UPDATE: Putnam judge sides with Gazette-Mail over AG subpoena

By Chris Dickerson | Nov 5, 2015

WINFIELD – A Putnam County judge says the Charleston Gazette-Mail does not have to turn over information regarding this summer’s merger of two daily newspaper to the state Attorney General’s office. Circuit Judge Phillip Stowers on Nov. 4 said probable cause was needed before the Daily Gazette Co. possibly would be forced to hand over the information about July’s merger of the Charleston Gazette and Charleston Daily Mail. Attorney General Patrick Morrisey’s office filed a petition Aug. 13, say

WINFIELD – A Putnam County judge says the Charleston Gazette-Mail does not have to turn over information regarding this summer’s merger of two daily newspaper to the state Attorney General’s office.

Circuit Judge Phillip Stowers on Nov. 4 said probable cause was needed before the Daily Gazette Co. possibly would be forced to hand over the information about July’s merger of the Charleston Gazette and Charleston Daily Mail.

"The judge did a superb job," said Richard Neely, the attorney for the Daily Gazette Co. "He had really read everything, and there were a lot of filings. 

"He held against us to disqualify the AG. But, he went through all of the elements that would be necessary to show probable cause. He emphasized that the Daily Gazette Co. owned both papers to begin with. And, as we all know, it's black-letter law that you can’t conspire with yourself."

Neely, a former state Supreme Court justice who now is a partner in the Charleston firm of Neely & Callaghan, said Stowers stressed that the Daily Mail had been published as an independent paper only because of the Justice Department dissent decree in 2010.

"When that decree expired, there is no reason to believe there is any violation," Neely said. "And, of course, the Gazette-Mail’s position was that the attorney general brought this frivolous action simply to punish the Gazette-Mail for having revealed various nefarious dealings that he had in a number of areas, beginning with a drug company and, more recently, hiring a political hack at the expense of someone in his office's consumer protection division."

A spokesman for Attorney General Patrick Morrisey said the office is working to decide what to do next in the matter.

“We believe our arguments are straightforward," Morrisey press secretary Curtis Johnson said. "We are disappointed that the judge reversed his earlier finding that we had demonstrated probable cause that the subpoena was proper.  We are now evaluating our next steps.”

The AG's office filed a petition Aug. 13, saying it had probable cause to believe July’s merger of the Charleston Gazette and the Charleston Daily Mail newspapers may violate the West Virginia Antitrust Act.

“The Attorney General is informed and believes the Gazette Company and/or Gazette-Mail possesses information relevant to the inquiry,” the petition stated. “Obviously, the operators of the two former newspapers conspired … merging the operations of the daily newspapers into one.”

In its petition, the AG's office said it began investigating the merger on July 19, the day it was announced. Two days later, the office issued a subpoena to the Daily Gazette Company directing it to answer interrogatories and produce documents and information specified to the AG’s office by July 31.

Morrisey’s office claimed the probable cause is that the apparent merger violated the Antitrust Act. The office sought an order compelling the Gazette Company to answer the interrogatories and produce the documents requested within two weeks. It also sought an order enjoining the Gazette Company from further merging of the two papers until it complied in full with the subpoena. It also sought court costs and attorney fees.

The July 19 merger came five years to the day after a federal antitrust settlement was reached regarding Charleston’s two daily newspapers. Morrisey’s memorandum noted that the announcement came hours before the expiration of the final judgment in that settlement.

“Importantly, the Attorney General is not seeking to enforce the terms or to remedy a potential violation of the Final Judgment,” the memorandum said. “Rather, the Attorney General is simply seeking to enforce the validly issued investigative subpoena in order to determine whether the Gazette-Mail was created in violation of the Antitrust Act.

“The timing of the events, as they are currently known, combined with the prior conduct remedied through the Final Judgment instills, at the very least, an honest belief in a reasonable and prudent person that the Gazette-Mail was arguably created in violation of the Antitrust Act.”

On July 19, 2010, U.S. District Judge John Copenhaver approved an antitrust settlement to regulate both newspapers.

"The Charleston Daily Mail shall continue to be published as a daily newspaper," he wrote then.

In his memorandum, Morrisey said, “Indeed, based upon the information currently available, it is entirely reasonable to believe that the Gazette-Mail represents exactly the same single daily newspaper the owners of the Gazette and Daily Mail attempted to create beginning in 2004 – an effort that was challenged, and ultimately reversed, because it violated antitrust laws.”

