SF Weekly

Guardian lawsuit moves to the next stage

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› tredmond@sfbg.com

The news hit the front page of the San Francisco Chronicle Web site (www.sfgate.com) May 9 under a nice, subtle headline: "SF Weekly Loses Big, Again."

And while it’s not exactly a done deal, Judge Marla Miller appeared poised that day to finalize a $15.6 million award to the Guardian and issue an injunction barring SF Weekly from continuing to sell ads below cost.

The decision, expected this week, will bring the lawsuit to its next stage, as the Weekly and its 16-paper chain parent, Village Voice Media, threaten to try to overturn the 1913 California law that protects small businesses against big predatory competitors.

The Guardian‘s lawsuit charged the Weekly and Village Voice Media with vioutf8g the California Unfair Practices Act, which bars companies from selling a product below the cost of producing it with the intent to harm a competitor or reduce competition.

On March 5, a San Francisco jury found that the Weekly had engaged in predatory pricing and awarded the Guardian $6.39 million in damages. The law allows for treble damages.

Judge Miller opened the hearing by stating that, on the basis of legal briefs filed by the two sides, she was inclined to triple $4.6 million of the damages, leaving a final judgment of $15.6 million.

Although Guardian attorney Ralph Alldredge argued that the entire verdict should be tripled, the outcome wasn’t a big surprise: from the day of the verdict, we’ve been reporting that the likely final award would be around $15 million.

Forrest Hainline III, a new lawyer representing the Weekly, argued vociferously against any injunction, claming that the court would be wading into troubling First Amendment territory. He argued that the only way the Weekly could comply with an injunction would be to cut editorial expenses — and that would have an impact on the paper’s right to free speech.

But Alldredge pointed out that courts have always found that newspapers have to pay taxes and obey basic business regulations. What, he asked, would happen if the Weekly were found guilty of dumping toxic printing-press waste into the bay? Would the paper argue that paying the cleanup costs would violate the First Amendment?

The argument wasn’t new — the Weekly tried the same First Amendment claim early in the trial, when the paper filed to have the lawsuit dismissed. Judge Richard Kramer, who handled the first stages of the suit, rejected the argument. The Weekly sought an appeal of Kramer’s ruling, but the appeals court denied that as well.

Judge Miller seemed to imply in her questioning of Hainline that an injunction would only require the Weekly to do what it should be doing anyway: competing fairly. "Would you advise your client to go ahead and violate the law?" she asked.

Among the more interesting parts of Hainline’s argument was the claim that the Weekly would never be able to survive in San Francisco unless it could sell ads below cost. He essentially implied that the Weekly can’t make a profit on its own, and is in business only because its corporate parent is underwriting it.

Hainline said that he didn’t see how the Weekly would be able to sell ads at a price that covered its operating costs.

An injunction that would force the paper to operate like a normal business and live within its means would threaten the Weekly‘s very existence, Hainline argued, proclaiming that Miller was threatening to "silence a First Amendment voice." He implied that the Unfair Practices Act should never apply to newspapers and that the entire verdict ought to be invalidated.

Alldredge pointed out that it was silly to say the Weekly would be forced out of business. After all, he said, the Guardian is selling ads at a price that allows it to cover costs.

Miller took the matter under consideration and will issue a final ruling within 10 days.

The Guardian‘s lawyers are Alldredge, Richard Hill, and E. Craig Moody.

For more details on the case, the latest updates, and the dueling Guardian and Village Voice Media blogs, go to sfbg.com/politics.

Whining at the Weekly

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My old pal Andy Van De Voorde is back. Village Voice Media, which owns the SF Weekly and is now pleading poverty, managed to fly Van De Voorde and the two top comany executives, Mike Lacey and Jim Larkin, in to San Francisco for the hearing Friday on our lawsuit. And Van De Voorde, writing as The Snitch, has put forward a remarkable work of journalistic whining.

Oh, dear, says Andy; Judge Marla Miller is prepared to accept the jury’s verdict after a five-week trial and follow the law by issuing an injunction. Requiring the Weekly to follow the law would violate the First Amendment.

There are a couple of key points that he misses.

One is that courts have found consistently over the years that newspapers, despite their First Amendment protections, are also businesses — in some cases, big businesses — and have to follow the same sorts of basic regulations as all other businesses. It costs money to comply with OSHA rules, the National Labor Relations Act, and environmental laws. It’s costing the Guardian (and, I assume, the Weekly) a bit of cash to comply with the city’s new health-insurance law. Should those laws be invalidated because complying with them means I as an editor have less money to spend on reporters and freelancers?

Be serious.

The other point that he misses is that the Unfair Practices Act, the Progressive Era law designed to keep small business from being destroyed by giant predatory competitors, actually promotes the goals of the First Amendment, which, history tells us, include the notion that a broad variety of voices in the marketplace of ideas make for a healthy democracy.

Preventing one large media company from driving a locally owned competitor out of business is a positive result.

See, the Weekly can whine about the First Amendment all it wants, but a jury found that the 16-paper chain, with revenues of some $150 million a year, that owns the Weekly, was trying to silence a First Amendment-protected local San Francisco voice. The Weekly wanted to shut us down, in part because the owners of the chain don’t like what we have to say and the way we say it.

Um, Andy, isn’t there a First Amendment issue there?

If the Weekly now wants to whine about the size of the verdict, let me say for the record that we have warned these folks repeatedly, going back more than five years, that they were violating the law. When we first sent a warning letter, we asked for no damages at all; all we wanted was for the predatory activity to cease. We filed suit only because we had no other choice — and even after years of litigation, the jury found that the below-cost selling continued, up to the moment of the verdict.

And now we have no choice but to ask for an injunction, to do what we tried to do from the start: Make these guys follow the law.

Now the Weekly and its parent, Village Voice Media, have resorted to trying to overturn the Unfair Practices Act and complain about their First Amendment Rights.

Boys: As my late grandfather, the Honorable James C. O’Brien, a New York State Supreme Court judge, used to say, you made your bed — now eat it.

Guardian poised for legal victory

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Judge Marla Miller appeared poised May 9th to finalize a $15.6 million award to the Bay Guardian and to issue an injunction barring SF Weekly from continuing to sell ads below cost.

In a post-trial hearing on the Guardian’s lawsuit against the Weekly and its chain parent, Miller said she was inclined to rule that some, but not all of the damages a jury awarded to the Guardian in March should be trebled. And she said in a tentative ruling that she was prepared to issue an order forbidding the Weekly from engaging in further predatory behavior.

