Court denies motion in Honolulu case

By: Lucia Moses The Honolulu Star-Bulletin got a reprieve until at least Nov. 10 after a federal appeals court upheld a preliminary injunction halting its scheduled Oct. 30 execution.
Gannett Co. Inc., owner of the morning Honolulu Advertiser, and Liberty Newspapers, owner of the Star-Bulletin, want to end their joint operating agreement (JOA) 12 years early and close the afternoon Star-Bulletin. Liberty would get 26.5 million dollars from Gannett in exchange.
Those plans hit a snag when U.S. District Judge Alan Kay issued an injunction Oct. 13 blocking the closure until an antitrust lawsuit filed by the state of Hawaii is resolved. Kay cited a public interest in keeping separate editorial voices. The 9th U.S. Circuit Court of Appeals denied a motion by the newspapers' owners to lift the order but expedited the appeal, setting a briefs schedule through Nov. 10.
The appeal is likely to be resolved quickly, and its outcome could help determine how long the paper lasts.
Star-Bulletin Publisher John Flanagan said that, whatever the outcome, a speedy decision is in everyone's best interest. The Advertiser made job offers to some 25 of his people, who were put on hold. Two of his staffers already have accepted jobs elsewhere, and others are looking around, he said.
"If the newspaper staff stays in this kind of limbo, more and more people will look for jobs elsewhere, and there's not a lot I can do," Flanagan said. "It's going to be incredibly difficult to keep the paper together."
Meanwhile, other newspaper companies are taking note of the Honolulu affair. The Hearst Corp. is watching the case because it may have implications for its own pending deal in San Francisco. Hearst, parent of the San Francisco Examiner, bought its JOA partner, the San Francisco Chronicle, and put the Examiner up for sale. Hearst is widely expected to merge the city's two daily papers. The U.S. Justice Department is investigating the deal.
A source close to Hearst pointed out that JOA newspapers have enjoyed a long hands-off period by the government and that the decision to halt a paper's closing is a first ? and one other newspaper companies are watching closely. "It is extraordinarily significant," the source said. "No question, granting the preliminary injunction isn't a favorable event."
Tom Brislin, a former Advertiser editor who heads the University of Hawaii's journalism department and supports a continued Star-Bulletin, agrees the decision is significant. "There will be no way to unring that particular bell."
Doug Cuthbertson, executive officer of the guild unit representing Chronicle and Examiner employees, said he sees the Hawaii case delaying the Chronicle sale and potential merger with the Examiner. "I'd like to see them be able to complete the purchase," he said. "It is inevitable."
While a local grass-roots effort has sprouted in support of the Star-Bulletin, an outside observer sees the government's interest in the case as misdirected.
Stephen Lacy, a JOA expert who teaches journalism at Michigan State University, said the Honolulu JOA resembles many JOAs around the country that, for various reasons, are dissolving. What's different about Honolulu is that the afternoon paper is still profitable, he said.
"I'm baffled by the Justice Department preventing the shutdown of a paper that's going to go out of business and ignoring the destruction of competition in other parts of the country," he said, referring to newspaper clustering and cross ownership of newspaper and broadcast properties. "I think there are bigger concerns going on."
Rupert Phillips, general partner of Liberty, said earlier that he decided to bail out of the Star-Bulletin because investors could make more money elsewhere.
A shutdown of the Star-Bulletin, circulation 67,000, would leave the Advertiser, daily circulation 104,000, as Honolulu's only daily newspaper. The state of Hawaii says the closure amounts to a payoff and violates antitrust laws. Gannett says the deal has clear legal precedent and that a newspaper can't be forced to publish. Hope remains at the Star-Bulletin, though. "We delayed our closing party," the Star-Bulletin's Flanagan said. "We're hoping to turn it into a Christmas party."
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(copyright: Editor & Publisher October 23, 1999) [Caption]