THE SF Bay Guardian's SHAKEDOWN HITS A SNAG
BY Andy Van De Voorde
(ed note: Andy Van De Voorde is executive associate editor of Village Voice Media. He will be blogging on the SF Weekly vs. Bay Guardian trial for the Snitch. Print this first one out. It's long. Yay!)
The Bay Guardian’s “predatory pricing” lawsuit against the SF Weekly hit a snag Thursday when the Guardian’s $500-per-hour expert witness changed his story on the eve of the trial.
The Guardian wants a jury to force the Weekly to pay it millions of dollars to make up for profits it ostensibly didn’t make because the Weekly stole its customers. But one of the critical pieces of evidence Guardian expert Clifford Kupperberg was relying upon to calculate the paper’s alleged damages has since been repudiated by the witness himself.
That didn’t stop Kupperberg from rolling out bold new damage claims, however. And while San Francisco Superior Court Judge Marla J. Miller ruled on a number of pre-trial motions Wednesday and Thursday, the majority of her time was spent considering the implications of Kupperberg’s sudden change of heart.
The judge ultimately concluded that the Weekly deserved additional time to respond, a decision which could delay the long-awaited trial. The Guardian originally filed its lawsuit in Oct. 2004, naming the Weekly, its former sister paper, the East Bay Express, and their parent company, New Times, as defendants. (New Times has since merged with another company and changed its name to Village Voice Media, which owns 16 weeklies around the country.)
The document Kupperberg disavowed was a compilation of financial information from papers belonging to the Association of Alternative Newsweeklies. Weekly attorney H. Sinclair Kerr, Jr. had already argued that its use at trial was a stretch. The Guardian wanted to hold it up as a financial benchmark to establish how much it would have made in profits if it didn’t have to compete against the Weekly’s low prices. But Kupperberg backed away from the AAN report after Weekly attorney Ivo Labar produced an affidavit from the woman who had compiled it asserting that it was unaudited and relied completely on self-reporting from various newspapers, rendering it meaningless as a measure of financial performance.
Guardian attorney Ralph C. Alldredge sought to downplay Kupperberg’s about-face, telling Miller that his fundamental theories wouldn’t change much as a result of the AAN document being thrown out.
But Kerr called that position absurd, noting that Kupperberg was now offering a slew of never-before-seen damage estimates that ranged all the way from $2.7 million to $9.6 million. The Weekly has already spent tens of thousands of dollars responding to Kupperberg’s earlier theories, Kerr told the judge.
“I have never in thirty years of practice been put in a more unfair and prejudicial position than the plaintiffs have put us with this expert,” he said. “He shouldn’t be able to recant [his opinions] four days before the trial and offer new opinions.”
Although Kerr asked Miller to bar Kupperberg from testifying, the judge ruled that the CPA had a right to change his mind, despite the late date. “It seems to me unfair to say you can’t change your opinion,” Miller said. However, she acknowledged that the unexpected development could pose difficulties for the Guardian when Kupperberg takes the stand. “You obviously have a lot of grist for impeachment [of the witness]” she told Kerr.
The Guardian apparently will now shift gears and attempt to estimate its alleged damages by calling the publisher of the Pacific Sun and Palo Alto Weekly to testify about his paper’s financial performance. As with the papers in the AAN report, neither of those publications operates in San Francisco, and what relevance their performance might have in the case was not clear.
Miller made a number of other rulings Wednesday and Thursday which helped shape the evidence that will be allowed at trial. In most cases, she denied motions from both sides that sought to limit what the opposition could bring up.
Perhaps most notably, Miller spent much of Wednesday afternoon wading through a lengthy motion filed by the Guardian which attempted to prohibit Weekly attorneys from raising what it termed “improper and prejudicial subject matter.”
Based on the pleadings, that “subject matter” consisted largely of embarrassing facts Guardian owner and publisher Bruce Brugmann doesn’t want a jury to hear. Those included:
-- The Guardian’s battle with union organizers who staged a walk-out at the paper in 1996. Weekly attorneys argued that Brugmann’s anti-union behavior is relevant because it--and not competition from the Weekly--helps explain why Brugmann doesn’t pay his employees higher wages. Miller declined to rule on that motion and said she finds it unlikely the subject will come up.
-- The fact that former Guardian shareholder Donald Werby, a close friend of the founding member of the Church of Satan had been convicted on morals charges. The judge ruled that question moot when Kerr informed her the Weekly did not intend to make the extracurricular activities of the Guardian’s devil-worshipping pal an issue.
-- The fact that the Guardian has spent more than $300,000 in attorney’s fees on the case while at the same time slashing its spending on editorial--and blaming those cuts on the Weekly. The judge withheld a ruling and said she would revisit the question if it was raised at trial.
-- The assertion that Brugmann has told people he filed the lawsuit to squeeze a settlement out of the Weekly or to force parent company New Times to sell the Weekly to him. Kerr argued that such behavior goes to Brugmann’s credibility. Judge Miller denied the motion, but added that the Guardian was free to object should the subject come up at trial.
-- The Guardian’s widespread use of unpaid interns to do work for which they should have been paid minimum wage under California labor law. Not only is it hypocritical for a “pro labor” paper to make use of unpaid workers, but the practice “goes to the Guardian’s artificially low costs for editorial and marketing expenses,” Labar argued in a written motion. Miller denied the Guardian’s request that the subject be declared off limits, although she added that she “doesn’t want to try the Guardian’s wage practices” during the proceedings.
