Hearst: P-I for sale unless case speeds up

The Hearst Corp. is threatening to put the Seattle Post-Intelligencer up for sale if court proceedings in the dispute over the joint-operating agreement (JOA) between The Seattle Times and the P-I are not speeded up.

In a letter to King County Superior Court Judge Greg Canova delivered Wednesday, Hearst said it couldn't wait for a Sept. 12 date Canova has set for a critical hearing in the newspaper fight, in which Hearst is trying to block The Seattle Times Co. efforts to close the P-I.

Canova had set the date after postponing the original hearing date — yesterday — and allowing an ad hoc citizens group to intervene in the case.

With the clock running on an 18-month deadline toward a possible shutdown, the New York-based company indicated it needed as much time as possible to fulfill what it believes is a requirement under antitrust law: offering the paper for sale before a shutdown takes place.

"Under the revised schedule," the letter said, "Hearst will be required to start the sales process prior to the hearing, with the inevitable adverse effect this action will have on the P-I."

Earlier, P-I Publisher Roger Oglesby said rumors of a possible shutdown had already moved some employees to look for other jobs.

Court officials said Canova would decide Monday whether to move up the hearing date possibly to Aug. 22 or Sept. 5. Hearst said it was willing to have the hearing on any date, "even weekends if necessary."

Guy Michelson, an attorney for Hearst, said the letter was not an effort to pressure the judge, but rather an effort to alert the court to a problem associated with delaying a resolution of the dispute.

Canova is presiding in a lawsuit Hearst filed in April seeking to prevent the shutdown. In May, he ruled against Hearst's request to stop the clock on a JOA provision that gives the companies 18 months to negotiate a shutdown of one of the papers if either declares three consecutive years of losses.

Times Publisher Frank Blethen notified Hearst in April that his paper lost money in 2000, 2001 and 2002, setting the provision in motion.

If no agreement is reached in 18 months — by the end of October 2004 — the JOA dissolves and the papers go their separate ways. Because The Times handles all non-news functions for both papers under the JOA, Hearst has said the P-I would not be able to publish outside the agreement.

Hearst officials have pressed for quick court action in the case. If a shutdown becomes necessary, they say, the company would need time to put the P-I up for sale first to demonstrate that there are no potential buyers in order to receive approval for a shutdown from the U.S. Department of Justice, which oversees JOAs.

"Before the Justice Department would allow termination of joint operations, it would want to know whether or not someone out there would purchase the P-I and run it outside the JOA," Michelson said.

"This has nothing to do with squeezing the court or The Times," he added. "It's a reality that we are being forced to take this step."

Times spokeswoman Kerry Coughlin said the threat to put the P-I up for sale was Hearst's decision. "We haven't done anything that would require that," she said.

A Justice Department spokesman yesterday declined to comment, citing an investigation the department is conducting into the Seattle JOA.

Neither the Newspaper Preservation Act, which authorizes the exemption of JOAs from federal antitrust regulations, nor the Clayton or Sherman antitrust acts, which set out the legal boundaries for antitrust activities, require one participant to attempt to sell its paper before shutting it down.

Three years ago, in another JOA fight involving Hearst in San Francisco, U.S. District Court Judge Vaughn Walker noted that no court precedents exist on how JOA partners can close one paper.

The only indication of the Justice Department's thinking on the matter, Walker said, was a press release issued in 1983 by then-Assistant Attorney General William Baxter on efforts by the St. Louis Post-Dispatch and Globe-Democrat to terminate their JOA.

Baxter warned that Justice Department officials would take a tough legal position if one of the St. Louis JOA partners sought to shut its paper. That would include a requirement to show the paper faced "the probability of business failure and that there are no prospective purchasers."

Ultimately, the Newhouse newspaper group, which owned the Globe-Democrat, sold the paper's assets, and the paper folded within two years.

Judge Walker's conclusion in the San Francisco case was that to shut one paper in a JOA, the owner would need to show it would fail without JOA support and that "there are no alternative purchasers willing to operate the newspaper outside the JOA."

Michelson said Hearst was pressing the judge here to move more quickly to allow for a "full and adequate" search for a buyer.

Locating someone willing to buy the P-I could be a tough sell for Hearst. Besides having no support facilities, the P-I has been losing circulation while The Times has gained new readers since the two papers went head-to-head in the morning in 2000.

The Audit Bureau of Circulations, which tracks newspaper circulation, showed The Times' average daily circulation for the six-month period ending March 31 was 239,468, up nearly 5 percent over the same period a year before. The P-I's circulation fell 5 percent to 155,813 during the same time period.

It is unclear what a prospective buyer would get if it purchased the P-I. The P-I has about 155 employees, a rented newsroom, a 140-year-old masthead and the rotating globe atop the P-I's headquarters next to Elliott Bay.

P-I staffers learned of Hearst's warning yesterday when Publisher Oglesby read to the newsroom a copy of an electronic message from the Pacific Northwest Newspaper Guild. The message described Hearst's intention to put the paper up for sale before the Sept. 12 hearing.

"We're not giving up on either paper," the union's administrative officer, Elizabethe Brown, said in the message. "These are tense times, especially as the corporate players make their moves."

Oglesby also read a short statement from Hearst in which the company said the letter to the judge reiterated what the company has noted in court papers: that the JOA requires a process to offer the P-I for sale.

"This will have no effect on the litigation we commenced to continue the JOA publication of the P-I," the statement said.

The paper's reporters and editors have been grappling with uncertainty about the P-I's future since The Times' loss notification began the 18-month countdown.

"People don't know what to make of it," Jane Hadley, a P-I transportation reporter, said of Hearst's latest move.

Hadley said morale at the paper has remained high. "Basically," she said, "people have accepted the fact that we don't know what will happen to us."