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Newspaper Attorneys File Motion to Dismiss Suit
Posted Thursday, July 26, 2007 ; 06:00 AM | View Comments | Post Comment
Updated Wednesday, July 25, 2007; 04:18 PM

Lawyers for Daily Gazette Co., MediaNews Group say complaint is 'based on obsolete theory.'

Story by Beth Gorczyca Ryan
Email | Bio | Other Stories by Beth Gorczyca Ryan

CHARLESTON -- The legal battle between the U.S. Department of Justice and the owners of The Charleston Gazette and the Charleston Daily Mail is heating up.

Attorneys representing the Daily Gazette Co. and MediaNews Group Inc. filed a motion July 23 asking U.S. District Judge John T. Copenhaver Jr. to dismiss the antitrust lawsuit filed in May. The newspapers said the suit should be dismissed because the Justice Department's complaint is "based on an obsolete theory of how the antitrust laws apply to economically integrated joint ventures" and "rests on the mistaken notion that commercial competition exists within a JOA, when in fact the only remaining competition is editorial competition -- competition in 'thoughts and ideas.'"

In addition, the newspapers' lawyers allege the antitrust suit will end up hurting the two newspapers instead of preserving them. Specifically, the lawyers said the cost of defending the newspapers against the lawsuit might undermine the financial stability of the joint operating agreement, or JOA, the Gazette and Daily Mail have been working under for nearly 50 years. A JOA is an exception to antitrust laws that allows competing newspapers to share advertising, circulation, printing and distributing costs, while also sharing profits.

"In this lawsuit, the Justice Department declares that it has set out to rescue the Mail, but its misguided attempt is more likely to destroy the Mail than save it," the newspapers' lawyers wrote in a 50-page support document backing up their motion to dismiss.

The Justice Department filed the antitrust lawsuit May 22, a little more than three years after the Daily Gazette Co., which owns The Charleston Gazette, purchased its capital city rival, the Charleston Daily Mail, from Denver-based MediaNews Group.

The suit alleged the Daily Gazette Co. bought the Daily Mail in May 2004 with the intention of shutting it down and creating a newspaper monopoly in Kanawha County. The Justice Department said the Daily Gazette Co. suspended those actions in December 2004 but only after the company learned the federal agency had launched an investigation into the newspaper company's maneuvers.

The Justice Department contends the $55 million sale was illegal, and its suit asks the court to rescind it and restore the Daily Mail to its previous competitiveness.

The Justice Department has asked Copenhaver to give them until Aug. 31 to file their response to the newspaper's motion. Currently, the government has until Aug. 6 to file the response.

Lawyers for the newspapers allege the DOJ's suit is flawed on many levels. They said DOJ's accusation that the sale impedes competition in Kanawha County is impossible because the two newspapers have been sharing expenses and profits since the JOA was formed in 1958.

"For this reason alone, the 2004 transaction cannot possibly have eliminated or reduced competition between the two newspapers, because such competition had long been nonexistent," according to the motion. "The complaint alleges a legal and factual impossibility -- a conspiracy between, and the elimination of competition between, partners in a fully integrated joint venture."

The newspapers' lawyers continued by saying a recent ruling by the U.S. Supreme Court in an antitrust case relating to gasoline negates the Justice Department's claim that the sale stripped the newspapers of their antitrust immunity. In that case known as Texaco Inc. v. Dagher, the High Court ruled antitrust laws did not require two different types of gasoline produced by the same joint venture to compete against each other.

"Charleston Newspapers, as well, sells two different brands formerly owned by the joint venture partners -- the Gazette and the Mail -- and under Dagher, these brands, too, do not and need not compete under antitrust laws," the motion read.

To top off the challenges, lawyers said the only way for a court to decide the case would be to evaluate "the content and quality of constitutionally protected expression" of the two newspapers.

"No case like this one has ever been brought, and for good reason. ... Never before has the Justice Department sued the newspapers in an ongoing (joint operating agreement), and never before has the Justice Department contended that newspapers in a JOA have forfeited the antitrust immunity conferred on them by Congress in the Newspaper Preservation Act," according to the newspaper's dismissal motion.

However, the Justice Department said in the May lawsuit that specific actions by the Gazette following the 2004 transaction showed it was trying to shut down its rival. Those actions included stopping a separate Saturday edition, allowing the number of reporters to sharply decline and halting all marketing of the newspaper.

"The May 2004 transaction invalidated any claim by Charleston Newspapers to antitrust immunity under the NPA because they were part of a plan to terminate publication of the Charleston Daily Mail, leaving only one daily newspaper in the Charleston area," the lawsuit read.

Attorneys for the newspapers, however, said the DOJ's contention is simply not true. They said the Daily Gazette Co. and MediaNews specifically outlined how the editorial coverage would remain separate in the amended JOA following the 2004 sale.

"Preservation of the editorial independence of the newspapers is the essence of this JOA. (Gazette Company) and (MediaNews) each agree ... to retain the editorial independence of Gazette and Gazette-Mail on the one hand, and Mail, on the other hand," according to excerpts of the JOA included in the newspapers' response. "(MediaNews) agrees that neither it nor any affiliate shall have any connection with the news or editorial operations of Gazette or Gazette-Mail. The separate editorial and reportorial staffs of Gazette and Gazette Mail, on the other hand, shall be independent and shall not be merged, combined or amalgamated, and their editorial policies shall be independently determined."

The newspapers' attorneys also pointed out that since the JOA was entered into nearly 50 years ago, all commercial, non-editorial functions of both newspapers have been handled by Charleston Newspapers, not the specific owner companies. As a result, the business end of the Daily Mail was not changed or altered because of the sale despite what the Justice Department alleges.

"In short, the complaint's fundamental allegation is that the 2004 Transaction left the Mail as a weakened editorial voice in Charleston. As the Court and any newspaper reader in Charleston know, however, both newspapers continue to be published today, with distinctive voices, content, and editorial policies. Indeed, subsequent to the 2004 Transaction, the Mail, in the opinion of its peers, has been the best newspaper of its size in the state of West Virginia," according to the motion to dismiss.

Copyright 2010 West Virginia Media. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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