Will this family feud be the last of its kind?
Originally published in NewsInc.
IF THOMAS SHEARMAN HAD COME AND GONE in any other state in the nation, he could have divided up his publishing fortunes in any manner he saw fit without the certainty of a long legal battle after his death. But he died (in 1988) a citizen of Louisiana, where precedent is based on the Napoleonic code, a holdover from 19th-century France. Part of that tradition, known as the “forced heirship” law, requires parents to leave at least half of their estates to the next generation, and to divide the wealth equally among the progeny.
Nonetheless, Shearman had other ideas for his Lake Charles American Press and the rest of his estate, worth an estimated $18.4 million. And no plans at all to give his daughters—key members of a long-simmering feud—controlling interest in the paper. His motives are unclear (family members and their attorneys won’t elaborate), but one possibility is that he hoped to make the American Press less vulnerable to corporate takeover.
According to family members, Thomas Shearman began dismantling his estate years before he died and came pretty close to total dissolution. Most of his gifts over the past two decades ended up in his grandchildren’s hands. “The idea was to shortchange all the children in favor of the grandchildren—in effect, to skip a generation,” says one relative. And by the time his will was read, he owned very little: “personal belongings,” as one family member puts it.
But the Napoleonic code governs all bequeathals made over a lifetime, and the two daughters—Virginia Shearman Jackson and Marjorie Shearman Beck—felt shortchanged in the final tally. (Attorney Michael Christovich says matters were complicated by the fact that their mother hadn’t left them anything, either.)
Shocked by their exclusion—the daughters weren’t even named in the will—they took their ire to court in a case that has been languishing for two years.
Hanging in the balance is the American Press, maybe the last newspaper in the country to get caught up in the wrangling over forced heirship. Last year, the Louisiana legislature made it legal for the first time to disinherit children, except handicapped heirs, over the age of 23. The law took effect last July, after years of pressure by parents who wanted the option of leaving their estates to their spouses instead of their children.
ONE OBVIOUS EFFECT WILL BE AN END to the type of post-mortem struggle that has ravaged the Shearman family. But there might be a more significant impact: The new law could help keep family newspapers from being gobbled up by chains.
Louisiana has received its share of overtures from large newspaper companies looking to snatch up family newspapers. While the state “doesn’t have the demographic appeal of other states, the independent papers in Louisiana are very valuable,” says Drew Marcus, vice president of Henry Ansbacher, a New York investment bank specializing in newspapers. While Newhouse, Gannett, and The New York Times all own a piece of Louisiana, the state has independent dailies in five of its six largest cities, including Baton Rouge, Lafayette, and Alexandria.
Forced heirship made it easier for chains to find families willing to sell their newspapers. Under the old law, “if you owned a newspaper and you wanted to leave it to one particular child, you had to generate an equal amount of property to leave to the others,” says Joe Smith, board chairman of the Alexandria Daily Town Talk. In many families, that was impossible—so newspaper stock would be divided among all the children, and eventually all the grandchildren. The more diffuse ownership becomes, the harder it is to keep family members from selling out.
“As newspapers are passed down, you have a large number of individuals with varying interests owning the paper,” says Marcus. “Cousins may disagree about whether to sell the paper, and the financial advantages of selling the papers are often far greater than the dividends.”
That could easily have been the case with the American Press had the paper fallen under the control of two warring factions of children and grandchildren. One need only look north to the Shreveport Times, which had supported the new law.
Owned at the turn of the century by Robert Ewing, the Times—along with two Monroe dailies, two Shreveport radio stations, and part of a Little Rock television station—was divided among some two dozen heirs by the time it reached the third generation.
“Have you ever gotten 23 or 24 people to agree on anything in the running of a company?” asks Times managing editor Jim Montgomery. So intense was the “hoo-rah,” he says, that the largest shareholders decided to buy out their cousins. They contacted a newspaper broker to determine a fair price—and “discovered that it was worth a great deal more than they anticipated,” Montgomery says. The family business was eventually lured onto the market, with Gannett winning a fierce bidding war in the late 1970s.
And armed with the chain’s war chests, the Times then went after the independent Shreveport Journal, depressing the competition’s daily circulation from 40,000 to just 16,000 by early this year. Journal owner Charles Beaird shut down the 96-year-old paper in March, a casualty of the Napoleonic code’s restrictions.
In the Times case, there was no indication that the first- or second-generation owners wanted to disinherit any of their children. Yet “it was possible that if the ownership had been consolidated, the sell-out would not have happened,” says Jeff David, publisher of the Denham Springs-Livingston Parish News and former head of the Louisiana Press Association. With forced heirship, there was little a publisher could do to prevent the Shreveport fiasco from repeating itself elsewhere.
The legislature’s recent action changes that. It will “allow the newspaper to be passed along to the child who has exhibited the most experience in managing a newspaper,” David says.
FEW IN THE NEWSPAPER BUSINESS PREDICT that the disinheritance law alone will keep the chains at bay. The other 49 states, which didn’t have forced heirship laws, are certainly witnessing their own frantic buyouts of family-owned newspapers. And in Louisiana, other forces, from tax laws to social pressures, also contribute to spreading newspaper ownership among dozens of heirs, making them open to big-dollar buyouts.
But at worst, say publishers, the new law will do nothing; at best, it could help alleviate some of the pressure to sell. “It will certainly do a lot to bring us in line with the rest of the country,” David says. “It can’t do anything but help keep newspapers in the family.”
The story behind the dragging American Press suit is as muddy as the swampland that covers much of southwestern Louisiana. It involves a family feud that, in the words of family friend David Manship, “has just simmered over the years.” And whatever its outcome, there’s no predicting the future of the 98-year-old daily.
Until 1967, the American Press was owned by a family partnership that included Shearman, his two sons, and his daughters’ husbands. When the partnership dissolved (for undisclosed reasons), the sons took control of the paper—and all of the Class A voting stock in the company. The daughters and their spouses sued, and in a settlement reached on the courtroom steps they received some cash, the small Roswell Daily Record in New Mexico, and part interest in the family’s oil and gas concern.
The Class B stock stayed with Shearman senior, who divvied it up over the years among his four children and 16 grandchildren. That’s the way the situation remained more than two decades later.
Once the partnership dissolved, “it was my grandfather’s feeling that ‘That was that,’ in terms of my aunts,” says Bill Shearman.
“His mistake was assuming there would be no family problems,” says another relative. And the daughters’ mistake was to think the score would be evened up in the will. They were all wrong: The Shearmans and their lawyers are now trying to negotiate a settlement of the daughters’ lawsuit.
Right now, the litigation remains on hold as the two sides squabble over the value of the estate their father had built. The sons argue that they received the exact same share as their sisters—counting just the Class B stock.
The daughters, of course, disagree. According to one of their attorneys, they contend that the Lake Charles paper’s controlling stock was part of the inheritance, and must be counted. (Because state law doesn’t count property won through legal action as inheritance, the daughters’ 1967 settlement is not part of the tally.)
But no matter how the case boils down, the American Press may still wind up on the auction block. Family ownerships—legal restrictions or none—don’t often survive very public family squabbles.