After nearly three years, small-town newspaper fight in southeast Minnesota appears finished

A legal grudge match over the sale of a newspaper group has been resolved.

On one side is David Phillips, the former owner of six small-town newspapers in southeast Minnesota. On the other side: Jason Sethre, owner and publisher of the Fillmore County Journal, who bought and closed those newspapers in 2020.

Sethre felt Phillips acted in bad faith and violated the terms of the sale when Phillips gave an old computer to a former employee, who used its files to start her own competing newspaper in Chatfield. So Sethre decided in 2021 not to pay Phillips the $78,000 Phillips was owed as part of the sale for a three-year consulting gig.

Phillips lawyered up and sued Sethre; the two have battled it out in court ever since.

That battle ended last week when a Fillmore County judge sided with Phillips, saying Sethre owed the money stipulated in the agreement.

“(Sethre) is asking the Court to find that the covenants to not compete covered conduct they were not written to cover, which is not something the Court can do,” Fillmore County District Judge Jeremy Clinefelter wrote in his Feb. 13 decision.

Clinefelter wrote that Phillips likely violated the spirit of his deal with Sethre when he gave a nearly two-decades-old computer to Pam Bluhm, who worked at the former Chatfield News for nearly 40 years.

Phillips says he didn’t know it at the time, but that computer contained more than Bluhm’s old notes for stories. It had subscriber lists, and the software necessary to make and ship out a newspaper to a third-party printer and distributor. Bluhm used those files to start up the Chatfield News Co., printing a new paper and keeping a similar name as her former employer.

Sethre declined to comment Thursday on the court decision. But he told the Star Tribune in 2020 he believed the files on Bluhm’s computer belong to him.

“We purchased [the files],” Sethre said. “We own all the intellectual property. She just walked in and took over something that wasn’t hers.”

It’s unclear if Sethre will appeal the decision. Sethre sued Bluhm shortly after she started her newspaper but later asked a judge to drop the case.

Neither Phillips nor Sethre proved in court exactly what was on the computer or how it damaged Sethre’s operations. Further, those files weren’t specifically covered in the purchase agreement when Sethre bought Phillips’s company.

Phillips’s $78,000 consulting contract was part of the agreement, however, beginning in 2021 as the sale took place during the start of COVID.

“It’s been a long time,” Phillips said Thursday. “I’m relieved now, finally, but it’s been such a long process.”

Phillips was bound by a noncompete agreement not to work in newspapers; it expired in January. He said he’s enjoying retirement, but he may consider freelancing for other papers in the future.

The Chatfield News Co. continues to print and has expanded to slightly over 1,000 subscribers, according to Bluhm. She still uses the same computer that caused all the trouble in the first place.

“I keep my bills paid and I don’t have to borrow any money, knock on wood,” she said. “I’m just working on saving money to buy a new computer.”