Group asks judge to rule parts of P-I, Times pact unlawful

The committee that says it speaks for the public in Seattle's long-running newspaper war asked a judge Tuesday to rule that parts of a 1999 deal between the owners of the city's two daily newspapers violate the state constitution.

King County Superior Court Judge Greg Canova is scheduled to hear the Committee for a Two-Newspaper Town's motion for summary judgment April 6.

If Canova rules for the group, it could undercut — or at least complicate — ongoing efforts by the owners of The Seattle Times and Seattle Post-Intelligencer to settle their longstanding dispute in private, through binding arbitration. A decision from arbitrator Larry Jordan is expected by May 31.

A Times victory in the arbitration could lead the P-I's owner, The Hearst Corp., to take steps to close its paper — an outcome the Committee for a Two-Newspaper Town (CTNT) wants to block.

In its motion, the group repeats and expands upon an argument it first made in court in 2003: that an arrangement between the companies that allows Hearst to close the P-I and get part of The Times' profits is an unconstitutional restraint of trade.

Key argument

"The key here is, there is an agreement between two competitors to eliminate one of the competing products," said Kathy George, one of the committee's lawyers.

Seattle Times Co. spokeswoman Jill Mackie said The Times will fight the motion.

She said she couldn't address its potential impact on the closed-door arbitration proceedings.

Sources say a climactic hearing before Jordan is scheduled to start April 9, just three days after the CTNT's scheduled summary-judgment hearing.

But Mackie did say that "CTNT's actions do nothing to preserve two newspapers and greatly threaten local ownership of The Seattle Times."

A Hearst lawyer did not respond to a request for comment.

In the early 1980s, with the P-I at risk of failing, the two companies signed and won federal approval for a joint-operating agreement (JOA). Under its terms, the papers maintain separate news and editorial operations, but the larger Times prints and handles almost all business functions for both.

In return, it gets the lion's share of what's left after it is compensated for the non-news expenses of producing both papers.

Originally, the JOA said the contract would terminate three years after one paper notified the other that its proceeds from the arrangement hadn't been enough to cover its news-related expenses for the preceding three years.

JOA revised

In 1999, the companies amended the JOA. One of the changes shortened the waiting period for termination to 18 months.

But the amended pact also included new language that said if one newspaper closed voluntarily before those 18 months were up, the JOA could continue. The owner of the surviving newspaper would get 68 percent of its profits, the owner of the closed newspaper 32 percent until 2083, when the JOA expires.

The Times notified Hearst in 2003 that it had lost money under the JOA formula in 2000, 2001 and 2002. It asked Hearst to take steps under the amended agreement to close the P-I within 18 months.

Hearst challenged the validity of The Times' losses in court. It said the P-I couldn't survive outside the JOA.

The Times said wealthier Hearst was using the suit to "bleed" The Times and force its owners, the local Blethen family, to sell to Hearst.

Canova allowed the citizens group to intervene in the lawsuit, saying it appeared to represent the public interest.

The group wasn't included, however, when Hearst and The Times agreed last year to settle their claims against each other through binding arbitration, with no appeal.

In the motion filed Tuesday, CTNT asked Canova to strike down several 1999 amendments, including the one that could give Hearst 32 percent of The Times' profits. Those amendments would be supplanted by the language in the original 1981 JOA.

If Hearst wasn't guaranteed 32 percent of The Times' profits, it might be less inclined to close the P-I, said George, a former P-I reporter and editor.

But The Times' Mackie noted that the 1999 amendments say a one-newspaper JOA can happen only if it is lawful. "CTNT is claiming that an agreement to undertake only lawful action is itself unlawful," she said.

Papers' rebuttal

When CTNT first raised its restraint-of-trade claim in 2003, The Times and Hearst offered several arguments in rebuttal. They said federal law had pre-empted the state constitution. They also said the committee had waited too long to challenge the 1999 amendments.

And Hearst insisted it wasn't interested in closing the P-I. "The very existence of this lawsuit [against The Times] establishes that the 32 percent provision is not an inducement to halt publication of the P-I," Hearst attorney Guy Michelson wrote.

The Times has suggested in the past that, if CTNT succeeds, it would touch off a chain of events that could force The Times to return to afternoon publication and near-certain death.

That's because language in the 1999 JOA amendments says that, if any one amendment is struck down, all would be invalidated.

One of the 1999 amendments allowed The Times to begin publishing in the morning and competing head to head with the P-I.

But George said such an outcome is unlikely.

"They would go back to the bargaining table," she said. "I don't know that it would benefit Hearst to have The Times move back to the afternoon slot."

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