Daily Court Transcripts

May 31, 2000

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                                                     VOLUME 11 

                                                     PAGES 2295 - 2473  

                               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 31, 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 

              

                                                                         2296



         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     

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        25    

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              OPENING ARGUMENT BY MR. ALIOTO                 2300     11
         6    CLOSING ARGUMENT BY MR. ROSCH                  2381     11
              CLOSING ARGUMENT BY MR. HALLING                2416     11
         7    CLOSING ARGUMENT BY MR. CONNELL                2436     11
              CLOSING ARGUMENT BY MR. BALABANIAN             2447     11
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         1    WEDNESDAY - MAY 31, 2000                            9:35 A.M. 
               
         2     

         3               THE CLERK:  CALLING CIVIL 2000-119, CLINTON REILLY 

         4    VERSUS THE HEARST CORPORATION, THE CHRONICLE PUBLISHING COMPANY 

         5    AND EXIN. 

         6               COUNSEL, YOUR APPEARANCES FOR THE RECORD, PLEASE. 

         7               MR. ALIOTO:  JOSEPH M. ALIOTO, YOUR HONOR, DANIEL 

         8    SHULMAN AND ANGELINA ALIOTO-GRACE FOR THE PLAINTIFF. 

         9               MR. HALLING:  GARY HALLING AND JERRY CONNELL, TOM 

        10    NEVIN FOR DEFENDANT THE HEARST CORPORATION. 

        11               MR. ROSCH:  GOOD MORNING, YOUR HONOR.  TOM ROSCH 

        12    TOGETHER WITH GREGORY LINDSTROM AND PETER HUSTON FOR CHRONICLE 

        13    PUBLISHING COMPANY. 

        14               MR. BALABANIAN:  GOOD MORNING, YOUR HONOR.  DAVID 

        15    BALABANIAN, CHRISTOPHER HOCKETT, FOR INTERVENOR EXIN LLC. 

        16               THE COURT:  VERY WELL.  GOOD MORNING, COUNSEL. 

        17               COUNSEL, I DON'T KNOW IF YOU HAD ANY DISCUSSIONS 

        18    AMONGST YOURSELVES WITH RESPECT TO HOW YOU WISH TO PROCEED.  

        19    HAVE YOU? 

        20               MR. ALIOTO:  NO, YOUR HONOR. 

        21               THE COURT:  ALL RIGHT.  WELL, THEN, WHY DON'T WE 

        22    JUST PROCEED IN THE USUAL FASHION.  WE'LL LET THE PLAINTIFF 

        23    LEAD OFF FIRST.  I'VE GOT SOME QUESTIONS THAT I'D LIKE TO HAVE 

        24    ANSWERS TO, BUT I THINK PROBABLY THOSE ARE BEST ADDRESSED IN 

        25    THE COURSE OF ARGUMENT.  I KNOW THAT YOU EACH HAVE 

                                                                         2299
                                 OPENING ARGUMENT \ ALIOTO 


         1    PRESENTATIONS THAT YOU'D LIKE TO MAKE AND I DON'T WANT TO 

         2    INTERFERE WITH THAT. 

         3               AND I SEE WE HAVE SOME DEMONSTRATIVES IN THE 

         4    COURTROOM.  I ASSUME WE'RE GOING TO HAVE SOME OF THESE SHOWN 

         5    DURING THE COURSE OF THE ARGUMENTS.  WHOSE ARE THESE? 

         6               MR. ALIOTO:  THEY ARE THE PLAINTIFF'S, YOUR HONOR. 

         7               THE COURT:  AH HA, ALL RIGHT.  WELL, THAT'S FINE.  I 

         8    WOULDN'T WANT TO INTERFERE WITH THIS PRESENTATION, SO LET ME 

         9    ASK YOU TO LEAD OFF. 

        10               MR. ALIOTO:  THANK YOU, YOUR HONOR. 

        11                           OPENING ARGUMENT  

        12               MR. ALIOTO:  MAY IT PLEASE THE COURT. 

        13               FIRST OF ALL, I WOULD LIKE TO SAY ON BEHALF OF MY 

        14    COLLEAGUES AND MYSELF, MR. SHULMAN, MR. HILBERT, 

        15    MS. ALIOTO-GRACE AND MYSELF, THAT WE CONSIDER IT TO HAVE BEEN 

        16    AN HONOR AND A PLEASURE, A SPECIAL PRIVILEGE EVEN, TO PRESENT 

        17    THIS IMPORTANT CASE OF FIRST IMPRESSION TO YOUR HONOR, AND WE 

        18    FEEL THAT WE HAVE BEEN TREATED VERY FAIRLY AND HAVE HAD EVERY 

        19    OPPORTUNITY TO PRESENT THE EVIDENCE THAT WE THOUGHT WAS GERMANE 

        20    TO THE ISSUES. 

        21               WE BELIEVE THAT THIS PARTICULAR CASE HAS SOME VERY 

        22    STRONG SIGNIFICANCE OBVIOUSLY IN A VERY IMPORTANT AREA OF OUR 

        23    COUNTRY, VERY IMPORTANT INDUSTRY OF OUR COUNTRY, AND THAT THIS 

        24    COURT, I THINK, IS THE FIRST TO BE ABLE TO EVER LOOK AT IT IN 

        25    TERMS OF A TERMINATION OF A JOINT OPERATING AGREEMENT. 

                                                                         2300
                                 OPENING ARGUMENT \ ALIOTO 


         1               IT WAS MY PROPOSAL OR BELIEF, YOUR HONOR, THAT WHAT 

         2    I WOULD LIKE TO DO IS I WOULD LIKE TO PROCEED, IF IT IS 

         3    CONVENIENT TO THE COURT, I WOULD LIKE TO PROCEED ON THE FACTUAL 

         4    GROUNDS IN A CHRONOLOGICAL ORDER AND ATTEMPT TO DEVELOP OUR 

         5    ARGUMENTS ON THAT BASIS OR TO SKIP AROUND AS THE COURT -- 

         6    HOWEVER THE COURT PLEASES. 

         7               AS THE COURT IS AWARE, THERE ARE TWO THINGS I WANT 

         8    TO MENTION AND IT'S KIND OF UNUSUAL IN ADDRESSING JUST THE 

         9    COURT RATHER THAN THE JURY, BUT OF COURSE THE STANDARD OF PROOF 

        10    IS THE PREPONDERANCE OF THE EVIDENCE.  WE BELIEVE THAT IN 

        11    WEIGHING THE EVIDENCE, EACH OF THE ELEMENTS ARE NOT ONLY 

        12    SATISFIED BUT SATISFIED ALMOST TO AN ABSOLUTE. 

        13               WE ALSO WANT TO EMPHASIZE THAT THE COURT BEING THE 

        14    TRIER OF FACT, THAT A VERY IMPORTANT PART OF THE CASE WILL ALSO 

        15    BE THE CREDIBILITY OF THE WITNESSES; THAT THE CREDIBILITY OF 

        16    THE WITNESSES AND THE DECISION BY THE TRIER OF FACT WITH REGARD 

        17    TO THE CREDIBILITY OF THE WITNESSES IS, OF COURSE, NOT 

        18    REVIEWABLE.  IT IS THE FUNCTION OF THE TRIER OF FACT TO 

        19    DETERMINE THE CREDIBILITY OF THE WITNESS AND ONLY THE TRIER OF 

        20    FACT. 

        21               WE'D LIKE TO GET INTO THE CASE THE VERY BEGINNING, 

        22    EVEN BEFORE THE LAW BEGAN TO CHANGE, YOUR HONOR.  THAT WAS THE 

        23    JOA IN THIS VERY CASE, AND THAT IS THE -- THAT WAS MARKED AS 

        24    EXHIBIT 1 IN OUR CASE, AND IT IS THE JOA WHICH WAS DATED 

        25    OCTOBER 23RD, 1964, AND IT HAD THE EFFECTIVE DATE OF JANUARY 

                                                                         2301
                                 OPENING ARGUMENT \ ALIOTO 


         1    THE 1ST, 1965. 

         2               NOW, I THINK IT IS EXTREMELY IMPORTANT TO RECOGNIZE 

         3    IMMEDIATELY THAT THIS WAS A TOTAL VOLUNTARY AGREEMENT BETWEEN 

         4    TWO VIABLE COMPETITORS AT THE TIME, BOTH WHO HAD NEWSPAPERS IN 

         5    THE MORNING.  BUT THERE WAS AN OBVIOUS TREND IN THE INDUSTRY, 

         6    IN THE NEWSPAPER INDUSTRY ALONE, THAT BEGAN TO -- WHERE THESE 

         7    DIFFERENT AGREEMENTS BEGAN TO CROP UP, AND THE NEWSPAPERS TOOK 

         8    IT UPON THEMSELVES TO BEGIN TO ENTER INTO THESE OULD GO OUT OF BUSINESS.   

         9               BUT IT APPARENTLY WAS NOT THAT DRASTIC.  BUT 

        10    WHATEVER THE CIRCUMSTANCE, BOTH PARTIES AGREED FROM THE VERY 

        11    BEGINNING.   

        12               AND WHAT WE'RE GOING TO SHOW, I BELIEVE THAT THE 

        13    EVIDENCE HAS SHOWN IN THIS CASE, IS THAT IF THERE WERE EVER A 

        14    SITUATION IN WHICH AN INDUSTRY TOOK ADVANTAGE OF A PARTICULAR 

        15    PRIVILEGE, IT IS THIS INDUSTRY AND THAT THESE PAPERS, 

        16    ESPECIALLY AS STATED BY THE EVIDENCE HERE, ARE USING THE JOA AS 

        17    A STEPPINGSTONE TO MONOPOLY, PARTICULARLY THIS DEFENDANT, THE 

        18    HEARST CORPORATION, WHICH SEEMS TO HAVE A PENCHANT FOR DOING 

        19    THIS VERY KIND OF CONDUCT, A KIND OF REVERSE MIDAS TOUCH THAT 

        20    THEY HAVE WHERE ANY PAPER THAT THEY TOUCH TURNS INTO ASHES AND 

        21    THEY IMMEDIATELY INSTEAD OF ALLOWING THE PAPER ITSELF, OR 

        22    BECAUSE OF THEIR OWN INEPTITUDE, OR FOR WHATEVER REASON, TURN 

        23    AROUND AND USE MONEY INSTEAD OF INVESTING IN THEIR OWN PAPER, 

        24    INVESTING IN THE REMAINING PAPER, THE MAJOR PAPER. 

        25               THE COURT:  LET ME ASK YOU IN THAT CONNECTION, HOW 

                                                                         2303
                                 OPENING ARGUMENT \ ALIOTO 


         1    DOES THE MARCH 16 CONTRACT FIT INTO THIS SCENARIO? 

         2               MR. ALIOTO:  WHICH MARCH 16 CONTRACT? 

         3               THE COURT:  THAT'S THE TRANSFER OF CERTAIN EXAMINER 

         4    ASSETS AND PAYMENTS TO EXIN CORPORATION. 

         5               MR. ALIOTO:  OH.  WELL, THERE'S TWO ITEMS ABOUT 

         6    THAT.  THE FIRST ONE IS, OF COURSE, THAT AS THE COURT I THINK 

         7    IS AWARE, UNDER THEIR AGREEMENT, THE CHRONICLE AND THE HEARST 

         8    CORPORATION, THAT THE SALE OF THE EXAMINER IS -- TO THE FANGS 

         9    IS CONTINGENT UPON THE FIRST CONTRACT. 

        10               BUT THE FACT OF THE MATTER IS THAT THE SALE OF THE 

        11    EXAMINER WAS AN EFFORT, THEY SAY, POLITICAL EFFORT, AND WE 

        12    THINK THE EVIDENCE IS VERY CLEAR THAT THE EVIDENCE IS THAT THEY 

        13    WERE BASICALLY TOLD THAT THEY WOULD NOT HAVE OPPOSITION IF THEY 

        14    SOLD THE PAPER TO THE FANG COMPANY.  BUT WE BELIEVE THAT UNDER 

        15    THE ARRANGEMENT THAT THE FANG GROUP HAVE WITH THE HEARST 

        16    CORPORATION, THAT THAT IS SO CLEAR THAT IT WILL NOT BE A 

        17    COMPETITIVE NEWSPAPER, AND SO IT WAS A SHAM AND A FARCE. 

        18               AND I WOULD SAY, YOUR HONOR, WITH REGARD TO THAT, 

        19    THAT THERE HAVE BEEN AT LEAST FOUR DIFFERENT FACES OF THE 

        20    SO-CALLED HEARST CORPORATION WITH REGARD TO THAT VERY ISSUE, 

        21    AND ONE OF THEM WAS RIGHT HERE IN THIS CASE, RIGHT HERE DURING 

        22    THE TRIAL.   

        23               ACTUALLY, YOU KNOW, I HAVE A -- I DIDN'T INTEND TO 

        24    PULL IT OUT NOW, BUT I CAN PULL IT OUT NOW, YOUR HONOR.  THIS 

        25    IS -- 

                                                                         2304
                                 OPENING ARGUMENT \ ALIOTO 


         1               THE COURT:  ONE OF THE THREE FACES, IS IT? 

         2               MR. ALIOTO:  THIS IS -- WE'VE GOT NUMBER FOUR.  WE 

         3    HAVEN'T ADDED IT YET, YOUR HONOR.  IT'S CLOSE TO THE THREE 

         4    FACES OF EVE BUT IT'S NOT QUITE. 

         5                              (LAUGHTER) 

         6               MR. ALIOTO:  THE COURT WILL REMEMBER THAT UP TO 

         7    AUGUST 6, 1999, WHEN THE HEARST CORPORATION AND CHRONICLE 

         8    ENTERED INTO THEIR AGREEMENT, PRIOR TO THAT TIME -- AGAIN AND 

         9    AGAIN WE'LL POINT OUT, AND THIS IS A VERY HUGE, IN OUR 

        10    JUDGMENT, CREDIBILITY ISSUE, AGAIN AND AGAIN THEY SAID THAT 

        11    THEY WERE GOING TO STAY IN SAN FRANCISCO AFTER 2005.  THEY SAID 

        12    WHAT KIND OF PAPER THEY WERE GOING TO HAVE.  THEY SAID THAT 

        13    THEY WERE GOING TO COMPETE ON THE PRICES.  THEY SAID THAT 

        14    BEFORE AUGUST 6, 1999. 

        15               AFTER AUGUST 6, WHEN THEY MADE THEIR AGREEMENT WITH 

        16    THE CHRONICLE, THEY IMMEDIATELY SHIFT AND THEY SAY, "NO ONE CAN 

        17    REMAIN IN THE MARKET AND THAT THERE'S NO WAY THAT THIS CAN 

        18    HAPPEN."   

        19               THEY REPRESENT TO THE DEPARTMENT OF JUSTICE THAT 

        20    PERSON WOULD BE IRRATIONAL TO EVEN THINK THAT THEY COULD DO IT.  

        21    AND THEN, OF COURSE, THEY MAKE THE AGREEMENT WITH THE FANG 

        22    GROUP IN MARCH 16, 2000.  AND NOW WHAT DO THEY SAY?  THEY SAY, 

        23    "WELL, THE FANGS NOT ONLY -- THEY WILL BE COMPETITIVE."  AND 

        24    THEY MAKE THIS STATEMENT, AND AGAIN A CREDIBILITY ISSUE, THEY 

        25    MAKE THE STATEMENT TO THE DEPARTMENT OF JUSTICE. 

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                                 OPENING ARGUMENT \ ALIOTO 


