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Sumner Redstone Battle: Judge to Sign Off on Philippe Dauman Settlement After Lawyers Strike Deal for Granddaughter

After a contentious hearing that hinged on the question of Sumner Redstone’s mental capacity, lawyers for the mogul and one of his granddaughters came to terms in a Massachusetts courtroom Friday on a deal that paves the way for the end of litigation against Redstone by former Viacom CEO Philippe Dauman.

Keryn Redstone’s challenge to the settlement agreement reached by Dauman and Sumner Redstone’s camp last week was seen as a last-ditch effort to press the case that the 93-year-old mogul is mentally incapacitated and that his daughter Shari has subverted his will in decision-making about his empire and the Redstone family trust.

But Keryn, Sumner Redstone’s 30-something granddaughter, emerged with victories as Judge George Phelan praised the lawyers for reaching “a reasonable and human outcome to a human issue” and commended them for their “flexibility and common sense.” (The hearing in the Canton, Mass., courthouse was live streamed by Courtroom View Network.)

The deal hashed out by lawyers during an afternoon recess calls for the family trust to be amended to ensure that all five of Redstone’s grandchildren are treated equally in future distributions from the trust — an issue that had been raised by Keryn, who has publicly battled Shari, her aunt, in recent years.

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The deal also calls for Keryn Redstone to have a face-to-face meeting with Sumner Redstone in the coming weeks, something Keryn maintained she had been denied since Shari Redstone became the dominant influence in her father’s life last October. The judge set a status conference for lawyers to provide him updates on the process of amending the trust for Sept. 23.

The judge questioned Sumner Redstone lawyer Robert Klieger about whether the meeting between Keryn and Sumner would include the presence of a caregiver who was alleged, in the blizzard of court filings related to Sumner Redstone’s capacity, to have been a paid informant for Shari Redstone. Klieger assured the judge that the person in question would not be present — and Elizabeth Burnett, attorney for Shari Redstone, was quick to add that claims of Shari having moles on the payroll were “false allegations.”

Separate from the issues sorted through on Friday, Keryn Redstone will still pursue through mediation in California a claim that she was improperly removed in 2013 as a candidate to be a  future member of the board of trustees of the Redstone trust.

The hearing demonstrated the level of rancor in the House of Redstone, with Keryn’s sister and cousins siding against her in the fight that has accused Shari Redstone of being the “puppet master” who was bent on gaining control of his empire and subverting her father’s will.

With the agreement reached Friday, the sides agreed to put a hold on plans for depositions of Sumner Redstone and other family members and people associated with the trust. The deal also included an agreement for Sumner Redstone’s camp to split the cost of the litigation 50-50 with the plaintiffs, which include Dauman, fellow Sumner Redstone confidant George Abrams and Keryn. But in fact, Dauman and Abrams already have an agreement that Viacom will pay for their legal costs, as per the terms of their settlement with Redstone.

During the hearing, Klieger indicated that the mogul was in reasonably good health, and he mentioned that he spoke with the 93-year-old corporate titan by FaceTime during the recess about his willingness to meet with Keryn.

Meanwhile, Burnett asserted that Shari Redstone was happy with the deal reached on Friday.

“The plaintiffs’ claims filed against Sumner and Shari have been dismissed, the settlement agreement is firmly in place, and Sumner’s decisions have been honored in all respects. This result benefits Viacom, National Amusements and all of the beneficiaries of Sumner’s trust,” Burnett said in a statement.

Sumner Redstone and his representatives must have figured they were done with answering questions about the billionaire’s mental competency and his ouster of Dauman as chief executive of Viacom, given last week’s settlement of complicated litigation on those issues. But that sense of finality didn’t take into account Keryn, whose lawyers spent Friday morning furiously arguing before a Massachusetts judge that the magnate’s decision making, and mental health, should remain very much in question.

After hours of argument, Phelan continued the case into Friday afternoon, remaining unpersuaded by lawyers for Dauman and his fellow Viacom board member, George Abrams, that he could dismiss the two from the litigation over the governance of Redstone’s $40 billion corporate empire.

Keryn Redstone’s ability to hold up proceedings that had appeared settled was just the latest twist in a legal saga that began last November, when Sumner Redstone’s fragile condition became known to the world. At the time, the dispute centered on his long-time companion and former lover, Manuela Herzer, who sued to be re-installed as his health care guardian. Herzer, now 53, lost that case. But she continues to press for an inheritance valued at $70 million in a Los Angeles courtroom and to support her friend, Keryn Redstone, who she met when the two were both caring for the media magnate.

