JUDGE GRANTS CLINT REILLY'S REQUEST FOR PRELIMINARY INJUNCTION

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By G.W. Schulz

In a short decision released just hours ago, federal judge Susan Illston granted Clint Reilly's request to enjoin the Hearst Corp. and MediaNews Group from discussing any cooperative agreements until Reilly's antitrust complaint against the two companies and other business partners goes to trial next April.

Reilly and his attorney, Joe Alioto, had requested the preliminary injunction (after the first request was denied because a $300 million Hearst investment in MediaNews stock had not yet technically been consummated) arguing that the defendants had withheld from the court a letter outlining how the two companies might be able to share delivery trucks and advertising efforts, discussions that Reilly believed threatened antitrust rules.

The defendants told the judge in response to Reilly's second request that between the date of the letter and now, they had not held further discussions about combining such business functions. But as we reported last week, Hearst and MediaNews had together recently purchased a paper in southern California called the Daily Breeze for $25 million and intended to buy another in the northeastern United States that in court filings had gone unnamed.

Hearst also revealed recently in court that it had last year asked MediaNews to print the San Francisco Chronicle and that MediaNews intended to utilize a Hearst-owned Shared Services Center in North Carolina to handle some of its accounting.

Denver-based MediaNews already owned several papers in the Bay Area before purchasing the Contra Costa Times and the San Jose Mercury News earlier this year from the Sacramento-based McClatchy Company. The purchases enabled MediaNews to secure near-complete control over the newspaper establishment in the Bay Area. Its only remaining competitor, Hearst and the Chronicle, have throughout the years been a business partner of MediaNews CEO William "Lean" Dean Singleton.

While Illston acknowledges the defendants' assurances that no conversations involving the content of the April 26 letter had taken place since that time, she wished to do some serious house cleaning.

From her decision:

"The court is concerned that denying the preliminary injunction may leave defendants unsure of whether they are free to immediately pursue such agreements. The April 26 letter is in the form of a potentially binding agreement, and defendants have expressed the desire, if not the intent, to pursue the cooperative agreements discussed in the letter. The court therefore wants to leave no confusion as to its expectation that defendants will comply with their stated intent not to pursue any of the agreements at issue; the only way to do so is to issue the preliminary injunction."

Here's a link to the judge's decision.

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