Cleary Gottlieb represented Shari Redstone and two other CBS directors in obtaining dismissal of a putative securities fraud class action in the U.S. District Court for the Southern District of New York.
On January 15, 2020, Judge Valerie E. Caproni granted a motion to dismiss securities fraud claims against Shari Redstone and several other directors of CBS related to sexual misconduct allegations against former CEO Les Moonves. In September 2018, Moonves stepped down as CEO of CBS amid accusations of misconduct. After CBS stock fell, plaintiffs filed suit alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act by CBS, Moonves, and several CBS directors and officers, including Shari Redstone. Specifically, plaintiffs alleged that CBS and its management had made statements about CBS’s workplace culture and Moonves’ importance to the company’s financial performance but had failed to disclose the risk that Moonves would be brought down by sexual misconduct allegations.
The court dismissed all claims except for those against Moonves and CBS, holding that plaintiffs had identified only a single potentially materially misleading statement and that they had not pled scienter for anyone other than Moonves. In particular, the court noted that steps Ms. Redstone and other directors took to investigate Moonves when rumors about his misconduct first arose suggested “a prudent course of action” in response to possible risks “that weakens rather than strengthens an inference of scienter.”