Friedman v. Dolan: Substituting Ineffective Process for Substance (Part 2)

We are discussing Friedman v. Dolan.  According to the complaint, a majority of the board of directors of Cablevision consisted of members of the Dolan family.  As the complaint alleged: 

  • Cablevision is controlled by the Dolan family, who collectively hold 72.9% of the total voting power of all the outstanding Cablevision common stock.  Charles F. Dolan (“Charles”), the family’s patriarch, founded Cablevision and has served as the Company’s Executive Chairman since 1985. James L. Dolan (“James”), Charles’ son, has served as Chief Executive Officer (“CEO”) of the Company since 1995 and a director since 1991. Eight other Dolan family members serve on the Board, and along with James and Charles, they constitute a majority of the Board. Cablevision is controlled by the Dolan family, who collectively hold72.9% of the total voting power of all the outstanding Cablevision common stock.Charles F. Dolan (“Charles”), the family’s patriarch, founded Cablevision and hasserved as the Company’s Executive Chairman since 1985. James L. Dolan (“James”),Charles’ son, has served as Chief Executive Officer (“CEO”) of the Company since1995 and a director since 1991. Eight other Dolan family members serve on the Board,and along with James and Charles, they constitute a majority of the Board.

The plaintiff asserted that the company paid an excessive amount of compensation.  As the court described: 

  • The pending litigation asserts claims related to compensation awarded to the Dolan Defendants. From fiscal years 2010 through 2012, Cablevision paid James and Charles compensation worth $41.18 million and $40.27 million, respectively. 12 The executive compensation packages for James and Charles included “a base salary, perquisites, annual cash bonuses, and long-term incentive awards.”13 The perquisites, including a company car and driver and a security program, were valued at $476,000 and $792,000. Also included was a March 2012 “‘special’ one-time grant of stock options,” awarding James and Charles options valued at $6.85 and $7.09 million.

In addition, plaintiff challenged the compensation paid to three members of the Dolan family who served as directors of the company.  

Compensation for non-executive directors was determined by the board.  Compensation for Charles and James was determined by the compensation committee. The compensation committee consisted of three directors characterized by the company as independent. As the plaintiff alleged, the chair of the committee had been a Cablevision director since 1996, had been on the compensation committee since 2004, and served as a director of Madison Square Gardens, "another company under the Dolan family’s control". Moreover, his brother also worked for MSG.   

The court had to determine whether plaintiff sufficiently alleged facts that would be sufficient to get past a motion to dismiss.

J Robert Brown Jr.