Times, P-I stick with arbitration

Seattle's two daily newspapers said Thursday they will proceed with plans to resolve their long-running legal dispute in private, through binding arbitration, after all.

The Seattle Times Co. and The Hearst Corp., owner of the Seattle Post-Intelligencer, announced the arbitration agreement March 30. But the deal allowed either to pull out unless King County Superior Court Judge Greg Canova agreed to freeze all court proceedings until the arbitration was done.

Canova refused to do that and, until Thursday, the arbitration plan was up in the air.

In an e-mail to Times employees, President Carolyn Kelly said although Canova's April 27 ruling complicated matters, the company concluded arbitration remains "the clearest and quickest path to resolution."

P-I Publisher Roger Oglesby made a similar announcement to that paper's employees.

Canova rejected the newspapers' bid to put all court proceedings on hold at the request of the Committee for a Two-Newspaper Town, a citizens group that is an intervenor in the Times-Hearst lawsuit but is not part of the arbitration agreement.

The committee had argued its interests would have been irreparably harmed if it were forced to wait until after the arbitration to litigate its claims against both papers.

After Canova ruled, Hearst and The Times could have allowed the committee a role in the arbitration, backed out of the agreement entirely or opted to proceed on two tracks: arbitrating their claims against each other while continuing to face the two-newspaper committee in court.

They chose the last approach.

Neither Hearst spokesman Paul Luthringer nor Times spokeswoman Jill Mackie would say whether the newspapers plan to do anything soon about the committee's claims, such as moving for the court to dismiss them.

"I would think they would probably sit back and wait for us" to act, said Seattle attorney Anne Bremner, the committee's co-chairwoman.

The committee suffered a blow Saturday when the Pacific Northwest Newspaper Guild voted to sever ties with the group. The union gave birth to the committee in 2003 and provided most of its money.

Some Guild members from The Times had expressed concern the committee's actions could abort the arbitration. Bremner said the arbitration deal was never really in danger and expressed disappointment that some in the Guild apparently responded to that fear.

Mackie said the Guild vote didn't influence The Times' decision to continue with the arbitration.

"The decisions were really not linked," she said, although the company was pleased members of the Guild, the largest union at the two papers, "recognize [the committee's] litigation is a real threat to The Seattle Times."

Luthringer declined comment on the Guild vote.

Mackie also said the "discovery" phase of the arbitration, under which the companies seek information from one another, has begun, and a closed-door trial before arbitrator Larry Jordan, a former King County Superior Court judge, is likely to begin next year.

Under the agreement, Jordan must rule by next May 31. There would be no appeal.

When they announced the arbitration plan, the papers said it offered both the prospect of a quicker resolution and the opportunity to settle their differences without publicly disclosing sensitive financial information.

They also have argued that proceeding on two tracks simultaneously — in private before Jordan and in public before Canova — would be expensive and complicated. It is not clear what would happen if the arbitration had been decided and the committee's case were still being litigated.

The Times and Hearst have operated under a federally sanctioned joint-operating agreement (JOA) since 1983. They maintain separate news and editorial operations, but The Times handles advertising, printing and other business functions for both.

In return, it gets three-fifths of what remains after the non-news costs of publishing both papers are paid.

The Times notified Hearst in April 2003 that it had lost money under the JOA in each of the previous three years. That triggered an escape clause in the contract that would have led to termination of the JOA, closure of the P-I or both.

Hearst, which says the P-I can't survive outside the JOA, sued, challenging the validity of The Times' losses.

The Times says the cost of publishing the smaller P-I has become an economic burden that threatens The Times' future.

The Committee for a Two-Newspaper Town has generally sided with Hearst in court, but also has filed a claim against both companies. It says a JOA provision that allows Hearst to close the P-I and collect 32 percent of The Times' profits until 2083 is an unconstitutional restraint of trade.

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