The ruling hit the front page of Sfgate this afternoon with the headline “SF Weekly loses big, again.”

Editor’s Notes

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› tredmond@sfbg.com

I was away with the kids and missed the state Democratic convention in San Jose, but from what I hear, it was quite the show. The big local news, of course, was that Assemblymember Mark Leno blocked State Senator Carole Migden from winning the party’s endorsement for her reelection bid. That’s a big victory for Leno, who is trying to unseat her.

And the way a lot of my favorite blogs told the story, it was also a victory for the grassroots activists in the party: the Sacramento establishment, they say, was working for Migden.

I don’t think that’s entirely true; both sides had their heavy hitters. And I’m going to sound a note of caution here: Leno and his team papered the hall with some nasty negative fliers attacking Migden, not just for her travails with the Fair Political Practices Commission but for her driving record.

Leno told me he had to educate the delegates in a short period of time and that the fliers contained "nothing but facts." Which is true. But I don’t think he needs to go negative on Migden; she’s doing a fine job of that herself. And the attacks open ugly wounds in the community and could help the third candidate, Marin’s Joe Nation.

Leno needs to keep a tight leash on his campaign team as this heads for the finish.

And now we pause for a brief reflection on the First Amendment.

Matt Smith over at the SF Weekly took a shot at us last week, arguing that our lawsuit would somehow damage his paper’s ability to produce good journalism. Migden was in court this week to argue that the state shouldn’t prevent her from spending campaign money in violation of campaign-finance rules. Both claims rely on a dangerous interpretation of one of the most important pieces of law in the history of the world.

Smith’s theory: since we nailed the Weekly and its corporate parent for predatory pricing violations, we are somehow guilty of seeking to force the chain to cut back its editorial staff.

We heard the same sort of argument in court, and I suspect the Weekly‘s lawyers will trot out the First Amendment on appeal. Gee, they will say, the government can’t tell a newspaper how much to charge for its ads. That’s unconstitutional.

In fact, I think it’s pretty clear that the Weekly, not the Guardian, has been the paper attacking the First Amendment. The whole notion that James Madison had in mind when he introduced the Bill of Rights was that a free marketplace of ideas made for a more free and democratic society. Big chains that swallow independent papers limit that marketplace, particularly if, like the SF Weekly‘s owners, they enforce ideological consistency. Chains that try to kill other papers are even worse. That’s what our lawsuit was about.

Then there’s Senator Migden, whose legal papers cite one of the worst Supreme Court decisions of my lifetime, Buckley v. Valeo, which says that money is speech and that the rich can spend whatever they want on political campaigns. Again, the problem is the marketplace of ideas: if one side can corner the market with cash, there’s no free exchange. Campaign finance laws, properly written, don’t diminish the First Amendment; they enhance it. So do fair-competition laws in the media. Because both promote what Madison had in mind — a level (or at least relatively fair) playing field of ideas.

Give me a break, Matt Smith

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I’m starting to wonder how many times I’m going have to fight this battle.

For five weeks, as our predatory-pricing case against the SF Weekly was in trial, Andy Van De Voorde, the Denver-based hit man who works for Village Voice Media, attacked me, attacked the Guardian, attacked our witnesses and attacked the whole idea that an independent paper had the right to go to court to fight a predatory attack by a national chain.

When a San Francisco jury found (by an 11-1 margin) that VVM and its local outlet, the SF Weekly, had sold ads below cost for seven years with the intent to harm the Guardian – a violation of state law – Van De Voorde attacked the judge, the jury and the law itself.

Then when we started to talk about what the verdict meant, the hit man retailed the same old arguments all over again, in yet another blog post.

And now Matt Smith, the Weekly columnist who is often wrong on the issues but generally has some sense, has jumped in with what appears to be a preview of the arguments we can expect when the Weekly pursues its appeals.

Blown coverage

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Most major media outlets are cautious about the war in Iraq these days. Other than times like, say, the fifth anniversary, they don’t cover the war every day, and when they do, they usually provide some sense of the war’s enormous costs, as well as its unpopularity both here and abroad.

But that wasn’t always the case. When George W. Bush beat the drums of war five years ago, most news organizations did little to question the president’s rhetoric. Some even played an active role in selling his case to the public.

“Although some raised doubts, none of the major newspapers were completely against the war,” Greg Mitchell, editor of Editor and Publisher magazine, told the Guardian. According to a 2003 survey by Mitchell’s publication, about 24 percent of newspapers questioned Bush’s arguments prior to the invasion, while the rest supported or were impartial to them.

“Very few disagreed with Bush’s language when he used terms like axis of evil and evildoers,” said David Domke, associate professor of communication at the University of Washington. Domke analyzed 320 editorial pages of the country’s top 10 newspapers between Sept. 11 and the beginning of the Iraq War. He found very little scrutiny or questioning of the administration’s case.

Another 2003 study, this one published in the Newspaper Research Journal, examined coverage by The New York Times and Washington Post between Sept. 11 and Oct. 7, 2001. The study concluded that most editorials in the influential papers simply reiterated White House opinions. This passive acceptance of administration spin did not just influence public opinion, the Journal argued. It also set the tone for news coverage across the country.

Broadcast media mimicked the pro-war bent of the country’s major newspapers. “Overwhelmingly, the expert sources [on television] were pro-war, even [on] PBS,” said Isabel Macdonald, communications director of Fairness and Accuracy in Reporting (FAIR).

In the weeks following Colin Powell’s presentation to the United Nations, FAIR found that 75 percent of the 393 sources who appeared on ABC, CBS, NBC, and PBS nightly news were current or former military officials. Only one speaker, Sen. Edward Kennedy (D-Mass.) denounced the invasion.

Since the invasion five years ago, the public’s approval of the Iraq War has gone from about 70 percent to 35 percent. Recent editorials reflect this drastic shift. A July 2007 study by Politico.com found that newspaper opinion pieces are now much more critical of the war. The New York Times called for a troop withdrawal on July 8, 2007. The Fort Worth Star-Telegram, which twice endorsed Bush, called for a withdrawal several months before the Times. Another traditionally conservative daily, the Dallas Morning News, also asked for troop reductions.

Once the war started going badly, “a lot of military elite jumped ship,” Robert McChesney of the media reform organization Free Press told the Guardian. “Reporters have changed their stance because their sources have given them a different point of view.”

The alternative press, on the other hand, was consistently against the war from the start, and alternative weeklies provided some of the most significant coverage of the antiwar movement. The Guardian editorialized against the war, did cover stories against the war and pushed the agenda on a regular basis – and we weren’t alone.

