The Deseret News filed a lawsuit in state court Monday against the holding and publishing companies of the Salt Lake Tribune, alleging the Tribune has tried to "stifle competition" between the two papers by delaying the Deseret News' move to morning publication.
The complaint, filed in 2nd District Court in Davis County, asks for a jury to determine the contractual "rights and obligations" of all three entities — the Deseret News Publishing Co., Kearns-Tribune, and the Salt Lake Tribune Publishing Co.
"We have a joint operating agreement that provides all parties to that agreement with certain rights," said Deseret News publisher Jim Wall. "And that's what this case is about. The honoring of those rights."
The suit specifically seeks validation of the Deseret News' claim that it must consent to any sale of the Tribune and its accompanying half of the Newspaper Agency Corp.
Printing, advertising and distribution for the Deseret News and the Salt Lake Tribune are handled by the NAC, the company created by the JOA.
Although the NAC is owned equally by both newspapers, its president, Dominic Welch, is also the publisher of the Salt Lake Tribune.
Welch told the Deseret News he was "appalled" by the filing. "I was hoping we could resolve this without getting to this point," he said. "But I guess these are the issues that have to be resolved."
The suit alleges that the publishing company has abused its "control over the NAC for its own benefit" and "caused the NAC to engage in discriminatory practices designed to favor the Salt Lake Tribune and damage the Deseret News."
The Deseret News claims the Tribune has breached the JOA by:
Using NAC personnel and assets without payment or reimbursement
Collecting inflated or unfair rent from the NAC for use of leased space
Collecting "unreasonable and unwarranted" monetary assessments against the Deseret News
Engaging in billing and revenue allocation practices that "unjustly enrich" the Tribune and "injure" the Deseret News.
The suit also alleges the Tribune has obstructed the Deseret News' efforts to publish a morning newspaper. From the beginning, the "decision to publish a morning edition met stiff and unjustified resistance," the suit states.
Tribune managers "inaccurately asserted" that the NAC's current printing facility could not produce two morning papers, overestimated the cost of the simultaneous printing and insisted that the Deseret News would have to bear the inflated expense, according to the complaint.
"On repeated occasions, Mr. Welch has stated to (Deseret News) managers that 'ultimately there will be only one newspaper, and it won't be the Deseret News.' "
Welch said Monday morning that statement was "a total lie." What he predicted was that neither newspaper would survive in the traditional format.
"Perhaps you could have two newspapers on the Internet," he said. "That's happening all over America."
Although the suit states that the Deseret News has "suffered economic harm" as a result of the Tribune's "wrongful actions," Wall said the company is making "no claim for monetary damages at this time."
"We're only seeking declaratory and injunctive relief," he said, an adjudication of the contractual rights of all the parties involved in the JOA.
The lawsuit was filed after a unanimous vote of the Deseret News board of directors. Wall said it was filed in Davis County, because the population there reflected a nearly 50-50 split of readership between both newspapers.
"We wanted neutral forum for a jury pool," he said.
Wall said the Tribune has a larger circulation than the Deseret News in Salt Lake County and the Deseret News has the higher circulation in Utah County.
The suit was filed in state court, even though all of the recent legal activity surrounding the Tribune has taken place in federal court.
Managers of the Tribune tried to block the sale of Kearns-Tribune by AT&T Corp. to Denver-based MediaNews Group in December, but U.S. District Judge Tena Campbell denied their request for a preliminary injunction.
The sale, finalized Jan. 2, was followed by several changes to the NAC board. MediaNews President Dean Singleton replaced Welch and chief operating officer Randy Frisch with MediaNews representatives.
On Feb. 21, Campbell ruled those changes were improper and Welch and Frisch returned to the board.
But Singleton immediately appealed that decision to the 10th Circuit Court of Appeals in Denver, where the case is still pending.
Since Monday's suit involves two Utah parties, its proper venue, Wall said, is state court.
Both this suit and the Tribune's lawsuit against MediaNews focus on two documents written in 1997 when the original owners of Tribune agreed to a $731 million tax-free stock swap with Tele-Communications Inc.
AT&T acquired the Tribune when it merged with TCI in 1999.
The Tribune managers claim a "management agreement" gives them the right to manage the day-to-day operations of the newspaper, despite the fact that Kearns-Tribune is now owned by MediaNews.
The managers also claim an "option agreement" protects their rights to purchase the newspaper back in the summer of 2002.
In its suit, the Deseret News is asking for a declaration that the option agreement is unenforceable, reasserting its long-held belief that, under the JOA, the Deseret News has to consent to any sale of the Tribune and its half of the NAC.
Before it began negotiating to buy the Tribune, MediaNews sought and received Deseret News permission in accordance with the JOA requirement.
E-MAIL: mtitze@desnews.com