October 27, 1999

Star-Bulletin closing after 117 years

Gannett’s Appeal Brief
CASE NO. 99-17201

IN THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR APPELLANTS

ON EMERGENCY APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF HAWAII IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

STATE OF HAWAII,

P1aintiff-Appellee,

- vs -
)
)
)
)
)
)
)
GANNETT PACIFIC CORPORATION, LIBERTY NEWSPAPERS LIMITED PARTNERSHIP, AND HAWAII NEWSPAPER AGENCY, Defendants-Appellants.


Dated: October 27, 1999


TABLE OF CONTENTS

STATEMENT OF JURISDICTION
ISSUES PRESENTED FOR REVIEW
STATEMENT OF THE CASE
A. Proceedings Below
B. This Appeal
STATEMENT OF FACTS
A. Parties
B. Congress Enacts the NPA
C. Despite the NPA, Afternoon Newspapers Continue to Fail
D. Hawaii Governments' Unsuccessful Attacks on the Honolulu JOA
E. The 1993 Amendment Restructures the JOA
F. The 1999 Amendment Responds to the Star-Bulletin's Deterioration
STANDARD OF REVIEW
SUMMARY OF ARGUMENT
I. THE 1999 AMENDMENT IS EXEMPT FROM THE ANTITRUST
A. The NPA Expressly Provides That Amendments Are Exempt
B. Nothing In The NPA Precludes Amendments Ending JOAs; And, If The NPA's Policy Is To Be Considered, The District Court's Decision Contravenes lt
1. The NPA Contains "No Temporal Limitation."
2. The District Court's Order Contravenes The NPA's Purpose
C. The JOA Has Lasted Longer Than The Time Grandfathered -- And Thus Deemed Acceptable -- By Congress
II. EVEN APART FROM THE NPA, THE 1999 AMENDMENT DOES NOT VIOLATE THE ANTITRUST LAWS
A. No Assets Were "Stripped."
B. There Is No Agreement to Stop the Star-Bulletin from Publishing
C. There Is No Harm To Competition In A Relevant Market Because There Is No Competition Between The Star-Bulletin And Advertiser
D. There Is No Antitrust Injury
III. THE DISTRICT COURT'S INTERPRETATION OF THE NPA WOULD RENDER IT UNCONSTITUTIONAL
IV. THE ORDER OTHERWISE VIOLATES THE FIRST AMENDMENT
CONCLUSION
TABLE OF AUTHORITIES

FEDERAL CASES

Adaptive Power Solutions v. Hughes Missile Systems,
141 F.3d 947(9th Cir. 1998) /31,35,37

Apex Hosiery Co. v. Leader,
310 U.S. 469(1940) /34,35

Arkansas Writers Project v. Ragland,
481 U.S. 221(1987)/44

Armstrong v. United States,
364 U.S. 40(1960)/40

Associated Press v. United States,
326 U.S. 1(1944)/39

Atlantic Richfield Co. v. USA Petroleum Co.,
495 U.S. 328 (1990)/36,37

Baggett V. Bullitt,
377 U.S. 360 (1964)/42

Bay Guardian v. Chronicle Publishing Co.,
344 F. Supp. 1155 (N.D. Cal. 1972)/26

Cargill, Inc. v. Monfort of Colorado, Inc.,
479 U.S. 104(1986)/36

Citizen Publishing Co. v. United States,
394 U.S. 131(1969) /9

City and County ofHonolulu v.
Hawaii Newspaper Agency, Jnc.,
559 F. Supp. 1021 (D. Haw. 1983)/8, 12,20, 30


Committee for an Independent P-I V. Hearst Corp.,
704F.2d467(9thCir. 1983) /22,27

Connally v. General Construction Co.
269 U.S. 385 (1926) /42

DeBartolo Corp. v. Florida Gulf Coast
Building & Construction Trades Council,
485 U.S. 568 (1988) /37

Dedication and Everlasting Love to
Animals v. Humane Society,
50 F.3d 710 (9th Cir. 1995) / 34

Dolan v. City of Tigard,
512 U.S. 374(1994) /40

Eastern R.R. V. Noerr Motor Freight, Inc.,
365 U.S. 127(1961) / 37

Elrod v. Burns,
427 U.S. 347 (1976) /44

FTC V. Tenet Health Care Corp.,
186 F.3d 1045 (8th Cir. 1999) /32

Grosjean v. America Press Co.,
297 U.S. 233 (1935) /43

Hawaii Newspaper Agency V. Bronster,
103 F.3d 742 (9th Cir. 1996)/8, 9,10, 12, 18, 22, 27, 28, 30

Lucas v. South Carolina Coastal Council
505 U.S. 1003 (1992) /40

Miami Herald Public Co. v. Tornillo,
418 U.S. 241(1974) /39, 40, 42

Michigan Citizens for an
Independent Press v. Thornburgh,
868 F.2d 1285 (D.C. Cir.), aff'd, 493 U.S. 38 (1989) /9

Miller v. California Pacific Medical Center,
19F.3d449(9thCir. 1994)/17

Minneapolis Star and Tribune Co. v.
Minnesota Commissioner of Revenue,
460 U.S. 575 (1983) /44

Nollan v. California Coastal Commission,
483 U.S. 825 (1987) /40

Northern Pacific R.R. Co. v. United States,
356 U.S. 1(1958) /34

Nynex Corp. V. Discon, Inc.,
525 U.S. 128, 119 5. Ct. 493 (1998) /36

Pennsylvania Coal Co. v. Mahon,
260 U.S. 393 (1922)/40

Smith V. Goguen,
415 U.S. 566(1974) /42

Smith V. National Collegiate Athletic Association,
139 F.3d 180 (3d Cir. 1998),
vacated on other grounds,
525 U.S. 459 (1999) /34

Turner Broadcasting System V. FCC,
512 U.S. 622 /43

United States v. Gray,
177 F.3d 86(1st Cir. 1999) /38

Wooley v. Maynard,
430 U.S. 705 (1977)/38

STATE CASES

Roberts Hawaii School Bus.,
Inc. v. Laupahoehoe Transport Co., Inc.,
91 Haw. 224 (1999) /28


DOCKETED CASES

Florida Publications, Inc. v.
The Miami Herald Publishing Co.,
No. 88--2421-CIV-MARCUS (S.D. Fla. 1988) /24, 38


FEDERAL STATUTES

15 U.S.C. ßß 1 and 2/4
15 U.S.C. ß 1801 et seq./2,41
15 U.S.C. ß 1803(a)/ passim
15 U.S.C. ß 1803(c) /21
28 U.S.C. ß 1292(a)(1) /1
28 U.S.C. ßß 1331,1337 and 1367/1
15 U.S.C. ßß 1 and 2 /4


FEDERAL RULES AND REGULATIONS
Fed. R. App. P. Rule 4(a)(1)(A) /1
Fed. R. App. P.26.1/2,3
Fed. R. App. P. 32(a)(7)(C) /47
Fed. R. Civ. P. 12(b)(6) /4
28 C.F.R.ß 48.16 /9


STATE STATUTES AND MATERIALS

Haw. Rev. Stat. ß 480--3(1999) /28

Hawaii Atty Gen. Antitrust Op. on
Constitutionality of S.B. 341, S.B. 459,
S.C.R. 15 and S.R. 90, Relating to
Newspapers (March 7,1979) (informal op.) /12

Hawaii Att'y Gen. Antitrust Op. on
Constitutionality of S.B. 341, S.B. 459 /12

Hawaii Att'y Gen. Op. No.74-11
(April 2, 1974) /11

LAW REVIEWS

Anita M. Carlson, Note,
The Newspaper Preservation Act:
The Seattle
Application, 1982 U. Ill. L. Rev. 669,
674 n.40 (1982) /34

John H. Carlson, Note, Newspaper
Preservation Act: A Critique, 46
Ind. L.J. 392, n.7 (1971) /10

LEGISLATIVE HISTORY

Newspaper Preservation Act:
Debate on S.1520 Before the Senate,
Cong. Rec. 1786 (Jan.29, 1970)
(statement ofSen. Inouye) /8

Newspaper Preservation Act:
Debate on S.1520 Before the Senate,
Cong. Rec. 1815 (Jan.29, 1970)
(statement of Sen. McIntyre) /33

The Newspaper Preservaflon Act:
Debate on S.1520 Before the Senate,
Cong. Rec. 1817 (Jan. 29-30, 1970) /36

