Hoiles Winds Up Case, Awaits Court Ruling

Lawyers for publishing heir Harry H. Hoiles on Wednesday ended their presentation in the trial of Hoiles’ suit to break up Freedom Newspapers Inc. They now await a ruling--expected late next month--on defense arguments that they failed to prove their case.

During the three-week break, lawyers for the privately owned, Irvine-based media chain and for the families of Hoiles’ sister and late brother will file a written motion for judgment against Hoiles.

They claim that he has not presented enough evidence to show, as required by state legal standards, that he was treated so unfairly by the other two family branches that the corporation should be dissolved. They also claim that he has failed to prove that the majority owners breached their fiduciary duties toward him.

The lucrative Freedom chain operates five television stations and 29 daily newspapers, including the Orange County Register, its flagship publication.

If Orange County Superior Court Judge Leonard Goldstein agrees with the defense after the May 20 oral arguments, the case will be over. If he denies the motion, the defendants will begin presenting their side of the case.

In eight weeks of testimony, the defense already has presented much of its case through the appearances of five family members and a Freedom Newspapers employee, all called by Hoiles’ lawyers as hostile witnesses.

Hoiles, whose family owns about a third of the company, claims that the majority froze him out of a key management position and took actions that damaged the value of his family’s stock.

But the families of Mary Jane Hoiles Hardie and the late Clarence H. Hoiles--each of which also owns about a third of the company--argue that they took only those actions necessary to protect the company and themselves in light of Harry Hoiles’ threats to sell his stock to outsiders.

So far, every major legal issue raised in the case has gone against Harry Hoiles.

In the first phase of the trial starting Dec. 10, Hoiles tried to show that ownership of Freedom Newspapers was structured in such a way that his attorneys could argue his case under a section of state law that would have made it easier for him to dissolve the company. That section comes into play only when a company has 35 or fewer shareholders.

Goldstein rejected Hoiles’ novel bid to categorize each branch of the family as a single shareholder--although in reality the stock is divided among about 50 family members--because of their alleged tendency to vote along family lines.

The judge also barred from evidence testimony about the expectations of Hoiles or others. Hoiles had claimed that, because of things said to him by other members of the family, he reasonably expected to succeed his brother Clarence as the company’s chief executive officer. Instead, the majority abolished the position and transferred its powers to a ruling troika.

Goldstein also limited the amount of testimony on the libertarian philosophy espoused by the company and its founder, R.C. Hoiles.

Libertarianism is a key issue for Hoiles, who claims that under that philosophy his family had a right to leave Freedom Newspapers with the family’s share of the assets, not just a drastically discounted price that the majority offered for the stock.

On Tuesday, before leaving on vacation, the judge is expected to hear arguments from Hoiles’ attorneys that the majority’s 1981 proposal to buy his family’s shares at a discount constituted an unfair act. The majority offered the Hoiles family $120 a share, or $74.1 million, for stock that would go in a companywide sale for $320 a share.