Court Hears ‘Salt Lake Tribune’ Arguments

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By: Paul Foy, AP Business Writer

(AP) The former owners of The Salt Lake Tribune said Wednesday they had an “ironclad” right to buy back the newspaper as their lawyers asked the 10th Circuit Court of Appeals to overturn a lower court’s ruling blocking them from doing so.

“When the deal was done, there was no confusion,” said Sarah McCarthey, one of five siblings who sold their nearly 40% share of Utah’s largest paper five years ago as part of a lucrative stock swap with a cable-television company. “We intended from the very beginning to reacquire the newspaper.”

But to a panel of three federal judges, the rights of the McCartheys are anything but clear, given the complicated relationship between the Tribune and the Deseret News, its joint-operating business partner and chief rival.

“That principle of good faith and fair dealing cannot trump legal principles, can it?” asked Judge David Ebel of Denver, who led the questioning of three sides in the dispute.

The McCarthey family is asking the court to reverse a district court’s ruling this summer that upheld the right of the Deseret News to approve the paper’s purchase by MediaNews Group Inc. of Denver. The Deseret News asserts that it has veto power over any business decisions involving the Tribune.

The McCartheys had sued MediaNews and the Deseret News almost two years ago, hoping to block MediaNews’ purchase, but U.S. District Court Judge Ted Stewart ruled against them, saying the Deseret News had the right of consent.

Outside of the appeals court Wednesday, the McCartheys explained why they sold the paper: to give Telecommunications Inc., the cable TV company, back shares of super-voting stock; satisfy other Tribune shareholders; and avoid a huge estate-tax bill. They had to give up ownership of the paper for five years to avoid taxes.

But dense corporate law dominated the debate inside court, with lawyers for MediaNews and the Deseret News arguing the McCartheys made a calculated gamble — and lost control of the paper after a series of takeovers left it in the control of MediaNews, which refuses to give it up.

MediaNews owns The Denver Post and 49 other dailies and bought The Salt Lake Tribune to complete its Rocky Mountain news empire. The Tribune takeover was completed Aug. 1.

MediaNews attorney Kevin Baine said the McCartheys took on “an option agreement that’s full of risk” and got what they bargained for.

The debate turned on an obscure point — whether the McCartheys could get around the Deseret News‘ opposition by taking back the Tribune without its share of stock in the Newspaper Agency Corp., or NAC, which handles printing and business functions for both Salt Lake City papers.

The stock in the NAC is significant, because the lower court ruled the Desert News could block the move by refusing to allow a stock transfer in the NAC.

Ebel, for one, said he was “having trouble” understanding the complicated ties that bind both Salt Lake City papers. The panel, which also included chief 10th Circuit judge Deanell Reece Tacha, was not expected to issue a decision for months.

MediaNews chief executive Dean Singleton said he remained confident after Wednesday’s hearing that his company would be able to hold onto the Tribune.

The family’s supporters were equally optimistic.

“We’re asking the court to correct an injustice in an extraordinary case: a family’s right to own a newspaper,” McCarthey attorney Seth Waxman said.

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