Seattle Paper Tells Court It Faces Collapse

By: (AP) A lawyer for the Seattle Post-Intelligencer has told state Supreme Court justices that the newspaper would collapse unless they overrule a lower court decision that could end its joint operating agreement with The Seattle Times Co.

The Times has been trying to get out of the agreement with the P-I's parent company, The Hearst Corp., since April 2003, saying the agreement is no longer profitable because of changes in the market.

Last March, a three-judge state Court of Appeals panel unanimously ruled that the Times had a right to seek an end to the JOA, which has been in place since 1983. Hearst has said the P-I can't survive without it, because it lacks staffing and facilities for key business functions, including printing.

"The P-I's future is at stake here," Kelly Corr, representing the P-I, told the justices Tuesday.

But a spokeswoman for The Times disputed that contention following the hour-long hearing.

"Hearst is a multibillion-dollar company and could choose to make an investment if they think the P-I is viable," Kerry Coughlin said.

Under the agreement, The Times -- owned by the Blethen family with a minority share held by Knight Ridder -- handles printing, distribution, and advertising at both papers in exchange for 60 percent of their joint revenues.

JOAs are an exception to federal antitrust law that are allowed by the Newspaper Preservation Act of 1970. The law was designed to maintain multiple editorial voices in markets that might not otherwise support more than one major newspaper.

A provision in the JOA allows either company to opt out of the pact after three straight years of losses. The P-I claims that an exception to that is any annual loss caused by extraordinary events, such as the 49-day strike against both dailies in late 2000.

The Times argues that under the language in the contract, no such exception exists.

The Times said it suffered financial losses under the agreement in three consecutive years -- 2000, 2001 and 2002 -- thus triggering an 18-month period during which The Times and the P-I could negotiate the P-I's closure.

But Hearst sued, arguing that the strike was an extraordinary event, and could not be counted toward three consecutive years of losses.

"The Times cannot use a strike to try to put the P-I out of business," Corr argued Tuesday.

A King County Superior Court judge agreed with that argument in 2003, but the state Court of Appeals reversed that ruling last year.

Dmitri Iglitzin, a lawyer for the Committee for a Two-Newspaper Town, urged the justices to consider the "public interest at stake here."

"There is concern that the Pugent Sound area is going to lose what it's had for decades, which is two daily newspapers of general circulation," he said.

But Justice Richard B. Sanders asked about how that would affect the Times.

"The public interest would require the Seattle Times to lose their shirt?" he asked.

Iglitzin said that the Times would have continued to maintain a profit if not for the strike, something that Times officials have disputed.

"You have to ask, if that's the case, why would the Times be needing to file the loss notice?" Coughlin said. "The Seattle Times' survival is also very much at stake in this. It shouldn't be legally mandated to subsidize a losing operation."

Losses at the paper have led to impending layoffs. Unionized workers at the Times have until Friday to volunteer for a severance package after they bargained with the newspaper to avoid involuntary layoffs as much as possible.

The newspaper plans to cut 90 to 110 workers in a bid to save money.

Chief Justice Gerry Alexander noted that Hearst Corp. could ensure that the P-I has access to a printing press, something Iglitzin acknowledged.

That's a point Times attorney Stephen Rummage seized on, saying that statements of the P-I's demise are misguided. He noted that if the Times prevails, the P-I will be put up for sale.

"Someone may want to buy it, and the P-I will then operate merrily along. The P-I will be alive and this will continue to be a two-newspaper town," he said.

He said even if the paper isn't bought, there are 12 months to consider renegotiating the agreement. An after-hours message left with New York-based Hearst was not returned Tuesday.

But Corr said The Times was using the strike as a pretext to get rid of the P-I.

He called it "disingenuous" to suggest "that the P-I could somehow survive this. It is not financially viable. It will not exist."

The justices are expected to rule within the next several months.