We emailed editors of papers belonging to the Association of Alternative Newsweeklies to get a sense of how many were out in front against the invasion, and the results were impressive. All over the country, in big cities and small towns, alt-weeklies were filling the role that the daily papers and TV stations didn’t.

Among the papers that published articles critical of Bush’s war plans and that reported favorably on the protests: Tucson Weekly. Athens (Ohio) News. Boulder Weekly. Long Island Press. North Coast Journal. Monterey Coast Weekly. Random Lengths (San Pedro). Memphis Flyer. Boston Phoenix. ArtVoice (Buffalo). Rochester City Newspaper. Colorado Springs Independent.

“We came out against it immediately,” wrote Bradley Zeve, publisher of the Coast Weekly. “And we sent a report to Iraq.”

Said Robbie Woliver, editor in chief of Long Island Press: “We were on this from the start and even had some amazing ongoing coverage by a reporter who was non-embedded. Back then that was pretty rare.”

Paemla White at Boulder Weekly noted that her paper “wrote a mondo article covering every single antiwar event in the week prior to shock and awe in an effort to prove conclusively that there was opposition.”

Ken Neill, publisher of the Memphis Flyer, reminded us that his paper was “ahem, outspoken in our editorials and in coverage of marches, etc.” That’s something of an understatement – Neill and his publication were among the most vociferous opponents of the war in the country.

In fact, most of the alts were writing about the war well ahead of the invasion: “Don’t forget that we gave the anti-war perspective BEFORE the war started,” said James Allen, publisher of Random Lengths.

The Village Voice and the L.A. Weekly both had strong antiwar articles in 2003. But they’re now part of the same chain that owns the SF Weekly, and the chain (now called Village Voice Media) doesn’t allow editorials in its publications. In fact, the Weekly made fun of the antiwar protesters (including the Guardian staff).

But overall, if you wanted to find out the other side of the war story, the alternative weeklies were offering it.

What the verdict meant

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>>Read more at www.sfbg.com/lawsuit

› tredmond@sfbg.com

The press coverage was impressive: The San Francisco Chronicle put the story on page one. KTVU-TV made it the third item on its 10 O’Clock News. Editor and Publisher, the newspaper trade journal, picked it up, as did Forbes magazine. The San Francisco Daily used a front-page bold banner headline: "Jury punishes chain."

And indeed, as anyone who follows the local news media is aware by now, a San Francisco jury March 5th ruled that the SF Weekly and its corporate parent, Village Voice Media, illegally sold ads below cost in an effort to harm the Guardian. The jurors awarded $6.3 million in damages, and since the law allows as least part of that award to be trebled, the Weekly and VVM could be liable for as much as $15.6 million.

VVM already announced it will appeal, which means it’s unlikely the Guardian will see any cash award for several years as the case works its way through the legal system. But in the meantime, we will be asking Judge Marla Miller to issue an injunction barring any further below-cost sales.

Under state law, interest on the judgment will accrue at 10 percent a year. That means the Weekly and VVM will be paying $4,000 a day in interest for as long as they seek to dispute and appeal the jury decision.

The verdict alone sends a powerful message that goes beyond the newspaper industry. California’s Unfair Practices Act, a Progressive-era measure, forbids a big chain with deep pockets from coming into town and using predatory pricing to run a locally-owned, independent operation out of business. A San Francisco jury has confirmed that the law can be a powerful weapon against the consolidation of news media — and the chain-store assault on local merchants.

Not surprisingly, VVM’s principals have said they are going to try to invalidate the law in the courts. In a written statement posted to the SF Weekly Web site, the chain says it doesn’t think the law ought to apply to competitive markets.

Of course, the entire point of our lawsuit was that the Weekly and VVM wanted to end competition — that the chain was trying to harm its only direct competitor in the San Francisco marketplace. And that’s precisely what the law was written to prevent.

As James R. McCall, a law professor at Hastings, wrote in a 1997 article for the Pacific Law Journal, "the commercial practice of knowingly selling below cost with the intent to injure competitors or injury competition has long been considered unlawful by American courts and state legislatures."

The trial produced reams of evidence and extensive testimony on the business practices of both papers, and provided some remarkable insights into how the nation’s largest alternative newspaper chain operates. Some highlights:

•VVM, which has built highly profitable papers in many national markets, fared very differently here. The chain bought two papers that were profitable concerns — the SF Weekly in 1995 and the East Bay Express in 2001 — and turned them both into huge money losers. Over the past 12 years, the company lost some $25 million in the Bay Area, and has pumped $13 million from corporate headquarters into propping up the Weekly.

Financial data presented in court showed that in markets where the chain faces no direct competition from a strong alternative paper, VVM is practically printing money. Profits in Denver and Phoenix were sky-high, sending some $40 million back to corporate headquarters over about 10 years. But in places where a strong competitor challenged the VVM paper — San Francisco and Cleveland being the two most notable examples — the chain was losing money or its profits were much thinner.

•The folks in Phoenix were obsessed with going after the Guardian. The record is littered with e-mails between VVM headquarters and the SF office discussing ways to get ads out of the locally owned paper. The Weekly publishers had to send a regular "Guardian report" back to Phoenix to show how the two papers stacked up. Weekly publishers admitted that they might have offered special bonuses to sales reps who took ads away from the Guardian.

In fact, three witnesses testified that on the day he bought the Weekly in 1995, Mike Lacey, one of the chain’s two principals, threw a copy of the Guardian on the floor and vowed to put us out of business.

The jurors found that sort of behavior strong evidence of predatory intent. One panel member, Kerstin Sjoquist, a local business owner and graduate student, said in an interview that "it felt overly predatory on the part of the Weekly" and that "the predatory intent trickled down from the top."

You could see that same intent by the way the Weekly covered the trial. None of the local reporters at the paper were in the courtroom; instead, the chain brought in one of its top editorial executives, Andy Van De Voorde, from Denver to write about the case every day. And the blog posts he authored were about as personally vicious as anything I’ve seen in a long, long time.

Van De Voorde portrayed this entirely as an attempt by Guardian publisher Bruce Brugmann to shake down the Weekly and VVM for money. (And he never reported on the fact that the evidence clearly showed Bruce and his wife, Jean Dibble, had never taken big profits out of the paper and had instead reinvested money to improve the Guardian.) From the start, Van De Voorde called the suit silly and stupid and tried to make the case that the Guardian had no evidence at all to prove predatory pricing.

