A recent Law 360 story by Jeff Montgomery, “$122.5M Viacom-CBS Merger Suit Deal, $27M Fee OK’d in Del.”, reports that Delaware's Court of Chancery approved one of the largest stockholder class settlements for a fiduciary duty breach in state court history, a $122.5 million deal with Paramount Global that ends a challenge to the fairness of CBS' $30 billion merger with Viacom in 2019.  Vice Chancellor Sam Glasscock III approved without objections the settlement terms, which will cover distributions to stockholders after a $26,922,500 attorney fee and $2,167,079 expense award

The approval settles more than 3½ years of litigation over the tie-up, which created Paramount Global, though what the suit argued was conflicted share exchange terms that counsel for the Viacom stockholders said "significantly overpriced CBS" relative to Viacom.  Gregory V. Varallo of Bernstein Litowitz Berger & Grossmann LLP, counsel to the class, told Vice Chancellor Glasscock that the case had to survive disputes both with Viacom's controllers and independent committee members as well as the impact of litigation by CBS stockholders who, despite Viacom's position, alleged that they were the ones shortchanged.

"This settlement is a robust one, I think it's not overstated to say," Varallo said. He added later that the settlement was the result of a mediator recommendation that was offered after more than a full year of mediation.  Awaiting approval is a proposed $167.5 million settlement and $45 million in fees sought by attorneys for former CBS Corp. stockholders to end both derivative and class litigation over their alleged damages in the same merger. A hearing on that settlement is slated for Sept. 6 in the same court.

Co-lead counsel Kessler Topaz Meltzer & Check LLP, Prickett Jones & Elliott PA and Grant & Eisenhofer PA are asking for $2.5 million in litigation expenses and a fee award of up to 27.5% of the $167.5 million CBS settlement amount minus those expenses, or roughly $45.37 million, according to a stipulation docketed on May 26.

The proposed Viacom class action was filed in late 2019, with a Viacom investor accusing media mogul Shari Redstone, daughter of National Amusements Inc. founder Sumner Redstone, and Viacom officers of breaching their fiduciary duty by pushing a "long-anticipated yet much-maligned" $30 billion merger with CBS, asserting the tie-up is "patently unfair" to Viacom shareholders.

Vice Chancellor Glasscock described the fee as illustrating "why we have to make contingent fee awards in settlements of this type that are large enough — although still wholesome in comparison to the whole — so the system will work" while relying on "entrepreneurial" counsel.  The 27,000 hours of contingent fee work by class attorneys "is an investment without a guarantee," the vice chancellor said.  "The $2.1 million in expenses is an investment without a guarantee."

Earlier in the case, Varallo said the litigation would have been judged based on the plaintiff-friendly "entire fairness" judgment standard, triggered by the appearance of a controller on both sides of a transaction, rather than business judgment deference.  In the Viacom-CBS deal, Shari Redstone was described as being on a mission to push through a deal combining the media giants, with Robert M. Bakish, her choice for CEO, slated to helm the combined company, Varallo said.

A special Viacom committee set up to review the merger caved to Redstone's governance demands to install loyalists at the helm of the new company instead of securing more economic considerations for Viacom shareholders, the suit asserts.  Varallo said the stockholders had arguments that the merger undervalued Viacom by $165 million under one measure, and by as much as $917 million under another, but still risked no recovery at all if the court found that the claim fell within a range of possible fairness conclusions.

The vice chancellor observed that "among the best corporate counsel in the country were involved here on both sides. There's no question this matter got the litigation attention it deserved. I don't find the 22% recovery here, given the contingent nature of the action and the result achieved, anything other than justified."