Superior Court Presiding Judge James McBride April 1 granted a motion by the San Francisco Bay Guardian to set a hearing for the Bank of Montreal, the lead bank for the SF Weekly and its parent chain, to show cause why it should not be held in contempt of court for interfering with a judge’s order in the Guardian’s attempt to collect on its $2l million plus judgment in a 2008 predatory pricing trial.
McBride set the hearing for April 30 and said that he would not hear the case but would assign another judge to hear it.
He said at the beginning of his remarks that the Guardian in its briefs had established a prima facie case for a hearing.
After hearing oral arguments from Guardian attorneys Richard Hill and Jay Adkisson, and Bank of Montreal attorney
Dan Falk, McBride ruled in favor of the Guardian’s motion.
The motion addresses the latest twist in the efforts by the Weekly’s parent company, Village Voice Media, to duck payment of the judgment. For more than two years, since a jury ruled in the Guardian’s favor, VVM and the Weekly have been hiding behind a complex corporate structure and a cozy relationship with a banking syndicate and have refused to pay the debt.
The Guardian has seized two of the Weekly’s vehicles and the rent that subtenants pay the Weekly, and on March 9th, Court Commissioner Everette A. Hewlett Jr. ordered the Weekly to turn over half of its ad revenue to the Guardian.
The Guardian contacted the Weekly’s advertisers and advised them of the order. But, according to the Guardian brief, “after BMO received notice of the 9 March 2010 order, it began contacting all of the advertisers subject to the Assignment Order and instructed them to disregard that order and make payments directly to BMO.”
The Bank of Montreal, which heads a banking syndicate that has helped finance VVM’s expansion over the years, argues that VVM owes $77 million on a loan, and on March 12th, the syndicate declared the loan in default. That, the bank argues, means that BMO gets all of VVM’s money and that the Guardian is second in line.
However, the chain was valued just two years ago at $191 million, and under California law, BMO is required to marshal the assets of VVM – that is, to do an inventory of what the company owns and what it’s worth – so that other debtors can be paid.
“I have three times requested in writing to BMO that they marshal the assets of SF Weekly LP and New Times Media LLC, however BMO has never responded,” Adkisson stated in his court filing.
Hewlett has already said in open court that “it is possible that [BOM is] in contempt of court.”
The Guardian will be back in court April 14th asking that a receiver be appointed to take control of SF Weekly’s finances.
The banks in the syndicate that are holding the VVM debt (as of March, 2009) are Bank of Montreal, U.S. Bank, Wells Fargo, WestLB AG, Rabobank, BNP Paribas, and Brown Brothers Harrimann. You can read Adkisson’s filing here (PDF)