Documents reveal no secret deals in Seattle newspaper settlement

Newly disclosed documents support statements by the owners of Seattle's two daily newspapers that, contrary to a citizens group's suspicions, they made no secret deals when they settled their four-year legal dispute last April.

The Committee for a Two-Newspaper Town suggested in court after the settlement was announced last year that there could be a separate, undisclosed arrangement between The Seattle Times Co. and the Hearst Corp. to close Hearst's Seattle Post-Intelligencer in the next few years.

The companies denied any secret pact. The new documents, produced this month by the U.S. Justice Department's anti-trust division in response to a Freedom of Information Act request, "appear to confirm" that the companies were telling the truth, a committee lawyer said.

The documents include the one piece of information about the settlement that the companies did fight to keep secret: a breakdown of the millions The Times paid Hearst as part of the deal.

It shows Hearst got most of the money for dropping its lawsuit and a smaller amount for giving up its right to a share of The Times' future profits. The lawsuit had charged that The Times illegally maneuvered to drive the P-I out of business.

Several outside lawyers said the companies — especially The Times — most likely wanted to keep the breakdown secret because it implied Hearst's claims were valid.

Both The Times and Hearst declined to comment. The Times has said in the past that it has always lived up to its contractual obligations to Hearst.

The P-I and Times have been linked since 1983 by a joint operating agreement (JOA) overseen by the Justice Department. They maintain separate news operations, but The Times handles the business side for both in return for a larger share of the joint proceeds.

Their legal dispute began in 2003 when The Times, arguing the JOA was no longer economically viable, moved to trigger an escape clause that could have led to the P-I's closure.

Hearst sued, charging, among other things, that the larger Times had worked for years to sabotage the P-I rather than acting in its best interests, as the JOA contract requires.

The companies settled last April on the eve of a binding-arbitration hearing. Hearst paid The Times $25 million to not trigger the escape clause again before 2016. The Times paid Hearst $49 million for two things: dropping its suit, and giving up its previous right to 32 percent of The Times' profits until 2083 even if the P-I closes before then.

The breakdown of the $49 million was redacted — edited out — of the version of the settlement agreement the companies made public a year ago. They consistently declined to say why.

In an unsuccessful court bid to get the numbers, the Committee for a Two-Newspaper Town argued that if Hearst had received most of the $49 million to forgo the profit provision, it could be a payoff from The Times to close the P-I in a few years as part of a secret deal.

But an unredacted version of the agreement the Justice Department provided this month shows Hearst got the lion's share of the money — $31 million — for dropping its legal claims. It received $18 million for giving up its potential future Times profits.

The $31 million payment suggests The Times saw a substantial risk that it would lose the arbitration hearing, said Stew Cogan, a former King County Bar Association president.

University of Washington law professor Kathleen O'Neill agreed. "That's a big chunk of change," she said. It's difficult to see why The Times would pay so much, she added, "if both sides didn't think there was something there [in Hearst's allegations]."

Language in the settlement agreement absolves both companies of "liability, fault or responsibility."

The Justice Department also released post-settlement letters from Times and Hearst lawyers responding to a Justice request for copies of all agreements between the companies.

In their responses, both companies listed four written agreements — all made public last April — and said there were no others.

The Justice Department deleted some material from the letters before releasing them. The companies, however, later provided complete, unedited versions.

"This does appear to confirm the newspapers' position [that there are no secret deals]," Kathy George, the Committee for a Two-Newspaper Town's attorney, said of the letters. "This is what we had sought to find out."

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