In the past, shareholder derivative lawsuits tended to settle for the defendants’ agreement to adopt corporate therapeutics and the payment of plaintiffs’ attorneys’ fees. There typically was not a cash component to the settlement, and rarely a substantial cash component. In more recent years, settlement patterns have changed, and, increasingly, derivative suit settlements have entailed large amounts of cash. The latest example of these new derivative suit settlement patterns is the $167.5 settlement of the derivative lawsuit brought by CBS shareholders in Delaware Chancery Court in connection with CBS’s $30 billion 2019 acquisition of Viacom. (The combined company was known as ViacomCBS, which changed its named to Paramount Global in February 2022.) Paramount Global disclosed the settlement of the CBS shareholder derivative lawsuit it its April 21, 2023 filing on Form 8-K, here.

According to the plaintiffs’ consolidated amended complaint (here), the 2019 merger of CBS and Viacom followed years of efforts by Shari Redstone, who was a director of both CBS and Viacom, and who through National Amusements, Inc. (NAI) controled both companies. The 2019 merger, the complaint alleges, was the culmination of years of “relentless” effort on Redstone’s part to merge the companies. The complaint alleges that after prior unsuccessful efforts to effect the merger, Redstone packed the CBS board with hand-picked loyalist directors and also convinced certain hold-over directors to support her efforts, using compensation inducements. The plaintiffs alleged that as a result of these changes, Redstone was finally able to have the merger completed in December 2019, a transaction the plaintiffs allege resulted in the combination of the poorly performing Viacom with CBS, destroying value for CBS to the benefit of NAI.

The CBS Shareholder Derivative Lawsuit and its Settlement

The plaintiff CBS shareholders filed a lawsuit in the Delaware Chancery Court against certain NAI parties, as well as certain directors and officers of CBS. The complaint alleges that the defendants breached their fiduciary duties in connection with the negotiation and approval of the merger. The defendants filed motions to dismiss. In a February 21, 2021 order (here), Vice Chancellor Slights largely denied the defendants’ motion to dismiss. The case was scheduled to go to trial in June 2023.

In its April 21 8-K announced that on April 18, 2023, the parties had agreed to settle the litigation according to the terms of a term sheet that is to be incorporated in a long-form settlement agreement that will be subject to final approval of the court. According to the 8-K, the settlement agreement provides for “the final dismissal of the Litigation in exchange for a settlement payment to the Company in the amount of $167.5 million, less administrative costs and plaintiffs’ counsels’ fees and expenses.” The 8-K does not say who is to pay the cash amount, nor does it say whether any portion of the settlement will be funded by D&O insurance.


As readers know, I have been maintaining a runny tally of the largest shareholder derivative settlements. My table of the largest settlements, updated to reflect this new CBS/Viacom (Paramount Global)settlement can be found here. This new settlement is one of the ten largest derivative suit settlements ever. Depending on how you count some of the arguably larger settlements, this latest settlement could be the ninth largest, or better.

As massive as this settlement is, there is further context to this settlement that makes the overall settlement costs arising out of the CBS Viacom merger even more impressive.

As it turns out, there was not only a lawsuit filed by CBS shareholders in connection with the merger, but there was also a separate lawsuit filed in Delaware Chancery Court on behalf of Viacom shareholders. The Viacom shareholder suit presents similar allegations about the way Shari Redstone allegedly “steam-rolled” the two companies’ combination.

As reflected in a February 2023 filing by Paramount Global on Form 8-K (here), the separate Viacom shareholder action recently settled for $122.5 million, subject to court approval. Because the Viacom shareholder action was filed as a direct action and not as a derivative action, it does not qualify for my list of largest derivative lawsuit settlements (though were it a derivative settlement, it would have qualified for the list).

The total amount of these two settlements is $290 million, which obviously puts a high additional price tag on the cost of the merger. As I noted above, the source of the funds to pay the CBS derivative settlement is not clear. However, the Paramount Global 8-K in which it disclosed the settlement of the Viacom shareholder action said, with respect to the settlement that “is currently engaged in litigation regarding insurance coverage against certain of its insurance carriers in the Superior Court of the State of Delaware. The Company intends to pursue its claims vigorously. Pending recovery of any such insurance proceeds, the Company will advance funds for the settlement when they become due.”