerning whether the
    Compensation Committee or the Board was empowered to terminate the Employment
    Agreement, it was defendants’ position that this was “a decision rightly left to the judgment
    of the Board.” Defs.’ Opening Br. 43 (Dkt. 55).
    128
    8 Del. C. § 141(a).
    31
    To be sure, directors may—and must as a practical matter for a large public
    corporation—delegate day-to-day decision-making to officers.129 Critically though,
    these “delegations ‘must be monitored in order to ensure their quality and
    integrity.’”130
    Here, as one would expect for a corporate executive receiving millions of
    dollars of compensation, Redstone’s Employment Agreement expressly required
    him to “be actively engaged” in performing certain specified duties:
    Without limiting the foregoing, you [Redstone] will be actively
    engaged in, and have responsibility, working with the Board and the
    President and [CEO] of CBS, [] for (a) the overall leadership and
    strategic direction of CBS, (b) providing guidance and support to senior
    management of CBS, (c) the coordination of the activities of the Board
    and (d) communication with shareholders and other important
    constituencies.131
    Contrary to the terms of the Employment Agreement quoted above, the Amended
    Complaint alleges numerous facts demonstrating that it should have been abundantly
    clear to the members of the Board—from their attendance at Board meetings, press
    publicity, and other interactions with the Company—that far from being “actively
    129
    8 Del. C. § 142.
    130
    1 STEPHEN A. RADIN, THE BUSINESS JUDGMENT RULE 444 (6th ed. 2009) (quoting
    William B. Chandler III, The Legal Framework for Analyzing Audit Committee Oversight,
    CORP. GOVERNANCE ADVISOR 18 (Jan./Feb. 2000)).
    131
    Moses Aff. Ex. 9 at Ex. 10.1 ¶ 1.
    32
    engaged” in the CBS’s affairs, Redstone was providing no meaningful services to
    the Company beginning at some point in the latter part of 2014 or in 2015:
     On May 22, 2014, after being carried onstage in a chair, Redstone
    only briefly attended the annual stockholders meeting to call it to
    order.132
     Beginning with the July 29, 2014 Board meeting, Redstone, who
    usually attended Board meetings in person, never physically attended
    another Board meeting.133
     Redstone’s participation in the July 29, 2014 Board meeting, the
    October 1, 2014 Board meeting, the November 5, 2014 quarterly
    earnings call, the December 11, 2014 Board meeting, and the
    January 29, 2015 Board meeting consisted of little more than
    introducing himself. He made no substantive contribution.134
     Redstone did not participate in any conference calls with Wall Street
    analysts in 2015, and he did not speak at all at any of the other Board
    meetings held in 2015—on March 31, May 21, October 2, and
    December 10.135
     On May 20, 2015, The Hollywood Reporter published an article
    reporting that Redstone was severely impaired.136
     On May 31, 2015, Vanity Fair published a similar article.137
     On November 24, 2015 the Herzer Action was filed.138
    132
    Am. Compl. ¶ 38.
    133
    Am. Compl. ¶¶ 40, 44, 49, 56.
    134
    Am. Compl. ¶¶ 40, 44, 47, 49, 56.
    135
    Am. Compl. ¶ 56.
    136
    Am. Compl. ¶ 59.
    137
    Am. Compl. ¶ 62.
    138
    Am. Compl. ¶¶ 7-8.
    33
    The Amended Complaint also sets forth individualized allegations as to
    several CBS directors—namely Moonves, Kopelson, and Goldberg—indicating that
    they knew about Redstone’s inability to contribute to CBS in any meaningful sense:
     On July 14, 2014, Moonves received an email from a CBS executive
    alerting him that Redstone’s speech was incomprehensible.139
     By early September 2014, Moonves and Kopelson (as well as
    several CBS executives) knew that Redstone had been hospitalized
    at the end of August 2014 with pneumonia.140
     On November 3, 2014, Kopelson sent Moonves an email stating:
    “Hard to tell if he is worse. Barely communicates and then is totally
    unintelligible. Had coughing fit Saturday night and Sydney took
    him into the hospital just to check him out and then home.”141
     In October 2015, Goldberg and Kopelson met with Redstone at his
    home, during which Redstone was “especially vacant and absent”
    and “appeared out of touch, remote and non-responsive to the people
    around him.”142
     On December 2, 2015, Moonves received an email from a fellow
    CBS director expressing concern about distractions caused by legal
    actions and questions regarding Redstone’s health.143
    139
    Am. Compl. ¶ 39.
