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Medianews Group, Inc. v. Daily Gazette Co.

United States District Court, S.D. West Virginia, Charleston Division

January 19, 2018

MEDIANEWS GROUPS, INC. et al., Plaintiffs,
v.
DAILY GAZETTE COMPANY, et al., Defendants.

          MEMORANDUM OPINION AND ORDER

          THOMASE E. JOHNSTON CHIFE JUDGE.

         Pending before the Court are Petitioners Charleston Publishing Company and MediaNews Group, Inc.'s Petition for Order Confirming Arbitration Award, (ECF No. 2), and Motion to Confirm Arbitrators Award, (ECF No. 9). Also pending before the Court is Respondents Daily Gazette Company and Daily Gazette Holding Company's Combined Motion to Vacate Arbitrator's Award. (ECF No. 8).[1] For reasons stated more fully below, Petitioners' petition to confirm the Arbitrator's award, (ECF No. 2), and motion to confirm the Arbitrator's award, (ECF No. 9), are GRANTED. Respondents' motion to vacate the Arbitrator's award is DENIED. (ECF No. 8.)

         I.BACKGROUND

         Petitioners, MediaNews Group, Inc. (“MediaNews”) and Charleston Publishing Company (“CPC”) are both Delaware corporations, with CPC being the wholly owned subsidiary of MediaNews. (ECF No. 2 at ¶¶ 1-2.) Respondent, Daily Gazette Company (“DGC”), is a West Virginia corporation and is also the sole member of Respondent Daily Gazette Holding Company, LLC (“DGHC”). (Id. at ¶¶ 3-4.)

         In 2003, MediaNews received an offer to purchase the Charleston Daily Mail (“Daily Mail”). (ECF No. 2-1 at 5.) Due to a previous agreement between MediaNews and DGC, DGC had a right to exercise a right of first refusal to purchase the Daily Mail. (Id.) DCG exercised this right and purchased the Daily Mail. (Id.) The purchase of the Daily Mail raised anti-trust issues with the U.S. Department of Justice (“DOJ”) under The Newspaper Preservation Act (“NPA”). (Id.) In order to comply with the NPA, MediaNews and DGC negotiated a sale of MediaNews' economic interest in the joint venture to own the Daily Mail to DGC. (Id.) Under the deal, MediaNews retained a reversionary interest in certain assets it contributed to the joint venture, including a reversionary interest in the URL “dailymail.com.” (Id.) MediaNews was further given sole responsibility for the editorial content of the Daily Mail and would receive a management fee of $200, 000 a year. (Id.) In order to manage this joint venture, MediaNews and DGC created Charleston Newspaper Holdings, L.P. (“CNH”) through their subsidiaries, CPC and DGHC. (Id.) CPC became the sole limited partner in CNH and DGHC became the sole general partner. (ECF No. 2 at ¶¶ 2, 4.) The limited partnership was to last until June 30, 2024. (ECF No. 2-1 at 6.)

         The DOJ challenged the joint venture and instituted an anti-trust lawsuit. (Id. at 5.) A consent decree in that lawsuit was entered on July 19, 2010. (Id.) As a result of the consent decree, on or about July 23, 2010, CPC and DGHC entered into an Amended and Restated Limited Partnership Agreement (“LPA”) for CNH. (ECF No. 2 at ¶ 9; ECF No. 2-1 at 6.) On the same day, CPC, DGC, and DGHC entered into a Second Amended Restated Joint Operating Agreement (“the JOA”). (ECF No. 2 at ¶ 10.) Part of the agreement raised MediaNews's annual management fee to $225, 000. (ECF No. 2-1 at 6.) Most importantly to the present action, section VII(P) of the JOA incorporated Exhibit A, an attached Arbitration Agreement, into the JOA. (ECF No. 2 at ¶ 13.) The Arbitration Agreement set forth the procedures to be followed in the event that there is a dispute, claim, or controversy arising from the JOA, “or any course of conduct, course of dealings, statements (oral or written), or actions of any party related to the JOA, including any claim based on or arising from an alleged tort.” (See ECF No. 2-3 at Exhibit A.) It further provided that the result of any arbitration will be binding on the parties and that any judgment on the Arbitrator's Award may be entered in a court designated in the Arbitration Agreement. (ECF No. 2 at ¶ 15.) None of the parties dispute the validity of the Arbitration Agreement.

