Currently, the two papers are bound by a joint operating agreement (JOA), which allows them to compete editorially while sharing business functions. Since The Stranger published a scoop that Blethen had told his staff he was seriously considering ending the JOA ["One-Paper Town?" Sandeep Kaushik, Oct 10, 2002], speculation has been rife in the newspaper world that the Times would formally provide Hearst with a "loss notice." Issuing such notification invokes a clause in the JOA that would lead to the termination of the agreement, and most likely the shuttering of the P-I as well.
The clause states that if either paper (in this case, the Times) suffers three consecutive years of losses, it can initiate negotiations over the closure of the other paper (the P-I). In return, Hearst would receive 32 percent of the Times' profits for the next 80 years. If negotiations fail, the agreement would end after 18 months, and the P-I would have to survive independently, building its noneditorial operations from scratch.
With the public revelation of Blethen's intentions, Hearst and the Times began talks aimed at saving the JOA late last year. In those talks, Blethen asked for the Times' share of joint JOA revenues to be boosted from 60 to 68 percent, Times freelancer Bill Richards reported on Monday; Hearst refused, leading to last weekend's developments.
The Hearst filing was made in King County Superior Court. Hearst asked the court to bar the Times from invoking the clause, arguing that the Times' losses were largely due to extraordinary circumstances--the newspaper strike that began in November 2000 and the 9/11 terrorist attacks--which Hearst claims fall under another clause of the agreement, called "force majeure," and so can not legitimately be used in calculating the Times' losses for the purposes of the JOA.
The clause states, "Neither party shall be liable to the other for any failure or delay in performance of this agreement for the purposes of this Agreement occasioned by war... public enemy... strike, labor dispute... or any other cause substantially beyond the control of the party required to perform." The Hearst filing claims Blethen described the strike as a "force majeure" event in a 2002 letter to Hearst.
The lawsuit asserts that both papers were profitable in 2000 until the strike put them the red. It blames the Times' 2001 losses on the 9/11 attacks, and argues Blethen acted unreasonably in 2002 by boosting expenses--including hiring more than 63 new staffers--in the midst of a faltering economy.
Times spokesperson Kerry Coughlin did not return several calls, but told the Associated Press that the force majeure clause does not apply to the loss notice provisions. During a Sunday-evening reception at a Newspaper Association of America convention downtown, a genial and relaxed-looking Blethen alluded to The Stranger's previous JOA reporting in declining to discuss the situation. "Oh, you're the fiction writer," he joked.
Over the weekend, a Times press release quoted Blethen saying he was not out to kill the Post-Intelligencer. "It is Hearst's strategy to kill the Seattle Times," he claimed.
P-I staffers scoffed at Blethen's assertion. "Frank is just being Frank," P-I reporter Neil Modie said. "He's saying Hearst is out to kill the Times as he attempts to pull the plug on the P-I."
In a prepared statement announcing the lawsuit, Hearst CEO Victor Ganzi said, "Our actions today are consistent with the company's long-stated goal to maintain two newspapers in Seattle publishing under a JOA that has been very successful for most of the past 20 years."
P-I staffers said they were elated that Hearst was suing. Roger Oglesby, the P-I's editor and publisher, came down to the newsroom Monday afternoon and read aloud Hearst's statement, but did not take questions from staffers. The statement was greeted with cheers, staffers said.