The Bay Guardian hit the lawsuit lottery for the second time in its history last Wednesday, winning a $15.6 million judgment against SF Weekly and its parent company, New Times (now Village Voice Media), and its former sister paper the East Bay Express. The jury awarded the Guardian $1.79 million for damages from Oct. 2001 to Oct. 2003, and $4.6 million for damages from Oct. 2003 to the present; that second amount may be trebled by the judge.
Village Voice Media vows that Guardian publisher Bruce Brugmann will have a difficult time cashing his ticket.
The verdict came despite the fact that the Guardian produced no direct evidence of a predatory-pricing conspiracy aimed at harming the Guardian, and called not a single advertiser to the stand to testify on its behalf. The paper did, however, play heavily on the jury's emotions, portraying itself as the local victim of a national chain and describing Village Voice Media as a company with "unlimited resources" that could easily afford to prop up its longtime ideological rival with a cash infusion.
Prior to the trial, Superior Court Judge Richard A. Kramer had ruled that the Guardian would not be allowed to ply the jury with talk of Village Voice Media's larger size and deeper pockets. But in a highly unusual development, Kramer handed off the case to another judge on the eve of trial, despite having presided over the complex litigation for more than three years.
The new judge, Marla J. Miller, who openly admitted from the bench that getting up to speed on the case was proving a challenge, allowed the Guardian to make the "unlimited resources" argument; the newspaper took full advantage of the opportunity.
At one point, Guardian executive editor Tim Redmond even talked casually about Weekly editors being able to snap their fingers and have millions of dollars wired up from Phoenix, where New Times is based. The Guardian portrayed itself as helpless in the face of such superior resources and lightning-fast money transfers.
In fact, the last thing the jury heard was the Guardian's claim that if it didn't receive a huge cash payout from the Weekly, it would go out of business.
In his closing arguments, Guardian attorney Ralph C. Alldredge told the jury that, should the Guardian lose, its demise was "inevitable." That assertion was made despite the fact that the Guardian made a profit last year and continues to have a higher circulation than the Weekly. Indeed, despite its claim that New Times has been engaged in a predatory scheme since the day it purchased the Weekly in 1995, the Guardian has always been the larger, more profitable paper, and had a 29-year head start on New Times.
After forming in 1966, the Guardian didn't take long to choose suing competitors as its preferred business model. In the 1970s, Brugmann filed suit against San Francisco's daily newspapers as one of several parties that alleged the Chronicle and the Examiner were attempting to establish a monopoly. Brugmann took a $500,000 settlement before the case ultimately was decided in favor of the dailies.
As with its claim against the dailies, the Guardian insists it would have made more money if not for wrongful competition from the Weekly.
SF Weekly immediately announced it would appeal the verdict, and issued a statement noting that the Depression-era California predatory-pricing law under which the suit was filed makes a mockery of prevailing federal court standards.
Over the years, federal courts have increasingly viewed below-cost pricing claims dubiously because they can easily be twisted to protect not consumers' pocketbooks, but the right of an inefficient competitor to stay afloat.
Village Voice Media says that is precisely what happened here. "Instead of competing in the marketplace, Brugmann seeks shelter in court-sanctioned price fixing," company owners Michael Lacey and Jim Larkin said in a statement. "He wants mom-and-pop advertisers to pay higher rates."
In fact, the Guardian's Alldredge endorsed price fixing several times during the trial, repeatedly asking New Times witnesses why their papers (the company owned the Express from 2001 to 2007 and sold it at a loss) didn't just "raise their prices to the same level as the Guardian's and let the customer decide."
That query drew a quizzical response from New Times' vice president for financial operations, Jeff Mars, who, during his testimony, asked Alldredge, "Are you attempting to suggest that we should call the Guardian and get their rates before we set ours?"
Alldredge's questions certainly sometimes seemed strange. Indeed, it's hard to imagine a more bizarre notion than the suggestion that a newspaper could raise its advertising prices at will during the massive downturn in print media that caused the hometown San Francisco Chronicle to lose $330 million between 2000 and 2006.
But Wednesday's verdict suggests that Alldredge, a veteran attorney with the courtroom demeanor of a kindly if sometimes bumbling grandfather, knew what he was doing all along. In fact, even before the trial started, Alldredge publicly bragged that the extraordinarily low burden of proof called for under California's Unfair Practices Act would make his job simple.
And he kept it simple at trial, not bothering to call any advertisers to the stand and instead repeatedly hammering away at the fact that New Times had sold thousands of ads "below cost." Saying a company is selling below cost is just another way of saying it is losing money.
But in Alldredge's hands, New Times' willingness to invest millions of dollars in the Bay Area — most of which went to salaries and benefits for employees — began to sound like a conspiracy.
The Guardian has complained about the Weekly's high costs, and even asked Judge Miller to issue an injunction preventing the paper from selling below cost in the future. The Guardian has yet to say which journalists or salespersons the Weekly should lay off in an effort to "live within its means," a favorite Guardian catch phrase during the trial. The paper has had plenty to say, however, about New Times' alleged ill intentions, despite having produced no smoking-gun evidence of a plot.