During its short life, Philadelphia Newspapers LLC has stirred plenty of hometown drama.

Local housing tycoon Bruce Toll and ad executive Brian Tierney formed a buyout group to purchase the publisher of the Inquirer and the Daily News from McClatchy Co. in 2006. McClatchy had snubbed the papers, and the city, when it announced that it would flip the dailies immediately after buying Knight-Ridder Inc.

Then, when the publisher went bankrupt in February 2009, Citizens Bank of Pennsylvania and other lenders litigated at every step of the reorganization. Tierney threatened to sue one member of the lending group, saying he had illegally recorded negotiations. The executive further raised the lenders' ire with a "Keep It Local" ad campaign suggesting that ownership by distant financial institutions would be disastrous.

More recently, Philly native Raymond Perelman (father of dealmaker Ronald Perelman) formed two local buyout groups and aggressively but unsuccessfully pursued the publisher.

With its sale to Angelo, Gordon & Co., Credit Suisse Group, Alden Global Capital and other out-of-towners, the papers have emerged from bankruptcy protection as Philadelphia Media Network Inc. The Chapter 11 case is winding down.

But the legacy of Philadelphia Newspapers continues to stir drama among so-called Philebrities.

Vahan Gureghian, a wealthy Philadelphia lawyer and a local charter school operator, dogged Philadelphia Newspapers and former CEO Tierney throughout the case. In a lawsuit filed about a month before the bankruptcy, Gureghian, wife Danielle and the company allege that the Inquirer maligned their company, Charter School Management Inc., as payback for a busted deal. For his part, Tierney and his successors have not budged on their support of the coverage. As one observer says, "It's two rich guys who want to prove a point."

Gureghian is a lawyer who founded CSM more than a decade ago. The entrepreneur's vast suburban Philadelphia home has been profiled in local media. A piece in the Inquirer said the "French-inspired brick-and-limestone mansion in Gladwyne built by Vahan H. Gureghian is one of the largest homes on the Main Line, surpassing the famed Ardrossan homestead in Radnor and the former residence of Walter Annenberg in Wynnewood," and quoted a Philadelphia politico who compared the estate to Versailles.

Gureghian sits on the board of trustees for the University of Pennsylvania, a favorite institution of Philadelphia's elite. Trustees include Ron Perelman, who bid alongside his father Raymond in an early auction for Philadelphia Newspapers, and Robert Toll, executive chairman of construction firm Toll Brothers Inc. and the brother of former Philadelphia Newspapers backer Bruce Toll. Gureghian also serves on the Dean's Advisory Council at the business school of his alma mater, Villanova University, also on the Main Line.

Despite their business quarrels, Gureghian and Tierney have sympathetic politics. Both are prominent in local Republican circles. Tierney reportedly oversaw George W. Bush's efforts to win over Roman Catholics in the 2000 elections, among other campaign responsibilities.

The two got off on the right foot. Pleadings state that the businessmen explored joint ventures between Charter School Management and Philadelphia Newspapers. Tierney allegedly learned that the Pennsylvania Department of Education had concerns about Chester Community Charter School, which CSM oversees.

The relationship fell apart in the summer of 2008. Gureghian alleges that Tierney refused to sign a pledge that the newspaper would not publish financial data or other information disclosed during the talks. The plaintiff argues that a pair of retaliatory articles about CSM followed in the Inquirer after the deal talks broke up.

The articles centered on finances and the highly profitable special-education program at Chester Community Charter School. The Pennsylvania Department of Education investigated Chester Community, although the agency dismissed challenges to the school earlier this year.

The Gureghians filed suit against Tierney and the Inquirer in state court in January 2009, shortly after the articles appeared. The following month, Philadelphia Newspapers sought Chapter 11 protection.

In addition to filing a claim in the bankruptcy, Charter School Management filed objections and other motions throughout the case. There are signs that the quarrel has become personal. Gureghian asked the court to require Tierney, who had already left the company, to return from a European trip to testify at a Philadelphia hearing this summer. U.S. Bankruptcy Judge Stephen Raslavich denied the motion.

The latest dispute involves treatment of Charter School Management's claim. The company's attorney, Edmond George of Philadelphia law firm Obermayer Rebmann Maxwell & Hippel LLP, argued that CSM's $1.8 million in alleged damages and about $150,000 in legal fees should be treated as administrative claims, alongside expenses for the debtor's own advisers and other debts taken on after the bankruptcy filing.

Damages suffered after a bankruptcy filing can be characterized as administrative claims.

Gureghian and CSM argued that the newspapers' website had effectively republished the offending articles, post-bankruptcy. An April 2010 online item on charter schools referred to "greedy grown-ups pilfering public gold under the guise of enriching children's lives." The story contained a link to a page on the website with the papers' coverage of charter schools, including the articles on CSM.

"There is no question that the [debtor] and its employees ... are accusing claimants of committing one of the most egregious crimes imaginable -- stealing from children," Gureghian and CSM asserted. The "personal injuries" from the continued availability of the articles are "no different than the harm that would result from a dangerous product manufactured by the debtors."

Raslavich did not accept the argument that the online articles were a continuing defamation, and he denied the motion for administrative claims. The Gureghians and CSM appealed to the District Court.

In addition to the appeal, there is the prebankruptcy lawsuit in the state court. The bankruptcy stay and injunctions blocked the litigation in the state court for part of the Chapter 11 case, but the suit can now proceed.

Gureghian and his counsel did not respond to inquiries about what they'll do next. And so, in one venue or another, the battle of the Philebrities continues long after Philadelphia Newspapers
has died.