Citizens group fights to see payment details of papers' pact

by Eric Pryne, Seattle Times

The owners of Seattle's two daily newspapers may have agreed to settle their four-year legal dispute, but they aren't out of court yet.

The third party in the long-running lawsuit asked a judge Tuesday to grant it access to details about the settlement that The Seattle Times Co. and The Hearst Corp. so far have refused to disclose.

In its motion, the Committee for a Two-Newspaper Town (CTNT) expressed concern that, while the settlement appears to keep both papers alive, The Times and Hearst, owner of the Seattle Post-Intelligencer, may have a secret deal to close down one later.

The group said the companies had rebuffed its attempts to obtain the information informally, while at the same time suggesting the committee drop its legal claims against The Times and Hearst.

"Either they have something to hide, or not," the committee's motion states.

P-I Publisher Roger Oglesby and Kelly Corr, one of Hearst's Seattle lawyers, said they had not yet seen the committee's motion and would have no comment. Times spokeswoman Jill Mackie did not respond to requests for comment.

King County Superior Court Judge Greg Canova could rule on the request as soon as next Wednesday.

Breakdown sought

Kathy George, one of the committee's lawyers, said the group is particularly interested in the breakdown of a $49 million payment The Times is making to Hearst as part of the settlement.

The settlement agreement indicates some is for Hearst dropping its claims against The Times, and some is for Hearst agreeing to change the joint-operating agreement (JOA) between the companies to eliminate language that would have allowed the New York-based company to collect 32 percent of The Times' profits until 2083 if it closed the P-I.

But the precise numbers are redacted — edited out — of versions of the agreement provided to the committee and the public.

The group said it wants to know how much Hearst is getting to give up the 32 percent.

"CTNT has good reason to fear that the new, instant payoff might simply be compensation in advance for voluntary closure [of the P-I] in the future," the motion reads.

"The amount of the payoff would shed light on the newspapers' motivations ... ."

Or The Times and Hearst may have a private deal under which Hearst would buy The Times and close down the smaller P-I, the committee's motion suggests.

Hearst has first right to buy the Blethen Corp.'s majority interest in The Times Co., a stake Times Publisher Frank Blethen has said repeatedly isn't for sale.

The settlement agreement says the companies have agreed to nothing that isn't included in documents made public, albeit some in redacted form. George said she has no evidence that's not true.

"I just wonder why the newspapers are so reluctant, at this point and in this context, to cooperate with us," she said.

If Canova grants the committee's motion, George said, it may also want to question Times and Hearst executives. "We think it's prudent to make sure we know everything."

Under the JOA, in place since 1983, The Times and P-I have separate news operations, but The Times handles the business and production side for both in return for a larger share of the combined proceeds.

The Times moved in 2003 to trigger an escape clause in the JOA contract that could have led to the P-I's closure. Hearst sued.

The Committee for a Two-Newspaper Town organized weeks later, and Canova allowed it to intervene in the lawsuit, saying it appeared to represent the public interest.

The companies later agreed to submit their dispute to binding arbitration. The settlement was announced April 16 as the arbitration hearing was about to begin.

In addition to the $49 million payment from The Times to Hearst and elimination of the 32 percent provision, the agreement prohibits The Times from triggering the escape clause again for at least nine years.

In return, Hearst is to pay The Times $25 million.

The settlement appeared to both achieve the Committee for a Two-Newspaper Town's goal — keeping both newspapers alive — and eliminate the basis for its chief claim.

The group had challenged the JOA's 32 percent provision, saying it was an unconstitutional restraint of trade and a disincentive for Hearst to keep publishing the P-I.

No victory statement

But the group refused to declare victory, saying it would scrutinize the documents.

In the motion it filed Tuesday, the group noted that Hearst and The Times didn't reveal the existence of the settlement agreement for several days after announcing a deal, instead disclosing only a proposed revised JOA.

Given that history, "CTNT is justified in its concern that the newspapers may be hiding something," the motion reads.

It also cites Oglesby's refusal to say Hearst will continue to publish the P-I for nine more years, and Blethen's comments that he remains skeptical the JOA's economics can work.

article originally published at http://seattletimes.nwsource.com/html/businesstechnology/2003726835_joa30.html.

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