Group's suit delayed until Times, Hearst arbitration is over

A committee working to keep both of Seattle's daily newspapers alive will have to wait for its day in court.

In a ruling released Wednesday, King County Superior Court Judge Greg Canova agreed to postpone the Committee for a Two-Newspaper Town's suit against The Hearst Corp. and The Seattle Times Co. until after a private arbitrator decides a high-stakes contract dispute between the companies.

Before the ruling, Canova had been slated April 6 to hear the committee's chief claim against The Times and Hearst, owner of the Seattle Post-Intelligencer.

A four-week hearing in the separate, closed-door arbitration proceeding that could determine whether the P-I closes is scheduled to start April 9.

The companies had argued that preparing for both at the same time would be too burdensome.

Canova now will take up the committee's lawsuit June 29. Arbitrator Larry Jordan's ruling is expected by May 31.

Both companies were pleased by Canova's decision. "It allows us to focus our attention where it needs to be, namely on the upcoming arbitration," Hearst lawyer Guy Michelson said in an e-mail.

"We've been concerned all along about the expense and difficult nature of being involved in two proceedings at the same time," said Times Vice President Jill Mackie.

But committee lawyer Kathy George said Canova's ruling only "prolongs the uncertainty" over the committee's dispute with the Times-Hearst contract, which is at the heart of the arbitration proceedings.

"The parties — and the public — will have to wait to find out if it's even lawful," she said.

The companies are linked by a federally sanctioned joint-operating agreement (JOA). Under that pact, signed in 1981 and amended in 1999, the papers have separate news operations, but the larger Times prints, markets and distributes both in return for a bigger share of combined proceeds.

The Times says the JOA's economics no longer work, and that the arrangement has become a threat to the newspaper's continued local ownership. In 2003, it moved to trigger an escape clause in the JOA, notifying Hearst it had lost money in 2000, 2001 and 2002 under a formula spelled out in the contract.

Under the amended JOA, that notice required negotiations for Hearst to close the P-I within 18 months, after which it would get 32 percent of The Times' profits until 2083, when the JOA expires.

If Hearst balked, the JOA would end and Hearst would get nothing from The Times.

Hearst maintains the P-I can't survive outside the JOA and has challenged the validity of The Times' losses in court. Last spring, the companies agreed to submit the dispute to binding arbitration, with no appeal.

The Committee for a Two-Newspaper Town, while not involved in the arbitration, is an intervenor in the underlying lawsuit. Last month, it filed a motion with Canova seeking a quick decision on a claim it first filed against both companies in 2003.

That claim contends the 1999 amendment allowing one paper to close and continue to collect part of the survivor's profits is an unconstitutional restraint of trade — in effect, an incentive to stop publishing.

Hearst asked Canova to postpone any action on the committee's motion until the arbitration is over. It argued the committee had let years pass without pursuing its claim, and that forcing the newspapers to deal with it now, on the eve of the arbitration hearing, would hinder their ability to present their cases there.

Hearst also said a delay wouldn't hurt the committee.

The Times filed court papers offering similar arguments.

But the committee, whose members include labor, Democratic Party and neighborhood groups, and current and former journalists, said it couldn't wait for the arbitration's outcome.

If Jordan rules for The Times, it argued in a brief filed Monday, the P-I might close before the committee's claim was decided.

The arbitration agreement The Times and Hearst signed last spring says that if The Times prevails, the P-I could close as soon as six months after Jordan's decision. But the newspapers now say they have agreed the P-I would not close until at least 10 months after the ruling — if all parts of the committee's lawsuit are postponed until after the arbitration.

That offer is contingent on Canova also rejecting the committee's bid to get all the evidence the two companies have compiled in preparation for the arbitration hearing, Mackie said.

Canova is scheduled to consider that issue Friday.

The committee says it needs the arbitration documents — which total more than 3.5 million pages — now to help prepare its case.

The newspapers say the committee's requests should be delayed until after Jordan rules, again because complying now would be a "tremendous burden."

Procedures for protecting confidential information would need to be worked out, the newspapers say, and their lawyers would have to review each document before handing it over.

In court papers filed Wednesday, the committee said if Canova rules Friday for Hearst and The Times, he should bar them from moving to close the P-I until after all the committee's claims are resolved.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com