Lawyers for the SF Weekly and its parent company tried July 8 to overturn the Bay Guardian’s $16 million predatory pricing verdict, rehashing several old arguments and trotting out a few new ones.
Judge Marla Miller took the case under submission and is expected to rule within ten days.
The Weekly and Village Voice Media asked the judge to throw out the jury verdict or order a new trial. The gist of their arguments: The evidence presented in court didn’t support the decision that a San Francisco jury reached after a five-week trial.
The arguments were at times highly technical, and hinged on the finer points of the definitions of words. In the same way the Bill Clinton once asked what the meaning of “is” is, James Wagstaffe, one of the VVM lawyers, tried to insist that the judge and jury had misinterpreted the term “agent” – and thus improperly concluded that the Phoenix-based chain was equally responsible for paying the damages.
The argument was aimed at severing VVM – a company with $190 million in sales and $11 million in profits – from the verdict. That way the only guilty party would be the Weekly – which VVM admits has no assets and would be unable to pay the Guardian anywhere near $16 million.
Evidence presented at the trial had shown that VVM executives were well aware of, and directly involved in, the SF Weekly’s long pattern of selling ads below cost in an effort to harm a locally owned competitor. In fact, two senior officers, CFO Jed Brunst and group publisher Scott Tobias, admitted on the stand that the SF Weekly would have gone out of business years ago if the chain hadn’t made a policy of shipping large sums of money from headquarters into the San Francisco operation to subsidize below-cost sales.
And yet, Wagstaffe claimed, the law required that VVM be acting as an “agent” for SF Weekly in order to be equally liable. “You have to act on behalf of someone else to be an agent,” he argued. “It is not enough to aid or assist.”
Since VVM was the parent company, Wagstaffe told Miller, nobody at that entity was taking orders from the local subsidiary. So VVM and its officers couldn’t have been SF Weekly’s “agents.”
He also said that Miller had screwed up and given the jury the wrong instructions about the presumption of intent. He said the instructions improperly allowed the jury to assume that VVM and the Weekly intended to harm the Guardian.
At the time those instructions were hammered out, later in the trial, “it was nine o’clock at night and we were all running around,” he told her with typical animation. “I was there with my usual energy but everyone else was tired.”
Guardian lawyer, Ralph Alldredge calmly asked Miller to look directly at the statute involved in the case. “The language is remarkable in its breadth,” he said, explaining that the state Legislature had clearly written the Unfair Practices Act to prevent big companies from hiding their assets by blaming subsidiaries for illegal acts. The law, he said, “refers to aiding and assisting, directly or indirectly, and says that the people who do that are equally responsible.”
He added: “What more aid and assistance could you possibly provide in a predatory pricing case than to fund it?”
As for the jury instructions, Alldredge pointed out that the issue of presumption is hardly new. “That court has already looked long and hard at this,” he said. “There were long discussions about jury instructions.”
Alldredge agued that the state law applied directly to the facts at trial, and that the jury properly applied that law. “This is exactly the sort of scenario that the law was written to cover,” he said. “A big company with operations in many markets was going after a smaller entity in one market.
“That statute,” he concluded, “was set up to presume that if you can prove below-cost sales and damages, intent shouldn’t be the sticking point.”
H. Sinclair Kerr, Wagstaffe’s partner and the lead Weekly lawyer during the trial, then rehashed the VVM argument from the trial that the Guardian profits over the seven year period of the complaint were not sufficient to justify the $6.3 million in damages that the jury awarded. (Miller later ruled that much of the damages should be trebled).
Alldredge countered that the Guardian financial expert, Clifford Kupperberg, had calculated the profit the Guardian could have made during that period without the Weekly’s below-cost pricing and the losses the Guardian experienced. The combination of the two would be around a million dollars a year, he said.
Although Kerr claimed the damages were “excessive,” Alldredge argued the Guardian had to shrink its business to survive the predatory onslaught and would have to make major investments to build the paper back up. “The Guardian must get back the profits and invest to rebuild the business,” he said. There was “nothing excessive about what the jury found,” he said.
At one point, as Kerr tried to bring back the VVM argument about the extent of the competition for the two alternatives Judge Miller interrupted and said, “Do you mean the poetry journal and the paper in Livermore?”
She was referring to the VVM argument during trial in which it cited a huge list of papers, from the Gilroy Dispatch to the Bodega Bay Navigator to a paper in Livermore, as competition. Alldredge made fun of the reference during trial. Miller’s remark stopped Kerr from continuing this line of reasoning.
The hearing lasted four and a half hours, and Miller allowed both sides considerable latitude in speaking and addressing the arguments. Both of the top executives of VVM, Mike Lacey and Jim Larkin, were on hand, as was Brunst and Andy Van De Voorde, who has been covering the trial for VVM.
Van De Voorde, whose reports have been long on rhetoric and personal attacks, posted an atypically short and non-bombastic story on the hearing.
The Guardian is represented by Alldredge, Hill and E. Craig Moody. The Weekly has brought Forrest Hainline onto its legal team after the trial, but he is no longer involved, so the case is in the hands of Kerr and Wagstaffe.
Click here to see the Guardian arguments as laid out in our opposition brief.