By Renee Schafer Horton with Mark Fitzgerald
Published: May 18, 2009 8:40 PM ET
CHICAGO The Tucson Citizen was losing $10,000 a day before it was folded last weekend -- money that would be better spent making a "vibrant" Arizona Daily Star, lawyers for Gannett Co. and Lee Enterprises Inc. argued before a federal judge Monday.
Arizona's Office of the Attorney General is asking for a temporary restraining order that would force the chains to operate the Citizen as a print publication or find a buyer who would keep it publishing.
U.S. District Court Judge Raner C. Collins sitting in Tucson said he would rule on the state's motion Tuesday (May 19th) before 2 p.m. local time.
In the hearing Monday, Nancy M. Bonnell, a lawyer for the attorney general's office, argued that by folding the Citizen, but continuing its business partnership with Lee Enterprises, publisher of the Star, Gannett "wants to have its cake and eat it, too."
Gannett and Lee Enterprises operated their papers under a joint operating agreement (JOA) first established in 1940, nearly three decades before the Newspaper Preservation Act was law. When Gannett announced the folding of the print Citizen -- and its replacement by a "modified" online-only operation with little news coverage -- it said it was terminating the JOA but continuing as a partner with Lee in Tucson.
"We understand that a temporary restraining order is an extraordinary remedy," Bonnell told the judge, adding that it was necessary because of the "harm to competition" of having no print Citizen.
The Citizen Web site -- which will rely heavily on blogs and has just two permanent editorial employees from the former newspaper staff of 60 -- does not provide true competition, Bonnell said.
But Don Kaplan, a lawyer representing Lee Enterprises, argued that the Citizen was a "failing paper" that cost the partnership more than it earned. He said the paper was losing $10,000 a day as a print publication. There is a "greater good" in getting rid of a paper that is failing in order to save the more "vibrant" remaining paper, Kaplan said.
Bonnell responded that the Citizen was not a failing paper because there was someone willing to buy it, California publisher Stephen Hadland, whose bid for the paper was rejected. Gannett had been seeking $1 million for the assets of the Citizen, not including its stake in the JOA. Hadland offered $400,000.
"The fact of the matter is, there is no obligation to sell at any price," Kaplan said.
Kaplan and Gordon L. Lang, representing Gannett, also made the argument that their Tucson partnership has always been "one entity," and that therefore there are no competitive issues. They noted that each pays half of the editorial cost of the other's newspaper.
It also emerged at Monday's hearing that the Arizona attorney general's office, the antitrust division of the U.S. Justice Department and the two chains had an understanding that the newspapers would give the Justice Department three day's notice before folding the Citizen. Gannett had announced a May 1 deadline to sell or close the paper, but delayed it on a day-to-day basis while negotiating its sale.
The reason the Arizona authorities filed for its temporary restraining order just hours before the last edition hit the streets Saturday morning -- and minutes before the federal court was closing Friday evening -- was that the state did not get any word of the closing from the Justice Department, Bonnell said. The state attorney general had prepared a lawsuit to block the paper's closing.
Also Monday, the staffing of the Citizen Web site was settled. It will have six temporary employees as it transitions from print, and two permanent employees: former assistant managing editor Mark Evans and Ryn Gargulinski, a general assignment reporter at the newspaper.