The Failing Newspaper Act:
Hearings on S. 1312 Before the Subcomm.
on Antitrust and Monopoly
of the Senate Comm. on the Judiciary,
90th Cong. 425 (1967) /24


MISCELLANEOUS

1 Kristen B. Mallegg, ed., Gale Directory
of Puhlications and Broadcast Media
459-63 (133rd ed., 1999)/35


lA Sutherland Stat. Const. ß 20.12
(5th ed. 1993 and Supp. 1999)/22

Editor & Publisher Annual Yearbooks,
1975--1999/11

Newspaper Association of America,
Number of U.S. Daily Newspapers (last modified Oct. 17,1999) /11

"Newspaper Suit Cleared," Washington Post,
June 17, 1981, at D16/ 26

Paul Farhi, The Death of the JOA,
American Journalism Review (AJR),
September 1999/15,23,25,26

SRDS Circulation 94/15

Todd S. Purdum, Jts Economy Ailing,
Hawaii Hangs Some Hopes on Hollywood,
N.Y. Times, May 17, 1999/15

Tom Kaser, IL WU Takes Membership Vote
As Hawaii Prepares For Strike,
Journal ofCommerce, Oct.20, 1999/15

Laura Pavlenko Lutton, 3 Hawaiian Banks
Track Lackluster Economy, The
American Banker, Mar. 11, 1998/15

STATEMENT OF JURISDICTION

The District Court has jurisdiction pursuant to 28 U.S.C. ßß 1331,1337 and 1367.

On October 13,1999, the District Court issued an oral preliminary injunction, which it reduced to writing and entered as its Order Granting the State's Motion for a Preliminary Injunction on October 15,1999. Excerpt of Record ("ER") 5. This appeal is from both versions of the Order. This Court has jurisdiction pursuant to 28 U.S.C. ß 1292(a)(1).

Appellants (defendants below) filed their Amended Notice of Appeal on October 15, 1999. ER 2. This appeal is timely under Rule 4(a)(1)(A) of the Federal Rules of Appellate Procedure.

ISSUES PRESENTED FOR REVIEW

1. Whether the District Court, relying on the antitrust laws, erred when it prohibited defendants from amending their newspaper Joint Operating Agreement ("JOA") to end that agreement:

a. even though the Newspaper Preservation Act ("NPA"), 15 U.S.C. ß 1801 et seq., expressly provides that "it shall not be unlawful under any antitrust law for any person to perform, enforce, renew, or amend any Joint Newspaper Operating Arrangement entered into prior to July 24, 1970..." (15 U.S.C. ß 1801(a) (emphasis added));

b. even though ending the JOA will not harm competition and will not cause antitrust injury; and

c. even though the Court's unprecedented interpretation of the NPA is unconstitutional.

2. Whether the District Court's reliance on the antitrust laws to force defendants (a) against their will, to continue to publish the Honolulu Star-Bulletin and (b) when doing so, to meet the Court's standard of "high quality," was proper under the First Amendment.


STATEMENT OF THE CASE

This is an appeal from an Order of the United States District Court for the District of Hawaii (Kay, J.) that preliminarily enjoins defendants from terminating their JOA, despite the plain language of the NPA specifically providing that it is not "unlawful under any antitrust law . . . to amend" a JOA. 15 U.S.C. ß 1803(a). The preliminary injunction orders defendants, among other things, to continue indefinitely to publish the Honolulu Star-Bulletin newspaper ("Star Bulletin"), notwithstanding the Star-Bulletin's continuing substantial operating losses. ER 5 at 30-33; ER 6 at 63. The Order should be reversed.

The State has not shown a probability of success on its claims. An amendment shortening the term of or ending a JOA is exempt from antitrust scrutiny under the NPA and, even apart from the NPA, the parties' amendment does not violate federal or state antitrust laws. The District Court's interpretation of the NPA cannot be accepted, because it would render the NPA unconstitutional.

In addition, the State has demonstrated no i njury, and the Order causes defendants irreparable injury. The balance of harms therefore tips in defendants' favor.

A. Proceedings Below.

The State of Hawaii commenced this action on October 6,1999. ER 12. The State challenges the September 7, 1999 Amendment and Termination Agreement (the "1999 Amendment") between Gannett Pacific Corporation, owner and publisher of The Honolulu Advertiser (the "Advertiser"), and Liberty Newspapers Limited Partnership ("Liberty"), owner and publisher of the Star-Bulletin. The 1999 Amendment provides for the termination of the parties' JOA on October 30, 1999. ER 8, Declaration of Robert C. Bernius ("Bernius Decl."), Exh. A.

The State claims the 1999 Amendment is an agreement to shut down a "competitor" in violation of Sections 1 and 2 of the Sherman Act (15 U.S.C. ßß 1 and 2) and of parallel provisions of Hawaii's antitrust laws. The State seeks unprecedented and wide-ranging injunctive relief and civil penalties.

On October 8, 1999, the State moved for a temporary restraining order. ER 11. On October 11, 1999, Gannett Pacific moved to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) (ER 8), and on October 12, defendants filed their opposition to the State's TRO motion.

The District Court heard oral argument on the TRO application on October 13. Noting that the motion "simply involves questions of law," the Court (on consent of the parties) treated the motion as one for a preliminary injunction. ER 6 at 4-5. Following argument, the Court issued an oral preliminary injunction, and issued its written order two days later, on October 15, 1999. In its written opinion, the Court concluded that ending the JOA will "in effect. . . lead to the closure of the Star-Bulletin," and consequently "contravene[s] the purpose" of the NPA. ER 5 at 2. As a result, in its oral and written orders (the operative terms of which are the same), the District Court forces the defendants to maintain the JOA and to continue publishing the Star-Bulletin newspaper:

...Defendants are hereby enjoined . . . to preserve the status quo, including without limitation:

1. Defendants shall take no steps, whatsoever, to implement or make any payments under the amendment and termination agreement dated September 7, 1999, or any other agreement of like intent or effect.

2. Defendants shall take no steps that are contrary to or inconsistent with the stated purpose and intent of the Hawaii Joint Operating Agreement Amendment and Restatement of Mutual Publishing Plan Agreement of January 30, 1993, to produce high quality newspapers for their readers, improve acceptance for their advertisers, subserve public interest by maintaining separate identities, individuality and editorial and news freedom and integrity of the Honolulu Star-Bulletin and the Honolulu Advertiser.

3. Defendants shall refrain from taking any actions that may cause any material adverse change in the business, including loss of subscribers and advertisers, or financial condition of the Star-Bulletin as a viable going concern. ER 5 at 32-33; ER 6 at 63-64.

Although the District Court found that the 1999 Amendment did "not expressly require the closure of the Star-Bulletin," and that "Liberty is not required to cease publishing the Star-Bulletin" (ER S at 15--16, 21), it nevertheless concluded that the State was likely to succeed on its antitrust claims. The District Court predicted that the Star-Bulletin would likely close and, as a consequence, the 1999 Amendment would "deprive newspaper readers of free and open competition in the sale of daily newspapers and their differing editorial and reportorial voices, deprive advertisers of free and open competition, and ... deprive creators of news, editorial and entertainment content of free and open competition...." ER S at 19.

Notwithstanding that the NPA specifically exempts amendments to pre-1970 JOAs (such as the Honolulu JOA) from antitrust scrutiny, the District Court opined that the 1999 Amendment was not exempt because it is contrary to the NPA's "purpose." ER S at 2. The District Court also rejected defendants' argument that they have a First Amendment right not to publish a newspaper, on the ground that the preliminary injunction does not compel defendants "to publish any particular viewpoint." ER 5 at 26.

B. This Appeal.

Defendants filed their notice of appeal, and unsuccessfully moved in the District Court for a stay on October 15, 1999. On the same day, defendants moved for a stay and expedited review in this Court. On October 20,1999 this Court denied the application for a stay and granted the motion for expedited review.

STATEMENT OF FACTS

A. Parties.

Plaintiff is the State of Hawaii. The three defendants are the parties to a JOA in Honolulu.

Defendant Gannett Pacific Corporation is the owner of the Advertiser, a morning daily newspaper published in and distributed throughout Hawaii.

Defendant Liberty Newspapers Limited Partnership is the owner of the Star-Bulletin, an afternoon daily newspaper published in and distributed throughout Hawaii.

Defendant Hawaii Newspaper Agency ("HNA") is a limited partnership, of which Gannett Pacific is the general partner and Liberty is the limited partner.

