Sunday, March 09, 2008

Guardian v. Weekly: Peeling the Appeal



In the aftermath of its humiliating loss to the Guardian in California Superior Court, SF Weekly has made it clear that it will appeal the decision. And it's announced these intentions in the only way New Times Village Voice Media knows how: loudly and inaccurately. We asked our legal counsel, a non-partner track junior associate at AltWeeklyDeathWatch LLP, to parse the Weekly's two-fisted press release (er, "blog post"), written by Men's Wearhouse clotheshorse Andy Van De Voorde.

[I]f 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.

"Politburo"? Putting out a superior product to win all the business in the area and profit = capitalism. Intentionally selling your product at such a low rate so that your rivals go out of business = unfair practices (also known as predatory pricing). The law exists because large firms with cash reserves could maintain a monopoly over a given area by selectively undercutting any competition until the competition was effectively destroyed, and monopolies are undesirable. Or at least that's the theory ... comrade.

Anyway, this might be a sound economic theory, it might not be. But short of getting a judge to go batshit and completely overturn existing law, it's still the law. So VVM had better come up with a decent grounds for appeal here.

First up: the law is ... old?

The 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.

"Depression-era"? And that makes it ... not real law somehow? Because it was written before people knew how awesome VVM was -- before people understood money and newspapers and stuff? I'm sure the Weekly likewise objects to the Depression-era minimum wage laws and the Depression-era securities laws. Crap, are my bank deposits safe? They're insured by the Depression-era FDIC!

Breaking: man convicted of murder under Hammurabi-era law.

Anyway, they've got a strong argument here, as this case was filed in federal court, and subject to "prevailing federal court standards." Wait a minute ...

/checks notes
/reads filings
/consults abacus

According to my diligent research, this case is in state court. Breaking: Village Voice Media is unaware of the principle of federalism. Which is understandable, since it's a Revolutionary War-era doctrine.

The newspapermen noted that the U.S. Supreme Court in 1993 ruled that sales-below-cost statutes simply don't apply to highly competitive marketplaces.

Uh, you mean Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209 (1993)? The case that ruled on predatory pricing under the federal Sherman Act? What a great case to cite in this context! "The mere fact that the Unfair Practices Act proscribes conduct that might, according to some federal courts, be permitted under federal law is insufficient to demonstrate that the Unfair Practices Act is preempted by the Sherman Act." Turnbull & Turnbull v. ARA Transportation, 219 Cal.App.3d 811, 825 (1990). Oh. That Supreme Court case means nothing here. Well then.

Next up: the jury instructions were a big pile of crazy.

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.

Nice try, but this is actually known as "burden-shifting", not "guilt-declaring" -- that's what "presumed" and "may be overcome" (see below) mean. For the same reason that an instruction to a jury that a criminal defendant is "presumed innocent" does not somehow "declare the criminal's innocence before deliberations even begin," the court's instruction here just outlines which party has to provide evidence at what point in the case. The Guardian met its burden by demonstrating the below cost sales and the injury, and therefore the burden was shifted to the Weekly to prove a benign intent. This ain't exactly a conspiracy.

"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," read Instruction No. 21. The instruction goes on to say that the presumption of guilt 'may be overcome by other evidence.'"

Yup. "Under section 17071, proof of one or more acts of selling or giving away any article or product below cost or at discriminatory prices, together with proof of the injurious effect of such acts, is presumptive evidence of the purpose or intent to injure competitors or destroy competition." Fisherman's Wharf Bay Cruise Corp. v. Superior Court, 114 Cal. App. 4th 309, 321 (2003). That's the law. The judge applied the law as it was written. God, even Tom DeLay and the entire Justice Sunday convention couldn't find a problem here. Then again, this case is First Season of American Idol-era law.

That language essentially requires the Weekly to prove a negative.