         1               THE DEPARTMENT OF JUSTICE COMES IN 14 DAYS LATER, 

         2    HANDS IN THAT PRESS RELEASE THAT THE COURT REMEMBERS IN WHICH 

         3    THEY SAY FOR THE FIRST TIME IN 35 YEARS THERE'S GOING TO BE 

         4    COMPETITION FOR THE SUBSCRIBERS AND THE ADVERTISERS AND THE 

         5    PEOPLE OF SAN FRANCISCO WITH TWO COMPETING NEWSPAPERS. 

         6               THE COURT:  WELL, LET'S ASSUME I BELIEVE ALL OF THAT 

         7    AND FIND THAT YOUR RECITATION OF THE FACTS IS CORRECT AND 

         8    CONSISTENT WITH WHAT OCCURRED HERE.  HOW DOES THE SPIN-OFF OF 

         9    THE EXAMINER ASSETS CONSTITUTE A VIOLATION OF SECTION 1 OR 

        10    SECTION 2? 

        11               MR. ALIOTO:  BECAUSE, YOUR HONOR, WE HAVE STATED, AS 

        12    WE STATED IN OUR BRIEFS, THAT WE BELIEVE THAT THE HEARST 

        13    CORPORATION HAS DONE A NUMBER OF THINGS, BUT ONE OF THEM UNDER 

        14    SECTION 2 OF THE SHERMAN ACT, UNDER THE ATTEMPT-TO-MONOPOLIZE 

        15    PHASE, THIS IDEA WAS IN ORDER TO GET THE MONOPOLY, THEY FIRST 

        16    ARE SHUTTING DOWN THE JOA; AND THEN IN ORDER TO TRY TO DO THAT 

        17    WHICH THEY SAY FOR POLITICAL REASONS, THEY THEN MAKE THE 

        18    AGREEMENT WITH THE FANGS. 

        19               THE COURT:  ALL RIGHT.  LET'S ASSUME I BELIEVE THAT 

        20    THERE'S NO BUSINESS JUSTIFICATION WHATEVER FOR THAT SPIN-OFF OF 

        21    EXAMINER ASSETS TO THE FANGS, THAT IT WAS A PURE POLITICAL PLOY 

        22    ON HEARST'S PART TO CURRY FAVOR WITH CITY HALL AND WITH THE 

        23    DEPARTMENT OF JUSTICE.  ASSUME I BELIEVE ALL OF THAT.  HOW DOES 

        24    THAT AMOUNT TO A VIOLATION OF EITHER SECTION 1 OR SECTION 2? 

        25               MR. ALIOTO:  BECAUSE IT IS A COMBINATION OF THE TWO 

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                                 OPENING ARGUMENT \ ALIOTO 


         1    INDEPENDENT GROUPS FOR THE PURPOSE OF GRANTING TO THE HEARST 

         2    CORPORATION A MONOPOLY.  BOTH SIDES HAVE ADMITTED, YOUR HONOR, 

         3    INCLUDING MR. ASHER, THE COURT WILL RECALL, THAT AT THE TIME 

         4    THEY MADE THE AGREEMENT, BECAUSE THIS WOULD BE THE FOURTH FACE 

         5    OF HEARST, AT THE TIME THEY MADE THE AGREEMENT, NEITHER THE 

         6    HEARST CORPORATION NOR THE FANGS HAD ANY INTENTION TO HAVE A 

         7    COMPETING PAPER WITH THE MORNING CHRONICLE. 

         8               AND I THINK ALSO THE COURT HAS TO UNDERSTAND THAT IN 

         9    SOME RESPECT HERE THE WHOLE SHUTTING DOWN OF THE JOA IN ORDER 

        10    TO ACHIEVE A MONOPOLY, ANY ACT THAT'S TAKEN TO FURTHER THE 

        11    ESTABLISHMENT OF A MONOPOLY, EVEN IF THE ACT IN ITSELF WERE 

        12    WHOLLY INNOCENT IN ITSELF, IF IT IS ONE OF THE ACTS THAT ARE 

        13    PUT TOGETHER TO ACHIEVE THE UNLAWFUL OBJECTIVE, THEY ALSO 

        14    BECOME UNLAWFUL. 

        15               WE BELIEVE ALSO THAT THE HEARST CORPORATION -- LOOK 

        16    AT THE CONTRACT OF MARCH 16.  THE MARCH 16TH CONTRACT, TO BE 

        17    KIND, WOULD PROBABLY HAVE TO BE DESCRIBED AS A VERY SUBTLE 

        18    PERHAPS BUT NONETHELESS DOWN-AND-DIRTY BRIBE.  THE WHOLE POINT 

        19    IS THAT HERE YOU DO NOT MAKE THIS PAPERWORK, AND WE'RE GOING TO 

        20    REWARD YOU WITH SO MUCH MONEY EVERY YEAR, MORE THAN THEY HAD 

        21    EVER MADE BEFORE.   

        22               THAT MEANS THAT THEY JOIN -- 

        23               THE COURT:  GO AHEAD. 

        24               MR. ALIOTO:  I DIDN'T MEAN TO INTERRUPT, YOUR HONOR. 

        25               THAT MEANS THAT THEY JOINED IN ON THE MONOPOLY 

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                                 OPENING ARGUMENT \ ALIOTO 


         1    UNDERSTANDING THAT A MONOPOLY WOULD BE CREATED. 

         2               IF THE FANGS HAD NO INTENTION OF COMPETING AGAINST 

         3    THE CHRONICLE IN THE SENSE THAT THE OLD EXAMINER WAS AND IF THE 

         4    EXAMINER HAD THE SAME INTENTION WHEN IT MADE THAT DEAL WITH THE 

         5    FANGS, THEN WHAT ARE THEY DOING? 

         6               AND AT THE SAME TIME THEY KNOW THAT THEY'RE 

         7    REPRESENTING TO THE GOVERNMENT AND TO YOUR HONOR IN THE BRIEFS 

         8    FILED IN THIS COURT THAT THAT WHOLE DEAL IS REALLY TO BE A 

         9    COMPETING NEWSPAPER. 

        10               THE COURT:  FULLY COMPETITIVE. 

        11               MR. ALIOTO:  YES, TO THE CHRONICLE. 

        12               THE COURT:  WELL, ALL RIGHT.  LET'S ASSUME I BELIEVE 

        13    THAT THIS WAS A BRIBE OR IMPLICIT BRIBE.  IS THAT A VIOLATION 

        14    OF SECTION 2?   

        15               BECAUSE WHAT HAS BEEN CREATED OUT OF THAT IS A 

        16    DIFFERENT NEWSPAPER, AN INDEPENDENTLY AND SEPARATELY-PUBLISHED 

        17    NEWSPAPER WHICH IS GOING TO PRESUMABLY GO OUT AND COMPETE FOR 

        18    ADVERTISING AND READERS WITH THE CHRONICLE.  HOW DOES THAT 

        19    TRANSACTION CREATE A MONOPOLY OR HOW DOES IT REPRESENT AN 

        20    ATTEMPT TO CREATE A MONOPOLY? 

        21               MR. ALIOTO:  BECAUSE IT IS CHANGING A COMPETITIVE 

        22    PAPER.  THE EXAMINER AND THE CHRONICLE UNDER THE JOA ARE 

        23    COMPETING NEWSPAPERS, BOTH OF THEM MAKING MONEY. 

        24               THE COURT:  ALL RIGHT. 

        25               MR. ALIOTO:  BOTH OF THEM -- 

                                                                         2308
                                 OPENING ARGUMENT \ ALIOTO 


         1               THE COURT:  DO I HAVE TO FIND THAT THERE IS 

         2    COMPETITION NOW BETWEEN THE EXAMINER AND THE CHRONICLE TO 

         3    SUSTAIN YOUR THEORY? 

         4               MR. ALIOTO:  YOU MEAN IN THE JOA? 

         5               THE COURT:  CORRECT. 

         6               MR. ALIOTO:  NO, I DON'T THINK SO, BUT THERE IS 

         7    ANYWAY.  THERE IS COMPETITION.  I DO NOT BELIEVE SO.   

         8               I BELIEVE UNDER SECTION 7, THE POTENTIAL 

         9    COMPETITION, WHICH IS ON THIS RECORD, FLATLY BY BOTH THE 

        10    CHRONICLE AND THE EXAMINER, YOUR HONOR, AND THEY BOTH FLATLY 

        11    ANTICIPATE OR SAY THAT THEY ANTICIPATE, UNLESS YOU DISBELIEVE 

        12    THEM, THEY SAY THAT THEY INTEND TO COMPETE IN 2005, THEY SAY, 

        13    EVEN THE EXAMINER -- REMEMBERING, YOUR HONOR, THE EXAMINER -- I 

        14    WANT TO SHOW YOU ANOTHER ONE TOO -- BUT THE EXAMINER, REMEMBER, 

        15    CHARGED THAT IT WAS AN ANTITRUST VIOLATION THEY BELIEVED, THEIR 

        16    LAWYERS BELIEVED, THEY BELIEVED IT, THAT IT WAS AN ANTITRUST 

        17    VIOLATION TO IN ANY WAY HARM THE EXAMINER IN ITS PREPARATION AS 

        18    IT BEGAN TO POSITION TO BE ABLE TO COMPETE IN 2005. 

        19               I THINK THAT IT IS IMPORTANT TO UNDERSTAND -- MAY I 

        20    USE THE EASEL, YOUR HONOR? 

        21               THE COURT:  OF COURSE. 

        22               MR. ALIOTO:  YES.  LET ME SHOW THE BASIC THRUST OF 

        23    THAT, OF THE JOA, AND HOW IT CAME ABOUT. 

        24               UP TO -- THIS IS 1964.  THE TWO NEWSPAPERS, THE 

        25    CHRONICLE AND THE EXAMINER WERE COMPETING AND THEY ARE FULLY 

                                                                         2309
                                 OPENING ARGUMENT \ ALIOTO 


         1    SUBJECT TO THE ANTITRUST LAWS OF THE UNITED STATES AT THIS 

         2    TIME. 

         3               NOW, THE SUPREME COURT HAD NOT RULED IN THE CITIZENS 

         4    CASE NOR, FOR THAT MATTER, HAD THE UNITED STATES GOVERNMENT 

         5    RULED IN THE NEWSPAPER PRESERVATION ACT.  THEY JOINED -- 

         6               THE COURT:  IN FACT, THE DEPARTMENT OF JUSTICE GAVE 

         7    A GO-AHEAD TO THE PARTIES TO ENTER THE JOA; DID IT NOT? 

         8               MR. ALIOTO:  I DON'T KNOW WHETHER THEY DID OR THEY 

         9    DIDN'T, YOUR HONOR.  BUT I WILL SAY THAT SUBSEQUENTLY, IN LIGHT 

        10    OF THE NEWSPAPER PRESERVATION ACT, CERTAIN PORTIONS WERE 

        11    ALLOWED, NOT ALL PORTIONS.   

        12               BUT I WILL SHOW THAT IN 19 -- SO THEY FORMED -- AND 

        13    WE'LL MAKE THIS AS THEIR JOINT OPERATING AGREEMENT, A BOX, AND 

        14    THEY SPLIT THAT 50-50.  SO NOW THEY HAVE A 50-50 ARRANGEMENT. 

        15               AND LET'S SAY THAT THE NEWSPAPER PRESERVATION ACT 

        16    HAS NOW BEEN PASSED.  WHAT HAPPENS WHEN THIS IS OVER?  WHEN 

        17    IT'S OVER, THEY GO BACK TO WHERE THEY WERE BEFORE, COMPETING ON 

        18    THE MERITS.  IT NO LONGER APPLIES ANYMORE.  BUT DURING THIS 

        19    TIME PERIOD, THEY HAVE CERTAIN EXEMPTIONS BECAUSE OF THE 

        20    NEWSPAPER PRESERVATION ACT. 

        21               IF IN THE FINAL PART WHEN THEY'RE JOCKEYING FOR 

        22    POSITION PREPARING THEMSELVES FOR COMPETITION -- AND I HAVE 

        23    THIS (INDICATING), AND I USE THE HORSES, YOUR HONOR, FOR TWO 

        24    REASONS.  ONE, IT GOES ALONG WITH -- IT'S ONOMATOPOETIC AND THE 

        25    OTHER REASON IS THAT AT THE TIME WE MADE THEM, IT WAS DURING 

                                                                         2310
                                 OPENING ARGUMENT \ ALIOTO 


         1    DERBY WEEK. 

         2                              (LAUGHTER) 