In 1962, the publishers of the Star-Bulletin and Advertiser concluded that the Advertiser was failing financially. Newspaper publishers throughout the country, facing the same economic conditions, had over the preceding decades turned to joint operating agreements to try to solve their financial problems. A JOA is a "commercial merger."1 The JOA entity sets advertising and circulation rates, solicits advertising and newspaper sales, engages in distribution and purchasing, and allocates production facilities -- in short, the JOA runs the newspapers as a single business, although the newspapers' editorial departments remain separate and distinct. Hawaii Newspaper Agency v. Bronster, 103 F.3d 742, 744 (9th Cir. 1996) (hereinafter "Bronster"); see ER S at 6.

    1"These two changes in the law, allowing for a commercial merger, and providing a reasonable definition for a failing newspaper, are essential if we are to preserve our newspapers." Newspaper Preservation Act: Debate on S.1520 Before the Senate, Cong. Rec. 1786 (Jan. 29, 1970) (statement of Sen. Inouye). "As I have indicated, joint operating arrangements are commercial mergers... Id. at 1995 (Jan. 30, 1970) (statement of Sen. Inouye). A copy of this legislative history is included with Addendum to Appellants' Brief ("Add.,") Tabs 2 and 3.

The Honolulu publishers similarly concluded that a JOA was necessary to preserve Hawaii's two daily editorial voices. The parties thus formed a JOA, merging all of their commercial functions including their accounting, circulation, advertising and production departments. The publishers' judgment as to the necessity for a JOA was later confirmed by the District Court. City and County of Honolulu v. Hawaii NewspaperAgency, Inc., 559 F. Supp. 1021, 1032 (D. Haw. 1983); see Bronster, 103 F.3d at 744.

The scheduled duration of the Honolulu JOA was thirty years, from 1962 to 1992.

B. Congress Enacts the NPA.

Eight years later, in 1970, Congress became concerned about the rash of newspaper failures and the Supreme Court's decision that a newspaper JOA in Tucson, Arizona violated the antitrust laws.2 In response, it passed the NPA.

    2Citizen Publishing Co. v. United States, 394 U.S. 131(1969); see Bronster, 103 F.3d at 744.


Congress recognized that the unique economics of the newspaper business had caused, and would continue to cause, newspapers to fail, leaving areas with only one daily newspaper. See Michigan Citizens for an Indep. Press v. Thornburgh, 868 F.2d 1285,1287-88 (D.C. Cir.), aff'd, 493 U.S. 38 (1989); Bronster, 103 F.3d at 745, 748. The NPA specifically granted antitrust immunity to pre-existing JOAs where, at the time the JOA was formed, not more than one of the newspapers was "financially sound." 15 U.S.C. ß 1803(a). Congress also provided an antitrust exemption for post-July 24, 1970 JOAs, but added the requirement that such new JOAs be approved by the Attorney General of the United States.3

    3 15 U.S.C. ß 1803(b). See Bronster, 103 F.3d at 745. Although the Attorney General was granted the authority to approve new JOAs (15 U.S.C. ß 1803(b)), Congress endorsed preexisting JOAs directly. Id. at ß 1803(a). The Attorney General therefore has no role with respect to the Honolulu JOA other than the ministerial one of accepting the filings of amendments. Id.; 28 C.F.R. ß 48.16.


The NPA does not limit the way in which newspaper owners can combine their business operations, and a variety of JOA structures have emerged. The parties may form a partnership or corporation, which holds the assets and runs the combined business.4 Or they may choose a "host-tenant" relationship, in which one newspaper owns all of the production assets, is responsible for all capital investment, and manages the business operations of both newspapers. ER 6 at 51-52. In either case, the commercial goal is to achieve cost savings by avoiding duplication and gaining scale economies.

    4 John H. Carlson, Note, Newspaper Preservation Act: A Critique, 46 md. L. J. 392, 393 n.7 (1971).


The NPA expressly provides that, for pre-existing JOAs, it "shall not be unlawful to ... amend any joint operating arrangement," with two provisos: the amendment must not add a newspaper to the JOA, and the amendment must be filed with the Department of Justice. 15 U.S.C. ~ 1803(a).

C. Despite the NPA, Afternoon Newspapers Continue to Fail.

Notwithstanding passage of the NPA, the economic forces governing the newspaper industry, including competition from other media, have caused hundreds of afternoon and evening newspapers throughout the country to close. From 1980 to 1998, the number of evening newspapers declined by about 44%, from 1,388 to 781. See Newspaper Association of America,
Number of U.S. Daily Newspapers (last modified Oct.17, 1999). Most notably, afternoon newspapers in El Paso, Knoxville, Miami, Nashville, Pittsburgh, Shreveport and Tulsa all ceased publishing despite heing in a JOA. Other afternoon newspapers were closed in Baltimore, Buffalo, Charlotte, Cleveland, Dallas, Jacksonville, Louisville, Los Angeles, Memphis, New York, Philadelphia, Rochester, San Antonio, and Washington; afternoon newspapers in Chicago, Columbus, Denver, Houston, Kansas City, Lincoln, Milwaukee, Minneapolis, New Orleans, New York, Oklahoma City, Oakland, Phoenix, Portland, St. Louis, San Antonio, San Diego, Santa Fe and other cities either converted to morning publication or merged with a morning newspaper.5

    5Compiled from Editor & Publisher Annual Yearbooks, 1975-1999.


D. Hawaii Governments' Unsuccessful Attacks on the Honolulu JOA.

Over the years, Hawaii "has made several unsuccessful attempts to regulate or dismantle" the Honolulu JOA. Bronster, 103 F.3d at 745. Thus:

* the State legislature, in 1974, proposed a bill to regulate the two newspapers as utilities. The then-Hawaii Attorney General advised the legislature that its bill violated the First Amendment and the bill did not pass.6

    6Hawaii Atty Gen. Op. No.74-II (April 2, 1974) at 4, 12.


* the State legislature, in 1979, proposed a bill that would have regulated the newspapers as utilities and would have repealed the State antitrust exemption for the JOA. Once again, the then-Attorney General found the legislation unconstitutional, and the bills did not pass.7

    7 Hawaii Atty Gen. Antitrust Op. on Constitutionality of SB. 341, S.B. 459, S.C.R. 15 and S.R. 90, Relating to Newspapers (March 7, 1979) (informal op.) at 1-2, 14.


* the City and County of Honolulu, in 1979, sued to invalidate the JOA, and the court rejected the claim. City and County of Honolulu, 559 F. Supp. at 1032.

* the State, in 1996, sought to "dismantle' the JOA through legislation which required the JOA parties to file their tax returns with the Attorney General. This Court rebuffed the State's attack, noting that the "newspapers' financial status" is confidential, and holding that Congress "preempted the field in enacting the NPA." Bronster, 103 F.3d at 745, 747-48.

E. The 1993 Amendment Restructures the JOA.

From time to time after its 1962 formation, the parties amended various terms of the JOA, and on occasion changed its duration. The most recent amendment (prior to that at issue in this case) was made in 1993, contemporaneous with a change in the ownership of the two newspapers. Amendment and Restatement of Mutual Publishing Plan Agreement dated as of January 30, 1993 ("1993 Amendment") (ER 8, Bernius Decl., Exh. B).

Prior to the 1993 Amendment, Gannett Pacific owned the Star-Bulletin, and Honolulu Advertiser, Inc. owned the Advertiser. Each owner had an undivided interest in the JOA's physical assets, and each received a share of the JOA's profits. In 1993, Gannett Pacific had agreed to buy the Advertiser and wanted to sell the Star-Bulletin. To attract a buyer for the Star-Bulletin, however, it was necessary for Gannett Pacific to agree that the new owner would not have to invest in the capital equipment used in the newspapers' production. ER 6 at 60. When Liberty bought the Star-Bulletin, it did not want to purchase any of the physical assets used to produce the newspapers. Id. 8

    8 The District Court seems to have relied on an article in a weekly newspaper competitor of the JOA, which was outside the record, for its mistaken conclusion that Gannett "stripped" the Star-Bulletin of its assets. BR 6 at 28. That speculative article is incorrect. ER 7. The Court's "stripping" characterization misperceives a fundamental premise of the NPA: one benefit of joint operation is the ability to eliminate expenses by reducing duplicative and expensive capital investments.


