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VOLUME 7
PAGES 1261 - 1498
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
BEFORE THE HONORABLE VAUGHN R. WALKER, JUDGE
CLINTON REILLY, )
)
PLAINTIFF, )
)
VS. ) NO. C 00-0119 VRW
)
THE HEARST CORPORATION, )
ET AL., )
)
DEFENDANTS. )
____________________________)
SAN FRANCISCO, CALIFORNIA
WEDNESDAY, MAY 10, 2000
TRANSCRIPT OF PROCEEDINGS
APPEARANCES:
FOR PLAINTIFF: JOSEPH M. ALIOTO LAW FIRM
ONE EMBARCADERO CENTER, SUITE 4000
SAN FRANCISCO, CALIFORNIA 94111
BY: JOSEPH M. ALIOTO
ANGELINA ALIOTO-GRACE
ATTORNEY AT LAW
SHULMAN, WALCOTT & SHULMAN, P.A.
121 WEST FRANKLIN AVENUE
MINNEAPOLIS, MINNESOTA 55404
BY: DANIEL R. SHULMAN
JAMES HILBERT
ATTORNEYS AT LAW
(APPEARANCES CONTINUED ON FOLLOWING PAGE)
REPORTED BY: JO ANN BRYCE, CSR, RMR, CRR, FCRR
JUDITH N. THOMSEN, CSR, RMR, FCRR
OFFICIAL REPORTERS, USDC
COMPUTERIZED TRANSCRIPTION BY ECLIPSE
1262
1 APPEARANCES: (CONTINUED)
2 FOR DEFENDANT SHEPPARD, MULLIN, RICHTER & HAMPTON
HEARST CORPORATION: FOUR EMBARCADERO CENTER, 17TH FLOOR
3 SAN FRANCISCO, CALIFORNIA 94111
BY: GARY L. HALLING
4 THOMAS D. NEVINS
ATTORNEYS AT LAW
5
BAKER & HOSTETLER LLP
6 1050 CONNECTICUT AVE., N.W.
SUITE 1100
7 WASHINGTON, D.C. 20036
BY: GERALD A. CONNELL
8 ATTORNEY AT LAW
9 FOR DEFENDANT LATHAM & WATKINS
CHRONICLE PUBLISHING 505 MONTGOMERY STREET
10 COMPANY: SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
11 BY: PETER K. HUSTON
J. THOMAS ROSCH
12 GREGORY P. LINDSTROM
ATTORNEYS AT LAW
13
FOR INTERVENOR- MC CUTCHEN, DOYLE, BROWN & ENERSEN
14 DEFENDANT EXIN, LLC: THREE EMBARCADERO CENTER, SUITE 1800
SAN FRANCISCO, CALIFORNIA 94111
15 BY: DAVID M. BALABANIAN
CHRISTOPHER B. HOCKETT
16 THOMAS S. HIXSON
ATTORNEYS AT LAW
17
18
19
20
21
22
23
24
25
1263
1 I N D E X
2
PAGE VOL.
3
OPENING STATEMENT BY MR. ROSCH 1386 7
4
5 PLAINTIFF'S WITNESSES PAGE VOL.
6 WEAVER, MICHAEL (RECALLED)
DIRECT EXAMINATION BY MR. SHULMAN 1268 7
7 CROSS-EXAMINATION BY MR. LINDSTROM 1282 7
CROSS-EXAMINATION BY MR. HOCKETT 1344 7
8 CROSS-EXAMINATION BY MR. HALLING 1351 7
REDIRECT EXAMINATION BY MR. SHULMAN 1354 7
9
10 DEFENDANTS' WITNESSES PAGE VOL.
11 FALK, STEVEN
DIRECT EXAMINATION BY MR. HALLING 1396 7
12 CROSS-EXAMINATION BY MR. BALABANIAN 1441 7
CROSS-EXAMINATION BY MR. ALIOTO 1446 7
13
14 E X H I B I T S
15
PLAINTIFF'S EXHIBITS W/DRAWN IDEN EVID VOL.
16
83 1465 7
17 166 1269 7
18 DEFENDANTS' EXHIBITS W/DRAWN IDEN EVID VOL.
19 1189 1418 7
1194 1422 7
20 1197 1426 7
983 1434 7
21 984 1431 7
986 1428 7
22 H-1190 1372 7
1408 7
23 1414 7
24
25
1264
1 WEDNESDAY - MAY 10, 2000 8:43 A.M.
2
3 THE COURT: VERY WELL. COUNSEL?
4 MR. HALLING: YOUR HONOR, IF IT PLEASE THE COURT, I
5 HAVE TWO PRELIMINARY MATTERS I WOULD LIKE TO TAKE UP. FIRST, I
6 JUST WOULD LIKE TO ALERT THE COURT THAT IF A RELATED CASE
7 NOTICE HAS NOT BEEN FILED, IT WILL BE SHORTLY WITH RESPECT TO A
8 COMPLAINT THAT WAS FILED MONDAY. IT'S ENTITLED SAN FRANCISCO
9 WEB PRESSMEN AND PREPRESS WORKERS UNION LOCAL 4 AGAINST SFNA,
10 HEARST AND CHRONICLE, AND THE COMPLAINT SAYS, COMPLAINT -- THE
11 TITLE IS "COMPLAINT TO COMPEL ARBITRATION AND FOR INJUNCTION TO
12 PRESERVE STATUS QUO PENDING ARBITRATION, C OO-1647. I JUST
13 WANTED TO ALERT YOU THAT THIS HAS BEEN FILED.
14 THE COURT: THANK YOU. HAS A RELATED CASE NOTICE
15 BEEN FILED OR IS IT YOUR INTENTION TO FILE ONE, OR --
16 MR. HALLING: ONE WILL BE FILED I EXPECT TODAY,
17 ALTHOUGH IT MAY EVEN HAVE BEEN FILED; BUT IF IT HASN'T BEEN, IT
18 WILL BE SHORTLY.
19 THE COURT: BY YOUR OFFICE OR BY THE PLAINTIFF IN
20 THIS NEW CASE?
21 MR. HALLING: I DON'T KNOW ABOUT THE PLAINTIFF, BUT
22 EITHER IT WILL BE FILED BY SFNA OR THE HEARST CORPORATION OR
23 BOTH.
24 THE COURT: ALL RIGHT.
25 MR. HALLING: THE SECOND --
1265
1 THE COURT: I HAVE NOT SEEN THE COMPLAINT AS YET. I
2 WAS ALERTED BY THE CLERK THAT SHE HAD HEARD THAT ONE WAS COMING
3 IN.
4 MR. HALLING: THE SECOND MATTER, YOUR HONOR, IS I
5 UNDERSTAND THAT MR. ROSCH WOULD LIKE TO ADDRESS THE QUESTION
6 THAT YOU POSED TO MR. CONNELL AT THE END OF THE DAY.
7 THE COURT: WELL, I'M ANXIOUS TO GET YOUR VIEWS ON
8 THIS, BUT I'M NOT SURE THIS IS THE TIME TO DO THAT.
9 MR. ROSCH: WHENEVER, YOUR HONOR. I JUST HAD A
10 CLARIFICATION.
11 THE COURT: CLARIFICATION OF THE QUESTION OR --
12 MR. ROSCH: CLARIFICATION OF THE RESPONSE.
13 ACTUALLY, OF THE COLLOQUY. IT WOULDN'T TAKE MORE THAN ABOUT A
14 MINUTE. BUT WHATEVER THE COURT'S PLEASURE IS.
15 THE COURT: LET'S CARRY ON. AS A MATTER OF FACT, I
16 HAVE ANOTHER QUESTION WHICH YOU CAN MULL OVER, ALL OF YOU,
17 SOMEWHAT ALONG THE SAME LINES, AND IT ARISES OUT OF SECTION
18 1804, WHICH IS PART OF THE NEWSPAPER PRESERVATION ACT. I'M NOT
19 SURE WHAT SECTION OF THE ACT IT WAS, BUT IT'S BEEN CODIFIED AT
20 TITLE 15 U.S.C. 1803, THAT -- I'M SORRY, 1804.
21 THAT PROVISION, TOGETHER, OF COURSE, WITH THE OTHER
22 PROVISIONS OF THE ACT, FAIRLY READ NEGATE THE SUPREME COURT'S
23 DECISION IN CITIZEN PUBLISHING. WHERE DOES THAT LEGISLATIVE
24 EXPRESSION LEAVE US? DOES THAT MEAN THAT CITIZEN PUBLISHING IS
25 OFF THE BOOKS AND WE START AFRESH WITH OUR ANALYSIS UNDER
1266
1 SECTION 7; OR IF THE COURT CONCLUDES THAT THE NEWSPAPER
2 PRESERVATION ACT HAS NO APPLICATION IN THIS ACTION, DOES
3 CITIZEN PUBLISHING KICK BACK IN AND EXPRESS THE LAW AS IT
4 EXISTS?
5 MR. ROSCH: AND THAT I THINK I CAN RESPOND TO YOU
6 RIGHT NOW.
7 THE COURT: ALL RIGHT. I REALLY DON'T WANT ARGUMENT
8 ON THIS, MR. ROSCH. I JUST WANT TO THROW THESE QUESTIONS OUT
9 AND HAVE YOU THINK ABOUT THEM.
10 MR. ROSCH: YES.
11 THE COURT: AND I DON'T WANT TO JUST HAVE
12 HIT-OR-MISS LEGAL ARGUMENTS.
13 MR. ROSCH: I UNDERSTAND THAT.
14 THE COURT: BUT THESE ARE THINGS THAT ARE ON MY MIND
15 AND I WANT YOU TO KNOW WHAT'S ON MY MIND AS WE GO THROUGH THIS
16 PROCESS, AND YOU CAN BE THINKING ABOUT HOW YOU RESPOND TO THESE
17 QUESTIONS AT AN APPROPRIATE TIME.
18 MR. ROSCH: IF YOUR HONOR WOULD LIKE ME TO DEFER, I
19 WILL.
20 THE COURT: THANK YOU.
21 MR. ROSCH: THANK YOU.
22 THE COURT: NOW, ARE WE READY WITH THE NEXT WITNESS,
23 MR. SHULMAN?
24 MR. SHULMAN: WITH THE WITNESS WHO WAS ON THE STAND.
25 I HAVE ONE PRELIMINARY MATTER, YOUR HONOR. YOUR
1267
1 HONOR ASKED YESTERDAY ABOUT THE AMICUS BRIEF OF THE DEPARTMENT
2 OF JUSTICE IN THE HONOLULU CASE. WE HAVE THAT FOR YOU. I
3 THINK YOU WILL FIND THAT IT BEARS DIRECTLY ON SOME OF THE
4 QUESTIONS YOU'VE BEEN ASKING.
5 THE COURT: VERY WELL. I LOOK FORWARD TO READING
6 IT.
7 ANY OTHER PRELIMINARY MATTERS?
8 (NO RESPONSE)
9 THE COURT: I HOPE YOU HAVE AN INTERESTING DAY IN
10 STORE FOR US, MR. SHULMAN.
11 MR. ALIOTO: IT'S GOING TO BE REAL EXCITING, JUDGE.
12 THE COURT: I TURNED DOWN AN OPPORTUNITY TO SEE MARK
13 MC GWIRE AT PAC BELL PARK JUST TO BE HERE WITH YOU.
14 (LAUGHTER)
15 THE COURT: SO --
16 MR. SHULMAN: THAT'S A TALL ORDER, YOUR HONOR.
17 THE COURT: ALL RIGHT. YOUR NEXT WITNESS?
18 MR. SHULMAN: IT'S MR. WEAVER, YOUR HONOR. WE'RE
19 CONTINUING WITH MR. WEAVER.
20 THE COURT: OH, YES, HE'S STILL ON THE STAND.
21 MICHAEL WEAVER,
22 CALLED AS A WITNESS FOR THE PLAINTIFF, HAVING BEEN PREVIOUSLY
23 DULY SWORN, TESTIFIED FURTHER AS FOLLOWS:
24 THE COURT: GOOD MORNING, MR. WEAVER.
25 THE WITNESS: GOOD MORNING.
1268
WEAVER - DIRECT / SHULMAN
1 THE COURT: DO YOU UNDERSTAND THAT THE OATH THAT YOU
2 TOOK YESTERDAY APPLIES TO THIS TESTIMONY?
3 THE WITNESS: YES, I DO.
4 THE COURT: SO YOU'RE STILL UNDER OATH. IS THAT
5 UNDERSTOOD?
6 THE WITNESS: THAT'S UNDERSTOOD.
7 THE COURT: VERY WELL. YOU MAY PROCEED,
8 MR. SHULMAN.
9 MR. SHULMAN: THANK YOU. MAY IT PLEASE THE COURT.
10 DIRECT EXAMINATION (RESUMED)
11 BY MR. SHULMAN:
12 Q. MR. WEAVER, YESTERDAY WHEN YOU WERE ON THE STAND I WAS
13 ASKING YOU ABOUT PLAINTIFF'S EXHIBIT 46, AND I WANT -- ONE OF
14 THE THINGS I HAD ASKED YOU ABOUT IN EXHIBIT 46 WAS THE VERY
15 LAST PAGE, WHICH WAS THE PROJECTED PROFIT AND LOSS STATEMENT
16 THAT YOU DID ON FEBRUARY 10. DO YOU HAVE THAT IN FRONT OF YOU?
17 A. YES, I DO.
18 Q. OKAY. NOW, YOU SHOULD ALSO HAVE ON THE WITNESS STAND IN
19 FRONT OF YOU PLAINTIFF EXHIBIT 166, WHICH IS NOT YET IN
20 EVIDENCE. DO YOU HAVE THAT?
21 A. YES, I DO.
22 Q. OKAY. NOW, IS THIS -- CAN YOU TELL US WHAT THIS IS
23 WITHOUT --
24 MR. SHULMAN: DOES YOUR HONOR HAVE THAT ONE, 166?
25 THE COURT: I DON'T HAVE IT IN MY HAND, BUT --
1269
WEAVER - DIRECT / SHULMAN
1 MR. LINDSTROM: YOUR HONOR, FOR THE RECORD, IT'S THE
2 SAME AS HEARST 1036, WHICH IS ALREADY IN EVIDENCE.
3 MR. SHULMAN: OH, IT IS. ALL RIGHT.
4 THE COURT: PLAINTIFF'S 166?
5 MR. SHULMAN: IT'S HEARST 1036 HE SAYS.
6 THE COURT: I'VE GOT YOUR BOOK HERE.
7 MR. SHULMAN: OH, IT'S PLAINTIFF 166, RIGHT.
8 THE COURT: OKAY. AND THEY'RE IDENTICAL; ARE THEY,
9 MR. --
10 MR. LINDSTROM: YES, YOUR HONOR.
11 MR. SHULMAN: SO WE CAN OFFER 166?
12 MR. LINDSTROM: AND YOU'LL BE MET WITH NO OBJECTION.
13 MR. SHULMAN: OKAY. WE OFFER 166.
14 THE COURT: ALL RIGHT.
15 (PLAINTIFF'S EXHIBIT 166
16 RECEIVED IN EVIDENCE)
17 THE COURT: GO AHEAD, MR. SHULMAN.
18 MR. SHULMAN: LET ME PUT UP -- AM I GOING....
19 (PAUSE IN PROCEEDINGS.)
20 BY MR. SHULMAN:
21 Q. ALL RIGHT. PLAINTIFF EXHIBIT 166 IS SIMILAR TO -- THE
22 NUMBERS ON IT ARE THE SAME -- ARE THE NUMBERS ON 166 THE SAME
23 AS THE NUMBERS ON EXHIBIT -- ON THE LAST PAGE OF EXHIBIT 46?
24 A. YES. THE PAGES ARE MARKED R00036 IS THE SAME AS R000237.
25 Q. OKAY. BUT THE DATE ON EXHIBIT 166 IS APRIL 6, WHICH IS A
1270
WEAVER - DIRECT / SHULMAN
1 LATER DATE THAN THE FEBRUARY 10 DATE OF THE EARLIER SCHEDULE;
2 CORRECT?
3 A. THAT'S CORRECT. THAT REPRESENTS THE DATE IN WHICH IT WAS
4 PRINTED.
5 Q. OKAY. SO CAN YOU EXPLAIN THE RELATIONSHIP BETWEEN 166 AND
6 46?
