Longest Day

Guardian subjects jury to more ghost witnesses, general tedium

By Andy Van De Voorde

Bay Guardian attorney Ralph C. Alldredge continued to offer dramatic renderings of New Times executives Monday, portraying New Times chief executive officer Jim Larkin and chief operating officer Scott Tobias as he read their deposition testimony into the record.

But his theatrical performance did little to change the perception that, from an evidentiary standpoint, the Guardian’s lawsuit is laying an egg.

The Guardian’s decision to read long deposition passages from the stand forced the jury to sit through nearly five hours during which the Guardian failed to produce a single live witness, lulling several jurors into what appeared to be brief cat naps and generally testing the stamina of the entire gallery.

Larkin and Tobias could not be compelled to testify because they’re out of state. They may be called to testify as part of the Weekly’s case later on in the trial.

The deposition testimony highlighted by Guardian attorneys was aimed at portraying New Times as a predatory chain seeking to harm their client through illegal below-cost pricing. But, as has so often been the case in this trial, much of that evidence cut both ways.

For instance, the Guardian is arguing that New Times, the Weekly’s parent company, intentionally lost money in order to bleed the Guardian. But a series of New Times e-mails shown to the jury Monday contained just as many references to the Guardian slashing rates as the Weekly.

In fact, three different internal messages from New Times executives mentioned Guardian rate-cutting.

“They continue to print lots of fluff and are undercutting us on price across the board,” former Weekly publisher Troy Larkin wrote on July 11, 2000 in a message to his father.

And things hadn’t changed much later that year, when the younger Larkin reported, “They are desperate and continue to discount rates and provide free upsizes just to keep up.”

The pattern persisted on July 27, 2006, when Weekly publisher Josh Fromson sent Larkin and Tobias an update.

“We are doing a great job all things considered,” Fromson wrote. “It is becoming more prevalent that they are giving away second ads, free ads, upsizes, etc.”

The Guardian apparently hopes the jury will interpret those comments the way it does: That it was forced to lower its prices after the Weekly lured it into a mad race to the bottom.

However, the Guardian has already told the jury that it started dramatically discounting prices only in 2003 — apparently as part of its strategy in this lawsuit — and did so for only about a year.

When interviewing the absent Larkin, Guardian attorney Richard P. Hill spent a good amount of time focusing on e-mails that described the Weekly’s interest in its rivalry with the Guardian.

In a November 3, 2006 missive, for example, Weekly publisher Josh Fromson sent his superiors a report on the Guardian-Weekly dynamic, explaining, “Normally you only want this once a month, but we kicked his ass on ad count this week, so I figured I’d share this early.”

Just whose ass did Fromson kick? Hill asked Larkin. “I assume it was the Guardian,” replied the witness.

On February 24, 2006, Larkin wrote Fromson with an observation: “No way they should stay ahead of us on ad count like this.”

“I’m not okay with losing to anyone, least of [all Guardian owner Bruce] Brugmann,” Fromson replied. Added the publisher, “On my worst day I better beat him on his best.”

On January 3, 2007, Fromson sent a “Guardian Report” with good news for his boss. “As you can see, we had a great quarter against our competitor,” he wrote.

Which competitor was that? asked Hill, clearly hoping the answer would amplify in the jury’s mind the Weekly’s wrongful obsession with his client.

Instead, Larkin’s reply offered a new perspective that had nothing to do with an illegal pricing conspiracy.

“It seems like there’s only one person in San Francisco who’s suing us,” Larkin replied. “And I assume that’s who he meant.”

Guardian owner Bruce Brugmann filed suit against the Weekly in October 2004.

Hill’s fixation on “The Guardian Report,” a document that was prepared by Weekly publishers such as Fromson to give their corporate bosses updates on which ads were running in the publication, reflected his desire to convince the jury that the Weekly is the Guardian’s only real competitor. That claim is one of the fundamental conceits of the Guardian’s suit, and is critical to establishing its much-sought victim status under California law.

However, what the jury didn’t hear Monday was that the Guardian has already admitted to keeping its own reports on the Weekly, which would seem to lessen the relevance of the fact that the Weekly kept tabs on it. And in a 2004 press release crowing about the fact it was taking the Weekly to court, the Guardian had this to say on the subject of competitors: “The Bay Guardian was founded in 1966 specifically to be competitive with (and alternative to) the daily newspapers, and we have had competition every day of our existence, from dailies, weeklies, community papers and other publications in one of the most media-rich markets in the country.”

Brugmann’s song remained the same in a September 1996 interview with California Publisher. “I think the future of American journalism is coming out now in San Francisco,” he said. “You can go to City Hall and there are 30 newsracks down one side and you look down the other side and there are 30 racks down the other side. Those are all voices in the community. It’s not just two daily papers — which will soon become one — it’s 40 or 50 voices in print, plus the ‘zines, plus and the radio and the TV.”

However, Brugmann has sung a different tune since suing the Weekly. Today his definition of competition conforms more closely to that required by California statutes.