    140
    Am. Compl. ¶¶ 41-42.
    141
    Am. Compl. ¶ 45.
    142
    Am. Compl. ¶¶ 66-67.
    143
    Am. Compl. ¶ 70.
    34
    One logically would expect, and thus it would reasonable to infer, that these reports
    and observations about Redstone’s condition would have been reported back to the
    other members of the Board.144
    Viewing these and the other alleged facts in the light most favorable to
    plaintiff, as the court must at this stage of the case, the Amended Complaint
    describes with particularity a situation where the members of the Board face a
    substantial threat of liability for non-exculpated claims for waste and/or bad faith
    because: (1) Redstone’s contributions to the Company after May 2014 were so
    negligible and inadequate in value that no person of ordinary, sound business
    judgment would deem them worth the millions of dollars in salary that the Company
    was paying him; and (2) the failure to inquire into Redstone’s health or to at least
    consider terminating his Employment Agreement while the Company paid him
    millions of dollars over a twenty-month period is reflective of a conscious disregard
    of the directors’ fiduciary duties.
    To be clear, the Board certainly did not need to terminate Redstone’s
    employment immediately upon him falling ill. Redstone has been a leading and
    144
    See J. Travis Laster & John Mark Zeberkiewicz, The Rights and Duties of Blockholder
    Directors, 70 BUS. LAW. 33, 45 (2014) (citing Gantler v. Stephens, 
    965 A.2d 695
     (Del.
    2009) (“The failure by an officer or director to provide information regarding the
    corporation to the board, or a group of directors who direct that information not be
    furnished to one or more directors, may constitute a breach of fiduciary duty on the part of
    the officers or directors responsible for the failure.”).
    35
    prominent figure in the entertainment industry for decades, before and after CBS
    became an independent public company. He was entitled to be treated in a dignified
    and respectful manner upon falling ill, as one would hope the Company would treat
    any of its employees. According to the allegations of the Amended Complaint,
    however, the Company made no effort to reckon with the financial consequences of
    Redstone’s severe incapacity for approximately twenty months.               If plaintiff’s
    allegations are true, the Board’s extended period of inaction is inexplicable.
    Focusing on the decline in Redstone’s compensation “from $11.76 million in
    2013 to $1 million in 2016,” defendants argue that “[t]here is simply no logical
    inference . . . that Mr. Redstone’s capabilities and health issues were ignored.”145
    Perhaps discovery will bear out that these concerns actually were addressed as
    defendants imply, but the record currently before the court does not. To the contrary,
    there is no indication in plaintiff’s pleading, or in the many documents defendants
    chose to place in the record from the Section 220 production to plaintiff, that
    Redstone’s mental or physical capacity or his ability to perform any substantive tasks
    was discussed in any meaningful sense during the Relevant Period.146 Glaringly
    145
    Defs.’ Reply Br. 30 (Dkt. 68).
    146
    For example, CBS’s Board and Compensation Committee minutes in the latter part of
    2014 and throughout 2015 contain no discussion of Redstone’s mental or physical capacity.
    See Moses Aff. Exs. 20, 22-34. Defendants argue that “there is no requirement under
    Delaware law that board minutes adopt any level of particularity.” Defs.’ Reply Br. 30.
    True enough, but at this stage of the litigation all reasonable inferences must be drawn in
    favor of plaintiff.
    36
    absent, for example, is any memorandum or other writing candidly assessing
    Redstone’s capabilities and the pros and cons of terminating his Employment
    Agreement.147
    In sum, based on the particularized allegations of the Amended Complaint and
    the procedural posture of the pending motion, the court has good reason to doubt the
    ability of the Company’s directors to investigate impartially claims against
    themselves concerning the salary payments made to Redstone as Executive
    Chairman after late May 2014. Accordingly, demand is excused with respect to that
    part of Count I of the Amended Complaint.