         3               MR. ALIOTO:  BUT THE POINT IS, IS THAT DURING THE 

         4    JOA, DURING THE JOA PART WHERE THEY HAVE IMMUNITIES, THEY ARE 

         5    GETTING READY, BOTH OF THEM SAY, BOTH OF THEM THREATEN THE 

         6    OTHER, AS THEY SAY, WITH COMPETITION GETTING READY, GETTING 

         7    READY TO BEGIN COMPETING IN 2005.   

         8               NOW, IF ONE OF THESE COMPANIES TAKES ACTION AGAINST 

         9    THE OTHER, WHICH THE EXAMINER CLAIMED THE CHRONICLE WAS DOING, 

        10    IF ONE OF THEM TAKES ACTION AGAINST THE OTHER TO TRY TO PREVENT 

        11    THEM OR SOMEHOW HURT THEM BEFORE THEY GET LINED UP FOR THE 

        12    RACE, THEN AS THE EXAMINER SAID, THAT'S AN ANTITRUST VIOLATION, 

        13    AND I BELIEVE IT IS SO.  AND SO THERE IS THIS DEGREE OF 

        14    COMPETITION EVEN POSITIONING AND GETTING READY. 

        15               SO, FOR EXAMPLE, I THINK YOUR HONOR WILL REMEMBER AT 

        16    LEAST TWO ITEMS ON THAT.  ONE IS THAT THE EXAMINER WANTED TO 

        17    MOVE ALSO TO THE MORNING, BECAUSE YOUR HONOR MAY RECALL THAT 

        18    MR. BENNACK SAID FROM THE VERY BEGINNING OF THE JOA THAT RIGHT 

        19    FROM THE VERY START, NOW THIS IS VOLUNTARY, JUDGE, RIGHT FROM 

        20    THE VERY START GOING IN THE AFTERNOON WAS NOT GOOD FOR THE 

        21    EXAMINER, WAS NOT GOOD FOR -- LET ME SEE...  I WANT TO -- 

        22               THE COURT:  LET ME JUMP AHEAD IF I MIGHT AND SEE IF 

        23    I UNDERSTAND THE ARGUMENT. 

        24               MR. ALIOTO:  YES. 

        25               THE COURT:  IS YOUR POINT THAT ALTHOUGH THERE MAY 

                                                                         2311
                                 OPENING ARGUMENT \ ALIOTO 


         1    NOT BE COMPETITION BETWEEN THE EXAMINER AND THE CHRONICLE UNDER 

         2    THE JOA AS IT PRESENTLY EXISTS, THE JOA HAS A TERMINATION TIME, 

         3    A TERMINATION DATE? 

         4               MR. ALIOTO:  YES.  YES. 

         5               THE COURT:  AND THERE IS COMPETITION AT THE END OF 

         6    THAT AGREEMENT. 

         7               MR. ALIOTO:  YES.  IT HAS TO GO BACK TO WHAT WE USED 

         8    TO CALL STATUS QUO ANTE. 

         9               THE COURT:  AND WHAT THE HEARST ACQUISITION OF THE 

        10    CHRONICLE WILL DO WILL SNUFF OUT THE POSSIBILITY OF THAT 

        11    COMPETITION IN 2005 -- 

        12               MR. ALIOTO:  NO QUESTION. 

        13               THE COURT:  -- OR 2015? 

        14               MR. ALIOTO:  NO QUESTION.  IT'S GONE. 

        15               THE COURT:  AND THAT IS THE SECTION 2 VIOLATION, 

        16    THAT IS THE -- 

        17               MR. ALIOTO:  AND 7 AND 1 BECAUSE REMEMBER, YOUR 

        18    HONOR, SECTIONS -- 

        19               THE COURT:  HOW IS IT A VIOLATION OF SECTION 1? 

        20               MR. ALIOTO:  SECTION 1 IS THE COMBINATION TO 

        21    RESTRAIN TRADE.  AND YOUR HONOR MAY RECALL, AS WE POINTED OUT 

        22    IN THE LEXINGTON BANK CASE, THAT WHEN YOU HAVE A SECTION 7 CASE 

        23    OF A THREATENED INJURY IN THE FUTURE, POTENTIAL, POTENTIAL 

        24    DESTRUCTION OF COMPETITION, THAT WHEN YOU HAVE THAT, THAT THAT 

        25    ALSO INVOLVES A SECTION 1 OR IT IS, IN FACT, A SECTION 1 CASE 

                                                                         2312
                                 OPENING ARGUMENT \ ALIOTO 


         1    TOO. 

         2               THE COURT MAY RECALL, I THINK WE PUT IT IN OUR 

         3    BRIEF, AMERICAN TOBACCO WAS VERY CLEAR ABOUT IT, THEY'VE SAID 

         4    THAT THE PREVENTION OF COMPETITION IS CHEAPER THAN THE CURE.  

         5    THAT IS THE REASON WHY YOU HAVE TO HAVE SECTION 7 AND SECTION 1 

         6    RIGHT IN THE BEGINNING WHEN THEY'RE STARTING TO JOCKEY AND TAKE 

         7    THESE POSITIONS.   

         8               SUPPOSE, FOR EXAMPLE, THE EXAMINER, YOU KNOW, HITS 

         9    ONE OF THE -- YOU KNOW, TRIES TO INJURE THE OTHER HORSE, OR 

        10    SOMETHING LIKE THAT, MAKE IT MORE DIFFICULT, OR THE CHRONICLE 

        11    DOES, MAKE IT MORE DIFFICULT TO BE ABLE TO COMPETE IN 2005.  

        12    THAT THEN IS -- THEY'RE TRYING TO JOCKEY AS IT IS.   

        13               I THINK YOUR HONOR REMEMBERS THAT THE DLJ PEOPLE 

        14    TOLD THE CHRONICLE THAT WHAT THEY'RE GOING TO HAVE TO DO, IF I 

        15    COULD SHOW IT AGAIN, BUT BEFORE THEY GOT TO 2005, 2002 AND 2003 

        16    THEY'RE GOING TO HAVE TO BUY A PLANT AND THEY'RE GOING TO HAVE 

        17    TO START TO GET READY.  AND THE EXAMINER SAYS TO THE CHRONICLE, 

        18    "WE'VE GOT TO GO IN THE MORNING BECAUSE WE'RE GOING TO GET 

        19    READY.  WE'RE HERE FOR KEEPS.  WE WANT YOU TO KNOW THAT."  

        20    THAT'S WHAT THEY WERE SAYING. 

        21               OF COURSE, THEY COME INTO THIS COURT CONFRONTED WITH 

        22    THAT, YOUR HONOR, AND OF COURSE THEY DENY THAT.  THEY SAID IT 

        23    WAS A BIG BLUFF, A BLOWFISH OR SOMETHING LIKE THAT.  BUT THEY 

        24    WERE EVEN TELLING EACH OTHER THAT.   

        25               AND IF YOU CAN BELIEVE MR. BENNACK WHEN HE HAS TO 

                                                                         2313
                                 OPENING ARGUMENT \ ALIOTO 


         1    GET ON THE STAND AND SAY -- I SHOWED HIM AN INTERNAL DOCUMENT 

         2    WHERE THEY MADE THAT STATEMENT THAT THEY HAVE TO GET READY TO 

         3    COMPETE IN 2005 AND AFTERWARDS, AND I SAID, "YOU WROTE THAT TO 

         4    YOUR OWN" -- YOU KNOW, HE WROTE IT TO HIS OWN PEOPLE.  AND HE 

         5    SAID, "SOMETIMES YOU HAVE TO PROTECT YOUR OWN PEOPLE."  HE SAID 

         6    THAT WHEN COUNSEL WAS QUESTIONING HIM.  PROTECT THEM BY LYING 

         7    TO THEM. 

         8               THE COURT:  BUT IF THEY CAN ESTABLISH, IF THE 

         9    PARTIES CAN ESTABLISH THAT ONE OF THESE TWO NEWSPAPERS IS A 

        10    FAILING NEWSPAPER AND CANNOT EXIST INDEPENDENT OF THE JOINT 

        11    OPERATING AGREEMENT, THEN PRESUMABLY THEY CAN RENEW THE JOINT 

        12    OPERATING AGREEMENT FOR SOME ADDITIONAL PERIOD OF TIME; CAN 

        13    THEY NOT? 

        14               MR. ALIOTO:  THERE'S TWO THINGS.  FIRST OF ALL -- 

        15               THE COURT:  LET ME JUST FINISH THE POINT. 

        16               MR. ALIOTO:  ALL RIGHT. 

        17               THE COURT:  DON'T YOU HAVE TO SHOW THAT AT THE END 

        18    OF THE ROAD, AT THE END OF THE JOA, 2005 OR 2015, THAT BOTH OF 

        19    THESE NEWSPAPERS ARE VIABLE ENTERPRISES? 

        20               MR. ALIOTO:  I DON'T THINK SO, YOUR HONOR, BECAUSE 

        21    THERE'S -- 

        22               THE COURT:  IT SEEMS TO ME YOU'VE PROVEN JUST THE 

        23    OPPOSITE. 

        24               MR. ALIOTO:  YEAH, I DON'T THINK SO, YOUR HONOR.  I 

        25    THINK THAT -- I THINK TO UNDERSTAND THE REASON FOR THE 

                                                                         2314
                                 OPENING ARGUMENT \ ALIOTO 


         1    NEWSPAPER PRESERVATION ACT AND THE CASE THAT STARTED IT, THE 

         2    CITIZENS CASE AND WHAT THEY DID HERE, THEY HAVE GONE IN -- THEY 

         3    ARE SAYING FROM THE VERY BEGINNING THAT WE CANNOT SURVIVE.  

         4    THEY SAY HEARST INCURRED DEFICITS WITH RESPECT TO ITS 

         5    PUBLICATION AND THEY SAY THAT HEARST AND THE CHRONICLE ARE 

         6    CONVINCED THAT ONLY WITH THE JOA WILL THEY BE ABLE, BOTH OF 

         7    THEM, LATER TO SURVIVE AS PUBLISHERS. 

         8               SO THE POINT OF THE NEWSPAPER -- 

         9               THE COURT:  I'M SORRY.  SAY THAT AGAIN. 

        10               MR. ALIOTO:  ONLY WITH THE JOA, ONLY WITH THE JOA IT 

        11    WOULD ENABLE, QUOTE, "WILL ENABLE BOTH CHRONICLE AND HEARST TO 

        12    SURVIVE AS PUBLISHERS OF SEPARATE AND INDEPENDENT NEWSPAPERS."  

        13    THAT'S THE ONLY WAY IT'S GOING TO HAPPEN. 

        14               SO WHAT DID THEY DO VOLUNTARILY WHEN THEY JOINED?  

        15    NOW, REMEMBER ALL OF THIS IS VOLUNTARY.  NOBODY IS FORCING 

        16    ANYBODY TO DO ANYTHING. 

        17               THE EXAMINER TAKES A SEAT IN THE AFTERNOON ON ITS 

        18    OWN.  THEY'RE COVERING THEIR BASES.  NOW, IT MAY HAVE A DEFICIT 

        19    NOW AND IT MAY GET WORSE, BUT THEY HAVE DECIDED VOLUNTARILY 

        20    BETWEEN THEM THAT WHAT THEY WANT TO DO IS COVER THE WHOLE AREA. 

        21               MR. BENNACK AT PAGE 800 EVEN SAYS THAT.  HE SAYS -- 

        22    I CAN'T READ WHAT HE SAYS UNLESS I HAVE MY GLASSES, JUDGE.  HE 

        23    SAYS:   

        24                   "WE STARTED THIS JOINT OPERATING AGREEMENT 

        25               WITH NEWSPAPERS THAT WERE ROUGHLY IN 

                                                                         2315
                                 OPENING ARGUMENT \ ALIOTO 


         1               EQUIVALENCY."   

         2               WELL, THAT'S NOT QUITE WHAT WAS SAID IN THE 

         3    AGREEMENT, BUT THAT'S WHAT HE SAYS.   

         4                   "THE DISPARITY LARGELY HAD COME ABOUT 

         5               RESULTING FROM THE MORNINGNESS OF THE 

         6               CHRONICLE." 

         7               SO HE IS SAYING THAT THEY WERE ABOUT EQUIVALENT.  

         8    THEY JOINED THE AGREEMENT, THEY REPRESENT TO EVERYBODY THAT 

         9    THERE'S A DEFICIT, AND THEY VOLUNTARILY SAY TO THE EXAMINER, 

        10    "GO IN THE AFTERNOON." 

        11               NOW, THEY COULD AT ANY TIME, IF THE COURT WOULD 

        12    ACCEPT THEIR ARGUMENT, ANY NEWSPAPER AT ANY TIME WOULD USE THE 

        13    JOA FOR MONOPOLY BECAUSE THEY COULD ALWAYS HAVE THE OTHER PAPER 

        14    DO SOMETHING LIKE BE IN THE AFTERNOON OR COVER THIS OR COVER 

        15    THAT, OR WHATEVER THEY WANTED TO DO, AND THEY COULD AT ANY TIME 

        16    THEN SAY, "OKAY, WE'RE GOING TO STOP IT RIGHT NOW.  YOU'RE A 

        17    FAILING COMPANY.  WE'VE GOT A MONOPOLY." 

        18               AND THAT IS NOT WHAT THE NEWSPAPER PRESERVATION ACT 

        19    IS ABOUT, AND THERE'S AN ANSWER TO IT TOO, YOUR HONOR.  THIS IS 

        20    INTERESTING. 

        21               WHEN THE CITIZENS CASE CAME ABOUT -- 

        22               THE COURT:  YOU'RE NOT GOING TO GET ANY ARGUMENT 

        23    FROM ME ON THAT. 

        24               MR. ALIOTO:  ON WHAT, YOUR HONOR? 

        25               THE COURT:  THAT THIS IS INTERESTING. 

                                                                         2316
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  YES. 

         2                              (LAUGHTER) 

         3               MR. ALIOTO:  THIS IS ESPECIALLY INTERESTING. 

         4                              (LAUGHTER) 

