Times, Hearst settlement pact becomes public, but not all of it

The owners of Seattle's two daily newspapers Tuesday released an edited version of the settlement agreement that recently ended their four-year-old legal dispute.

The five-page document, signed April 15, is complete but for two numbers.

In the hours after its release, observers speculated about why it was so important to The Seattle Times Co. and The Hearst Corp. that those figures not be disclosed.

The agreement says Hearst, owner of the Seattle Post-Intelligencer, will pay The Times more than $25 million, and The Times will pay Hearst $49 million — both numbers that had been widely reported.

But the document also reveals that some of The Times' $49 million payment to Hearst is in return for Hearst dropping its legal claims, and the rest is in return for Hearst giving up its right to 32 percent of The Times' profits until 2083 if the P-I ever closes.

The precise breakdown is redacted, or edited out of the version made public.

Kathy George, a lawyer for the Committee for a Two-Newspaper Town, said her client would ask for the missing numbers.

The group is an intervener in the Hearst-Times lawsuit that has been the center of the dispute. It is weighing whether to drop its claims against both companies because of the settlement.

Times spokeswoman Jill Mackie said the breakdown was redacted because it "is not relevant to the ongoing operation of the two newspapers."

Hearst spokesman Paul Luthringer would say only both companies had agreed the numbers would remain confidential.

Outside lawyers offered two theories that could explain the secrecy:

If The Times paid Hearst most of the $49 million to drop its legal claims, some said, The Times might not want that public because it could create or reinforce a perception The Times did something wrong.

"It might suggest that The Times behaved badly," said Jack Kirkwood, an antitrust expert at Seattle University's law school who has followed the case closely.

Kathleen O'Neill, who teaches contracts at the University of Washington law school, agreed. "Everybody has a lot of ego involved in these fights," she said.

The settlement agreement says expressly that neither side admits any "liability, fault or responsibility."

Even so, O'Neill said, if The Times paid Hearst a significant sum to drop its claims, "the implication to some might be that Hearst was not going off half-cocked, that they had some valid complaints."

Hearst claimed in legal proceedings that the larger Times, which handles all business functions for the P-I under a joint-operating agreement (JOA), worked for many years to undermine the Hearst paper rather than acting in its best interests, as the contract requires.

The Times has denied that charge and disputed it again Tuesday. "The Seattle Times has and will continue to operate the JOA honorably, ethically and with professionalism," Mackie said in an e-mail.

Kirkwood offered a second theory that assumes the bulk of the $49 million was in return for Hearst's potential future 32 percent stake in The Times if it becomes Seattle's only daily.

The companies might want to keep that private, Kirkwood said, because it could suggest that, contrary to their public statements, they have agreed privately or informally to eventually close one paper.

Under the settlement agreement, Hearst is paying The Times $25 million in return for The Times' commitment not to move until at least 2016 to end the JOA and possibly shut down the P-I.

Perhaps, Kirkwood said, Hearst has agreed not to contest such a move in nine years.

Mackie said The Times would not comment on speculation. Luthringer also declined to comment.

Nothing in writing made public so far suggests any secret deal between the papers.

The Committee for a Two-Newspaper Town, whose goal is synonymous with its name, said in a claim filed in 2003 that the 32 percent provision was an unconstitutional restraint of trade.

Since the redacted numbers concern that provision, lawyer George said, the group is entitled to see them.

She said she did not know when the committee would complete its review of the settlement agreement or when it would decide whether to drop its claims.

"We'll be reviewing all of this carefully," she said. "We're not in a rush."

The settlement agreement also amends a 1999 contract in which The Times sold Hearst first right to buy a majority interest in The Times Co. should its owner, the Seattle-based Blethen family, ever choose to sell.

That contract, also made public in edited form yesterday for the first time, required Hearst to pay the Blethens $1 million a year from 1999 through 2008 in return for the right.

The original contract said Hearst's right would expire whenever the JOA ended. The amendment in the settlement agreement drops that provision, potentially extending Hearst's right until 2083.

It also requires Hearst to pay the Blethens another $1 million, in 2009.

Mackie said Hearst wanted the amendment. It has little significance, she said, since the Blethens have no intention of selling.

The settlement agreement requires The Times to pay Hearst a net $24 million — $49 million minus $25 million — by Aug. 15. After that, it says, the companies will move to dismiss their claims against each other in King County Superior Court.

The long legal fight revolved around a Times bid to invoke an escape clause in the JOA that would have forced Hearst to close the P-I, end the JOA or both.

Hearst, which sued, said The Times was trying to put the P-I out of business.

The Times said the JOA was no longer economically feasible, and that much-larger Hearst was trying to "bleed" The Times and force the Blethens to sell.

The settlement leaves the JOA largely intact. The Times continues to get 60 percent of the joint proceeds, Hearst 40 percent.

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