A Choice Ruling

The Seattle Times wins a battle in court, but its war with the Seattle Post-Intelligencer will continue.

Last week's Washington State Supreme Court ruling on the joint operating agreement (JOA) between The Seattle Times and Hearst Corp.'s Seattle Post-Intelligencer did little to resolve whether Seattle will have one or two daily newspapers.

On Thursday, June 30, the court ruled 9-0 that the Times could count losses in 2000 and 2001 toward the three consecutive years of losses the Times needs to force Hearst to renegotiate the profit split from the federally sanctioned JOA, shutter the P-I, or run the P-I as a stand-alone business. Under the JOA, the Times handles printing, distribution, and advertising for both papers.

But all the ruling means is that there will still be two dailies in Seattle for the foreseeable future—and lawyers will be racking up thousands of billable hours squabbling over the JOA's fine print for years to come.

In a statement, Frank Blethen, the Times' publisher whose family owns the controlling interest in the Seattle Times Co., called on Hearst to renegotiate the agreement with the Times to "reflect today's difficult newspaper economics." The Times has lost money each year since 2000, including a $12 million loss last year. A Times spokesperson declined to answer questions about the paper's financial health this year, which has seen 99 Times employees volunteer to be laid off in exchange for a severance package.

Hearst fired back in its own statement that "this case is far from over" and gave no indication that it would sit down with Blethen any time soon. "The fight has just begun," says Kelly Corr, a Seattle attorney representing Hearst. He says that the court's ruling merely cleared up the narrow issue of whether the 2000 union strike against the Times and P-I, which generated losses for both papers, could be used by Blethen as a contributing reason to break up the JOA.

Corr says there are other issues at stake in the 2000 and 2001 losses, and he intends to litigate every aspect of them to determine whether the Times was acting properly as the JOA's manager or whether it was out to sink the P-I. Corr says Blethen's long-known desire to drown the JOA, which was agreed to in 1983, is proved by a 2002 Times internal document which states that the paper had articulated a goal of ending the agreement as far back as 1985. The Times declined to answer questions beyond Blethen's statement.

The matter fell into the Supreme Court's lap after the Times filed a "loss notice" with Hearst in 2003, citing losses in 2000, 2001, and 2002. Hearst sued the Times. That fall, King County Superior Court Judge Greg Canova found that the strike-generated losses in 2000 and 2001 were an extraordinary event that could not be counted as part of the three years of losses required to renegotiate or terminate the JOA. The Times appealed to the state Court of Appeals, which overruled Canova last year. Hearst appealed that ruling to the state Supreme Court, which heard arguments in February.

Also at issue in the case, which now returns to Superior Court, are Times losses in 2002, which Corr argues may have been the result of the Times purposely trying to generate losses by hiring some six dozen new editorial staff members. The Supreme Court did not rule on the 2002 loss.

Lost in the JOA fight is that both papers have seen serious drops in circulation— for a six-month period ending March 31, the P-I's circulation dropped 4 percent to 144,836 copies and the Times' dropped 1.7 percent to 233,268—and that the P-I has taken overt steps to react. In recent weeks, the P-I has made its paper much more Seattle-focused.

P-I columnist Joel Connelly calls it a "course correction" and a return to the paper's traditional strength. The strength of the smaller, plucky P-I (with roughly 150 editorial staff) versus the much-larger Times (with about 300 ) has been obvious. The P-I bested the Times on the monorail's financing fiasco and has been producing smart urban features.

How readers respond remains to be seen, although for now they still have what they've long had in Seattle—a daily choice.


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