UPDATE 3-CBS fails to end Rather suit; Redstone may testify

* Rather seeks $70 million

* Judge sets Dec. 22 hearing

* Sumner Redstone to give testimony (Adds CBS comment, Redstone age)

By Jonathan Stempel

NEW YORK, Sept 21 (Reuters) - A New York judge on Monday rejected CBS Corp's (CBS.N) bid to dismiss former TV news anchor Dan Rather's $70 million lawsuit claiming he was fired over a controversial election-year report on former President George W. Bush's Vietnam War-era military service.

New York State Supreme Court Justice Ira Gammerman set a Dec. 22 hearing in the case and directed that testimony be taken from witnesses including Sumner Redstone, the 86-year-old chairman of Viacom Inc (VIAb.N), which once controlled CBS.

"Let's get this case moving," Gammerman said. "I would really like to get this case ready for trial."

Rather, 77, sued CBS in 2007 and has filed a separate fraud case against CBS Chief Executive Leslie Moonves and former CBS News President Andrew Heyward over his firing from the network, his home for more than four decades.

CBS has acknowledged it could not authenticate documents used in the Sept. 8, 2004, report on Bush's National Guard service, which aired two months before Bush won a second term in the White House.

Rather accused the network in his lawsuit of breaching his contract in part by not giving him enough on-air assignments following his March 2005 removal as anchor of the "CBS Evening News," a job he held for 24 years.

RATHER SAYS PRINCIPLE AT STAKE

"It was definitely a positive day for us," said Martin Gold, a partner at Sonnenschein Nath & Rosenthal LLP who represents Rather, after Monday's roughly 40-minute hearing.

"They saw their best interest was to abandon the story whether it was accurate or not and to get rid of Dan Rather," he said. "That's what this case is about."

James Quinn, who co-chairs Weil Gotshal & Manges LLP's litigation practice and represents CBS, said he had expected Gammerman to keep the case alive. "If we have to go to trial, we're ready," he said after the hearing.

CBS spokesman said the hearing constituted a "good day," for the company, noting that Gammerman agreed with its request that testimony from Redstone be limited to half a day.

Rather hopes to show Redstone wanted him fired. CBS lawyers argued that Redstone had no such recollection, and that deposing him would as a result accomplish nothing.