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Appeals court rules in favor of The Times in JOA case

By Bill Richards
Special to The Seattle Times

	Greg Canova
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A three-judge panel sent the case back to a lower court with orders to reverse a September decision against The Times.

But while the 16-page ruling was unanimous, it ended on an unusually sad note. "The Times' loss notice represents a sad moment for Seattle and for journalism," the judges wrote, acknowledging a temptation "to rewrite the JOA, in the hope we will somehow preserve both (newspapers)."

"But this we may not do," they said.

The Times claimed that the paper lost money in 2000, 2001 and 2002, triggering a JOA provision requiring negotiations to either shut one paper or end the 21-year-old JOA. The Times tied the paper's 2000 and 2001 losses to a 49-day strike against the company that spanned both years.

JOA in review Players: The Seattle Times Co. and The Hearst Corp. have a joint-operating agreement to publish their papers, The Seattle Times and the Seattle Post-Intelligencer. Under the JOA, The Times Co. handles printing, distribution, marketing and other non-news functions for both papers. Each paper maintains separate news and editorial staffs. The background: For almost a year, the two companies have been embroiled in a legal dispute over the JOA. In September, a King County Superior Court judge prohibited The Times Co. from using financial losses it incurred in 2000 toward invoking a JOA provision that could lead to closing one paper or ending the JOA. The Times appealed. What happened: The State Court of Appeals reversed the Superior Court decision yesterday, allowing consideration of The Times loss claims for 2000 and 2001 (both sides agreed the 2001 losses would also apply in the appeal). What's next: Hearst could appeal to the State Supreme Court. Hearst is also contesting Times losses for 2002 on different grounds — that they resulted from excessive spending. This issue is yet to be heard in Superior Court.

Yesterday's court decision is a boost to The Times' attempt to "get out from under a money-losing business arrangement," the company said in a statement. Times Publisher Frank Blethen has publicly argued that the JOA is no longer financially viable and that Hearst, a New York-based media conglomerate with annual revenues of more than $5 billion, was using it to bleed the smaller Seattle Times Co. of its assets and force the sale of The Times to Hearst.

The Times' statement, however, appeared to focus on the possibility that the ruling could open the door to renegotiating the JOA contract, giving The Times a larger share of the revenue split and allowing both papers to keep operating. The Times, Blethen said in the statement, was "willing to work with the Hearst Corporation to negotiate a reasonable contract change to sustain two newspapers in Seattle."

In its own statement, Hearst said it would study the Appeals Court ruling before deciding whether to appeal to the State Supreme Court.

Hearst attorneys have said in the past that they planned such a move if they lost and would also seek a separate trial on the third year of losses The Times claims. That leaves open the possibility that a final decision on the 142-year-old P-I's fate could stretch to 2007.

"A decision on the strike-related losses does not resolve all the issues in this case," Hearst's statement said. The company said it would "vigorously resist efforts of The Seattle Times Company to turn Seattle into a one-newspaper town."

The court's decision came in a lawsuit Hearst filed last April in King County Superior Court. The suit challenged consideration of The Times' losses for 2000 and 2001, saying they were covered by JOA's "force majeure," or "greater force," clause. That clause exempts the companies from liability in cases where performance is affected by events outside of their control.

Hearst also challenged the 2002 loss in its suit, saying it resulted from overspending by The Times.

Yesterday's Appeals Court decision dealt only with the 2000 and 2001 losses.

In ruling for The Times, the Appeals Court reversed a decision by Superior Court Judge Greg Canova last September. In his partial summary judgment — a ruling from the bench without a trial — Canova agreed with Hearst's argument that the JOA's force majeure clause covered The Times' strike-related losses, removing them from the three-year loss umbrella.

Times attorneys argued that the force majeure clause applied only to production and performance issues, and losses caused by a strike against the paper during its busiest advertising period were valid claims.

The three judges said Hearst claims were "not a reasonable reading of the agreement. ... (T)he force majeure clause protects against (performance) liability. It does not cancel the loss notice."

The court also dismissed Canova's ruling that state-court decisions broadened contract "intent" beyond the JOA's specific language. That would have allowed Hearst to argue that force majeure could be stretched to overrule any stop-loss claims by The Times, the judges said. Instead, they said, intent covers only the language of the contract. "Whatever we may now wish," the judges said, "this is not what the (JOA) parties agreed."

Because of this, the court said it could also not accept a separate argument by the Committee for a Two-Newspaper Town, an ad hoc citizens group granted intervenor status in the case.

The committee, the court said, provides "sound reasons for an inarguable position" that having two newspapers is in the public interest. But it rejected its argument that public interest requires a trial to decide whether The Times' or Hearst's argument should prevail.

Dmitri Iglitzin, the attorney for the committee, couldn't be reached for comment yesterday.

If Hearst decides to appeal the Appeals Court's decision, the JOA case could take a year or more to move through the State Supreme Court if the nine-member court decides to hear it, said Julie Shapiro, a procedural specialist and associate professor of law at Seattle University Law School.

The Supreme Court has wide latitude over whether to hear a case, she said. "If they thought it was important enough, they could take it even if the issue wasn't that broad," Shapiro said. "Or they could say this is a straightforward contract issue and there's nothing we can do."

Normally, Shapiro said, the Supreme Court decides in the spring and summer which cases to hear and then hears arguments in the fall. After that, she said, "they can take their own sweet time."

Supreme Court decisions can take six to eight months to be decided after arguments are heard.

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 © 2004 The Seattle Times Company