7 A. YES. THIS IS THE SAME ITERATION OF THE PROFIT AND LOSS
8 MODEL. IT'S THE SAME NUMBERS, HAS THE SAME CURRENT EXPENSE
9 STREAM AND THE SAME THREE-YEAR -- TWO-, THREE-YEAR SCENARIOS.
10 Q. BUT IT'S JUST PRINTED AT A LATER DATE?
11 A. THAT'S CORRECT.
12 Q. NOW, ATTACHED TO EXHIBIT 166 THERE ARE A NUMBER OF
13 SCHEDULES. CAN YOU EXPLAIN GENERALLY WHAT THEY ARE?
14 A. YES. THE SCHEDULE MARKED PAGE 238, WE TALKED A LITTLE BIT
15 ABOUT THIS YESTERDAY, THIS IS A SCHEDULE OF EMPLOYEES, AND HERE
16 THE MAJOR -- THERE ARE TWO DIFFERENCES. ONE IS THE EARNINGS,
17 AS YOU CAN SEE, ARE NOT ROUNDED TO ZERO. THAT'S THE CENTER
18 COLUMN. THOSE ARE ACTUALLY THE BEST NUMBERS I COULD GET FROM
19 THE VERONIS AND SUHLER OFFERING MEMORANDUM AS TO THE ACTUAL
20 SALARY LEVELS, AVERAGE SALARY LEVELS IN THESE GROUPS.
21 ALSO, AS YOU'LL SEE LATER, THAT THE ACTUAL STAFFING
22 IS DIFFERENT BECAUSE ON THE NEXT PAGE, WHICH IS 239, YOU SEE
23 THE ASSUMPTIONS THAT UNDERLIE THIS MODEL. AND IN THIS CASE, AS
24 YOU SEE ON PAGE 239, THIS IS AN ATTEMPT TO LOOK AT OPERATING AN
25 EXAMINER WITH A PRESS RUN SIMILAR TO WHAT WE HAVE TODAY.
1271
WEAVER - DIRECT / SHULMAN
1 YOU SEE 125,000 DAILY NEAR THE MIDDLE AND 150,000 ON
2 SUNDAY. THIS, OF COURSE, IMPACTS THE CALCULATIONS FOR
3 NEWSPRINT AND THE COST OF SUPPLEMENTS, AS WELL AS LOOKING AT
4 THIS MODEL WE'RE GOING TO HAVE HIGHER STAFFING ON PAGE 238
5 BECAUSE WE'RE LOOKING AT A PAPER THAT LOOKS QUITE -- VERY, VERY
6 SIMILAR TO TODAY'S EXAMINER.
7 Q. OKAY. IF YOU SEE AT THE TOP YOU HAVE -- THESE ARE THE
8 ASSUMPTIONS FOR THE PAGES?
9 A. YES. THIS IS ALSO AN ATTEMPT TO LOOK AT THE NUMBER OF
10 PAGES AND ADVERTISING RATES, REVENUE FRINGE OR COST FRINGE.
11 AND IN THIS CASE THE NUMBER OF PAGES IS SIGNIFICANTLY LARGER
12 THAN IN THE OTHER MODEL THAT WE WERE LOOKING AT.
13 Q. SO THIS ASSUMES A PAPER WITH 56 PAGES DAILY AND A HUNDRED
14 ON SUNDAY?
15 A. THAT'S CORRECT.
16 Q. AND THEN OF THOSE 56, 22.4 ARE FOR ADVERTISING?
17 A. THAT'S CORRECT.
18 Q. AND THE PRESS RUN OF THIS PAPER IS 125,000 DAILY AND
19 150,000 ON SUNDAY?
