Las Vegas Sun

March 18, 2024

Judge affirms arbitrator’s decision favoring Sun in dispute with R-J

A Clark County judge on Wednesday affirmed an arbitrator’s ruling that largely favored the Las Vegas Sun in the newspaper’s legal dispute with the Las Vegas Review-Journal.

District Judge Timothy Williams ruled that the arbitrator decided correctly that the R-J violated terms of a joint operating agreement with the Sun in ways that deprived the Sun of millions of dollars in annual profit payments to which it was entitled under the JOA. Williams also sided with the arbitrator’s ruling that the R-J violated the JOA by not including the Sun in promotional and marketing materials, and agreed with the arbitrator that the Sun deserved to audit the R-J to verify payments made after Sheldon Adelson purchased the newspaper in late 2015.

Williams’ ruling is the latest development in a long-running legal battle between Nevada’s two largest newspapers.

In July, the arbitrator sided with the Sun by ruling that the R-J violated the contract by charging its editorial costs as expenses against the joint entity. The arbitrator agreed with the Sun that the contract requires both parties to independently pay for their editorial expenses. The Sun’s lawyers argued Adelson-owned R-J’s improper accounting practice cost the Sun in two ways, depriving it of its full portion of profits but also forcing it to subsidize the costs of its competitor’s editorial operation.

The arbitrator further ruled that the R-J violated the contract by improperly charging outside advertisements that omitted the Sun against the joint operation, thus reducing profit payments to the Sun to the sole benefit of the R-J. The amount owed to the Sun on this matter will be determined during an audit.

As for auditing the R-J, Williams repeated the arbitrator’s remarks that the “Review-Journal has done just about everything possible to blunt, avoid, deter and postpone an audit” and ruled that the audit be conducted.

The ruling from Williams, which followed a two-hour hearing at the Regional Justice Center, was a significant victory for the Sun, its attorney Leif Reid said. Sun attorneys will shortly submit a judgment to the court requesting collection on millions of dollars — plus interest — of profit-sharing payments dating to 2016, Reid said.

“We prevailed on the primary issues in the arbitration,” Reid said. “Our judgment will have a full calculation of what’s owed to the Sun. Interest will accrue back to 2016, so it will be substantial as well.”

Although most of Williams’ ruling favored the Sun, he also affirmed the arbitrator’s ruling that the Sun was not entitled to attorney fees in the suit. The Sun anticipates further argument on this issue.

The R-J might also may take further action based on Williams’ ruling.

“We were utterly stunned that the Sun would have the audacity to say their claims should go forward while our claims be prohibited,” said Ben Lipman, vice president of legal affairs and general counsel for the R-J. “In the end, Judge Williams declined to overturn the (arbitration) award. We’ll have to see if that warrants another court taking a look at it.”

The JOA structure was created under the Newspaper Preservation Act, which was approved by Congress and signed into law in the 1970s. The legislation provides limited antitrust protection for newspapers to combine business functions while remaining editorially independent.

The R-J in September announced its plans to try to dissolve the agreement under which the newspapers have operated since 1989 and which was amended in 2005. The R-J filed that action as a counterclaim to a pending state court action by the Sun accusing the R-J of changing its front page and diminishing the Sun’s presence on it in a manner not allowed under the agreement

When the R-J announced its plans, the Sun went to U.S. District Court and filed suit saying the effort and other actions by the R-J constituted a violation of federal antitrust regulations and an attempt to create an illegal monopoly in Clark County. The Sun alleges that Adelson, the prominent GOP donor, is trying to stifle an alternative editorial voice in Las Vegas.

Williams last month imposed a partial stay to the R-J’s counterclaims, citing concerns over whether a state court had jurisdiction in several matters also being litigated in federal courts. Williams also on Wednesday said that other than his ruling on the arbitration, all remaining disputes between the newspapers in state court would be stayed pending the outcome of the federal lawsuit.