Thursday, March 11, 2010

SF Weekly ordered to give 50% of revenues to rival

Winning a lawsuit is one thing, collecting the money from the loser is another.

Two years ago, a lawyer for Bruce Brugmann's Bay Guardian convinced a San Francisco jury that the SF Weekly and its parent company were selling ads at below the cost of production in order to gain market share and run Brugmann out of business. A jury on March 5, 2008, awarded Brugmann $6.39 million. A judge added $9.2 million in penalties. Since then more than $5 million in interest has accrued, bringing the total to $21 million.

For the past several months, Brugmann has been attempting to collect his money. In January, he got a court order seizing two of the SF Weekly's delivery vans and he is allowed to collect rent from the SF Weekly's subtenants.

But that was nothing compared to the bombshell of an order Superior Court Commissioner Everett Hewlett issued on Tuesday that requires the SF Weekly and all of its advertisers to immediately begin remitting advertising revenues to the Bay Guardian.

The Assignment Order also requires SF Weekly’s credit card processing company to remit 100% of the credit card payments directly to Bay Guardian rather than to SF Weekly, according to the Guardian.

From now on, the Guardian will get to keep 50% of the Weekly's revenue.

Additionally, SF Weekly must turn over to the Bay Guardian a list of all its advertisers and the amounts that they currently owe to SF Weekly.

"The Village Voice folks first claimed that we would never collect anything, then they claimed that we would never collect more than a few thousand dollars, but the amount that we will now be collecting is certainly very significant," Brugmann said.

At a Feb. 11 hearing, the Weekly's parent company, Village Voice Media Holdings, argued that seizure of the ad revenue would violate the rights of Village Voice Media's main creditor, the Bank of Montreal, which has lent the chain $80 million, according to a Chronicle report.

Andy Van De Voorde, executive associate editor of Village Voice Media Holdings and the reporter who covered the 2008 Guardian-v-SF Weekly trial, denied this week that the ruling will force the chain of alternative papers into bankruptcy. He told a sister publication, Westword in Denver, that the company is optimistic about its chances in an appeals court, even though no hearing date has been set. He notes that the Guardian's lawsuit named the SF Weekly and New Times Media as defendants, but not the current holding company, Village Voice Media Holdings.

Van De Voorde also told Westword: "The Guardian is trying to drum up headlines and damage our business by creating the entirely inaccurate perception that we're going to start selling off papers in order to meet this judgment. And that's not going to happen."

Below is the text of a Van De Voorde memo sent to all Village Voice Media employees:
    March 10, 2010

    To: All Employees

    From: Andy Van De Voorde

    By now you may have seen news reports about the fact that a San Francisco court commissioner yesterday issued an order giving the Bay Guardian rights to 50% of SF Weekly's revenues.

    We have known for weeks that such an order might be issued, and we have a plan in place to deal with it. We also will be appealing the order to the California Court of Appeal.

    Despite uninformed speculation in certain publications, SF Weekly is not going out of business. Its day-to-day operations will remain unaffected...

    With regard to yesterday's ruling, this latest legal gambit by the Guardian is just another example of that company's flawed and increasingly desperate strategy: to try and collect whatever monies it can before the California Court of Appeal has even had a chance to rule on the underlying merits of the lawsuit.

    The near-manic intensity with which the Guardian is attempting to scrape together cash reflects the true nature of this case: That it is the Guardian, not the Weekly, that is struggling to stay in business, and which views these legal proceedings as its last hope.

    We fully expect to win the case on appeal, and we are heartened by the fact that the Court of Appeal has already advised us that it has read all of the briefs, is familiar with the facts of the case, has conferenced the case, and is ready to set oral arguments.

    The appeal briefs filed in this case make it clear that the Weekly is on the side of consumers -- in this case, local advertisers. The Guardian, on the other hand, is openly and unashamedly advocating against the interests of these consumers, fighting instead for its right to raise prices during one of the worst recessions this country has ever seen.

    That is a fight we are happy to wage, and we intend to win it.


Anonymous said...

huh, the SFW says its on the side of consumers? Their plan, according to the jury, was to run a competitor out of business. Once they had a monopoly in the free weekly category, they could charge monopoly prices. If the SFW had succeeded, it would have been bad for advertisers. The SFW is really trying to twist the facts.

Anonymous said...

The SF Weekly isn't an oil well. Assume the judgement stands and the Guardian somehow convinces another court to carry out this absurd ruling.

The Weekly will just fire its sales staff and reporters and go out of business.

Then some other company will come in and set-up shop and will kick the Guardians ass because it no longer does journalism, just hack propaganda pieces.

Thanks a lot Guardian, for forcing more of our media colleagues out of a job in the middle of the worst journalism job market in history!

Anonymous said...

The SF Weekly claims it has no money to pay the Guardian. A few days later it says it will fight the Guardian and win. With what? That takes money. I hope the Guardian can find where the Weekly has been socking away its money.