         A. Dispute that Led to the Arbitration

         On or about April 16, 2013, without CPC's approval, DGHC transferred registration for the URL “dailymail.com” from the Daily Mail to CNH. (ECF No. 2-1 at 8.) DGHC did not inform CPC that it was negotiating with the publisher of the UK Daily Mail newspaper for the sale of the URL. (Id.) In November of that same year, DGHC sold the website to the UK Daily Mail publisher for $1.5 million without CPC's knowledge or consent. (Id.) CPC believed it was entitled to receive the URL at the end of the joint venture's duration. (Id.)

         In May 2015, DGC sought permission from CPC to combine the Charleston Gazette and the Daily Mail. (Id.) MediaNews responded that it would not give consent until DGC consulted with the DOJ. (Id.) DGC notified the DOJ of its intent to consolidate and stop publishing the Daily Mail as an independent newspaper, but implemented the consolidation unilaterally without discussion with the DOJ or CPC's consent. (Id.) On July 20, 2015, CNH implemented the consolidation and stopped publishing the Daily Mail. (Id.) At that point, MediaNews and CPC were owed $495, 000 in unpaid management fees. (Id.)

         A dispute arose between the parties with MediaNews and its subsidiary claiming breaches of the LPA and JOA as well as breaches of fiduciary duty and civil conspiracy by Respondents. (ECF No. 2 at ¶ 17.) Specifically, Petitioners asked for (1) $495, 000 in overdue management fees, (2) approximately $1.8 million of future annual fees due through the end of the joint venture in 2024 because Petitioners alleged they were unilaterally and wrongfully terminated, and (3) $1.5 million, the price at which Respondents sold the URL “dailymail.com.” (ECF No. 2-1 at 4, 9.)

         Respondents argued that Petitioners wanted out of ownership of the Daily Mail in 2004; that anything agreed to in the LPA and JOA from 2004 and 2010 were to satisfy the DOJ; that Respondents had a right to substitute a new URL for “dailymail.com” as collateral for Respondents' loan with United Bank; that the Petitioners did nothing to earn their management fees; that the Petitioners did not act in good faith by bringing their action because they knew Respondents did not have the means to pay any award; and that, in the current market, publishing two papers in Charleston, West Virginia was not economically feasible. (Id. at 9.)

         Pursuant to the Arbitration Agreement, the parties submitted the dispute to an Arbitrator, Edward D. McDevitt (“the Arbitrator”). (ECF No. 2 at ¶ 18.) On April 12, 2017, the Arbitrator held a full and final hearing on the claims, after which a prepared transcript and post-hearing briefs from both parties was submitted. (Id.) On August 28, 2017, the Arbitrator entered an award in favor of Petitioners, finding that Respondents' arguments were legally insufficient to defeat Petitioners' claims. (Id. at ¶ 19; ECF No. 2-1 at 10-17.) The Arbitrator awarded Petitioners the amount stated in their claims plus interest. (Id. at 16.)

         B. Present Motions

         On September 5, 2017, Petitioners submitted a petition to this Court to confirm the arbitration award in accordance with a provision in the Arbitration Agreement that allows the parties to ask that any arbitration award be entered in a court designated in the agreement.[2](ECF No. 2.) Respondents filed a motion to vacate the arbitration award arguing that the Arbitrator made significant errors of law that led him to “a judgment that was contrary to the law of West Virginia and completely inequitable.” (ECF No. 8 at 2.) Petitioners filed a combined response and motion to confirm the arbitration award. (ECF No. ...


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