20 A. THAT'S CORRECT.
21 Q. OKAY. NOW I WANT TO DIRECT YOUR ATTENTION TO THE -- AND
22 SO THEN THIS IS THE BACKUP FOR THE MODEL THAT'S ON THE LAST
23 PAGE OF EXHIBIT 46 OR THE FIRST PAGE OF EXHIBIT 166?
24 A. THAT IS CORRECT.
25 Q. ALL RIGHT. NOW I WANT TO DIRECT YOUR ATTENTION BACK TO
1272
WEAVER - DIRECT / SHULMAN
1 EXHIBIT 46 AND SPECIFICALLY THE SECOND PAGE. THIS IS A MODEL
2 THAT YOU DID -- IS THIS ANOTHER MODEL YOU DID?
3 A. YES. THIS MODEL IS A -- WAS BASED UPON A COPY OF THE
4 EARLY ONE. YOU CAN SEE ON TOP IT SAYS "SAN FRANCISCO
5 EXAMINER - 1." SO I COPIED THE EARLIER MODEL AND PUT IN NEW
6 ASSUMPTIONS.
7 Q. OKAY. AND YOU DID THIS MODEL -- YOU PRINTED THIS MODEL ON
8 WHAT DATE?
9 A. ON MARCH 23RD.
10 Q. ALL RIGHT. AND THIS IS -- WAS THIS DONE AFTER THE EARLIER
11 MODEL?
12 A. YES. THIS WAS DONE MUCH LATER. THIS WAS DONE IN
13 PREPARATION FOR THE MEETING WE'VE TALKED ABOUT OR THAT'S BEEN
14 TALKED ABOUT IN COURT ON MARCH 25TH.
15 Q. SO THIS WAS AN -- ALL RIGHT.
16 LET'S LOOK AT PAGE 300 -- FOUR ZEROS 33, WHICH IS
17 ENTITLED "REVENUE AND EXPENSE DETAILS." CAN YOU EXPLAIN WHAT
18 THIS IS?
19 A. THIS IS AN ITERATION OF THIS MODEL THAT SHOWS A NEWSPAPER
20 THAT IS SIGNIFICANTLY SMALLER IN TERMS OF PAGES, 44 PAGES
21 DAILY, 64 SUNDAY. THAT RESULTS IN AN ASSUMPTION OF FEWER AD
22 PAGES.
23 BECAUSE OF THE PRESS RUN AND THE PAID CIRCULATION
24 ASSUMPTIONS ARE LOWER, THE RATE PER INCH IS NOW $25 VERSUS I
25 THINK WE'VE SEEN 36 AND 40 ON THE OTHER SCHEDULE.
1273
WEAVER - DIRECT / SHULMAN
1 Q. SO THE SECOND MODEL YOU DID ASSUMES A SMALLER PAPER?
2 A. THAT'S CORRECT.
3 Q. WITH 44 PAGES DAILY AND 64 ON SUNDAY?
4 A. THAT'S CORRECT.
5 Q. AND YOU MADE AN ASSUMPTION AS TO THE VARIOUS -- AS TO THE
6 NUMBER OF PAGES THAT WOULD BE USED FOR ADVERTISING IN EACH
7 PAPER?
8 A. YES.
9 Q. THAT'S 17.6 DAILY, 32 SUNDAY?
10 A. YES.
11 Q. ALL RIGHT. AND THE PRESS RUN THAT YOU SHOW, IT'S A LITTLE
12 LOWER ON THE PAGE, FOR THE PAPERS, THAT IS 80,000 FOR THE
13 DAILY, 80,000 FOR THE SUNDAY?
14 A. THAT'S CORRECT.
15 Q. ALL RIGHT. AND THEN USING THESE DID YOU MAKE -- DID YOU
16 MAKE ANY ASSUMPTIONS ABOUT WHETHER YOU WOULD IN FACT BE ABLE TO
17 ACHIEVE THE REVENUE -- THE ADVERTISING REVENUE THAT'S SHOWN AT
18 THE TOP OF THE PAGE, THE $23 MILLION?
19 A. NO, I DID NOT. THIS WAS NOT AN ATTEMPT FOR ME TO SUGGEST
20 THAT THE REVENUE NUMBER OF 23 MILLION 076 IS MY ESTIMATE OF THE
21 REVENUE, IT IS SIMPLY A CALCULATION GIVEN THE ASSUMPTIONS OF
22 THE TOTAL PAGES, THE NUMBER OF ADVERTISING PAGES AND THE RATE
23 PER INCH.
24 Q. OKAY. AND IF WE GO BACK TO THE SECOND PAGE, WE SEE,
25 ACCORDING TO THIS MODEL, WHAT YOU ANTICIPATE THE PERFORMANCE OF
1274
WEAVER - DIRECT / SHULMAN
1 SUCH A PAPER TO BE IN THE THIRD YEAR?
2 A. (WITNESS EXAMINES DOCUMENT.) IT'S NOT WHAT I ANTICIPATE
3 IT TO BE. IT'S SIMPLY WHAT THE MODEL COMES UP WITH GIVEN THAT
4 REVENUE ASSUMPTION.
5 Q. AND THIS SIZE PAPER WITH THIS STAFFING?
6 A. YES.
7 Q. OKAY. AND UNDER THIS MODEL OF THIS NEWSPAPER YOU SHOW
8 OPTIMISTIC IN THE THIRD YEAR A LOSS OF ABOUT $11 MILLION?
9 A. THAT'S CORRECT.
10 Q. AND THE REALISTIC LOSS FOR THE THIRD YEAR IS IN THE AREA
11 OF $20 MILLION; IS THAT RIGHT?
12 A. YES, 19 MILLION 152.
13 Q. NOW I WANT TO GO BACK TO YOUR AFFIDAVIT, EXHIBIT 60, THE
14 SECOND PAGE OF THE AFFIDAVIT. IN PARAGRAPHS 2 AND 3 YOU RECITE
15 VARIOUS INFORMATION THAT WAS AVAILABLE TO YOU AT THE MEETING OR
16 BEFORE THE MEETING ON THE 25TH?
17 A. THAT'S CORRECT.
18 Q. ALL RIGHT. NOW LET'S LOOK AT PARAGRAPH 4. YOU SAY:
19 "BASED UPON THOSE FACTS AND MY EXPERIENCE IN
20 THE INDUSTRY, THE PRESENT SUBSIDY BY HEARST WILL
21 NOT UNDER ANY CIRCUMSTANCES BE ABLE TO SUPPORT
22 THE PROBABILITY OR EVEN THE POSSIBILITY OF A
23 VIABLE PAPER WHICH WOULD BE COMPETITIVE TO THE
24 CHRONICLE."
25 IS THAT YOUR OPINION?
1275
WEAVER - DIRECT / SHULMAN
1 A. YES.
2 Q. AND HAVE YOU STATED THE BASIS FOR THAT OPINION IN YOUR
3 TESTIMONY IN THIS TRIAL?
4 A. NOT YET.
5 Q. OKAY. TELL US WHAT THE BASIS FOR YOUR OPINION IS.
6 A. IN MY OPINION, THE COSTS SHOWN ON THE MODEL THAT WE TALKED
7 ABOUT, WHICH ARE IN THE 43 TO -- 42 TO 43 MILLION-DOLLAR RANGE
8 IN ONE SCENARIO AND THE MID-50 MILLION-DOLLAR RANGE IN ANOTHER,
9 UNDERSTATES THE ACTUAL COSTS BECAUSE I'M ASSUMING IN THIS MODEL
10 THAT WE'RE IN AN EQUILIBRIUM STATE RATHER THAN BUILDING
11 CIRCULATION. AND I THINK THE COSTS TO BUILD CIRCULATION AND
12 EVEN TO GET IT TO THIS LEVEL WOULD BE SIGNIFICANTLY MORE THAN
13 THE AMOUNT SHOWN UNDER CIRCULATION OTHER ON THESE TWO MODELS.
14 THEREFORE, MY FEELING IS THAT THE COSTS WILL BE A
15 MINIMUM OF $50 MILLION, POSSIBLY $60 MILLION, AND THE REVENUE
16 OFFSETS IN MY OPINION WOULD BE RELATIVELY LOW.
17 Q. OKAY. YOU SAY, QUOTE:
18 "IN ORDER TO PRODUCE A VIABLE COMPETITIVE
19 PAPER, ANY BUYER OF THE EXAMINER WOULD NEED A
20 SUBSIDY OF UP TO $50 MILLION FOR THREE YEARS."
21 I'M GOING TO STOP THERE. IS THAT YOUR OPINION?
22 A. YES.
23 Q. NOW, DO YOU MEAN $50 MILLION A YEAR FOR EACH YEAR OR DO
24 YOU MEAN A TOTAL OF 50 MILLION?
25 A. $50 MILLION PER YEAR FOR UP TO THREE YEARS.
1276
WEAVER - DIRECT / SHULMAN
1 Q. OKAY. NOW, YOU UNDERSTAND THAT'S DIFFERENT FROM THE
2 OPINION THAT OTHERS AT THE MEETING REACHED?
3 A. I UNDERSTAND THAT.
4 Q. OKAY. EXPLAIN, PLEASE, THE BASIS FOR YOUR OPINION.
5 A. IN MY OPINION A REASONABLE SUBSIDY FOR THREE YEARS WOULD
6 GET THE EXAMINER INTO A SITUATION WHERE WE COULD MAKE A
7 DECISION OR THE OWNER COULD MAKE A DECISION ABOUT WHETHER THE
8 EXAMINER ITSELF WILL BE VIABLE IN THE LONG-TERM, AND IT SEEMS
9 TO ME TO BE A REASONABLE POINT AT WHICH TO STEP BACK AND SAY,
10 "WE PUT A SIGNIFICANT AMOUNT OF MONEY INTO THIS. WE'VE
11 INVESTED INTO THE PAPER. WHAT ARE OUR CHANCES AT THAT TIME?"
12 Q. OKAY. YOU SAY:
13 "ACCORDING TO THE EVIDENCE THAT I HAVE SEEN
14 AND MY EXPERIENCE IN THE INDUSTRY, IT WILL COST
15 AT LEAST $50 MILLION A YEAR IN ORDER TO BE ABLE
16 TO PUBLISH AN ECONOMICALLY VIABLE AND
17 COMPETITIVE EXAMINER."
18 IS THAT YOUR OPINION?
19 A. YES.
20 Q. HAVE YOU TOLD US THE GROUNDS FOR THAT OPINION?
21 A. YES.
22 Q. AND YOU SAY, QUOTE:
23 "I AM INFORMED THAT HEARST CURRENTLY PAYS
24 APPROXIMATELY $90 MILLION A YEAR TO SUPPORT THE
25 EXISTING PAPER," END OF QUOTE.
1277
WEAVER - DIRECT / SHULMAN
1 WHAT IS THE SOURCE OF THAT INFORMATION?
2 A. THAT INFORMATION COMES FROM THE $80 MILLION WE'VE TALKED
3 ABOUT IN THE OTHER DEPOSITIONS AND THE $10 MILLION ADDITIONAL
4 FOR THE SUNDAY PRODUCT.
5 Q. THEN YOU SAY, QUOTE:
6 "FURTHER, UNDER THE TERMS OF THE DEAL
7 BETWEEN HEARST AND PAN ASIA, THE FOUR-MONTH
8 TRANSITION IS TOO SHORT A TIMEFRAME FOR PAN ASIA
9 TO BE IN A POSITION TO PRODUCE A STAND-ALONE,
10 VIABLE, PAID CIRCULATION DAILY PAPER WHICH WOULD
11 BE COMPETITIVE TO THE CHRONICLE. AT A
12 MINIMUM" -- I'M GOING TO STOP THERE.
13 IS THAT YOUR OPINION?
14 A. YES, IT IS.
15 Q. AND WHAT IS THE BASIS FOR THAT OPINION THAT THE FOUR-MONTH
16 TRANSITION TIME PERIOD IS TOO SHORT A TIMEFRAME FOR PAN ASIA TO
17 BE IN A POSITION TO PRODUCE A STAND-ALONE, VIABLE, PAID
18 CIRCULATION DAILY NEWSPAPER THAT WOULD BE COMPETITIVE TO THE
19 CHRONICLE?
20 A. IN MY OPINION A STAND-ALONE, VIABLE, COMPETITIVE NEWSPAPER
21 WOULD BE, IN THE TERMS OF DR. COMANOR, A SUBSTITUTE FOR THE
22 CHRONICLE; IN OTHER WORDS, A PAPER THAT YOU WOULD READ INSTEAD
23 OF RATHER THAN ALONG WITH THE CHRONICLE. AND AS A SUBSTITUTE
24 NEWSPAPER, A COMPETITIVE NEWSPAPER, IT WOULD HAVE TO CARRY MOST
25 OF THE ADVERTISING, PARTICULARLY FROM THE LARGE ADVERTISERS,
1278
WEAVER - DIRECT / SHULMAN
1 AND IT WOULD HAVE TO HAVE NEWS CONTENT THAT WAS A SUBSTITUTE,
2 IF YOU WILL, COMPETITIVE WITH THE CHRONICLE.
3 IN MY OPINION IT WOULD TAKE MORE THAN FOUR MONTHS TO
4 TRANSITION THE ADVERTISING; AND WITHOUT THE NEWS-GATHERING
5 FORCE CURRENTLY EXISTENT AT THE EXAMINER, I THINK IT WOULD BE
6 DIFFICULT TO DUPLICATE THAT QUALITY OF NEWS COVERAGE AND HAVE
7 THAT UP AND GOING IN FOUR MONTHS.
8 Q. THEN YOU SAY:
9 "AT A MINIMUM ANY BUYER OF THE EXAMINER
10 WOULD REQUIRE AT LEAST A 12- TO 18-MONTH
11 TRANSITION PERIOD BEFORE IT COULD PRODUCE AN
12 ECONOMICALLY VIABLE PAPER."
13 IS THAT YOUR OPINION?
14 A. YES.
15 Q. WHAT IS THE BASIS FOR THAT OPINION?
16 A. THAT'S BASED UPON THE DISCUSSIONS AND THE WORK THAT WERE
17 DONE WITH MR. FLAHERTY AND MR. INGRAM IN WHICH WE LOOKED AT HOW
18 LONG A TRANSITION PERIOD MIGHT BE. EARLIER IN THE TRIAL WAS
19 TALKED ABOUT 22 MONTHS. IF YOU LOOK CLOSELY AT THAT, I THINK
20 YOU WOULD SEE THE FIRST FOUR TO SIX MONTHS WERE NEGOTIATIONS
21 AND FOLLOWUP.
22 AND ALSO ON THE OPINION OF MR. INGRAM THAT TO
23 PRODUCE A PAPER, YOU WOULD HAVE TO PUT IN -- INTO PLACE A PRESS
24 ROOM CAPABLE OF PRODUCING THAT PAPER, AND THAT IN ITSELF WOULD
25 TAKE THE 12 TO 18 MONTHS.
1279
WEAVER - DIRECT / SHULMAN
1 MR. SHULMAN: THANK YOU. I HAVE NO FURTHER
2 QUESTIONS.
3 THE COURT: BEFORE YOU MOVE ON, MR. SHULMAN --
4 MR. SHULMAN: SURE.
5 THE COURT: -- LET ME ASK THE WITNESS TO GO BACK TO
6 A STATEMENT ON PAGE 2, I BELIEVE IT IS, OF HIS DECLARATION,
7 PARAGRAPH 4, BEGINNING ABOUT LINE 23, IN WHICH YOU EXPRESS THE
8 OPINION THAT HEARST NOW PAYS APPROXIMATELY $90 MILLION PER YEAR
9 TO SUPPORT THE EXISTING PAPER.
10 LET ME ASK YOU TO EXPAND ON THAT. TELL ME HOW YOU
11 ARRIVED AT THAT NUMBER.
12 THE WITNESS: I WOULD CALL YOUR ATTENTION BACK TO
13 EXHIBIT EITHER 46 OR 166 WHERE I HAVE ATTEMPTED TO LAY OUT THE
14 CURRENT EXPENSE STREAM AS I UNDERSTOOD IT BASED UPON
15 INFORMATION IN THE OFFERING MEMORANDUM.
16 THE COURT: ALL RIGHT. I HAVE 46.
17 THE WITNESS: 166 IS --
18 THE COURT: I'VE GOT 166 AS WELL OR THE EQUIVALENT,
19 THE HEARST EQUIVALENT.
20 MR. SHULMAN: THE FIRST PAGE, YOUR HONOR.
21 THE WITNESS: IF YOU LOOK AT THAT, WHICH IS MARKED
22 PAGE 000237, YOU SEE A TOTAL EXPENSE STREAM THERE OF
23 $80 MILLION BASED UPON THE INFORMATION THAT I WAS ABLE TO
24 GATHER FROM THE OFFERING MEMORANDUM.
25 THE COURT: LET'S SEE, WHAT'S THE BATES STAMP NUMBER
1280
WEAVER - DIRECT / SHULMAN
1 YOU'RE READING FROM?
2 THE WITNESS: 000237.
3 THE COURT: YES.
4 THE WITNESS: LOWER RIGHT-HAND CORNER.
5 THE COURT: OH, I SEE, CURRENT REVENUE STREAM.
6 THAT'S THE COLUMN YOU'RE READING FROM.
7 MR. SHULMAN: CURRENT EXPENSE STREAM.
8 THE WITNESS: CURRENT EXPENSE STREAM.
9 THE COURT: CURRENT EXPENSE STREAM, THANK YOU.
10 THE WITNESS: SO THE SOURCE OF THESE NUMBERS IS THE
11 OFFERING MEMORANDUM.
12 THE COURT: RIGHT, I UNDERSTOOD THAT.
13 THE WITNESS: AND THEN THERE'S BEEN A LOT OF
14 DISCUSSION ABOUT THE SUNDAY PAPER AND HOW MUCH OF THAT IS OR
15 ISN'T IN THIS $80 MILLION.
16 I BELIEVE IN EARLIER --
17 MR. SHULMAN: 46, FIRST PAGE.
18 THE WITNESS: 46, FIRST PAGE --
19 THE COURT: WELL, WHAT I'M DRIVING AT IS YOUR
20 CHARACTERIZATION OR STATEMENT THAT THESE NUMBERS INVOLVE A
21 PAYMENT BY HEARST OF $90 MILLION. YOU'RE NOT SAYING, ARE YOU,
22 THAT HEARST INCURS A LOSS OF $90 MILLION A YEAR ON THE PAPER,
23 AN OUT-OF-POCKET LOSS OF THAT MAGNITUDE; ARE YOU?
24 THE WITNESS: YOU'RE CORRECT.
25 THE COURT: ALL RIGHT. NOW, WHAT IS IT YOU'RE
1281
WEAVER - CROSS / LINDSTROM
1 SAYING BY THAT STATEMENT, THAT HEARST CURRENTLY PAYS
2 $90 MILLION A YEAR TO SUPPORT THE EXISTING PAPER?
3 THE WITNESS: I THINK IT WOULD BE MORE CORRECT TO
4 SAY THAT THE SAN FRANCISCO NEWSPAPER AGENCY AND HEARST SPENDS
5 APPROXIMATELY $90 MILLION A YEAR TO SUPPORT THE EXISTING PAPER.
6 THE COURT: AND THAT PAPER GENERATES REVENUES OF
7 WHAT?
8 THE WITNESS: I HAVEN'T -- I HAVE NOT IN THIS
9 SITUATION MADE ANY ESTIMATES OF THE REVENUE NUMBERS.
10 THE COURT: ALL RIGHT. SO YOUR STATEMENT, THEN,
11 REFERS ONLY TO THE AMOUNT OF MONEY THAT HEARST HAS TO INCUR AS
12 EXPENSES TO SUPPORT THE PAPER TOGETHER, OF COURSE, WITH ITS
13 SHARE OF WHAT EXPENSES ARE INCURRED BY THE NEWSPAPER AGENCY?
14 THE WITNESS: THIS STATEMENT IS -- MY STATEMENT IS
15 THAT THE EXPENSES INCURRED BY THE NEWSPAPER AGENCY AND HEARST
16 ONLY, IRREGARDLESS OF REVENUES, IS APPROXIMATELY $90 MILLION.
17 THE COURT: ALL RIGHT. OKAY. THANK YOU,
18 MR. SHULMAN.
19 MR. SHULMAN: THANK YOU.
20 THE COURT: MR. LINDSTROM.
21 MR. LINDSTROM: THANK YOU, YOUR HONOR. YOUR HONOR,
22 IF IT PLEASE THE COURT, MAY I APPROACH THE WITNESS?
23 THE COURT: YES, YOU MAY.
24
25
1282
WEAVER - CROSS / LINDSTROM
1 CROSS-EXAMINATION
2 BY MR. LINDSTROM:
3 Q. GOOD MORNING, MR. WEAVER.
4 A. GOOD MORNING, MR. LINDSTROM.
5 Q. I HAVE -- WE'VE MET BEFORE; HAVEN'T WE?
6 A. WE HAVE.
7 MR. LINDSTROM: I HAVE, YOUR HONOR, FOR THE WITNESS,
8 IN ORDER TO EXPEDITE HIS EXAMINATION, A COLLECTION OF EXHIBITS
9 THAT I MIGHT REFER TO DURING THE COURSE OF THE EXAMINATION
10 WHICH I'D LIKE TO PLACE BEFORE HIM. THEY'RE ALL IN EVIDENCE.
11 AND I HAVE A COPY FOR THE COURT. IF YOUR HONOR WISHES TO HAVE
12 THE SAME DOCUMENT, I'LL TENDER IT TO YOUR CLERK AT THIS TIME.
13 THE COURT: ALL RIGHT.
14 MR. LINDSTROM: AND I WISH TO ADVISE THE COURT, I
15 HAVE NO INTENTION OF GOING THROUGH ALL THESE DOCUMENTS, BUT
16 THIS WITNESS HAS PRODUCED A NUMBER OF THINGS AND THEY MAY COME
17 INTO PLAY DURING THE COURSE OF THE EXAMINATION.
18 THE COURT: ALL RIGHT.
19 BY MR. LINDSTROM:
20 Q. LET ME ASK JUST A COUPLE OF FOLLOWUP QUESTIONS WITH
21 RESPECT TO YOUR CALCULATION OF THE COSTS RELATING TO PRODUCING
22 TODAY'S EXAMINER.
23 DIRECTING YOUR ATTENTION TO PLAINTIFF'S 46, ON THE
24 FIRST PAGE, AS MR. SHULMAN JUST INDICATED, THE FIRST PAGE OF
25 THIS EXHIBIT, BATES STAMPED PAGE R00030, IS YOUR CALCULATION OF
1283
WEAVER - CROSS / LINDSTROM
1 THE COSTS ASSOCIATED WITH PRODUCING A SUNDAY NUMBER, A SUNDAY
2 PAPER; CORRECT?
3 A. THAT WAS A CALCULATION THAT WAS BASICALLY PREPARED BY
4 LARRY INGRAM.
5 Q. WITH WHICH YOU AGREE; CORRECT?
6 A. YES.
7 Q. AND IF ONE ADDS THAT $10 MILLION TO THE $80 MILLION ON
8 PAGE 00036, YOU GET THE $90 MILLION THAT'S REFERENCED IN YOUR
9 DECLARATION; CORRECT?
10 A. THAT'S CORRECT.
11 Q. NOW, LET ME ASK YOU A QUESTION ABOUT BATES STAMPED PAGE
12 R00031. HERE YOU COME UP WITH A COST ESTIMATE FOR THE
13 EXAMINER, NOT INCLUDING THE SUNDAY PAPER, OF 73 RATHER THAN
14 $80 MILLION. I THINK I UNDERSTAND YOUR TESTIMONY ON THIS
15 POINT, BUT COULD YOU EXPLAIN TO THE COURT WHY IT IS THAT THIS
16 NUMBER IS DIFFERENT THAN THE 80 MILLION WE SAW A FEW MOMENTS
17 AGO?
18 A. (WITNESS EXAMINES DOCUMENTS.) I WOULD START WITH THE TOP
19 LINE ON THE RIGHT, NEWSPRINT AND INK. ON THIS PAGE THE
20 4 MILLION 635 SIMPLY PICKS UP THE NEWSPRINT AND INK NUMBER
21 THAT'S UNDER THE OPTIMISTIC SCENARIO, SO THAT IT UNDERSTATES
22 THE COST OF NEWSPRINT AND INK. THE NUMBER 8 MILLION 498 IS A
23 BETTER NUMBER FOR THAT.
24 THE SAME --
25 Q. LET ME STOP YOU FOR A MOMENT. WHY DID YOU MODEL THIS
1284
WEAVER - CROSS / LINDSTROM
1 SCENARIO THAT'S DIFFERENT THAN THE FIRST THAT YOU RAN?
2 A. I MODELED THE SECOND SCENARIO TO LOOK AT NOT THE CURRENT
3 EXPENSE STREAM, WHICH I DID NOT OBVIOUSLY GO BACK AND VERIFY
4 FROM ONE TO THE OTHER, BUT TO LOOK AT WHAT DIFFERENT
5 ASSUMPTIONS WOULD BE ON THE PROFIT AND LOSS OR THE EXPENSE AND
6 REVENUE STREAMS FROM ONE MODEL TO ANOTHER.
7 Q. WOULD IT BE FAIR TO SAY WITH RESPECT TO THIS MODEL, YOUR
8 GOAL WAS TO MODEL FOR MR. REILLY A SCALED-BACK OPERATION THAT
9 WOULD ENTAIL A TOTAL COST TO HIM OF PUTTING THE PAPER OUT OF
10 SOMETHING ON THE ORDER OF $40 MILLION AND TO COMPARE THAT ON AN
11 APPLES-AND-APPLES BASIS WITH WHAT THE CURRENT COST OF PRODUCING
12 THE EXAMINER WOULD BE MADE ON THE SAME SET OF ASSUMPTIONS?
13 A. YOU'RE CORRECT THAT THIS MODEL ON PAGE 31 WAS PUT TOGETHER
14 TO REFLECT WHAT COULD BE DONE IF YOU WERE TO SPEND 40 TO
15 $50 MILLION TO PRODUCE THE EXAMINER.
16 THE SECOND HALF OF THE STATEMENT I THINK I WOULD
17 STILL SAY THAT THE EXPENSE STREAM OF $80 MILLION IS MORE
18 ACCURATE.
19 Q. CORRECT. AND AUGMENTED BY THE 10 MILLION FOR SUNDAY,
20 $90 MILLION IS THE FIGURE THAT HIS HONOR SHOULD TAKE FROM YOUR
21 TESTIMONY IS THE COST OF PRODUCING TODAY'S EXAMINER; ISN'T THAT
22 RIGHT? 90 MILLION.
23 A. I HAVE -- I HAVE PUT TOGETHER THE FIRST 80 MILLION FROM
24 INFORMATION PROVIDED TO ME IN THE OFFERING MEMORANDUM, AND I
25 BELIEVE THAT THE OFFERING MEMORANDUM HAS, AS THEY ALL DO, LOTS
1285
WEAVER - CROSS / LINDSTROM
1 OF CAVEATS IN THEM. SO I CAN'T STAND BY THOSE NUMBERS
2 INDEPENDENTLY OF THE OFFERING MEMORANDUM. I CAN ONLY OFFER
3 THEM UP -- EXCUSE THE PUN -- AS WHAT IS PRESENTED BY VERONIS
4 SUHLER AND HEARST CORPORATION AS THE COSTS ASSOCIATED WITH
5 PRODUCING THE EXAMINER.
6 Q. WELL, THESE WERE THE NUMBERS YOU OFFERED UP TO YOUR
7 CLIENT, MR. REILLY; RIGHT?
8 A. THAT'S CORRECT.
9 Q. THE 80 MILLION; CORRECT?
10 A. THAT'S CORRECT.
11 Q. AND THE 10 MILLION FOR A SUNDAY EDITION; RIGHT?
12 A. THAT'S CORRECT.
13 Q. AND YOU PROVIDED HIM WITH THOSE ESTIMATES AT A POINT IN
14 TIME BEFORE YOU WERE RETAINED TO TESTIFY IN THIS LITIGATION;
15 RIGHT?
16 A. THAT'S CORRECT.
17 Q. YOUR GOAL IN PROVIDING HIM WITH THAT INFORMATION WAS TO
18 GIVE HIM THE BEST DATA YOU COULD COME UP WITH TO ENABLE HIM TO
19 NEGOTIATE WITH HEARST; ISN'T THAT RIGHT?
20 A. THAT'S CORRECT.
21 Q. NOW, YOU LOOKED AT THE VERONIS AND SUHLER OFFERING
22 MEMORANDUM; CORRECT?
23 A. THAT'S CORRECT.
24 Q. YOU TOLD US DURING DIRECT THAT YOU ALSO LOOKED AT A ROOM
25 FULL OF DOCUMENTS AT THE SHEPPARD, MULLIN LAW FIRM; RIGHT?
1286
WEAVER - CROSS / LINDSTROM
1 A. THAT'S CORRECT.
2 Q. AND WHAT KINDS OF DOCUMENTS DID YOU LOOK AT THERE?
3 A. THE SHEPPARD, MULLIN LAW FIRM DOCUMENTS INCLUDED
4 INFORMATION ABOUT THE PROFIT AND LOSS OF THE SAN FRANCISCO
5 NEWSPAPER AGENCY. THERE WAS A LOT OF INFORMATION ABOUT
6 ADVERTISING, ADVERTISERS, ADVERTISER CONTRACTS, AND THERE WAS
7 INFORMATION ABOUT CIRCULATION. THERE WERE SOME OTHER THINGS I
8 DON'T THINK WE TOOK ANY -- I DIDN'T TAKE AWAY ANY INFORMATION
9 OTHER THAN THAT.
10 Q. THE DOCUMENTS RELATING TO THE COSTS AND EXPENSES THAT YOU
11 SAW AT SHEPPARD, MULLIN, WERE THOSE THE TYPES OF DOCUMENTS THAT
12 YOU WOULD TYPICALLY RELY UPON AS A CFO IN PREPARING THIS KIND
13 OF A PROJECTION?
14 A. YES.
15 Q. AND YOU SAT THROUGH NEARLY THE ENTIRE COURSE OF THIS
16 TRIAL; ISN'T THAT RIGHT?
17 A. YES.
18 Q. AND YOU'VE HEARD NOTHING DURING THE COURSE OF THIS TRIAL
19 THAT SUGGESTS TO YOU THAT ANY OF THE NUMBERS THAT WERE PROVIDED
20 BY HEARST THROUGH ITS LAWYERS OR IN THE VERONIS SUHLER REPORT
21 WERE WRONG; HAVE YOU?
22 A. THAT'S CORRECT.
23 Q. NOW, AT THE TIME YOU PREPARED THIS PROJECTION, YOU
24 INCLUDED NO NUMBERS FOR CURRENT EXPENSE STREAM; CORRECT?
25 A. NO REVENUE NUMBERS?
1287
WEAVER - CROSS / LINDSTROM
1 Q. FOR TODAY'S EXAMINER, NO REVENUE NUMBERS.
2 A. THAT'S CORRECT.
3 Q. AND PART OF THE REASON FOR THAT IS YOU DON'T REGARD
4 YOURSELF AS A REVENUE EXPERT; RIGHT?
5 A. THAT'S CORRECT.
6 Q. YOU HAD THE IMPRESSION, THOUGH, DID YOU NOT, THAT TODAY'S
7 EXAMINER WAS LOSING MONEY?
8 A. THAT'S CORRECT.
9 Q. AND YOU AND MR. FLAHERTY TALKED ABOUT YOUR PERCEPTIONS IN
10 THAT REGARD; ISN'T THAT RIGHT?
11 A. THAT'S CORRECT.
12 Q. AND HE AGREED WITH YOU DID HE NOT?
13 A. THAT'S CORRECT, YES.
14 Q. AND MR. INGRAM ALSO SHARED THE SAME VIEW THAT THE PAPER
15 WAS LOSING MONEY; ISN'T THAT RIGHT?
16 A. THAT'S CORRECT.
17 Q. BUT AT THAT POINT YOU DIDN'T KNOW HOW MUCH; RIGHT?
18 A. THAT'S CORRECT.
19 Q. NOW, SINCE YOUR ENGAGEMENT IN THIS MATTER, YOU'VE HAD A
20 CHANCE TO TALK WITH REVENUE EXPERTS; HAVEN'T YOU?
21 A. YES.
22 Q. INCLUDING HEARING THEIR TESTIMONY HERE IN THIS COURT;
23 ISN'T THAT RIGHT?
24 A. YES.
25 Q. AND YOU WOULD REGARD MR. CLANCY AS A REVENUE EXPERT; WOULD
1288
WEAVER - CROSS / LINDSTROM
1 YOU NOT?
2 A. YES.
3 Q. AND MR. CLANCY ACTUALLY TOOK YOUR NUMBERS AND HE FILLED
4 THEM IN; DIDN'T HE?
5 A. I WAS NOT HERE WHEN MR. CLANCY GAVE HIS DEPOSITION, SO I'M
6 NOT SURE.
7 Q. HIS TRIAL TESTIMONY.
8 A. HIS TRIAL TESTIMONY. I'M NOT SURE.
9 Q. LET ME DIRECT YOUR TESTIMONY TO CHRONICLE EXHIBIT C-23 IN
10 EVIDENCE. NOW, YOU RECOGNIZE THE TEMPLATE ON WHICH THESE NOTES
11 ARE TAKEN; ISN'T THAT RIGHT?
12 A. THAT'S CORRECT.
13 Q. AND THIS IS A DOCUMENT THAT YOU HANDED OUT AT THE MARCH
14 25TH MEETING; RIGHT?
