SALT LAKE PAPERS TO MEET IN SECOND COURT Deseret News asks state judge, jury to clarify rights under JOA with Tribune

NewsInc, April 23, 2001

A new front has opened in the battle of Salt Lake City as the Deseret News took its Salt Lake Tribune publishing partner to state court, seeking clarification of rights all parties enjoy under their joint operating agreement.

Deseret News Publishing Co., which owns the 65,900-circulation afternoon Deseret News, named Salt Lake Tribune Publishing Co. and Kearns-Tribune LLC in its suit. The 134,500-circulation morning Salt Lake Tribune now is owned by MediaNews Group of Denver.

The independent newsrooms rely on business, production and distribution services provided by the Newspaper Agency Corp. (NAC) under a JOA created in 1952. The JOA was renewed in 1982 and amended this year when MediaNews bought Kearns-Tribune LLC from AT&T Broadband for $200 million.

The MediaNews acquisition is being challenged in federal court by Tribune Publishing, which claims the right to operate the paper and regain ownership in 2003 under terms of the 1997 sale of Kearns-Tribune to Tele-Communications Inc., which was subsequently sold to AT&T.

U.S. District Judge Tena Campbell granted an injunction in March, saying MediaNews and Deseret News Publishing could not alter the JOA as they had when the deal was sealed in January, and restored Tribune Publishing executives to the agency's board. MediaNews' appeal of that ruling is pending before the 10th Circuit Court of Appeals in Denver.

MediaNews executive Joseph Zerby manages day-to-day operations of the agency. Each paper has two members on the agency board, with Tribune Publisher Dominic Welch as its chairman.

Deseret News Publishing filed its state court suit, says Publisher Jim Wall, to clarify just who controls the assets of Kearns-Tribune, and whether an option agreement signed by K-T and Tribune Publishing, under which Tribune Publishing could buy K-T's assets, is valid under terms of the JOA.

Wall says the state suit was necessary because Tribune Publishing had filed an amendment to its federal court suit against MediaNews and AT&T, asking that court to rule on provisions of the JOA. "The way we read the federal complaint," Wall says, "they're seeking to get resolution that they don't need our approval" to transfer the assets.

The company turned to a Utah court because Tribune Publishing was asking a federal court "to rule on some of our rights," Wall says. "Because we were not a party to it, we felt the need to file a suit."

In its brief, Deseret News Publishing cites language in the JOA forbidding transfer of either party's stock in the agency corporation during the life of the JOA. It also cites a 1997 legal opinion from a K-T attorney to TCI stating that if Tribune Publishing were to exercise its option, the transfer of its shares in the agency "will require the consent of Deseret Publishing."

Says Wall: "We're in court to protect that as the most specific issue: You just have to honor agreements."

Welch, who was removed from his post as agency chairman by MediaNews when it acquired the paper but then was returned to that post by the federal court injunction now on appeal, dismisses the state suit.

"I can't tell you how silly these charges are," he says, adding that a number of issues raised in the new suit should have been addressed at the agency level, but never were.

"The suit is to get that veto power of the NAC" to prevent Tribune Publishing from exercising its option to buy the paper in 2003, Welch says. While he does not contest that MediaNews owns K-T, he does contend "we have an option and interest" to be exercised in 2003.

He also contests the suit's allegations that the agency and K-T gave News Publishing "stiff and unjustified resistance" to its 1997 plan to convert the Deseret News to morning circulation.

Welch contends that under the JOA, News Publishing must pay the cost of converting, which would include purchase of additional presses and a reconfiguration of how the papers are distributed, but that the company balked at his efforts to assess the costs and reach an agreement.

The suit also claims Tribune Publishing "abused its control over the NAC" in its use of agency personnel and assets, to which Welch responds, "We will show that that is sheer foolishness." He dismisses allegations that the agency was overcharged on rent in the Tribune building, and that at times its employees were committed only to serving Tribune Publishing.

Welch is especially scornful of the suit's venue, in Davis County, which News Publishing has said it chose in order to provide a balanced jury pool.

"It's obvious to me that this is forum shopping," he says, charging that News Publishing didn't like its chances in federal court and then deliberately picked a county with an "overwhelming" population of members of the Church of Jesus Christ of Latter-day Saints, which owns the Deseret News.

-- P.W.