         5               MR. ALIOTO:  WHEN THE SUPREME COURT DECIDED THE 

         6    CITIZENS PUBLISHING COMPANY CASE, AND AGAIN THIS IS WHERE THEY 

         7    SAID THAT ALL THE CONDUCT WAS DETERMINED TO BE UNLAWFUL AT THAT 

         8    TIME, SO HERE'S THE QUESTION THAT THE COURT POSES AT THE TIME:  

         9    THE CITIZEN PAPER CONTINUED TO BE A SIGNIFICANT THREAT TO THE 

        10    STAR.  THIS IS THE PAPER SO-CALLED THAT'S SUPPOSED TO BE, YOU 

        11    KNOW -- 

        12               THE COURT:  THE CITIZEN WAS THE FAILING PAPER. 

        13               MR. ALIOTO:  YES.  I DON'T KNOW.  I DON'T LIKE TO 

        14    USE THAT WORD BUT I'M GOING TO USE IT ANYWAY.   

        15               -- THE FAILING PAPER BECAUSE THERE'S REALLY STRICT 

        16    RULES ABOUT WHAT A FAILING PAPER IS. 

        17               OKAY.  BUT LET'S SAY THAT THE CITIZEN IS THE FAILING 

        18    PAPER.  THE CITIZEN -- THIS IS WHAT THE COURT SAID -- NOW, THE 

        19    CITIZEN BEING THE FAILING PAPER, HOW IS IT THAT THE CITIZEN -- 

        20    HOW IS IT THAT THE OTHER PAPER, THE STAR, EVEN ALLOWED THEM TO 

        21    GET INTO THE RACE WITH THEM? 

        22               SO THE SUPREME COURT SAYS:   

        23                   "INDEED, THE CITIZEN CONTINUED TO BE A 

        24               SIGNIFICANT THREAT TO THE STAR."   

        25               THIS IS AT 394 U.S. 136 AT 137 RIGHT IN THE 

                                                                         2317
                                 OPENING ARGUMENT \ ALIOTO 


         1    BEGINNING. 

         2               "HOW OTHERWISE IS ONE TO EXPLAIN THE STAR'S 

         3               WILLINGNESS TO ENTER INTO AN AGREEMENT TO SHARE 

         4               ITS PROFITS WITH CITIZEN?  WOULD THAT BE TRUE 

         5               IF, AS NOW CLAIMED, THE CITIZEN WAS ON THE BRINK 

         6               OF COLLAPSE?" 

         7               THAT'S WHAT WE HAVE HERE.  FOR WHAT PURPOSE OR 

         8    REASON WOULD THE CHRONICLE ENTER INTO THIS AGREEMENT WITH 

         9    HEARST IF HEARST IS IN A DEFICIT?  AND FOR WHAT REASON WOULD 

        10    THE CHRONICLE WANT TO ENTER INTO THAT AGREEMENT IN ORDER TO 

        11    ENABLE HEARST TO SURVIVE AS A PUBLISHER?  WHY DO THEY WANT TO 

        12    DO THAT?  AND THE SUPREME COURT SAID, BECAUSE THERE WAS THIS 

        13    SO-CALLED THREAT. 

        14               SO, IF YOU TOOK -- 

        15               THE COURT:  AREN'T YOU ARGUING WITH CONGRESS? 

        16               MR. ALIOTO:  PARDON ME? 

        17               THE COURT:  AREN'T YOU ARGUING WITH CONGRESS? 

        18               MR. ALIOTO:  NO.  NO.  NO. 

        19               THE COURT:  CONGRESS ATTEMPTED TO ABROGATE THIS 

        20    DECISION. 

        21               MR. ALIOTO:  NO.  EXCUSE ME, YOUR HONOR, IF I MIGHT, 

        22    IF I MIGHT PROCEED ON THAT. 

        23               THE COURT:  ABSOLUTELY. 

        24               MR. ALIOTO:  THE IDEA WAS AFTER CITIZENS, AFTER THE 

        25    CITIZEN CASE -- AND REMEMBER, IF IT PLEASE YOUR HONOR, THE 

                                                                         2318
                                 OPENING ARGUMENT \ ALIOTO 


         1    CHARGE THERE WAS PROFIT POOLING AND PRICE FIXING AND WHAT THEY 

         2    CALLED MARKET CONTROL OR A KIND OF FIRST RIGHT OF REFUSAL.  THE 

         3    SUPREME COURT KNOCKED THEM ALL DOWN AS UNLAWFUL, ALL OF THEM.  

         4    AND THAT CASE WAS A SECTION 7, SECTION 1 AND SECTION 2.  

         5    KNOCKED THEM ALL DOWN. 

         6               OKAY.  THE CONGRESS OF THE UNITED STATES THEN PASSES 

         7    THE SECTION UNDER THE NEWSPAPER PRESERVATION ACT. 

         8               THE COURT:  RIGHT. 

         9               MR. ALIOTO:  NOW, WHAT IS IMPORTANT ABOUT THAT IS 

        10    THAT -- 

        11               MR. SHULMAN:  DO YOU WANT THIS ONE UP? 

        12               MR. ALIOTO:  NO, NOT YET. 

        13               WHAT IS IMPORTANT ABOUT THAT IS THAT WHAT IS IT THAT 

        14    THEY ARE GOING TO ALLOW NEWSPAPERS TO DO AND WHEN ARE THEY 

        15    GOING TO ALLOW THEM TO DO IT? 

        16               SECTION 1802 IS THE DEFINITIONAL SECTION.  SECTION 

        17    1802(2), ARABIC TWO, STATES WHAT IS GOING TO BE ALLOWED WITH 

        18    RESPECT TO ANY ONE OR MORE OF THE FOLLOWING.  YOU CAN DO IT 

        19    JOINTLY:  PRINTING, TIME, METHOD, FIELD OF PUBLICATION, 

        20    ALLOCATION OF PRODUCTION FACILITIES, DISTRIBUTION, ADVERTISING 

        21    SOLICITATION, CIRCULATION SOLICITATION, BUSINESS DEPARTMENT, 

        22    ESTABLISHMENT OF ADVERTISING RATES -- YOU CAN FIX THE PRICE ON 

        23    THE RATES -- ESTABLISHMENT OF CIRCULATION RATES -- YOU CAN DO 

        24    THAT -- AND REVENUE DISTRIBUTION -- YOU CAN SPLIT THE PROFITS.  

        25    YOU CAN HAVE PROFIT POOLING.  ALL CARTEL-TYPE ACTION. 

                                                                         2319
                                 OPENING ARGUMENT \ ALIOTO 


         1               NOTHING IN THE NEWSPAPER PRESERVATION ACT EXEMPTS 

         2    ANYTHING LIKE A 60-MILE ANTICOMPETITIVE CLAUSE OR FIRST RIGHT 

         3    OF REFUSAL. 

         4               THE COURT:  OKAY.  HOW IS -- 

         5               MR. ALIOTO:  OKAY.  NOW -- ALL RIGHT.  IF THAT'S 

         6    SO -- I'M SORRY, YOUR HONOR. 

         7               THE COURT:  GO AHEAD AND FINISH YOUR POINT. 

         8               MR. ALIOTO:  OKAY.  IF THAT'S SO, WHAT DID THE 

         9    SUPREME COURT SAY IN CITIZENS WHAT IT WAS TALKING ABOUT?  IT 

        10    SAID IF IT'S FINISHED, IF THEY FINISH THE JOINT AGREEMENT, THEY 

        11    HAVE TO START COMPETING AGAIN OR YOU'RE SUPPOSED TO COMPETE 

        12    AGAIN OBVIOUSLY BECAUSE THE EXEMPTION IS ONLY TO THE TIME THAT 

        13    YOU AGREE.  IT'S VOLUNTARY AGAIN.  THEY CHOSE 30 YEARS.  THEY 

        14    ALSO CHOSE WAYS IN WHICH THEY COULD EXTEND IT. 

        15               NOBODY FORCED THEM ON THAT.  NOBODY SAID 30 YEARS.  

        16    THEY COULD HAVE DONE FIVE YEARS, COULD HAVE DONE 10.  THEY 

        17    COULD HAVE DONE WHATEVER THEY WANTED. 

        18               IF IN THE MEANTIME THEY WANT TO -- IF SOMEBODY WANTS 

        19    TO SELL -- SUPPOSE THE CHRONICLE WANTED TO SELL.  WELL, IT 

        20    WOULD SELL ITS INTEREST OBVIOUSLY IN THE JOA IN WHICH THEY'RE 

        21    MAKING MONEY. 

        22               IF THE EXAMINER FOR ONE REASON OR ANOTHER WANTED TO 

        23    SELL, IT WOULD SELL ITS INTEREST, WHATEVER IS REMAINING.  WE 

        24    HAD SOME ESTIMATES IN THE COURSE OF THE TRIAL THAT FROM THIS 

        25    POINT FORWARD THE STREAM OF REVENUE WOULD BE WORTH ALMOST 

                                                                         2320
                                 OPENING ARGUMENT \ ALIOTO 


         1    $90 MILLION. 

         2               THEN WE START GETTING INTO REALLY RATIONAL STUFF, 

         3    NOT LIKE THE NEGATIVE PRICE SITUATION, BUT THEY COULD DO THAT 

         4    IF THEY WANTED TO. 

         5               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 

         6    

         7    

         8    

         9    

        10    

        11    

        12    

        13    

        14    

        15    

        16    

        17    

        18    

        19    

        20    

        21    

        22    

        23    

        24    

        25    

                                                                         2321
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  IF AT THE END, IF AT THE VERY END, THE 

         2    EXAMINER WANTS TO LEAVE, THEN LET IT GO.  IT CAN GO. 

         3               BUT IF IT WANTS AT THE VERY END THEN -- BECAUSE IF 

         4    IT THINKS THAT IT'S FAILING, IF IT WANTS TO GO, IF IT'S NOT 

         5    MAKING ANY MONEY, IF IT HASN'T TAKEN ADVANTAGE OF JOCKEYING FOR 

         6    POSITION -- IF IT HASN'T DONE ALL THE THINGS THAT THEY SAID IN 

         7    THE RECORD THAT THEY ARE GOING TO DO, WHICH I WILL HOPE TO GO 

         8    THROUGH WITH YOUR HONOR -- I MEAN, THESE ARE VERY POSITIVE 

         9    STATEMENTS AND PRECISE STATEMENTS AS TO WHAT THEY INTEND TO DO.  

        10    IF THEY DIDN'T DO THAT, THEN THEY COULD -- IF THEY WANT TO 

        11    LEAVE, THEY CAN LEAVE. 

        12               BUT THEY COULDN'T BUY THE OTHER ONE BECAUSE THAT 

        13    WOULD BE A MONOPOLY.  THAT WOULD CREATE -- THAT WOULD BE AN 

        14    ORDINARY -- BECAUSE THE ANTITRUST LAWS APPLY AGAIN, AND THAT 

        15    WOULD BE JUST A STRAIGHT MONOPOLY. 

        16               SO WHAT ARE THEY DOING?  WHAT ARE A LOT OF THESE 

        17    PAPERS DOING?  THEY ARE USING THIS JOA AS A STEPPING STONE TO 

        18    MONOPOLY.  THEY ARE CUTTING IT SHORT BEFORE THE TIME, AND THEY 

        19    ARE SAYING ONE OF THE GUYS IS A FAILING COMPANY AND THEY ARE 

        20    NOT FAILING.  THEY'RE MAKING MONEY.  THEY'RE MAKING MONEY UNDER 

        21    THE JOA.  BUT THEY'VE USED THIS LEDGER DEMAND, THIS SHELL GAME, 

        22    IN WHICH IT'S BASICALLY A CON JOB, TO SAY, "OKAY, WELL, ONE OF 

        23    THEM IS IN BAD SHAPE RIGHT NOW." 

        24               NOW, WHEN THEY ENTERED INTO THIS, ONE OF THEM HAD TO 

        25    BE IN BAD SHAPE.  THAT'S THE LAW.  THE LAW SAID THAT IF YOU 

                                                                         2322
                                 OPENING ARGUMENT \ ALIOTO 


         1    ESTABLISH THIS IN ANY CITY -- IF YOU ESTABLISH THIS -- NOT MORE 

         2    THAN ONE OF THE NEWSPAPERS INVOLVED IN THE PERFORMANCE OF SUCH 

         3    ARRANGEMENT WAS LIKELY TO REMAIN OR BECOME FINANCIALLY SOUND. 

         4               THAT MEANS THAT ONLY ONE OF THEM COULD BE -- REMAIN.  

         5    ONLY ONE OF THEM LOOKS LIKE IT WAS GOING TO REMAIN.  ONLY ONE 

         6    OF THEM LOOKS LIKE IT WOULD BECOME FINANCIALLY SOUND.  THAT 

         7    MEANS THAT THE OTHER ONE LOOKED LIKE IT WAS GOING TO TAKE A 

         8    DIVE. 

         9               WE'LL LET YOU GO AND DO THIS.  NOW, IF AT THAT TIME 

        10    WHAT WOULD HAPPEN WHEN THEY ENTERED?  THE ANTITRUST LAWS ARE 

        11    APPLYING BEFORE THEY ENTER.  OKAY.  WHAT WOULD HAPPEN IF ONE OF 

        12    THEM TRIED TO BUY THE OTHER ONE THAT IS NOT LIKELY TO REMAIN?   

        13               SECTION 7 WOULD BLOW THEM OUT AND THEY WOULD HAVE NO 

        14    EXEMPTION, AND THERE WOULD BE NO WAY THEY COULD DO IT.  AND 

        15    THEY WOULD HAVE TO SHOW THAT ANOTHER PAPER OR SOMEONE ELSE 

        16    WOULD HAVE TO BUY IT, WOULD BE ABLE TO BUY IT. 

        17               SO WHAT DO THEY DO?  EVEN THOUGH ONE IS NOT LIKELY 

        18    TO REMAIN, THEY JOIN INTO THE JOA.  THEY GET TO COVER A LOT OF 

        19    AREA SO THEY ARE NOW PART OF THE JOA. 

        20               CERTAINLY, AT ANY TIME THEY COULD TRY TO STOP IT AND 

        21    SAY, "HOLD IT.  HE'S A FAILING COMPANY."  AND THAT'S END OF 

        22    THAT. 

        23               NOW, THERE IS SOMETHING ELSE THAT'S VERY -- ALSO AT 

        24    THE CORE OF THIS, TO SHOW THE SCHEME THAT IS IN THE WORKS   

        25    HERE.  AND THAT IS, AS THE SUPREME COURT SAID IN CITIZENS -- 

                                                                         2323
                                 OPENING ARGUMENT \ ALIOTO 


         1    THIS IS VERY CLEAR, TOO, IN MY JUDGMENT -- AT 394 U.S. 138.  IN 

         2    THE FIRST FULL PARAGRAPH, IT STATES: 

         3                   "THE FAILING COMPANY DOCTRINE PLAINLY CANNOT 

         4               BE APPLIED IN A MERGER OR ANY OTHER" -- "IN ANY 

         5               OTHER CASE UNLESS IT IS ESTABLISHED THAT THE 

         6               COMPANY THAT ACQUIRES THE FAILING COMPANY OR 

         7               BRINGS IT UNDER DOMINION IS THE ONLY AVAILABLE 

         8               PURCHASER." 

         9               IT ASSUMES THAT IF THERE IS A FAILING COMPANY, IT'S 

        10    THE NONFAILING COMPANY THAT'S GOING TO BE DOING THE BUYING.  

        11    BECAUSE HOW IN THE WORLD COULD THE FAILING COMPANY DO THE 

        12    BUYING?  THEY ARE NOT FAILING.  THEY'VE GOT ENOUGH CASH TO BUY 

        13    THE OTHER GUY.  THAT'S WHAT THE SUPREME COURT SAYS. 

        14               AND SO WHAT DO WE HAVE HERE?  THIS IS JUST A -- THIS 

        15    IS A MAJOR FRAUD.  THE EXAMINER, WHAT ARE THEY DOING?  THEY'RE 

        16    GETTING $660 MILLION.  WHERE ARE THEY PUTTING IT?  IN A 

        17    NEWSPAPER.  WHERE?  IN SAN FRANCISCO.  WHAT IS THAT ALL ABOUT?  

        18    ARE THESE THE SAME PEOPLE THAT CLAIM WE'RE FAILING; THEREFORE, 

        19    WE CAN BUY THE OTHER ONE?  IT IS THE REVERSE OF WHAT THE 

        20    FAILING COMPANY DOCTRINE HAS EVER BEEN. 

        21               THE COURT:  LET'S TALK ABOUT SOME OTHER ANTITRUST 

        22    PRINCIPLES FOR A MINUTE.  SECTION 16, CLAYTON ACT. 

        23               MR. ALIOTO:  YES, YOUR HONOR. 

        24               THE COURT:  WHAT DOES THE PLAINTIFF NEED TO SHOW 

        25    WITH RESPECT TO INJURY IN FACT OR ANTITRUST INJURY?  IS THE 

                                                                         2324
                                 OPENING ARGUMENT \ ALIOTO 


         1    MOST RECENT PRONOUNCEMENT OF THE SUPREME COURT ON THAT SUBJECT 

         2    THE CARGO CASE? 

         3               MR. ALIOTO:  WHICH CASE? 

         4               THE COURT:  CARGO. 

         5               MR. ALIOTO:  YES, YOUR HONOR. 

         6               THE COURT:  OR IS THERE SOMETHING IN THE -- 

         7               MR. ALIOTO:  THE CARGO CASE WAS -- 

         8               THE COURT:  OR CLEAR? 

         9               MR. ALIOTO:  THE CARGO CASE WAS A COMPETITOR CASE. 

        10               THE COURT:  CORRECT. 

        11               MR. ALIOTO:  SO IT WAS THE SECOND COMPETITOR -- 

        12               THE COURT:  RIGHT. 

        13               MR. ALIOTO:  -- WHO WAS BRINGING THE CASE.  AND 

        14    THERE THE CLAIM WAS THAT -- AND IN THAT -- AND IN THAT CASE -- 

        15    WELL, I DON'T HAVE TO SAY THAT, BUT IN THAT CASE THE DEPARTMENT 

        16    OF JUSTICE WAS TRYING TO TAKE THE POSITION THAT ONLY THE 

        17    DEPARTMENT SHOULD BRING THESE CASES AND THE SUPREME COURT 

        18    KNOCKED THEM DOWN. 

        19               BUT THAT CASE IS -- YEAH.  THEY DON'T LIKE GUYS 

        20    FOOLING AROUND, SEE?  THIS DEAL WOULD BE A DONE DEAL IF THEY 

        21    WON THAT CASE, JUDGE.  WE WOULDN'T EVEN BE HERE. 

        22               THE COURT:  IT INTERFERES WITH THE FAMILY BUSINESS, 

        23    DOES IT? 

        24               MR. ALIOTO:  IT DOES. 

        25               SECTION 16 -- SECTION 16 BEGINS BY SAYING ANY 

                                                                         2325
                                 OPENING ARGUMENT \ ALIOTO 


         1    PERSON.  AND THEY CAN BRING THE ACTION FOR INJUNCTIVE RELIEF, 

         2    AND IT'S A THREATENED CONDUCT THAT WILL CAUSE LOSS OF DAMAGE. 

         3               THE COURT:  OKAY.  I THINK IT'S CLEAR -- 

         4               MR. ALIOTO:  OKAY. 

         5               THE COURT:  -- A THREATENED INJURY IS SUFFICIENT TO 

         6    CREATE STANDING UNDER SECTION 16. 

         7               MR. ALIOTO:  OKAY.  NOW, CARGO -- 

         8               THE COURT:  LET ME JUST FINISH -- 

         9               MR. ALIOTO:  YES. 

        10               THE COURT:  -- WHERE I THINK THE LAW IS AND YOU TELL 

        11    ME IF I AM INCORRECT AND THEN FILL IN THE REST FOR ME. 

        12               AND CARGO TELLS US THAT THE PLAINTIFF HAS TO SHOW 

        13    ANTITRUST INJURY -- 

        14               MR. ALIOTO:  YES. 

        15               THE COURT:  -- UNDER SECTION 16.  DOES THE PLAINTIFF 

        16    HAVE TO SHOW INJURY IN FACT?  AND, IF SO, WHAT IS THE 

        17    DIFFERENCE BETWEEN INJURY IN FACT AND INJURY TO TRADE OR 

        18    BUSINESS, OR PROPERTY OR BUSINESS? 

        19               MR. ALIOTO:  OKAY.  IT -- WELL, FIRST OF ALL -- 

        20               THE COURT:  WHICH MUST BE SHOWN UNDER SECTION 4? 

        21               MR. ALIOTO:  OKAY.  FIRST OF ALL, SECTION 16, THE 

        22    PLAINTIFF DOES NOT HAVE TO SHOW INJURY IN FACT BECAUSE THE 

        23    PLAINTIFF IS COMPLAINING AGAINST SOMETHING THAT IS GOING TO 

        24    OCCUR. 

        25               THE COURT:  WELL, THREATENED INJURY IN FACT. 

                                                                         2326
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  YES. 

