Medianews Group, Inc. v. McCarthey

• Decision Date: 24 April 2006
• Docket Number: No. 2:03-CV-176 TC.,2:03-CV-176 TC.
• Citation: 432 F.Supp.2d 1213
• Court: U.S. District Court — District of Utah
• Parties: MEDIANEWS GROUP, INC., and Kearns-Tribune, LLC, Plaintiffs/Counterclaim Defendants, v. Philip G. McCARTHEY, Thomas K. McCarthey, Sarah J. McCarthey, Shaun P. McCarthey, and Maureen P. McCarthey, Defendants/Counterclaim and Third-Party Plaintiffs, v. DESERET NEWS PUBLISHING COMPANY; Deseret Management Corporation; AT & T Corporation; Comcast Corporation; Dirks, Van Essen & Murray; Gary Gomm; and John/Jane Does 1-25, Third-Party Defendants.

432 F.Supp.2d 1213

MEDIANEWS GROUP, INC., and Kearns-Tribune, LLC, Plaintiffs/Counterclaim Defendants, v. Philip G. McCARTHEY, Thomas K. McCarthey, Sarah J. McCarthey, Shaun P. McCarthey, and Maureen P. McCarthey, Defendants/Counterclaim and Third-Party Plaintiffs, v. DESERET NEWS PUBLISHING COMPANY; Deseret Management Corporation; AT & T Corporation; Comcast Corporation; Dirks, Van Essen & Murray; Gary Gomm; and John/Jane Does 1-25, Third-Party Defendants.

No. 2:03-CV-176 TC.

United States District Court, D. Utah, Central Division.

April 24, 2006.

COPYRIGHT MATERIAL OMITTED

James S. Jardine, Allan T. Brinkerhoff, Ray Quinney & Nebeker, Salt Lake City, UT, Paul B. Gaffney, Suzanne H. Woods, Williams & Connolly, Washington, DC, for Plaintiffs.

E. Barney Gesas, Matthew A. Steward, Jennifer A. James, Clyde, Snow, Sessions & Swenson, John T. Anderson, Thomas R Karrenberg, Stephen P. Horvat, Anderson & Karrenberg, Salt Lake City, UT, for Defendants.

David J. Jordan, David J. Williams, Jill M. Pohlman, Mark E. Hindley, Stoel Rives, R. Willis Orton, Christopher S. Hill, Kirton & McConkie, Alan L Sullivan, Todd M. Shaughnessy, Snell & Wilmer, Salt Lake City, UT, for Counter Defendants.

ORDER AND MEMORANDUM DECISION

CAMPBELL, District Judge.

Plaintiffs Kearns-Tribune, LLC (KTLLC) and MediaNews Group, Inc. (MNG) currently own the newspaper The Salt Lake Tribune. But the Tribune used to be owned by the Kearns-Tribune Corporation (KTCorp), which was controlled by the Defendants (and siblings) Philip, Thomas, Sarah, Shaun, and Maureen McCarthey (the McCartheys' great grandfather acquired the Tribune in 1901). The McCartheys want the newspaper back.

At the center of this controversy is what the McCartheys call the "Family Agreement." According to the McCartheys, the Family Agreement is a collateral oral agreement formed in connection with a 1997 merger between the Tribune's thenowner KTCorp and Tele-Communications, Inc. (TCI). They claim that they have individual rights to re-purchase the newspaper through an option created by the Family Agreement. The McCartheys claim that the Family Agreement—purportedly between the individual members of the McCarthey family on the one hand, and KTCorp and TCI on the other hand— has been breached. The parties opposing the McCartheys' claims primarily contend that no such enforceable Family Agreement exists separate and apart from written merger-related documents.

KTLLC and MNG filed this declaratory judgment action to resolve the McCartheys' claims.¹ In response to the complaint, the McCartheys filed counterclaims against MNG and KTLLC and filed a third-party complaint against Deseret News Publishing Company (DNPC) (publisher of a competitor newspaper in Utah) Deseret Management Corporation (DMC) (owner of DNPC); AT & T Corporation (former owner of the Tribune); Comcast Corporation (former owner of the Tribune in connection with AT & T); Dirks, Van Essen & Murray (newspaper broker and appraiser); and R. Gary Gomm (a former DNPC consultant).

This matter comes before the court on the Plaintiffs/Counterclaim Defendants' and Third-Party Defendants' motions to dismiss or for summary judgment.² For the reasons set' forth below, the court holds, based on the undisputed factual evidence and integration clauses in the written merger documents, that no collateral oral Family Agreement exists. And even if such an agreement was formed, it is unenforceable because it violates the Statute of Frauds. As a consequence of the court's ruling regarding the Family Agreement, and for other reasons as well, the McCartheys' remaining tort and equitable claims fail as a matter of law. Accordingly, the Plaintiffs/Counterclaim Defendants' Motion for Summary Judgment and the Third-Party Defendants' motions to dismiss or for summary judgment are granted.

FACTUAL BACKGROUND³

In 1995, a merger between KTCorp and TCI was initially proposed. At the time, KTCorp owned The Salt Lake Tribune. Merger discussions continued through 1996. The McCartheys, who collectively were shareholders and directors of KTCorp, had enough stock and voting power as a group to vote down the proposed merger. And they were ready to use their power to defeat the merger because they did not want to lose their family legacy in the Tribune. In fact, during a January 23, 1997 KTCorp Board meeting on the proposed merger, the "no" vote of the McCarthey siblings on the board (Thomas, Philip, and Sarah) prevented any merger plans from going forward.

