320 F.3d 1081 (10th Cir. 2003), 02-4126, Salt Lake Tribune Pub. Company., LLC v. At & T Corp.

Docket Nº:02-4126, 02-4165.
Citation:320 F.3d 1081
Party Name:SALT LAKE TRIBUNE PUBLISHING COMPANY, LLC, Plaintiff-Appellant, and James E. Shelledy, as editor and administrator of news gathering for The Salt Lake Tribune; The Salt Lake City Weekly; KUTV; KUTV Holdings; KTVX-TV; Clear Channel Communications, Plaintiffs-Intervenors, v. AT & T CORPORATION; AT & T Broadband & Internet Services, LLC; Deseret News
Case Date:February 24, 2003
Court:United States Courts of Appeals, Court of Appeals for the Tenth Circuit

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320 F.3d 1081 (10th Cir. 2003)



James E. Shelledy, as editor and administrator of news gathering for The Salt Lake Tribune; The Salt Lake City Weekly; KUTV; KUTV Holdings; KTVX-TV; Clear Channel Communications, Plaintiffs-Intervenors,


AT & T CORPORATION; AT & T Broadband & Internet Services, LLC; Deseret News Publishing Company; Medianews Group, Inc.; and Kearns-Tribune, LLC, Defendants-Appellees.

Nos. 02-4126, 02-4165.

United States Court of Appeals, Tenth Circuit

February 24, 2003

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[Copyrighted Material Omitted]

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Seth P. Waxman, Wilmer, Cutler & Pickering, Washington, DC, (A. Stephen Hut, Jr., Patrick J. Carome, Jennifer M. O'Connor, Rachael A. Hill, Luke A. Sobota, Wilmer, Culter & Pickering, Washington, DC; Gary F. Bendinger, Milo Steven Marsden, Jeffrey S. Williams, Lisa R. Petersen, Bendinger, Crockett, Peterson & Casey, Salt Lake City, UT; Daniel M. Reilly, Barbara Z. Blumenthal, Sean Connelly, Hoffman, Reilly, Pozner & Williamson LLP, Denver, CO, with him on the briefs) for Plaintiff-Appellant.

Kevin T. Baine, Williams & Connolly LLP, Washington, DC and David J. Jordan, Stoel Rives, Salt Lake City, UT, (Victoria Radd Rollins, Paul B. Gaffney, Jennifer G. Wicht, Katherine P. Chiarello, Williams & Connolly LLP, Washington, DC; James S. Jardine, Allan T. Brinkerhoff, Ray, Quinney & Nebeker, Salt Lake City, UT; Jill M. Pohlman, Stoel Rives, Salt Lake City, UT; Alan L. Sullivan, Todd M. Shaughnessy, Snell & Wilmer

LLP, Salt Lake City, UT, with them on the briefs) for Defendants-Appellees.

Before TACHA, Chief Judge, EBEL, and O'BRIEN, Circuit Judges.

EBEL, Circuit Judge.

The parties in this case are involved in a continuing fight over the ownership and control of The Salt Lake Tribune, the largest newspaper in Utah. The principal shareholders of the plaintiff, Salt Lake Tribune Publishing Co. ("Tribune Publishing"), once owned The Tribune, and Tribune Publishing sued the defendants seeking enforcement of a contract giving it an option to purchase the assets of the newspaper. MediaNews Group ("Media-News"), through its wholly owned subsidiary Kearns-Tribune LLC ("KTLLC"), is the current owner of the assets of The Tribune, and KTLLC and MediaNews have defended against the lawsuit by arguing that Tribune Publishing's option contract to repurchase the assets of The Tribune is unenforceable. Deseret News Publishing Co. ("Deseret News"), which is owned by the Church of Jesus Christ of Latter-Day Saints and publishes the newspaper that is The Tribune's chief competitor in Salt Lake City, has joined the action claiming that a separate contract between it and KTLLC—a Joint Operating Agreement pursuant to which KTLLC and Deseret News share certain newspaper business operations—forecloses Tribune Publishing's ability to enforce performance of its option contract against KTLLC.

This case has not yet reached trial. Before us is Tribune Publishing's appeal of the district court's denial of its request for a preliminary injunction. The injunction sought would have allowed Tribune Publishing to continue managing The Tribune, which it had been doing since 1997 under a management agreement with KTLLC that

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expired on July 31, 2002. Related to our review of the denial of the preliminary injunction is the question certified for appeal by the district court pursuant to 28 U.S.C. § 1292(b), and appealed by Tribune Publishing, of whether a provision of the Joint Operating Agreement purporting to prohibit the transfer of certain stock is void as against public policy. We have jurisdiction pursuant to 28 U.S.C. §§ 1292(a)(1) and 1292(b).