         2               THE COURT:  THREATENED INJURY IN FACT. 

         3               MR. ALIOTO:  SO IT'S THREATENED INJURY.  OKAY.  

         4    NOW -- 

         5               THE COURT:  BUT DOES HE HAVE TO SHOW THREATENED 

         6    INJURY IN FACT? 

         7               MR. ALIOTO:  THAT THAT'S GOING TO HAPPEN AS A MATTER 

         8    OF FACT? 

         9               THE COURT:  THAT HE IS GOING TO BE INJURED. 

        10               MR. ALIOTO:  YES, AS A MATTER OF THE PREPONDERANCE 

        11    OF THE EVIDENCE.  WHAT IS THE EVIDENCE ABOUT IT? 

        12               IN CARGO YOU MAY RECALL THAT THERE WAS AN INCREASE 

        13    IN COMPETITION; THEREFORE, THEY COULDN'T SHOW THAT.  BECAUSE 

        14    THE ALLEGATION WAS THAT THE COMBINERS WERE GOING TO LOWER THE 

        15    PRICE AND SO THE COMPETITOR WAS SAYING, "WE'RE GOING TO LOSE 

        16    MONEY," AND THE SUPREME COURT SAID, "YEAH, YOU'RE GOING TO LOSE 

        17    MONEY BECAUSE THEY'RE GOING TO COMPETE BECAUSE THEIR PRICES ARE 

        18    GOING TO GO LOWER AND YOU ARE GOING TO HAVE TO COMPETE.  YOU 

        19    ARE NOT IN HERE ON AN ANTITRUST INJURY.  THAT'S WHAT ANTITRUST 

        20    LAWS ARE SUPPOSED TO DO." 

        21               OKAY.  HERE WHAT HAPPENS?  HERE BOTH OF THEM HAVE 

        22    ALREADY PROGNOSTICATED, BOTH OF THEM, THAT THEY ARE GOING TO 

        23    BEGIN TO COMPETE AFTER 2005 AND THEY ARE GOING TO LOWER THE 

        24    PRICES. 

        25               THE COURT:  LET'S FOCUS ON THE FANG TRANSACTION.  DO 

                                                                         2327
                                 OPENING ARGUMENT \ ALIOTO 


         1    YOU CONCEDE THAT THE PLAINTIFF MUST SHOW THREATENED INJURY IN 

         2    FACT? 

         3               MR. ALIOTO:  YES. 

         4               THE COURT:  YOU DO CONCEDE THAT? 

         5               MR. ALIOTO:  YES. 

         6               THE COURT:  OKAY.  WHAT IS REILLY'S INJURY FROM 

         7    COMPLETION OF THE HEARST/FANG TRANSACTION? 

         8               MR. ALIOTO:  A MONOPOLY WOULD BE CREATED. 

         9               THE COURT:  WELL, HOW IS HE INJURED? 

        10               MR. ALIOTO:  A MONOPOLY WOULD BE CREATED BECAUSE -- 

        11               THE COURT:  HE HAS -- AS I UNDERSTAND HIS -- THERE 

        12    CAN BE TWO POSSIBLE WAYS THAT A PLAINTIFF COULD OBTAIN STANDING 

        13    HERE, EITHER AS A CONSUMER OF NEWSPAPERS OR AS AN ADVERTISER OF 

        14    NEWSPAPERS OR PRESUMABLY A COMPETITOR COULD BRING AN ACTION, 

        15    ALTHOUGH THAT MIGHT RUN UP AGAINST THE CARGO REASONING THAT YOU 

        16    WERE JUST DESCRIBING.  BUT HOW IS REILLY INJURED IN FACT OR 

        17    THREATENED TO BE INJURED IN FACT BY THE FANG TRANSACTION? 

        18               MR. ALIOTO:  OKAY. 

        19               THE COURT:  AS A CONSUMER OF NEWSPAPERS HE GETS TWO 

        20    NEWSPAPERS, DOESN'T HE?  HE GETS THE CHRONICLE AND HE GETS THE 

        21    EXAMINER.  SO HE IS CERTAINLY NOT INJURED AS A CONSUMER OF 

        22    NEWSPAPERS.  HE IS NOT AN ADVERTISER, IS HE? 

        23               MR. ALIOTO:  THE VERY FIRST THING, YOUR HONOR, IS 

        24    THAT WE KNOW FROM THIS RECORD AS DOCUMENTS IN THEIR OWN FILES 

        25    TWO THINGS AT LEAST.   

                                                                         2328
                                 OPENING ARGUMENT \ ALIOTO 


         1               FIRST YOU WILL RECALL THAT BOTH THE CHRONICLE AND 

         2    THE EXAMINER, HEARST CORPORATION, HAD MADE BUSINESS JUDGMENTS 

         3    AND STATEMENTS THAT BEGINNING IN 2005, AT LEAST, THEY WILL 

         4    BEGIN TO COMPETE, AND ONE OF THE FIRST THINGS BOTH OF THEM WILL 

         5    DO IS LOWER THE PRICES FOR NEWSPAPERS. 

         6               THE COURT:  THIS IS MS. GREENTHAL'S WAR SCENARIO? 

         7               MR. ALIOTO:  IT'S HER WAR SCENARIO.  IT'S ALSO THE 

         8    MISSION STATEMENT BY THE EXAMINER.  IT'S THE CONTRA CONSISTENT 

         9    STATEMENTS BY MR. BENNACK THAT THEY WERE GOING TO DO THAT. 

        10               OKAY.  WHAT HAPPENS IF THEY DON'T COMPETE?  IF THEY 

        11    DON'T COMPETE WHAT DID THEY -- WHAT DID THEY SHOW US?  THEY 

        12    DIDN'T EXPECT IT BUT WHAT DID THEY SHOW US?   

        13               MR. FALK GOT UP THERE ON THEIR DOCUMENTS THAT THEY 

        14    DID, AND WHAT THEY INTENDED TO DO WAS TO KEEP THE PRICES AND 

        15    THE REVENUES THE SAME, EVEN THOUGH THEY ELIMINATE ANOTHER 

        16    NEWSPAPER. 

        17               THAT MEANS THAT THEY WILL NOT, IF THE PAPER IS SOLD 

        18    TO THE FANGS OR ANYONE ELSE, AND NOT REQUIRED -- NOT REQUIRED 

        19    TO CONTINUE -- AND NOT ONLY REQUIRED TO CONTINUE IN THE SENSE 

        20    OF REQUIRING THE JOA TO CONTINUE, I MEAN REQUIRED IN THE SENSE 

        21    THAT THE COURT WOULD ENJOIN HEARST FROM BUYING THE CHRONICLE.  

        22    BECAUSE THEN ALL KINDS OF COMPETITIVE ISSUES WOULD BEGIN TO 

        23    RISE THAT WOULD HELP EVERYBODY. 

        24               BUT IF THEY SOLD THE EXAMINER, THE PRICES WOULD STAY 

        25    THE SAME OR GO UP -- OR GO UP.  INDEED, THE CHRONICLE DID THEIR 

                                                                         2329
                                 OPENING ARGUMENT \ ALIOTO 


         1    STATEMENT WHERE THEY WOULD KEEP THE REVENUES AT THE SAME AMOUNT 

         2    AND CUT THE COSTS OFF OF THE EXAMINER.  THIS IS LIKE A 

         3    MONOPOLY.  YOU HAVE TWO FOLKS BOTH MAKING MONEY.  THEY 

         4    ELIMINATE ONE AND THEY DON'T INTEND TO TOUCH THE PRICES. 

         5               ALSO MS. -- MS. GREENTHAL IN HER STATEMENT, THE 

         6    CHRONICLE STATEMENT, THAT THEY HAD IN FRONT OF THEM WHEN THEY 

         7    MADE THE DECISION ON AUGUST THE 6TH AND WHEN THEY HAD TO GO 

         8    OVER IT, THIS WAS THE BIG DECISION -- THEY HAD IN FRONT OF THEM 

         9    ALSO WHAT WOULD HAPPEN IS THAT -- IS THAT THE CHRONICLE WOULD 

        10    THEN BEGIN TO COMPETE AND UPGRADE, AND THEY WOULD HAVE NEW 

        11    PLANTS, AS THE COURT IS AWARE. 

        12               THE COURT IS ALSO AWARE THAT MR. WHITE OVER AND OVER 

        13    AGAIN, WE'RE GOING TO GET READY.  WE'RE GOING TO GET -- WE'RE 

        14    GOING TO GET MORE REPORTERS.  WE ARE GOING TO GET MORE 

        15    SECTIONS.  WE ARE GOING TO DO ALL OF THAT.  SO THAT NOT ONLY IS 

        16    THERE A PRICE DIFFERENCE, BUT THERE IS THE KIND OF COMPETITION 

        17    AND CHOICE THAT WOULD OTHERWISE -- THAT WILL EXIST. 

        18               IF IT GOES TO THE FANGS, WE ARE NOT GOING TO HAVE 

        19    CHOICE. 

        20               NOW -- 

        21               THE COURT:  WHY NOT? 

        22               MR. ALIOTO:  WELL, BECAUSE OF A NUMBER OF THINGS, 

        23    YOUR HONOR.  FIRST OF ALL, IT'S NOT A COMPETING PAPER, WE NOW 

        24    FIND OUT.  THEY NEVER INTENDED IT TO BE A FULLY COMPETING 

        25    PAPER.  WE FOUND OUT EVEN WHEN MR. FANG WAS ON THE STAND -- WE 

                                                                         2330
                                 OPENING ARGUMENT \ ALIOTO 


         1    FOUND OUT THAT -- THAT ACCORDING -- ACCORDING TO HIM THERE IS 

         2    NO CHANCE OF THE PAPER EVER MAKING IT IF THE CONTRACTS -- THE 

         3    ADVERTISING CONTRACTS WENT WITH THE SALE. 

         4               WELL, WE POINTED OUT THAT IN THE AGREEMENT OF THE 

         5    SALE, THE PURCHASE BY HEARST, THEY GET ALL OF THE CONTRACT FROM 

         6    THE SAN FRANCISCO NEWSPAPER AGENCY.  THEY GET EVERYTHING. 

         7               THERE IS NO WAY.  WE WENT THROUGH ALL THE DIFFERENT 

         8    THINGS THAT MR. FANG SAID.  ALL OF THE DIFFERENT THINGS THAT HE 

         9    SAID WOULD HAPPEN HE COULDN'T MAKE IT IF THOSE THINGS HAPPENED, 

        10    EVERY ONE OF THEM HAPPENED.  IT'S A SHAM, JUDGE.  WHAT WILL 

        11    HAPPEN, AS HE SAYS AND HE POINTS OUT, IT'S AN ENTIRELY 

        12    DIFFERENT NONCOMPETITIVE NEWSPAPER. 

        13               THE COURT:  ALL RIGHT.  ASSUME I AGREE IT'S A SHAM.  

        14    HOW IS MR. REILLY HURT? 

        15               MR. ALIOTO:  FIRST ON THE PRICES.  IF THE COURT 

        16    RULES THAT THE EXAMINER CANNOT -- THE HEARST CORPORATION CANNOT 

        17    PURCHASE THE CHRONICLE, THEN WHAT HAS TO HAPPEN IS THEY HAVE TO 

        18    CONTINUE FOR FIVE YEARS UNDER THE JOA, UNLESS THEY WANT TO SELL 

        19    IT TO SOMEBODY ELSE.  THEY HAVE TO CONTINUE FOR FIVE YEARS 

        20    MAKING MONEY -- 

        21               THE COURT:  COULDN'T HEARST OR CHRONICLE, FOR THAT 

        22    MATTER, SIMPLY DECIDE THEY ARE NO LONGER GOING TO PUBLISH THE 

        23    NEWSPAPER? 

        24               MR. ALIOTO:  THERE IS AN OBLIGATION IN THE JOA TO 

        25    PUBLISH. 

                                                                         2331
                                 OPENING ARGUMENT \ ALIOTO 


         1               THE COURT:  IS THERE AN OBLIGATION THAT THEY MUST 

         2    SUPPLY -- 

         3               MR. ALIOTO:  THERE IS.  AND ONE OF THE DOCUMENTS, 

         4    YOUR HONOR, WHEN -- WHEN MR. BENNACK WAS TRYING TO DO HIS 

         5    CARTEL AGREEMENT, WHICH NO ONE HAS SEEN THOSE KIND OF SPLIT 

         6    AGREEMENTS WHERE A FELLOW SAYS, "I AM GOING TO SHUT MY PAPER 

         7    DOWN BUT I STILL GET A CUT FOR A COUPLE OF YEARS."  THE LAST 

         8    TIME THEY DID THAT WAS WHEN ROCKEFELLER DID THE SOUTHERN 

         9    IMPROVEMENT COMPANY, GOT ALL THE GUYS IN, SHUT DOWN ALL THE 

        10    REFINERIES AND ALL OF THAT.  THAT'S WHERE ANTITRUST COMES FROM, 

        11    A MISUSE OF THE TRUST AGREEMENT.  THAT'S WHERE IT COMES FROM. 

        12               BUT, ANYWAY, MR. BENNACK -- I DON'T KNOW WHERE I GOT 

        13    OFF ON THAT ONE.  BUT MR. BENNACK, MR. BENNACK HIMSELF SAYS 

        14    JUST THAT, YOUR HONOR, THAT WHEN HE IS GOING TO MAKE THAT DEAL 

        15    WHERE HE IS GOING TO GET A PERCENTAGE -- THIS IS IN 1997 -- HE 

        16    SAID, "OF COURSE, WE'LL HAVE TO HAVE THEM AGREE THAT WE DON'T 

        17    HAVE TO PUBLISH."  BECAUSE RIGHT NOW UNDER THEIR AGREEMENT THEY 

        18    ARE SUPPOSED TO -- 

        19               THE COURT:  WHERE IS THAT?  LET ME SEE THAT. 

        20               MR. ALIOTO:  YES.   THE DOCUMENT TO WHICH I AM 

        21    REFERRING, YOUR HONOR, IS A 19 -- IT SHOULD BE THE 1997 

        22    DOCUMENT.  IT IS FROM -- 

        23               THE COURT:  I THOUGHT YOU WERE REFERRING TO A PAST 

        24    PROVISION IN THE JOINT OPERATING AGREEMENT. 

        25               MR. ALIOTO:  HE -- THERE IS A PROVISION IN THE JOINT 

                                                                         2332
                                 OPENING ARGUMENT \ ALIOTO 


         1    OPERATING AGREEMENT.  THE PRINTING COMPANY, THE SAN FRANCISCO 

         2    NEWSPAPER, THEY HAVE THE OBLIGATION TO ACTUALLY PRINT THE 

         3    PAPER. 

         4               THE COURT:  WELL, I UNDERSTAND THAT.  BUT WHERE IS 

         5    THERE AN OBLIGATION IN THE JOA THAT THE TWO JOINT VENTURERS 

         6    MUST CONTINUE TO PUBLISH NEWSPAPERS?  IS THERE SUCH A 

         7    PROVISION? 

         8               MR. ALIOTO:  WELL, THERE IS -- YOUR HONOR, THERE IS 

         9    AN AGREEMENT THAT -- OKAY.  WHAT THEY ARE TALKING ABOUT -- THEY 

        10    HAVE TO PUT IN THEIR PAPER, THEY HAVE TO PUBLISH IN THE 

        11    AFTERNOON AND THEN THE PRINTING IS ACTUALLY DONE BY THE 

        12    PRINTING COMPANY. 

        13               THE COURT:  NO.  I UNDERSTAND. 

        14               MR. ALIOTO:  OKAY. 

        15               THE COURT:  BUT YOU SAID THERE IS A PROVISION IN THE 

        16    JOA THAT REQUIRES THE PARTIES TO PUBLISH A NEWSPAPER, THAT 

        17    CHRONICLE AND HEARST HAS TO SUPPLY THE NEWSPAPER AGENCY WITH A 

        18    NEWSPAPER. 

        19               MR. ALIOTO:  WELL, THE NEWSPAPER AGENCY HAS TO PRINT 

        20    THE NEWSPAPER FOR -- 

        21               THE COURT:  THE JOINT VENTURERS HAVE TO FURNISH AN 

        22    EDITORIAL PRODUCT FOR THE AGENCY TO PRINT. 

        23               MR. ALIOTO:  OKAY.  NOW, IT SAYS IN THE -- IT SAYS 

        24    THAT -- RIGHT IN THE BEGINNING IN THE "WHEREAS" -- IN THE 

        25    "WHEREAS" SECTIONS, YOUR HONOR, IT SAYS THAT -- THIS IS WHERE 

                                                                         2333
                                 OPENING ARGUMENT \ ALIOTO 


         1    THEY ARE GOING TO HAND OVER THE PRODUCTION OF BOTH OF THE 

         2    NEWSPAPERS. 

         3               THE COURT:  RIGHT. 

         4               MR. ALIOTO:  I THINK THAT -- AND, AGAIN, THE IDEA 

         5    WAS TO ENABLE BOTH TO SURVIVE AS -- TO SURVIVE AS INDEPENDENTS. 

         6               THE ACTUAL -- THE -- BOTH OF THE PARTIES AGREE WITH 

         7    THE PRINTING COMPANY, THAT THE PRINTING COMPANY WILL PUBLISH 

         8    BOTH NEWSPAPERS.  THAT'S ON 3.1 OF THE AGREEMENT AT PAGE 20. 

         9               THE COURT:  THAT'S CLEAR. 

        10               MR. ALIOTO:  PARDON ME? 

        11               THE COURT:  THAT'S CLEAR. 

        12               MR. ALIOTO:  YES. 

        13               SO THAT IT SAYS: 

        14                   "COMMENCING ON THE EFFECTIVE DATE AND 

        15               CONTINUING THROUGHOUT THE TERM HEREOF THE 

        16               PRINTING COMPANY WILL" -- AND THEN "PRINT BOTH 

        17               THE NEWSPAPERS." 

        18               SO THAT IS THE OBLIGATION OF THE PRINTING, AND BOTH 

        19    THE OTHER PARTIES ARE AGREEING THAT THAT'S WHAT THIS NEW PARTY 

        20    IS SUPPOSED TO DO AND THAT'S WHAT THEY HAVE TO DO. 

        21               WHEN MR. BENNACK TALKS ABOUT   -- HE SAYS THAT HE 

        22    BELIEVES -- HE BELIEVES THAT THE CHRONICLE WILL LET THEM OUT OF 

        23    THEIR OBLIGATION TO PRINT -- OR TO PUBLISH A NEWSPAPER WHEN HE 

        24    IS MAKING HIS AGREEMENT WITH THEM.  AND THAT DOCUMENT IS 19 -- 

        25    IT SHOULD BE 1997 AND '98, YOUR HONOR, AND I CAN -- I CAN GET 

                                                                         2334
                                 OPENING ARGUMENT \ ALIOTO 


         1    THAT ONE.  I THINK THAT -- THAT THE OBLIGATION IS APPARENTLY -- 

         2    HERE IT IS, YOUR HONOR.  THIS IS ON EXHIBIT NUMBER 67.  THIS IS 

         3    THE DOCUMENT DATED OCTOBER 27, 1997. 

         4               THE COURT:  IT'S A MEMO FROM BENNACK TO ASHER? 

         5               MR. ALIOTO:  YES, SIR. 

         6               THE COURT:  IT'S A MEMO TO FILE. 

         7               MR. ALIOTO:  YES, SIR.  NOW, THIS IS ON THE 

         8    PERPETUAL ARRANGEMENT DEAL WITH THE CHRONICLE THAT THEY ARE 

         9    TRYING TO DO. 

        10               IF THE COURT WILL GO TO PAGE 3 AND THE FIRST FULL 

        11    PARAGRAPH, THIRD SENTENCE, WHICH BEGINS IN A PARENTHESES, 

        12    QUOTE: 

        13                   "I ACKNOWLEDGED CHRONICLE WOULD HAVE TO 

        14               RELIEVE US OF OUR PUBLISHING OBLIGATIONS, WHICH 

        15               WE BELIEVED THEY WOULD DO." 

        16               THE COURT:  WHERE ARE THOSE PUBLISHING OBLIGATIONS? 

        17               MR. ALIOTO:  I THINK THAT THE WAY THAT THEY HAVE 

        18    WRITTEN THE JOA, YOUR HONOR, IS THAT BOTH OF THEM AGREE WHAT 

        19    THE PRINTING COMPANY IS TO DO, AND THE PRINTING COMPANY HAS AN 

        20    OBLIGATION TO PRINT BOTH. 

        21               THE COURT:  WELL, LET'S ASSUME -- LET'S ASSUME THAT 

        22    THERE IS NOTHING IN THE JOA WHICH PREVENTS THE PARTIES FROM 

        23    SHUTTING DOWN ONE OF THE TWO NEWSPAPERS. 

        24               MR. ALIOTO:  OKAY. 

        25               THE COURT:  WHY COULDN'T THEY DO THAT?  

                                                                         2335
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  IF A NEWSPAPER WANTED TO -- SUPPOSE THE 