Phelan rejected a request from the Abrams and Dauman lawyers to enter an order removing the two men from the case. He said just before breaking for lunch that he needed to hear more from both sides, quipping that a resolution to the dispute had seemed near “two minutes ago.” But the judge also indicated he did not have broad authority over corporate matters and was unclear how much authority he could exercise on the portion of the settlement related Viacom’s governance.

Both Dauman and Abrams must continue to wait until at least later Friday to see whether the three-month-old litigation that they started will go away. The duo both served earlier in their careers as Redstone’s lawyers, before becoming close confidantes and members of the boards of both the magnate’s theater chain, National Amusements Inc., and of Viacom, the multi-national corporation that controls Comedy Central, MTV, VHI, BET and the Paramount Pictures studio.

Dauman and Abrams filed their lawsuit in the Massachusetts family and probate court, located in a Boston suburb, in May. They charged that Redstone, now 93, did not have the mental capacity to remove the pair as directors from both National Amusements, which serves as a holding company for his controlling positions in Viacom and CBS Corp. — and from the family trust that will oversee Redstone’s holdings if he becomes incapacitated, or at the time of his death.

They also said that his mental frailty made him susceptible to his daughter, Shari, who they charged got her father to toss aside his career-long aversion to having her or another family member take over his role directing his corporate holdings. The two men alleged that the younger Redstone isolated her father and then, with the help of his staff, coerced him into changing many things in his life — including Abrams’ and Dauman’s membership in the crucial panels that oversee National Amusements.

Keryn Redstone’s lead lawyer, Pierce O’Donnell, argued Friday to Phelan that the case could not be properly resolved without a medical examination and deposition of Redstone, to determine whether he really understood the gravity of booting his two long-time allies. They said that Shari’s true goal in removing them from National Amusements was to put her allies on the Viacom board, thereby obtaining the leverage to oust her long-time rival, Dauman, from atop the family conglomerate. (Five new members were added to the board in May, at the direction of National Amusements and the pending settlement would have them seated immediately.)

Last week’s wide-ranging appeared to bring an end to the Massachusetts lawsuit and two others, in California and Delaware, over the complex corporate governance feud. Lawyers for Dauman and Abrams asked Friday to end the discovery process and withdraw the Massachusetts lawsuit, which had been scheduled to go to trial Sept. 19. But Keryn Redstone’s attorneys pressed for the case to remain open; arguing that the the central question had not been resolved — whether the frail nonagenarian, often confined to bed unable to express himself clearly, wittingly move to revamp his business empire? Or the corollary question: Did Shari, 62, scheme to become the power behind the throne?

Shari Redstone’s representatives have vehemently argued that she has only moved to enact her father’s wishes and to try to do what is best for the family’s companies and their thousands of shareholders. They say the conspiracy theories have been trumped up to turn her father against her, as she claimed his long-time live-in companion, Herzer, had previously succeeded in doing.

Keryn Redstone joined the legal fight as a beneficiary of the trust. O’Donnell hammered away in his appeals to Phelan with the one question: “What does Sumner want?” He said the subject could not be dropped just because Dauman and Abrams have reached a settlement with Viacom and its board. Judge Phelan pressed O’Donnell as to whether a resolution could be reached by having Dauman and Abrams sign an affidavit asserting that they now believe the mogul had the capacity to make his own decisions. Attorneys on both sides seemed caught off guard by the request and could not give the judge an immediate answer. Dauman and Abrams were not in attendance.

Sumner Redstone’s attorneys argued that Keryn Redstone’s claims extend far beyond the scope of the Dauman/Abrams suit. The back and forth in the courtroom demonstrated the extent of the infighting among Redstone’s children and grandchildren.

Keryn Redstone — the daughter of the Redstone patriarch’s estranged son, Brent — was depicted as the grandchild who was closest to her grandfather and who at times helped with his care.

Klieg didn’t hide his frustration with O’Donnell’s effort to fast-track dozens of depositions and requests for thousands of pages of discovery documents. He suggested that Keryn Redstone had hoped the Dauman/Abrams litigation would “carry the water” for the costs of pursuing her own claims. (Her connection and support of Herzer did not take center stage at Friday’s hearing.)

O’Donnell suggested that the examinations and deposition of Redstone needed to occur as soon as possible, because of the mogul’s sketchy and deteriorating health. Klieger said this was simply not true — that Redstone had gotten better (earlier this year he was mainly confined to bed and fed through a tube.) Klieger said: “There’s no imminent risk of any health problems, there’s been no recent hosptalizations. There’s no reason to believe that Mr. Redstone will not still be here with us for the duration of this case on any reasonable schedule.”

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