As the case wore on, he started to change his tune: by the last few days, he was tacitly acknowledging that there was a chance the Weekly would lose, and he started attacking the law itself. In the end, he told me he "wasn’t surprised" by the verdict — although for weeks his blog posts had taken the position that the Guardian couldn’t possibly win.

•The Weekly‘s lawyers essentially argued that their own client was unable to handle pressure from the Internet and unable to adapt to a changing marketplace. Expert after expert on the VVM payroll testified that both the Guardian and the Weekly had seen revenues drop because of outside market forces in San Francisco that apparently were completely beyond the coping ability of a national chain that was making money hand over fist in the rest of the country. In his closing arguments, H. Sinclair Kerr, the Weekly‘s lead attorney, insisted that the market for alternative newsweekly advertising had shrunk and that both papers were, in essence, failing.

That contrasted dramatically with testimony from the only expert witness for either side who had actually run a weekly newspaper. Bill Johnson, publisher of the Palo Alto Weekly, testified that the Internet was not destroying alternative papers and that it was entirely possible to make money in the Bay Area, even during a tough economy. He pointed out that, unlike daily newspapers that rely increasingly on wire-service stories, alt-weeklies offer unique content that can’t be found anywhere else. And the people who are looking for those stories make up a lucrative market for advertisers.

His conclusion, after attending much of the trial and viewing much of the economic evidence: the reason the Guardian was losing revenue was that the Weekly had systematically depressed the price of display ads in the alternative weekly marketplace. And the chain paper was able to do that because of its deep pockets.

Numerous witnesses agreed that the Weekly could have raised its rates and made a profit. But that would have made it possible for the Guardian to compete for those clients — and VVM wanted the market to itself.

In the end, the jury got the message: the Guardian has been hurting badly all these years not because of any external factor but because a rich competitor was selling below cost.
That, Johnson testified, was exactly how predatory chains operate. "It happens," he said, "all the time."

The Guardian was (well) represented by Ralph Alldredge, Rich Hill and E. Craig Moody

Eviscerating the SF Weekly’s legal arguments

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I had nothing to do with this, I swear. I don’t even know who the “non partner track associate at Altweeklydeathwatch LLP” is. But there’s a brilliant analysis of the Village Voice Media’s grounds for appealing our court victory here.

The blog post goes through a recent SFW/VVM piece on the verdict and takes it apart, line by line. Here’s just one example:

>[The Unfair Practices Act is] the equivalent of an open invitation for plaintiffs to roll the dice.

This accurately describes all litigation anywhere, ever. It manages to be both condescending, pathetically stupid, and completely devoid of anything that would help the reader understand the issues at hand. It is beautiful.

Wrapping it up

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› tredmond@sfbg.com

The Guardian went to press this week without a jury verdict in our lawsuit against the SF Weekly.

As of the morning of March 4, the jury had been deliberating more than two days and was still behind closed doors in Superior Court. Any updates will be posted to www.sfbg.com.

The jurors have to answer a series of questions to reach a decision in the case, which alleges a violation of the state’s Unfair Practices Act. First they have to decide if the Weekly sold ads below cost. Then they have to determine whether that was done to injure a competitor (us) and whether the below-cost sales were a substantial factor in actually causing the Guardian harm. Only at that point would the jurors begin discussing damages.

The fact that the panel is still talking after more than 10 hours means it’s likely they answered yes to the first question and possibly the second or third — if those answers had been no, the case would have been over.

But trial lawyers all agree that it’s always a mistake to try to predict the outcome of jury deliberations. The trial has been going on for more than four weeks, with detailed and sharply conflicting testimony on the behavior, intent, and financial status of the city’s two alternative weekly newspapers.

The Guardian argued that the Weekly, owned by the Phoenix-based chain Village Voice Media (VVM; formerly known as New Times), has since at least 2001 engaged in a practice of selling ads for far less than the cost of producing them in an attempt to damage the local, independent competitor. Testimony showed consistently that the chain-owned paper was indeed selling below cost. In fact, the Weekly has lost money for the past 12 years, and the chain has shipped $13 million to San Francisco to prop up the paper and allow it to continue below-cost selling, testimony showed.

Three witnesses testified that they had heard Mike Lacey, one of the two principals of VVM, announce when the chain bought the Weekly in 1995 that he intended to put the Guardian out of business.

But the Weekly‘s lawyers argued that Lacey was just engaging in hyperbole, and that there was never a predatory intent. In fact, they argued, any financial0 losses the Guardian had seen were the result of a weak economy and competition from the Internet.

The Guardian‘s expert accounting witness, Clifford Kupperberg, conducted a study showing that the local paper had lost money to the Weekly‘s price-cutting. In 90 percent of the sample accounts he studied, the Weekly had sold ads below cost — and two-thirds of those were associated with the Guardian either losing a customer or having to cut its rates.

The Weekly brought out $1,075-per-hour Harvard economist Joseph Kalt to argue that it would be economically irrational for the Weekly to try to put the Guardian out of business. But the Guardian‘s business expert, Bill Johnson, publisher of the Palo Alto Weekly, said that VVM was behaving just the way many big chains do: it was cutting rates to seize as much market share as possible with the aim of undermining a competitor.

Kupperberg put the damages at between $5 million and $11 million. The Weekly‘s expert, Everett Harry, tried to belittle those claims, but in the process he gave the jury some misleading charts that completely misinterpreted Kupperberg’s work.

Even if the jury awards only modest damages, the Guardian can ask Judge Marla Miller to issue an injunction barring the Weekly from continuing to sell ads below cost.

Three days and counting

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The jury in the Guardian’s lawsuit against the SF Weekly finished its third full day of deliberations without returning a verdict. The 12 members will be back at it tomorrow morning at 8:30.

No verdict yet

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The jury in the Bay Guardian’s lawsuit against the SF Weekly finished its second full day of deliberations without reaching a verdict Monday. The 12 members will be back at work tomorrow morning.

Meanwhile, the Chronicle weighed in with a nice, fair story by Meredith May Saturday. There were, of course, things I wish May had written, and things I wish she hadn’t, but I don’t think either side can complain about the piece.

Here’s what was most interesting to me:

Both Village Voice Media Executive Editor Michael Lacey and Weekly Editor Tom Walsh declined to comment.

Come on, guys. You run newspapers. What’s this shit about not talking to the press?

The jury has it

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The Guardian’s case against the SF Weekly finally went to the jury yesterday.

A little after 1 pm, Judge Marla Miller called in a bailiff, explained the verdict form to the jurors, and dismissed the panel to begin deliberations.