         2    EXAMINER WAS TIRED AND THEY SAID, "OKAY, WE'RE IN THE JOA.  

         3    WE'VE HAD IT.  WE'RE SHUTTING DOWN OUR PAPER." 

         4               FINE.  SEE YOU LATER.  THAT IS -- THERE WOULD BE A 

         5    MONOPOLY CREATED, BUT IT WOULD BE THRUST UPON THE REMAINING 

         6    PAPER, THE CHRONICLE.  IT'S NOTHING THAT HE DID, NOTHING THAT 

         7    THE CHRONICLE DID -- OR SHE DID.  IT'S NOTHING THAT THE 

         8    CHRONICLE ITSELF DID. 

         9               SO IF THE EXAMINER SAYS, "I DON'T WANT TO DO IT 

        10    ANYMORE.  I DON'T WANT THIS 25 MILLION EVERY YEAR.  IT'S 

        11    BUGGING ME," AWAY THEY GO. 

        12               THE COURT:  WELL, I GATHER THAT HEARST WOULD STILL 

        13    BE ENTITLED TO HALF THE NET EXCESS?   

        14               MR. ALIOTO:  ABSOLUTELY NOT.  THAT IS CARTEL.  THE 

        15    OBLIGATION UNDER THE -- UNDER THE NEWSPAPER PRESERVATION ACT IS 

        16    THAT -- IS TO PRESERVE THE PAPERS.  THAT WOULD VIOLATE THE -- 

        17    THAT IF THEY -- THAT IS THE TRUST AGREEMENT.  THAT IS -- THE 

        18    IDEA THAT THEY COULD SHUT THEIR PAPER DOWN, THAT WAS OUT -- 

        19    THAT WAS THROWN OUT IN THE HAWAII CASE.  NO ONE HAS SEEN THIS 

        20    KIND OF CONDUCT, YOUR HONOR, SINCE THE TURN OF THE CENTURY 

        21    EXCEPT IN THESE JOA'S WITH THESE NEWSPAPERS.  THEY'RE DOING IT, 

        22    APPARENTLY, MR. BENNACK TESTIFIED, TO TWO OR THREE OF THEM.  

        23    THEY DID IT IN DETROIT.  THEY SHUT THE PAPER DOWN AND THEY 

        24    STILL GET INTEREST ON IT.  THEY GET PAID FOR SHUTTING THE PAPER 

        25    DOWN.  THEY GET PAID, AS THE HAWAII COURT SAYS, FOR SHUTTING A 

                                                                         2336
                                 OPENING ARGUMENT \ ALIOTO 


         1    COMPETITOR DOWN.   

         2               I MEAN, THAT IS REALLY OLD-TIME CARTEL STUFF.  AND I 

         3    DON'T THINK -- YOU KNOW, I MENTIONED BEFORE, YOU KNOW, THE 

         4    SOUTHERN IMPROVEMENT COMPANY, AND THAT'S WHAT THEY USED TO DO.  

         5    AND THAT WAS TOSSED OUT.  THAT WAS RIDICULOUS.  BECAUSE IT 

         6    IS -- IT IS NONCOMPETITIVE IN ITSELF.  IT IS AN AGREEMENT TO 

         7    PAY SOMEONE NOT TO COMPETE.  IT'S ALMOST COMMON LAW. 

         8               SO WHEN MR. BENNACK SUGGESTED THAT OR -- 

         9               THE COURT:  IS THAT WHAT IS GOING ON HERE? 

        10               MR. ALIOTO:  YEAH.  WELL, THEY TRIED IT. 

        11               THE COURT:  AND YOUR THEORY IS THAT THAT'S THE 

        12    REASON CHRONICLE IS GETTING $660 MILLION FOR THIS PAPER AS 

        13    OPPOSED TO THE FOUR TO FIVE HUNDRED MILLION DOLLARS WHICH 

        14    KNIGHT RIDDER AND GANNETT AND TIMES MIRROR WERE OFFERED? 

        15               MR. ALIOTO:  WELL, YOUR HONOR, THOSE OTHER PAPERS 

        16    NEVER EVEN GOT INTO THE ACT.  THE PERSON FROM DLJ WHO WAS HERE, 

        17    SHE SAYS, WHAT IS THE -- WHAT IS THE THING IN THE JOA?  THIS IS 

        18    ONE OF THE THINGS WE ARE ASKING THE COURT TO GET RID OF. 

        19               THEY NOT ONLY HAVE A FIRST RIGHT OF REFUSAL, THEY 

        20    HAVE A FIRST NEGOTIATION.  AND THERE IS NO TIME LIMIT ON IT.  

        21    AND SO WHAT THEY GET IS NOT ONLY -- YOU HAVE TO NEGOTIATE WITH 

        22    US, AND THEN IF THE NEGOTIATIONS BREAK DOWN, THEN IF SOMEONE 

        23    ELSE OFFERS, THEN THEY GET A FIRST RIGHT OF REFUSAL. 

        24               WELL, WHO WOULD BE COMPETING AGAINST THAT?  THAT 

        25    FIRST RIGHT OF REFUSAL WAS KNOCKED DOWN IN CITIZEN PUBLISHING, 

                                                                         2337
                                 OPENING ARGUMENT \ ALIOTO 


         1    AND IT WAS NOT RESURRECTED IN THE NPA. 

         2               THE COURT:  WELL -- 

         3               MR. ALIOTO:  BECAUSE THEY HAD IT THERE IN THAT ONE. 

         4               THE COURT:  LET'S TALK ABOUT THAT. 

         5               MR. ALIOTO:  OKAY. 

         6               THE COURT:  FIRST RIGHT OF REFUSAL AND THE 60-MILE 

         7    CLAUSE. 

         8               MR. ALIOTO:  OKAY. 

         9               THE COURT:  HOW IS REILLY HARMED BY THE ENFORCEMENT 

        10    OF THOSE PROVISIONS?  ISN'T CHRONICLE THE PARTY THAT'S -- 

        11    THAT'S HARMED?  LET'S ASSUME THAT THOSE PROVISIONS ARE NOT 

        12    EXEMPTED BY THE NEWSPAPER PRESERVATION ACT.  DOESN'T THAT GIVE 

        13    CHRONICLE ESSENTIALLY AN OPTION TO REQUIRE THAT THE PAPER BE 

        14    EXPOSED TO OTHER BUYERS, EVEN WITHIN THE 60-MILE RADIUS OF SAN 

        15    FRANCISCO, OTHER PUBLISHERS WITHIN THAT RADIUS, WHICH WOULD 

        16    INCLUDE KNIGHT RIDDER AND I SUPPOSE THE NEW YORK TIMES AND 

        17    GANNETT BECAUSE OF THEIR OWNERSHIP OF PAPERS IN THE 60-MILE 

        18    AREA? 

        19               MR. ALIOTO:  YES. 

        20               THE COURT:  BUT ISN'T THE PARTY HARMED BY THOSE 

        21    PROVISIONS CHRONICLE RATHER THAN MR. REILLY? 

        22               MR. ALIOTO:  THERE IS NO QUESTION THAT THE CHRONICLE 

        23    IS SUBSTANTIALLY HARMED BY THOSE PROVISIONS.  BUT IT IS ALSO 

        24    CORRECT THAT THOSE PROVISIONS, THOSE RESTRAINTS, TEND TO AND 

        25    WILL LIKELY -- AND LIKELY THREATEN HARM TO MR. REILLY OR ANY 

                                                                         2338
                                 OPENING ARGUMENT \ ALIOTO 


         1    OTHER SUBSCRIBER. 

         2               THE COURT:  HOW SO? 

         3               MR. ALIOTO:  BECAUSE THOSE TEND TO -- THAT 

         4    GUARANTEES TO THE EXAMINER THAT THEY DON'T HAVE TO WORRY ABOUT 

         5    ANOTHER COMPETITOR COMING INTO THE MARKET.  THEY DON'T HAVE TO 

         6    BE CONCERNED ABOUT THAT.  THEY DON'T HAVE TO BE CONCERNED ABOUT 

         7    HAVING TO COMPETE.  WHEN THEY COMPETE, THEY DO A LOT OF THINGS 

         8    EVEN IN THE JOA, WHICH THEY SAID THAT THEY WOULD DO, YOUR 

         9    HONOR.  THEY SAID THAT. 

        10               SO IF YOU HAVE THOSE KINDS OF RESTRAINTS THAT 

        11    PREVENT THE POSSIBILITY, THE FREE AND OPEN POSSIBILITY, OF THE 

        12    SALE OF EITHER ONE OF THE PAPERS, BUT IT WOULD HAVE TO BE -- 

        13    YOU KNOW, THEY COULD ONLY TAKE THE POSITION THAT THE PAPER HAS 

        14    WITH THE JOA, UNTIL IT'S OVER. 

        15               BUT NOW, REMEMBER, THE COURT MAY RECALL, THAT IN THE 

        16    DOCUMENT WE HAD -- IT WAS NOT DLJ BUT IT WAS THE DOCUMENT BY 

        17    THE EXPERTS FOR HEARST IN WHICH -- IN WHICH THEY SAID THAT 

        18    WE'VE GOT TO GET MOVING HERE BECAUSE, AS THE TIME GETS CLOSER 

        19    TO THE 2005, OUR LEVERAGE IS LESSENED AND LESSENED.  AND 

        20    SOMEONE COULD COME IN AND BE A BRAND NEW COMPETITOR. 

        21               SO IT HAS AN IMPACT -- IT HAS AN IMPACT.  IT HAS THE 

        22    TENDENCY TO RESTRAIN TRADE IN THIS MARKET.  AND, AS THE COURT 

        23    KNOWS AS WELL, THE COURT -- ITS A LONG-TIME PRINCIPLE, JUDGE.  

        24    YOUR HONOR HAS EXTRAORDINARY POWERS GRANTED TO YOUR HONOR.  AND 

        25    THE COURT CAN, AS THE PARAMOUNT CASE SAID, NOT ONLY RESTRAIN 

                                                                         2339
                                 OPENING ARGUMENT \ ALIOTO 


         1    THOSE ACTS WHICH ARE ILLEGAL IN THEMSELVES, BUT EVEN THOSE ACTS 

         2    THAT TEND TOWARD IT, EVEN THOUGH THEY MIGHT OR ARE PART OF 

         3    IT -- EVEN THOUGH THEY MIGHT INDIVIDUALLY VIEWED BE -- BE OKAY, 

         4    INNOCENT, WHOLLY INNOCENT ACTS, IT'S LIKE FRUIT FROM THE 

         5    POISONOUS TREE OR FRUIT FROM A TREE AND THE GUY -- THE COURT 

         6    HAS THE POWER TO CUT THE WHOLE TREE.  IF THE COURT BELIEVES 

         7    THAT THAT'S GOING TO SAVE THE ORCHARD EVEN THOUGH -- THEY USE 

         8    THE TREE ANALOGY IN THE PARAMOUNT  CASE SO I AM NOT GETTING 

         9    FARTHER THAN THAT ONE, YOUR HONOR. 

        10               BUT THE POINT IS THAT THE COURT HAS POWER TO ENJOIN 

        11    THAT.  SO WHETHER IT ACTUALLY HAS -- 

        12               THE COURT:  HAVING BEEN SAID TO CLIMB OUT ON LIMBS 

        13    MYSELF. 

        14                              (LAUGHTER) 

        15               MR. ALIOTO:  ALL RIGHT.  WELL, THAT'S ONE I WILL 

        16    KIND OF SEMI BACK ON. 

        17               BUT THE POINT IS THAT THE 60-MILE LIMIT, THE FIRST 

        18    RIGHT OF REFUSAL, IF THAT IS TAKEN OUT, THEY ARE NOT A PART OF 

        19    THE NEWSPAPER PRESERVATION ACT.  AND WE HAVE TO REMEMBER, THE 

        20    NEWSPAPER PRESERVATION ACT AND, I BELIEVE, THE ANTITRUST LAWS, 

        21    IN THIS INDUSTRY FAVOR THE NUMBER OF COMPETITORS, NOT THE 

        22    ELIMINATION OF THEM. 

        23               THE PURPOSE OF THE NEWSPAPER PRESERVATION ACT IS TO 

        24    HAVE TWO OR MORE. 

        25               THE COURT:  IS THERE ANY EVIDENCE IN THIS RECORD TO 

                                                                         2340
                                 OPENING ARGUMENT \ ALIOTO 


         1    SUPPORT THE IDEA THAT IF SOME OTHER PURCHASER WERE TO ACQUIRE 

