Court Rejects McCartheys' Effort to Buy Back Tribune

Court Rejects McCartheys' Effort to Buy Back Tribune

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SALT LAKE CITY (AP) -- Former owners of The Salt Lake Tribune were rebuffed Monday in their effort to buy back the newspaper after an appeals court affirmed the right of the Deseret News to block the McCarthey family from buying back the Tribune.

The three-judge panel of the 10th Circuit Court of Appeals ruled valid a stock restriction that gave the Deseret News a right to reject the McCartheys' bid to buy back the Tribune, said Kevin Baine, attorney for MediaNews Group Inc., which bought the Tribune in January 2001.

The appeals court left open the McCarthey family's claim that it has an ironclad right to regain Utah's largest newspaper. The panel said that question can be decided only in further litigation.

The decision doesn't prevent the McCartheys from suing to reverse the sale to MediaNews, claiming they had an option to buy back the paper when they sold it to John Malone's Telecommunications Inc. That option was disregarded by AT&T Corp. when it bought TCI.

At a November hearing in Denver, the appeals panel appeared to indicate the rights of the McCartheys were anything but clear, given the complicated relationship between the Tribune and the Deseret News, its joint-operating business partner and chief rival.

"That principle of good faith and fair dealing cannot trump legal principles, can it?" asked Judge David Ebel of Denver, who led the questioning of three sides in the dispute.

The appeals panel said U.S. District Court Judge Ted Stewart had jurisdiction when he decided in favor of the Deseret News' stock restriction.

The panel said Stewart was right to deny a preliminary injunction that would have kept the McCartheys in control of the paper until the case was finally decided.

The McCartheys had sued MediaNews and the Deseret News almost two years ago, hoping to block MediaNews' purchase, but Stewart ruled against them, saying the Deseret News had the right of consent.

After the November hearing, the McCartheys explained why they sold the paper: to give Telecommunications Inc., the cable TV company, back shares of super-voting stock, satisfy other Tribune shareholders and avoid a huge estate-tax bill. They had to give up ownership of the paper for five years to avoid taxes.

But lawyers for MediaNews and the Deseret News argued the McCartheys made a calculated gamble -- and lost control of the paper after a series of takeovers left it in the control of MediaNews, which refuses to give it up.

MediaNews owns The Denver Post and 49 other dailies and bought The Salt Lake Tribune to complete its Rocky Mountain news empire. The Tribune takeover was completed Aug. 1.

In November, Baine said the McCartheys took on "an option agreement that's full of risk" and got what they bargained for.

Debate in the case turned on an obscure point -- whether the McCartheys could get around the Deseret News' opposition by taking back the Tribune without its share of stock in the Newspaper Agency Corp., or NAC, which handles printing and business functions for both Salt Lake City papers.

The stock in the NAC is significant, because the lower court ruled the Desert News could block the move by refusing to allow a stock transfer in the NAC.

The case has been marked by arguments over dense corporate law, and confusion over the status of the Tribune was underscored when Ebel said he was "having trouble" understanding the complicated ties that bind both Salt Lake City papers.

(Copyright 2003 by The Associated Press. All Rights Reserved.)

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