A shareholder derivative lawsuit seeks to block Paramount Skydance\u2019s proposed acquisition of Warner Bros. Discovery, alleging directors put their own interests ahead of the company\u2019s by making political and editorial concessions to secure regulatory approval.<\/p>\n
A Paramount Skydance shareholder has launched a derivative action<\/a> in Delaware seeking to block the company\u2019s proposed $111 billion acquisition<\/a> of Warner Bros. Discovery, alleging that the deal is the culmination of a pattern of fiduciary breaches in which senior executives allegedly traded editorial independence for favourable treatment from the Trump administration.<\/p>\n The lawsuit, filed on 14 July in the Delaware Court of Chancery on behalf of shareholder Paul Robbins, names Paramount chairman and chief executive David Ellison, his father and controlling shareholder Lawrence Ellison, the company\u2019s board of directors and other senior figures as defendants. It seeks an injunction preventing completion of the proposed merger, which the complaint describes as the largest transaction in Hollywood history, along with other equitable relief.<\/p>\n The claim has been brought as a shareholder derivative action, meaning Robbins is suing on behalf of Paramount itself rather than seeking compensation personally.<\/p>\n Personal interests<\/p>\n According to the complaint, Paramount\u2019s controlling shareholders and directors breached their fiduciary duties by allegedly offering political and editorial concessions to secure regulatory approval for both the completed Skydance acquisition of Paramount and the proposed purchase of Warner Bros. Discovery. The claim alleges those actions exposed the company to substantial legal, financial and reputational risks while placing the personal interests of company insiders ahead of those of Paramount and its shareholders.<\/p>\n The complaint relies heavily on Delaware corporate law principles governing directors\u2019 duties of loyalty, arguing that corporate fiduciaries cannot knowingly cause a corporation to pursue unlawful conduct. Citing the Delaware Court of Chancery\u2019s 2011 decision in In re Massey Energy, it contends that \u201cDelaware law does not charter law breakers\u201d and alleges that the defendants\u2019 conduct amounts to breaches of those duties.<\/p>\n Editorial changes<\/p>\n Among its allegations, the complaint claims David and Lawrence Ellison promised changes to the editorial direction of CBS and, if Paramount acquired Warner Bros. Discovery, CNN, in exchange for favourable regulatory treatment from the Trump administration. It also points to Paramount\u2019s settlement of litigation brought by President Trump against CBS, together with subsequent changes to CBS News, as part of what it characterises as a wider pattern of conduct designed to obtain regulatory approval for major media acquisitions.<\/p>\n The claimant further argues that the proposed Warner Bros. Discovery acquisition threatens Paramount by exposing it to future regulatory investigations and litigation while eroding the value of its news operations. It also alleges that Paramount\u2019s share price has fallen substantially since the merger agreement was signed.<\/p>\n \u2018Make no sense\u2019<\/p>\n The proceedings were announced by the Freedom of the Press Foundation (FPF) and the Public Integrity Project.<\/p>\n Seth Stern, FPF\u2019s chief of advocacy, said in a statement: \u201cThe economic terms of this merger, on their own, make no sense for Paramount shareholders. They make even less sense given reports of the Ellisons\u2019 commitments to Trump to tank CNN\u2019s reputation and viewership just like they did at CBS.\u201d<\/p>\n He added: \u201cCNN and CBS viewers want real journalism. If Paramount\u2019s news networks are watered down to appease the administration, they\u2019ll stop tuning in, and the public will be less informed.\u201d<\/p>\n Brendan Ballou, chief executive of the Public Integrity Project, said: \u201cAmerica\u2019s richest people want to turn America\u2019s most important media outlets into propaganda machines for the president. This is bad for Paramount\u2019s shareholders. This is bad for democracy. And this is deeply corrupt.\u201d<\/p>\n He added: \u201cThis case is about exposing and stopping that corruption.\u201d<\/p>\n The claimant is asking the court to prevent the completion of the Warner Bros. Discovery acquisition and to stop the defendants from receiving merger-related financial benefits, including executive awards and other compensation linked to completion of the transaction. It alleges that allowing the merger to proceed would enable the defendants to profit from conduct that breached their fiduciary duties to Paramount.<\/p>\n Representation<\/p>\n The claimant is represented by Brendan Ballou and Emily Gilman of Public Integrity Project, Seth Stern of Freedom of the Press Foundation and Mary Thomas of Thomas Law.<\/p>\n","protected":false},"excerpt":{"rendered":"A shareholder derivative lawsuit seeks to block Paramount Skydance\u2019s proposed acquisition of Warner Bros. 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