15 A. THAT'S CORRECT.
16 Q. AND I WILL REPRESENT TO YOU THAT MR. CLANCY APPEARED IN
17 THIS COURTROOM AND TESTIFIED THAT THESE WERE HIS REVENUE
18 CALCULATIONS FOR A STAND-ALONE EXAMINER. I WANT YOU TO ASSUME
19 THAT'S TRUE.
20 SO IF YOU TAKE THESE NUMBERS FROM A REVENUE EXPERT
21 AND APPLY THEM AGAINST YOUR COST ESTIMATES, TODAY'S EXAMINER IS
22 LOSING, BY MR. CLANCY'S CALCULATION, ABOUT $40 MILLION; ISN'T
23 THAT RIGHT?
24 A. YES.
25 Q. BUT MR. CLANCY WAS USING THE 73 MILLION-DOLLAR COST
1289
WEAVER - CROSS / LINDSTROM
1 ESTIMATE; ISN'T THAT RIGHT?
2 A. THAT'S CORRECT.
3 Q. AND IF WE WERE TO USE THE NUMBER THAT YOU TOLD US WAS THE
4 CORRECT NUMBER WITHOUT SUNDAY, THE $80 MILLION, THIS 38 WOULD
5 NEED TO BE ABOUT 45 MILLION; ISN'T THAT RIGHT?
6 A. THAT'S CORRECT.
7 Q. AND IF WE WERE TO TAKE IT UP TO YOUR TESTIMONY TODAY OF
8 90 MILLION, MR. CLANCY, OUR REVENUE EXPERT, WOULD HAVE US AT
9 55 MILLION-DOLLAR LOSS; ISN'T THAT RIGHT?
10 A. THAT'S CORRECT.
11 Q. OKAY. NOW, MR. FLOOD, YOU HEARD HIS TESTIMONY HERE IN THE
12 COURTROOM; DID YOU NOT?
13 A. YES, I DID.
14 Q. HE'S ANOTHER REVENUE EXPERT; ISN'T THAT RIGHT?
15 A. THAT'S CORRECT.
16 Q. AND YOU'VE WORKED WITH THESE GENTLEMEN IN YOUR PAST
17 CAREER; RIGHT?
18 A. THAT'S NOT CORRECT.
19 Q. HAVE YOU NOT WORKED WITH EITHER FLOOD OR CLANCY?
20 A. I HAVE NOT WORKED WITH FLOOD AT ALL, AND I'VE NEVER REALLY
21 WORKED WITH MR. CLANCY. I HAVE -- WHEN I WAS IN CHICAGO, HE
22 WAS IN CHICAGO DOING DIFFERENT THINGS.
23 Q. IT'S TRUE, ISN'T IT, THAT YOU WERE ALL WITH THE TRIBUNE
24 ORGANIZATION AT ONE POINT OR ANOTHER?
25 A. THAT'S TRUE.
1290
WEAVER - CROSS / LINDSTROM
1 Q. ALL RIGHT. AND YOU HAVE NO REASON TO DOUBT MR. FLOOD'S
2 CAPABILITIES AS A REVENUE-SIDE EXPERT; DO YOU?
3 A. THAT'S CORRECT.
4 Q. NOW, LET ME SHOW YOU EXHIBIT C-322 IN EVIDENCE. THIS IS A
5 PAGE OF CALCULATIONS FROM MR. FLOOD TO WHICH HE JUST TESTIFIED
6 YESTERDAY. AND LET ME ZOOM IN, IF I MAY.
7 YOU HEARD HIM, DIDN'T YOU, WHEN HE TESTIFIED
8 YESTERDAY THAT HE MADE A CALCULATION OF THE EXAMINER'S
9 CONTRIBUTION TO THE REVENUE OF THE AGENCY? YOU HEARD THAT
10 TESTIMONY; DIDN'T YOU?
11 A. YES.
12 Q. AND HE TOLD US DURING HIS TESTIMONY, REFERRING TO THIS
13 EXHIBIT, THAT HIS CALCULATION WAS $43 MILLION FOR THE
14 EXAMINER'S CONTRIBUTION TO REVENUE; RIGHT?
15 A. YES.
16 Q. DO YOU REMEMBER THAT TESTIMONY?
17 A. ACTUALLY I DO NOT REMEMBER THE 43 MILLION.
18 Q. ALL RIGHT. WELL, I WILL REPRESENT TO YOU AND ASSUME THAT
19 IT'S TRUE THAT THE NUMBER IN THIS DOCUMENT IN EVIDENCE C-322
20 WAS ALSO TESTIFIED TO YESTERDAY BY MR. FLOOD.
21 AND THEN HERE'S ANOTHER NUMBER, $275,000. THAT
22 NUMBER IS FAMILIAR TO YOU; ISN'T IT, SIR?
23 A. YES, IT IS.
24 Q. IN FACT, THAT NUMBER WAS OBTAINED BY MR. FLOOD FROM YOU;
25 ISN'T THAT RIGHT?
1291
WEAVER - CROSS / LINDSTROM
1 A. IT CERTAINLY COULD BE. I DON'T KNOW WHERE HE GOT IT.
2 Q. ALL RIGHT. FOR THE COURT, WHAT IS THE $275,784 THAT'S
3 INDICATED ON EXHIBIT C-22?
4 A. THAT'S THE REVENUE -- I BELIEVE THAT'S THE ADVERTISING
5 REVENUE ATTRIBUTABLE TO SALES OF EXAMINER-ONLY ADVERTISING IN
6 1997, 1998. ONE OF THOSE TWO YEARS.
7 Q. ALL RIGHT. NOW, WERE YOU HERE WHEN MR. PAGE TESTIFIED?
8 A. NO.
9 Q. THIS NUMBER OF $275,000, IF I UNDERSTAND YOUR TESTIMONY,
10 THIS NUMBER, LESS THAN $300,000, REPRESENTS THOSE ADVERTISERS
11 WHO ARE ONLY IN THE EXAMINER; IS THAT RIGHT?
12 A. THAT'S MY UNDERSTANDING. I BELIEVE THERE'S A SCHEDULE
13 THAT BACKS THAT UP. I'M NOT -- I ONLY HESITATE BECAUSE I DON'T
14 HAVE THAT IN MY MIND.
15 Q. AND YOU PREPARED JUST SUCH A SCHEDULE; DID YOU NOT, SIR?
16 A. THAT'S CORRECT.
17 Q. BECAUSE YOU WANTED TO SEE, AS BEST YOU COULD, WHAT
18 REVENUES WERE ATTRIBUTABLE TO TODAY'S EXAMINER; RIGHT?
19 A. NO. I -- I DIDN'T DO IT TO DETERMINE WHAT WERE
20 ATTRIBUTABLE. I WANTED TO FIND OUT HOW MUCH ADVERTISING WAS
21 SOLD EXAMINER ONLY IN CONJUNCTION WITH FINDING OUT HOW MUCH
22 ADVERTISING WAS SOLD IN COMBINATION.
23 Q. OKAY. AND IF WE LOOK AT C-315 IN EVIDENCE, THE LAST PAGE
24 OF THAT EXHIBIT, I THINK WE'LL FIND YOUR CALCULATION IN THAT
25 REGARD; ISN'T THAT RIGHT, SIR?
1292
WEAVER - CROSS / LINDSTROM
1 A. I CAN'T READ THAT.
2 Q. THAT'S WHY I GAVE YOU THE NOTEBOOK.
3 A. OH, I'M SORRY.
4 Q. YOU CAN SEE IT THERE. AND WHILE YOU'RE LOCATING IT, LET
5 ME ZOOM IN ON YOUR TOTAL FOR 1999. THERE IT IS BIGGER THAN
6 LIFE; RIGHT?
7 A. YES, THAT'S CORRECT.
8 Q. OKAY. NOW, WILL YOU EXPLAIN TO HIS HONOR HOW YOU CAME UP
9 WITH THIS NUMBER?
10 A. THIS INFORMATION I GATHERED WHEN I WAS AT SHEPPARD, MULLIN
11 OFFICE LOOKING THROUGH THE INFORMATION THAT WAS MADE AVAILABLE
12 TO POTENTIAL PURCHASERS. AND I PICKED UP THE NUMBER OF
13 INSERTIONS, THE NUMBER OF INCHES AND THE REVENUE IN THREE
14 DIFFERENT CATEGORIES THAT WERE EXAMINER ONLY.
15 Q. OKAY. AND THE CATEGORIES WERE RETAIL; RIGHT?
16 A. YES.
17 Q. NATIONAL?
18 A. YES.
19 Q. CLASSIFIED?
20 A. YES.
21 Q. IN OTHER WORDS, ALL OF THE TYPES OF ADVERTISING THAT MIGHT
22 BE PLACED IN THE EXAMINER; CORRECT?
23 A. YES.
24 Q. IN OTHER WORDS, YOU DIDN'T LEAVE OUT ANY SIGNIFICANT
25 CATEGORY OF ADVERTISING; DID YOU?
1293
WEAVER - CROSS / LINDSTROM
1 A. HAVING HEARD MR. FLOOD'S TESTIMONY ABOUT THE SUNDAY
2 MAGAZINE, THAT'S NOT INCLUDED IN HERE, BUT I DON'T THINK IT WAS
3 INTENDED TO BE. THAT'S A FULL-RUN BUY.
4 Q. ALL RIGHT. NOW RETURNING TO MR. FLOOD, IF WE ADD UP THESE
5 TWO NUMBERS, OUR REVENUE EXPERT, MR. FLOOD, COMES UP WITH
6 SOMETHING ON THE ORDER OF $43,350,000 AS THE EXAMINER'S
7 CONTRIBUTION TO REVENUE IN 1998; RIGHT?
8 A. YES, HE DOES.
9 Q. OKAY. SO IF YOU ASSUME THAT HIS CALCULATION IS TRUE AND
10 THAT IT COSTS $90 MILLION TO PUT THE PAPER OUT THAT YEAR, THEN
11 MR. FLOOD HAS US AT A LOSS OF HOW MUCH?
12 A. FIRST, I DON'T KNOW WHETHER MR. FLOOD INCLUDED CIRCULATION
13 REVENUE. YOU MIGHT BE ABLE TO PROVIDE SOME INSIGHT INTO THAT.
14 I THINK THAT'S ADVERTISING REVENUE.
15 Q. ALL RIGHT. MR. FLOOD IN HIS MATERIALS DID LOOK AT
16 ADVERTISING AND HE DID LOOK AT CIRCULATION; ISN'T THAT RIGHT?
17 A. I DON'T KNOW. I HAVEN'T SEEN THOSE MATERIALS.
18 Q. WELL, LET ME SHOW THEM TO YOU. THEY'RE -- AGAIN, THIS IS
19 322 IN EVIDENCE. ON THE VERY NEXT PAGE HE HAS A CIRCULATION
20 NUMBER, DOES HE NOT, OF $7 MILLION? DO YOU SEE THAT?
21 A. (WITNESS EXAMINES DOCUMENT.) NO, I DON'T SEE THAT.
22 Q. IT'S ON THE SCREEN HERE.
23 A. I SEE IT ON THE SCREEN. I WAS LOOKING IN 322.
24 Q. OKAY. DO YOU SEE IT ON THE SCREEN, THE $7 MILLION? I
25 WANT YOU TO ASSUME THAT FIGURE IS TRUE FROM MR. FLOOD. AND,
1294
WEAVER - CROSS / LINDSTROM
1 INDEED, IF WE GO BACK TO C-323, CLANCY'S DOCUMENT, WE SEE HE
2 HAS A VERY SIMILAR CALCULATION FOR CIRCULATION; DOES HE NOT,
3 7,400,000?
4 A. YES.
5 Q. OKAY. SO IF WE TAKE THESE TWO NUMBERS, WE COME UP TO
6 ROUGHLY 50 MILLION IN REVENUE THAT ACCORDING TO MR. FLOOD WAS
7 CONTRIBUTED BY THE EXAMINER IN 1998; RIGHT? 43 PLUS 7.
8 A. THAT'S CORRECT.
9 Q. AND IF IT COST 90 MILLION TO PUT THAT PAPER OUT THAT YEAR,
10 THEN IT LOST 50 MILLION -- $40 MILLION; ISN'T THAT RIGHT?
11 A. YES.
12 Q. THIS ISN'T A TRICK QUESTION. YOU'RE THE CFO.
13 MR. LINDSTROM: YOUR HONOR, MAY I APPROACH THE
14 EASEL?
15 THE COURT: YES, YOU MAY.
16 BY MR. LINDSTROM:
17 Q. LET ME KEEP TRACK OF THIS IF I MAY. REILLY EXPERTS.
18 NOW, A FEW MOMENTS AGO WE TALKED ABOUT CLANCY AND HE
19 CAME UP, AS WE SAW, WITH 45 TO $55 MILLION IN LOSSES FOR
20 TODAY'S EXAMINER; CORRECT? WE JUST WENT THROUGH THAT.
21 A. YES.
22 Q. ALL RIGHT. NOW, ON FLOOD, FLOOD HAS 50 MILLION IN
23 REVENUES AND APPLIED AGAINST YOUR 90 MILLION-DOLLAR COST
24 ESTIMATE, WHAT DOES THAT YIELD AS A LOSS?
25 A. THAT YIELDS $40 MILLION.
1295
WEAVER - CROSS / LINDSTROM
1 Q. OKAY. AND AS LONG AS I'M UP HERE, YOU HEARD YOUR COHORT,
2 MR. INGRAM, TESTIFY YESTERDAY; DID YOU NOT?
3 A. YES.
4 Q. AND HE SAID IT WAS 30 TO 50 IN HIS JUDGMENT; RIGHT?
5 THE COURT: I THINK "COLLEAGUE" WOULD BE A BETTER
6 TERM, MR. LINDSTROM.
7 MR. LINDSTROM: I'M SORRY. COLLEAGUE.
8 THE WITNESS: YES.
9 BY MR. LINDSTROM:
10 Q. HIS BEST ESTIMATE WAS 30 TO 50 MILLION OF LOSSES; RIGHT?
11 AND THEN YOU HEARD MR. SCHMIDT AND HE TOLD US, DID HE NOT, THAT
12 HIS ESTIMATE WAS 75 MILLION?
13 A. I DON'T RECALL THAT. I REMEMBER MILLIONS BUT I DON'T
14 REMEMBER THE NUMBER.
15 Q. ALL RIGHT. I'LL REPRESENT TO YOU THAT THAT WAS HIS
16 TESTIMONY.
17 AND YOU WERE HERE IN COURT, SIR, WERE YOU NOT, WHEN
18 MR. OSBORN TESTIFIED?
19 A. YES.
20 Q. AND DO YOU RECALL HIM SAYING THAT HIS ESTIMATE OF THE
21 LOSSES TODAY'S EXAMINER WAS SUSTAINING WAS ON THE ORDER OF 20
22 TO $25 MILLION?
23 A. YES.
24 Q. AND MR. FLAHERTY, YOU HAD A NUMBER OF DISCUSSIONS WITH
25 MR. FLAHERTY CONCERNING THE PROFITABILITY OF TODAY'S EXAMINER;
1296
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1 DID YOU NOT?