Nope, it actually requires the Weekly to prove that it had a decent reason to do what it did. Which means that the Weekly had to prove that it had any reason on earth except for an intent to destroy the Guardian. An intent to curry favor with advertisers, an intent to defraud VVM investors, an intent to see exactly how much money it could piss away until VVM employees were forced by budget cutbacks to write with only one fist instead of two ...

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.

This is true, and this is also irrelevant. They didn't have to provide direct evidence under California law (they presented enough evidence to create a rebuttable presumption of intent), and they wouldn't have to call a single advertiser to the stand if they could prove the below-cost pricing scheme some other way. As legal arguments go, this is a good description of court proceedings.

[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.

In their statement issued after the verdict, Lacey and Larkin affirmed their strong belief that VVM will prevail on appeal.

I suppose we could just describe their chances on appeal as a "roll of the dice" and be done with it. But let's see if we can't do them one better and actually explain the issues at hand (like a newspaper would!). As the "it's old!" and "it's crazy!" defenses (see supra) are unlikely to get anywhere, they'll have to challenge the jury's conclusions. There are three elements to the Unfair Practices Act: 1) below cost sales, 2) injury to the Guardian, and 3) intent to destroy (with #3 being presumed if the Weekly can't prove otherwise). Challenging a jury's determinations will be difficult, as if "the trial court's resolution of the factual issue is supported by substantial evidence, it must be affirmed." Winograd v. American Broadcasting Co., 68 Cal. App. 4th 624, 632 (1998).

The finding of below cost sales is a factual issue, as "the issue of cost as one which must be determined by the trier of fact." Pan Asia Venture Capital Corp. v. Hearst Corp., 74 Cal. App. 4th 424, 433 (1999). It's therefore governed by the substantial evidence rule, which in practice is a fairly high standard of deference to the trial court, and therefore pretty hard for an appellant to overcome.

Injury is probably the most difficult element for the Guardian -- if the appeals court wants to overturn this, here's your weak link. There are any number of reasons beside the underpricing of ads that could have caused hardship to the Guardian: the internet, the decline in print media generally, the Weekly's unwavering devotion to putting great boobs journalism on its cover ... all of these could have been "intervening causes" in the Guardian's financial situation. This, naturally, has nothing to do with the fact that "the Guardian made a profit last year and continues to have a higher circulation than the Weekly," the Weekly's apparent rebuttal to this element (a paper could, of course, be profitable and have a high circulation AND be damaged). God, even when the Weekly finds their best path to victory, they're so clumsy they muck it up with irrelevant facts and unearned sarcasm.

You know what? Maybe they are stupid enough to run their business at a loss without intending to. Maybe they were thick enough to act in a way that injured the Guardian without actually meaning to.

There you are. That's the Weekly's best defense on appeal. "You can't prove we're not this dumb."

29 comments:

Anonymous said...

I didn't realize Tommy Craggs was a legal scholar. Last I checked, he was just a shitty sports reporter with a grudge against his former employer.

altweeklydeathwatch said...

Pax.

Anonymous said...

YAY! FOR JOY!

Anonymous said...

Selling ad rates below cost and bulling your advertisers into to staying? You mean like SFBG? Look SFWeekly hasn't done anything that anyone in any other publication does. You think those ads are sold at cost? Not ever. Not once. Not especially by SFBG.

retail said...

I'm curious what "anonymous" is basing his/her comments on about SFBG selling below cost and bullying clients. SFBG turned over financials, and they ran their business to make a profit, even after having to make tough cut-backs to stay alive. How does SFBG bully clients into staying in the paper? How does any business owner get bullied by newspaper ad reps? Please tell...

Anonymous said...

Great Post. Thanks for keeping us informed.

Anonymous said...

I've been following this trial carefully and am glad to have a non-VVM and non-SFBG forum in which to comment. I sat in on some days in the court room, and can tell you, Andy's (SF Weekly's) coverage is the most one sided, intentionally inaccurate account of testimony I ever imagined possible. He didn't report one incident that made his employer look guilty as charged, but instead, he focused on personal attacks of the Bay Guardian owners and witnesses. I was happy to see that SFBG did not resort to personal attacks in their coverage when they could have just as easily.

