GCI serves ADN an eviction notice over $1.39 million in unpaid rent and fines

Alaska’s largest paper and news website, the Alaska Dispatch News, has been served with an eviction notice for the building that houses its printing press, according to court filings provided to The Midnight Sun.

The 2014 sale of the Anchorage Daily News to Alice Rogoff and the Alaska Dispatch coincided with the sale of the ADN building at 1001 Northway Drive to Alaska-based telecommunications company GCI. With plans to relocate the printing operations as the consolidated newsroom moved to a new location, Rogoff and GCI reached a deal to keep the press located through November 2015 with penalties if they stayed longer.

The relocation has been notoriously difficult, culminating in its own legal problems for the paper. Rumors have swirled for months that the ADN was in increasingly hot water with GCI over unpaid bills for rent that went far beyond the terms of the original agreement.

GCI’s patience ran out today.

GCI, Inc., has filed a civil complaint in Anchorage Superior Court that alleges ADN has failed to pay rent  and seeks to evict the ADN from 1001 Northway Drive. The filing seeks to remove ADN from the building and recoup $1.38 million in unpaid rent, utilities and fines. The filing also seeks to force the ADN to cover the cost to remove the printing press and restore the building to usable condition.

Part of the Northway building currently houses the GCI-owned KTVA.

[READ: GCI vs. Alaska Dispatch News court filing]

GCI spokeswoman Heather Handyside described the filing and a last resort after months of trying to work something out.

“Today’s action is the result of many many months of negotiation and trying to support the Alaska Dispatch News and their operation, but we believe we’re at a point where we aren’t going to get any further and we’ve exhausted our options,” she said. “We need the courts to help us resolve this issue.”

Handyside said ADN press crew will still have normal access to the building while the lawsuit resolves, adding that an out-of-court resolution is still possible.

“We will try to do what we can to support their continued operations, but it has to make business sense for GCI,” she said.

Key details of the filing

The filing outlines what GCI argues are good faith efforts to make the agreement work since the ADN ran into relocation troubles. The initial lease agreements required the ADN to move out by November 2015 or pay a holdover rate at 250 percent of the rent. When the ADN ran past that deadline, it refused to pay the holdover rate, according to GCI’s lawsuit. Rogoff and GCI went back and forth for more than a year on the issue, including an extension of the lease and settling debt with free advertising in the ADN.

That all appears to have fallen apart in February, when GCI claims negotiations stopped.

“Since February of 2017 GCI has presented alternatives to Rogoff to enable ADN to continue operations and to prevent forcible eviction. None of these alternatives were acceptable to Rogoff,” the lawsuit said. “As of the date of this complaint, ADN remains in possession of the premises, has failed to remit any due and owing base rent, holdover rent or utilities, and has not taken steps to remove the printing press from the premises.”

The lawsuit alleges the ADN hasn’t paid the holdover fee since Dec. 15, 2016, base rent for July and August 2017 or utilities since Feb. 7, 2017. In total, those unpaid bills amount to $1.39 million, according to the filing. GCI also estimates that the cost to remove the printing press and restore the building to a usable condition will cost $1.5 million.

Piercing the corporate veil

The lawsuit doesn’t only set its sights on the Alaska Dispatch News, but also the personal assets of owner Alice Rogoff. It offers a scathing reason for why the court should open Rogoff personally to liabilities.

“ADN and AK Publishing are mere instruments of Alice Rogoff, the corporate forms of which continue to be used by Rogoff to defeat public convenience and justify wrong,” explains the lawsuit. “Under Alaska law, Rogoff’s conduct pierces the corporate veils of ADN and AK Publishing, making Rogoff personally liable fro both companies’ debts, obligations and judgments to GCI.”

“Piercing the corporate veil” is not just some clever turn of phrase, but a specific legal term by which the court ignores the traditional protections of a limited liability corporation in order to impose the liability on the owners. The legal grounds to pierce the veil are, like most states, rather ambiguous in Alaska and will likely be the decision of the court.