2 A. THAT'S CORRECT.
3 Q. AND HE TOLD YOU THAT HE HAD DONE AN INCREMENTAL ANALYSIS
4 THAT SUGGESTED THAT THE PAPER WAS LOSING ABOUT $40 MILLION A
5 YEAR; ISN'T THAT RIGHT?
6 A. I WOULD HAVE -- I WOULD CHARACTERIZE HIM AS SAYING AT
7 LEAST 30.
8 Q. AT LEAST 30 IS YOUR RECOLLECTION?
9 A. THAT'S CORRECT.
10 Q. AND YOUR OWN ESTIMATE, SIR, IS 30 TO $50 MILLION OF ANNUAL
11 LOSSES; IS THAT NOT CORRECT?
12 A. MY ESTIMATE IS THAT THE NEWSPAPER AGENCY AND --
13 Q. DO YOU HAVE AN ESTIMATE, SIR?
14 A. YES, I WOULD ESTIMATE THAT THE COMBINATION OF THE SPENDING
15 BY THE NEWSPAPER AGENCY AND THE EXAMINER EXCEEDS THE REVENUE
16 THAT WOULD BE FAIRLY ATTRIBUTABLE TO THE EXAMINER BY SOMETHING
17 IN THE NEIGHBORHOOD OF 20 TO $50 MILLION.
18 Q. 20 TO 50.
19 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
20
21
22
23
24
25
1297
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1 BY MR. LINDSTROM:
2 Q. NOW, LET'S TALK ABOUT THE CALCULATIONS THAT YOU PERFORMED.
3 YOU ARE A CFO, RIGHT?
4 A. THAT'S CORRECT.
5 Q. AND YOU HAVE EXTENSIVE EXPERIENCE IN THE NEWSPAPER
6 INDUSTRY, RIGHT?
7 A. THAT'S CORRECT.
8 Q. AND YOU HAVE GOT AN MBA FROM DARTMOUTH?
9 A. YES.
10 Q. AND YOU WENT TO BERKELEY BEFORE THAT?
11 A. YES.
12 Q. AND YOU WORKED AT, I THINK IT WAS THEN KNOWN AS ARTHUR
13 YOUNG IN NEW YORK, CORRECT?
14 A. YES.
15 Q. AND YOU HAVE DONE A LOT OF PROFIT-AND-LOSS PROJECTIONS IN
16 YOUR TIME; IS THAT FAIR TO SAY?
17 A. YES.
18 Q. NOW, AT SOME POINT IN TIME DID YOU PERFORM AN INCREMENTAL
19 ANALYSIS OF THE TYPE ADJUDICATED BY THE DEPARTMENT OF JUSTICE
20 IN THE HONOLULU CASE?
21 A. WELL, I AM NOT FAMILIAR WITH THAT -- THAT CASE.
22 Q. ARE YOU FAMILIAR WITH AN INCREMENTAL ANALYSIS?
23 A. YES.
24 Q. AND WHO ASKED YOU TO PERFORM THAT ANALYSIS?
25 A. I DID IT MYSELF.
1298
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1 Q. WHY DID YOU UNDERTAKE TO PERFORM THAT ANALYSIS?
2 A. TO ATTEMPT TO PUT A VALUE ON THE CHRONICLE AS A
3 STAND-ALONE BUSINESS.
4 Q. ISN'T IT TRUE THAT YOU WERE ASKED BY THE LAWYERS IN THIS
5 CASE TO MAKE SUCH AN INCREMENTAL ANALYSIS?
6 A. NO.
7 Q. AS PART OF YOUR ANALYSIS, YOU LOOKED, AS I UNDERSTAND IT,
8 AT WHAT WOULD HAPPEN TO THE REVENUES AND COSTS OF THE SAN
9 FRANCISCO NEWS AGENCY WITHOUT THE EXAMINER; ISN'T THAT FAIR TO
10 SAY?
11 A. YES.
12 Q. AND WOULD YOU EXPLAIN TO HIS HONOR WHAT YOU CONCLUDED IN
13 THAT REGARD?
14 A. I PREPARED A -- A HANDWRITTEN AND THEN A MORE FORMAL
15 ANALYSIS THAT LOOKED AT A RANGE OF REVENUE ASSUMPTIONS FOR THE
16 SAN FRANCISCO NEWSPAPER AGENCY/CHRONICLE WITHOUT THE EXAMINER
17 AND A RANGE OF OPERATING INCOME FIGURES FOR THE SAN FRANCISCO
18 NEWSPAPER AGENCY/CHRONICLE WITHOUT THE EXAMINER. AND I USED
19 THAT, THEN, TO VALUE THE CHRONICLE AS A STAND-ALONE OPERATION
20 FREE OF THE JOA.
21 Q. AND WHAT YOU CONCLUDED WAS THAT THE AGENCY WOULD BE NET
22 BETTER OFF BY 30 TO $50 MILLION WITHOUT THE EXAMINER; ISN'T
23 THAT RIGHT?
24 A. I'D HAVE TO LOOK AT THE NUMBERS. CAN WE LOOK THROUGH
25 THOSE?
1299
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1 MR. LINDSTROM: YOUR HONOR, IF I MAY APPROACH THE
2 WITNESS WITH HIS DEPOSITION TRANSCRIPT, I WOULD LIKE TO ATTEMPT
3 TO REFRESH HIS RECOLLECTION ON THIS POINT.
4 THE COURT: ALL RIGHT. I DON'T BELIEVE I HAVE
5 HIS . . .
6 MR. LINDSTROM: LET ME TENDER IT UP, YOUR HONOR. I
7 HAVE TWO VOLUMES -- THERE WERE TWO VOLUMES. AND IF I MAY HAND
8 THEM TO YOUR CLERK, AND THEN I WILL PLACE BOTH VOLUMES BEFORE
9 THE WITNESS SHOULD WE NEED THEM.
10 BY MR. LINDSTROM:
11 Q. AND LET ME ASK YOU, SIR, IF YOU TAKE A MOMENT TO LOOK AT
12 YOUR TESTIMONY AT PAGE 83, LINES 3 TO 25, AND READ THAT TO
13 YOURSELF, IF YOU WOULD.
14 A. (WITNESS READING DOCUMENT).
15 Q. HAVE YOU COMPLETED THAT REVIEW?
16 A. NO, I HAVEN'T.
17 Q. DO YOU HAVE THE PAGE BEFORE YOU?
18 A. YES. I WAS LOOKING AT WHAT'S IN FRONT OF IT SO THAT I
19 COULD REFRESH MY MEMORY AS TO WHERE WE WERE IN THAT DISCUSSION.
20 Q. TAKE YOUR TIME.
21 A. (WITNESS READING DOCUMENT) YES, I . . .
22 Q. AND WOULD YOU TAKE A MOMENT ALSO TO LOOK AT YOUR TESTIMONY
23 ON THE NEXT PAGE, PAGE 84, FROM LINES 15 TO 23.
24 A. YES.
25 Q. DO THOSE PASSAGES REFRESH YOUR RECOLLECTION AS TO THE
1300
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1 NUMBERS?
2 A. YES.
3 Q. AND WHAT WERE THE NUMBERS THAT RESULTED FROM YOUR
4 INCREMENTAL ANALYSIS OF THE EFFECT ON AGENCY REVENUES AND COSTS
5 OF SHEDDING THE EXAMINER?
6 A. I DON'T BELIEVE THESE RELATE TO THAT SPECIFIC POINT IN
7 TIME. I AM NOT TRYING TO BE ARGUMENTATIVE, BUT I THINK THESE
8 PASSAGES RELATE TO MY THINKING EARLIER ON IN THE PROCESS, AS WE
9 WERE REVIEWING THE $80 MILLION, AND HOW I CAME UP WITH THAT.
10 Q. SO IS IT YOUR TESTIMONY YOU DON'T BELIEVE THESE PASSAGES
11 RELATE TO YOUR INCREMENTAL ANALYSIS?
12 A. THESE DON'T RELATE TO THE ANALYSIS I HAD IN MIND THAT I --
13 THAT I PREPARED MARCH 24TH AND -- 23RD, 24TH AND 25TH.
14 Q. ALL RIGHT. WHAT WAS THE RESULT OF THAT ANALYSIS?
15 A. WELL, I'D LIKE -- I DON'T REMEMBER THE EXACT NUMBERS.
16 THAT'S WHY I WAS SUGGESTING WE LOOK AT THAT IN DETAIL.
17 Q. WHICH DOCUMENT IS IT? AND PERHAPS I CAN DIRECT YOU TO ITS
18 INCLUSION IN THE NOTEBOOK, IF IT IS.
19 A. THERE WERE HANDWRITTEN NOTES.
20 Q. TAKE A LOOK AT C311, WHICH ARE YOUR PREPARATION NOTES FOR
21 THE MARCH 25TH MEETING.
22 A. AH, THAT'S IT, YES. THAT'S WHAT I WAS REFERRING TO.
23 Q. WOULD YOU TAKE A LOOK AT THOSE, PLEASE, AND AFTER YOU HAVE
24 HAD A CHANCE TO REVIEW THEM, TELL THE COURT WHAT THE RESULTS
25 WERE OF YOUR INCREMENTAL ANALYSIS.
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1 A. I AM REFERRING TO THE PAGE MARKED AS R000452.
2 AND UNDER THE -- IN THE MIDDLE UNDER -- UNDER "JOA
3 HEARST NUMBER 5, "I START DOING AN INCREMENTAL ANALYSIS,
4 SUGGESTING THAT, FIRST, THERE ARE $75 MILLION IN SERVICES FROM
5 THE SNA. AND I TAKE THE $75 MILLION AND ADD TO THAT THE
6 $50 MILLION IN EXCESS PROFITS DISTRIBUTED TO THE CHRONICLE AND
7 COME UP WITH $125 MILLION.
8 Q. ALL RIGHT. WOULD YOU TAKE US THROUGH THE REST OF THE
9 ANALYSIS?
10 A. YES. THEN UNDER SUBSECTION C, THE CHRONICLE CURRENTLY
11 GETS 225 MILLION IN SERVICES FROM SNA. THAT IS BASICALLY THE
12 DIFFERENCE BETWEEN THE 75 -- I'D HAVE TO GO THROUGH THAT AGAIN.
13 225 MILLION PLUS 50 MILLION OR 275 MILLION. SO I WOULD
14 REPHRASE THAT. THE FIRST A AND B SUGGESTS WHAT VALUE HEARST
15 RECEIVES, 125 MILLION, WHAT VALUE THE CHRONICLE RECEIVES,
16 275 MILLION.
17 Q. HAVE YOU COMPLETED YOUR RESPONSE?
18 A. NO.
19 I THEN UNDER -- UNDER D, ACTUALLY, THERE IS A
20 $350 MILLION REVENUE FIGURE, AND I SUBTRACT FROM THAT
21 $350 MILLION REVENUE FIGURE THE $225 MILLION SERVICES FROM SAN
22 FRANCISCO NEWSPAPER AGENCY, THE CHRONICLE, RECEIVES. THAT NETS
23 TO 125 MILLION.
24 ON THE LEFT-HAND SIDE YOU CAN SEE 125 MINUS 40,
25 WHICH WOULD BE -- IT WAS AN ESTIMATE I WAS USING AT THIS
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1 PARTICULAR POINT IN TIME FOR THE COSTS FOR EDITORIAL AND OTHER
2 EXPENSES OF THE CHRONICLE, AND I COME UP WITH AN $85 MILLION
3 OPERATING PROFIT FOR THE CHRONICLE AS A STAND-ALONE. SO . . .
4 Q. AND SO WHAT WAS YOUR CONCLUSION, SIR, ABOUT THE EFFECT ON
5 THE REVENUES OF THE SAN FRANCISCO NEWS AGENCY AND THE COSTS OF
6 THAT ENTITY IF IT WERE TO BE IN OPERATION WITHOUT THE EXAMINER?
7 A. MY CONCLUSION IS THAT THE CHRONICLE, AS A STAND-ALONE,
8 WOULD EARN MORE MONEY THAN IT DOES NET OF ITS SHARE OF THE
9 EXCESS PROFITS.
10 Q. WELL, IT'S YOUR VIEW, ISN'T IT, SIR, THAT THE CHRONICLE IS
11 SUBSIDIZING THE EXAMINER? ISN'T THAT RIGHT?
12 A. I AM NOT SURE WHAT YOU MEAN BY "SUBSIDIZE." I READ THE
13 JOA TO SAY THAT THESE TWO PEOPLE HAVE AGREED TO WORK TOGETHER,
14 AND THE FACT THAT MORE MONEY MAY BE SPENT OR -- ON THE EXAMINER
15 THAN THE CHRONICLE RELATIVE TO THE REVENUE, IF YOU WANT TO
16 CHARACTERIZE THAT AS A "SUBSIDY," THAT'S FINE.
17 Q. WELL, ISN'T IT TRUE, SIR, THAT YOU VIEW IT AS A SUBSIDY?
18 A. NO, I DON'T VIEW IT AS A SUBSIDY. I VIEW IT AS A
19 WORKING -- AS AN AGREEMENT THAT IS BEING CARRIED OUT BY THE TWO
20 PARTIES -- OR THREE PARTIES.
21 Q. YOU WERE HERE WHEN DR. COMANOR GAVE THAT SAME TESTIMONY,
22 WEREN'T YOU?
23 A. YES.
24 Q. ALL RIGHT. BUT I TOOK YOUR DEPOSITION BEFORE DR. COMANOR
25 GOT ON THE STAND, DIDN'T I?
1303
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1 A. THAT'S CORRECT.
2 Q. AND, AMONG OTHER THINGS, I ASKED YOU ABOUT THE MARCH 25TH
3 MEETING; ISN'T THAT RIGHT?
4 A. YES.
5 Q. AND AT THE MARCH 25TH MEETING, ONE OF THIS ASSEMBLED GROUP
6 OF EXPERTS EXPRESSED THE VIEW THAT THE CHRONICLE WAS
7 SUBSIDIZING THE EXAMINER; ISN'T THAT RIGHT?
8 A. YES.
9 Q. AND YOU DID NOT DISAGREE WITH THAT VIEW, DID YOU?
10 A. THAT'S CORRECT.
11 Q. IN FACT, YOU TOLD ME IT WAS YOUR OWN VIEW; ISN'T THAT
12 RIGHT, SIR?
13 A. THAT'S CORRECT.
14 Q. SO YOUR VIEW IS DIFFERENT IN THAT REGARD TODAY THAN IT WAS
15 AT THE TIME I TOOK YOUR DEPOSITION; IS THAT YOUR TESTIMONY?
16 A. NO, IT'S NOT.
17 Q. NOW, IN FACT, ISN'T IT TRUE THAT YOU AND DR. COMANOR HAD A
18 MEETING IN WHICH IT WAS DISCUSSED THAT THE CHRONICLE WAS
19 SUBSIDIZING THE EXAMINER?
20 A. YES.
21 Q. WHO EXPRESSED THAT VIEW, YOU OR DR. COMANOR, OR WAS IT A
22 CONSENSUS?
23 A. AS I RECALL THE CONVERSATION, WE WERE TALKING ABOUT THE
24 REVENUE AND EXPENSES, AND DR. COMANOR TOOK THE INITIAL POSITION
25 THAT IF YOU ALLOCATE REVENUE SIMPLY ON A CIRCULATION BASIS
1304
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1 BETWEEN THE TWO, THE CHRONICLE AND THE EXAMINER, WE TALKED
2 ABOUT THAT, AND IF YOU DO THAT, YOU FIND THAT THE EXAMINER IS
3 SOMETHING CLOSE TO A BREAK-EVEN.
4 AND I BELIEVE I EXPRESSED THE OPINION THAT THAT --
5 THAT TO ME WAS NOT A REALISTIC WAY TO ALLOCATE REVENUE. THAT
6 PROBABLY OVERSTATED THE REVENUE THAT WOULD BE ALLOCATED TO THE
7 EXAMINER.
8 THEREFORE, AS WE HAVE SAID AND AS I HAVE SAID, THERE
9 IS MORE MONEY BEING SPENT TO PRODUCE AND DISTRIBUTE THE
10 EXAMINER THAN THERE IS REVENUE ATTRIBUTABLE TO IT.
11 Q. IT IS TRUE, IS IT NOT, SIR, THAT IT IS YOUR OWN VIEW THAT
12 THE CHRONICLE IS EFFECTIVELY SUBSIDIZING THE EXAMINER TODAY?
13 YOUR ANSWER, PLEASE?
14 A. YES.
15 Q. AND YOU EXPRESSED THAT VIEW TO DR. COMANOR, DID YOU NOT?
16 A. YES.
17 Q. NOW, YOU WERE HERE IN COURT WHEN DR. COMANOR TESTIFIED;
18 ISN'T THAT RIGHT?
19 A. YES.
20 Q. AND YOU HEARD DR. COMANOR GIVE THIS ANSWER TO THIS
21 QUESTION PUT TO HIM DURING DIRECT EXAMINATION BY MR. SHULMAN,
22 DID YOU NOT? AT PAGE 440 OF THE TRANSCRIPT:
23 "Q. DID YOU -- IN CONSIDERING WHETHER THE
24 EXAMINER IS A FAILING COMPANY, DID YOU ENDEAVOR
25 TO LOOK AT HOW THE EXAMINER WOULD DO OUTSIDE OF
1305
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1 OR IN THE ABSENCE OF THE JOINT OPERATING
2 AGREEMENT?
3 "A. NO. IT SEEMED TO ME --
4 "MR. SHULMAN: IS THERE AN ANSWER? IS THAT
5 ANSWER NO?
6 "A. (WITNESS NODS HEAD)."
7 YOU WERE HERE WHEN DR. COMANOR GAVE THAT TESTIMONY;
8 ISN'T THAT RIGHT?
9 A. YES.
10 Q. AND WHEN HE GAVE IT, YOU KNEW THAT IT WASN'T TRUE; ISN'T
11 THAT RIGHT?
12 A. NO.
13 Q. WELL, YOU HAD HAD A MEETING WITH HIM ON APRIL 6TH WHERE
14 THE TWO OF YOU DISCUSSED WHETHER OR NOT THE EXAMINER WAS A
15 FAILING COMPANY; ISN'T THAT RIGHT?
16 A. NO. WE DISCUSSED THE -- THE ECONOMICS OF THE BUSINESS,
17 AND I WAS TRYING TO PROVIDE MR. COMANOR WITH DIFFERENT WAYS OF
18 LOOKING AT THE ALLOCATION OF REVENUE.
19 MR. LINDSTROM: YOUR HONOR, I WOULD LIKE TO READ
20 FROM THE WITNESS' DEPOSITION TRANSCRIPT, DATED APRIL 17TH, PAGE
21 324, LINES 14 TO 22.