-- That Brugmann told someone in the U.S. Attorney’s Office they should investigate New Times for antitrust violations against the Guardian and that he allegedly offered to provide documents produced during discovery in this case. “The fact (not a mere claim) that Brugmann sought a federal investigation of the defendant newspapers is relevant and highly probative to the Plaintiff’s longtime animosity toward Defendants,” Labar argued in his motion. Miller ruled that the question was moot after Kerr told her he didn’t plan to raise it at trial.
Though it may not surface during the trial, Brugmann’s cozy relationship with the government is one of the more fascinating by-products of the discovery process. In fact, the Guardian boss, who has long sought to portray himself as an anti-establishment crusader, makes it clear in his deposition testimony that his relationship with the feds is much like the relationship mob boss Jack Nicholson enjoyed with the FBI in the movie The Departed--that of a trusted informant who rails against the government in public and cooperates with it in private.
“In fact, you advocated on more than one occasion for various governmental entities to investigate New Times and other competitors, didn’t you?” Labar asked him during the deposition, which was taken several weeks ago.
“That’s correct,” Brugmann replied.
“Do you believe that cooperating with the government and encouraging them to sue your competitors is something that’s appropriate for a journalist to do?” Labar continued.
“We’re--for enforcement of the antitrust laws,” Brugmann said.
“When it’s in your interest?”
“No, just generally.”
-- The fact that the Guardian improperly obtained New Times financial information in 2002. A number of Guardian witnesses, including Brugmann and Guardian controller Sandy Lange, have testified in depositions that they did in fact have such a document, which included proprietary information about the Weekly and its former sister paper, the East Bay Express. They also claimed that they had no idea where it came from, and Lange told Labar she didn’t give it back to New Times because she was operating under the principle of “finders keepers.” The judge granted the Guardian’s motion, meaning the Weekly can’t mention it at trial. But she added that Kerr or Labar could bring it up if the Guardian “opened the door.”
-- The fact that Brugmann vowed when New Times purchased the Weekly that San Francisco would be the company’s “Vietnam.” Alldredge wound up withdrawing the motion, meaning it can be revealed at trial should Weekly attorneys seek to use it as evidence of Brugmann’s puffery and longtime animosity toward New Times. The Guardian's attempt to prevent New Times from bringing up the "Vietnam" comment was also ironic given the Guardian's own attempts to read meaning into alleged similar bravado on the part of New Times executive editor Mike Lacey. In fact, its chief "evidence" of malicious intent on the part of the Weekly is language Lacey purportedly used in a 1995 meeting with Weekly staff. It was the first time Lacey had met the staff, and he reportedly told the employees he wanted the Weekly to be "the only game in town," a comment the Guardian has interpreted as a prologue to predatory pricing.
-- The fact that in 1970 the Guardian participated in a lawsuit challenging the constitutionality of the joint-operating agreement between the San Francisco Chronicle and the San Francisco Examiner. Brugmann was wrong on the law in that case--a judge ultimately ruled that the JOA was in fact constitutional. But because he negotiated a settlement before the judge’s ruling, Brugmann walked away with cash over principles--a $500,000 payout for filing what proved to be an invalid claim. That money allowed him to begin publishing the Guardian on a weekly basis, essentially serving as the seed money for the publication as it now exists.
Labar and Kerr had sought to raise the issue of the JOA lawsuit to point out Brugmann’s history of inconsistent statements on the question of whether the San Francisco dailies constitute competition. In his deposition, Brugmann denied that the Guardian competes with the Chronicle and insisted the Weekly is the Guardian’s only real competition--a position he must maintain if he hopes to convince a jury that the Weekly’s lower prices are somehow the sole reason for his financial misfortunes.
But in the past Brugmann himself has boasted about how robustly he competes with the big boys. In a story he wrote for the Guardian in 2006--two years after filing the lawsuit against the Weekly and New Times--Brugmann waxed rhapsodic about how the Guardian had created “an influential new form of independent alternative journalism that works in the marketplace and provides what little real competition there is to the monopoly dailies.”
In fact, Brugmann admitted in that same story, the whole point of the 1970 lawsuit was that the daily “monopoly” had “left only crumbs for the other publications in town.” That is much the same argument he is now making in an effort to get a big payday from the Weekly.
The Weekly contends that it is only one of the Guardian’s many media competitors despite recent consolidation of several daily newspapers in the area. In recent years, new competitors ranging from Internet sites to The Onion have proliferated, even as Brugmann rails against his latest daily nemesis, Dean Singleton, a Denver-based newspaper mogul who has purchased a string of Bay Area papers outside of San Francisco.
What Brugmann hasn’t revealed in his screeds against Singleton--which sound much like the arguments he once made against the Chronicle and the Examiner--is that he has a conflict of interest when it comes to covering the actions of the daily czar. In fact, Brugmann owes Singleton roughly $200,000 in printing debt, something Brugmann acknowledged at his deposition. At one point, he admitted, before the debt was paid down, he was into Singleton for a staggering $560,000.
Judge Miller denied the Guardian’s motion to prohibit discussion of the JOA lawsuit at trial, although, as with many of the other issues in the Guardian’s motion, she added that she wasn’t clear on how the subject might come into the case.
All that and more will become clear once the trial starts. The proceedings were supposed to begin on January 22, but Miller’s ruling allowing Kerr more time to depose Kupperberg may well have the effect of delaying the start of the trial.
The judge told attorneys for both sides they should be ready to begin questioning prospective jurors on January 24.