Times, Hearst agree to submit dispute to arbitrator

The 3-year-long legal battle between The Seattle Times Co. and the Hearst Corp. over the future of their daily newspapers here took a notable turn today, as the companies agreed to use binding arbitration to resolve the dispute.

Under an agreement by both parties, the dispute will be arbitrated by retired King County Superior Court Judge Larry Jordan, now with a firm called Judicial Dispute Resolution.

The agreement to go to arbitration, subject to approval by a King County Superior Court judge, is the first major public action in more than nine months, and one that could signal the beginning of the end for the dispute – and possibly for Hearst's Seattle Post-Intelligencer.

Jordan is expected to make a decision on issues in the dispute by late spring 2007.

"Because this is the quickest way to resolve our differences, we endorse this approach. Quicker resolution is by far the best option for the newspapers and for the employees of both The Times and the Seattle Post-Intelligencer," said Frank Blethen, publisher of The Seattle Times.

"This approach is the best option for everyone concerned," said Roger Oglesby, editor and publisher of the P-I. "This brings a measure of certainty to a situation that has generated a lot of confusion and anxiety for newspaper employees and readers for some time."

Sen. Patty Murray, D-Wash., said in a statement that she reached out to leaders of both companies in fall 2004, asking them to settle the dispute. She said she asked former Senate Majority Leader George Mitchell, a renowned mediator, to help settle the dispute, but that effort failed. But, Murray said, that process helped lead the two parties "to conclude that protracted litigation was not in the best interest of either resolving their dispute or the public that they serve."

While noting that many questions remain around the dispute, Murray said: "Both The Seattle Times and Hearst are to be commended for committing to a process in which these questions can be answered in a thoughtful, rational way. "

At issue is The Times' effort to change or end the joint operating agreement that has bound the two companies since 1983. Under the JOA, The Times and the P-I maintain separate news and editorial operations, but The Times handles circulation, advertising, production and other business functions for both.

Under current terms, The Times gets 60 percent, Hearst 40 percent of any revenue that remains after accounting for non-news expenses of publishing both papers.

The Times says the arrangement is no longer financially viable, and that it has lost money under a JOA calculation. The P-I's circulation has declined precipitously, and Times officials say the P-I has become a big expense that threatens both The Times' profitability and its continued control by the Seattle-based Blethen family. Meanwhile, the economics of the newspaper business nationally have been woeful, especially with much classified-advertising revenue moving to the Internet.

In April 2003, The Times served notice to Hearst that, under terms of the JOA, it had lost money for three years in a row, from 2000 through 2002. The Times said it was triggering a clause in the JOA clause that allows it to terminate the agreement, move to shut down the P-I, or both. Hearst, in turn, filed suit contesting the legitimacy of those losses, a dispute that remains central to the case.

Since then, The Times notified Hearst in September last year that it had lost money under the JOA for the three years from 2002 through 2004. And the joint statement released by both parties today noted that The Times last week issued a third loss notice, this one covering 2003 through 2005.

Hearst has said the P-I can't survive outside the JOA.