22 THE COURT: 324?
23 MR. LINDSTROM: YES, YOUR HONOR.
24 THE COURT: PROCEED.
25 MR. LINDSTROM: "Q. WAS THERE ANY DISCUSSION OF
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1 WHETHER THE EXISTING SAN FRANCISCO EXAMINER WAS
2 A FAILING FIRM OR COMPANY?
3 "A. YES. I THINK THERE WAS A DISCUSSION
4 THAT SUGGESTED THAT THE EXAMINER, AS IT EXISTS
5 TODAY, COSTS THE NEWSPAPER AGENCY MORE THAN IT
6 BRINGS IN IN REVENUE AND THE FACT THAT IN FACT
7 THE EXAMINER SPENDS ONLY -- IN SOME WAYS SPENDS
8 ONLY 50 CENTS OUT OF A DOLLAR FOR ALL OF THE
9 ADDITIONAL EXPENSES IT INCURS."
10 BY MR. LINDSTROM:
11 Q. WERE THOSE QUESTIONS PUT TO YOU AND DID YOU GIVE THOSE
12 ANSWERS AT YOUR DEPOSITION?
13 A. YES.
14 Q. AND YOU WERE UNDER OATH?
15 A. YES.
16 Q. AND IT WAS EXACTLY THIS DISCUSSION WITH DR. COMANOR THAT
17 PROMPTED THE CONCLUSION THAT THE CHRONICLE WAS SUBSIDIZING THE
18 EXAMINER; ISN'T THAT RIGHT?
19 DO YOU WANT TO LOOK ON THE NEXT PAGE, LINES 4 TO 9?
20 A. I WOULD CALL YOUR ATTENTION TO LINES 8 AND 9. I BELIEVE
21 THAT'S ANOTHER WAY OF STATING WHAT I TRIED TO EXPLAIN.
22 Q. THE SUBSIDY, CORRECT?
23 A. I WOULD GO -- IT SEEMS TO ME THIS IS A QUESTION OF
24 SEMANTICS, BUT I WOULD GO WITH LINES 17 TO 22 ON PAGE 324.
25 IF YOU WANT ME TO USE THE WORD "SUBSIDY," I WILL BE
1307
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1 GLAD TO.
2 Q. THE QUESTION --
3 THE COURT: THE QUESTION IS WHETHER YOU GAVE THIS
4 TESTIMONY.
5 THE WITNESS: OH, YES, I DID.
6 THE COURT: ALL RIGHT.
7 BY MR. LINDSTROM:
8 Q. A QUESTION OF SEMANTICS REGARDING THE TERM "SUBSIDY,"
9 RIGHT? THAT'S WHAT YOU JUST SAID.
10 A. THAT'S WHAT I SAID.
11 Q. WERE YOU HERE IN THIS COURTROOM WHEN MR. ALIOTO QUESTIONED
12 JOHN SIAS ABOUT THE MEANING OF THE TERM "SUBSIDY"?
13 A. YES.
14 Q. AND WERE YOU HERE WHEN MR. ALIOTO SUGGESTED THAT MR. SIAS
15 HAD NO BASIS FOR THE REPRESENTATION HE MADE TO THE COURT THAT
16 THE CHRONICLE WAS SUBSIDIZING THE EXAMINER? DO YOU RECALL HIM
17 BEING ASKED THOSE QUESTIONS?
18 A. HE WAS ASKED THOSE QUESTIONS. I DON'T KNOW THAT THAT'S
19 THE SAME AS WHAT YOU JUST SAID.
20 Q. SUBSIDY. IN YOUR MIND THE CHRONICLE IS SUBSIDIZING THE
21 EXAMINER, ISN'T THAT RIGHT, ACCORDING TO THE COMMON LAY
22 INTERPRETATION OF THE TERM "SUBSIDY"?
23 A. YES. CAN I TRY IT THIS WAY? WITHIN THE -- WITHIN THE JOA
24 AND THE SAN FRANCISCO NEWSPAPER AGENCY, THE CHRONICLE
25 SUBSIDIZES THE EXAMINER.
1308
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1 Q. AND WITHOUT THE JOA THE EXAMINER IS A FAILING FIRM.
2 THAT'S WHAT YOU TOLD DR. COMANOR; ISN'T THAT RIGHT?
3 A. YES.
4 Q. THANK YOU.
5 NOW, WHEN DR. COMANOR INDICATED IN RESPONSE TO
6 MR. SHULMAN'S QUESTION THAT HE HAD NOT CONSIDERED WHETHER THE
7 EXAMINER WAS A FAILING COMPANY, YOU KNOW THAT TO BE NOT TRUE;
8 ISN'T THAT RIGHT?
9 YOU TALKED WITH HIM ABOUT IT, DID YOU NOT, SIR?
10 A. YES.
11 Q. AND THEN THE NEXT PORTION OF THE QUESTION:
12 "DID YOU" -- REFERRING TO DR. COMANOR --
13 "ENDEAVOR TO LOOK AT HOW THE EXAMINER WOULD DO
14 OUTSIDE OF OR IN ABSENCE OF THE JOINT OPERATING
15 AGREEMENT?
16 THE ANSWER WAS, "NO."
17 AND YET YOU KNOW HE DID THAT VERY ANALYSIS, DON'T
18 YOU?
19 A. NO, I DON'T KNOW THAT AND I DON'T THINK HE DID THAT
20 ANALYSIS.
21 Q. HE SENT IT TO YOU BY FAX, DID HE NOT?
22 A. HE SENT ME A FAX THAT SAID, "LOOK AT THIS." THIS WAS A FAX
23 THAT BASICALLY ALLOCATED REVENUE IN THAT SAME METHOD I HAD
24 SUGGESTED EARLIER BASED UPON CIRCULATION.
25 Q. WELL, WAS IT A FAX THAT INCLUDED AN ENDEAVOR TO LOOK AT
1309
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1 HOW THE EXAMINER WOULD DO OUTSIDE OF OR IN THE ABSENCE OF THE
2 JOINT OPERATING AGREEMENT?
3 A. NO.
4 Q. ALL RIGHT. LET'S TAKE A LOOK AT IT, IN YOUR NOTEBOOK
5 C345.
6 ON THE SCREEN HERE THE FIRST PAGE IS A FAX COVER
7 SHEET, RIGHT?
8 A. THAT'S CORRECT.
9 Q. AND THIS WAS ADDRESSED TO MICHAEL WEAVER, RIGHT?
10 A. YES.
11 Q. AT THE ALIOTO LAW FIRM, CORRECT?
12 A. YES.
13 Q. AND THEN SOMEONE HAS WRITTEN IN HANDWRITING, "MIKE, I WILL
14 BE INTERESTED IN YOUR COMMENTS. BILL."
15 DO YOU SEE THAT?
16 A. YES.
17 Q. NOW, LET ME ASK YOU FIRST, THIS WAS NOT PRODUCED BY YOU AS
18 PART OF YOUR PRODUCTION OF DOCUMENTS TO OPPOSING COUNSEL IN
19 THIS LAWSUIT PRECEDING YOUR DEPOSITION; ISN'T THAT RIGHT?
20 A. THAT'S CORRECT.
21 Q. AND EACH OF THE EXPERTS WAS ASKED, WERE THEY NOT, TO TURN
22 OVER THE DOCUMENTS WHICH THEY HAD GENERATED IN CONJUNCTION WITH
23 THIS ASSIGNMENT TO THE OTHER SIDE? AT LEAST YOU WERE ASKED TO
24 DO THAT; ISN'T THAT RIGHT?
25 A. YES.
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1 Q. NOW, LET ME SHOW YOU BEFORE WE MOVE ON A COPY OF EXHIBIT
2 C347 IN EVIDENCE.
3 MAY I APPROACH, YOUR HONOR?
4 THE COURT: YES.
5 MR. LINDSTROM: AND I HAVE A COPY OF THIS FOR YOUR
6 HONOR. I DO NOT HAVE -- IT'S NOT IN THE NOTEBOOK AND SO I WILL
7 TENDER IT TO YOUR CLERK, C347 IN EVIDENCE.
8 THE COURT: VERY WELL. THANK YOU.
9 BY MR. LINDSTROM:
10 Q. NOW, I WILL REPRESENT TO YOU, SIR, THAT THIS IS WHAT
11 DR. COMANOR SENT TO MY PARTNER, TOM ROSCH, SEATED OVER HERE AT
12 THE COUNSEL TABLE, J. THOMAS ROSCH, ESQUIRE:
13 "DAN SHULMAN ASKED THAT I SEND YOU THE
14 ATTACHED DOCUMENTS. BILL COMANOR."
15 AND ATTACHED IS A COLLECTION OF MATERIALS THAT
16 DR. COMANOR SENT IN ANTICIPATION OF HIS DEPOSITION TESTIMONY.
17 WOULD YOU LOOK THROUGH THIS EXHIBIT, SIR, AND TELL
18 THE COURT WHETHER YOU CAN FIND THE FAX THAT DR. COMANOR SENT TO
19 YOU?
20 A. I DON'T SEE IT IN THIS STACK OF PAPERS.
21 Q. IT'S NOT THERE, IS IT?
22 A. THAT'S CORRECT.
23 Q. NOW, LET'S GO BACK TO WHAT HE SENT TO YOU BUT DIDN'T SEND
24 TO MR. ROSCH. 4/14, JUST NINE DAYS BEFORE THE FAX TO
25 MR. ROSCH; ISN'T THAT RIGHT?
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1 A. YES.
2 Q. HE SENT YOU THIS DOCUMENT AND HE WAS INTERESTED IN YOUR
3 COMMENTS.
4 NOW, MY FIRST QUESTION IS: DID YOU KNOW THIS WAS
5 COMING?
6 A. NO, NOT UNTIL HE CALLED ME AND TOLD ME HE WAS GOING TO
7 SEND IT TO ME.
8 Q. WHAT DID HE TELL YOU HE WAS SENDING YOU? DO YOU REMEMBER?
9 A. NOT SPECIFICALLY.
10 Q. WELL, LET'S LOOK AND SEE WHAT HE SENT.
11 ON PAGE 2 OF THE EXHIBIT, "1998 INCOME STATEMENTS
12 EXAMINER," RIGHT-HAND COLUMN, "WITHOUT JOA."
13 YOU UNDERSTOOD THAT TO MEAN WHEN YOU RECEIVED THIS
14 FAX, DID YOU NOT, SIR, THAT THIS WAS DR. COMANOR'S ASSESSMENT
15 OF THE INCOME AND EXPENSES OF THE EXAMINER WITHOUT THE JOA?
16 A. YES.
17 Q. ALL RIGHT. LET ME ASK YOU, THEN, ONE MORE TIME, WHEN
18 DR. COMANOR ANSWERED "NO" TO THIS QUESTION, DID YOU ENDEAVOR TO
19 LOOK AT HOW THE EXAMINER WOULD DO OUTSIDE OF OR IN THE ANSWER
20 OF THE JOINT -- IN THE ABSENCE OF THE JOINT OPERATING AGREEMENT
21 HE ANSWERED THAT QUESTION NO. THAT WAS NOT TRUE, ACCORDING TO
22 YOUR OWN KNOWLEDGE. CORRECT?
23 MR. SHULMAN: I OBJECT, YOUR HONOR. THAT'S
24 ARGUMENTATIVE AND IT'S CONTRARY TO WHAT THE EVIDENCE IS.
25 THE COURT: OBJECTION OVERRULED.
1312
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1 THE WITNESS: RESTATE IT.
2 BY MR. LINDSTROM:
3 Q. ALL RIGHT. YOU KNEW WHEN YOU GOT THIS DOCUMENT, SIR,
4 THAT, IN FACT, EXACTLY WHAT IT WAS WAS AN ENDEAVOR BY
5 DR. COMANOR TO LOOK AT HOW THE EXAMINER WOULD DO OUTSIDE OF OR
6 IN THE ABSENCE OF THE JOINT OPERATING AGREEMENT; ISN'T THAT
7 TRUE?
8 A. YES.
9 Q. AND HE PROJECTED HERE A NET OPERATING LOSS OF MINUS THREE,
10 RIGHT?
11 A. YES.
12 Q. AND AFTER TAKING DEPRECIATION, A LOSS OF MINUS $9 MILLION,
13 RIGHT?
14 A. YES.
15 Q. OKAY. AND THAT WAS PREDICATED ON HIS ASSUMPTION OF
16 ALLOCATING 19 PERCENT OF THE COSTS AND REVENUES OF THE AGENCY
17 TO THE EXAMINER, RIGHT?
18 A. YES.
19 Q. AND YOU TOLD HIM THAT WASN'T A GOOD ASSUMPTION, CORRECT?
20 A. YES.
21 Q. AND, IN FACT, TO MAKE THAT ALLOCATION HAS THE EFFECT OF
22 OVERSTATING THE EXAMINER'S CONTRIBUTION TO REVENUE, RIGHT?
23 A. IN MY OPINION, YES.
24 Q. AND, INDEED, DR. COMANOR HIMSELF INDICATES IN THE FOOTNOTE
25 THAT IT ALSO HAS THE EFFECT OF UNDERSTATING THE EXAMINER'S
1313
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1 PORTION OF THE COSTS. RIGHT?
2 A. I DON'T SEE THAT IN THE FOOTNOTE.
3 Q. WELL, IF YOU LOOK AT THE FOOTNOTE -- IT'S ON THE SCREEN.
4 AND AT THE VERY BOTTOM DO YOU SEE THERE HE HAS GOT A DOUBLE
5 ASTERISK AND THEN HE SAYS, "ASSUMES REVENUES AND EXPENSES ARE
6 ALLOCATED ACCORDING TO CIRCULATION PROPORTIONS."
7 DO YOU SEE THAT?
8 A. YES.
9 Q. AND THEN IN THE NEXT SENTENCE HE SAYS, "PROBABLY
10 UNDERSTATES EXPENSES." RIGHT?
11 A. OH, YES, I SEE AT THE VERY END, YES.
12 Q. RIGHT. AND THIS DOUBLE ASTERISK REFERS TO THE CALCULATION
13 OF THE 19 PERCENT THAT HE HAS ATTRIBUTED TO THE CHRONICLE -- OR
14 TO THE EXAMINER, RIGHT?
15 A. YES.
16 Q. OKAY. NOW -- AND YOU AGREE WITH HIS SUGGESTION HERE THAT
17 TO -- TO MAKE THAT ALLOCATION PROBABLY UNDERSTATES THE
18 EXAMINER'S EXPENSES, RIGHT?
19 A. YES.
20 Q. OKAY. SO IF THE REVENUES ARE OVERSTATED AND THE EXPENSES
21 ARE UNDERSTATED, THEN THE 9 MILLION IS GOING TO HAVE TO GO UP
22 UNDER A PROPER ANALYSIS, RIGHT?
23 A. IT BECOMES A BIGGER NEGATIVE NUMBER?
24 Q. YES. THANK YOU.
25 A. YES.
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1 Q. DID YOU EXPRESS THAT SENTIMENT TO DR. COMANOR?
2 A. YES.
3 Q. AND YOU NEVER SAW THIS DOCUMENT AGAIN, DID YOU
4 (INDICATING), UNTIL YOUR DEPOSITION?
