Trial Approaching in Suit to Dissolve Newspaper Chain

Settlement talks have broken down in the bitter, 6-year-old lawsuit to dissolve the highly profitable Freedom Newspapers empire, and the case appears headed for trial next week.

Attorneys for both sides predicted Monday that the legal dispute between warring factions of the family that owns Freedom Newspapers will go through a full, several-month trial, then on to a far lengthier appeal process.

Word that the negotiations had broken down came only two weeks after lawyers for dissident shareholder Harry H. Hoiles said chances were “very good” that an agreement could be reached to avoid an emotional trial and end the battle to split the media chain, valued at more than $1 billion.

During settlement talks, Hoiles’ attorneys had suggested that he be given a management position of “group publisher” at the chain, with control over a significant number of the company’s newspapers. But after two daylong talks last week, the defendants--Freedom Newspapers and the families of Hoiles’ sister and late brother--rejected the proposal, evidently unwilling to give Hoiles a substantial role in running the chain.

“The bottom line is that they are not welcoming Harry back . . . to running things,” said a source close to the case.

Unfair Ouster Claimed

The lawsuit centers on Hoiles’ claim that the families of his late brother and his sister, Mary Jane Hoiles Hardie, unfairly ousted him from Freedom’s management in 1981 and since then have not given him or 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 chain.

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.

As the case approached the opening-statements phase of the trial last month, Orange County Superior Court Judge Leonard Goldstein “probably exhausted every method possible” of encouraging the factions to settle their differences, said Michael T. Hornack, counsel for the majority shareholders.

On Friday, Judge Goldstein took the highly unusual step of speaking directly with two of the main opponents--Hoiles and his sister, Mary Jane Hoiles Hardie--without their lawyers present, in a final, last-ditch effort to avoid trial.

But despite Goldstein’s efforts, no agreement could be reached. An attorney for Hoiles, Richard Quan, said he believes that there is now “zero” chance that a settlement will be reached during trial and that there is a “good” likelihood of an eventual appeal.

No further talks are scheduled, and Goldstein is out of town until next Monday.

Robert E. Currie, lead counsel for Freedom Newspapers, declined comment other than to confirm that opening statements are set to begin before Goldstein at 1:30 p.m. next Monday.