As expected, Guardian boss wallows in his trial-court victory.

By Andy Van De Voorde

The dust has barely settled at Superior Court following the jury verdict last week in the Bay Guardian’s predatory pricing lawsuit against the Weekly.

But already Guardian boss Bruce Brugmann is doing what The Snitch expected him to do: Loudly encouraging others to use his successful (for now) shakedown effort as a model for other businesses to employ against their competitors.

Brugmann must be angling for a bronze statue down at the courthouse — or in Red Square.

In a story published Tuesday in the Boston Phoenix, Brugmann tells Phoenix media writer Adam Reilly precisely how he wants to see his $15.6 million verdict against the Weekly and its parent company New Times (now Village Voice Media) interpreted.

“Everyone can use our suit as a model and template for any big chain that’s coming in and trying to predatory-price them,” said Brugmann.

Golly.

Creating a “model and a template” for a flood of anticompetitive litigation that will inevitably lead to fewer newspapers and higher prices for the mom ‘n’ pop business owners who buy most of the ads in alternative weeklies.

Such a legacy to leave for a self-professed defender of the little guy.

Compliments of the California Urban Issues Project comes this recent footage of the infamous Walter, the man who frequently adds his singing commentary to Board of Supervisors meetings on issues as diverse as the Ed Jew controversy (to the tune of Madonna's "Borderline"), and the SF Weekly's cover story this week about Board President Aaron Peskin (to the tune of both "Flipper" and Burt Bacharach's "One Less Bell.") Check out the clips for the full Walter experience. (via SFist)

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.

The potential for loose talk about hypothetical conspiracies involving a competitor is one reason federal courts rarely let predatory-pricing claims go to trial. At the federal level, such claims must pass a common-sense smell test, and the plaintiff must demonstrate that the defendant has a reasonable chance of recouping the money it lost as part of the scheme.

But the Guardian's rhetoric at trial often veered dangerously far from rational thought. Its damages expert, Clifford Kupperberg, told the jury that the paper was entitled to a judgment that far exceeded all the profits it has earned in its entire existence, despite the fact that the Guardian has a long history of scratching out paltry returns, even during the boom period of the late 1990s.

But the Guardian's own record of collectivist inefficiency didn't prevent it from openly advocating that Soviet-style economic shackles should be placed on its competitor.

A common question asked of Weekly witnesses, for instance, was whether the New Times paper realized that if it sold ads cheaper than the Guardian, such activity might harm the Guardian — a query that seemed to turn the American free-market system on its head.

However, if the Guardian's rhetoric occasionally appeared to have been piped in from the Politburo, many of those arguments were actually within the letter of the California law. Alldredge made that clear before the trial even started, telling a reporter for the local Daily Journal that the Unfair Practices Act made predatory-pricing claims a cinch.

Among other things, that law — which was passed in the 1930s in an effort to prevent Safeway from driving out independent grocers by offering low food prices — allows plaintiffs to recover attorneys' fees if they win, but forces defendants to pay their own attorneys' fees regardless of the outcome.

It's the equivalent of an open invitation for plaintiffs to roll the dice, and the Weekly isn't the first Bay Area paper to be sued under the statute. In fact, in the 1990s, a local jury awarded the San Francisco Independent millions in a judgment against the San Francisco Newspaper Agency. That judgment was reversed by a San Francisco appeals court.

"All you do is take all of their costs and divide that by the number of inches of advertising space they sold," Alldredge told the Daily Journal in January, describing the convenience of the Unfair Practices Act. "That tells you how much the cost is per inch. Whenever they sell below that cost, under California law, they've committed a violation."

In fact, the law is written so strongly in favor of plaintiffs that the jury in the Weekly's case received a jury instruction that was tantamount to declaring the Weekly's guilt before deliberations even began. "If you find that any defendant sold advertising space below cost, and any below-costs sale(s) injured the Bay Guardian as a competitor, it is presumed that defendant's purpose was to injure competitors or destroy competition," Instruction No. 21 read. The instruction goes on to say that the presumption of guilt "may be overcome by other evidence." That language essentially requires the Weekly to prove a negative.

Weekly attorneys H. Sinclair Kerr Jr. and Ivo Labar did their best, arguing at trial that the Weekly and the Express always got the most they could for their ads, and that the extremely competitive Bay Area media market combined with the dot-com bust, the events of 9/11, and the flow of advertising to Internet sites exerted powerful pressure to keep prices low.