5 A. I THINK THAT'S TRUE, YES.
6 Q. NOW, LET ME TAKE YOU TO PLAINTIFF'S EXHIBIT 51. THIS IS A
7 DECLARATION OF MR. ASHER.
8 YOU WERE HERE WHEN HE WAS EXAMINED BY THE
9 PLAINTIFFS, CORRECT?
10 A. YES.
11 Q. LET ME DIRECT YOUR ATTENTION TO PARAGRAPH 3 AND IN
12 PARTICULAR THIS SENTENCE:
13 "THE EXAMINER, CURRENTLY WOULD NOT BE
14 PROFITABLE ON A STAND-ALONE BASIS OUTSIDE THE
15 JOA."
16 DO YOU SEE THAT STATEMENT?
17 A. YES, I DO.
18 Q. YOU AGREE WITH THAT STATEMENT BY MR. ASHER, DO YOU NOT?
19 A. I DO.
20 Q. AND, IN FACT, EVERY ONE OF THE REILLY EXPERTS AGREES WITH
21 THAT STATEMENT; ISN'T THAT TRUE?
22 A. THAT'S TRUE.
23 Q. AND AT THE MARCH 25TH MEETING WE WERE TOLD BY MR. OSBORN
24 THERE WAS AN EMPHATIC CONSENSUS BY THOSE EXPERTS THAT TODAY'S
25 EXAMINER WAS LOSING MONEY, RIGHT?
1315
WEAVER - CROSS / LINDSTROM
1 A. WE WERE TOLD BY MR. OSBORN THAT, APPARENTLY.
2 Q. WELL, AND, IN FACT, NO ONE DISAGREED WITH THE NUMBER THAT
3 HE THREW OUT OF $20 MILLION LOSSES OR GREATER; ISN'T THAT
4 RIGHT?
5 A. YES.
6 Q. AND, IN FACT, AS WE HAVE SEEN FROM THIS ANALYSIS,
7 VIRTUALLY EVERY SINGLE EXPERT IN THEIR OWN MIND HAS A LARGER
8 NUMBER.
9 A. THAT'S CORRECT.
10 Q. OKAY. NOW, IN THE NEXT SENTENCE, YOU WERE HERE, WEREN'T
11 YOU, WHEN MR. ALIOTO QUESTIONED MR. ASHER ON THURSDAY AFTERNOON
12 AND THEN AGAIN ON FRIDAY REGARDING WHAT BASIS THAT GENTLEMAN
13 HAD FOR MAKING THIS STATEMENT, "THE COSTS TO PUBLISH THE
14 EXAMINER CURRENTLY EXCEED THE REVENUES IT CONTRIBUTES TO THE
15 JOA BY MILLIONS OF DOLLARS ANNUALLY."
16 DO YOU SEE THAT?
17 A. YES.
18 Q. YOU AGREE WITH THAT STATEMENT BY MR. ASHER, DO YOU NOT?
19 A. I DO.
20 Q. AND SO DO ALL THE REILLY EXPERTS, ACCORDING TO YOUR
21 KNOWLEDGE; ISN'T THAT TRUE?
22 A. YES.
23 Q. AND IN THE NEXT SENTENCE:
24 "AS A RESULT, CURRENTLY THE OPERATIONS OF
25 THE CHRONICLE SUBSIDIZE THE LOSSES WITHIN THE
1316
WEAVER - CROSS / LINDSTROM
1 JOA FROM THE OPERATION OF THE EXAMINER."
2 DO YOU SEE THAT SENTENCE?
3 A. YES.
4 Q. AND, AGAIN, YOU AGREE WITH THE STATEMENT OF MR. ASHER, DO
5 YOU NOT?
6 A. YES.
7 Q. NOW, BEFORE MR. ALIOTO QUESTIONED MR. ASHER, HAD YOU MADE
8 KNOWN TO HIM WHAT YOUR VIEWS WERE REGARDING THE LOSSES
9 SUSTAINED BY TODAY'S EXAMINER?
10 THE COURT: MADE KNOWN TO ALIOTO?
11 MR. LINDSTROM: I'M SORRY?
12 THE COURT: MADE KNOWN TO ALIOTO?
13 MR. LINDSTROM: YES, TO PLAINTIFF'S COUNSEL.
14 THE WITNESS: I THINK IT'S FAIR TO INFER THAT HE HAS
15 READ THE DOCUMENTS AND UNDERSTANDS THAT. EVEN IN MY OWN
16 DECLARATION YOU COULD CERTAINLY DRAW THAT CONCLUSION.
17 BY MR. LINDSTROM:
18 Q. ALL RIGHT. MR. ALIOTO WAS AT THE MARCH 25TH MEETING, WAS
19 HE NOT?
20 A. THAT'S CORRECT.
21 Q. HE HEARD THE EMPHATIC CONSENSUS OF THE REILLY EXPERTS;
22 ISN'T THAT TRUE?
23 A. YOU ARE USING MR. OSBORN'S WORDS. HE HEARD THE CONSENSUS
24 OF THE EXPERTS.
25 Q. AND HE WAS AT THE MEETING BETWEEN YOU AND DR. COMANOR;
1317
WEAVER - CROSS / LINDSTROM
1 ISN'T THAT RIGHT?
2 A. YES.
3 Q. WHERE THE TWO OF YOU DISCUSSED WHETHER OR NOT THE EXAMINER
4 WAS A FAILING FIRM?
5 A. HE WAS AT THE MEETING WHERE THE TWO OF US DISCUSSED THE
6 ECONOMICS OF THE EXAMINER.
7 Q. AND WHERE YOU EXPRESSED THE VIEW THAT THE REVENUES EXCEED
8 THE COSTS OR VICE VERSA?
9 A. THE COSTS EXCEED THE REVENUES, YES.
10 Q. NOW, LET ME CHANGE SUBJECTS HERE.
11 THE COURT: WHILE YOU ARE DOING THAT, HOW MUCH
12 LONGER DO YOU HAVE OF THIS WITNESS?
13 MR. LINDSTROM: I WOULD SAY 15 MINUTES, MAYBE, YOUR
14 HONOR.
15 THE COURT: IS THIS A CONVENIENT TIME TO TAKE A
16 BREAK?
17 MR. LINDSTROM: WHY DON'T WE DO THAT NOW AND I WILL
18 COLLECT MY NOTES AND SEE IF WE CAN'T EXPEDITE THINGS.
19 THE COURT: WE WILL TAKE UNTIL 25 AFTER.
20 (RECESS TAKEN AT 10:10 A.M.)
21 (PROCEEDINGS RESUMED AT 10:29 A.M.)
22 THE CLERK: PLEASE REMAIN SEATED. COME TO ORDER.
23 THIS COURT IS NOW IN SESSION.
24 THE COURT: VERY WELL. MR. WEAVER, WOULD YOU RESUME
25 THE STAND, SIR?
1318
WEAVER - CROSS / LINDSTROM
1 BY MR. LINDSTROM:
2 Q. MR. WEAVER, WE HAVE BEEN TALKING ABOUT TODAY'S EXAMINER,
3 AND I WANT TO SWITCH SUBJECTS AND MOVE ON TO THE PAPER THAT'S
4 ENVISIONED HERE IN YOUR DECLARATION THAT MR. SHULMAN TALKED TO
5 YOU ABOUT.
6 PARAGRAPH 4 OF YOUR DECLARATION SPEAKS IN TERMS OF A
7 VIABLE PAPER WHICH WOULD BE COMPETITIVE WITH THE CHRONICLE.
8 AND I THINK I UNDERSTAND FROM YOUR DIRECT TESTIMONY
9 THAT IN YOUR MIND THAT NEEDS TO BE A SUBSTITUTE FOR THE
10 CHRONICLE, CORRECT?
11 A. YES.
12 Q. AND I ASSUME THAT THE PAPER YOU ENVISION WOULD HAVE ALL OF
13 THE CHARACTERISTICS THAT MR. INGRAM TOLD US ABOUT YESTERDAY; IS
14 THAT RIGHT?
15 A. IN MAKING THIS DECLARATION AND IN MAKING THESE
16 CALCULATIONS, THAT'S CORRECT.
17 Q. OKAY. AND WITHOUT BURDENING THE RECORD WITH GOING THROUGH
18 THAT, IT WOULD NEED TO BE OF A SUFFICIENT LENGTH AND CONTENT
19 AND SO FORTH TO BE COMPETITIVE WITH THE EXAMINER, RIGHT?
20 A. WITH THE CHRONICLE, RIGHT.
21 Q. I'M SORRY.
22 AND IT WOULD HAVE TO BE LIKE TODAY'S EXAMINER; ISN'T
23 THAT RIGHT?
24 A. YES.
25 Q. IT WOULD HAVE TO BE A DAILY METROPOLITAN PAPER, RIGHT?
1319
WEAVER - CROSS / LINDSTROM
1 A. YES.
2 Q. NOW, IN WHAT MARKETS DID YOU ENVISION THIS PAPER COMPETING
3 WHEN YOU EXECUTED YOUR DECLARATION?
4 A. THE PAPER THAT IS SPOKEN ABOUT IN THE DECLARATION IS TO
5 PRODUCE A PAPER SIMILAR IN SUBSTANCE AND IN DISTRIBUTION TO
6 TODAY'S EXAMINER.
7 Q. SO IT WOULD BE IN ALL THE SAME MARKETS WHERE TODAY'S
8 EXAMINER COMPETES, RIGHT?
9 A. THERE ARE DIFFERENT PARTS OF THE DECLARATION. THE ONE
10 THAT RELATES TO $90 MILLION, YES. THE PART THAT RELATES TO THE
11 LOSSES, MY -- I WOULD ENVISION A SMALLER AND WAS ENVISIONING A
12 SMALLER PAPER IN A SMALLER MARKET.
13 Q. OKAY.
14 A. A DISTRIBUTION -- "A SMALLER PAPER," MEANING LESS
15 DISTRIBUTION IN A MORE CONDENSED MARKET.
16 Q. BUT THE MARKET YOU ENVISIONED DIDN'T STOP WITH THE
17 BOUNDARIES OF THE CITY AND COUNTY OF SAN FRANCISCO, DID IT?
18 A. THAT'S CORRECT.
19 Q. THE PAPER THAT YOU ARE TALKING ABOUT HERE, THE ONE THAT
20 YOU MODELED FOR MR. REILLY, WOULD COMPETE IN PARTS OF MARIN
21 COUNTY, RIGHT?
22 A. WE DISCUSSED COMPETING IN PARTS OF MARIN COUNTY, YES.
23 Q. AND THE EAST BAY?
24 A. YES.
25 Q. AND IN -- DOWN THE PENINSULA, CORRECT?
1320
WEAVER - CROSS / LINDSTROM
1 A. YES.
2 Q. ALL RIGHT. WHAT IS THE SAN FRANCISCO MARKET IN YOUR
3 JUDGMENT?
4 A. THE SAN FRANCISCO MARKET FOR THIS -- THE NEWSPAPER THAT I
5 MODELED? OR -- I AM NOT SURE OF THE QUESTION. WHAT'S THE SAN
6 FRANCISCO MARKET?
7 Q. WELL, LET'S START WITH THE PAPER THAT YOU MODELED FOR
8 MR. REILLY.
9 A. THE SAN FRANCISCO MARKET WOULD BE CENTERED AROUND THE CITY
10 AND COUNTY OF SAN FRANCISCO AND INCLUDE COMMUTERS IN AND OUT OF
11 THE CITY AND OTHERS WHO ARE INTERESTED IN AND TIED TO THE CITY
12 BECAUSE THEY WORK HERE IN SAN FRANCISCO OR HAVE OTHER CLOSE
13 TIES TO THE CITY.
14 Q. SO THAT WOULD INCLUDE PEOPLE WHO RESIDE OUTSIDE THE CITY
15 AND COUNTY OF SAN FRANCISCO, CORRECT?
16 A. YES, COMMUTERS GENERALLY WILL INCLUDE THAT.
17 Q. AND THEY'RE IN THE SAN FRANCISCO MARKET IN YOUR JUDGMENT;
18 ISN'T THAT RIGHT?
19 A. THEY'RE IN THE MARKET FOR A SAN FRANCISCO NEWSPAPER.
20 Q. THEY'RE IN WHAT YOU TERMED A "SAN FRANCISCO METROPOLITAN
21 MARKET"; ISN'T THAT RIGHT?
22 A. NO, I DON'T BELIEVE I SAID THAT. I SAID YOU WOULD HAVE A
23 SAN FRANCISCO METROPOLITAN -- I THINK I SAID THERE WOULD BE A
24 METROPOLITAN NEWSPAPER.
25 (CONTINUED ON NEXT PAGE - NOTHING OMITTED.)
1321
WEAVER - CROSS / LINDSTROM
1 Q. LET ME SHOW YOU YOUR PREPARATION NOTES, EXHIBIT C-311 IN
2 EVIDENCE. AND BEFORE I DO THAT, LET ME ASK YOU A FEW QUESTIONS
3 ABOUT THIS.
4 YOU TOOK THESE NOTES ON MARCH 24TH; RIGHT?
5 A. THAT'S CORRECT.
6 Q. SOME NINE PAGES OF NOTES; RIGHT?
7 A. YES.
8 Q. AND YOU DID SO IN ANTICIPATION OF THE MEETING OF REILLY
9 EXPERTS TO OCCUR THE FOLLOWING DAY; RIGHT?
10 A. THAT'S CORRECT.
11 Q. AND YOU HAD BEEN ON THIS ASSIGNMENT SINCE THE VERY EARLY
12 PART OF FEBRUARY; RIGHT?
13 A. THAT'S CORRECT.
14 Q. AND YOU KNEW THAT A NUMBER OF THE PEOPLE WHO WERE COMING
15 TOGETHER ON SATURDAY WERE NEW TO THE TEAM; RIGHT?
16 A. THAT'S CORRECT.
17 Q. AND ONE OF THE THINGS YOU DID WAS PREPARE INFORMATION THAT
18 YOU WANTED TO SHARE WITH THE ASSEMBLED EXPERTS; RIGHT?
19 A. THAT'S CORRECT.
20 Q. AND YOU ALSO PULLED TOGETHER YOUR THOUGHTS ON A WHOLE HOST
21 OF TOPICS IN ANTICIPATION OF WHAT THE DISCUSSION MIGHT INVOLVE
22 THE NEXT DAY; RIGHT?
23 A. YES.
24 Q. AND THERE CONTAINED -- THOSE THOUGHTS OF YOURS ARE
25 CONTAINED IN C-311, RIGHT, YOUR HANDWRITTEN NOTES?
1322
WEAVER - CROSS / LINDSTROM
1 A. YES.
2 Q. OKAY. NOW LET ME ASK YOU FIRST, DIRECTING YOUR ATTENTION
3 TO BATES PAGE NUMBER 449, YOU EXPRESSED THE VIEW THAT:
4 "A FANG-PRODUCED EXAMINER WILL NOT BE
5 'COMPETITIVE...'"
6 DO YOU SEE THAT?
7 A. (WITNESS EXAMINES DOCUMENT.) I SEE WHERE I HAVE WRITTEN
8 DOWN:
9 "FANG-PRODUCED EXAMINER WILL NOT BE," QUOTE,
10 "'COMPETITIVE...'
11 Q. AND BENEATH THAT YOU HAVE A NOTATION TO YOURSELF:
12 "... IN A MARKETPLACE FOR A PAID DAILY
13 NEWSPAPER IN SAN FRANCISCO AND THE THREE-COUNTY
14 SAN FRANCISCO METROPOLITAN AREA."
15 DO YOU SEE THAT?
16 A. YES.
17 Q. WHAT IS THE THREE-COUNTY SAN FRANCISCO METROPOLITAN AREA?
18 A. I BELIEVE, WHEN I WAS LOOKING AT THAT, THAT THE
19 THREE-COUNTY AREA INCLUDES SAN MATEO AND MARIN COUNTIES AS WELL
20 AS SAN FRANCISCO COUNTY.
21 Q. OKAY. NOW, WHAT WAS THE RELEVANCE TO YOUR THOUGHT PROCESS
22 OF INCLUDING THIS REFERENCE TO THE THREE-COUNTY SAN FRANCISCO
23 METROPOLITAN AREA?
24 A. I WAS LOOKING AT OTHER DEFINITIONS THAT HAVE BEEN USED,
25 PARTICULARLY IN THE VERONIS SUHLER OFFERING, THAT SUGGESTED
1323
WEAVER - CROSS / LINDSTROM
1 THERE WAS AN EIGHT- OR NINE-COUNTY AREA IN WHICH THERE WAS
2 COMPETITION.
3 Q. AND YOU CALL THAT THE BAY AREA MARKETPLACE; CORRECT?
4 A. I PROBABLY WOULD. I DON'T KNOW IF I HAD IN HERE OR NOT.
5 Q. NOW, THE SAN FRANCISCO METROPOLITAN MARKETPLACE, AS YOU
6 ENVISION IT, INCLUDES SAN FRANCISCO AND THESE OUTLYING AREAS;
7 ISN'T THAT RIGHT?
8 A. NO. I BELIEVE THIS IS A DEFINITION OF THE SAN FRANCISCO
9 METROPOLITAN AREA THAT'S COMMONLY ACCEPTED IN MARKETING
10 CIRCLES. I THINK THAT'S WHERE I GOT IT. I THINK I HAD SEEN A
11 REFERENCE OR WAS LOOKING AT A REFERENCE TO THE SAN FRANCISCO
12 METROPOLITAN AREA DEFINED FOR MARKETING PURPOSES AS SAN
13 FRANCISCO COUNTY, SAN MATEO COUNTY AND MARIN COUNTY.
14 Q. AND THAT WAS THE SAME AS THE MARKET IN WHICH THE REILLY
15 PAPER WAS GOING TO OPERATE PLUS PARTS OF THE EAST BAY WEST OF
16 THE BERKELEY HILLS; RIGHT?
17 A. THE REILLY PAPER WAS GOING TO OPERATE IN CERTAIN PARTS OF
18 SAN MATEO AND MARIN COUNTY AND IN SELECTED AREAS IN BERKELEY,
19 OAKLAND AND PIEDMONT.
20 Q. AND THOSE ARE ALL AREAS IN WHICH TODAY'S EXAMINER
21 COMPETES; RIGHT?
22 A. YES.
23 Q. AND THEY'RE ALL AREAS IN WHICH TODAY'S CHRONICLE COMPETES;
24 ISN'T THAT RIGHT?
25 A. YES.
1324
WEAVER - CROSS / LINDSTROM
1 Q. AND THERE ARE OTHER COMPETITORS IN THOSE MARKETS; ISN'T
2 THAT SO?
3 A. YES.
4 Q. NOW, YOU VIEW THIS MARKETPLACE AS VERY COMPETITIVE; ISN'T
5 THAT FAIR TO SAY?
6 A. YES.
7 Q. AND IF WE GO BACK TO THE PRECEDING PAGE, THE NUMBER ONE
8 FIRST THOUGHT THAT YOU HAD TO YOURSELF:
9 "... GIVEN ALL THE COMPETITION THAT CURRENTLY
10 EXISTS IN SAN FRANCISCO AND THE BAY AREA."
11 WHAT DID YOU MEAN BY THAT STATEMENT, SIR?
12 A. MY THOUGHTS HERE WERE WHAT COULD IT POSSIBLY MEAN IN THE
13 JOA TO MAINTAIN COMPETITION GIVEN THAT ALL -- THAT THERE IS A
14 LOT OF COMPETITION THAT CURRENTLY EXISTS AND THAT DID EXIST IN
15 1965.