After the proposed merger was voted down by the three McCarthey siblings, John Gallivan—who was a member of the KTCorp and TCI boards, as well as trustee of a McCarthey family trust and advisor to the McCartheys—negotiated on behalf of the McCartheys a "deal" with John Malone, CEO of TCI, under which the McCartheys agreed to vote for the merger if certain conditions were met by KTCorp and TCI. According to the McCartheys, Mr. Gallivan and Mr. Malone were "accustomed to dealing with [each other] on a handshake basis . . . [and] it was not necessary to reduce their mutual understandings and agreements to writing." (McCartheys' Opp'n to KTLLC/MNG Mot. Summ. J. [hereinafter "McCartheys' Opp'n"] ¶ 24.)

That "deal" formed the rough contours of what the McCartheys now allege is the Family Agreement. Generally, they claim that in exchange for their agreement to vote for the merger and convey their KTCorp shares, they were promised that a new entity, yet to be created by them, would be given an option to re-purchase the Tribune at fair market value five years later, during which time the new entity would continue to manage the newspaper.

The McCarthey board members then changed their stance and voted in February 1997 and April 1997 to approve the proposed merger based on the assurances that Mr. Gallivan communicated to them from Mr. Malone. The merger was eventually approved by the KTCorp Board and the KTCorp shareholders.

The merger transaction was memorialized, in relevant part, in five written documents: the Voting Agreement, the Merger Agreement, the Proxy Statement, the Management Agreement, and the Option Agreement. First, on April 18, 1997, TCI and certain majority shareholders of KTCorp entered into the Voting Agreement. The shareholder signatories to the Voting Agreement were James P. Kearns, Loretta M. Kearns (as Trustee under the Patricia Louis Kearns Trust), and, most important, Jane McCarthey (as Trustee under the McCartheys' Qualified Terminable Interest Property (QTIP) Trust for the benefit of Jane, Thomas, Philip, Sarah, Shaun, and Maureen McCarthey). Jane McCarthey, the mother of the McCarthey siblings, signed the Voting Agreement at the urging of her children. The parties to the Voting Agreement agreed that the signatory shareholders would vote their shares in favor of the merger and that TCI would enter into the Merger Agreement with KTCorp. On the same day, TCI and KTCorp executed the Merger Agreement.

Also in April 1997, the McCartheys, along with a few other individuals associated with KTCorp, formed the Salt Lake Tribune Publishing Company, LLC (SLTPC) for the specific purpose of carrying out the objectives of the deal associated with the merger (that is, to enter into and carry out the Option and Management Agreements). From 1997 to 2000, the McCarthey Family LLC (current members are Philip, Thomas, and Sarah McCarthey) was a member of SLTPC and held forty percent of the company (four other owners held the remaining sixty percent). Since 2000, the McCarthey Family LLC has held ninety percent of SLTPC. Although Shaun and Maureen McCarthey, the other siblings, may have been involved in the formation of SLTPC, they have no ownership or management interests in SLTPC.

On July 2, 1997, KTCorp issued the Proxy Statement to its shareholders. The Proxy Statement disclosed the details and anticipated results of the proposed merger.

On July 31, 1997, KTCorp and SLTPC entered into the Option Agreement, which gave SLTPC an option to purchase the Tribune five years later. Then KTCorp and SLTPC entered into the Management Agreement, which allowed SLTPC to manage the Tribune until it could exercise its 2002 option to purchase the newspaper.

But events did not occur as the McCartheys had planned.⁴ Now, almost nine years after the merger, neither SLTPC nor the McCartheys own the Tribune. (Instead, MNG purchased the Tribune in 2001.) A bitter dispute arose. Much litigation has ensued, this case being one of three lawsuits filed in this district alone.

PROCEDURAL BACKGROUND

In this lawsuit KTLLC and MNG seek a declaration "that the Defendants—Philip, Thomas, Sarah, Shaun and Maureen McCarthey—have no individual rights to acquire The Salt Lake Tribune separate and apart from the rights that [SLTPC] has under the Option Agreement." (KTLLC/MNG's Mot. Summ. J. at 1.) KTLLC and MNG contend that the McCartheys have raised every claim already asserted by their company SLTPC in the related cases of Salt Lake Tribune Publishing Company v. AT & T Corporation, Case No. 2:00-CV-936-TC (D.Utah) (the "AT & T case"), and Salt Lake Tribune Publishing Company v. Management Planning Inc. Case No. 2:03-CV-565-TC (D.Utah) (the "MPI case"). KTLLC and MNG assert that the McCartheys may not re-litigate the issues from the other cases, recasting the same claims as individual claims.

The McCartheys, in their counterclaim, assert seven causes of action against KTLLC and MNG: (1) Breach of Express Contract (that is, breach of the "Family Agreement"); (2) Breach of the Covenant of Good Faith and Fair Dealing; (3) Interference with Prospective Economic Advantage; (4) Civil Conspiracy; (5) Aiding and Abetting Interference with Contract; (6) Promissory Estoppel; and (7) Unjust Enrichment (requesting constructive trust and partition).

In their Third-Party Complaint, the McCartheys assert five causes of action against the various Third-Party Defendants: (1) Interference with Contract (that is, interference with the ...