Judge Lets Guardian's Loony Lawsuit Go to Trial

A Superior Court judge ruled Thursday that the Bay Guardian's predatory pricing lawsuit against SF Weekly and its parent company can go to trial.

After hearing arguments on SF Weekly's three motions for summary judgment, Superior Court Judge Richard A. Kramer said he believed the case should be heard by a jury. The ruling was not surprising, considering only about 7 percent of California cases are decided by summary judgment.

Speaking from the bench, Kramer emphasized he was not ruling on the merits of the case by allowing it to move forward. In fact, he noted that a reasonable person could easily conclude that some of the behavior described as illegal by the Guardian -- such as the Weekly's practice of keeping tabs on which customers were advertising with its alt-weekly rival -- was actually good business practice.

"You could look at the facts and say it was anticompetitive, or you could look at the facts and say, 'Boy, do I wish those guys were my senior management," the judge said with a smile as he made his ruling.

Kramer suggested that it should be left to a jury to make the final interpretation as to whether the Guardian's arguments have any merit.

SF Weekly's attorneys, James M. Wagstaffe and Ivo Labar of Kerr & Wagstaffe, had asked Kramer to award summary judgment because the Guardian failed to provide any concrete evidence to back its claim that SF Weekly and its parent company, New Times (now Village Voice Media), sold ads below cost and offered "secret rebates" to customers as part of an unlawful attempt to drive it out of business.

Wagstaffe also asked the judge to dismiss the case on the basis that it violated the Weekly's First Amendment rights. He noted that the lawsuit represents a direct attempt by the Guardian to dictate what prices the Weekly can charge for ads and therefore how much space it can make available for editorial content.

Judge Kramer described that First Amendment argument as "creative," but added, "I don't buy it." The judge ruled, however, that Wagstaffe would not be precluded from making First Amendment arguments to the jury as part of the Weekly's effort to highlight the fact that the Guardian has responded to its economic difficulties by slashing editorial spending while the Weekly has made the decision to keep a larger number of reporters and editors because it believes strong editorial content is the ultimate key to financial success.

One thing that quickly became apparent during the two-day hearing was the fact that the Guardian has used the lawsuit as an opportunity to sift through mountains of internal Weekly documents. As part of an exhaustive discovery process, the Weekly was forced to hand over more than 70 boxes of company records to its competitor. After spending years combing through those documents, the Guardian identified fewer than 100 customers it claimed had been sold ads below cost. During that same time period, 7,869 unique advertisers had done business with the Weekly. That paltry ratio didn't prevent the Guardian, however, from alleging a "massive" scheme of below-cost sales.

The Guardian's other evidence was similarly sketchy, consisting mostly of a handful of e-mails and internal documents that describe the Weekly's efforts to compete against it.

For instance, the Guardian cited the fact that the Weekly offered bonuses to its salespeople for taking ads from the Guardian as evidence of anticompetitive behavior rather than competitive behavior.

Labar found that claim particularly amusing. "If this is a 'purpose to injure competition,'" he noted, "then business is a purpose to injure competition."

In motions filed prior to the hearing, Weekly attorneys also questioned the Guardian's remarkable claim that if SF Weekly gives a discount to an advertiser and doesn't offer the same deal to every other similar advertiser -- and then notifies the Guardian so that its competitor could have a chance to match the price -- it was guilty of violating the law.

"So much for discounts off the sticker prices of automobiles, or Senior Citizens' Night at Luby's," the Weekly attorneys noted in their motion for summary adjudication.

Guardian attorney Ralph C. Alldredge also argued during the hearing that an e-mail exchange between then-Weekly publisher Chris Keating and a newly hired salesperson who had not yet started work was evidence that the Weekly was guilty of predatory behavior. In that email, the new employee told Keating, "The Bay Guardian is ripe for the picking, and I'm excited for the opportunity to lead the charge."

According to Alldredge, that gung-ho comment should be interpreted as evidence of wrongdoing. He also argued that the fact the Weekly prepared regular reports about its performance compared to the Guardian's was evidence of a predatory-pricing conspiracy.

Labar responded that that sort of comparison is "something businesses do all the time," and added that the Guardian had done precisely the same thing, preparing regular reports about the Weekly.

Indeed, an irony of the Guardian lawsuit that was underscored at the hearing is that the evidence actually seems to suggest that the Guardian itself was engaging in below-cost pricing and aggressive, even openly hostile, attempts to take business from the Weekly. For instance, an e-mail from Weekly publisher Josh Fromson -- put into evidence by the Guardian -- contains Fromson's notes that the Guardian was "giving away second ads, free ads, upsizes, etc."

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