A Delaware judge ruled yesterday that the principal owners of United Press International can remove Luis Nogales as chairman of the parent company of the troubled wire service.
The decision clears the way, according to the owners, for Nogales' firing from the wire service and for a sale of UPI, which is operating under Chapter 11 bankruptcy protection. Attorneys for the owners again said UPI would be sold soon.
But Nogales and other UPI officials continued to argue that the Delaware decision did not affect the control of the wire service, because under bankruptcy law Media News Co., UPI's Delaware-incorporated parent, no longer has any say in UPI's affairs, according to UPI officials.
The suit heard yesterday did not directly address control of UPI.
"UPI is still being operated by the present management in all respects," said Richard Levine, the company's bankruptcy attorney.
"Since UPI was not a party to the events in Delaware, the operations of UPI are not affected."
The issue of who controls the wire service now appears likely to go before the bankruptcy court in Washington that is handling the company's bankruptcy case.
One of UPI's co-owners, Douglas Ruhe, has said he and partner William Geissler will ask the bankruptcy court to decide who should control the company.
Ruhe and Geissler signed over control of UPI in March to Nogales and other top managers in an effort to end a dispute over the company's funding.
But Ruhe and Geissler have argued that the agreement transferring control was voided by the Chapter 11 filing two weeks ago.
Yesterday, Delaware Chancellor Joseph Walsh ruled that Ruhe and Geissler appeared to have the right to fire Nogales from the chairmanship of Media News.
The judge issued a temporary restraining order barring Nogales and other managers from making decisions about Media News.
Walsh set May 20 as the date for a hearing into whether a permanent injunction should be granted in the case.
Walsh's order said the judge was "satisfied there is a strong likelihood for success" in Ruhe and Geissler's attempt to formally regain control of Media News.
Ruhe and Geissler believe that, having regained control of Media News, they can now make changes at UPI -- a wholly owned subsidiary of Media News -- including firing Nogales and other top managers and selling the company.
"Up until today, there have been three players -- Nogales, Ruhe and the creditors," a UPI story quoted James Harrington, attorney for Ruhe and Geissler, as saying after yesterday's hearing.
"Now there are two -- Mr. Ruhe and the creditors."
But Levine disputed that, saying, "The management of UPI still is negotiating with the creditors. That's the way it's been and that's the way it continues."
In the increasingly heated battle for control of UPI, in which the owners and managers have exchanged charges of incompetence and wrongdoing, the creditors -- who are owed more than $35 million -- have previously indicated their support of Nogales. But that may now have shifted somewhat.
UPI reported yesterday that Jules Teitelbaum, an attorney for the creditors committee, walked out of a scheduled meeting in New York Thursday with the owners and managers when Nogales failed to show up. A company source quoted by UPI said, "Teitelbaum was very upset" by Nogales' absence.
An attorney for Nogales said he had seen no reason for Nogales to attend the meeting, reportedly called to discuss the mutual selection of an investment banking firm to screen possible bids for the company. Teitelbaum could not be reached for comment yesterday.