Under the 1993 Amendment, Liberty obtained the right to receive guaranteed payments each year but took no financial responsibility for hard assets and took no risk that profits might decline. ER 8, Bernius Decl., Exh. B at 23-26. Liberty is also entitled to 3% of "Special Profits" -- profits the JOA has never been able to earn. ER 6 at 48; ER 11, Declaration of Wayne E. Cahill ("Cahill Decl.") at ' 21(b). Had Gannett Pacific not agreed to take full responsibility for the physical assets of the JOA (ER 8, Bernius Decl., Exh. B at 4), the Star-Bulletin would not have been published at all. ER 6 at 60.

As a consequence of the 1993 transactions, Gannett Pacific essentially became the "host" in the JOA: Gannett Pacific became solely responsible for all capital expenses, investments, and liabilities; held virtually all of the physical assets necessary to publish and distribute both newspapers; and, as the general partner of HNA, was granted sole authority and responsibility for managing the JOA's combined operations. ER 8, Bernius Decl., Exh. B at 11-23.

Under the 1993 Amendment, HNA sets advertising and circulation prices, handles advertising and circulation sales, prints the newspaper, and pays all expenses. HNA receives all revenues from operations. Gannett Pacific ultimately pays all expenses and bears all losses from the Star-Bulletin's operations. ER 8, Bernius Decl., Exh. B at 7. Liberty's obligation, consistent with the requirements of the NPA, is to prepare an editorially independent Star-Bulletin newspaper for publication. ER 8, Bernius Decl., Exh. B at 3, 10,17-18.

The 1993 Amendment provides that the JOA will terminate by 2012, unless continued or terminated. ER 8, Bernius Decl., Exh. B at 11. The 1993 Amendment obligates HNA to pay a total of $28,730,000 in guaranteed payments to Liberty over the period 2000-2012. ER 8, Bernius Decl., Exh. B at 23. In addition, HNA is required to reimburse Liberty for all of its editorial expenses, and to pay directly all the other expenses associated with printing, producing, distributing, selling and marketing the Star-Bulletin. ER 8, Bernius Decl., Exh. B at 11--23.

F. The 1999 Amendment Responds to the Star-Bulletin's Deterioration.

From 1993 to 1999, the performance of the Star-Bulletin worsened considerably. Though the Advertiser's circulation essentially remained steady, the Star-Bulletin's circulation declined 23%, from 87,683 in 1993 to 67,000 in 1999. ER 6 at 29; SRDS Circulation 94 at 318. The costs to HNA of producing the Star-Bulletin substantially exceeded the incremental revenues, resulting in an approximate $10 million annual loss to HNA attributable to publication of the Star-Bulletin. ER 6 at 26, 64. During the same period, the Hawaii economy entered a recession.9

    9 See Tom Kaser, ILWU Takes Membership Vote As Hawaii Prepares For Strike, Journal of Commerce, Oct. 20, 1999 at 20 (describing "Hawaii's reeling economy"); Todd S. Purdum, Its Economy Ailing, Hawaii Hangs Some Hopes on Hollywood, N.Y. Times, May 17, 1999 at A18; Laura Pavlenko Lutton, 3 Hawaiian Banks Track Lackluster Economy, The American Banker, Mar.11, 1998 (describing Hawaii's economy as "in a persistent slowdown").


Although the Star-Bulletin suffered significant operating losses (absorbed by HNA and, consequently, by Gannett Pacific), Liberty (the Star-Bulletin's owner) continued to receive its guaranteed payments. However, because Liberty determined that any prospect of receiving the hoped-for "Special Profits" had evaporated, Liberty concluded that it could make a greater return on its investment elsewhere, provided that it could convince Gannett Pacific to replace Liberty's guaranteed JOA income stream with a lump sum payment. ER 6 at 49. Accordingly, Liberty concluded that it was not in its best interest to continue to participate in the JOA, and asked Gannett Pacific to end the JOA arrangement in return for a single payment. ER 6 at 31, 44, 49.

Gannett Pacific's options in responding to Liberty's request were simple. One alternative was to stand pat: continue to pay Liberty $28.7 million in scheduled payments over 13 years, watch the Star-Bulletin's circulation decline, pay the Star-Bulletin's editorial expenses, and bear 13 years of escalating Star-Bulletin losses. The other option was to pay Liberty a lump sum that would extricate Gannett Pacific from the JOA, and thus save HNA, and Gannett Pacific, millions of dollars.

Based on their own independent economic motivations, therefore, the newspaper owners amended the JOA to provide for its termination on or before October 30, 1999, and for a payment from Gannett Pacific to Liberty of $26.5 million. ER 8, Bernius Decl., Exh. A at ' 1(b). That is less than the $28.7 million that HNA would have had to pay Liberty under the 1993 Amendment, and much less than the total of the payments Gannett Pacific would have had to make and the losses it would have absorbed from publication of the Star-Bulletin.

The 1999 Amendment was signed and timely filed with the Department of Justice, as required by 15 U.S.C. ß1803(a). The defendants thereafter undertook significant efforts to prepare for the JOA termination. ER 4, Fisch Decl. at 2--7. Those efforts have been halted by the injunction.

STANDARD OF REVIEW

A preliminary injunction will be reversed where the District Court abused its discretion or based its decision on an erroneous legal standard. Miller v. California Pacific Medical Center, 19 F.3d 449,455 (9th Cir. 1994). When the District Court is alleged to have relied on an erroneous legal standard, review is plenary. Id. Issues of law underlying the District Court's preliminary injunction are reviewed de novo. Id.


SUMMARY OF ARGUMENT

The District Court agreed that the issues presented on the motion before it were questions of law. ER 6 at 4.

The core legal issue on this appeal is whether, despite the NPA, the antitrust laws prohibit the parties from amending a newspaper JOA to end it, and instead require the newspapers to continue publishing and operating jointly, against their will and indefinitely. The antitrust laws do not. As a result, the Order granting a preliminary injunction supposedly preserving the status quo, prohibiting the defendants' implementation of the 1999 Amendment, and requiring the publication of two "quality" newspapers, must be vacated.

The 1999 Amendment is exempt from antitrust scrutiny. Congress expressly provided in the NPA that:

it shall not be unlawful under any antitrust law for any person to ... amend any joint newspaper operating arrangement entered into prior to the effective date of this Act. [July 24, 1970].

15 U,S.C. ß 1803(a). The 1999 Amendment falls squarely within that provision. The "NPA contains no temporal limitation." Bronster, 103 F.3d at 748. Indeed, the District Court's apparent rule that JOAs can only be lengthened, but never shortened, would discourage newspapers from entering into or extending a JOA, resulting in a loss of editorial voices which would thwart the purpose of the statute. The lower court's order ignores the cold reality of the economics of the newspaper business. At some point a JOA, like any other commercial arrangement, must be permitted to end. In fact, the Honolulu JOA has already continued seven years beyond the termination date that Congress approved for it.

Even apart from the NPA, the 1999 Amendment does not violate the antitrust laws. There is no agreement between Gannett Pacific and Liberty that Liberty will not publish the Star-Bulletin or sell it to anyone else. If Liberty does not publish the Star-Bulletin, or no one seeks to buy it, that will be because of market realities, not any agreement with Gannett Pacific. Gannett Pacific's payment to Liberty simply reflects the fact that it was cheaper for Gannett Pacific to pay Liberty to end the JOA than to make 13 years of guaranteed payments and bear 100% of the Star-Bulletin's continuing losses.

In any event, the 1999 Amendment cannot harm competition, because any economic competition between the newspapers ended in 1962 when the JOA was formed. The Sherman Act does not govern the competition of editorial voices, as urged by the State, and there are many such voices. Furthermore, there could be no antitrust injury from the 1999 Amendment because giving up an exemption from the antitrust laws (which permits conduct that the antitrust laws would otherwise prohibit) is not an injury the antitrust laws were intended to proscribe.

Moreover, the District Court's interpretation of the NPA cannot be accepted because it would render the NPA unconstitutional. Relying upon the NPA to require the Star-Bulletin to speak against its will, and forcing HNA to fund that speech, violates the First Amendment and constitutes a "taking" of defendants' property in violation of the Fifth Amendment. This Court should reject the District Court's reworking of the NPA, and construe it consistently with the demands of the Constitution.

Finally, the District Court's extraordinary order violates the First Amendment because, at the behest of the State, it imposes a vague content standard to which the editors and reporters must adhere under pain of contempt, and impermissibly singles out the Advertiser and Star-Bulletin for judicial control over their commercial and editorial operations.

