Judge hears arguments over Seattle
Times' loss; no ruling until Sept. 25
By Bill
Richards
Special to The Seattle
Times
Seattle's battling newspapers took their
fight to a court hearing for the first time yesterday, arguing over whether
their joint-operating agreement (JOA) allows The Seattle Times Co. to claim a financial loss in 2000 because of a
49-day strike against the paper.
Attorneys for The Times, The Hearst Corp. and the Committee for a Two-Newspaper Town, a citizens group, squared off
for 90 minutes before King County Superior Court Judge Greg Canova and a
crowded courtroom.
Canova asked many questions of the attorneys and at the end of the hearing
said he would rule on Sept. 25.
At issue was whether The Times can use its loss from 2000, the year the
strike began, as part of a three-year calculation allowing the company to
move to shut down Hearst's Seattle Post-Intelligencer or to end the JOA.
Hearst claims that the JOA's "force majeure," or "greater force," clause
excludes The Times' 2000 loss claim from consideration.
Force majeure, standard boilerplate in
contracts, excuses a party from liability if some unforeseen event beyond its
control prevents it from performing its obligations under the agreement.
The Times is seeking to use the 2000 loss, along with subsequent losses in
2001 and 2002, to force Hearst under the JOA's
"stop-loss" provision to negotiate closing the P-I or ending the
JOA.
Under the JOA, The Times and P-I maintain their own news and editorial
staffs and publish separately. The Times handles non-news operations such as
production, distribution and advertising for both.
The two papers pool their revenues and split what remains after The Times
is paid for handling the business functions, with 60 percent going to The
Times and 40 percent to Hearst.
The Times contends the JOA, successful for most of its 20-year history, is
no longer financially viable.
Hearst says it intends to continue publishing the P-I, but would not be
able to do so outside the JOA.
Kelly Corr, a Seattle attorney
representing New York-based Hearst, opened his 30-minute argument by telling
the court the force majeure decision would be
"critical to the future of the P-I."
Hearst has already put the 140-year-old paper up for sale, because it
believes the Justice Department would require it to demonstrate that no buyer
exists before it can be shut down.
In his presentation,
Corr said the key to whether The Times loss should be considered valid under
JOA rules is a 1990 landmark state Supreme Court contract case known as the
Berg decision.
In that case, Washington's
top court ruled that disputed agreements must be examined not just for their
wording, but for their intent and for the conduct of the signers under the
agreement.
The purpose of the
JOA when it was implemented in 1983, Corr said, was to keep two daily
newspapers open in Seattle.
The intent of the JOA's stop-loss provision, which
permits either paper with three consecutive years of losses to demand
negotiations to shut one of the papers, was to allow each party to deal with
long-term market changes, he said.
A strike is not
evidence of a market change, Corr said.
Times attorney Douglas Ross argued that there is no evidence that during
negotiations over the JOA the intent was to include the three-year loss
notice within the agreement's force-majeure
provision. The provision, he said, was intended to apply only to the papers'
fulfilling performance obligations to each other, such as printing and
delivering a newspaper.
The Times lawyer said that during JOA negotiations Hearst officials did
discuss options on handling the financial impact of a strike, including a
five-year deferral on considering it toward losses, but those options weren't
adopted. Nor did the companies agree to exempt a strike from loss
consideration because of force majeure, Ross said.
If Judge Canova ruled that force majeure
exempted a strike, Ross said, that would open the door to excluding other
losses. For example, he said, if Boeing decided to
site a production facility for its proposed 7E7 airplane outside Washington state and
jobs were lost in the region, Hearst could cite resulting losses to the
newspaper as exempted by force majeure.
Hearst's force majeure arguments, he said, were
"trying to force a square peg into a round hole."
The third group at yesterday's hearing, the Committee for a Two-Newspaper Town, sought to broaden the argument
over the JOA. But Canova ruled the committee could not argue that the JOA
constitutes a restraint of trade, as it has contended. The judge said that
issue might be taken up at another time, but that it went beyond yesterday's
agenda.
Canova, however, did allow arguments over whether the JOA violates
public-policy law because one of its terms would have The Times paying Hearst
if Hearst voluntarily closes the P-I.
Under a 1999 revision of the JOA, The Times agreed that if it has three
consecutive years of losses and Hearst agrees to shut the P-I, The Times will
pay Hearst 32 percent of its profit, after deductions for news and non-news
expenses, until 2083, when the JOA expires.
Paying Hearst to close the P-I, said Dmitri Iglitzin,
the committee's lawyer, would be contrary to both state law and to the intent
of the federal Newspaper Preservation Act of 1970, which set up the JOA
structure.
The Times and P-I took different positions on the Iraq war, the
Bush-Gore campaign, the monorail and the estate tax, Iglitzin
said.
"In all those issues," he said, "it was vitally important
to hear both of those voices."
Bill Richards is a freelance writer hired on a special contract by The Seattle Times to cover events involving the joint
operating agreement with the Seattle
Post-Intelligencer. He can be reached at brichards@seattletimes.com
Copyright © 2003 The Seattle Times Company
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