IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF HAWAII
CIVIL NO.99-00687 SPK
DECLARATION OF MICHAEL J. FISCH IN SUPPORT OF APPLICATION TO STAY OR SUSPEND PRELIMINARY INJUNCTION PENDING APPEAL
STATE OF HAWAII, etc.,
Plaintiff
vs.
GANNETT PACIFIC CORPORATION, et al.,
Defendants.
DECLARATION OF MICHAEL J. FISCH IN SUPPORT
OF APPLICATION TO STAY OR SUSPEND
PRELIMINARY INJUNCTION PENDING APPEAL
MICHAEL J. FISCH, hereby declares:
1. I am the President of Gannett Pacific Corporation, the publisher of The Honolulu Advertiser newspaper, and the President of Hawaii Newspaper Agency Limited Partnership (hereinafter referred to as "HNA").
2. In 1962, The Honolulu Advertiser and the Honolulu Star-Bulletin entered into a joint newspaper operating arrangement ("JOA"), which was amended and restated in 1993.
3. On September 7, 1999, Gannett Pacific Corporation and Liberty Newspapers Limited Partnership ("Liberty"), the owners respectively of The Honolulu Advertiser and the Honolulu Star-Bulletin, and the partners in HNA, entered into an agreement to amend further the JOA agreement by changing the termination date to October 30, 1999 and providing for an orderly termination of the JOA agreement (hereinafter referred to as "the Amendment").
4. Under the JOA agreement, HNA, not Gannett Pacific Corporation or Liberty, is responsible for selling subscriptions to both the Honolulu Star-Bulletin and The Honolulu Advertiser, and for communicating with the subscribers for both newspapers. HNA is responsible for selling advertising in both newspapers and communicating with advertisers in both newspapers. Also, HNA: (i) prints, produces and distributes both newspapers, (ii) retains the employees necessary to carry out those functions, and (iii) contracts with independent contractors to distribute the newspapers.
5. In light of the announced termination of the JOA, and prior to the issuance of the preliminary injunction, HNA had been in constant and extensive communication with its readers, advertisers, employees and distributors concerning the impact of the termination on them and future plans. Those activities must continue if HNA is to meet its contractual obligations, in many cases, and to meet the expectations of our various constituencies, in every case.
6. The preliminary injunction issued by the Court, which enjoins HNA and its partners to "preserve the status quo" and prohibits any further steps to implement the Amendment, has an immediate and substantial effect on HNA, its readers, advertisers, employees and distributors.
7. The following steps to implement the Amendment, which had been under way prior to the preliminary injunction, appear to be prohibited under the terms of the preliminary injunction:
PERSONAL MATTERS
A. HNA had been engaging in "effects bargaining" with the employee unions, including the discussion of operational changes at HNA and the impact on our collective bargaining agreements. Further effects bargaining appears to be prohibited.
B. HNA, at our unions' request, was conducting surveys of employees who might be interested in voluntary layoffs. Further surveys appear to be prohibited.
C. HNA was establishing outplacement services for employees whose jobs would be eliminated as a result of the termination of the JOA. As a result of these efforts, some employees have already received and accepted job offers from other places and others were in the middle of negotiations. Some made these decisions with the expectation of special severance payments associated with the termination of the JOA. The preliminary injunction appears to require HNA to terminate outplacement services.
D. HNA had begun negotiation of severance payments for employees whose jobs were affected and was preparing other benefits such as vacation cash outs, pension plan benefits, medical benefits, and unemployment claims processing. Further negotiations or calculation of benefits packages appear prohibited.
E. HNA was planning for the dissolution of HNA and the creation of a new entity to hire former HNA employees, which again involved effects bargaining with our unions, as well as interviewing potential new employees, creating and registering the new entity, and establishment of insurance policies and benefit plans for the new entity. This process must result in the hiring of or transferring of 700-800 employees. The process appears to be prohibited.
CIRCULATION MATTERS
F. HNA has sent notices of termination to approximately 800 newspaper carriers, dealers, and agents responsible for distributing both the Honolulu Star-Bulletin and The Honolulu Advertiser and has offered them cash incentives to stay on through October 31, 1999. It is unclear if HNA must try to rescind these notices or may contract with regard to the period beginning November 1, 1999.
G. HNA was redesigning the circulation routes and recontracting approximately 800 independennt contractors for The Honolulu Advertiser delivery routes, in order to better serve former Honolulu Star-Bulletin subscribers. This redesign appears to be prohibited.
H. HNA has stopped sending bills to approximately 50,000 Honolulu Star-Bulletin subscribers. HNA is concerned about sending bills or selling subscriptions to the Honolulu Star-Bulletin when we don't expect to be able to honor them.
