A law professor who specializes in antitrust issues said Wednesday that a federal lawsuit seeking to halt the impending demise of the 24-year-old joint operating agreement between the Las Vegas Review-Journal and the Las Vegas Sun has little chance of succeeding.
Darren Bush, a professor at the University of Houston Law Center, said that allowing the Las Vegas Sun owners to retain their Internet site maintains the newspaper’s independent voice in the community, as spelled out under the federal Newspaper Preservation Act.
“If the future of newspapers is on the Internet, then maintaining the Web portal shows viability, as far as any antitrust issues are concerned,” said Bush, who reviewed the lawsuit, back-up material and the request for a temporary restraining order.
The documents were filed in U.S. District Court on Tuesday by attorneys for Las Vegas Sun publisher and editor Brian Greenspun.
Greenspun sued Stephens Media, operators of the Las Vegas Review-Journal, saying company executives conspired with members of his own family to end the agreement that was initially signed in 1989 and governs the operation of the two publications.
Greenspun did not sue his family members: brother Danny Greenspun and sisters Susan Greenspun Fine and Janie Greenspun Gale.
In the lawsuit, Brian Greenspun said that without the $1.3 million a year payment his company receives from the Review-Journal through the joint operating agreement, the Las Vegas Sun and its website would go out of business.
A hearing date has not been set. The case was assigned to U.S. District Judge James Mahan.
greenspun siblings’ VOTE WAS 3-1
In a statement Wednesday, Stephens Media CEO Mike Ferguson said he was “disappointed” that Greenspun had filed the lawsuit.
“To say that we are attempting to monopolize anything is utterly ridiculous considering the plethora of news and advertising sources available to Las Vegas residents and the realities of the modern media marketplace,” Ferguson said. “We will vigorously contest the unfounded allegations in this action and are confident that the courts will agree.”
The Greenspun siblings, who are Las Vegas Sun stockholders and the directors of Greenspun Media, voted 3-1 during a special meeting Aug. 7 to end the joint operating agreement and accept ownership of the URL lasvegas.com.
The website, which is owned by Stephens Media, is leased to a company owned by Greenspun Media. The URL is being used by the Las Vegas Convention and Visitors Authority.
Brian Greenspun opposed both moves while his brother and sisters supported the actions.
A letter of intent dated Monday, spelling out the agreement, was sent by Stephens Media to Greenspun Media Group CEO Paul Hamilton. However, Brian Greenspun’s lawsuit was filed before the letter was signed.
The letter stated that the joint operating agreement would be terminated for a cost of $10, the website URL would be transferred to the Greenspuns, and Stephens Media would pay each Greenspun sibling $70,000 as a closing price.
Bush, who has worked in both the federal and state level antitrust division in Texas, speculated that Brian Greenspun “would have a tough row to hoe” in proving that the end of the joint operating agreement would diminish competition in the market.
The Greenspun family, which has operated the Las Vegas Sun since 1950, would retain the newspaper’s intellectual property.
Also, a noncompete clause, keeping the Greenspuns from resuming any media operations, was not included in the letter of intent.
NO JUSTICE DEPARTMENT approval needed
Bush said the U.S. Department of Justice, which approved the joint operating agreement in 1989 and an amended version in 2005, would not have to sign off on the plans to end the current pact.
“If a party goes out of business, or wishes to go out of business, the DOJ can’t keep a party in business,” he said.
The 2005 revisions to the joint operating agreement changed the Las Vegas Sun from a stand-alone afternoon newspaper to a six- to 10-page section distributed with the morning Review-Journal.
Operators of the Review-Journal took over all business functions of the Las Vegas Sun in 1989. Bush said the history of the joint operating agreement reflected a reduction in competition between the newspapers, the largest of which came when the Sun was turned into an insert.
“There has been a reduction of competition at every step,” he said. “The question now is whether or not a judge believes the websites are now the competition.”
Despite the changes to the agreement, the Las Vegas Sun won a Pulitzer Prize in 2009 for its investigation of construction worker deaths at the CityCenter development.
TALKS BEGAN IN EARLY SUMMER
According to court documents and exhibits filed Wednesday, negotiations to end the joint operating agreement began in early summer.
Ferguson initiated talks in an email to Hamilton, the Greenspun Media CEO, on June 23. He said Stephens Media would terminate the lease agreement for lasvegas.com and transfer ownership to the Greenspuns for no additional payment.
Under the 2005 pact, the Greenspuns paid $12 million to acquire the rights to lasvegas.com and pay monthly fees of between $83,000 and $208,000.
Ferguson said Stephens Media also would be interested in acquiring the newspaper’s website, lasvegassun.com.
Initially, Ferguson sought five-year noncompete clauses from each Greenspun sibling in exchange for each receiving $25,000. The offer was rejected, but negotiations continued. In July, the offer stipulated in the letter of intent was agreed upon by the CEOs.
When the votes were taken Aug. 7, the noncompete clause and additional $25,000 payments were not put to a vote. There is no mention of a noncompete clause in the letter of intent.
In the lawsuit, attorneys said ending the joint operating agreement and the annual payment would force the shutdown of the printed Las Vegas Sun and lasvegassun.com.
“Even if closing down the Las Vegas Sun is not expressly contemplated, the termination of the 2005 JOA will effectively destroy the Las Vegas Sun and its website by leaving it with no infrastructure or facilities within which to produce, print, edit or operate the Las Vegas Sun print newspaper and the lasvegassun.com website, without which each would be forced to close,” attorneys wrote.
In an affidavit filed with the lawsuit, Greenspun said the 2008 recession reduced the Las Vegas Sun’s profits from the Review-Journal “by almost 90 percent.” The Las Vegas Sun and its sister publications employ about 200 people.
Contact reporter Howard Stutz at hstutz@review journal. com or 702-477-3871. Follow @howardstutz on Twitter.