The move came after both sides presented detailed closing arguments, seeking to tie together weeks of testimony, reams of exhibits and contradictory opinions from a total of five expert witnesses.

Judge Miller started the day by describing the applicable law to the jurors and explaining how they should interpret the facts. Then Ralph Alldredge, representing the Guardian, opened by explaining that the Weekly, its corporate parent (Village Voice Media, the chain formerly known as New Times) and the East Bay Express (until recently owned by VVM/New Times) were all jointly liable for any damages. “If the SF Weekly didn’t have the ability to get money from the corporate parent to cover its losses, it would have gone out of buinsess,” Alldredge said.

Then he ran through the basic facts of the case.

The hit man’s big duck

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Andy Van De Voorde, the Denver-based hit man for the Village Voice Media chain who is out here to cover the Guardian’s trial against the SF Weekly, rambles on at great length in print, using nasty personal attacks to fuel his vitriolic blogs.

But when you try to ask him a question in person, he’s not quite as forthcoming.

I tried to engage him outside of the courtroom yesterday. I had a question for Andy, and it went like this:

Isn’t it standard journalistic practice and basic professional ethics to call the other side for comment when you do a story? And when you dredge up a story that’s 30 years old just to try to smear the people who dared to sue your almighty employer for predatory pricing, doesn’t basic decency require that you check the facts before you go to print?

Van De Voorde refused to answer the question. The tough-sounding writer who excoriates his foes in print couldn’t handle a simple question from a reporter. “You write what you want and I’ll write what I want,” he said.

There’s a reason I confronted Mr. Van De Voorde yesterday morning. One of his blog posts from earlier in the week contained some startling inaccurate information about a fascinating battle the Guardian was involved in back in the late 1970s and early 1980s. The hit man dredged up information that was more than a quarter-century old to try to make some point about the Guardian (although I’m still not quite sure what it was or how it relates to this trial), and in the process, stuck his foot into a political and journalistic swamp that he clearly didn’t understand.

I understand it all too well. I was right in the middle of it, right after I started working for the Bay Guardian.

Big finish

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› tredmond@sfbg.com

After more than three weeks of testimony, a series of expert witnesses, reams of documents entered into evidence, and some stunning admissions on the part of the nation’s largest alternative newspaper chain, the Guardian‘s lawsuit against the SF Weekly is headed for the jury just as this issue hits the streets.

The outcome could impact the future of the alternative press.

The Guardian is charging the Weekly and its corporate owner, Village Voice Media, with predatory pricing, arguing that the Weekly for many years sold ads below cost with the intent of harming the locally owned competitor. That would be a violation of the California Unfair Practices Act.

The Weekly‘s last few witnesses were slated to take the stand Feb. 26 and closing arguments are set for Feb. 27, when Judge Marla Miller told the jury that it will probably begin deliberating.

The daily newspapers and the mainstream media in general have ignored the case. "That’s a shame," Mark Fitzgerald, a columnist for the trade magazine Editor and Publisher, wrote in a Feb. 24 piece that called the trial "sometimes raucous."

In fact, it’s been fascinating, and the jurors have seen some remarkable evidence. Since the chain, then known as New Times, bought the Weekly in 1995, the evidence has shown that the paper has never once made a profit. In fact, the corporation has had to ship in $13 million from its Phoenix headquarters to keep the Weekly afloat.

Several top executives, including two former Weekly publishers, Troy Larkin and Chris Keating, have admitted under oath that the Weekly was selling ads below cost. The Guardian‘s financial expert, accountant Clifford Kupperberg, has presented evidence that the Weekly sold ads below cost as much as 90 percent of the time and that the predatory practices have cost the Guardian between $5 million and $11 million.

On Feb. 22, Everett Harry, an expert witness hired by the Weekly, as much as admitted the same thing, presenting a series of charts that showed consistent below-cost sales.

The Weekly‘s lawyers are arguing that the 16-paper chain and its senior management never intended to harm the Guardian. Any financial setbacks the Guardian has suffered were due entirely to the dot-com bust, the post 9/11 recession, and the rise of Internet advertising, they say.

They also say that the Weekly and the Guardian have so many competitors in the San Francisco market that it would be foolish for VVM to try to damage a single competing newspaper.

But three witnesses have come forward to testify that Mike Lacey, one of the two principal owners of Village Voice Media, specifically vowed to put the Guardian out of business when he took over the Weekly. Memos from Weekly publishers to the bosses in Phoenix refer to the Guardian as the only significant competitor and discuss how the Weekly can take ads away from the Guardian.

In some memos, Weekly executives talk of how well they are doing in San Francisco, even as the Weekly was losing more than $1 million a year. The clear implication: the Weekly publishers weren’t being judged on how much money they made, but on how effectively they’ve tried to cripple the Guardian.

The jury will have to find that the Weekly sold below cost, that it did so to harm the Guardian, and that the Weekly‘s behavior played a significant role in causing the Guardian financial harm. The panel can then award damages.

Alternative papers around the country, particularly independents, are watching the trial closely. If the Guardian wins, the jury verdict could send a signal to big publishing outfits in California and in the 20 other states with similar antitrust laws that below-cost selling and attempts at market domination could be risky business.

The case closes

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I’ll start with a correction: I wrote last week that Cleveland and San Francisco were the only two cities where the chain that owns the SF Weekly faces direct competition from another alternative paper.

Actually, Village Voice Media, which used to be called New Times, owns the Seattle Weekly. The Stranger, owned by Tim Keck, competes directly against the Weekly.

And the LA Weekly, also a VVM paper, competes against the much smaller Los Angeles City Beat.

My point – and the point that we brought up in trial – was that VVM does very well in markets where there is no direct, head-to-head competition from another alternative paper of the same size and market share, but does badly when it faces real competition. I’m not the only one who thinks this; allow me to quote a Jan 27, 2003 filing by the U.S. Department of Justice, which had accused New Times and VVM, which were still separate companies, of conspiring to kill competition in two cities.

“In markets where they faced no direct alternative newsweekly competitor,” the federal complaint reads, “both defendants had double-digit annual profit margins. However, in Cleveland and Los Angeles … their profit margins were pinched.”

So I think that’s pretty clear.

The bigger story, of course, is that testimony ended today in the Guardian’s predatory-pricing case against the SF Weekly and its corporate parent. Judge Marla Miller has set closing arguments for Thursday morning. Then the case, which has been pending since 2004, will finally go to a jury.