In the 2010 order, Copenhaver wanted proof that Charleston Newspapers, the operating partnership between the papers, didn’t discriminate against the Daily Mail, which then was an afternoon newspaper with a smaller circulation than the morning Gazette. He sought that proof of compliance for five years. That five years expired Sunday, and staffers were gathered that afternoon and told of the merger.

Then, according to reports, newsroom staffers at both papers were gathered and told of the newsroom merger. They papers had shared the same press and business operations since forming a joint operating agreement in 1958. The Sunday Gazette-Mail has been published for decades, and the Saturday Gazette-Mail has been around for nearly a decade. Last year, the papers began printing combined holiday editions.

After new Charleston Gazette publisher Susan Chilton Shumate told the staffers of the merger, they had just hours to put together Monday’s paper, according to wvfocus.com.

“The action itself is not something I am surprised about,” one employee told wvfocus.com. “I’m surprised with the way they went about it, but then, I don’t know all the circumstances.”

Employees who weren’t at the meeting received an email announcing the change around 5 p.m. Sunday.

“Beginning today, the two newspapers are combining newsroom functions with the exception of editorial page content,” the email said. “Welcome to the Charleston Gazette-Mail.”

Like the announcement in the July 20 morning’s newspaper, the email said the new Gazette-Mail would retain two independent editorial pages – one conservative and the other liberal.

“This is not one paper gobbling up the other,” the announcement said. “It is a combination of the two newsroom staffs working in cooperation to produce the most comprehensive news product in West Virginia.”

“The email they sent made it sound like the Charleston Gazette-Mail would be bigger and better than before … But I don’t know that the situation was handled well enough to make me feel totally confident about that,” the anonymous employee told wvfocus.com. “Just based on the way that they’ve handled it so far, I don’t think that they will tell us any of their plans before executing them at any point in this transition.”

At a July 20 meeting, newsroom staffers were told they’d have to reapply for their jobs, and that the new Gazette-Mail newsroom would employ about 65. At the time of the merger, the Gazette employed 45 workers and the Daily Mail 33.

Copenhaver’s 2010 final judgement was in an antitrust case brought by the U.S. Justice Department against the Daily Gazette Company and MediaNews Group.

Although the Daily Mail’s and Gazette’s joint business operations were known as “Charleston Newspapers,” the Daily Gazette Company owned the Gazette and MediaNews owned the Daily Mail. Both companies had 50 percent stakes in Charleston Newspapers until 2004 when MediaNews sold out to the Daily Gazette Company for a reported $55 million.

In 2007, the Justice Department filed a suit alleging the Daily Gazette Company “planned to deliberately transform a financially healthy and stable Daily Mail into a failing newspaper and close it.”

In July, a federal agency spokesman said missed contributions to Charleston Newspapers’ retirement plan and the company’s application for a distress termination of the plan are not related.

Pension Benefit Guaranty Corporation spokesman Marc Hopkins said PBGC attached a lien on behalf of the plan earlier in the month. That’s a standard practice when required pension payments of $1 million or more are missed. Hopkins said Charleston Newspapers and other entities responsible for that retirement plan have missed payments for the last few years. The $1,341,121 in missed payments took several years to reach that amount, he said.

Regarding the distress termination of the plan, Hopkins said PBGC received that application in June.

“A plan sponsor that makes such an application must demonstrate to PBGC that it can’t stay in business and continue its pension plan,” Hopkins said. “PBGC will evaluate the company’s financial condition and make a decision based on those findings.

“It’s PBGC’s preference to keep plans going with their sponsors. If that can’t happen, we’ll step in and take responsibility for paying the pension benefits of all plan participants up to the legal limits. For plans that end in 2015, the maximum guaranteed benefit for a 65-year-old retiree is $60,136 a year.”

Shumate said the liens had been placed against the entities named as plan sponsors – Charleston Newspapers, Daily Gazette Company, The Daily Gazette Company, Daily Gazette Holding Company LLC, Charleston Newspapers Holdings LP, Daily Gazette Publishing Company LLC, G-M Properties Inc., ABRY/Charleston Inc. and Ridgeview Express Delivery LLC – because of lack of payments.

“We are behind on our minimum contributions, so we had the lien filed against us,” Shumate, who attended Tuesday’s hearing, said in July. “We’re now working with the PBGC to get caught up. We have been talking to them since January to get this taken care of. We will be done and caught up with our payments in the next few weeks, next few months.

“The PBGC guarantees benefits are there for those in the plan up to a certain maximum. And more than 99 percent of those in our plan are under that maximum.”

Putnam Circuit Court case number: 15-C-201

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