Thursday, March 25, 2010

Campbell Loses First Skirmish Over Control of the Indy, But Fights Back

Randy Campbell, publisher and majority owner of the Independent, won't be selling any of his interest in the paper. At least not anytime soon. On March 18, Santa Barbara Superior Court Judge Denise de Bellefeuille granted editor and minority owner Marianne Partridge's petition for a temporary restraining order and ordered Campbell not to directly or indirectly sell or otherwise dispose of his shares of stock in the weekly Santa Barbara newspaper.

Partridge's application for a temporary restraining order is but one battle in the larger war over control of the Independent.

On March 12 Campbell filed an answer and cross-complaint in response to Partridges' breach of contract lawsuit. He generally denied the allegations of Partridge's complaint and countered with allegations of his own alleging that Partridge was guilty of breach of contract, breach of her fiduciary duty to the corporation and breach of the covenant of good faith and fair dealing, which is a term that is implied in every contract that means that neither party will do anything to deprive the other party of the fruits of the agreement.

Based upon his answer to Partridge's complaint and the allegations contained in his own cross-complaint, it appears that Campbell is mounting a three-pronged defense to the allegation that he was required to sell his majority stake in the Independent to Partridge.

First of all, Campbell maintains, that there was never an offer to sell his shares that was capable of being accepted. According to his pleadings in the case:

(Partridge) brought this action based upon her mistaken belief that Campbell is required to sell to her his 51% interest in the Independent. Southland (the company that prints the Independent) offered to buy all of the shares of the Independent, and Campbell indicted his tentative willingness to vote his shares to sell the paper. Partridge incorrectly asserts that she matched the offer made to the Independent. The offer was to purchase all of the shares of the Independent, not just Campbell's, In fact, Southland would not have purchased only Campbell's shares. Campbell's notice provided that he would sell his shares pursuant to the terms of the Southland proposal. Thus, plaintiff never matched any purported offer made by Campbell.

In short, Campbell denies that the Southland proposal to acquire all of the stock of the Independent triggered any right of first refusal.

In his pleadings filed with the court, Campbell says that the buy-sell agreement required that each shareholder who acquires shares pursuant to the agreement must do so with their own funds. He alleges that Partridge told him, on several occasions, that neither she nor her mother had the funds to purchase the shares. Campbell argues that by obtaining funds from an outside source, which he believes she has done, and securing financing in her attempt to buy Campbell's shares, Partridge has breached the buy-sell agreement.

The lawsuit reveals that the Independent is a closely held corporation. Partridge, besides being the editor-in-chief of the paper, is also the secretary of the corporation. Campbell alleges that Partridge, in her capacity as secretary, did not provide accurate minutes of the meeting where the offer from Southland was discussed. He claims this is a breach of her fiduciary duties. According to Campbell, if the minutes were accurately drafted, they would defeat her claim that she has a right to purchase his shares.

And what about that part of the deal, which Partridge alleged was thrown in at the last minute as a poison pill, that required anyone who acquired control of the Independent to keep Campbell on as publisher at $100,000 per year (a figure twice that of Campbell's current salary)? Campbell points out that Partridge currently gets $94,000 a year as editor which is 46% more than Campbell's current compensation "despite Campbell's greater responsibilities." According to Campbell, his compensation has remained unchanged for nearly 18 years.

The next big event in the lawsuit will be a case management conference, where the attorneys and judge will agree on a schedule within which to get the case resolved. But that conference won't occur until mid-June.

Word around the Independent is that Campbell, who had not been seen in the offices of the paper since November, suddenly started showing up for work after the lawsuit was filed and has made it a point to arrive at the office each day before Partridge does.

Maybe he's hoping to be named, "employee of the month."

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