CHARLESTON, W.Va. — Charleston Newspapers and the former owner of The Charleston Daily Mail have continued to argue in federal court filings over whether the newspaper has to pay a $3.8 million arbitration judgement.
The lawyer for the Charleston Gazette-Mail, former state Supreme Court Justice Richard Neely, wants the arbitration ruling to be vacated.
Attorneys for MediaNews, the former Daily Mail owner now doing business as Digital First Media, want it to be enforced.
The situation began Sept. 5 when lawyers for MediaNews filed a motion in U.S. District Court, asking for the arbitrator’s ruling to be enforced.
The conflict — and the arbitrator’s ruling — are over the combination of Charleston’s two daily newspapers in summer 2015 and the sale of www.dailymail.com.
MediaNews says it did not consent to the combination and is entitled to backpayments plus payments of an annual management fee until the year 2024. It also claims the dailymail.com was its intellectual property that was sold without its consent.
In early September, arbitrator Edd McDevitt of Charleston ruled in MediaNews’ favor.
In a motion to vacate filed Sept. 21 in federal court, the local newspaper said the domain name sale and the combination of two newspapers were a financial necessity — that default on its loan with United Bank was at hand and that bankruptcy would have been necessary if two newspapers had continued operating into the next year.
That document contends that any other actions would have been impossible, given the economic environment for West Virginia and for newspapers.
The two companies have a long history of cooperation and conflict.
Until 2004, MediaNews Group had a 50-50 financial split with the owners of the Charleston Gazette, maintaining the combined advertising and circulation units that were established decades earlier — but maintaining separate Gazette and Daily Mail newsrooms.
That year, MediaNews received an offer from Wheeling-based Ogden newspapers to sell the Daily Mail. The Gazette had right of first refusal and took it, buying MediaNews’ share of the business for $55 million.
The continued publication of the Daily Mail wound up in federal court under antitrust law. The agreement that was hatched called for the continued publication of the Daily Mail, with MediaNews receiving an annual management fee but still having no ownership stake.
The most recent arbitration ruling has prompted a flurry of arguments and counterarguments over the past month.
MediaNews — represented by local attorneys from Kay Casto & Chaney — first filed a response to the Charleston Newspapers’ motion to vacate the arbitration ruling.
And then Charleston Newspapers filed a response to that.
And then MediaNews filed a response to the Charleston Newspapers response.
The first MediaNews response, filed Oct. 6, contends Charleston Newspapers has a heavy burden to prove the arbitration ruling should be vacated. It argues that many of Charleston Newspapers’ problems could have been foreseen or were self-inflicted.
“Here, the alleged impossibility of continuing to publish both newspapers was caused by respondents’ own conduct and was within respondents’ control,” wrote the lawyers for MediaNews.
“They voluntarily chose to close the Daily Mail. In short, respondents created the inability to perform; therefore, they cannot now use it as an excuse for nonperformance.”
Charleston Newspapers responded Oct. 15, likening the agreements it entered into with MediaNews to marriage, with the couples not thinking through what “marriage” truly means.
The response goes on to argue that sometimes the parties to a contract need flexibility to deal with situations they never foresaw arising.
Neely again wrote that Charleston Newspapers had no choice but to stop separate publication of the Daily Mail.
“The evidence presented in this case overwhelmingly stood for the proposition that the respondents would have gone bankrupt if they had continued to publish the Daily Mail as a separate newspaper. The arbitrator’s award essentially admits this fact, and there is no finding to the contrary,” Neely wrote.
He contended the arbitrator was unwilling, though, to give credence to the evidence — “a clear legal error.”
Neely wrote, as he had before, that the sale of the URL was necessary to keep the newspaper afloat.
“The Arbitrator has made a great moment of the fact that at the time of the sale of the URL, United Bank had not declared a default,” Neely wrote.
“But the evidence clearly shows that Daily Gazette Co. was in default: Since when is it necessary for the Bank to ‘declare’ a default when the bank and the customer are working either to cure the default or renegotiate terms. The truth of the matter is that Daily Gazette Co. was in default at the time they needed to sell the Daily Mail URL in order to prevent the bank from formally declaring a default.”
Neely asked the federal judge to require MediaNews to provide a full transcript of the arbitration proceedings, to set the matter for full oral argument and to vacate the award.
Last Monday, lawyers for MediaNews filed yet another response, taking issue with Charleston Newspapers’ first succeeding in circuit court to send the case to arbitration and then wanting to have the arbitration ruling voided.
“Despite having successfully caused a dismissal of a state court action on the basis of an enforceable arbitration agreement and participating in the arbitration itself, respondents now argue that the arbitration agreement should be declared ‘defective and thus unenforceable,'” MediaNews’ lawyers wrote.
They went on to write, “As respondents succeeded in their motion to compel arbitration, they are judicially estopped to now argue that the arbitration agreement is unenforceable.”
The MediaNews lawyers contended the Charleston Newspapers argument simply repackaged the newspaper’s own earlier argument without actually addressing the specific points that MediaNews had made earlier.
MediaNews’ lawyers again asked the federal judge to confirm the arbitration award and grant judgement.
Judge Thomas Johnston has been assigned to the case in federal court.
NOTE: The writer of this story was the Daily Mail’s editor and then co-editor of The Charleston Gazette-Mail during the first year of the newspaper combination.