A timeline of troubles

The lawsuit sheds significant light on the relationship between GCI and the ADN. All of the following is according to GCI’s legal filing.

• April 7, 2014: GCI inks deal to buy Northway building, a deal that includes $500,000 of ADN advertising.
• May 5, 2014: The sale of the Northway building is closed the same day the Dispatch formerly buys the ADN. The new Alaska Dispatch News immediately leases 89,012 square feet of the Northway building for the press. The lease for the portion of the building containing the printing press runs through November 2015, presumably enough time to move the press. The lease includes a holdover rate of 250 percent of regular rent if the ADN overstays the lease.
• Nov. 30, 2015: ADN overstays the lease. The newspaper continues to pay the base rent, but refuses to pay the holdover rate. ADN also signals it won’t pay back GCI for $205,558 of work done at the ADN’s new office because of a “shortage in cash flow.”
• Jan. 21, 2016: The ADN and GCI agree to a lease amendment that extends the lease for two years and allows the ADN to pay off the holdover debt and building work for advertising in the ADN.
• Sept. 16, 2016: ADN writes to notify GCI that it will be ending the lease early on Dec. 15, 2016.
• November 2016: ADN and GCI have a series of meetings, leaving GCI with the impression that the move out is on schedule.
• Dec. 15, 2016: ADN is still not out of the building. ADN refuses to make holdover rent payments, “citing cash flow problems.”
• December 2016 and January 2017: The two companies continue discussions and negotiations. Meanwhile two contractors file liens against the Northway building after ADN fails to pay their bills. One lien is released on March 1, 2017 and the other for $4,775 is still in place.
• February 2017: GCI offers another deal that would take care of the outstanding holdover rent for advertising. ADN refuses to the deal and negotiations stop. ADN stops paying for utilities at the location. GCI says the February bill is $29,000 and the July bill is $46,000. The lawsuit says utilities amount to about $1,500 per day.
• July and August 2017: ADN stops paying base rent. Default notices are sent In March, April and July.

Itemized damages

GCI is seeking a number of things in its lawsuit. Here’s each claim broken down and explained.

Nonpayment: Base rent, holdover rent and unpaid utilities totals $1,390,180.35 to GCI.

Holdover: GCI had planned on utilizing the ADN’s space, and the lawsuit claims the company has “incurred damages arising from its inability to occupy the warehouse premises. … Additional consequential damages continue to accrue and will accrue until after possession of the premises can be obtained and such commitments can be unwound.” The claim doesn’t include a specific dollar figure for this, but the suit seeks at least $1 million in “compensatory damages.”

Liens: The lawsuit asks the ADN to take care of the $4,775 bill owed to Anchorage Sheet Metal LLC and clear the lien it placed on the Northway building.

Removal improvements: ADN is still required to remove the printing press and get the building into usable shape. The exact amount is set to be determined in court, but it estimates in the lawsuit put that figure around $1.5 million.

A little more open

The ADN reported on the lawsuit late Friday afternoon. The paper, over the last week, has been more keen on reporting on its inner workings than when it declined to send any reporters to a trial earlier this year at which Rogoff’s attorney argued to block media coverage.

The paper also disclosed some rumblings that things aren’t all right in a report this week about the sale of the Juneau Empire, Peninsula Clarion and Homer News to GateHouse media. That story disclosed an internal email last week where Rogoff explained she’s “in discussions with several potential new investors” in the company. Rumor has been Rogoff is looking to sell the ADN.

In a full quote Rogoff also talked about the need to keep those discussions private. (Though they’ve appeared plenty on the pages of The Midnight Sun and other Alaska news blogs.)

“(W)e’ve been challenged by changing economic and financial circumstances, to say nothing of evolving news reading habits,” Rogoff wrote. Deliberations with potential investors “are private and must be kept that way, so I cannot comment on their status. The goal is simple: to keep the state’s major newspaper in the business of delivering both printed and digital news of, and for, Alaskans.”

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