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Tuesday, July 8, 2008

Back In Court

Posted By on Tue, Jul 8, 2008 at 6:37 PM

In final hearing, judge mulls Weekly arguments against anti-competitive Guardian verdict.

By Andy Van De Voorde

The final trial-court hearing in the Bay Guardian’s below-cost pricing lawsuit against the SF Weekly took place Tuesday at San Francisco Superior Court, capping the opening chapter of a bitter judicial battle that has already dragged on for more than three and a half years.

Although Superior Court Judge Marla J. Miller has offered preliminary rulings at previous hearings, she remained mute Tuesday on the question of how she would decide the Weekly’s motion for a new trial and its request that she overturn a jury verdict that awarded the Guardian $6.4 million in damages.

Tuesday’s hearing was punctuated with routines familiar to anyone who sat through the six-week trial: Guardian attorney Ralph C. Alldredge’s cell phone going off while he was making an argument; his colleague Richard P. Hill turning in his chair to glower at the gallery; and a perpetually overwhelmed court reporter complaining that attorneys for both sides were talking too fast.

Four chief arguments were put forth by Weekly attorneys James P. Wagstaffe, H. Sinclair Kerr Jr. and Don Moon:

• The $6.4 million verdict (trebled to $15.9 million by Miller) to compensate the Guardian for alleged “lost profits” between 2001-2008 is excessive on its face. Kerr noted that from 1988 to 2000, a period that included the dotcom boom in San Francisco, the Guardian only made $3.3 million in profits, an average of $257,000 a year. Yet, the jury award suggests the Guardian would have raked in annual profits four times that amount during the seven-year damages period.

• The judge erred in offering jury instructions that shifted the burden of proof to the defense. The Weekly attorneys raised their most strenuous objection to Jury Instruction No. 21, which said, “If you find that any defendants sold advertising space below cost and any below sale(s) injured the Bay Guardian as a competitor, it is presumed that defendant’s purpose was to injure competitors or destroy competition. But this presumption may be overcome by other evidence.”

• The verdict stands at odds with established federal precedent in predatory pricing suits that plaintiffs have to show that a defendant selling below cost had a realistic chance of recouping its losses. One reason federal courts have grown suspicious of predatory pricing claims, Moon argued, is that so-called “anti-competitive” behavior—such as offering below-cost prices and making aggressive comments about competitors—often doesn’t look any different than pro-competitive behavior. Federal courts tell the two apart by requiring plaintiffs to prove that defendants actually could establish a monopoly and then rake in profits—in other words, that they could get their money back. In a local advertising market flooded with Web sites, newspapers and magazines, noted Moon, “There’s no evidence that anyone is creating a monopoly here.”

• The Guardian’s theory that East Bay Express Publishing LP and New Times Media were acting as agents for the Weekly – and are liable for the exact same damages even though the jury’s verdict was limited to ad sales made by the Weekly--is illogical and stands established agency law on its head. New Times Media, now Village Voice Media, sold the Express last year.

Miller has until July 18 to rule on the motions; if she rules against the Weekly, the case will proceed to the California Court of Appeals.

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