Newspaper Heir Loses Suit to Dissolve Chain : Hoiles Failed to Prove Claims of Mistreatment by Family, Judge Says in Ruling for Defendants

Dissident Freedom Newspapers heir Harry H. Hoiles, spurned nearly seven years ago in his bid for control of the $1-billion publishing chain, on Tuesday lost his suit to dissolve the company started by his father more than 50 years ago.

In a brief oral ruling that halted the Santa Ana trial at the midway mark, Orange County Superior Court Judge Leonard Goldstein said Hoiles failed to prove that he was treated so badly by the families of his sister and his late brother that the family-owned media company should be dissolved and that his branch of the family should get a third of an estimated $1 billion in assets.

The judge also ruled that the members of the other branches of the family did not breach their corporate duties toward Hoiles, thus cutting off his claim for monetary damages.

But while it ended the current phase of the 7-year-old family feud, Goldstein’s decision sets the stage for an expected appeal by Hoiles, whose attorneys introduced several unique legal motions during the trial but were overruled on each of them.

Probable Appeal

“As far as I know, we’ll appeal,” said Hoiles’ trial attorney, Vernon W. Hunt Jr.

“But Mr. Hoiles and his family are very disturbed by the result, and they have to have a chance to get past the emotional reaction before they decide. . . . I don’t know if Mr. Hoiles wants to suffer through any more of this agony.”

Both sides will meet again Monday, however, to decide what to do about a suit the defendants have pending against the Hoiles family for reimbursement of legal fees and costs.

Through five years of litigation, 150 days of depositions and the accumulation of thousands of documents, total legal fees and costs for both sides approach $12 million, estimated Robert E. Currie, the Newport Beach lawyer for Freedom Newspapers.

Leonard A. Hampel, attorney for the majority shareholders, suggested that the best solution would be for Hoiles to drop any plans to appeal in return for dismissal of the suit for reimbursement of legal costs.

Tuesday’s ruling, granting a defense motion for judgment in midtrial after Hoiles’ attorneys rested their case, ends two months of testimony and eliminates the need for the defense to present its case.

Hoiles, 71, and his wife, Barbara, were visibly shaken by the ruling. Hoiles was hustled away after the decision by his wife and his son, Timothy, who said the family would make a statement on Thursday.

“Nobody can celebrate after something like this,” said R. David Threshie, son-in-law of Harry’s brother, the late Clarence Hoiles, and apparent heir to the company’s leadership. “Personally, though, I’m pleased we’ve finally reached this point.”

Threshie, who is publisher of the company’s flagship newspaper, the Orange County Register, and Richard Wallace, another son-in-law of Clarence Hoiles and general manager of the Register, said they hope now to get on with business as usual.

They said they do not expect the corporate status of Harry Hoiles or the 14 members of his branch of the family to change because of the ruling.

Harry Hoiles, whose family controls about 33% of Freedom’s shares, remains a director of the company, as do his son, publisher of the company’s Victorville Press, and son-in-law, Ricky C. Oncken, publisher of the company’s Columbus Telegram in Nebraska and a corporate vice president.

“The executive committee hopes that this is a time to leave our differences behind us and get together to help the management of Freedom Newspapers to make it a bigger and better company that is still dedicated to the libertarian philosophy,” Freedom President D. Robert Segal said after the ruling.

Hoiles’ Allegations

In their suit--filed in April 1982--Harry Hoiles and his family alleged that the other two branches of the family froze Harry out of a key management position and took a number of actions--including refusing to elect Harry chief executive of the company--that damaged the value of his family’s stock. The actions were so unfair, they alleged, that they warranted dissolving the company.

Each of the three families owns about a third of the company’s shares. Hoiles said the libertarian philosophy of their crusty, domineering father, R.C. Hoiles, dictated that any dissident family members could walk away with their fair share of the assets.

But Robert C. Hardie, the company chairman and husband of Hoiles’ sister, Mary Jane, maintained that the shareholders own stock, not assets, and have no right to ownership of specific Freedom Newspapers properties.

The Hardies and Threshie testified that their actions were mandated by Harry’s threats to sell his stock to outsiders, possibly corporate raiders or even competitors.

And Goldstein found that none of the actions of the majority amounted to the required “pervasive and persistent abuse of power” or “persistent unfairness” required under the law to dissolve the company.

“In failing to reelect Mr. Hoiles (to the company’s executive committee), the board of directors were motivated by sound business judgment,” Goldstein decided.