Las Vegas Sun story claiming victory in Review-Journal litigation omits major point

On a day that Las Vegas was full of presidential caucus and debate excitement, as well as presence of President Trump, the Las Vegas Sun this morning stripped this all-caps headline across the top of the front page of the Las Vegas Review-Journal, obliged by a joint operating agreement to print: “R-J ORDERED TO PAY SUN FOR IMPROPER ACCOUNTING PRACTICES.”

The story in the Sun, which is distributed as a section inside the RJ, said that state District Judge Timothy C. Williams had upheld an arbitration ruling ordering the RJ to pay the Sun $1.9 million. The Sun had claimed, among other things, that the RJ, which collects all advertising and circulation revenue for the two papers, improperly included its own editorial expenses from 2015 to 2018 before calculating how much cash flow should go to the Sun under a formula in a JOA agreement revised in 2005. That agreement, a revision of one originally negotiated in 1989, runs until 2040.

For some reason, the RJ, owned since 2015 by conservative Republican billionaire casino magnate and Trump supporter Sheldon Adelson, did not publish a story about this. But if it had, the paper might have pointed out what to me when I looked at the court file today was a rather glaring omission in the account in the Sun, founded in 1950 by the liberal Democratic and anti-Trump Greenspun family. In his order, based on a January 28 filing, Williams also upheld a finding by the unnamed arbitrator that the RJ did not engage in bad faith or unfair dealings in its relationship with the Sun.

This is more than a little thing. The Sun and the RJ currently are squaring off in somewhat parallel lawsuits in state and federal court. In the federal court case, the Sun is making all kinds of claims about bad faith against the RJ under the guise of the federal antitrust law exemption that allows purportedly competing newspapers to sell ads and subscriptions together, so long as their news and editorial operations are separate. In my view the Sun‘s federal case is pretty weak–as I have said previously, like letting a bank robber sue a confederate over division of spoils. Indeed, the federal magistrate judge hearing the case has stayed discovery, including taking a deposition of Adelson, pending a ruling on motions by the RJ to toss the entire matter. Not a good sign for the Sun.

A one-time payment of $1.9 million from the RJ to the Sun–and possibly a little more based on the outcome of an audit over how promotional expense accounting was handled–isn’t going to buy the Sun a lot of time. The Sun has complained in court papers it had not received a cash-flow payment from the RJ since 2017. As a result it has severely cut back its operation to the point where it has more lawyers than news reporters.

Under the formula in the 2005 amended JOA that made the failing Sun a section of the more prosperous RJ in exchange for 10% of the cash flow, the papers divvied up a $121 million-a-year cash-flow pie, according to a court filing. That was several RJ ownerships before Adelson’s and also before the meltdown of newspaper classified advertising thanks to Craigs List.

But since Adelson’s acquisition of the RJ in 2015, the year before I became New To Las Vegas, print and digital circulation of the combined paper has plummeted 69%, from 232,000 to less than 73,000. Yet, unless he reaches a deal with the Sun‘s ownership, Adelson remains remains stuck with the amended JOA agreement. I imagine the RJ legitimately has a negative cash flow of millions of dollars a year. If so, the RJ might well have a legally defensible basis to keep paying bupkis to the Sun–and to keep doing the stuff that the Sun claims is unfair.

Much of the case remain a mystery, since the two newspapers, supposedly committed by the ethos of their calling to openness, have filed motions to keep secret part of the court record. But it is an absolute fact that almost all of the several dozen newspapers JOAs created around the country over the past century have collapsed. Usually, the weaker paper went away, either because its ownership didn’t want to keep taking losses, or the owners of the stronger paper put it out of it misery with a payment that’s often a pittance. Another bad sign for the Sun.

We can now return to presidential politics.

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