Sumner Redstone.

The Delaware Court of Chancery on Thursday ruled the CBS Corp. board must face claims it improperly approved millions of dollars in payments to Sumner Redstone after the company's former executive chairman became incapacitated in 2014.

Chancellor Andre G. Bouchard said CBS investor R.A. Feuer could proceed with a derivative lawsuit alleging that the CBS board members had committed corporate waste by deciding to continue the annual payments, even after the 94-year-old's health had deteriorated to the point where he could no longer provide any meaningful services to the company.

The ruling marked a rare pleading-stage victory for a derivative plaintiff in a court which often defers to the judgment of a corporation's directors when reviewing business decisions made on behalf of a company.

However, Bouchard said it should have been “abundantly clear” to the board by 2014 that Redstone's physical and mental state could not justify paying his $1.75 million base salary as executive chairman and, later, $1 million for his role as chairman emeritus.

“This court has commented many times on the difficulty of pleading a viable claim for waste against a corporate director under our law,” Bouchard wrote in a 45-page opinion.

“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.”

The lawsuit, filed in 2016, accused the CBS directors of abandoning their obligations to investors out of loyalty to Redstone, who Feuer said, had been unjustly enriched by the bonus and salary payments.

By that time, according to court documents, Redstone, who lives in Los Angeles, had stopped participating in company meetings and press events, as his health took a precipitous decline. Still, the board granted Redstone a $9 million bonus in 2014, on top of his $1.75 million base salary, which he collected until stepping down to become chairman emeritus in 2016. In that position, Redstone made $1 million with no bonuses.

Meanwhile, the suit alleged, Redstone had lost his ability to talk and swallow on his own, and he required around-the-clock nursing care after being hospitalized with pneumonia.

The CBS directors, however, moved to dismiss the case in October 2016. They argued that Redstone's compensation had decreased from nearly $12 million in 2013 to just $1 million three years later, foreclosing the possibility that his health problems were ignored.

But Bouchard found no evidence in the record that the company had addressed Redstone's incapacity when approving the payments, exposing the individual directors to potential liability for the annual payments.

“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 20 months,” Bouchard said. “If plaintiff's allegations are true, the board's extended period of inaction is inexplicable.”

Feuer's claim to the $9 million bonus payment, however, was denied.

An attorney for the CBS directors declined to comment on Bouchard's ruling and an attorney for Feuer respond Thursday to a call seeking comment.

Feuer is represented by Norman M. Monhait and P. Bradford deLeeuw of Rosenthal, Monhait & Goddess in Wilmington; Richard D. Greenfield, Marguerite R. Goodman and Ilene Freier Brookler of Greenfield & Goodman in New York and Michael D. Donovan of Donovan Axler in Berwyn, Pennsylvania.

The board members are represented by Paul Vizcarrondo, Jonathan Moses, Lauren Kofke and Courtney Heavey of Wachtell, Lipton, Rosen & Katz in New York and Kurt M. Heyman, Patricia L. Enerio and Melissa N. Donimirski of Heyman Enerio Gattuso & Hirzel.

The case is captioned Feuer v. Redstone.