Sale of the Salt Lake Tribune - Read Deseret News archive stories and see related links about the sale of the Tribune.
Managers of the Salt Lake Tribune argued Tuesday that AT&T Broadband used rights to the newspaper it didn't legally own as "currency" in an agreement with the Deseret News.
The allegations came in final arguments before U.S. District Judge Tena Campbell, who is presiding over a hearing on the Salt Lake Tribune Publishing Co.'s motion for a preliminary injunction to halt AT&T's sale of the newspaper to Denver-based MediaNews Group.
Campbell was to hear from AT&T and MediaNews attorneys late Tuesday and rule on the motion possibly this week.
The publishing company, which manages the Tribune, contends the sale violates an option agreement that would allow the newspaper's former owners to buy the newspaper after July 2002. They sold the newspaper to Tele-Communi-cations Inc. in a tax-free stock swap in 1997 valued at more than $700 million. AT&T acquired TCI and the Tribune last year.
James Lowrie, attorney for the Tribune managers, said that under that agreement and a joint operating agreement the newspaper has with the Deseret News, only his clients can negotiate the particulars of shared presses, advertising and circulation.
"(These agreements) do not permit (AT&T) to use our rights. . . as currency with the Deseret News to get the Deseret News to go away," Lowrie said.
In recent years the Deseret News has become increasingly concerned over what it says is the domination of the equal partnership in the JOA by the Tribune and its unwillingness to support the Deseret News' conversion to morning publication. The Deseret News has threatened to sue to resolve its differences with the Tribune.
Campbell repeatedly interrupted Lowrie's closing remarks, questioning him on how his arguments related to the injunction.
"They (AT&T) haven't yet denied you (Tribune managers) the option (to buy), right? That's premature. And there has been no interference in your management rights. So tell me how that fits in. I'm not understanding," Campbell said.
Lowrie answered that AT&T asked MediaNews President Dean Singleton to "reach a deal with the Deseret News" over the disputes in the JOA.
At Singleton's request, the Deseret News did provide him with the conditions it would request a new owner to fulfill.
But Lowrie claims only the Tribune managers can negotiate the terms of the JOA.
"(Singleton) sits and tells you he's not going to tamper with the managers' rights, and then he tells you how he's going to do it," Lowrie said.
During a court recess, Singleton explained that the information he exchanged with the Deseret News was in the context of a "letter of understanding," not a contract, and that the proposals the Deseret News is suggesting are reasonable and common in most JOAs across the country.
"In other places, these kinds of things are business as usual," he said.
JOAs allow newspapers to combine printing, circulation and advertising costs and share profits in order to preserve their editorial voices in a community. The JOA between the Tribune and Deseret News began in 1952.
In his final argument, Lowrie reminded the judge of Monday's testimony from Tribune General Manager Randy Frisch and AT&T attorney Steven Garfinkle.
They gave contradictory accounts of the breakdown of negotiations between AT&T and the publishing company — a breakdown that precipitated the newspaper's eventual sale to MediaNews.
Frisch testified that on Friday, Nov. 17, he had three phone conversations with AT&T executives. He said they discussed the sale price ($180 million), financing of the deal, lingering disputes about a joint operating agreement the Tribune shares with the Deseret News, and questions about indemnification — legal protection if the Deseret News were to pursue disputes with the Tribune in court.
But Frisch said Garfinkle assured him they "were down to nits."
"(Garfinkle) told me there was no need to worry," Frisch testified. "The deal would be closed by the end of the year."
But Garfinkle denied Frisch's assertions that the sale was nearly final.
He said AT&T was concerned that Wells Fargo Bank, the lending institution designated in the sale, was not fully aware of problems the Tribune was having with the Deseret News.
Garfinkle said that while the Tribune managers were reassuring him the disputes over the Deseret News' desire to switch to morning publication were being resolved, the Deseret News said the talks had stalled.
And, Garfinkle added, AT&T and the Tribune managers were at least $17 million apart on the question of indemnification.
"It just seemed we weren't going to get any more favorable terms from the Salt Lake Tribune Publishing Company," Garfinkle said, adding that is when the deal with MediaNews looked more appealing.
MediaNews President Dean Singleton was also called as a witness during Monday's hearing. He told the court AT&T asked him to include "basically two things" in the purchase agreement: not to sell the newspaper to the management group or to the LDS Church before the option agreement period ran out in the summer of 2002.
Singleton said AT&T was concerned that selling to the management group before then might trigger "tax obligations involving (a 1997) merger (between Tele-communications Inc. and the newspaper's original owners)."
To the question of selling to the LDS Church, Singleton said he "could commit to that for eternity . . . because we had no intentions of selling (the Tribune) to the Deseret News."
Singleton said AT&T Executive Vice President Michael Huseby briefed him on the disputes between the two newspapers over the joint operating agreement before discussing the purchase of the Tribune. The Deseret News contends Tribune Publisher Dominic A. Welch, who is also president of the Newspaper Agency Corp., which manages the joint operating agreement, has blocked the News' plans to switch to morning circulation.
Singleton said he knew about the option agreement between the Tribune managers and TCI long before that conversation with Huseby because MediaNews had an interest in buying the Tribune in 1997, before AT&T acquired the newspaper.
Lawyers for the Tribune managers asked Singleton during the deposition — and again in court — whether Singleton, at that time, had "developed an opinion as to the validity of the option agreement."
Singleton answered he had no reason to believe the agreement was not valid but "that somebody, when they wrote it, had failed to address appropriately the role of the Deseret News in approving the exercise of the option."
Singleton said his understanding of the joint operating agreement is that no option to buy or sell can be exercised without the approval of the JOA partner, the Deseret News.
An opinion by the Tribune's attorney at the time of the TCI merger acknowledged that any future sale of the Tribune's NAC shares would "require the consent of Deseret News Publishing."
E-MAIL: mtitze@desnews.com