ARGUMENT

I. THE 1999 AMENDMENT IS EXEMPT FROM THE ANTITRUST LAWS UNDER THE NPA

A. The NPA Expressly Provides That Amendments Are Exempt.

In enacting the NPA, Congress granted an automatic antitrust exemption for JOAs entered into prior to July 24, 1970, provided that, at the time of formation, "not more than one of the newspaper publications involved in the performance of such arrangement was likely to remain or become a financially sound publication." 15 U.S.C. ß l803(a).10 The NPA's antitrust exemption is robust. It permits the parties to combine their business operations into a single entity, ending all economic competition between them.11

    10 The Honolulu JOA, of course, meets that standard. City and County of Honolulu, 559 F. Supp. at 1032.
    11 The only limitation is that the parties may not do jointly what would be unlawful for them to do if they were a single entity. 15 U.S.C. ß 1803(c).


Most importantly, as the District Court recognized (ER 5 at 23), (he NPA specifically provides that amendments are exempt from the antitrust laws, so long as they (1) are filed with the Department of Justice, and (2) do not add a newspaper to the JOA:

It shall not be unlawful under any antitrust law for any person to perform, enforce, renew, or amend any joint newspaper operating arrangement entered into prior to July 24, 1970, if at the time at which such arrangement was first entered into, regardless of ownership or affiliations, not more than one of the newspaper publications involved in the performance of such arrangement was likely to remain or become a financially sound publication: Provided That the terms of a renewal or amendment to a joint operating arrangement must be filed with the Department of Justice and that the amendment does not add a newspaper publication or newspaper publications to such arrangement. 15 U.S.C. ß 1803(a) (underlined emphasis included in original; italics added).

The 1999 Amendment satisfies both requirements. It was filed with the Department of Justice, and it does not add a newspaper to the JOA. ER 8, Bernius Decl. ' 4 and Exh. A. Thus, under the NPA, both the initial JOA between these newspapers and the 1999 Amendment are exempt.

B. Nothing In The NPA Precludes Amendments Ending JOAs; And, If The NPA's Policy Is To Be Considered, The District Court's Decision Contravenes It.

Despite the NPA's express statement, the District Court refused to hold the 1999 Amendment exempt, because the JOA would be terminated "without Liberty having to publish the Star Bulletin for the next thirteen years." ER 5 at 23 (emphasis added). The result, it believed, was contrary to the statute's policy of preserving newspapers. ER 5 at 23-24. The District Court's nullification of the plain language of the NPA was error.12

    12 This Court has previously focused on the "plain meaning" of the NPA in interpreting it (Committee for an Independent P-I v. Hearst Corp., 704 F.2d 467, 478 (9th Cir. 1983)) and found that the "text of the NPA is simple, yet direct and pervasive." Bronster, 103 F.3d at 748. Because the statutory language is plain and unambiguous, citation to the NPA's policy statement is unnecessary. See lA Sutherland Stat. Const. ß 20.12 (5th ed. 1993 and Supp. 1999) ("The policy section like the preamble is available for the clarification of ambiguous provisions of the statute, but may not be used to create ambiguity. The declaration of policy like the preamble is not part of the substantive proportion of the statute" (footnotes omitted)).


1. The NPA Contains "No Temporal Limitation."

Nothing in the NPA provides that the parties to a JOA may not shorten it. As this Court held concerning this JOA, the "NPA contains no temporal limitation." Bronster, 103 F. 3d at 748 (emphasis added). Indeed, when Congress passed the NPA and grandfathered twenty-two existing JOAs -- including Hawaii's -- it set no minimum term for any of them. Those grandfathered JOAs undoubtedly had different durations. In fact, Congress itself recognized that JOAs would end (as indeed, other commercial arrangements do); otherwise, there would have been no need for it to exempt from the antitrust laws renewals of JOAs (15 U.S.C. ß 1803(a)). Congress also knew that some JOAs (again, like other commercial arrangements) might end at the option of the parties, potentially leaving one newspaper without the physical assets necessary for production.13 In fact, since the NPA's enactment, JOAs in Chattanooga, El Paso, Knoxville, Nashville, Pittsburgh, Shreveport and Tulsa have all been amended to provide for their termination before their previously agreed-upon end.14

    13 The Failing Newspaper Act: Hearings on S. 1312 Before the Subcomm. on Antitrust and Monopoly of the Senate Comm. on the Judiciary, 90th Cong. 425 (1967). Accord, id. at 136.
    14 Paul Farhi, The Death of the JOA,
    American Journalism Review (AJR), September 1999.
    2. The District Court's Order Contravenes The NPA's Purpose.


Even if the "purpose" of the NPA were appropriately invoked to contradict the unequivocal terms of the statute, the District Court erred. Orders like the one at issue in this case -- which require newspapers to stay in a JOA they wish to leave -- undermine the NPA's purpose by deterring other newspapers from entering into joint operating arrangements. In Florida Publications, Inc. v. The Miami Herald Publishing Co., No. 88-2421-CIV-MARCUS (S.D. Fla. 1988), as here, certain plaintiffs sought a preliminary injunction prohibiting the parties to a JOA from amending the arrangement to permit one newspaper to cease publishing through the JOA. The court found that the relief sought: might undermine the very purposes of the Newspaper Preservation Act and its effectiveness in encouraging newspaper joint operating agreements nationally. To grant the plaintiffs' motion would send a message, we think, or could, to struggling newspaper publications that they better beware before they enter into a joint operating agreement pursuant to the Newspaper Preservation Act. For once they enter into such an agreement, they may be enjoined from getting out. Id. at lO3.15

    15 A copy of the court's order and the hearing transcript in this case is included in the Addendum at Tab 4. Due to the size of the Addendum, it has been filed as a separate volume.


The District Court's apparent holding here that the term of a JOA may not be shortened beyond the longest period at any time agreed by the parties, if ever (see ER 5 at 16, 18, 24), would similarly contravene the purpose of the NPA by discouraging the creation of future JOAs, and by deterring parties in existing JOAs from ever extending them. Newspaper owners would let their failing competitors die rather than join with them in a JOA, and newspaper owners in JOAs -- particularly those who see themselves in the stronger position -- would not lengthen their term for fear of being trapped. The upshot would be a loss of editorial voices, not their preservation.

Moreover, the District Court's policy determination ignores a simple, but crucial fact: JOAs do end. Yet in its written decision, the District Court noted that the 1993 Amendment provides for a term through 2012 "with subsequent five-year extensions unless either party elects to cancel" (ER 5 at 9), and at oral argument, seemed to suggest that even such renewals could be mandated by the court. ER 6 at 33-35. Indeed, when asked how parties to a JOA may "exit from them," counsel for the State could only answer "that's an interesting question that I have not effectively resolved." ER 6 at 19.

The truth, however, is that JOAs do end. Although a JOA may help newspapers in financial distress, it cannot guarantee that the newspapers will last forever, or even for a specified term. The economics of the newspaper business are too unforgiving. That is why seven JOA afternoon newspapers stopped publication despite being in a JOA.16 Indeed in those cities, either immediately or shortly after termination of the JOA, one of the two former JOA newspapers went out of business.17 Yet the approach taken by the District Court would require newspaper owners to continue publishing, regardless of the financial consequences.

    16 See Farhi, Supra.
    17 See Id..


The only appropriate rule is this: the NPA duration "requirement" for a JOA is the duration upon which the parties to the Congressionally-sanctioned contract agree, either at the time they enter into the contract, or at such later time as they agree in an amendment. The District Court's gloss on the NPA is contrary to its language and its policy, and cannot stand.18

    18 In its opposition to a stay, the State relied on dictum in Bay Guardian v. Chronicle Publishing Co., 344 F. Supp. 1155 (N.D. Cal. 1972), that the NPA does not permit "the elimination of a newspaper in a JOA." State's Mem. in Opp. to Emergency Motion at 14-15. The court's dictum dealt with a claim early in the litigation that the San Francisco newspapers were not entitled to the NPA exemption for their JOA because, at its inception, that JOA provided that one of the Hearst newspapers, the News-Call Bulletin, would cease publication. The court noted that "[i]t is a matter of evidence to be determined at trial whether the conduct of the defendants while entering their joint operating agreement bars them from the protection of the act." Id. at 1159. Not surprisingly, at the trial the exemption was sustained despite the closing of the News-Call Bulletin. See "Newspaper Suit Cleared," Washington Post, June 17, 1981, at D16.


