UPN Is One of Many Battlegrounds for Media Moguls.

WHAT happens when a media mogul -- stubborn, shrewd and litigious -- takes on a business partner? They often duel, from the boardroom to the courthouse.

Sure enough, Viacom Inc. Chairman Sumner Redstone and Chris-Craft Industries Inc. Chairman Herbert Siegel crossed swords this month over their jointly owned United Paramount Network, which supplies most of the prime-time programming to their respective TV stations.

Viacom pulled the trigger on a buy-sell agreement, offering to sell its 50 percent stake in UPN, or buy out Chris-Craft's, for $5 million within 45 days. Chris-Craft responded with a lawsuit to halt Viacom's pending merger with CBS Corp., alleging that Viacom has breached an agreement not to invest in a competing network.

Although the fight is ostensibly about UPN, much more is at stake. Viacom and CBS had hoped to buy Chris-Craft or its 10 TV stations, but something stymied\ the negotiations. Was it price? Ego? Other complicating factors?

Wall Street doesn't know the answer, but it wants a happy ending. Fund manager Mario Gabelli, a Chris-Craft shareholder for 21 years, says he hopes the two companies settle their differences and resume negotiations. "They need somebody to bring chicken soup for both of them," he says.

Redstone, 76, and Siegel, 71, seldom shrink from a fight. The two could fill a law library with their past cases.

Redstone, a Harvard-trained lawyer, has filed two antitrust lawsuits since taking charge at Viacom in 1987. He challenged Home Box Office Inc.'s dominance of the pay-TV business in 1989 and sued cable-TV giant Tele-Communications Inc. in 1993. Each case was settled after three years of litigation.

Siegel, for his part, holds the record for tenacity in a takeover battle. When Chris-Craft was thwarted in an unwelcome bid for Piper Aircraft Corp. in 1969, Siegel fought on in the courts for eight years until the U.S. Supreme Court finally ruled for his opponent.

Chris-Craft won several legal rounds during its tumultuous six years as Warner Communications Inc.'s largest shareholder. In 1987, a Delaware judge granted Siegel access to an internal report about Warner's dealings with a now-defunct theater linked to organized crime.

And at Siegel's behest, a New York state judge halted Warner's acquisition of Lorimar Telepictures in 1988. The issue was not unlike Chris-Craft's current quarrel with Viacom: Siegel's lawyers said the pending merger violated a preexisting agreement with Chris-Craft.

Non-compete clause

When Chris-Craft and Viacom's Paramount Pictures division formed UPN as the nation's fifth broadcast network, each company agreed not to own or control any competing network -- namely ABC, CBS, NBC or Fox. According to their agreement, the non-compete clause is in effect until Jan. 15, 2001.

The non-compete agreement was vital because the partners wanted to assure station affiliates and television program suppliers that Chris-Craft and Viacom were committed to UPN's long-term success.

Launched in 1995, UPN now reaches more than 175 television markets, or more than 90 percent of U.S. households. The network's viewership has increased 35 percent from a year ago, putting it in a dead heat with the rival WB Network, whose viewership has fallen 16 percent, according to Nielsen Media Research.

But UPN's cumulative losses exceed $800 million, and the network projects several more years of red ink.

Viacom kicked dirt in Chris-Craft's eye with its offer to sell its UPN stake for a mere $5 million or buy out Chris-Craft at that price. Some investors and Hollywood executives anticipated the lawsuit filed in New York State Supreme Court by BHC Communications Inc., the 80 percent-owned affiliate of Chris-Craft that formed the UPN partnership.

If Viacom has breached the UPN agreement, as BHC claims, Viacom could be forced out of UPN or required to buy Chris-Craft's stake at fair market value.

Sharing the wealth

The lawsuit also calls attention to a tag-along agreement in the UPN partnership. If either partner wanted to invest in a competing network during the non-compete period, it could do so only if "the full interest" was offered to the UPN partnership, the lawsuit says.

Viacom has "never offered any interest in CBS to UPN or to the BHC Group," BHC contends. Indeed, BHC says it was deceived by Viacom when it inquired about rumors of the CBS acquisition.

If the merger goes through, Chris-Craft contends that UPN would become "a second-rate subsidiary" because CBS Chief Executive Mel Karmazin -- slated to become chief executive of the merged company -- would likely favor the 100 percent-owned CBS over 50 percent-owned UPN in any conflict.

Some analysts say Viacom may have triggered the buy-sell agreement to get Chris-Craft to return to the bargaining table. Likewise, Siegel's lawsuit is viewed as an effort to stop the clock in order to regain leverage with Viacom or find another buyer. But there's no obvious buyer in the wings.

Meanwhile, Viacom and CBS are pooh-poohing the lawsuit. They say the suit lacks merit and won't delay the merger. But companies have eaten those words in the past.

Viacom fared poorly in Delaware Chancery Court when it was sued by Universal Studios Inc. in 1996 for violating its partnership agreement in USA Networks. In that case, the judge concluded that Viacom violated -- guess what? -- a non-compete clause. Viacom eventually sold its interest in the networks to settle the case.

Kathryn Harris is a columnist for Bloomberg News.