One has to ask, why didn't SF Weekly have a local reporter assigned to cover this story? Why fly in a corporate guy from Denver who didn't know the players, didn't know the market, and didn't have an ounce of interest in this battle? The answer is because Andy would, quite willingly, write what he was told to write. If you are reading the SF Weekly's blog for an account what happened, you're not getting the facts of the case.

Anonymous said...

The author of this blog needs to reread Fisherman's Wharf Bay Cruise Corp. v. Superior Court (Blue and Gold Fleet, Inc.) (2003)114 Cal.App.4th 309, the case he/she used to defend jury instruction 21. The case doesn't say what you think it says, and doesn't appear to justify that jury instruction, which apparently was the key to the outcome of the case.

In the Fisherman's Wharf case, cruise operator Red and White alleged that its larger competitor, Blue and Gold, was selling San Francisco Bay cruise tickets at below cost. The appellate court ruled that Red and White's claim could go forward, but said it had a tough road ahead. Here's the money quote:
"... in order for Red and White to maintain its price predation claim successfully, it must be able to link Blue & Gold's below-cost pricing to a competitive injury. (See C.E. Services, Inc. v. Control Data Corp. (5th Cir. 1985) 759 F.2d 1241, 1247 [distinguishing harm to a full-line competitor from harm to competitor dealing primarily in product priced at predatory level].) It must also be able to show that the below-cost sales were done "for the purpose of injuring competitors or destroying competition." These will be formidable tasks. (See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., supra, 20 Cal.4th at pp. 172-175.)"

In other words, the court merely said Red and White could go forward with its claims, but that was far from proving its case. The court said nothing about creating a presumption of guilt on behalf of Blue and Gold, merely because Blue and Gold sold tickets at below cost and that injured Red and White.

The Bay Guardian, like Red and White, according to the appellate court, had to prove that the below-cost sales were done "for the purpose of injuring competitors or destroying competition."

So how does that justify Jury Instruction 21, which essentially evicerated intent in this case?

Now, having said all that, I'm not at all sure that instruction 21 was based on the Fisherman's Wharf case. But if it was, it appears to have missed the boat.

Anonymous said...

I read Hit Man's and Puffy's accounts online. I thought Andy's was lively, snarky, funny, pointed. By the end of the trial, based on Andy's coverage, I fully expected the Evil Empire to prevail. Boy, was I surprised when that "Soviet"-era jury came in with its verdict. I guess Andy was pranking us.

altweeklydeathwatch said...

Dear Long-Winded Anonymous @5:52pm,

Fisherman's Wharf was cited for its application of the legal standard, not the facts of the case. The facts would be relevant if we had argued that this case was "totally like Fisherman's Wharf in every way, shape and form", but we really didn't. Try re-reading the post.

Nor did we claim that the court in the Guardian case was applying Fisherman's Wharf directly. In fact, the Guardian court was probably applying Cal Bus & Prof Code § 17071: "In all actions brought under this chapter, proof of one or more acts of selling or giving away any article or product below cost or at discriminatory prices, together with proof of the injurious effect of such acts, is presumptive evidence of the purpose or intent to injure competitors or destroy competition." Which is exactly what the Fisherman's Wharf court did. And which, to provide a painfully obvious answer to your question, is what justifies Jury Instruction 21.

Lessons learned:
1) Being able to successfully look up and read a case on Westlaw does *not* make you a competent lawyer.
2) The kind of douchebag who says things like "money quote" is probably unable to determine which quote is, in fact, money.
3) I get that you wanted to make a superficially clever, VVM-style pun at the end there, but misapplying a law is like missing a boat ... how, exactly?

Anonymous said...

POST AGAIN PUSSY

Anonymous said...

Here come the layoffs!

Anonymous said...

Now, I don't know if this is true, but it seems as if andy van de voorde fucks goats.

Unconfirmed if this includes Kevin Hoffman's mother.

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