    4.    The Chairman Emeritus Salary Payments
    On February 3, 2016, the day after Redstone resigned as Executive Chairman,
    the Board appointed him as Chairman Emeritus.148 About two weeks later, on
    February 18, the Compensation Committee decided to pay Redstone an annual salary
    147
    Pointing to the Company’s proxy statement, defendants assert that if Redstone’s
    employment had been terminated due to disability, the vesting of approximately $3.2
    million in equity awards would be accelerated. Defs.’ Opening Br. 13; Defs.’ Reply Br.
    21; Tr. 25 (Sept. 15, 2017). That certainly would be a valid consideration for the Board to
    take into account in deciding upon a course of action. The problem at this procedural stage,
    however, is that there is no indication in the record (including the documents that
    defendants submitted with their papers) that this factor actually was considered in real time.
    Tr. 25-26 (Sept. 15, 2017).
    148
    Am. Compl. ¶¶ 20, 80; Moses Aff. Ex. 27.
    37
    of $1 million for “his continuing employment with the Company as an at-will
    employee following [his] resignation.”149
    The setting of Redstone’s compensation as Chairman Emeritus was a
    Compensation Committee decision, like the setting of the bonus payment in 2014.
    Nevertheless, it would be unreasonable in my view to expect that the other members
    of the Board would be able to consider a demand regarding this decision
    impartially.150   Practically speaking, it would be against the personal interests of
    those directors to be critical of a decision to pay Redstone an annual salary of $1
    million given that plaintiff’s claims regarding the base salary payments made to
    Redstone as Executive Chairman after May 2014 (before he became Chairman
    Emeritus in February 2016) will proceed against them.
    Put differently, how could a director realistically be expected to criticize a
    subsequent decision to pay a $1 million annual salary when that director is already
    being sued for permitting prior annual salary payments to have been made to that
    same, allegedly incompetent person? This concern about impartiality is particularly
    149
    Am. Compl. ¶¶ 5(n) (quoting minutes of Feb. 18, 2016 Compensation Committee
    meeting (Moses Aff. Ex. 28 at 5)), 83.
    150
    One might question the non-Compensation Committee directors’ ability to be impartial
    with respect to the 2014 bonus payment for the same reason, but that one-time decision
    was qualitatively different. It is not contested that the Company met its performance goals
    for 2014 and that Redstone was able to perform his duties for approximately five months
    in 2014, which by itself may be sufficient consideration for the bonus. See Tr. 47, 65 (Sept.
    15, 2017).
    38
    acute here, where there is no indication from the allegations of the Amended
    Complaint that Redstone’s mental or physical capacity had improved in early 2016
    relative to the latter half of 2014 through 2015. Accordingly, demand is excused
    with respect to the claims regarding Redstone’s compensation as Chairman
    Emeritus.
    5.     Demand is Excused for Part of the Unjust Enrichment Claim
    Count II of the Amended Complaint asserts that Redstone was unjustly
    enriched through his receipt of cash compensation during the Relevant Period. This
    claim parallels plaintiff’s breach of fiduciary duty claim in Count I, turning on the
    same challenged payments.151
    For the reasons explained above, plaintiff has pled no particularized facts
    excusing his failure to make a demand on the Board with respect to the 2014 bonus
    payment. This holds true whether the theory of recovery for that payment is based
    on an alleged breach of fiduciary duty or unjust enrichment. The Board, however,
    could not impartially consider unjust enrichment claims with respect to the
    Executive Chairman and Chairman Emeritus base salary payments, since, as
    explained above, twelve of its thirteen members face a sufficiently substantial threat
    151
    See Seinfeld v. Slager, 
    2012 WL 2501105
    , at *16 (Del. Ch. June 29, 2012) (dismissing
    unjust enrichment claims that were “derivative of” other claims, including waste claims,
    that were dismissed for failure to demonstrate that demand on the board was excused).
    39
    of personal liability for breach of fiduciary duty by permitting those payments to be
    made. Accordingly, demand with respect to that aspect of Count II is excused.