The Weekly’s lawyers pulled a weird move at the very end of the trial, recalling Guardian publisher Bruce Brugmann to the witness stand and asking him a question that had almost nothing to do with the issues at hand. Brugmann had testified early in the trial, and on cross-examination, he was asked if he knew that the San Francisco Chronicle had lost some $300 million over the past few years.

No, Bruce said; Hearst Corp, which owns the Chron, is a privately held corporation and nobody’s sure exactly what the numbers are.

This time around, Weekly lawyer H. Sinclair Kerr pulled out a Guardian story from a year ago that reported on court records showing a $330 million Chronicle loss. I guess the implication was the Bruce didn’t remember what was in his own paper (frankly, I didn’t remember the exact figure either; I review almost every one of the hundreds of news stories we run every year, but I can’t swear to recall every detail of every single one).

Bruce’s response: Sure, we reported on the best figures we could find. And the point was?

Of course, the Weekly is trying to argue that since some daily newspapers are losing money, it would be reasonable to expect any an alternative newspaper in San Francisco to lose money, too. And thus any financial hit the Guardian has taken over the past seven years is the fault of market conditions, not predatory pricing by a big Phoenix-based chain.

The final witness in the case – Bill Johnson, the publisher of the Palo Alto Weekly, called by the Guardian to rebut the Weekly’s financial experts – made a strong case that the whole “dailies-are-losing-money-so-the-weeklies-should-too” line of argument is deeply flawed.

Johnson, whose company also owns the Pacific Sun and four community papers, testified that “there are big differences between the way market forces have affected dailies and non-daily papers.”

He pointed out that dailies have been hit much harder by the Internet: Before sites like Craiglist emerged, a large percentage of the revenue of daily papers came from classified ads, most of which have moved to the web. Weeklies were never as dependent as classified, he said.

Perhaps more important, much of the information that readers used to get from their morning daily paper – national and international news – can now be found just as easily on the web.

But papers like the Guardian still offer unique local content that can’t be found anywhere else. “Local papers have this connection with their local audience,” he explained. In fact, he said, “most non-daily publishers I know have done very well” during the past seven years, the time period the lawsuit covers.

He explained that the Palo Alto Weekly saw its display-ad revenues drop in 2002, but quickly rebounded. The dot-com bust and 9/11 had an impact, of course, he said, but after a year or so, “we held our ground and regained ground.” That was also true of his other Bay Area papers, Johnson said.

Johnson also discussed the Weekly’s theory that the San Francisco market is so full of media that the two alternative papers aren’t direct competitors in their own market. “Those two papers are looking for the same audience,” he said.

Johnson, who sat through the testimony of Harvard economist Joseph Kalt, completely dismissed the eminent professor’s theory that it would be irrational for the Weekly to try to damage the Guardian through below-cost selling. If one paper has deeper pockets and can drop its prices, it will gain market share. The smaller competitor will be forced to lower its prices, and both papers will start to lose money. But the paper with greater resources can continue to grow, showing advertisers that it’s becoming dominant in the market, and the paper with no source of outside capital won’t be able to keep up.

“It happens all the time,” Johnson said.

Kerr objected, and Judge Miller ordered that last remark stricken from the record.

SF Weekly witnesses make the Guardian’s case

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An expert witness for the SF Weekly put a bunch of charts before the jury Friday, trying to undermine the Guardian’s predatory pricing case – but every one of the charts seemed to prove exactly what we’ve been trying to say.

The Guardian is suing the Weekly and its corporate parent, Village Voice Media, for predatory pricing. The claim is that the 16-paper chain poured millions into propping up the San Francisco paper, which for 12 years has lost money while it sold ads below the cost of producing them. That, we argue, was done to harm the locally owned competitor.

Clifford Kupperberg, the Guardian’s expert witness, put the damages at between $5 million and $11 million.

Everett Harry, an accountant who specializes in analyzing damage claims in litigation, tried to take apart Kupperberg’s analysis. One of his weapons: A series of “scattergrams,” graphic representations of large numbers of sales transactions for clients that have advertised in both the Weekly and the Guardian.

Harry tried to use the charts to argue that the Guardian wasn’t losing business to lower-priced Weekly ads. But the stunning fact was that every single scattergram showed that the Weekly was indeed selling ads below cost.

Our expert, their expert

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Lawyers for the SF Weekly and its corporate parent tried mightily today to discredit the testimony of the Guardian’s expert on the damages caused by the chain’s predatory pricing in San Francisco.

It was a classic legal strategy: The Weekly lawyers tried to find flaws in Clifford Kupperberg’s detailed damage report, then brought in their own expert to argue that our expert was wrong.

But in the end, I didn’t see anything presented that undermined the Guardian’s basic argument: The Weekly’s below-cost sales damaged the local paper, and those damages were in the millions of dollars.

The crux of the attack on Kuppergberg’s data: The projections he showed for lost profits during 2001-2007, the period when the Guardian is charging the Weekly was selling ads below cost, exceeded the level of profits the paper had made in the previous few years.

Projecting damages in a case like this is an inexact science: You have to try to establish what would have happened if the illegal conduct hadn’t happened. Kupperberg used a series of different models to do that, and came up with damages of between $5 million and $11 million.

How, Weekly attorney Rod Kerr asked, could Kupperberg suggest that the Guardian would have made profits of well over 10 percent a year when the most the paper had earned in the previous decade was about 5 percent?

Well, Kupperberg noted, the 1990s were a period of rapid growth for the Guardian and the alternative press in general, and during periods of rapid growth, many companies re-invest profits in expanding their infrastructure. When a market starts to level off and mature, those investments pay off; that’s a period he called the “profit maximization level.”

So it wouldn’t be at all unreasonable to assume that, after spending money to expand in the 1990s, the Guardian might have been able to hold costs down and see real economic gains in the next decade.

The other point, of course, is that the Guardian’s owners, Bruce Brugmann and Jean Dibble, have never looked for high profits – all the money has been re-invested in the paper. So the money that the Guardian lost to SF Weekly’s predatory pricing might not have appeared on a balance sheet as “profit” – it might have appeared as higher expenses associated with improving the paper.

Kupperberg made another important point in his testimony: Ralph Alldredge, the Guardian’s lawyer, asked him directly: “Is there any doubt in your mind that the SF Weekly sold a significant percentage of its ads below cost during this period?”

“No,” said Kupperberg.