C. The JOA Has Lasted Longer Than The Time Grandfathered -- And Thus Deemed Acceptable -- by Congress.

The District Court's rejection of the NPA's exemption must be reversed for an additional reason: it ignores the undisputed facts of this case. When Congress passed the NPA, the Honolulu JOA provided for a thirty year term. Congress granted an exemption to that (and other) existing JOAs. Without post-1962 amendments, the Honolulu JOA would have terminated seven years ago, in 1992.

It does not violate the antitrust laws to end a JOA which has already lasted longer than the time period that Congress, by grandfathering it, deemed appropriate.

In Hearst, this Court wrote that "we will not emasculate the Act [NPA] in the guise of narrowly construing it." 704 F.2d at 483. Such an emasculation, however, is what the District Court's decision would accomplish here. The rationale of the decision below must therefore be rejected. JOA amendments which shorten the terms of JOAs, or which end JOAs, are entirely lawful under the NPA. The NPA exempts the 1999 Amendment from the antitrust laws.19

    19 The NPA similariy preempts the State's claims under Hawaii's antitrust laws. As this Court held, in passing the NPA, Congress exempted this JOA from all direct or indirect state regulations within the NPA's antitrust exemption. Bronster, 103 F.3d at 749.


II. EVEN APART FROM THE NPA, THE 1999 AMENDMENT DOES NOT VIOLATE THE ANTITRUST LAWS.

The District Court concluded as a matter of law that the State was likely to succeed on three violations of the Sherman Act -- restraint of trade in violation of Section 1; conspiracy to monopolize in violation of Section 2; and attempted monopolization in violation of Section 2 -- and the parallel provisions of Hawaii antitrust law.20

    20 The Hawaii antitrust laws are construed in accordance with the interpretations of the federal antitrust laws. ER 5 at 14 n.7 (citing Robert's Hawaii School Bus., lnc. v. Laupahoehoe Transp. Co., Inc., 91 Haw. 224, 247 (1999)). See also Haw. Rev. Stat. ß 480-3 (1999).


Boiled down, the Court's analysis was that (1) the "Star-Bulletin was stripped of its operating equipment and assets in 1993" (ER 5 at 16, 21); (2) Gannett Pacific's payment to Liberty to end the JOA is "essentially. . . a buyout of its sole competitor" (ER 5); and (3) the result would be a loss of competition in the "sale of daily newspapers and their differing editorial and reportorial voices," in the sale of advertising, and for the "output" of "creators of news, editorial, and entertainment content." ER 5 at 19. The District Court's analysis fails on all three grounds, however, and its decision cannot stand.

A. No Assets Were "Stripped."


As a threshold matter, there was no "stripping" of assets. Instead, keenly aware of the economics of the newspaper industry, Liberty chose not to buy an undivided share of the JOA's productive assets which would carry with it the attendant obligation to maintain and improve those assets. ER 6 at 59-60. The resulting relationship between the parties is an arrangement, typical in other JOAs, whereby Gannett Pacific through HNA, holds the JOA's physical assets (there is only one printing press) and runs the newspapers' business operations. Thus, the 1993 Amendment did not effect a sinister "stripping of the [Slar-Bulletin's] assets." Instead it simply converted the JOA to a variation of a common "host-tenant" joint agency, which allowed the Star-Bulletin to continue to be published. ER 6 at 60. As even the State concedes, the "joint printing" of newspapers is "potentially procompetitive." State's Mem. in Opp. to Emergency Motion at 13, n. 4.

B. There is No Agreement to Stop the Star-Bulletin from Publishing.

There is no agreement that the Star-Bulletin will not publish. The 1999 Amendment between Gannett Pacific and Liberty is in the record. ER 8, Bernius Decl., Exh. A. That six-page document contains no covenant not to compete. Liberty is free, if it wishes, to publish the Star-Bulletin or to sell the Star-Bulletin's assets. The 1999 Amendment contains no restriction whatsoever on any potential sale, and provides for no purchase by Gannett Pacific of the Star-Bulletin's assets. Those assets are returned to Liberty. ER 8, Bernius Decl., Exh. A at 4.

The 1999 Amendment specifically provides that it "constitutes the entire agreement of the Parties" and that there "are no other agreements written or oral ..." ER 8, Bernius Decl., Exh. A at 6. Indeed, the record is devoid of any evidence, despite the publicity accompanying the announced termination of the JOA, that anyone offered to purchase the Star-Bulletin from Liberty and operate it as a newspaper. ER 7.

Moreover, there is nothing untoward in Gannett Pacific's payment of $26.5 million to Liberty. As discussed above, Gannett Pacific had a simple choice: pay Liberty the guaranteed $28.7 million over 13 years, pay all of the Star-Bulletin's editorial expenses, and absorb all of the Star-Bulletin's losses -- or pay Liberty $26.5 million now. It quite understandably chose the latter course, and there is nothing in the antitrust laws or in the NPA that requires it to sustain an additional 13 years of multimillion dollar losses. As defendants acknowledged below, it is likely that the Star-Bulletin will not publish again as a daily newspaper. ER 6 at 32, 44. But if Liberty chooses not to publish the Star-Bulletin as a daily newspaper, or if no other buyer comes forward to do so, that will be because of the hard reality of the marketplace -- which has caused the demise of afternoon newspapers nationwide -- not the agreement of the parties. It was the inability of metropolitan areas to support multiple newspapers that caused Congress to pass the NPA in the first place. Bronster, 103 F.3d at 744. And the JOA was formed in 1962 because Honolulu could not support two daily newspapers. City and County of Honolulu, 559 F. Supp. at 1032.

C. There Is No Harm To Competition In A Relevant Market Because There Is No Competition Between The Star-Bulletin And Advertiser.

To succeed on its claims, the State must prove that competition is harmed in a relevant market. See Adaptive Power Solutions v. Hughes Missile Systems, 141 F.3d 947, 951-52 (9th Cir. 1998) (injury to competition required to establish antitrust claim).

As a threshold matter, the State has not put forward any facts from which one could conclude, as it alleges, that "English daily newspapers on the island of Oahu" is a relevant antitrust market. ER 12 at '' 10--11. Indeed, there is no evidence in the record that newspapers do not compete across the board with television, radio, other print media, Internet and other electronic publications. It was the State's burden on this motion to establish the market it alleged, and its failure to do so, by itself, requires that the preliminary injunction be reversed. See FTC v. Tenet Health Care Corp., 186 F.3d 1045 (8th Cir. 1999) (reversing preliminary injunction in antitrust case where plaintiff did not establish relevant market).

Furthermore, even under the purported "market" the State alleges, the Amendment cannot harm competition for a simple reason: there is no economic competition between the Advertiser and the Star-Bulletin now. All such competition ended more than 37 years ago when the JOA was formed. Under the JOA, the Advertiser and Star-Bulletin are and have been a single economic entity. The Advertiser, as general parmer of HNA, has the responsibility to "control, supervise, manage and perform all operations (other than the news and editorial operations of Advertiser and Star-Bulletin) involved in producing, printing, selling and distributing the Newspapers" -- including, among other things, fixing ad rates, setting newspaper prices, selling ads, promotion, and distribution. ER 8, Bernius Decl., Exh. B at 11-15. Ending the JOA cannot eliminate competition, because the Star-Bulletin and the Advertiser have not competed since 1962.

The District Court's thrice-repeated view that there would be a "loss of competition for advertisers" (ER 5 at 22; accord at 16 and 19) is thus plainly erroneous. Under the JOA, there is only one sales force selling ads and setting ad prices. HNA pays Liberty a specified amount each year, and Gannett Pacific receives the profit or loss. There is no difference to Gannett Pacific's or Liberty's bottom line if an advertiser pays $10 to place an ad in one newspaper or the other. ER 8, Bernius Decl., Exh. B at 11-15. In fact, the NPA was passed precisely so that newspapers could eliminate advertising and other commercial competition between themselves. See Add., Tab 3, Newspaper Preservation Act: Debate on S.1520 Before the Senate, Cong. Rec. 1815 (Jan. 29,1970) (statement of Sen. McIntyre).

The District Court similarly erred in its legal conclusion that the 1999 Amendment would eliminate competition in the "sale of daily newspapers and their differing editorial and reportorial voices." ER 5 at 19. As discussed above, there is no competition now for the revenues from the sale ofnewspapers -- all the money goes in the same pocket. That situation is no different from the Star-Bulletin and the Advertiser being commonly owned.