16 Q. AND IN YOUR MIND THE CURRENT COMPETITION INCLUDES
17 WEEKLIES; RIGHT?
18 A. YES.
19 Q. OTHER DAILIES?
20 A. YES.
21 Q. AND MR. FANG'S GROUP OF THRICE WEEKLIES; RIGHT?
22 A. YES.
23 Q. THAT WOULD INCLUDE, AMONG OTHERS, THE INDEPENDENT IS;
24 CORRECT?
25 A. THAT'S WHAT I WAS REFERRING TO IN FANG'S GROUP OF THRICE
1325
WEAVER - CROSS / LINDSTROM
1 WEEKLIES.
2 Q. NOW, FROM THE VERY BEGINNING OF YOUR WORK WITH MR. REILLY
3 ON THIS PROCESS, YOU WERE CONCERNED ABOUT POSSIBLE COMPETITIVE
4 RESPONSES FROM BAY AREA PAPERS OTHER THAN THE CHRONICLE; ISN'T
5 THAT TRUE?
6 A. YES.
7 Q. AND IN PARTICULAR YOU WERE VERY WORRIED THAT THIS SAN
8 FRANCISCO-FOCUSED PAPER YOU WERE PLANNING WOULD BE MET WITH A
9 COMPETITIVE RESPONSE FROM THE SAN JOSE MERCURY NEWS; ISN'T THAT
10 RIGHT?
11 A. NO.
12 Q. YOU DID VIEW THE SAN JOSE MERCURY NEWS AS A FORMIDABLE
13 COMPETITOR IN THE SAN FRANCISCO MARKETPLACE; IS THAT NOT TRUE?
14 A. IN THE MARKETPLACE THAT WE DEFINED NOW FOR THE REILLEY
15 PAPER?
16 Q. YES.
17 A. NOT FOR READERS.
18 Q. FOR ADVERTISING?
19 A. I BELIEVE SO.
20 Q. LET'S LOOK AT ANOTHER SET OF YOUR NOTES. THIS IS C-302 IN
21 EVIDENCE. IT'S THERE IN THE NOTEBOOK.
22 THESE ARE YOUR VERY, VERY FIRST NOTES YOU TOOK IN
23 THIS ENGAGEMENT, ISN'T THAT RIGHT, THE DAY BEFORE YOU WERE TO
24 MEET WITH MR. REILLY FOR THE FIRST TIME?
25 A. YES.
1326
WEAVER - CROSS / LINDSTROM
1 Q. AND YOU WANTED TO ORGANIZE YOUR THOUGHTS BEFORE YOU MET
2 WITH HIM; ISN'T THAT RIGHT?
3 A. YES.
4 Q. AND SO IN ITEM ONE YOU START OUT TALKING ABOUT DUE
5 DILIGENCE YOU'D WANT TO PERFORM; CORRECT?
6 A. YES.
7 Q. AND THEN WE GO OVER TO THE SECOND PAGE WE HAVE, "DUE
8 DILIGENCE 2." AND YOU SAY:
9 "COMPETITION PRINT IN SF, DAILY, WEEKLY,
10 ALTERNATIVE."
11 THOSE WERE ALL THINGS THAT -- ON WHICH YOU WANTED TO
12 CONDUCT DUE DILIGENCE; ISN'T THAT RIGHT?
13 A. I WANTED TO UNDERSTAND, YES.
14 Q. BECAUSE THE EXAMINER YOU WERE MODELING FOR REILLY WAS
15 GOING TO FACE COMPETITION FROM ALL THESE SOURCES; CORRECT?
16 A. YES.
17 Q. INCLUDING THE WEB AND BROADCAST; RIGHT?
18 A. YES.
19 Q. AND THEN UNDER "STRATEGY," "DEFINE MARKET, READERS";
20 RIGHT? THAT'S EYEBALLS AS YOU TOLD ME; CORRECT?
21 A. YES.
22 Q. ADVERTISERS; RIGHT?
23 A. YES.
24 Q. AND UNDER "GEOGRAPHIC" YOU'VE GOT "SF ONLY." DO YOU SEE
25 THAT?
1327
WEAVER - CROSS / LINDSTROM
1 A. YES.
2 Q. THAT'S DR. COMANOR'S DEFINITION, ISN'T IT, OF THE MARKET?
3 A. THAT IS HIS DEFINITION, YES.
4 Q. AND FROM THE VERY BEGINNING YOU WERE TALKING ABOUT A
5 MARKET THAT INCLUDED OTHERS; WERE YOU NOT?
6 A. I WAS LOOKING AT A BROADER MARKETPLACE THAN SF ONLY, YES.
7 Q. BECAUSE YOU VIEWED IT AS THE RELEVANT MARKETPLACE, ISN'T
8 THAT RIGHT, SIR, FOR A SAN FRANCISCO-FOCUSED PAPER?
9 A. NO.
10 Q. ALL RIGHT. LET'S TAKE A LOOK AT THE MEMO THAT YOU WROTE
11 AFTER THAT FIRST MEETING. THIS IS H-1038 IN EVIDENCE, SUMMARY
12 OF DISCUSSIONS FEBRUARY 2 TO 3.
13 THOSE ARE THE MEETINGS THAT YOU HAD WITH MR. REILLY;
14 RIGHT?
15 A. COULD YOU GIVE ME A NUMBER HERE?
16 Q. H-1038.
17 A. (WITNESS EXAMINES DOCUMENTS.) YES.
18 Q. NOW, YOU PREPARED THIS SUMMARY IN ORDER TO CAPTURE THE
19 ESSENCE OF WHAT WAS DISCUSSED IN THE TWO DAYS OF MEETINGS;
20 RIGHT?
21 A. YES.
22 Q. AND THE FIRST MEETING WAS WITH YOU, FLAHERTY AND REILLY ON
23 THE 2ND; RIGHT?
24 A. YES.
25 Q. AND THEN THE NEXT DAY YOU AND INGRAM AND REILLY MET;
1328
WEAVER - CROSS / LINDSTROM
1 RIGHT?
2 A. YES.
3 Q. OKAY. AND YOU DESCRIBE, DO YOU NOT, IN THE OVERVIEW, THE
4 MARKET THAT REILLY WAS SEEKING TO SERVE AS INCLUDING, NUMBER
5 ONE, THE PEOPLE WHO LIVE IN THE CITY AND COUNTY OF SAN
6 FRANCISCO; RIGHT?
7 A. YES.
8 Q. THAT'S DR. COMANOR'S MARKET; CORRECT?
9 A. YES.
10 Q. IN ADDITION, YOU WERE TARGETING THOSE PEOPLE WHO ARE SAN
11 FRANCISCO ORIENTED BECAUSE THEY WORK IN THE CITY OR INVOLVED
12 WITH THE THEATER AND THE ARTS; RIGHT?
13 A. YES.
14 Q. SO THOSE ARE INBOUND COMMUTERS; CORRECT?
15 A. YES.
16 Q. AND THEY'RE PEOPLE TO WHOM YOU WERE GOING TO SELL HOME
17 DELIVERY COPIES WHO MIGHT BE INTERESTED IN ENTERTAINMENT OR THE
18 ARTS OR SPORTS HERE IN THE CITY; RIGHT?
19 A. YES.
20 Q. AND THEY WERE PART OF THE READERSHIP FOR EYEBALLS AND FOR
21 ADVERTISING; RIGHT?
22 A. YES.
23 Q. OKAY. AND THEN ONE OF THE THINGS YOU WANT TO ANALYZE IS A
24 DEFINITION OF THE GEOGRAPHIC MARKET TO BE SERVED; RIGHT?
25 A. YES.
1329
WEAVER - CROSS / LINDSTROM
1 Q. A COMPETITIVE ANALYSIS OF SAN FRANCISCO AND BAY AREA PRINT
2 AND BROADCAST MEDIA?
3 A. YES.
4 Q. AND THEN DOWN HERE UNDER 9:
5 "POSSIBLE COMPETITIVE RESPONSES OF THE
6 CHRONICLE AND OTHER BAY AREA NEWSPAPERS."
7 DO YOU SEE THAT?
8 A. YES.
9 Q. WHO WERE YOU TALKING ABOUT THERE? OTHER BAY AREA
10 NEWSPAPERS BESIDES THE CHRONICLE, WHO MIGHT THAT BE?
11 A. SAN MATEO TIMES, SAN JOSE MERCURY NEWS, OAKLAND TRIBUNE,
12 CONTRA COSTA TIMES, ALL OF THOSE DAILY NEWSPAPERS THAT ARE IN
13 THAT EIGHT- OR NINE-MARKET AREA.
14 Q. COMPETITORS. AND THAT WOULD INCLUDE THE MARIN INDEPENDENT
15 JOURNAL AS WELL; RIGHT?
16 A. YES.
17 Q. AND YOU CONTINUED, AS YOU DID YOUR DUE DILIGENCE, TO HAVE
18 CONCERNS ABOUT COMPETITIVE RESPONSES FROM THESE OTHER BAY AREA
19 NEWSPAPERS; ISN'T THAT RIGHT, SIR?
20 A. YES.
21 Q. SO, FOR EXAMPLE, YOU SENT THIS E-MAIL TO MR. REILLY. THIS
22 IS EXHIBIT C-303. LET'S ZOOM IN.
23 THIS IS AN E-MAIL THAT YOU SENT TO CLINTON REILLY ON
24 OR ABOUT THE DATE THAT IT BEARS, FEBRUARY 22ND; RIGHT?
25 A. (WITNESS EXAMINES DOCUMENT.) YES.
1330
WEAVER - CROSS / LINDSTROM
1 Q. AND THIS IS SOME 20 DAYS AFTER YOUR INITIAL MEETINGS;
2 RIGHT?
3 A. YES.
4 Q. AND YOU OFFER SOME -- A FEW MORE THOUGHTS ON THE EXAMINER
5 SITUATION. THAT'S YOUR OPENING LINE; CORRECT?
6 A. YES.
7 Q. AND THEN YOU INDICATE:
8 "ALSO, WE HAVEN'T FOCUSED ON THE MARKET
9 RISKS AND THE POSSIBLE COMPETITIVE RESPONSES OF
10 THE CHRONICLE AND THE OTHER BAY AREA
11 NEWSPAPERS."
12 DO YOU SEE THAT?
13 A. YES.
14 Q. WHY WAS IT NECESSARY FOR YOU TO CALL TO MR. REILLY'S
15 ATTENTION THE NEED TO ASSESS POSSIBLE COMPETITIVE RESPONSES OF
16 THE CHRONICLE AND OTHER BAY AREA NEWSPAPERS?
17 A. I THINK IT'S IMPORTANT TO UNDERSTAND IF OTHER BAY AREA
18 NEWSPAPERS CAN RESPOND IN A WAY THAT WOULD NEGATIVELY IMPACT
19 THE PROPOSED EXAMINER.
20 Q. YOU WERE CONCERNED THAT THEY COULD IMPEDE THE POTENTIAL
21 SUCCESS OF THE REILLY EXAMINER; RIGHT?
22 A. I WAS CONCERNED THAT WE UNDERSTAND WHETHER THEY COULD HAVE
23 AN IMPACT ON A REILLY EXAMINER, YES.
24 Q. EVEN HERE IN THE CITY OF SAN FRANCISCO; RIGHT?
25 A. YES.
1331
WEAVER - CROSS / LINDSTROM
1 Q. NOW, YOUR MOTHER LIVES IN THE EAST BAY; RIGHT?
2 A. THAT'S CORRECT.
3 Q. AND WHEN YOU GET ON THE BART TO COME INTO THE CITY, YOU
4 CAN FIND THE SAN FRANCISCO PAPERS OUT THERE IN CERRITOS; RIGHT?
5 A. YES, IN EL CERRITO.
6 Q. CERRITO, THANK YOU.
7 A. EL CERRITO.
8 Q. WHEN YOU GET OFF AND WALK UP MARKET STREET, AS YOU WALK
9 DOWN MARKET STREET FROM THE BART TERMINAL OR FROM THE FERRY
10 TERMINAL, YOU CAN FIND ON THE STREETS OF SAN FRANCISCO TODAY
11 EVERY ONE OF THOSE NEWSPAPERS YOU IDENTIFIED; ISN'T THAT RIGHT?
12 A. I DON'T KNOW SPECIFICALLY; BUT, YES, I AGREE THAT I CAN
13 FIND THOSE OTHER NEWSPAPERS IN SAN FRANCISCO FOR SALE.
14 Q. CERTAINLY THE SAN JOSE MERCURY; RIGHT?
15 A. I JUST HAVEN'T SEEN THEM. I'M AGREEING THAT THOSE ARE
16 AVAILABLE IN SAN FRANCISCO FOR SALE.
17 Q. OKAY. AND AS YOU WALK UP THE STREET, YOU ALSO SEE THE LOS
18 ANGELES TIMES FOR SALE IN SAN FRANCISCO; ISN'T THAT RIGHT?
19 A. I DON'T KNOW IF THERE'S A NEWS RACK FOR THE LOS ANGELES
20 TIMES OR IF I CAN SEE THE LOS ANGELES TIMES WALKING UP THE
21 STREET, BUT I KNOW THE LOS ANGELES TIMES IS AVAILABLE FOR SALE
22 IN SAN FRANCISCO.
23 Q. ALL RIGHT. AND YOU KNOW THAT THE NEW YORK TIMES IS
24 AVAILABLE?
25 A. YES.
1332
WEAVER - CROSS / LINDSTROM
1 Q. AND YOU KNOW THAT THE WALL STREET JOURNAL IS AVAILABLE?
2 A. YES.
3 Q. AND YOU KNOW THAT U.S.A. TODAY IS AVAILABLE?
4 A. YES.
5 Q. ALL IN THE MARKET FOR SALE ON THE STREET IN THE CITY OF
6 SAN FRANCISCO; ISN'T THAT RIGHT?
7 A. YES.
8 Q. NOW, LET ME ASK YOU A QUESTION. WHEN I DROVE INTO COURT
9 THIS MORNING, I CAME UP LOMBARD STREET AND I PASSED TWO
10 BILLBOARDS, ONE FOR THE NEW YORK TIMES AND ONE FOR THE WALL
11 STREET JOURNAL.
12 MR. ALIOTO: OBJECTION.
13 THE COURT: SUSTAINED.
14 MR. LINDSTROM: IT'S HYPOTHETICAL, YOUR HONOR.
15 Q. I WANT YOU TO ASSUME THAT THOSE TWO --
16 THE COURT: MR. LINDSTROM, STRAIGHTEN OUT YOUR
17 QUESTIONS.
18 BY MR. LINDSTROM:
19 Q. TO YOUR KNOWLEDGE BOTH THE NEW YORK TIMES AND THE WALL
20 STREET JOURNAL ARE CURRENTLY SEEKING ENHANCED READERSHIP IN THE
21 CITY OF SAN FRANCISCO; ISN'T THAT RIGHT?
22 A. IT'S APPARENT TO ME THAT THE NEW YORK TIMES IS AND I WOULD
23 ASSUME THE WALL STREET JOURNAL IS.
24 Q. NOW, SIR, YOU PERSONALLY WOULDN'T AGREE, WOULD YOU, WITH
25 THE STATEMENT THAT WITHOUT THE EXAMINER, THE CHRONICLE WOULD
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1 HAVE A MONOPOLY IN THE MARKETPLACE?
2 A. NO, I WOULD NOT AGREE WITH THAT.
3 Q. AND IT'S YOUR VIEW THAT NO PAPER HAS A MONOPOLY IN THIS
4 MARKETPLACE; ISN'T THAT RIGHT?
5 A. YES, THAT'S MY VIEW.
6 Q. AND THAT WOULD EVEN BE TRUE IF THE EXAMINER WERE TO EXIT
7 THE MARKETPLACE; CORRECT?
8 A. THAT'S MY VIEW, YES.
9 Q. NOW, RETURNING TO YOUR DECLARATION, THE SUBSIDY THAT YOU
10 INDICATED WOULD BE REQUIRED OF $50 MILLION A YEAR, THAT WILL BE
11 REQUIRED NO MATTER WHO WAS TO OPERATE THE EXAMINER; ISN'T THAT
12 TRUE?
13 A. YES.
14 Q. WHETHER NEW YORK TIMES WAS TO OPERATE THE EXAMINER; RIGHT?
15 A. YES.
16 Q. OR THE FANGS?
17 A. YES.
18 Q. OR REILLY OR GANNETT OR ANY OF THESE OTHER EXISTING
19 PUBLISHERS; ISN'T THAT TRUE?
20 A. YES.
21 Q. AND IN YOUR DEFINITION YOU INDICATE YOU THINK THAT THAT
22 SUBSIDY OF $50 MILLION WOULD BE REQUIRED FOR A MINIMUM OF THREE
23 YEARS; RIGHT?
24 A. I BELIEVE IT SAYS UP TO THREE YEARS, YES.
25 Q. AND IN YOUR DEPOSITION YOU INDICATED THAT YOU THOUGHT
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1 MAYBE THAT IT WAS MORE LIKE FOUR OR FIVE YEARS; RIGHT?
2 A. YES.
3 Q. BECAUSE YOUR MODEL OF A 50 MILLION-DOLLAR A YEAR COST
4 PAPER ASSUMES THAT THAT PAPER IS ALREADY AT A COMPETITIVE
5 PARITY LEVEL WITH THE CHRONICLE; RIGHT?
6 A. CAN YOU CLARIFY THAT? I'M NOT SURE EXACTLY.
7 Q. IT'S YOUR JUDGMENT, SIR, THAT IT'S GOING TO TAKE YEARS FOR
8 THE EXAMINER, NO MATTER WHO RUNS IT, TO GET TO THE POINT WHERE
9 IT WILL BE COMPETITIVE WITH THE CHRONICLE?
10 A. THAT'S CORRECT.
11 Q. AND DURING THAT INTERIM PERIOD, IT'S GOING TO TAKE A LOT
12 MORE THAN $50 MILLION TO SUPPORT THAT EFFORT; ISN'T THAT FAIR
13 TO SAY?