By LACIE PIERSON
Charleston Gazette-Mail
CHARLESTON, W.Va. — An arbitrator has ruled that the owners of the Charleston Gazette-Mail must pay about $3.8 million to the former owners of the Charleston Daily Mail.
Of the amount awarded, $1.5 million is from the Gazette-Mail owners’ sale of the dailymail.com internet address to another newspaper, the London-based Daily Mail. The Charleston Daily Mail’s former owners — MediaNews Group Inc. and Charleston Publishing Company — argued that the web address belonged to them, and arbitrator Edward McDevitt agreed.
Also, $495,000 is owed to the Daily Mail’s former owners in past-due management fees. Under a previous agreement between the Charleston Gazette’s and Charleston Daily Mail’s owners, the Daily Gazette Co. was to pay $225,000 a year in management fees to MediaNews for operation of the Charleston Daily Mail newsroom. The arbitrator also awarded the Daily Mail’s previous owners $1.8 million in future management fees — originally scheduled through 2024 — that were canceled when the Gazette and Daily Mail combined in July 2015.
“Obviously, we are disappointed in Ed McDevitt’s decision and feel he got it wrong,” said Trip Shumate, Charleston Newspapers president and chief financial officer. “The company is currently evaluating its options on how to go forward with this decision. The way the arbitration clause is written, we can appeal this decision to the U.S. District Court.”
In 2004, the Charleston Gazette’s owners purchased most of MediaNews’ interest in the Charleston Daily Mail. MediaNews had reached an agreement to sell the Daily Mail to Ogden Newspapers, according to the decision, but the Gazette’s owners had the right of first refusal under the newspapers’ joint operating agreement. Under that agreement, the Gazette and Daily Mail maintained separate newsrooms but shared non-news functions like advertising and delivery.
After the 2004 sale, the Daily Mail maintained an editorially separate newsroom, and MediaNews was paid a $200,000 annual management fee to oversee it.
The U.S. Department of Justice sued over the 2004 sale, alleging it violated antitrust law. The parties reached a settlement in 2010 that, among other things, increased MediaNews’ management fee to $225,000 per year.
In July 2015, the Gazette’s owners announced they were combining the Gazette and Daily Mail into one newspaper, the Charleston Gazette-Mail, starting with the next day’s edition.
In his decision, McDevitt said he was “extremely sympathetic” to the Gazette-Mail’s owners and their positions. But he said those positions “are not legally sufficient to defeat the claims of the Claimants.”
“Regarding the management fees, it became impossible to operate two newspapers in this market through 2024…” Shumate said. “We acknowledged owing the management fee from May 2013 through July 2015, approximately $495,000.”
Shumate said the sale of dailymail.com had been examined by several legal experts before the transaction, and it was determined at the time that it was permissible under the contract and the law.
“The U.S. Department of Justice approved the sale without consent from [MediaNews],” he said.
The Daily Mail’s former owners were represented during the arbitration by Steven Douse of King and Ballow, a Nashville law firm. The Gazette-Mail’s owners were represented by Charleston lawyer Richard Neely.
Reach Lacie Pierson at [email protected], 304-348-1723 or follow @LaciePierson on Twitter.
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