Freedom Newspapers : Settlement Talks Continue in Suit Over Media Chain

Lawyers are talking seriously about settling a bitter, six-year lawsuit to dissolve the highly profitable Freedom Newspapers Inc. media chain, just one month after they gave the case no chance of ending without a long trial.

Since Feb. 9, attorneys for the warring factions of the family that owns Freedom Newspapers have been talking with Orange County Superior Court Judge Leonard Goldstein in all-day closed sessions in an effort to end the battle without splitting the media chain, valued at more than $1 billion.

“There’s a very good chance” the complex case will settle, perhaps as soon as Friday, Vernon W. Hunt Jr., the lawyer for dissident shareholder Harry H. Hoiles, said Wednesday.

Lawyers for the defendants--Freedom Newspapers and the families of Hoiles’ sister and late brother--agreed that by Monday the parties will know whether the case will settle or continue into the opening statements of the trial.

“There’s still a very large gap in what each side would accept,” said Robert E. Currie, the company’s lead counsel. “I’m encouraged that we have spent several . . . weeks discussing the possibility.”

Owns 33% of the Company

The lawsuit centers on Hoiles’ claim that the families of Mary Jane Hoiles Hardie and the late Clarence H. Hoiles unfairly ousted him from Freedom’s management in 1981 and since then have not given him and his family a fair voice in running the chain’s media empire. Hoiles wants one-third of the company’s estimated $1 billion in assets for his branch of the family, which owns 33% of the closely held media concern.

Irvine-based Freedom Newspapers owns the Orange County Register, 28 smaller dailies, three weeklies and five television stations. It is the 14th-largest newspaper chain in the nation.

On Wednesday, Hunt presented a plan to opponents that would create a management position at the chain of “group publisher.” Under the proposal, Hoiles would administer several groups of Freedom Newspapers, but the company’s ownership would remain intact.

The chain now is headed by a board of directors and executive committee. While individual papers have publishers, Freedom also has senior publishers, who are responsible for two to three papers each. Under Hunt’s plan, Hoiles would operate as a “group publisher” above the senior publishers but technically still responsible to company President D. R. Segal.

“It’s a compromise. It avoids (Freedom’s) dissolution . . . and (gives Hoiles) an area to administer,” Hunt said of the plan. Hoiles’ current role consists of sitting on Freedom’s 13-member board, along with three members of his family.

The feuding factions have worried throughout the legal struggle that splitting the corporate assets could hurt Freedom Newspapers by taking away some of its profit-making portions. A settlement also would allow family members to escape a public airing of the details of their business, including personal income.

Hunt denied that Hoiles became more willing to settle because of a recent major setback to his case. On Feb. 6, Judge Goldstein dismissed one of three claims made in the lawsuit. As a result, if the lawsuit is tried, Hoiles will have to meet a tougher legal standard to prove his case. But according to Hunt, “the evidence is still strong enough” for Hoiles to win.

Lawyers for the defendants said that Hoiles’ proposal almost certainly will be met by a counter-plan from the defense. When asked what the defense proposal is likely to seek, a source close to the case said, “All proposals (so far) have centered on keeping Harry (Hoiles) . . . in the company and keeping the company together.”