The legal battle for control of the Salt Lake Tribune — a case that has been a fixture in Utah's federal courthouse since December 2000 — returns to the 10th U.S. Circuit Court of Appeals in Denver today.
The appeals court will review the three-part appraisal process that set at $355.5 million the amount former owners of the paper would have to pay to exercise a 1997 option to buy the paper back. The price was upheld this past fall by U.S. District Judge Ted Stewart.
Arguing the price was at least $100 million too high, Salt Lake Tribune Publishing Co. (SLTPC) declined to meet the Oct. 10, 2003, closing deadline and chose instead to take the debate to the federal appeals court.
The 10th Circuit will hear arguments today but has no set time limit in which to make a ruling.
Philip McCarthey, SLTPC chairman, remains as certain as he was a year ago that his side will prevail on appeal.
"We are obviously very confident that the 10th Circuit isn't going to uphold somebody coming up here and trying to steal $150 million from this community," McCarthey said last week. "And that's what this is all about."
Tribune owner MediaNews Group Inc. believes the ultimate question on appeal is whether there are sufficient legal grounds to overturn the appraisal.
"This is a straightforward appeal from a district court decision declining to upset an appraisal that the parties had agreed in advance would be 'final, binding and conclusive,' " MediaNews attorneys wrote in their brief to the 10th Circuit.
"Although appellant Salt Lake Tribune Publishing Company (SLTPC) seeks to confuse the issue with rhetoric like 'hostile takeover,' 'hijacking' and conspiracies to 'silence the editorial voice' of the Salt Lake Tribune, those charges are as irrelevant to this appeal as they are baseless."
Denver-based MediaNews took over editorial control of the Tribune in July 2002. Although the ownership has been mired in legal matters, CEO William Dean Singleton said the experience has so far been a good one.
"The Tribune is an outstanding newspaper in an outstanding market that I've really liked for 20 years," Singleton said. "It's one of our prize newspapers."
To succeed on appeal, SLTPC must convince the three-judge panel in Denver that Stewart made a mistake when he refused to overturn the final appraisal in the three-part process. The disputed $331 million valuation was the final appraisal, and, when averaged with a prior $380 million assessment, resulted in the $355.5 million price tag.
An appraisal firm hired by SLTPC set the Tribune's value at $218 million. The $380 million figure came from MediaNews' firm.
Stewart determined the final appraisal, conducted by New Jersey-based Management Planning Inc., was an arbitration governed by the Federal Arbitration Act, which prevented him from overturning the award absent specific and egregious circumstances.
In court papers, SLTPC maintains the appraisal process was not an arbitration, and, even if it had been, should be overturned because of Management Planning's "inexplicable failures" to follow industry standards in reaching its final value. SLTPC also argues Management Planning failed to follow the express terms of the option agreement in determining the newspaper's fair market value.
The 1997 option agreement was born out of a $731 million stock swap between the historic owners of the Salt Lake Tribune and Telecommunications Inc. (TCI). Members of the Kearns-McCarthey family — motivated by what they call "business and estate-planning considerations" and what MediaNews terms "tax avoidance" — ceded ownership of the Tribune to TCI for a period of five years. SLTPC was created to manage the newspaper under a five-year management agreement. The option to buy could be exercised at the end of that five years. The deal, according to MediaNews' court filings, allowed the Kearns-McCarthey family to avoid $150 million in taxes. In the interim, however, TCI merged with AT&T. The telecommunication giant was not interested in owning a newspaper and in January 2001 sold the Tribune to MediaNews for $200 million.
SLTPC attempted to block that sale by filing suit in federal court, and the matter has been in litigation since. The Deseret Morning News, the Tribune's business partner in a 50-year-old joint operating agreement, has been involved in the case but is not involved in the appeal because it was not part of the option agreement.
In addition to arguing that the final appraisal should be vacated, SLTPC will argue Monday that it is entitled to an entire new round of appraisals because too much time has passed since the first ones were conducted.
MediaNews has balked at the idea, stating that SLTPC is the reason so much time has passed.
E-mail: awelling@desnews.com