Documents confirm no secret deal ended Seattle JOA conflict

[from Editor and Publisher]

The multimillion-dollar payments that ended the litigation between the dailies in the Seattle joint operating agreement (JOA) were not accompanied by a secret deal to fold the Seattle Post-Intelligencer, newly disclosed documents show.

When the P-I and The Seattle Times last April settled their suits and counter-suits over whether the Blethen family-controlled Seattle Times Co. had the right to force an end to the JOA, a citizens group said it suspected the settlement included a secret agreement by the P-I to shut down after a few years.

That has been stoutly denied by both newspapers, and now documents obtained from the U.S. Department of Justice Antitrust Division confirm the papers were telling the truth. The documents were first reported by Seattle Times business reporter Eric Pryne, who obtained them through a Freedom of Information Act request.

Litigation between the estranged partners began in 2003 when the P-I went to court saying the Times was about to trigger a clause in the JOA that would force an end to the agreement, or the folding of the P-I, or both. The clause could be triggered if the partnership had three consecutive years of financial losses.

Hearst Corp., the P-I's owner, sued, alleging the Times, which owns all the production and distribution operations, had long undermined the P-I. For its part, the Times Co. maintained the P-I's underperformance was bleeding it financially, and putting the company's viability at risk.

Just before binding arbitration hearings were to begin, the two sides settled.

Hearst agreed to pay the Times Co. $25 million to not trigger the escape clause before 2016.

The Times paid Hearst $49 million in exchange for dropping the suit, and giving up its right to a 32% stake in the JOA until 2083, even if the P-I is no longer publishing.

The agreement was made public, but a breakdown of the $49 million payment to Hearst was edited out of the public version.

The Committee For a Two-Newspaper Town immediately called foul, asking the papers to break down the Times payment. Some committee figures said they suspected the big payment was made in exchange for a Hearst promise to shut down the P-I well before 2016.

But the version released from the Justice Department shows that most of the payment -- $31 million -- was for Hearst's agreement to drop its suit. The rest was a buyout of the chain's right to future profits.

"This does appear to confirm the newspapers' position," Kathy George, a lawyer for the Committee for a Two-Newspaper Town, told Times business reporter Pryne. "This is what we had sought to find out."

article originally published at http://www.editorandpublisher.com/eandp/news/article_display.jsp?vnu_content_id=....

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