Furthermore, competition in editorial and reportorial voices which of course, must encompass all media, not just newspapers 21 -- is not the economic competition reached by the Sherman Act. The "trade or commerce" which the antitrust laws seek to protect is "commercial competition in the marketing of goods or services," Apex Hosiery Co v. Leader, 310 U.S. 469,495 (1940), not non-economic social values. The Sherman Act: was enacted in the era of "trusts" and of "combinations" of businesses and of capital organized and directed to control of the market by suppression of competition in the marketing of goods and services, the monopolistic tendency of which had become a matter of public concern. The end sought [by these laws] was the prevention of the restraints to the competition in business and commercial transactions which tended to restrict production, raise prices or otherwise control the market to the detriment of purchasers or consumers of goods and services, all of which had come to be regarded as a special form of public injury. Id. at 492-93 (emphasis added). The Sherman Act does not extend to noncommercial matters.22 Simply put, the Sherman Act is described as a "charter of economic liberty" (Northern Pacific R.R. Co. v. United States, 356 U.S. 1,4-5 (1958)), and is not a charter for the State of Hawaii to control competition in the marketplace of ideas.

    21 In Honolulu alone, numerous media entities compete with the Advertiser and Star-Bulletin. In addition to print publications (Honolulu Weekly, Honolulu Magazine, Island Business, Midweek, Contemporary Pacific, Hawaii Business, Honolulu Magazine, Island Business, Pacific Business News, Voice of Hawaiåi), satellite and cable media sources, and the Internet, there are seven television stations (KBFD-TV 32, KGMD-TV 9, KHET-TV 11, KHON-TV 2, KIKV-TV 20, KITV-TV 4, KWHE-TV 14) and 23 radio stations (KAIM-FM 99.5, KAIM-AM 870, KCCN-AM 1420, KCCN-FM 100.3, KDEO-FM 102.7, KGU-AM 760, KHPR-FM 88.1, KIKI-AM 990, KIKI-FM 93.9, KIPO-FM 89.3, KISA-AM 1540, KKUA-FM 90.7, KULT-AM 1040, KNDI-AM 1270, KPOI-FM 97.5, KQMQ-AM 690, KQMQ-FM 93.1, KSSK-AM , KSSK-FM 92.3, KTUH-FM 90.3, KUMU-FM 94.7, KWAI-AM 1080, KZOO-AM 1210). 1 Kristen B. Mallegg, ed., Gale Directory of Publications and Broadcast Media 459-63 (133rd ed., 1999); SRDS Circulation 99.
    22 See, e.g., Smith v. National Collegiate Athletic Association, 139 F.3d 180, 185 (3d Cir.1998) (Sherman Act did not apply to NCAA's eligibility rules which were "not related to commercial or business activities"), vacated on other grounds, 525 U.S. 459 (1999); Dedication and Everlasting Love to Animals V. Humane Societv, 50 F.3d 710 (9th Cir. 1995) (Sherman Act is inapplicable to competition for charitable contributions). Indeed, even critics of the NPA have noted, "Antitrust law deals with commercial competition, and from this point of view a joint operating arrangement and a complete merger are the same because both end all commercial competition." Anita M. Carlson, Note, The Newspaper Preservation Act: The Seattle Application, 1982 U. Ill. L. Rev. 669, 674 n.40 (1982).


The District Court also suggested that the 1999 Amendment could cause a loss of competition for "creators of news, editorial and entertainment content" in the State of Hawaii. ER 5 at 16. There is nothing in the record to support this theory. "Creators of news, editorial and entertainment content" have any number of purchasers to whom to sell -- both in Hawaii and out, including suburban, community, and other newspapers, magazines, radio, television, internet publications, and wire services. Any theoretical effect on such "creators" is de minimis, and cannot establish an antitrust claim. See Adaptive Power Systems, 141 F.3d at 95 1 (to constitute an injury to competition, the restraint must be "of significant magnitude" . . . and "more than trivial." (internal citations omitted)).

Indeed, the termination of the JOA, if anything, should increase competition. Afier termination, if Liberty (or any subsequent owner) thinks the market would support it, it would be free to publish the Star-Bulletin in any form it chooses. If, as the District Court believes (and is likely because of the economics of the newspaper business) the owner of the Star-Bulletin were to choose not to publish as a daily newspaper, the Star-Bulletin might operate on the Internet, as it does now. Furthermore, as opponents of the NPA suggested (in arguing it would be better to let newspapers fail than form JOAs), the Star-Bulletin's closure would make it easier for other types of publications, such as weeklies, suburban newspapers (and today, on-line and desk-top publications) to enter.23

    23 "It can be assumed, said Mr. McLaren in opposing the pending Congressional legislation, åthat new competition will be more likely to enter a newspaper market occupied by one publisher, even though he publishes morning and evening papers, than it will be a market with separate and ostensibly independent publishers bound together in an agreement to eliminate commercial competition."' Add., Tab 3, The Newspaper Preservation Act: Debate on S.1520 Before the Senate, Cong. Rec. 1817 (Jan. 29-30, 1970). See also id, at 1996, 2012.


The 1999 Amendment cannot harm competition,24 because there is no competition between the Advertiser and Star-Bulletin now.

    24 The District Court's Order could be read to suggest that it believed that harm to competition is not an element of the State's conspiracy to monopolize claim. See ER 5 at 19. In Nynex Corp. v. Discon, Inc., 525 U.S. 128, 119 S. Ct. 493 (1998), the Supreme Court remanded a conspiracy to monopolize claim, noting that "[u]nless those agreements [which formed the basis of the claim] harmed the competitive process, they did not amount to a conspiracy to monopolize." 119 5. Ct. at 500 (emphasis added).


D. There Is No Antitrust Injury.

Even if a plaintiff establishes an antitrust violation, the plaintiff must still prove "antitrust injury" -- defined as injury "of the type the antitrust laws were intended to prevent and that flows from that which makes defendants' acts unlawful." Cargill, Inc. v. Monfort of Colorado, Inc., 479 U.S. 104, 113 (1986) (citing Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977)). The antitrust injury requirement applies to all antitrust claims brought under Sections 4 and 16 of the Clayton Act (Cargill, 479 U.S. at 113) and regardless of whether the challenged conduct is unlawful per Se. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328 (1990). The purpose of the antitrust injury requirement, of course, is to make sure that a plaintiff cannot obtain relief unless competition is harmed. "The antitrust injury requirement ensures that a plaintiff can recover only if the loss stems from a competition-reducing aspect or effect of the defendant's behavior." Atlantic Richfield, 495 U.S. at 344 (emphasis in original); see Adaptive Power Solutions, 141 F.3d at 951 (the "alleged injury must be caused by a reduction, rather than an increase, in competition resulting from the restraint" (citation omitted)).

There cannot be any antitrust injury here, because, as discussed above, the 1999 Amendment, if anything, increases competition - it does not reduce it. Furthermore, the conduct challenged by the State is defendants' abandonment of an exemption from the antitrust laws -- an act which cannot logically or reasonably be deemed anticompetitive.

III. THE DISTRICT COURT'S INTERPRETATION OF THE NPA WOULD RENDER IT UNCONSTITUTIONAL

The courts have a duty to interpret and apply federal statutes so as to avoid creating constitutional issues. DeBartolo Corp. v. Florida Gulf Coast Bldg. & Constr. Trades Council, 485 U.S. 568 (1988); Eastern R.R. v. Noerr Motor Freight, Inc., 365 U.S. 127 (1961). The District Court's invocation of the "policy" of the NPA to countermand the specific wording of that statute violates this constitutional tenet.

As an inescapable consequence of its view of the "purpose" of the NPA, the District Court ordered defendants to continue to publish the Star-Bulletin, notwithstanding their unwillingness to do so, and notwithstanding the millions of dollars of incremental losses that such publication would entail. The lower court's NPA reasoning has inevitably resulted in an injunction that violates the First and Fifth Amendment rights of defendants. The District Court's statutory interpretation underpinning the injunction is accordingly unacceptable.