Then the Weekly brought in it’s expert, Everett Harry, who did the opposing-expert-witness thing and tried to say that Kupperberg’s figures were all wrong. His basic line was the same thing the Weekly has been retailing all along: The early part of this decade was marked by a recession, 9/11 and the rise of the Internet, all of which hit local newspapers and led to a decline in revenues.

But other weekly newspapers in the region (and weeklies all over the country) came out of the recession fairly quickly and saw revenues (from display ads, which are what this case is about) come back strongly. And between 2001 and 2007, there is no evidence that the Guardian lost any display ads to the Internet.

The San Francisco alternative weekly market was unlike markets anywhere else: One competitor, with $13 million in chain money to back it up, was systematically depressing the price of display ads. And the Guardian suffered damages as a result.

I have more when Harry finished his testimony and is cross-examined tomorrow.

The damages: $5 – $11 million

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An accountant with more than 30 years experience analyzing damage claims in lawsuits testified today that the SF Weekly’s practice of selling ads below cost damaged the Bay Guardian badly – and he put the financial toll at between $5 million and $11 million.

Clifford Kupperberg took the stand in the Guardian’s predatory-pricing suit against the SF Weekly and its corporate owner. The Guardian is charging that the Weekly for more than seven years violated the state law barring companies from selling a product below cost for the purpose of harming a competitor.

Guardian attorney Ralph Alldredge walked Kupperberg through the detailed process of how he evaluated the Weekly’s and the Guardian’s costs, the price of display ad space in the two papers, and the projections he made of how much the Weekly rate-cutting had harmed the locally owned paper.

If the jury finds that the Weekly and Village Voice Media, the chain formerly known as New Times, broke the law, Kupperberg’s calculations will be the basis for awarding monetary damages.

Editor’s Notes

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› tredmond@sfbg.com

There comes a time in any campaign, a political consultant once told me, when you just have to hang up the phone, stop looking at polling data, walk away from the office, and leave it in the hands of the voters. You do everything you can; you work every angle, make the case every possible way you can … and in the end, someone else is going to decide. You can only hope that if you told the truth, played by the rules, and showed why your side was right, in the end you’ll come out on top.

And sometime around the day this issue hits the stands, the Guardian‘s case against the big national chain that owns the SF Weekly will go to the jury. We have the facts on our side. We have the law on our side. We have the truth on our side. And all we can do now is hope the jury sees it.

If you haven’t been following this on the blogs or in the paper: we’re suing the Weekly and Village Voice Media, which used to be known as New Times, for predatory pricing. Our claim is that the Weekly (and until recently, the East Bay Express, which VVM just sold) has been selling ads below cost for the purpose of hurting a local, independent competitor.

Over the past three weeks I’ve been in the courtroom almost every day, watching the story unfold. I’ve learned a lot: the Weekly, for example, has lost money every single year since New Times bought it in 1995. In the past few years the losses have only escalated (to nearly $2 million per year). The paper is still publishing because the corporate parent in Phoenix has shipped more than $16 million to San Francisco to prop it up.

That’s pretty good evidence of the first part of our claim: if the Weekly keeps losing money, the paper is clearly selling ads below cost.

I’ve also seen evidence that the Weekly prepared special Guardian reports every month to send to Phoenix, that the Weekly‘s publishers devoted a special section of their regular financial reports to competition with the Guardian, and that the senior staff regularly talked about the war they were waging on us. Three witnesses testified to hearing Mike Lacey, one of the principals of VVM, announce that he wanted to drive the Guardian out of business.

I’ve seen memos and heard testimony showing the Weekly paid its sales staff bonuses to take ads away from the Guardian. I’ve seen a study showing that in 91 percent of key accounts, the Weekly sold below cost — and in 66 percent of those cases the Guardian either lost the ad or had to deeply discount rates to keep it.

I’ve heard witnesses from the Weekly‘s side testify that the Guardian was just one of many competitors in the market and that they treated it no differently than any other publication. I’ve heard misdirection and lies so blatant that I’ve wanted to stand up and point my fingers at the witnesses and call them out and demand they be indicted for perjury.

And now a jury will have to sort that out. In the end, I think this is a pretty clear case: we are a small, locally owned independent business under assault by a chain competitor that is vioutf8g state law in an effort to take monopoly control of the market. I think we’ve proved that. We’ll know soon.

Weekly publisher dodges the facts

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The publisher of the SF Weekly took the stand Friday and today in the Guardian’s predatory-pricing suit and presented all of the Weekly’s positions as if he’d been rehearsing for weeks.

And in fact, Fromson has been sitting in the courtroom watching most of the trial so far. Most witnesses in legal cases don’t get to watch the proceedings until after they’re done with their turn in the box – it might influence their testimony – but Judge Marla Miller has been pretty lax on that front. She’s allowed one representative from each paper to sit in for the entire case, and Fromson has apparently been the Weekly’s designate.

(She’s also allowed me to sit there and watch, and then write about, the proceedings even though it’s theoretically possible that the Weekly’s lawyers will try to put me back on the stand.)

I have no objection to any of this; I’m simply pointing it out because Fromson’s testimony was carefully targeted to hit all the major points where the Weekly has been weak.

But his carefully buffed lines, delivered like the salesman he is, don’t exactly jibe with the evidence.

Fromson’s line – and the line of the lawyers for the 16-paper chain now known as Village Voice Media – is that the poor beleaguered Weekly was trying really hard to raise its ad rates so that it wouldn’t be selling below cost and would be starting to make a profit. The company, he said, is “concerned with rate growth, revenue growth, and increased profit.”

But the facts show that over the 12 years the chain has owned the Weekly, the paper has never made a profit. In fact, for every one of those years, the Weekly has been selling ads below cost.

Fromson tried to argue that in many cases, the Guardian’s ad rates were actually lower than the Weekly’s, and that he as publisher has had to cut prices to meet the competition from the Guardian. But again, the evidence shows otherwise – while there are no doubt a few cases here and there where the Guardian rates were lower, the overall financial statements from both companies make very clear that the Weekly’s rates were consistently below the Guardian and consistently below cost.

Then he tried to argue that he was cutting rates to meet other competition. In fact, the notion that the Guardian was not the Weekly’s prime competitor – that there were dozens of other media outlets fighting for every ad dollar – is central to the Weekly’s defense.

Fromson talked about fighting with the Onion, the neighborhood newspapers and SFStation.com, among others, for ads, and cited some cases in which he said he’d had to lower rates to meet those competitors’ prices.

But again, the evidence doesn’t lie. The Weekly publishers before Fromson all had to prepare regular special reports on the Guardian – and on no other competitor. Fromsom filed some “Guardian reports” of his own – and he couldn’t point to a single similar report he’d filed on any other competitor.

