Opinion ID: 2576158
Heading Depth: 1
Heading Rank: 6

Heading: the loss operations clause

Text: ¶ 22 The loss operations clause provides for termination of the agreement if either party suffers three years of losses. [10] By its terms, the clause may be triggered if, for three consecutive years, either party does not receive a distribution of agency remainder that is adequate to pay the expenses of its news and editorial operations for each of such years. Agency remainder is defined in the JOA as the excess of agency revenues over agency expenses. Agency revenues are further defined as revenues from circulation... and from advertising, plus certain incidental matters, but excluding income from sources not directly related to printing and publishing the newspaper. CP at 114. ¶ 23 The real core of the controversy here is whether agency expenses, as used in the JOA, include losses occasioned by the 2000-2001 Newspaper Guild and Teamsters Union labor strike. Unlike the term gross rentals in Berg, the term agency expenses is defined in the JOA. In fact, the definition of agency expenses is five pages long. [11] Agency expenses are defined as all expenses associated with the Times' obligation to produce, promote, and distribute the newspapers and their contents, including 22 identified categories of expenses. News and editorial expenses are defined in Appendix C of the JOA and include 15 identified categories of expenses. [12] The definition of agency expenses includes [c]ompensation, including, but without limitation, retirement, health, death and other fringe benefits, workers' compensation coverage and group insurance of Times' non-news and non-editorial employees. CP at 118. ¶ 24 Under the JOA, the Times' independent accountants must do an annual audit of the amount of agency revenues, agency expenses, and agency remainder and certify those results to Hearst as having been prepared in accordance with generally accepted accounting principles. CP at 94. In order to give a loss notice, the opinion of a national firm of independent certified public accountants must be included, certifying that the news and editorial expenses are fairly presented in accordance with generally accepted accounting principles. Hearst has the right to audit the agency remainder and, when a loss notice is issued, may audit the news and editorial expenses as well. ¶ 25 Losses are to be determined by consulting the detailed schedule laid out in the JOA and its appendices. The definitions adopted by the parties do not list or exclude from calculations expenses attributable to strikes or other force majeure events. Thus, there is nothing in the definition of agency expenses or the loss operations clause that purports to deal with alternative means of calculating losses, e.g., losses caused by a strike as opposed to losses caused by a marketplace unable to sustain two newspapers.