Seattle citizens group wants to see JOA arbitration documents

by Eric Pryne, Seattle Times

A citizens group made a bid Thursday to lift at least a corner of the shroud of secrecy enveloping the high-stakes legal war between Seattle's two daily newspapers for the past eight months.

The Committee for a Two-Newspaper Town asked attorneys for The Hearst Corp., owner of the Seattle Post-Intelligencer, to provide it with documents produced during binding arbitration proceedings with the rival Seattle Times Co. that may decide the fate of one, or both, papers.

In a letter to Hearst's lawyers, Michael Gendler, a committee attorney, asked for records concerning The Times that Hearst had subpoenaed last month from Goldman Sachs, the New York investment-banking firm.

But Gendler said in an interview the committee is entitled to all legal documents produced — but not made public — since the Times-Hearst dispute went behind closed doors last spring.

"It's important to have access to these records because it's important to the community, to the region whether its largest city continues to have two daily newspapers," Gender said.

If Hearst won't produce the Goldman Sachs records, Gendler said, the committee probably will go to court to get them.

Hearst's Seattle lawyers and a Times spokeswoman did not return calls seeking comment. But both companies are likely to resist any bid to hand over documents.

They have said in the past that privacy was one of the big reasons they chose binding arbitration over a public trial.

After three years of battling in court over the future of their joint-operating agreement (JOA), New York-based Hearst and The Times agreed last spring to submit the dispute to arbitrator Larry Jordan, a former judge, and not to appeal his decision.

Since then, they have been engaged in what lawyers call "discovery" — obtaining documents and interrogating potential witnesses under oath — to prepare for what amounts to a private trial before Jordan in April. His decision is expected by May 31.

The arbitration agreement specifies that the proceedings are to remain "strictly private and confidential." The companies have refused to let the Committee for a Two-Newspaper Town participate.

But the committee, which says it speaks for the public, is an intervenor in the underlying lawsuit Hearst lodged against The Times in the dispute. That suit, filed in April 2003, remains alive.

"We're a party to the lawsuit," Gendler said. "Any party to a lawsuit is entitled to records produced in discovery. It's pretty basic."

Under the 24-year-old JOA, the two papers maintain separate news and editorial operations, but The Times handles the business side and collects advertising and circulation revenue for both. It gets the lion's share of what remains after the expenses it incurs in producing both newspapers are paid.

But The Times says the economics of the arrangement no longer work and that the JOA threatens its future as a family-controlled newspaper. In April 2003, it triggered an escape clause in the JOA, notifying Hearst it had lost money under the JOA formula for three straight years.

Under the contract, that required Hearst to negotiate a date to close the P-I within 18 months. After that, Hearst would get 32 percent of The Times' profits until 2083, when the JOA expires. If no deal were struck, the JOA would dissolve.

Hearst, which maintains the smaller P-I wouldn't survive outside the JOA, challenged the validity of The Times' losses in court. The Times won the first round in 2005, but years of additional litigation loomed.

After the arbitration deal was announced, King County Superior Court Judge Greg Canova agreed in April to put court proceedings between the two companies on hold.

But, at their request, he retained jurisdiction to assist the arbitrator in compelling third parties to provide evidence.

So far, according to court records, Hearst has sought and received Canova's help in obtaining records from six companies — most recently, Goldman Sachs.

The firm was a longtime adviser to Knight Ridder, the now-defunct newspaper chain. Knight Ridder owned a minority interest in The Seattle Times Co. until last summer, when it ceased to exist after unhappy investors forced a sale to Sacramento-based McClatchy.

In a subpoena delivered Dec. 12 to Goldman Sachs, Hearst sought all documents the banker had produced for Knight Ridder in 2003, 2004 and 2005 "relating or referring to valuations or assessments of the Seattle Times newspaper, the Seattle Times Company and/or the Seattle Joint Operating Agreement."

Those are the records the Committee for a Two-Newspaper Town also wants. Goldman Sachs was to have complied with Hearst's subpoena by today.

Gendler, one of the committee's five new lawyers, said the group is interested in more records than that. "This one's current," he said of the Goldman Sachs subpoena, "so I'm starting with this one."

The committee filed a claim against both The Times and Hearst in 2003, contending the JOA clause that would allow Hearst to voluntarily close the P-I and collect profits until 2083 is a disincentive to continue publishing and an unconstitutional restraint of trade.

The group hasn't actively pursued that claim. But former Supreme Court Justice Phil Talmadge, a committee board member, said recently it intends to file a motion soon to get the question decided.

The committee retained the new legal team after its longtime attorney, Dmitri Iglitzin, withdrew, saying he couldn't represent both that group and a newspaper union that dropped its support for the committee in May.

article originally published at http://seattletimes.nwsource.com/html/businesstechnology/2003510269_joa05.html.

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