And anyone with any common sense knows that there’s a market niche for alternative weeklies; if there weren’t, neither the Guardian nor the New Times/VVM chain would have survived and grown over the past three decades.

In fact, Fromson as much as admitted that on cross-examination. Guardian attorney Rich Hill asked if any of the neighborhood papers, or the Onion, were members of the Association of Alternative Newsweeklies or represented by either of the two national ad firms that specialize in alternative weeklies. No, he acknowledged. The neighborhood papers, Hill asked, have much lower circulation and very different types of editorial, don’t they? Yes, said Fromson.

“Are there serious investigative pieces in the Onion?” asked Hill.

“They don’t see themselves doing that,” Fromson replied.

In other words, Hill said, those supposed competitors are actually quite different products, right?

“I don’t agree with that,” Fromson said.

But it became very clear during cross-examination that Fromson did, indeed, see the Guardian as his chief competitor – and that he and the top executives at New Times/VVM were looking for ways to hurt the competitor.

Hill took Fromson through the paper’s finances. In 2005, when he arrived, the Weekly lost $1.8 million. In 2006, with Fromson at the helm, the loss was $2.5 million. And the steep losses continued in 2007.

Hill pointed to several memos showing how Fromson and his bosses, chain president Scott Tobias and CEO Jim Larkin, saw the competition with the Guardian. In one memo, dated Feb/ 24, 2006, Larkin warned Fromson that the Guardian had more ads in the paper. “No way they should be ahead of us in ad count like this,” Larkin wrote.

“They won’t,” replied Fromson. “That is the loudest drum I am beating around here.”

The point of that exchange: Fromson and the higher-ups were concerned not with increasing their rates or making a profit, but with making sure they had more total ads than the Guardian.

“I’m not OK with losing to anyone, least of (sic) Brugman (sic),” Fromson’s email continued.

In July, 2006, Fromson sent an email back to corporate headquarters stating that “we are doing a great job, all things considered.” That came at a time when Fromson’s paper had lost more than a million dollars in just the previous six months.

In November, 2006, Fromson wrote that he was “feeling good about working them over the rest of the year.” Who, Hill asked, is the “them” referred to in that message?

“I imagine it would be the Guardian,” Fromson said.

That same month, while the Weekly was losing $179,000, Larkin wrote to Fromson and said: “great work, let’s keep it going.”

And in Fromson’s Nov. 30,2006 “Guardian report” to Larkin, he wrote: “As you can see, we are winning the battle locally and nationally.”

Since that clearly wasn’t a battle to be profitable or a successful business, Fromson had to be referring to something else. As Hill put it: “Is that the battle to wreck the Guardian?”

Fromson: “There was no battle to wreck the Guardian.”

One of the things the jury will have to do is decide is which witnesses are telling the truth, and which ones, as the lawyers say, lack credibility.

The Weekly’s expert, laid low

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The chain that owns the SF Weekly brought its star witness to court today, a Harvard economist with a stack of academic credentials who typically works for oil companies and who charges $1,075 an hour. He delivered quite a lecture on his own economic theory of predatory pricing – and then was laid low by a little newspaper called the Bodega Bay Navigator.

Some background before we get into the juicy details.

I was an economics major way back when. I have sat through many lectures by learned economists, have read their learned papers, and have tried to keep up somewhat on the dismal science. And I can say without hesitation that most academic economists live in a world devoid of reality.

Economists try to study human behavior as it’s manifested in markets, but they don’t want to be confused with people who actually study human behavior. They will tell you they aren’t (gasp) sociologists; they want to make everything fit in nice little mathematical theories.

To do that with such non-mathematical concepts as the actions of a small business and its owners in a community, you have to make a lot of assumptions. That’s what economists do; they make assumptions. They assume, for example, that all the participants in a market have the necessary knowledge and information to make the proper decisions. They assume that random factors like politics, love, passion, pride, anger, envy or simple nastiness are never part of the economic equation. They assume that everyone in a marketplace acts “rationally.”

That, of course, is an irrational assumption, particularly when it comes to small businesses (and even more so when it comes to the alternative press). If all of us in this business had acted rationally, there would be no Bay Guardian. There would be no SF Weekly, New Times or Village Voice Media. The entire alternative press exists because some utterly irrational people with little background in business and no rational hope for success decided to start little newspapers. They were – and many still are – motivated by politics, community service, excitement and a lot of other things, but rational business motives were never really high on the list.

Which brings us to the eminent Dr. Joseph Kalt.

Weekly publisher admits below-cost sales

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The former publisher of the SF Weekly admitted today to a key part of the Guardian’s lawsuit against the Weekly and its corporate parent.

Chris Keating, who was the Weekly publisher between 2004 and 2006, was on the stand for cross-examination by Guardian lawyer Ralph Alldredge. After a lengthy discussion in which he discussed numerous examples of efforts to win ads away from the Guardian by cutting rates, Alldredge asked him directly:

“You knew those [prices] were below your cost, right?”

Keating replied, “Yes.”

That’s a significant admission: The Guardian is claiming that the Weekly sold ads below cost with the intent to harm the locally owned paper. That’s a violation of California law.

The SF Weekly’s war of attrition

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Another fascinating day in court in the Guardian’s predatory-pricing lawsuit against the SF Weekly and its corporate owner. The Weekly is now well into its defense case, and the lawyers for the 16-paper chain that owns the paper are making the same arguments they’ve made all along. And they aren’t holding up very well.

The Guardian, as readers of this blog know by now, is claiming that the Weekly and Village Voice Media, the chain formerly known as New Times, sold ads below cost in an effort to harm the local competitor.

Today’s main witness was Jed Brunst, the company’s Phoenix-based CFO. H. Sinclair Kerr, the Weekly’s lead attorney, asked Brunst why New Times decided to buy the Weekly in 1995. “We saw San Francisco as a very vibrant market,” Brunst testified. “We saw it as an opportunity to make money and to practice good journalism.”

It was clear that Brunst was well prepared – much of his testimony seemed pre-rehearsed, which is not terribly surprising. Lawyers in a case like this typically make sure their own witnesses aren’t going to surprise them.

But Brunst got out of the box with a big problem: He said the chain saw San Francisco as a good opportunity to make money. And it became clear as the day went on that the Weekly had never made any money at all. Neither had the East Bay Express, which New Times bought in 2001. Both lost huge amounts of cash.

SFBG vs. SF Weekly lawsuit

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