The attorneys produced numerous exhibits and witnesses who described a media economy in which all print papers are suffering, and also offered undisputed evidence that revenues and overall ad count in both the Guardian and the Weekly had dropped since 2001. The fact that both papers rose together prior to 2001 and fell together from that point forward proved that the Weekly hadn't gained at the expense of the Guardian, the Weekly attorneys argued.

Kerr and Labar also made the point that the Weekly has always had a lower circulation than the Guardian. Even Guardian copublisher Jean Dibble admitted under oath that papers with lower circulations would be expected to have lower prices.

Alldredge and the Guardian, however, kept a laser focus on the "below-cost" issue, and also aggressively contested the notion that the Guardian had any significant competitors other than the Weekly. That argument was critical to maximizing damages, even if it flew in the face of past statements from the Guardian itself.

For instance, the Guardian's 2004 press release announcing the lawsuit trumpeted the fact that the newspaper "has 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."

But at numerous points during the trial, Guardian witnesses such as Palo Alto Sun publisher Bill Johnson scoffed at the idea that community papers or even Internet sites could ever have a meaningful impact on an alternative weekly.

The Weekly's attorneys argued that its struggles to achieve profitability were a direct result of a multicompetitor environment, and made a point of noting that one reason the Weekly's costs are high is that it has invested heavily in its Web site in an effort to keep up with industry trends. The Guardian, by contrast, acknowledged that it had laid off its Web team in an effort to save money, and suggested that it is only now regaining momentum on the Internet.

Brugmann also acknowledged on the stand that he had made the decision to buy a $5.2 million office building in 2002, just as the print economy started to plummet. The Guardian boss insisted that the purchase was a great deal for his paper, despite the fact that it sent millions of dollars in equity into his own pocket because he and Dibble had set up their own limited liability company to make the purchase. The deal also had the effect of saddling the Guardian with a monthly rent payment roughly twice that paid by the Weekly.

Throughout the trial, the Guardian never let such inconvenient truths get in the way of its chief argument that New Times had intentionally lost more than $20 million in an effort to bleed the Guardian. It then asked the jury to interpret the mere fact of those losses as circumstantial evidence of a below-cost plot.

The only other evidence the Guardian presented regarding New Times' purpose was the fact that the Weekly maintained a "Guardian Report" that tracked ads in its competitor by category, and statements purportedly made by executive editor Lacey at a staff meeting in 1995. Three Guardian witnesses claimed Lacey had said he wanted the Weekly to be "the only game in town," and two said he uttered "words to the effect" that he wanted to drive the Guardian out of business.

However, Lacey disputed ever having vowed to put the Guardian out of business, and was backed up on that point by Patricia Calhoun, editor of Westword, Village Voice Media's paper in Denver. And even the Guardian witnesses, two of whom had been fired by New Times after its purchase of the Weekly, acknowledged that Lacey never said a word about advertising or any pricing plans.

As for the "Guardian Reports," the Guardian's own witnesses admitted maintaining "SF Weekly Reports."

New Times documents presented at trial did include several e-mails that referred to the Weekly's aggressive competition with the Guardian, including messages that Guardian attorneys called "militaristic" owing to the use of terms such as "guerrilla tactics." Other Weekly documents talked about "kicking the Guardian's ass" on ad count.

However, Weekly attorneys noted that for every Weekly e-mail about the Guardian there were an equal number of Guardian documents about the Weekly, including discussions about forcing New Times to shut down the Weekly and retreat to Phoenix. A "database" presented at trial by the Guardian in an attempt to show it had been harmed by the Weekly referred to Weekly employees as "assholes."

In their statement, Lacey and Larkin affirmed their strong belief that Village Voice Media will prevail on appeal. They noted that the U.S. Supreme Court in 1993 ruled that sales-below-cost statutes simply don't apply to highly competitive marketplaces.

"The highest courts of all five states that have ruled on sales-below-cost claims since the Supreme Court ruling have agreed," they added. "We look forward to giving California its first opportunity to become the sixth state."

Lacey and Larkin also had this to say about Brugmann's newspaper: "We have not sought to injure the Bay Guardian. We just don't want to read it."

The judgment has not yet been entered. Attorneys for both sides will meet again at a March 25 hearing, at which the Guardian is expected to ask Judge Miller to issue an injunction that monitors the behavior of the Weekly with regard to ad pricing.