Heir’s Effort to Dissolve Freedom Newspapers Stymied

Dissident heir Harry Hoiles’ long-running effort to break up Freedom Newspapers Inc., owner of the Orange County Register, received a major setback Monday when an appeals court delivered a ringing affirmation of a lower court’s earlier dismissal of his lawsuit.

Harry Hoiles, one of three sons of Freedom Newspapers founder R.C. Hoiles, has been engaged in a decade-long feud with the other two branches of the family and claimed in a 1982 lawsuit that they had treated him unfairly as a minority shareholder in the company.

He contends that he was prevented from selling his stock in the family-owned media firm at fair value and asked the court to force the liquidation of Freedom Newspapers. But an Orange County Superior Court judge dismissed the case during a 1987 trial before Freedom even had to present its defense.

In a written ruling Monday, the three-judge panel for the 4th District Court of Appeal characterized Harry Hoiles demands as “corporate blackmail” and firmly rejected his contention that the majority shareholders in Freedom had violated their fiduciary duties through “abuse of authority or persistent unfairness towards any shareholders.”

Kenneth P. Scholtz, the attorney representing Harry Hoiles in the appellate case, said he expected that Hoiles would ask for a rehearing of the case. If that request is rejected, he said, an appeal would probably be carried to the California Supreme Court.

R. David Threshie, publisher of the Orange County Register and a son-in-law of Harry Hoiles’ late brother Clarence, said: “We’re pleased. We anticipated the result, and we hope we can get on with things.” Freedom, in addition to the flagship Register, owns 28 newspapers and five television stations.

The appellate court decision stated that Harry Hoiles and his branch of the family had received fair benefits from their shares, including $2 million a year in dividends in addition to salaries and directors’ fees, and said: “That the minority shareholders could reasonably anticipate they could also force the majority to buy them out at full value whenever they might desire bears the same relation to reality that acquisition of a lottery ticket does to winning a jackpot: It would be unwise to invest a great deal of future planning on either event.”

The court said the Freedom board’s dismissal of Harry Hoiles from the company’s three-person executive committee after he had discussed a sale of his shares to Times Mirror Co., owner of the Los Angeles Times, “hardly demonstrated either abuse of authority or unfairness, persistent or otherwise.”

The stock-sale restriction plan adopted by the company in 1981, the court found, was perfectly legal under California law and could not be shown to have diluted the value of Harry Hoiles’ holdings. Hoiles maintained in his suit that the $74.1 million that Freedom offered for his shares in 1981 was only one-third of their market value.

During the long legal battle, Harry Hoiles has also cast himself as defender of the libertarian flame long carried by his father, R.C. Hoiles. But Freedom has consistently contended that the lawsuit is simply a result of Harry’s anger at not being elected chief executive of Freedom in 1981.