City Pages’ owners lose $22 million case; say local operation unaffected

Last week, the San Francisco Weekly lost its final appeal in a predatory pricing case; its principals — who also own the Village Voice Media Holdings alt-weekly chain that includes City Pages — are on the hook for $22 million in damages plus interest.

So will that eight-figure hit hurt CP? Not at all, insists a company official. Unquestionably, says a lawyer for the winning California side.

Quick background: In 2008, VVMH’s SF Weekly was hit with a $6.3 million judgment for selling ads below cost to drive the rival Bay Guardian out of business, a violation of California law. A judge partially trebled those damages, and interest piled up during appeals.

On Nov. 23, the California Supreme Court declined to review the case; VVMH Executive Associate Editor Andy Van De Voorde acknowledged, “The legal case is done,” adding the chain would not leave the San Francisco market.

Twenty-two million is a lot of dough, and it’s hard to see how ownership could pull it all out of San Francisco, where it lost money every year from 2002 to 2007.

One way to lessen the blow: a settlement. Van De Voorde confirms there are talks. Asked why the Bay Guardian would settle at this point, the newspaper’s lawyer Jay Adkisson says, “That issue is starting to be batted around on our side quite a bit.”

Short of the Guardian giving up most of its hard-won and now legally enforceable winnings, is there some way the alt-weekly’s owners could limit the financial pain to the Bay Area market? “No,” says Adkisson simply.

Van De Voorde disagrees. He contends VVMH’s corporate structure protects City Pages.

“It’s important to note that neither City Pages nor VVMH are defendants in this lawsuit,” he says. “The two named defendants are SF Weekly and New Times Media, which is a holding company that doesn’t conduct any business. That’s who the judgment is against. That’s why I say that we and CP will not be affected. CP, like all of our publications, is incorporated as a separate entity, plus it wasn’t even sued. It will continue business as usual.”

Adkisson has disputed this, noting that VVMH owns New Times and New Times owns papers like City Pages. The contention was never resolved in court, where Adkisson moved to add VVMH as a defendant along with New Times and SF Weekly. An abortive settlement this summer sidetracked a resolution on that issue.

During the legal wrangling, the Bank of Montreal — to whom VVMH owes at least $77 million — filed an action to get paid before the Guardian did. The filing noted that the loan was guaranteed by New Times subsidiaries. Should there be a repayment issue, any VVMH alt-weekly could be at risk.

VVMH may well uphold Van De Voorde’s “no harm to CP” pledge. The paper is considered a good performer and may be an asset worth protecting, assuming Adkisson’s legal theory is right and protection is warranted.

VVMH’s “stay in San Francisco” statement seems to rule out a local or chain-wide bankruptcy; Adkisson notes New Times claimed $191 million worth of assets in 2007 and has more recently bragged about soaring digital revenues.

Should an unlikely Ch. 11 occur, Adkisson says his client would still have a secured claim. “It is always better to be a creditor in bankruptcy than a debtor,” he notes. “Who wants to do business with a company in bankruptcy?”

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