Gannett Co. v. Register Publishing Co.

The Hartford Times (the Times) was a newspaper owned by Gannett Co. (plaintiff). Gannett sold the Times to the Register Publishing Company (Register) (defendant) for $7 million on September 30, 1973. Immediately after, Register discovered that Gannett had inflated circulation figures and overvalued assets. Register engaged an accounting firm to conduct an audit beginning in October. By November 30, Gannett’s significant fraud was confirmed. Register withheld an installment payment to Gannett. Register’s board of directors discussed the possibility of rescission. Gannett and Register engaged in settlement negotiations beginning in December, but Register did not notify Gannett of any intention to seek rescission. During this period, Register made several changes at the Times, including a significant capital expenditure in switching to cold type from hot metal, consolidating personnel with other newspapers owned by Register, and changing the newspaper’s price. Register eventually closed the Times. At the same time, Register was defending a lawsuit filed by several beneficiaries to trusts that owned Register, which alleged the purchase of the Times was a breach of fiduciary duty. During this suit, two trustees sent a letter to a beneficiary denying that Register would seek rescission. Failing to reach a settlement with Register, Gannett sued Register for the purchase price on April 15, 1974, and Register counterclaimed on June 12, claiming breach of contract among other causes of action, as well as seeking rescission of the contract. The trial court considered whether rescission was available.