Two Seattle Papers Taking Their JOA Dispute To Binding Arbitration

By: Mark Fitzgerald For months, the usually heated dispute over the fate of the Seattle joint operating agreement (JOA) between The Seattle Times Co. and Hearst Corporation, publisher of the Seattle Post-Intelligencer, has been strangely quiet.

Now we know why: In a surprise joint announcement Thursday, the two companies said they will submit the disputes in their lawsuits and counter-suits to binding arbitration with no possibility of appeal.

Depending on how he rules, the arbitrator, identified in a P-I Web story as retired King County (Wash.) Superior Court Judge Larry A. Jordan, could determine whether the JOA survives -- which the Times Co. maintains is bleeding its paper, The Seattle Times, to death -- or whether Times Co. has right to end the agreement, which Hearst says means the P-I will fold.

Hearst and Times Co. said the arbitration will be private, but the arbitrator's decision will be made public. "The parties expect a decision by late spring 2007," the statement said.

Under terms of the 23-year-old JOA, the Times gets 60% and Hearst 40% of revenues remaining after shared expenses related to producing and distributing the newspapers. Frank Blethen's family company controls the Times -- though 49.5% of the paper is owned by Knight Ridder Inc., which has sold its stake to The McClatchy Co. in their recent $6 billion mega-deal -- as well as the printing press, production equipment, and trucks used by the JOA.

Since the newspaper recession of early 2001, Blethen has complained that the expense of producing the P-I under the JOA is undermining the financial viability of his own paper and family company.

In April 2003, he formally notified Hearst that a JOA clause allowing the agreement to be dissolved -- or for the P-I to be folded -- had been triggered because the partnership had suffered three consecutive years of financial losses.

Hearst preemptively filed a lawsuit to block the triggering of the so-called "loss notices," and said that instead the losses should not be counted because they came under another clause of "force majeure," that is, events outside the control of the parties.

One year of losses included a bitter Newspaper Guild strike at the height of the Christmas advertising season. Hearst argued those losses in 2000 should not be counted, nor should losses during recession year of 2001 that included the aftermath of the 9/11 terror attacks.

Last June, the Washington Supreme Court ruled that the Times could claim the losses for 2000 and 2001.

Since the dispute started, the Times has maintained the JOA has had six consecutive losses.

In their statement Thursday the companies said they have "agreed that the arbitration will address the 2000-2002 and 2002-2004 loss notices filed by The Seattle Times, as well as a third notice covering 2003-2005, issued this week."

The arbitration, which is common in civil litigation, must be approved by the judge presiding over the lawsuits. A hearing on the matter is expected next week.

"Because this is the quickest way to resolve our differences, we endorse this approach," Blethen said in a statement. "Quicker resolution is by far the best option for the newspapers and for the employees of both The Times and the Seattle Post-Intelligencer."

"This approach is the best option for everyone concerned," P-I Editor and Publisher Roger Oglesby said in a statement. "This brings a measure of certainty to a situation that has generated a lot of confusion and anxiety for newspaper employees and readers for some time."