First, the injunction requires the defendants to publish an entire newspaper against their will, and consequently violates the newspapers' constitutional right not to engage in speech. The First Amendment protects the right not to speak as forcefully as it protects the right to speak, since "the right to speak and the right to refrain from speaking are complementary components of the broader concept of åindividual freedom of the mind."' Wooley v. Maynard, 430 U.S. 705, 714 (1977) (emphasis added) (citations omitted). Indeed, silence can be "deafening." United States v. Gray, 177 F.3d 86, 90 (1st Cir. 1999). Ordering parties to a JOA to continue to publish a newspaper when they do not wish to do so violates their "right to refuse to speak." Florida Publications, Inc. v. The Miami Herald Publishing Co., No. 88-2421-CIV-MARCUS (S.D. Fla. 1988), Tr. at 103-104 (Dec.30, 1988).

In Miami Herald Pub. Co. v. Tornillo, 418 U.S. 241(1974), the Court struck down a Florida "right of reply" statute that merely required a newspaper to offer responsive editorial space to political candidates who had been criticized by the newspaper. The Court held unequivocally that publishers may not be forced to "publish that which åreason tells them should not be published."' Id. at 256 (citation omitted). The District Court's interpretation of the NPA forces Liberty to prepare, and Gannett Pacific to fund, an entire newspaper which "reason" tells Liberty should not be published. The lower court has therefore construed the NPA to conflict with the First Amendment.25

    25 The District Court mistakenly dismissed all First Amendment concerns by relying on Associated Press V. United States, 326 U.S. 1(1944) (plurality opinion). In Associated Press, however, the Court carefully noted that the injunction at issue, unlike the order in this case, did "not compel AP or its members to permit publication of anything which their 'reason' tells them should not be published." Id. at 20 n.18.


In addition, although it acknowledged that Gannett Pacific "may lose money due to the Star~Bulletin's operating losses" (ER 5 at 4), the District Court relied on the NPA to order those newspaper losses to continue. Again, its construction violates the First Amendment, which protects newspapers against incurring even the small costs "in printing and composing time and materials" resulting from occasional forced publication of editorials. Miami Herald Pub. Co., 418 U.S. at 255.

Moreover, the District Court ordered defendants to bear the expense of publishing the Star-Bulletin in order to satisfy the State's apparent objectives of full employment and diverse editorial voices. ER 5 at 32-33; ER 12 at 9. The Order thus constitutes a "taking" which violates the Fifth Amendment. One of the principal purposes of the takings clause is to bar government from forcing individuals to bear burdens that should be borne by the public as a whole. Dolan v. Citv of Tigard, 512 U.S. 374, 384 (1994); Armstrong v. United States, 364 U.S. 40, 44 (1960). Governmental regulation that goes "too far" in imposing burdens on individual citizens, as opposed to the citizenry as whole, is a taking. Lucas v. South Carolina Coastal Council, 505 U.S. 1003, 1015-16 (1992); Pennsylvania Coal Co. v. Mahon, 260 U.S. 393, 415 (1922). The lower court's view of the NPA imposes upon defendants, and defendants alone, the financial and managerial burdens of securing the State's professed goals of a diversity of Hawaii editorial voices and a sustained level of employment in the Hawaii newspaper industry. By imposing that burden on defendants alone, the District Court has imposed an unconstitutional exaction. Dolan, 512 U.S. at 385; Nollan v. California Coastal Comm ån, 483 U.S. 825 (1987).

It is indeed ironic that the purported rationale for an injunction that destroys a newspaper's constitutional rights lies in a statute, the purpose of which is to maintain "a newspaper press editorially and reportorially independent." 15 U.S.C. ß 1801. The District Court's interpretation of the NPA cannot be reconciled with the Constitution, and accordingly must be rejected.

IV. THE ORDER OTHERWlSE VIOLATES THE FIRST AMENDMENT


By its terms, the preliminary injunction requires defendants "to produce high quality newspapers" and to "improve acceptance for their advertisers." ER 5 at 32. The preliminary injunction is thus a content-related edict, which inevitably acts as a prior restraint on publication, and violates the First Amendment.

There can be no real dispute that the injunction is content-related. Although it contains no precise political regimen, its context is the District Court's insistence that the Star-Bulletin persist as adequate "competition" to the Advertiser for "news, editorial, and entertainment content." ER 5 at 5. Defendants, moreover, have been ordered to produce "high quality" newspapers that maintain their "individuality." The inescapable effect of the injunction is to force newspaper editors to contemplate contempt of court, in addition to assessing traditional news issues, before approving the content of news and editorials for publication. Even though the terms of the injunction are taken principally from the terms of the 1993 Amendment (ER 8, Bernius Decl., Exh. B at 2), there is a world of difference between a newspaper's own commitment to "quality," and a court order mandating a governmental standard of "quality" under the threat of contempt. That difference is what the First Amendment is all about:

The choice of material to go into a newspaper, and the decisions made as to limitations on the size and content of the paper, and treatment of public issues and public officials -- whether fair or unfair -- constitute the exercise of editorial control and judgment. It has yet to be demonstrated how governmental regulation of this crucial process can be exercised consistent with First Amendment guarantees of a free press as they have evolved to this time. Miami Herald Pub. Co., 418 U.S. at 258.

Moreover, the injunction's insistence upon a "high quality" publication is so vague as independently to violate defendants' First Amendment rights. A statute or court order is unconstitutionally vague if persons of "common intelligence must necessarily guess at its meaning and differ as to its application." Connally V. General Construction Co., 269 U.S. 385, 391(1926); Smith V. Goguen, 415 U.S. 566, 572-73 (1974). The District Court's "quality" standard is entirely subjective. No newspaper editor can discern its meaning with any degree of assurance. The injunction therefore forces editors to steer wide of the forbidden zone and violates the First Amendment. Baggelt v. Bullitt, 377 U.S. 360, 372 (1964).

Finally, the injunction violates the First Amendment because it isolates the defendant newspapers and subjects them alone to special regulation.

The District Court concluded that because defendants "availed themselves of the exemptions under the Newspaper Preservation Act," they are "not a typical free enterprise situation where the owner of a business wishes to close it." ER 6 at 61. Defendants, however, did not abandon their First Amendment rights by entering into the JOA. The premise of the District Court's regulation applies only to defendants, and if upheld has the potential to punish the specific editorial content in their newspapers. Targeting the press for special regulation violates the First Amendment. Minneapolis Star and Trihune Co. v. Minnesota Comm år of Revenue, 460 U.S. 575, 585 (1983). Targeting groups within the press for special regulation also violates the First Amendment. See Arkansas Writers' Project v. Ragland, 481 U.S. 221, 229 (1987); Grosjean v. Am. Press Co., 297 U.S. 233, 244-245 (1935). There is no "special characteristic" of the press which warrants the individual regulation of defendants. See Turner Broadcasting System v. FCC, 512 U.S. 622, reh'g den., 512 U.S. 1278(1994).

Because the particular terms of the preliminary injunction violate the First Amendment, the orders from which this appeal is taken must be reversed.

CONCLUSION

For the aforementioned reasons, the State's complaint is without merit, and the District Court wrongly concluded, as a matter of law, that the State had demonstrated a likelihood of success on the merits. The orders from which this appeal are taken should therefore be reversed.

Moreover, the injunction is causing irreparable injury to defendants, since the "loss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury." Elrod v. Burns, 427 U.S. 347, 373 (1976). There is no cognizable antitrust injury to the State. Since the balance of hardships thus tips in favor of defendants, the preliminary injunction cannot be upheld.

AUTHORITIES

FARELLA, BRAUN & MARTEL LLP

By:
Douglas R. Young
Grace K. Won
30th Floor, Russ Building
235 Montgomery Street
San Francisco, California 94104
(415) 954-4400
Attorneys for Gannett Pacific Corporation

NIXON PEABODY LLP
Robert C. Bernius
John Stuart Smith
Gordon L. Lang
One Thomas Circle, Suite 700
Washington, D.C. 20005
(202) 457-5300
Attorneys for Gannett Pacific Corporation

GOODSILL ANDERSON QUINN & STIFEL
John R. Lacy
Lisa Woods Munger
AIii Place, Suite 1800
1099 Makea Street
Honolulu, Hawaii 96813
(808) 547-5600
Attorneys for Gannett Pacific Corporation and Hawaii Newspaper Agency

KING & BALLOW
Alan L. Marx
1100 Union Street Plaza
Nashville, Tennessee 37201
(615) 259-3456
Attorney for Liberty Newspapers Limited Partnership

DAMON KEY LEONG KUPCHAK HASTERT
Diane D. Hastert
Suite 1600, 1001 Bishop Street
Honolulu, Hawaii 96813
(808) 533-2242
Attorney for Liberty Newspapers Limited Partnership


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