         2    THE CHRONICLE, A PURCHASER OTHER THAN HEARST, THAT THAT WOULD 

         3    LEAD TO GREATER PRICE COMPETITION? 

         4               MR. ALIOTO:  YES. 

         5               THE COURT:  WHAT IS THAT? 

         6               MR. ALIOTO:  THE EVIDENCE IS THAT THE CHRONICLE 

         7    ITSELF -- ONE WOULD ASSUME THAT IF IT WERE A PERSON OF SOME -- 

         8    IT DEPENDS ON WHO IT IS, OBVIOUSLY.  BUT, OBVIOUSLY, THEY WOULD 

         9    LOOK AT AND MAKE A JUDGMENT ON A BUSINESS ARRANGEMENT.  THAT'S 

        10    WHAT THEY WERE AFRAID OF. 

        11               THE COURT:  LET'S ASSUME IT'S ONE OF THOSE 

        12    PUBLISHERS WITHIN A 60-MILE RADIUS OF SAN FRANCISCO, KNIGHT 

        13    RIDDER, NEW YORK TIMES, GANNETT. 

        14               MR. ALIOTO:  YES. 

        15               THE COURT:  OBVIOUSLY, COMPANIES WITH THE FINANCIAL 

        16    RESOURCES TO DO THIS 3AND OBVIOUSLY EXPERIENCED IN THE 

        17    NEWSPAPER BUSINESS.  THEY KNOW HOW TO RUN A NEWSPAPER. 

        18               MR. ALIOTO:  YES. 

        19               THE COURT:  WHAT LEADS YOU TO BELIEVE OR WHAT 

        20    EVIDENCE IS THERE IN THIS RECORD TO SUGGEST THAT IF THE 

        21    CHRONICLE WERE TO BE PURCHASED BY ONE OF THOSE FIRMS THAT THERE 

        22    WOULD BE A GREATER DEGREE OF PRICE COMPETITION? 

        23               MR. ALIOTO:  BOTH OF THEM DID STUDIES ABOUT IT, AND 

        24    THAT'S WHAT THEY CONCLUDED.  THAT'S WHY THEY WANTED TO EXCLUDE 

        25    COMPETITORS, BECAUSE SOME OF THESE COMPETITORS WOULD COME IN 

                                                                         2341
                                 OPENING ARGUMENT \ ALIOTO 


         1    AND ALREADY HAVE THEIR PRINTING FACILITIES.  AND SO, FOR 

         2    EXAMPLE, THE EXAMINER WAS PARTICULARLY CONCERNED ABOUT IT.  AND 

         3    THEIR EXPERTS -- I FORGOT THE GUY'S NAME. 

         4               THE COURT:  WHERE IS THAT?  WHERE IS THAT EVIDENCE? 

         5               MR. ALIOTO:  OKAY.  LET ME GET IT, JUDGE.  THIS IS 

         6    THE EXHIBIT -- EXHIBIT 89, YOUR HONOR.  THIS IS PROJECT SUN.  

         7    THIS IS THE PROJECT BY WASSERSTEIN, PERELLA, THE COURT MAY 

         8    RECALL, AND IF YOU LOOK DOWN AT THE BOTTOM ON ARABIC NUMBER 2, 

         9    HEARST POSSIBLE LOSS OF COMPETITIVE ADVANTAGE OVER TIME, IN THE 

        10    FIRST BULLET: 

        11                   "THIS WILL BE PARTICULARLY TRUE IF THE 

        12               CHRONICLE SALE WERE ONLY TO OCCUR SHORTLY BEFORE 

        13               JOA UNWIND IN 2005 SINCE THIRD-PARTY BUYERS 

        14               WOULD NO LONGER BE SUBJECT TO UNFAVORABLE 

        15               ECONOMIC SPLITS OF JOA GOING FORWARD. 

        16               'COMPETITORS' (WITH THEIR OWN PLANT/FACILITIES) 

        17               WOULD BE ABLE TO BID FOR THE CHRONICLE, THEREBY 

        18               ELIMINATING NEED TO PAY 'MAXIMUM' VALUE TO 

        19               ACQUIRE HEARST'S SHARE OF THE AGENCY IN 2005, 

        20               LEAVING HEARST WITH MORE LIMITED ALTERNATIVES TO 

        21               MONETIZE ITS INTERESTS IN THE JOA." 

        22               THIS IS A MAJOR THREAT.  AND SO IF SOMEBODY CAME IN, 

        23    FOR INSTANCE, THE NEW YORK TIMES, THEY COULD BUY THE CHRONICLE.  

        24    THEY WOULD HAVE A 50/50 SITUATION UNTIL THE 2005 IS OVER.  BUT 

        25    THEY WOULD BE GEARING UP.  THAT'S THE JOCKEYS AGAIN.  AND THEY 

                                                                         2342
                                 OPENING ARGUMENT \ ALIOTO 


         1    WOULD BE GEARING UP.   

         2               AND BOTH OF THESE STUDIES SAY WHAT IS GOING TO 

         3    HAPPEN IN 2005 IS THAT THE EXAMINER IS GOING TO MOVE TO THE 

         4    MORNING.  AS SOON AS THEY DON'T HAVE THIS THING ANYMORE, THE 

         5    EXAMINER IS GOING TO MOVE TO THE MORNING.  THE EXAMINER IS 

         6    GOING TO COMPETE ON PRICES.  CHRONICLE IS GOING TO COMPETE ON 

         7    PRICES.  IF CHRONICLE REMAINS CHRONICLE, IT'S GOING TO HAVE TO 

         8    BUILD A NEW PLANT.  THEY ARE EXPECTING -- IN THEIR DOCUMENTS 

         9    THEY WERE EXPECTING TO BUILD A NEW PLANT IN 2002 OR 2003. 

        10               THE COURT:  WELL, IT'S EASY TO SEE HOW CHRONICLE MAY 

        11    BE HARMED BY THIS PROVISION OR THESE POSSIBLE OTHER ACQUIRERS 

        12    OF THE CHRONICLE -- NEW YORK TIMES, GANNETT, KNIGHT RIDDER.  

        13    BUT HOW IS A CONSUMER OF NEWSPAPERS OR SUBSCRIBER AND READER OF 

        14    NEWSPAPERS HARMED? 

        15               MR. ALIOTO:  BY THE RESTRICTIVE AGREEMENTS. 

        16               THE COURT:  WELL, BUT IS THAT INJURY IN FACT? 

        17               MR. ALIOTO:  IT -- NO, YOUR HONOR.  THIS IS UNDER 

        18    INJUNCTION, AND WHEN THE COURT IS SAYING "INJURY IN FACT," THAT 

        19    IMPLIES TO ME THAT THAT IS THE FACT OF DAMAGE WHICH IN AN 

        20    INJUNCTION YOU DON'T HAVE. 

        21               WHAT YOU ARE DOING IS YOU ARE LOOKING TO THE FUTURE, 

        22    AND THE LAWS -- YOU KNOW, THE LAW UNDERSTANDS OUR DIFFICULTY 

        23    BECAUSE THE LAW SAYS THAT CONGRESS WROTE "MAY SUBSTANTIALLY 

        24    LESSEN COMPETITION OR TEND TO CREATE A MONOPOLY." 

        25               WHAT HAS THE COURT SAID ABOUT THAT THIS?  THEY SAID 

                                                                         2343
                                 OPENING ARGUMENT \ ALIOTO 


         1    WE HAVE GOT TO NIP THESE THINGS IN THE BUD.  WE CAN'T EVEN LET 

         2    THEM COME ABOUT.  SO IF IT LOOKS LIKE IT'S GOING IN THAT 

         3    DIRECTION, IF IT LOOKS LIKE IT'S THE KIND OF THING THAT WILL 

         4    CAUSE HARM OR INJURY -- OBVIOUSLY, IF THESE ARE THE TWO -- IF 

         5    THIS IS THE AREA OF COMPETITION THAT SUBSCRIBERS ARE LOOKING 

         6    TO, THE IDEA THAT THERE WOULD BE AGREEMENTS THAT WOULD LIMIT 

         7    THE POTENTIAL EXPANSION OF THAT OR THE CHANGE OF THAT OR THE 

         8    BETTERMENT OF THAT OR THE LIKELY COMPETITION OF THAT, THAT 

         9    WOULD HAVE AN IMPACT ON THEM, AS WELL, NOT ONLY ON THE 

        10    CHRONICLE BUT ON THEM, AS WELL. 

        11               AND IT ALL WORKS.  IT WORKS, JUDGE, BECAUSE BEFORE 

        12    YOU HAVE THESE AGREEMENTS YOU'VE GOT TO COMPETE, JUST LIKE 

        13    EVERY OTHER INDUSTRY AND EVERYBODY ELSE.  BECAUSE OF THESE 

        14    AGREEMENTS, WHICH ARE VERY LIMITED -- THERE IS ONE PART HERE 

        15    THAT I NEED TO POINT OUT, YOUR HONOR, IF I MAY USE THIS.  THIS 

        16    IS 18 -- THIS IS VERY IMPORTANT BECAUSE THE -- WHAT IS EXEMPT 

        17    FROM THE ANTITRUST LAWS IS REALLY VERY LIMITED BY 1802 OR 1801 

        18    AND 180 -- 1802. 

        19               IN ADDITION TO THOSE LIMITS, WHAT THE CONGRESS SAYS 

        20    IN THIS VERY LAST LINE IS:  

        21                   "EXCEPT AS PROVIDED IN THIS CHAPTER, NO 

        22               JOINT NEWSPAPER OPERATING ARRANGEMENT OR ANY 

        23               PARTY THERETO SHALL BE EXEMPT FROM ANY ANTITRUST 

        24               LAW." 

        25               PERIOD.  SO IF IT'S NOT IN 1802, YOU CAN'T DO IT.  

                                                                         2344
                                 OPENING ARGUMENT \ ALIOTO 


         1    AND THERE IS NOTHING IN THERE ABOUT A 60 MILE; THERE IS NOTHING 

         2    IN THERE ABOUT FIRST RIGHT OF REFUSAL, WHICH THE SUPREME COURT 

         3    ALREADY THREW OUT AND WHICH THE CHRONICLE, BY THE WAY, 

         4    INTERESTINGLY ENOUGH, AGREES THAT IT WOULD NOT BE COVERED -- 

         5    WOULD NOT BE COVERED BY THAT. 

         6               NOW, I THINK IT'S IMPORTANT BECAUSE THE COURT IS 

         7    RAISING THESE ISSUES -- IT'S IMPORTANT TO SEE, YOU KNOW, 

         8    EXACTLY WHAT -- WHAT SOME OF THE THINGS THEY WERE TALKING 

         9    ABOUT. 

        10               THIS IS EXHIBIT 84, YOUR HONOR.  EXHIBIT 84 IS A 

        11    GROUP OF DOCUMENTS WHICH INCLUDES EXHIBIT 83, WHICH IS THE SAN 

        12    FRANCISCO EXAMINER BUSINESS PLAN, WHICH ALSO INCLUDES THE 

        13    ATTACHMENT BY THEIR FOLKS THAT -- TWO PEOPLE THAT WERE 

        14    IDENTIFIED AS JIM SEVRENS AND LEE. 

        15               NOW, IN THAT -- 

        16               THE COURT:  84? 

        17               MR. ALIOTO:  84 IS THE KIND OF COVER FOR IT, YOUR 

        18    HONOR, BUT THE REAL DOCUMENT IS 83.  84 REFERENCES 83.  THAT'S 

        19    WHY I HAVE THEM TOGETHER. 

        20               THE COURT:  84 MENTIONS THE MCCLATCHY ANCHORAGE 

        21    WINDOW? 

        22               MR. ALIOTO:  THERE IS THAT, BUT ALSO YOU WILL SEE IN 

        23    THE THIRD PARAGRAPH, "ATTACHED IS A SOLO A.M. PLAN WE HAD JIM 

        24    SEVRENS AND LEE DEVELOP LAST JULY." 

        25               THE COURT:  RIGHT. 

                                                                         2345
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  THAT'S WHAT THIS IS.  AND THAT'S 

         2    EXHIBIT 83. 

         3               AND THAT ONE BEGINS, YOUR HONOR -- AND THAT ONE 

         4    BEGINS BY IN THEIR MISSION STATEMENT, QUOTE: 

         5                   "THE SAN FRANCISCO JOA TERMINATES IN 2005.  

