2 papers postpone arbitration hearing for week

The owners of Seattle's two daily newspapers Friday announced a one-week delay in the start of their climactic binding arbitration hearing, fueling speculation that settlement talks may be under way.

The closed-door hearing, which had been scheduled to start Monday, was pushed back to April 16. The only explanation came from Seattle Times President Carolyn Kelly, who said in an e-mail to employees that the delay was "a result of some scheduling issues and complexity around our upcoming arbitration."

Neither The Times nor The Hearst Corp., owner of the Seattle Post-Intelligencer, would say anything more.

A source slated to testify at the hearing said an attorney for one of the companies indicated earlier this week that the private trial still was on schedule to convene April 9.

Some observers saw the postponement as a sign of renewed behind-the-scenes negotiations between the two parties. The case schedule had been set for months.

Jack Kirkwood, a Seattle University law professor who has followed the case closely, said the companies could be in settlement discussions.

"That's what often happens on the eve of a trial, when everyone knows what they've got," he said.

On the other hand, he added, given the case's mammoth record and complex claims, "it doesn't strike me as implausible that the litigators have just said, 'Can we have another week?' "

Kathy George, an attorney for the Committee for a Two-Newspaper Town, said the delay could be connected to another postponement, this one in the lawsuit that underlies the arbitration proceedings.

The committee, which says it wants to keep both newspapers alive, has filed claims against both companies in King County Superior Court. Judge Greg Canova this week put off a scheduled hearing on those claims three weeks, to July 20.

But that's just speculation, George added: "One theory, obviously, is that they are on the brink of some settlement."

Stew Cogan, a former King County Bar Association president and full-time mediator and arbitrator, said the delay "could be of great importance and moment, or it could be of no moment at all."

The Times and Hearst have been fighting for four years over the future of the joint operating agreement (JOA) that has linked the two papers since 1983. Under the contract, they maintain separate newsrooms, but The Times handles business functions in return for 60 percent of what remains after production expenses are paid.

In 2003 The Times moved to trigger an escape clause in the JOA, notifying Hearst it had lost money in each of three preceding years under a formula spelled out in the contract. Under the contract, that notice gave Hearst a choice between closing the P-I in return for 32 percent of the surviving Times' profits, or terminating the JOA.

Hearst said that also would kill the P-I, since the paper has no presses. It filed a lawsuit challenging The Times' losses. After nearly three years in court, the companies agreed last spring to submit the dispute to arbitrator Larry Jordan and not appeal his ruling.

The deadline for Jordan's ruling had been May 31. With the one-week delay, Times spokeswoman Jill Mackie said, that now slips to June 7.

The Times and Hearst have tried to negotiate their way out of the fight at least twice. In late 2002 and early 2003, before The Times filed its "loss notice" and Hearst filed its lawsuit, top executives talked extensively about possible ways to avoid a legal confrontation, including:

• Keeping the P-I alive in reduced form, perhaps killing its Saturday and holiday editions.

• Giving The Times a bigger cut of the papers' joint revenue.

• Deferring a showdown for several years in return for a lump-sum payment from Hearst to The Times.

The companies engaged in secret settlement talks again from late 2004 until August 2005, mediated by ex-U.S. Sen. George Mitchell, D-Maine. U.S. Sen. Patty Murray, D-Wash., convened those negotiations.

Murray spokeswoman Alex Glass said in an e-mail Friday that if Hearst and The Times are involved in settlement talks now, Murray isn't involved.

Times Publisher Frank Blethen said in 2004 that he would settle the case in return for a bigger slice of the JOA's proceeds. But he has said nothing like that recently, instead maintaining that the Seattle market no longer can support two daily newspapers.

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