In resolving these appeals, we make four principal rulings. First, we conclude that the stock transfer restriction in the JOA is valid and enforceable under Utah law. Second, we conclude that the district court has subject matter jurisdiction over the case. Third, we hold that the district court did not abuse its discretion in denying Tribune Publishing's motion for a preliminary injunction. Fourth, despite these three rulings, we conclude that there is a substantial likelihood that Tribune Publishing will prevail at trial on the merits of its claim of the right to acquire the assets of The Tribune. We therefore reverse the district court's holding to the contrary, which was relied upon as an alternative ground for denying the preliminary injunction motion.

Accordingly, we AFFIRM in part and REVERSE in part the district court's order denying the preliminary injunction.


In 1997, The Salt Lake Tribune was owned by the Kearns-Tribune Corporation, the principal shareholders of which were members of the Kearns-McCarthey family. Members of the family, descendants of Utah mining magnate and U.S. Senator Thomas Kearns, had owned and published The Tribune for more than a century. In April 1997, however, the shareholders of the Kearns-Tribune Corporation decided to sell Kearns-Tribune Corporation to cable company Tele-Communications, Inc. ("TCI"), while receiving an option to repurchase the assets of The Tribune at a later date. The transaction was motivated by the shareholders' desire to realize the economic value of what had become Kearns-Tribune Corporation's most valuable asset—approximately $400 million in TCI stock—while preserving control over and ultimately reacquiring the assets of The Tribune by the Kearns-McCarthey family.

To achieve these objectives, members of the Kearns-McCarthey family formed the plaintiff company, Tribune Publishing. Contemporaneously with the sale of Kearns-Tribune Corporation to TCI, Tribune Publishing negotiated two contracts with Kearns-Tribune Corporation: a Management Agreement and an Option Agreement. The Management Agreement appointed Tribune Publishing as the exclusive agent of Kearns-Tribune Corporation to manage and operate The Tribune for a period of five years ending on July 31, 2002. This Agreement provided for automatic renewal unless it was terminated by one of the parties. The Option Agreement gave Tribune Publishing the right "to purchase all, and not less than all . . . of the assets used, held for use or usable in connection with the operation and publication of The Salt Lake Tribune." The first date upon which the option could be exercised was August 1, 2002, five years after the date of the execution of the Option Agreement.

Two aspects of the exercise date of the Option Agreement are important to this case. First, the earliest date for exercise of the option (August 1, 2002) was one day after the expiration of the Management Agreement (July 31, 2002), should one of the parties to the Management Agreement terminate that agreement before it was automatically renewed. Second, upon exercise of the option by Tribune Publishing,

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the Option Agreement provides for an interim period prior to the closing of the option transaction of up to 120 days, during which the parties may use a specified appraisal process to determine the exercise price of the option. Because there is no necessary overlap between the termination date of the Management Agreement and the closing date for the purchase of the Tribune Assets under the Option Agreement, there was always the potential for Tribune Publishing to be ousted as manager of The Tribune even as it was preparing to buy the assets of the newspaper.

This possibility has now occurred. In January 2002, KTLLC notified Tribune Publishing that it was terminating the Management Agreement. The Management Agreement therefore expired on July 31, 2002, and KTLLC assumed control of The Tribune. Then, on August 1, 2002, Tribune Publishing notified KTLLC that it was exercising its option to purchase the Tribune Assets. Tribune Publishing is thus no longer the manager of The Tribune even as it seeks to enforce its option to buy the assets of The Tribune.

This state of affairs is due, at least in part, to transactions that occurred after Kearns-Tribune Corporation was bought by TCI. In 1999, TCI merged with AT & T Corporation, giving AT & T control over Kearns-Tribune Corporation. As part of the TCI-AT & T merger, Kearns-Tribune Corporation became a limited liability company, Kearns-Tribune LLC (hereinbefore designated as KTLLC), and assumed all of the rights and responsibilities of Kearns-Tribune Corporation. AT & T thereafter sold KTLLC to MediaNews, its current owner, in 2001. It was the prospect of the sale of KTLLC to MediaNews that prompted Tribune Publishing to begin this litigation by filing a complaint against AT & T in the United States District Court for the District of Utah in December 2000. The complaint alleged that the sale of KTLLC to MediaNews would interfere with Tribune Publishing's rights under the Option Agreement and it sought injunctive and declaratory relief and damages.

The district court did not stop AT & T's sale of KTLLC to MediaNews, in part because the sale documents recognized and preserved Tribune Publishing's rights under the Option and Management Agreements. MediaNews bought KTLLC, which as noted above owned The Tribune, for $200 million in January 2001. Despite the sale of KTLLC, the litigation continued. Tribune Publishing has amended its complaint several times since then, and it currently seeks damages from and injunctive relief against MediaNews, KTLLC, and Deseret News for, among other things, breach of contract, interference with prospective economic relations, and breach of the duty of good faith and fair dealing.1

As the termination date of the Management Agreement approached (July 31, 2002), Tribune Publishing moved for a preliminary injunction that would prevent MediaNews or KTLLC from ousting Tribune Publishing as manager of The Tribune. The district court denied that motion on July 22, 2002, nine days before the termination date. Tribune Publishing filed a notice of appeal on the...

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