Appellate Court Hears Freedom Newspapers’ Case
The bitter family feud that has racked Freedom Newspapers Inc. for nearly a decade was aired again Tuesday as a three-judge appellate panel heard arguments in dissident heir Harry H. Hoiles’ lawsuit to break up the company.
Hoiles, 74, one of three descendants of Freedom Newspapers founder R.C. Hoiles, contends that two other branches of the family have illegally prevented him from selling his stock in the family-owned media firm at fair value.
Freedom attorney Robert E. Currie said that in the lawsuit, Hoiles in effect is demanding the “execution” of the company.
Freedom operates a chain of 29 newspapers and five television stations throughout the United States, with nearly half its revenue coming from its flagship, the Orange County Register. It is one of a number of family-run media companies around the country that have been subject to internecine battles among descendants of the founders.
The appeals court is required to rule on the matter within 90 days, but attorneys said an earlier decision is likely.
Originally filed in 1982, the Hoiles suit was dismissed in 1987 by an Orange County Superior Court judge before Freedom presented its defense. But Kenneth P. Scholtz, an attorney for Hoiles, on Tuesday told the 4th District Court of Appeal that trial Judge Leonard Goldstein had erred in failing to recognize that the corporate interests of Freedom were identical to those of the family members who control a majority of its stock.
Freedom attorney Robert E. Currie countered: “The sole reason we are standing before this court is because Harry Hoiles was disappointed and angry that his brother and sister and nieces and nephews didn’t vote him in as chief executive officer” of Freedom in 1981. He emphasized that Hoiles, who with his descendants controls 32.8% of Freedom’s stock, continued to receive the same dividends and privileges as other shareholders.
Hoiles, who followed the arguments intently but declined any comment on the case, resigned from the Freedom board of directors last month. He was replaced by his 36-year-old son, Timothy Hoiles.
Harry Hoiles alleges in his lawsuit that the two branches of the family controlling a majority of the stock--led by Freedom Chairman Robert C. Hardie, son-in-law of R.C. Hoiles, and R. David Threshie, Register publisher and son-in-law of Harry’s late brother Clarence--froze him out of management of the company and took measures that prevented him from realizing full value of his Freedom stock.
He also maintained that the company’s management, including Freedom President D.R. Segal, who is not a family member, is leading the firm away from the strident libertarianism espoused by the company’s founder. Harry Hoiles appeared in court Tuesday carrying a libertarian tract entitled “The Ethics of Liberty.”
Harry Hoiles’ suit charges that Freedom’s 1981 offer to buy out his shares for $74.1 million would have given him only a third of what his stock was worth and that an agreement adopted by other family members that year to restrict the sale of shares to outsiders prevented him from realizing a fair market value.
These actions, he claims, represented unfair treatment and a breach of fiduciary duty by the majority shareholders, who cannot take actions that benefit them at the expense of minority shareholders. But Freedom contends that the actions were aimed at preventing a hostile takeover and were in the interests of the company, not the majority shareholders, and were legitimate under corporate law.