    D.     The Amended Complaint States Claims for Breach of Fiduciary
    Duty and Unjust Enrichment
    In this section, I address whether plaintiff has stated a claim for relief with
    respect to the claims for which demand is excused, i.e., the breach of fiduciary duty
    and unjust enrichment claims concerning the Executive Chairman and Chairman
    Emeritus salaries paid to Redstone after late May 2014. The standards governing a
    motion to dismiss for failure to state a claim for relief under Court of Chancery Rule
    12(b)(6) are well settled:
    (i) all well-pleaded factual allegations are accepted as true; (ii) even
    vague allegations are “well-pleaded” if they give the opposing party
    notice of the claim; (iii) the Court must draw all reasonable inferences
    in favor of the non-moving party; and ([iv]) dismissal is inappropriate
    unless the “plaintiff would not be entitled to recover under any
    reasonably conceivable set of circumstances susceptible of proof.”152
    1.     The Executive Chairman Salary Payments
    “The standard for pleading demand futility under Rule 23.1 is more stringent
    than the standard under Rule 12(b)(6), and a complaint that survives a motion to
    dismiss pursuant to Rule 23.1 will also survive a 12(b)(6) motion to dismiss,
    assuming that it otherwise contains sufficient facts to state a cognizable claim.” 153
    152
    Savor, Inc. v. FMR Corp., 
    812 A.2d 894
    , 896-97 (Del. 2002) (citations and internal
    quotations omitted).
    153
    Citigroup, 964 A.2d at 139 (citation and internal quotations omitted).
    40
    Accordingly, for the same reasons stated in the demand futility analysis, plaintiff has
    stated a claim with respect to the payment of the Executive Chairman salary from
    the latter half of 2014 until Redstone’s resignation from that position in February
    2016.     To briefly reiterate, plaintiff sufficiently has alleged well-pled facts
    demonstrating that Redstone’s contributions over that time period were so
    disproportionately small that continued payment of the Executive Chairman salary
    ($1.75 million annually) was a decision beyond the range of what any reasonable
    person might be willing to trade for such “services.”
    2.    The Chairman Emeritus Salary Payments
    Plaintiff also has stated a claim for breach of fiduciary duty with respect to
    the Chairman Emeritus salary payments. The Company explicitly stated that it
    appointed Redstone as Chairman Emeritus and decided to pay him an annual salary
    of $1 million with the expectation that Redstone would continue to contribute to
    CBS. In particular, the minutes of the Compensation Committee’s February 18,
    2016 meeting state that it set Redstone’s salary in consideration of his “continuing
    employment with the Company as an at-will employee,” and that Redstone’s
    “continuing availability for advice and consultation and continuing participation on
    the CBS Board of Directors as Chairman Emeritus” was a factor in making this
    41
    decision.154 But, as discussed above, plaintiff has alleged facts that the Board knew
    that Redstone would not be able to contribute anything of value to CBS by this time,
    and had known so for a while.
    The Compensation Committee minutes reflect that Redstone’s “significant
    historical contributions to the Company” also was discussed when determining the
    Chairman Emeritus salary.155 The Company similarly recited in a proxy statement
    that “[t]he Board believes that that appointment of Mr. Redstone as Chairman
    Emeritus is appropriate, in view of his many years of leadership as Executive
    Chairman of the Board and his significant historical contributions to the
    Company.”156        Relying on these references, defendants defend the Chairman
    Emeritus salary awarded to Redstone based on this court’s dismissal of waste claims
    involving the payment of compensation for past services rendered.
    In each of those cases, however, the payments made were one-time events,
    typically as part of a severance or retirement arrangement.157 Here, by contrast, the
    154
    Am. Compl. ¶ 5(n) (quoting minutes of Feb. 18, 2016 Compensation Committee
    meeting (Moses Aff. Ex. 28 at 5)); see also Moses Aff. Ex. 28 at Ex. K (approving the $1
    million Chairman Emeritus salary “with respect to the continuing at-will employment
    arrangement with Mr. Sumner M. Redstone”).
    155
    Am. Compl. ¶ 5(n) (quoting minutes of Feb. 18, 2016 Compensation Committee
    meeting (Moses Aff. Ex. 28 at 5)).
    156
    Moses Aff. Ex. 3 at 8.
