CBS CBS Corp

By Keach Hagey 

Representatives of Sumner Redstone have entered talks to settle a legal dispute with a former companion who challenged the media mogul's mental competency, according to people familiar with the matter, the latest twist in a drama that has riveted Hollywood and Wall Street.

The former companion, Manuela Herzer, filed a suit in November claiming that Mr. Redstone, the 92-year-old controlling shareholder of Viacom Inc. and CBS Corp., was mentally incompetent when he removed her as his health-care agent and kicked her out of his Los Angeles mansion. Mr. Redstone's team had argued the suit was without merit and was fighting it.

The litigation has been suspended pending the settlement talks, the people familiar with the matter said. Viacom Chief Executive Philippe Dauman -- the person with authority over the mogul's care in case he's incapacitated -- was scheduled to be deposed in the case Tuesday, but that no longer will happen, the people said.

For Viacom, a settlement would sidestep the embarrassment of a trial, which is set for May. It also would avoid the prospect of a judge ruling on the condition of Mr. Redstone, whose health has declined in recent years after mini-strokes and other problems that have made it hard for him to speak.

Mr. Dauman said in an affidavit late last year that Mr. Redstone was "engaged and attentive" on a recent visit, while Ms. Herzer described him as a "living ghost." Mr. Redstone stepped down as executive chairman of Viacom and CBS in February just days after the judge in the case allowed a geriatric psychiatrist working for Ms. Herzer to evaluate him.

The deposition of Mr. Redstone's daughter, Shari Redstone, originally scheduled for Wednesday, also has been canceled, the people said. She has been the driving force behind the settlement talks, which began about a week ago, according to people familiar with the matter. Ms. Redstone owns a 20% stake in National Amusements Inc., the holding company that controls Viacom and CBS, and is vice chair of both companies.

Ms. Redstone was once considered her father's likely successor, though over the years they have had tensions in their relationship and in 2014 she rejected Mr. Redstone's offer to buy her out of his media empire for $1 billion, The Wall Street Journal previously reported.

Ms. Redstone became involved in the mental competency case when she submitted an affidavit for Mr. Redstone's side this winter, saying she and her family had been able to rebuild their relationship with Mr. Redstone since Ms. Herzer's departure.

Among the questions being debated in the settlement talks are who will be Mr. Redstone's health-care agent going forward, as well as other reforms to his health care and the size of Ms. Herzer's financial award, the people familiar with the talks said.

Daniel Weinstein, a retired judge with the commercial dispute resolution company JAMS, is mediating the talks, Mr. Weinstein confirmed. The two sides are close to an agreement, the people said.

Ms. Herzer, who had at one time been romantically involved with Mr. Redstone but in recent years served as his live-in companion and caregiver, was due to inherit $50 million in cash and real estate valued at $20 million, until Mr. Redstone changed his will last October after he kicked her out of his house, according to court documents.

Mr. Redstone's lawyers have alleged that she was motivated by money, but Ms. Herzer's lawyers have maintained she filed the suit out of concern for Mr. Redstone. Gabrielle Vidal, an attorney at Loeb & Loeb, which is representing Mr. Redstone on the case, declined to comment through a spokeswoman. Ira Steinberg, an attorney at Greenberg Glusker Fields Claman & Machtinger, which represents Ms. Herzer, also declined to comment.

Mr. Redstone controls nearly 80% of the voting shares of CBS and Viacom, which owns cable networks such as MTV and Nickelodeon as well as the Paramount Pictures studio. When he dies or is deemed incapacitated, his holdings will be managed by a seven-person trust.

As the drama over Mr. Redstone's personal affairs has played out, Viacom's Mr. Dauman has been trying to turn around the company, whose shares have slid because of investor concerns over the future of cable television in a media landscape where streaming video and cord-cutting are on the rise.

Write to Keach Hagey at keach.hagey@wsj.com

(END) Dow Jones Newswires

April 05, 2016 16:15 ET (20:15 GMT)

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