A decision today by a King County Superior Court judge throws a roadblock before Seattle's two daily newspapers and their attempt to settle their long-running legal dispute by binding arbitration.

Judge Greg Canova rejected a motion from The Seattle Times Co. and the Hearst Corp. to freeze their legal cases while they move their case into arbitration. In doing so, Canova accepted arguments by a third party, the Committee for a Two-Newspaper Town, to reject the companies' motion to stay all legal proceedings in the lawsuit Hearst filed three years ago tomorrow until the arbitrator rules.

The decision came after Canova heard oral arguments from all three parties this afternoon.

The committee has filed claims against both papers. To put them on hold until the arbitration is completed "would deprive [the committee] of its right to litigate," Canova said.

Officials of The Times Co. and Hearst, owner of the Seattle Post-Intelligencer, said they didn't know immediately what their next move will be. In late March, they said they planned to to take the case before an arbitrator, former Superior Court Judge Larry Jordan. Those hearings would be closed to the public.

Under terms The Times and Hearst worked out, Jordan would make a decision within 14 months. The decision could not be appealed.

The dispute centers on an escape clause in the JOA that allows either party to demand negotiations to close one paper if either has a financial loss – as calculated by a formula in the contract – in three consecutive years.

In April 2003, The Times notified Hearst that it had losses in 2000, 2001 and 2002, triggering the clause. That gave both parties 18 months to negotiate the closing of the P-I or terminating the JOA.

But, on the day before the notice, Hearst filed suit in Superior Court challenging the validity of the losses in each of those years. In September of that year, Canova ruled in Hearst's favor on losses for 2000 and 2001, but a three-judge panel of the state Court of Appeals overturned that decision. The state Supreme Court affirmed the appeals court ruling.

Meanwhile, the 18-month clock was stopped until all legal proceedings were exhausted. The case remained largely silent for seven months until the end of March, when The Times and Hearst both announced the decision to go to binding arbitration. Under the arbitration agreement, Jordan would rule on the validity of The Times' "loss notice" covering 2000 to 2002 and two similar notices it filed later — for 2002 to 2004 and 2003 to 2005 — by May 31, 2007. While the proceedings would be secret, Jordan would be required to produce a "reasoned decision" that would be made public.

The Committee for a Two-Newspaper Town, citing the "public interest," at first said it wanted to be part of the arbitration proceedings, something The Times and Hearst said they would oppose. It then asked the court to reject the joint move by the newspaper companies to put court proceedings on hold.

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