In his deposition, Brugmann was asked by Guardian attorney Ivo Labar, “In the 1990s, who were the Bay Guardian’s competitors?”

“The main one was the SF Weekly,” he replied.

“Okay,” Labar said. “You say the main one. Were there any others?”

“Not really, it was the Weekly,” answered Brugmann.

“In the first seven years of this decade, who were the Bay Guardian’s competitors?” he asked.

“The competitor was the SF Weekly,” said Brugmann.

“Any others?”

“Not really.”

Apparently, that “media-rich market” had suddenly constricted.

Hill also asked Tobias whether he got reports about any competitors other than the Guardian.

Tobias replied that he receives competitive reports from all of the company’s sixteen markets. In Denver, he noted, his employees track The Onion.

Tobias also was eager to discuss the “ass-kicking” e-mail from Fromson. Like Larkin, he suggested to Hill that if a newspaper sues another newspaper, it shouldn’t be shocked if that paper starts keeping an eye on its behavior.

“Over the years, Guardian management has voiced many, many negative things about our company,” he said. “So it is not unusual for one of our publishers to be competitive. I think this was Josh saying he was up to the job.”

Hill also wondered about the rhetoric Larkin used in an e-mail to Tobias on December 16, 2003. In that document, Larkin included on a list of “operational challenges” the use of “guerrilla tactics.”

The Guardian also cited the “guerrilla” e-mail in its opening statement, and clearly hopes that talk of “guerrilla tactics” will evoke dark images among jurors.

Instead, Tobias explained to Hill that it is a common expression in advertising. “There are books that use ‘Guerrilla Marketing’ in their title, for instance,” he explained, and they simply describe getting marketing people “out on the street.”

The best example of guerrilla tactics at the Weekly, Tobias continued, are “Street Teams” of young people who drive around to nightclubs and hand out “collateral.” That collateral might include “matchbooks, fliers, coupons, bottle openers — whatever our customer might want to distribute,” he added.

No rocket launchers were mentioned.

In an effort to pursue the notion that the Weekly has purposefully kept prices below profitable levels, Hill pressed Tobias on the question of whether the Weekly had a “break-even point” for ad rates in San Francisco. Tobias told him he believed it was probably around $18 or $19 per dollar inch.

Hill later produced a financial summary from January 2005 that suggested the Weekly’s average local ad rate was running only about $16.50 per inch. That meant the paper had a “rate problem,” Tobias acknowledged.

But the executive took umbrage when Hill followed up with a January 2006 e-mail from New Times controller Jeff Mars in which Mars discussed rising print costs companywide and mused about “mandating more revenue (specifically rate increases).”

The implication was that all New Times needed to do to make money was jack its prices up. Tobias suggested that Hill needed to bone up on the realities of a free-market economy. “It’s not like we had control of the market condition, which is what you’re trying to imply,” he said.

And in fact a number of the internal New Times e-mails displayed by Hill specifically talked about the company’s efforts to raise rates, not lower them.

In a May 9, 2005 e-mail about the struggling East Bay Express, which New Times bought for roughly $5 to $6 million in 2001 and sold for just over $2 million last year, Larkin himself asked “How fast can we raise the rate?”

An annual rate increase was even built into the Weekly’s deal with Clear Channel/Bill Graham Presents in which the concert promoter agreed to purchase advertising from the Weekly and the Weekly agreed to buy naming rights to the Warfield Theater.

The Guardian initially claimed that the BGP deal was an example of New Times providing Clear Channel with a “secret rebate.” It dropped that claim from the suit before trial. But it now hopes to cite the sponsorship arrangement, under which Clear Channel promised to buy a certain amount of premium-placement advertising from the Weekly, either as a lump sum or a percentage of the local alternative Weekly market, as an example of illegal below-cost pricing.

Hill spent a good deal of timing questioning Tobias about the details of the sponsorship arrangement, essentially the equivalent of Chevron getting its logo on a NASCAR vehicle in return for gasoline. He was particularly curious about whether New Times executives had “analyzed” the deal to see whether it paid off in the end. Tobias said they hadn’t performed an official review.

An October 2005 e-mail from Larkin to Tobias, however, suggested the arrangement was hardly the stuff of dreams from the company’s perspective.

“I’m sorry I ever green-lighted the idea,” Larkin wrote.

The comment came in response to an e-mail from former Weekly publisher Chris Keating noting that the National Guard had committed to purchasing signage as a cosponsor of an event at the Warfield.

Larkin’s e-mail suggested that, as much as he respected the Guard, he didn’t consider it the perfect client for a San Francisco music hall.

“I mean it is not like the Warfield is in Wichita, Kansas, politically,” he noted.

Keating had earlier indicated that the Guard was running a “soft campaign” because “they are well aware of the sensitive nature of people in San Francisco.”

The last witness of the day — and the first not to be portrayed by Alldredge -- took the stand after 1 p.m., shortly before Superior Court Judge Marla J. Miller dismissed the jury for the day.

Things should liven up for the jury Tuesday. The Guardian's laywers are expected to call Brugmann to the stand tomorrow.

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