    157
    See Seinfeld, 
    2012 WL 2501105
    , at *7 (dismissing waste claim with respect to a $1.8
    million retirement bonus paid for past services rendered); Zucker v. Andreessen, 
    2012 WL 2366448
    , at *10 (Del. Ch. June 21, 2012) (dismissing waste claim with respect to a
    42
    Board did not purport to make only a single payment to Redstone for past
    contributions as part of a plan of separation. Rather, the Company chose to continue
    to pay him an annual salary in “exchange” for services it allegedly knew that he
    could not render. The decision to award an apparently ongoing salary of this size
    under the circumstances was “sufficiently unusual to require the court to refer to
    evidence before making an adjudication of [its] validity and consistency with
    fiduciary duty.”158 Accordingly, this aspect of Count I also states a claim for relief.
    3.     Unjust Enrichment
    Unjust enrichment is “the unjust retention of a benefit to the loss of another,
    or the retention of money or property of another against the fundamental principles
    of justice or equity and good conscience.”159 “The elements of unjust enrichment
    are: (1) an enrichment, (2) an impoverishment, (3) a relation between the enrichment
    and impoverishment, (4) the absence of justification, and (5) the absence of a remedy
    provided by law.”160 “When the complaint alleges an express, enforceable contract
    severance package); Zupnick v. Goizueta, 
    698 A.2d 384
    , 388-89 (Del. Ch. 1997)
    (dismissing waste claim with respect to a stock option award granted for past services
    rendered where the options became exercisable immediately upon the executive’s
    retirement and the executive was eligible to retire when the options were granted).
    158
    Lewis v. Vogelstein, 
    699 A.2d 327
    , 339 (Del. Ch. 1997) (Allen, C.).
    159
    Fleer Corp. v. Topps Chewing Gum, Inc., 
    539 A.2d 1060
    , 1062 (Del. 1988) (citation
    and internal quotations omitted).
    160
    Nemec v. Shrader, 
    991 A.2d 1120
    , 1130 (Del. 2010) (citation omitted).
    43
    that controls the parties’ relationship, however, a claim for unjust enrichment will
    be dismissed.”161
    Because Redstone’s base salary compensation as Executive Chairman was
    governed by the Employment Agreement, plaintiff has not stated a claim for unjust
    enrichment with respect to those payments. It is not alleged, however, that Redstone
    ever signed a new employment contract in connection with his appointment as
    Chairman Emeritus after his resignation as Executive Chairman.162 With respect to
    these payments, Redstone only implicitly challenges the fourth element, i.e., the
    absence of justification:
    To the extent the Complaint seeks to challenge the compensation paid
    to Mr. Redstone following his resignation as Executive Chairman and
    appointment as Chairman Emeritus, it nonetheless fails to state a claim
    because . . . there was no underlying wrongful conduct by the Individual
    Defendants in awarding that compensation to Mr. Redstone.163
    I disagree. For the reasons explained above, plaintiff has adequately pleaded that
    the Chairman Emeritus payments made to Redstone were wasteful and thus lacked
    justification. Accordingly, at this stage of the case, the court cannot conclude that
    161
    Bakerman v. Sidney Frank Importing Co., Inc., 
    2006 WL 3927242
    , at *18 (Del. Ch.
    Oct. 10, 2006) (citation omitted).
    162
    Redstone’s Joinder & Mot. to Dismiss ¶ 4 n.5 (Dkt. 58).
    163
    
    Id.
    44
    there is no reasonably conceivable set of circumstances under which Redstone was
    unjustly enriched by these particular payments.164
    IV.   CONCLUSION
    For the reasons stated above, defendants’ motion to dismiss is GRANTED in
    part and DENIED in part. This action will proceed in the manner set forth above.
    The parties are directed to confer and to submit an implementing order within five
    business days of this decision.
    IT IS SO ORDERED.
    164
    See Ryan v. Gifford, 
    918 A.2d 341
    , 361 (Del. Ch. 2007) (quoting Schock v. Nash, 
    732 A.2d 217
    , 232-33 (Del. 1999)) (“A defendant may be liable ‘even when the defendant
    retaining the benefit is not a wrongdoer’ and ‘even though he may have received [it]
    honestly in the first instance.’”).
    45