Hoiles-Newspaper Case : Court Is Asked to Ban Philosophy Testimony

In a move that would gut part of dissident shareholder Harry H. Hoiles’ suit to dissolve Freedom Newspapers Inc., company lawyers on Monday asked the Orange County Superior Court judge hearing the case to ban all testimony regarding the libertarian philosophy.

The 21-page written motion to block further evidence on the issue was filed just after a luncheon break in the 2-week-old trial and before Hoiles’ sister, Mary Jane Hardie, was to resume testimony about her beliefs in the philosophy espoused by her father, Freedom Newspapers founder R.C. Hoiles.

Defense attorneys claim that Hoiles injected the libertarian philosophy into the case long after his complaint was filed. The lawsuit never raised the philosophy as an issue, and the volumes of pretrial depositions show only that Hoiles’ attorneys objected to Hoiles answering questions on libertarianism because they were irrelevant to the case, they claim.

Besides, they say, no unified view exists on just what constitutes libertarianism.

Hoiles’ lawyers have maintained that Hoiles explained in depositions that his disagreements with the two other family branches stem from the majority’s departure from the libertarian way of operating the company.

Judge Leonard Goldstein halted testimony for the day to give Hoiles’ attorneys time to prepare a formal response to the defense motion.

Each Family Owns Third

The families of Hoiles, his sister and his late brother, Clarence H. Hoiles, each own about a third of the closely held media chain, which owns the Orange County Register, 28 other dailies and five television stations.

Hoiles sued to dissolve the company five years ago after the other two family branches refused to elect him to succeed his brother as chief executive officer and refused to give him a third of the company’s assets so his family could strike out on its own. He claims the majority froze him out of management and took steps to devalue his family’s stock.

The majority shareholders contend that Hoiles took himself out of management and that they took steps that were reasonable in light of his threat to sell to outsiders.

The libertarian issue is a key element of Hoiles’ trial strategy, partly because it provides the basis for his claim that all family members had reasonable expectations about what they could do with their ownership interests.

Hoiles claims that the families always required unanimity in taking major actions, such as changing bylaws and that the families always believed that they owned the assets, not just the shares, of the company. Anyone could leave the company with his share of the assets anytime he disagreed with the majority, Hoiles claims.

Discounted Offer Made

But after the other two branches talked about or threatened to pull out of the company in the late 1970s, Hoiles took steps to withdraw in late 1980. Instead of being offered a third of the assets--even though the families were negotiating such a division for nearly a year--Hoiles was offered $74.1 million for his family’s shares, a 71% discount in the value that the majority placed on his share of the company.

Goldstein has severely limited the amount of evidence that Hoiles’ trial attorney, Vernon W. Hunt Jr. of Santa Ana, can bring into the trial. A general discussion of libertarian philosophy, he has ruled, is irrelevant to the issues in dispute.

However, the judge has heard evidence of libertarian philosophy whenever it touches on the management of the company.

Robert C. Hardie, the company chairman, testified, for instance, that libertarian principles guided management actions and that they included an opposition to governments and majorities imposing their will “into the private lives of citizens.”

And his wife said Monday on the witness stand that those principles also include the concepts that no one has a right to control another person’s life or property without that other person’s consent.