MediaNews Group, Inc. v. McCarthey

494 F.3d 1254, 35 Media L. Rep. (BNA) 2099, 2007 U.S. App. LEXIS 17936, 2007 WL 2153228
CourtCourt of Appeals for the Tenth Circuit
DecidedJuly 27, 2007
Docket06-4132
StatusPublished
Cited by23 cases

This text of 494 F.3d 1254 (MediaNews Group, Inc. v. McCarthey) is published on Counsel Stack Legal Research, covering Court of Appeals for the Tenth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
MediaNews Group, Inc. v. McCarthey, 494 F.3d 1254, 35 Media L. Rep. (BNA) 2099, 2007 U.S. App. LEXIS 17936, 2007 WL 2153228 (10th Cir. 2007).

Opinion

LUCERO, Circuit Judge.

Philip, Thomas, Sarah, Shaun, and Maureen McCarthey (the “McCartheys”) seek to enforce a collateral oral agreement allegedly guaranteeing their individual right to repurchase The Salt Lake Tribune (“Tribune ”) from its current owner, Me-diaNews Group, Inc. (“MediaNews”), for fair market value. Because the McCar-theys’ oral contract claims are superceded by written contracts to substantially the same effect, they are barred by the parol evidence rule and the statute of frauds. Accordingly, we conclude that the district court properly dismissed their claims. Exercising jurisdiction under 28 U.S.C. § 1291, we AFFIRM.

I

From 1901 until 1997, descendants of Senator Thomas Kearns controlled Salt Lake City’s largest daily newspaper, the Tribune, through their collective ownership of shares in the Kearns-Tribune Corporation (“KT”), a holding company for the newspaper and other assets. 1 Although ownership of KT grew more diffuse over the years, the McCarthey family retained the largest block of its stock, comprising approximately 39% of all outstanding shares. These shares were held individually and in trust by Jane McCarthey and her five children. For all practical purposes, ownership of those shares allowed the McCarthey family to veto'prospective changes to the ownership and operation of the Tribune. In addition, three of the McCarthey siblings, Philip, Sarah, and Thomas, served on the KT Board of Directors.

Family control of the paper persisted for decades, in part because some Kearns descendants felt an obligation to maintain the Tribune’s role as an independent voice in Utah. Long-time KT executive and McCar-they family advisor Jack Gallivan was explicitly entrusted with the duty to maintain the Tribune’s independence by Jennie Kearns, widow of Senator Kearns. Yet by 1995, if not somewhat earlier, a series of developments drove the family to sell their stake in KT. Over the years, the value of *1258 KT stock had risen exponentially, primarily due to KT’s ownership of a founding stake in Tele-Communications, Inc. (“TCI”). Gallivan was instrumental in the decision to invest in TCI, and he maintained a close relationship with TCI’s founders, John Malone and Robert Magness, throughout the company’s meteoric rise from a tiny Western cable and microwave operator into one of the largest telecommunications companies in the United States. By the mid-1990s, KT’s stake in TCI was worth several hundred million dollars and exceeded the value of all of KT’s other assets combined, including the Tribum. However, KT could not easily liquidate that stake because the shares were largely in the form of unmarketable “Super-B” voting stock. Moreover, KT shareholders could only sell their shares to other shareholders or back to the corporation, which had limited funds to buy shares. These restrictions on sale were one of several aspects of KT’s ownership structure designed to maintain family control of the company. Thus, although KT shares were valuable on paper, there was little shareholders could do to realize those gains. In addition, as several major shareholders (notably Jane McCarthey) grew older, the family sought greater liquidity in order to reduce its massive potential estate tax exposure. Finally, TCI itself wanted to buy KT’s “Super-B” shares for reasons related to corporate control.

Starting in 1995, these developments prompted Gallivan, Malone, and Magness to propose a merger of KT into TCI in exchange for readily marketable TCI common stock. From the start, all three men understood that continued McCarthey family control of the Tribune was a precondition to any merger. Whereas other KT shareholders were less committed to control of the Tribune, the MeCartheys were adamant about preserving family ownership.

Despite the assurances provided by Gal-livan to the MeCartheys that they would retain control of the Tribune after the merger, they remained deeply skeptical. When TCI presented a merger plan to the KT Board in January 1997, the MeCar-theys alone opposed it. That rejection prompted renewed negotiations between the MeCartheys, Gallivan, Malone, and other KT and TCI principals. The end result of those negotiations was a switch in the MeCartheys’ position toward the merger, such that they voted in February and April of 1997 to approve it.

A set of written documents memorialized the merger: (1) the Voting Agreement, which committed several of the largest KT shareholders to vote their shares in favor of the merger; (2) the Merger Agreement, which set forth the terms under which the two companies would merge; (3) the Proxy Statement, which was provided to all KT shareholders, and described the terms and intended results of the proposed merger; (4) the Option Agreement, which provided a newly organized company, Salt Lake Tribune Publishing Company, L.L.C. (“SLTPC”), with an option to purchase the Tribune from KT in five years, under certain terms; and (5) the Management Agreement, which gave SLTPC the right to manage the Tribune during the five-year period before the right to repurchase vested. TCI and the relevant shareholder signatories entered into the Voting Agreement on April 18, 1997, and the Merger Agreement was executed the same day. KT and SLTPC then entered into the Option and Management Agreements on July 31, 1997. The Voting Agreement, Option Agreement, and Management Agreement all contain integration clauses. Collectively, the written agreements represent a finely calibrated, thoroughly lawyered attempt to ensure the MeCartheys’ right to enjoy uninterrupted control of the Tribune, and to regain ownership at the end of five years, while still *1259 abiding by rules governing a 26 U.S.C. § 368 tax-free merger under the tax code and relevant regulations.

In 1999, TCI merged with AT & T Corporation. Soon thereafter, AT & T decided that ownership of the Tribune did not fit with its strategic goals, and began exploring its options to sell the paper. Des-eret News Publishing Company (“DNPC”), publisher of the Deseret News, the Tribune’s primary competitor in the Salt Lake City market, considered purchasing the Tribune from AT & T. Both papers had operated since 1952 under a Joint Operating Agreement (“JOA”), which provided for shared ownership of most of the plant and equipment used to produce the two papers, as well as consolidated business operations. The Newspaper Agency Corporation (“NAC”) was formed to implement the JOA, and its ownership is split between KT and DNPC. DNPC, owned by the Church of Jesus Christ of Latter-day Saints, sought ownership of the Tribune for both economic and political reasons. The record demonstrates the Church instructed Glen Snarr, publisher of the Des-eret News, to pursue assiduously what it viewed as an historic opportunity to remove a source of negativity toward the Church. Snarr and other DNPC executives also believed the profitability of the Deseret News

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494 F.3d 1254, 35 Media L. Rep. (BNA) 2099, 2007 U.S. App. LEXIS 17936, 2007 WL 2153228, Counsel Stack Legal Research, https://law.counselstack.com/opinion/medianews-group-inc-v-mccarthey-ca10-2007.