Daily News arbitrator's award set aside

By: Lucia Moses Deliverers union plans to appeal federal court decision that would save the paper a cool 52.5 million

Despite a personal 19-million-dollar contribution from co-owner Mortimer Zuckerman last year, the New York Daily News is too cash-poor to pay its delivery drivers wage increases awarded in arbitration, a federal judge said last week.
The revelations came in an opinion unsealed Dec. 2, disclosing the privately owned tabloid's confidential financial information.
The Daily News reported losses and negative cash flow in three of the six years from 1993 to 1998. After the 19-million-dollar contribution from Zuckerman in 1998, the paper still had a negative cash flow of 127,000 dollars that year, according to the opinion by U.S. District Court Judge Thomas P. Griesa.
The Daily News was "extremely gratified" by Griesa's decision, Zuckerman said in a statement. "This decision lets us use our resources in a way that will enable us to continue our commitment to editorial quality, to serve our readers and protect our employees. We now have the opportunity to grow the Daily News as we intended," the statement read.
J. Warren Mangan, a lawyer for the Newspaper and Mail Deliverers Union, said the union plans to appeal the decision.
In tossing out the award, Griesa said the arbitrator "manifestly disregarded" critical financial information suggesting the award would have forced the Daily News, already in dire straits, into bankruptcy and to close its doors.
The arbitrator's March 8 ruling granted a 16.9 percent raise over 18 months to the union's 400 drivers, bringing their base pay to about 912 dollars a week.
The paper's eight other craft unions had agreed to less than 3 percent raises, but would have stood to gain the same raises if the arbitrator's ruling had been upheld. All in all, the paper would have had to fork over 52.5 million dollars through 2005.
The Daily News, which weathered bankruptcy in 1991, has endured financial uncertainty ever since, with unexpected printing-press bills coming on top of capital investments and the launch of an expanded Sunday edition.
After reporting positive cash flow of 33 million dollars in 1993 and 20 million dollars in 1994, the Daily News sustained a whopping 52-million dollar cash-flow loss in 1995. That was due largely to high capital equipment costs that had been deferred, said Martin D. Krall, a Daily News lawyer.
Based on its cash-flow situation during the years the award covered, the paper couldn't have paid the arbitrator's award, the judge wrote.
The paper reported positive cash flow of 167,000 dollars in 1997. By contrast, the arbitrator ordered payments of 4.1 million dollars the first year and 8.6 million dollars the second. As for this year, the paper didn't provide figures. "However," Griesa wrote, "there is no indication of any substantial change in the trend of the News' financial picture" that would indicate it could pay 10.6 million dollars as ordered.
"For one thing, one cannot simply assume that the owners will continue to make large contributions to subsidize losses," Griesa wrote.
The arbitrator, accounting for the hefty award, said the Daily News hadn't offered a financial-hardship defense, according to Griesa. The News initially refused to turn over financial data, saying its defense wasn't about inability to pay, but then changed course, saying it couldn't pay the award.
Mangan said the figures had no supporting evidence, preventing the union from analyzing them. "It is a self-serving document," he said. The paper's failure to claim financial distress at first suggests it could have paid the award, he said.
The drivers sought a bigger wage increase than the other crafts to bring their pay in line with their industry peers, Mangan said. In 1997, the Daily News paid its drivers 773.57 dollars a week, while the rival New York Post paid its drivers 885.65 dollars, according to the arbitrator's figures.
"No private company wants to disclose all its internal financial results to the whole world," Krall said of the paper's turnaround. "Nobody could possibly believe this arbitrator did what he did." Krall wouldn't discuss the paper's financial prospects, saying the case was ongoing.
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