Court agrees to fast-track appeal in JOA fight

The Washington state Court of Appeals agreed yesterday to hear an accelerated appeal of the legal dispute over the future of Seattle's two warring daily newspapers.

In an eight-page decision, Appeals Court Commissioner James Verellen said there is "substantial grounds for a difference of opinion" over whether The Seattle Times can use its strike-related losses in 2000 and 2001 to press for a shutdown of the Seattle Post-Intelligencer or an end to the 20-year joint-operating agreement (JOA) between the papers.

Verellen, who functions as a procedural gatekeeper for the Appeals Court, ordered the court clerk to set oral arguments before a three-judge panel as early as January. Under the court's normal timetable, it often takes six to eight months to reach the hearing stage.

Times spokeswoman Kerry Coughlin said the paper was "very pleased" by the commissioner's decision. "We asked that the appeal be expedited, and this appears to be on an expedited schedule," she said.

Guy Michelson, an attorney for the P-I's owner, The Hearst Corp., said Verellen's decision was not a surprise. "When everybody indicates they are willing to have a discretionary review on an accelerated basis, it's what we anticipated," Michelson said.

In his decision, Verellen also ruled the court would sidestep normal legal procedure, which requires a lower state court to sign off on a case before the appeals court hears it.

Last month, King County Superior Court Judge Greg Canova ruled in favor of Hearst, which has challenged The Times' attempt to exercise a JOA provision that would use financial losses in 2000 and 2001 toward an effort to close its rival. But Canova's ruling left open an additional challenge by Hearst to JOA-related losses in 2002.

Under the JOA, The Times, after undergoing three consecutive years of losses, can demand that Hearst negotiate a shutdown of the P-I, or end the agreement. In April, Times Publisher Frank Blethen notified Hearst his paper had lost a total of $10 million under the JOA from 2000 to 2002.

The day before notification, Hearst filed a pre-emptive suit to block any move to shut the P-I. Hearst's suit challenged The Times' 2000 and 2001 losses on the grounds that they were caused by an employee strike.

Hearst said the strike was a "force majeure," or "greater force," event and that a force-majeure provision in the JOA contract trumped the agreement's loss-notice clause.

Force majeure is a common contract term excusing either party from liability for failing to perform because of an event beyond its control.

While acknowledging the unusual step of moving the case to the appeals stage before completing lower-court action on all elements, Verellen said the appeals court had authority because of the "unusual and emergent circumstances presented in this matter."

Both The Times Co. and Hearst have raised concerns about the future of their papers if the JOA dispute is allowed to drag on.

"This litigation is not merely a dispute between two large businesses involving substantial sums of money," Verellen said. "It is an issue of substantial significance to the local community."

All three parties in Hearst's suit — The Times Co., Hearst and the Committee for a Two-Newspaper Town, an ad hoc citizens group — agreed not to oppose a fast appeal.

Michelson, the Hearst attorney, said the New York-based media company would seek to resolve the appeal of The Times' losses in 2000 and 2001 before renewing its challenge in the lower court to the 2002 loss. Hearst contends that loss was caused by overspending by The Times on staff and content.

Dmitri Iglitzin, an attorney for the Committee for a Two-Newspaper Town, said the group likely would take no action on another legal loose end until after the appeals hearing.

Canova granted the group intervenor status in Hearst's case in July. It has challenged the validity of the JOA itself, charging the agreement has elements that constitute an illegal restraint of trade by the papers' owners.

The judge has set aside deciding on that argument for now.

Bill Richards is a freelance writer hired on a special contract by The Seattle Times to cover events involving the joint-operating agreement with the Seattle Post-Intelligencer. He can be reached at brichards@seattletimes.com.