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Group asks high court to reverse JOA ruling

By Bill Richards
Special to The Seattle Times

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A citizens group opposing the shutdown of either of Seattle's daily newspapers told the state Supreme Court yesterday that public-policy considerations outweigh contractual squabbling between the two and that both should keep publishing.

In a petition for a hearing filed with that court yesterday, the Committee for a Two-Newspaper Town said the state Court of Appeals had failed to give enough consideration to public-policy issues when it rejected in March The Hearst Corp.'s arguments that sought to block a shutdown of the company's Post-Intelligencer.

The Seattle Times last year moved to open negotiations that could lead to a shutdown of the P-I or an end to the two papers' joint-operating agreement (JOA).

Times officials, who have said the agreement is no longer financially viable, cited a JOA "loss notice" provision permitting them to demand the negotiations after three consecutive years of financial losses. They say their paper lost money under a JOA formula from 2000 through 2002.

Under the JOA, the two papers have 18 months from the loss notice to either shut one paper or end the JOA. If they agree on the shutdown, Hearst would get 32 percent of The Times' profits — after non-news and newsroom expenses are deducted — for the next 80 years.

Hearst sued in April 2003 to block the shutdown effort. After a lower-court ruling in Hearst's favor last September, both sides agreed to stop the 18-month clock until all parts of the suit have been decided.

In its own petition Monday for a Supreme Court hearing of its case, Hearst challenged The Times' loss claims for 2000 and 2001, arguing that they were invalidated by the JOA's "force majeure" clause.

In its petition, the committee, which claims a membership of more than 220 "readers, subscribers, journalists, employees, citizens and elected officials," said the Appeals Court failed to recognize the primacy of public policy in interpreting the JOA. The group also said force majeure — a contract provision excluding parties from liability for events beyond their control — could be applied to losses at The Times in 2000 and 2001 because they stemmed largely from a 49-day newspaper strike.

"We are saying that in essence the JOA is not a commercial contract and the Court of Appeals should have treated it as a unique agreement with public policy taking a front-and-center role," said Dmitri Iglitzin, the committee's attorney.

Iglitzin said there is a link between The Times' loss notice and how a force majeure event — the strike — put Hearst in an untenable position.
 
"Had there been no strike, there would have been no losses," Iglitzin said. "Had there been no losses there would have been no loss notice by The Times. With no loss notice, Hearst wouldn't have to choose between shutting the P-I and losing an 80-year income stream."

The committee was granted intervenor status in Hearst's case last year by King County Superior Court Judge Greg Canova.

Times spokeswoman Kerry Coughlin said her paper agreed with the committee's goal of preserving both papers. "But public policy or not, you can't expect The Times to continue to lose money under the JOA," she said.

Coughlin said The Times did not agree with the committee's stand on the JOA's force majeure provision.

A Hearst spokeswoman said the company would have no comment beyond a statement earlier this month.

In that statement, Hearst said the Appellate Court mistakenly applied a "technical reading" of the JOA and ignored "both the intent of the parties to the JOA and the interpretation The Seattle Times itself placed on the JOA."

The state Supreme Court is expected to decide whether to consider both petitions later this spring or summer.

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

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