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Pacific Northwest Magazine

Arbitration was unlikely to end fight, Times says

By Eric Pryne

Seattle Times staff reporter

The Seattle Times Co. said Wednesday it decided to settle its four-year legal fight with The Hearst Corp. in part because it was "fairly certain" the costly struggle would have dragged on even after a climactic binding-arbitration trial decided the matter.

The statement raised another question: Who would have pressed the fight?

"We really don't want to get into that," Times spokeswoman Jill Mackie said. "We want to focus on the future."

The new Hearst-Times agreement

Many of its provisions address examples of alleged unfair treatment by The Times that Hearst has raised in legal proceedings.

• Times pays Hearst $24 million.

• Times commits to Hearst to treat both papers equally "with regard to production quality and color pages."

• New language allowing the P-I to become a tabloid if Hearst chooses.

• Restored executive in The Times' circulation department to work primarily to build P-I circulation.

• More Hearst control over promotion of the P-I.

• Times commits that a minimum percentage of new, solicited subscriptions for both papers in the Greater Seattle area will be for the P-I.

• Times commits to repaint, at its expense, trucks that now bear only The Times' brand so they include the names of both newspapers.

• Times commits that any transactions between the two-newspaper "agency" and Times affiliate companies be at fair-market value and as much to the agency's benefit as a transaction with a third party.

• Hearst gives up right to 32 percent of The Times' profits until 2083 should the P-I close and The Times become Seattle's only daily.

• Hearst must concur with increases in minimum space allocated for news in both newspapers (Times controlled this previously).

• Times commits not to move to terminate the JOA until 2016.

• Both papers can engage in new business ventures, including "niche publications," without sharing revenue.

• New $2 million limit on how much cash compensation any Times executive can be paid annually from the two-newspaper agency's coffers.

• Times required to pay 10 percent of compensation of its publisher, president, CFO and other top executives from its own resources instead of agency accounts.

• Times required to pay all expenses associated with Times training of Blethen family members now in their 20s and 30s (agency paid previously ).

• All future disputes to be submitted to private, binding arbitration with no appeal.

Sources: 2007 Revised Joint-Operating Agreement, The Seattle Times Co., The Hearst Corp.

One answer, however, may be the Committee for a Two-Newspaper Town, a group not involved in the arbitration deal. It filed claims in 2003 against both The Times and Hearst, owner of the Seattle Post-Intelligencer, that still are in King County Superior Court.

The committee has little money, and pressing those claims could have been challenging. But "no court has ever examined the merits of our antitrust claim — and it's a very strong claim," Kathy George, one of the group's attorneys, said late Wednesday.

George also said she found The Times' statement "puzzling," since Hearst and The Times had agreed in advance to stop fighting each other and not appeal the arbitrator's decision.

The statement was included in a series of questions and answers about the settlement that The Times e-mailed to employees Wednesday.

The Times and P-I have been bound since 1983 by a joint-operating agreement (JOA). Under its terms, they maintain separate news operations, but The Times handles the business side for both in exchange for a bigger slice of the proceeds.

The court battle over the contract began in 2003, after The Times moved to trigger an escape clause that might have forced the P-I to close. Hearst sued in response.

The binding-arbitration hearing — a closed-door, private trial — was supposed to settle the dispute. Instead, as the hearing was about to convene Monday, the companies announced a settlement.

The Times agreed not to try to trigger the escape clause again until 2016. Hearst agreed to give up its claim to 32 percent of The Times' profits until 2083 if the P-I ever closes. The Times agreed to pay Hearst $24 million.

In explaining the decision, which many observers say favors Hearst, The Times said in its e-mail to employees that "... we were fairly certain that once the arbitration concluded, no matter the outcome, the legal wrangling would not have been over. We could not afford the cost, time, or distraction of continuing to be focused on legal matters. ... ."

The Committee for a Two-Newspaper Town's chief claim against the papers challenges the JOA provision — now eliminated — that would have awarded Hearst 32 percent of The Times' profits until 2083 if it closed the P-I.

The committee, whose goal is synonymous with its name, said the provision was an unconstitutional restraint of trade and a disincentive to continue publishing.

King County Superior Court Judge Greg Canova still is scheduled to hear arguments on that claim July 20.

Committee Co-Chair Anne Bremner said the group had just begun to review the new agreement between The Times and Hearst and would not decide whether to drop its claim until next week.

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

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