I. Before the preliminary injunction, HNA communicated to each of the subscribers of the Honolulu Star-Bulletin about options to either receive The Honolulu Advertiser in fulfillment of their existing contracts or to receive a cash refund. HNA also communicated with the Hawaii Department of Consumer Affairs to make sure the Department was aware in advance of our plans for dealing with our Honolulu Star-Bulletin subscribers. Further communications appear to be prohibited, including communications intended to encourage Honolulu Star-Bulletin readers to become The Honolulu Advertiser readers.
J. HNA had been recruiting new carriers to cover new and vacated newspaper distribution routes caused by the announced termination of the JOA. It is unclear what HNA can say to these new carriers.
K. HNA offered special discounts for subscriptions in The Honolulu Advertiser. It is unclear if these discounts may continue.
PRODUCTION MATTERS
L. HNA had begun planning for new production schedules, including bargaining with the unions on those new schedules. Further planning appears prohibited.
M. HNA was in the process of hiring six new pressroom apprentices for single-cycle operations. This hiring appears prohibited.
N. HNA was in the middle of hiring 25 new part-time inserters in the mailroom for single-cycle operations. This hiring appears prohibited.
O. HNA was working on changing work shifts in order to accommodate new single-cycle printing schedules. Those shift changes appear prohibited.
P. HNA was in the middle of discussions with the affected personnel and unions, in the camera, imaging, and composing departments involved in publishing both newspapers. Further discussions appear prohibited.
ADMINISTRATION MATTERS
Q. HNA was writing new computer programs, including redesigned newspaper distribution routes and revision of advertising information to eliminate Honolulu Star-Bulletin historical information. Further redesign or revision appears prohibited.
R. HNA was making changes in payroll personnel systems and reprogramming our accounting systems. These changes appear to have to be undone.
S. HNA was in the process of purchasing and installing a new program designed for rerouting our circulation. The purchase may need to be suspended.
T. HNA was purchasing new computer terminals for customer service applications.
U. HNA was implementing systems to revamp the budgeting process. This implementation may need to be suspended.
ADVERTISING MATTERS
V. HNA was engaged in extensive communications with our advertisers including advising of the elimination of a planned advertising rate increase in light of the Amendment. The impact of the order on these plans is uncertain.
W. HNA had begun offering special advertising incentives to advertisers. It is unclear if they can continue.
X. HNA had prepared new advertising rate cards and was preparing to distribute then to the market.
Y. HNA changed advertising deadlines in contemplation of not having available an evening newspaper. The order's effect on these changed deadlines is uncertain.
Z. HNA held meetings with advertisers to determine how it could continue to meet their advertising needs. It is unclear if HNA will be able to implement the results of those meetings.
AA. HNA had entered into extensive media advertising contracts to make the public aware of our new plans for The Honolulu Advertiser. It is unclear what use HNA can make of those media buys at this time.
8. In order to implement many of these steps, HNA was required to give advance notice. For example, both HNA and Liberty have been or will be required to give notices under the Hawaii Dislocated Workers' Act.
9. If HNA is required to suspend the sort of activities set forth above, it will be impossible to implement the Amendment on October 30, 1999.
10. In addition, if HNA continues to be prohibited from communicating with our readers, advertisers, employees and distributors about our plans, there will be continued confusion in the market, which will adversely affect readers and advertisers and seriously impair our goodwill. HNA competes with television, radio, cable TV, weekly newspapers, business publications, specialized publications, shoppers and other media for the business of advertisers. There can be no doubt that our media competition will continue to capitalize on that confusion. Similarly, freezing HNA to the "status quo" would hinder our ability to compete.
11. As stated in the Amendment, the incremental costs to HNA of producing the Honolulu Star-Bulletin substantially exceed the incremental revenues derived from the continued publication of the Honolulu Star-Bulletin. Accordingly, if the preliminary injunction remains in effect, HNA will continue to incur substantial additional losses.
12. The breadth and nature of the preliminary injunction means that virtually any business decision made by HNA could be second-guessed, on pain of contempt, if the State disagrees with the decision and asserts that it violated the terms of the preliminary injunction.
13. Every aspect of publishing the newspapers is in constant change. The newspapers themselves are new each day. The needs of readers constantly change and we must react to them on a daily basis. For example, HNA must constantly relocate newsracks to spots where it is more likely that consumers will buy newspapers. The State has already objected to that practice.
14. Under these circumstances, it is impossible to "preserve the status quo."
I declare under penalty of law that the foregoing is true and correct. Executed on October 15, 1999.
(SIGNED)
MICHAEL J. FISCH