         6               IT IS THE INTENTION OF THE HEARST CORPORATION TO 

         7               MAINTAIN A NEWSPAPER PRESENCE AND COMPETE FOR 

         8               THE MARKETPLACE FOLLOWING THE DEMISE OF THE 

         9               JOA." 

        10               AND DOWN BELOW YOU WILL SEE WHAT THEY ARE TALKING 

        11    ABOUT.  I MEAN, THEY ARE VERY SPECIFIC.  THE VERY LAST 

        12    PARAGRAPH: 

        13                   "THE FOLLOWING PLAN ASSUMES THAT OUR 

        14               STRATEGIC MOVES WILL HAVE PUT US IN A POSITION 

        15               TO ESSENTIALLY LAUNCH A NEW MORNING EXAMINER IN 

        16               2005 AND INCLUDES ASSUMPTIONS IN EACH OF THE 

        17               FOLLOWING CATEGORIES:" 

        18               NOW, AGAIN, THAT'S THIS.  WHAT THEY ARE TALKING 

        19    ABOUT IS THEY ARE GETTING READY -- THEY ARE GETTING READY FOR 

        20    2005.  AND THEY ARE VERY SPECIFIC ABOUT IT.  AND THAT'S WHY IF 

        21    EITHER COMPANY MAKES ANY MOVES AGAINST THE OTHER TO PREVENT 

        22    THEM TO GET READY FOR THE RACE IN 2005, THAT'S WHY THE EXAMINER 

        23    CALLS THAT AN ANTITRUST VIOLATION. 

        24               AND IF YOU GO TO THE NEXT PAGE, WHAT THEY ARE 

        25    TALKING ABOUT IS, QUOTE: 

                                                                         2346
                                 OPENING ARGUMENT \ ALIOTO 


         1                   "THE SAN FRANCISCO EXAMINER WILL BE A 

         2               300,000 CIRCULATION NEWSPAPER." 

         3               THEY ALSO SAY, IF THE COURT WOULD GO TO UNDER 

         4    THEIR -- UNDER THEIR SCENARIO, THEY HAVE A NUMBER OF SCENARIOS, 

         5    BUT UNDER SCENARIO 1 -- AND THIS IS THE SECOND PAGE.  IT HAS 

         6    THE BATES NUMBER, YOUR HONOR, HN0013765. 

         7               AND WHAT THEY SAY IS -- ON THE VERY TOP THEY ARE 

         8    TALKING ABOUT REDUCING THE ADVERTISING RATES.  BUT IF THE COURT 

         9    WILL GO DOWN TO THE THIRD FULL PARAGRAPH THAT BEGINS, QUOTE, 

        10    "THE SINGLE COPY PRICING."  IT'S THE THIRD PARAGRAPH.  AND IT 

        11    STATES, QUOTE: 

        12                   "THE SINGLE COPY PRICING WILL BE TEN CENTS 

        13               DAILY AND 50 CENTS ON SUNDAY, A REDUCTION FROM 

        14               OUR CURRENT PRICING OF 25 CENTS DAILY AND 1.50 

        15               ON SUNDAY.  THESE DISCOUNTED RATES SHOULD RESULT 

        16               IN SEVEN-DAY VENDING MACHINE SALES OF 75,000, ET 

        17               CETERA." 

        18               IN OTHER WORDS, THEY ARE TALKING ABOUT S, "OH, WELL, YOU KNOW, IF WE CAN'T BUY THE CHRONICLE, WELL, 

        21    AFTER 2005, YOU KNOW, WE ARE JUST GOING TO GIVE UP, YOU KNOW, 

        22    AND WALK AWAY."  THAT'S WHAT HE TRIED TO SAY. 

        23               BUT THE COURT WILL REMEMBER THAT I ALSO HAD HIM ON A 

        24    DOCUMENT WHERE HE WAS TALKING TO HIS OWN PEOPLE AND -- AND WHEN 

        25    HE WAS TALKING TO HIS OWN PEOPLE, THIS IS WHERE HE GAVE THAT 

                                                                         2348
                                 OPENING ARGUMENT \ ALIOTO 


         1    EXTRAORDINARY STATEMENT THAT, "WELL, YOU KNOW, YOU'VE GOT TO 

         2    FAKE IT WITH YOUR OWN PEOPLE."  HE SAID THAT -- THEY'RE ALL 

         3    TALKING ABOUT COMPETING BEYOND 2005, YOUR HONOR.  BUT HE SAID 

         4    IN HIS PAPER -- IF THE COURT WILL JUST GIVE ME JUST ONE SECOND.  

         5    HERE IT IS.  THIS IS TO HIS OWN PEOPLE.  THIS IS EXHIBIT 71.  

         6    THIS IS DATED SEPTEMBER '98.  AND HE SAYS -- AND THIS IS TO 

         7    MR. ASHER AND TO MR. IRISH FROM MR. BENNACK HIMSELF.  AND HE IS 

         8    TALKING ABOUT WHAT HE WAS TELLING MR. SIAS FROM THE CHRONICLE: 

         9                   "I TOLD HIM WE WOULD CERTAINLY APPROACH 

        10               MATTERS IN THE SAME GOOD FAITH SPIRIT.  I TOLD 

        11               HIM, HOWEVER, THAT WE WERE CERTAINLY GOING TO 

        12               TAKE THE STEPS WE BELIEVED NECESSARY TO PREPARE 

        13               OURSELVES FOR THE RESUMPTION OF A FULLY -- 

        14               "RESUMPTION OF A FULLY COMPETITIVE SITUATION IN 

        15               THE POST-2005 PERIOD." 

        16               AND HE GOES ON TO SAY THAT: 

        17                   "I TOLD HIM THAT WE HAD DISCUSSIONS" -- THIS 

        18               IS GETTING INFORMATION ON SPLITTING THE 

        19               ASSETS -- "BUT, AMONG OTHER THINGS, PREPARING 

        20               OURSELVES FOR THE DAYS WHEN WE WOULD BE 

        21               CONVENTIONAL COMPETITORS AGAIN." 

        22               WELL, WHY DO YOU SAY -- IF YOU DIDN'T BELIEVE THIS, 

        23    IF THIS WAS THE BLOWFISH IDEA AND EVERYTHING, WHY ARE YOU 

        24    TELLING THIS TO YOUR PEOPLE HERE?  WHY DON'T YOU PUT IN HERE, 

        25    "WELL, THIS IS A BIG FAKE AND DON'T WORRY ABOUT IT?"  WHY DO 

                                                                         2349
                                 OPENING ARGUMENT \ ALIOTO 


         1    YOU PUT IN HERE, INSTEAD, "NONE OF THIS IS VERY PLEASANT TO 

         2    CONTEMPLATE." COMPETITION SOMETIMES ISN'T BUT IT'S COMPETITION.  

         3    SO WHY ARE YOU TELLING YOUR OWN PEOPLE THAT?   

         4               AND HE MAKES THIS EXTRAORDINARY STATEMENT AND 

         5    SOMETIMES YOU'VE GOT TO -- YOU KNOW, YOU CAN'T TELL YOUR OWN 

         6    PEOPLE YOU'RE GOING TO DIE, YOU KNOW, OR I THINK HE USED THE 

         7    EXPRESSION "ROAD KILL."  YOU CAN'T TELL THEM THAT.   

         8               WELL, WHAT IS HE SAYING, THAT HE'S GOING TO -- THAT 

         9    HE IS LYING TO THEM?  NO.  WHAT HE IS DOING IS HE IS TRYING TO 

        10    COVER UP HIS TESTIMONY BEFORE YOUR HONOR TO TRY TO SUGGEST HE 

        11    DIDN'T MEAN THIS.  AND HE DOESN'T MEAN IT NOW BECAUSE IF HE DID 

        12    MEAN IT, HE HAS THE INTENT TO COMPETE, AND HE CANNOT BE ALLOWED 

        13    TO NOT COMPETE.  AND HE HAS THE WHEREWITHAL.  HE HAS THE 

        14    $660 MILLION.  AND HE HAS -- AND HE HAS THE VERY PRODUCT THAT 

        15    WE ARE TALKING ABOUT, A NEWSPAPER, AND WHEN THE COURT COMES TO 

        16    JUDGE THE CREDIBILITY OF THE WITNESS, THIS IS -- THIS IS 

        17    CLASSIC OMAR KHAYYAM. 

        18               THE COURT:  YOU LOST ME. 

        19               MR. ALIOTO:  WELL, LET ME GIVE IT.  OMAR KHAYYAM IS 

        20    GREAT, JUDGE, BECAUSE IT REALLY APPLIES TO THESE WITNESSES.  IT 

        21    SIMPLY SAYS:   

        22                   "WHEN THE MOVING FINGER WRITES AND HAVING 

        23               WRIT MOVES ON:  NOR ALL YOUR WIT NOR PIETY CAN 

        24               LURE IT BACK TO CANCEL HALF A LINE, NOR ALL YOUR 

        25               TEARS WASH OUT A WORD OF IT."  

                                                                         2350
                                 OPENING ARGUMENT \ ALIOTO 


         1               SO YOU WRITE IT; IT'S THERE; YOU CAN'T GET IT BACK.  

         2    WIT, PIETY OR TEARS.   

         3               HERE IT IS (INDICATING).  THAT'S IT.  HE'S STUCK 

         4    WITH IT.  HE'S STUCK WITH IT AND HE DIDN'T LIKE IT.  AND IT 

         5    WASN'T ONCE, JUDGE.  IT WAS SO MANY TIMES.  AND SO WHAT -- AND 

         6    SO HE HAD NO PROBLEM TELLING YOU, WELL, HE DIDN'T MEAN IT. 

         7               AND EVEN WHEN YOU HAVE MR. WHITE, MR. WHITE WAS 

         8    SAYING THE REASON I WAS SENT OUT HERE WAS TO DO THIS.  REMEMBER 

         9    ALL THE THINGS THAT HE IS GETTING READY TO DO. 

        10               THE COURT:  WHERE IS THE EVIDENCE HERE THAT HEARST 

        11    ATTEMPTED TO ENFORCE THAT 60-MILE CLAUSE? 

        12               MR. ALIOTO:  TO ENFORCE THE 60-MILE CLAUSE? 

        13               THE COURT:  YES, TO EXCLUDE -- 

        14               MR. ALIOTO:  YOUR HONOR? 

        15               THE COURT:  TO EXCLUDE ANY POTENTIAL -- 

        16               MR. ALIOTO:  HOW ABOUT THIS?  THEY DIDN'T EVEN HAVE 

        17    TO GET TO THAT.  IT'S LIKE THEIR ARMOR.  IT'S LIKE THEIR 

        18    PROTECTION.  THEY HAVE THIS RIGHT, WHICH WE ARE ASKING THE 

        19    COURT TO VOID, OF NOT ONLY FIRST RIGHT OF REFUSAL, BUT THEY 

        20    HAVE TO NEGOTIATE WITH THEM FIRST.  THEY HAD SET A DATE, AS 

        21    YOUR HONOR RECALLS, FOR -- I FORGOT.  IT WAS AUGUST 12TH OR 

        22    16TH OR WHATEVER IT WAS, WHICH WAS THE LAST DAY THAT ANYONE 

        23    COULD SUBMIT A BID FOR THE CHRONICLE.  THEY MADE THEIR DEAL 

        24    AUGUST 6TH, BEFORE THE DATE THAT ANYONE HAD THE RIGHT TO DO IT.  

        25    THEY DIDN'T EVEN HAVE TO USE THE 60 DAYS.  ALL THEY HAVE TO DO 

                                                                         2351
                                 OPENING ARGUMENT \ ALIOTO 


         1    IS TALK ABOUT IT.  DID YOU HEAR THE LADY FROM DLJ -- I FORGOT 

         2    HER NAME RIGHT NOW, GREENTHAL. 

         3               THE COURT:  GREENTHAL. 

         4               MR. ALIOTO:  YES.  DID YOU HEAR -- THE WAY THEY 

         5    WOULD TALK ABOUT IT, THEY DON'T -- ALL THEY HAVE TO DO IS 

         6    MENTION IT.  SO -- 

         7               THE COURT:  ISN'T THE PARTY HARMED BY THAT 

         8    CHRONICLE? 

         9               MR. ALIOTO:  YES, DEFINITELY.  DEFINITELY THEY ARE. 

        10               THE COURT:  I DON'T HEAR MR. ROSCH COMPLAINING ABOUT 

        11    THIS, HOWEVER. 

        12               MR. ALIOTO:  I THINK HIS CLIENTS MIGHT BECAUSE IT'S 

        13    INTERESTING, JUDGE, WHEN YOU ASK THAT QUESTION, THE CHRONICLE 

        14    TOOK THE POSITION IT'S NOT PROTECTED.  THAT WAS A VERY 

        15    INTERESTING ADMISSION.  SOMEBODY IS GETTING THE PICTURE.  

        16    REMEMBER, THAT MR. SIAS WAS NO FRIEND OF THE CHRONICLE 

        17    STOCKHOLDERS.  THIS GUY WAS LIKE AN INSIDER.  HE WAS GIVING 

        18    MORE INFORMATION TO HEARST THAN HEARST COULD GET ON ITS OWN. 

        19               MR. ROSCH:  YOUR HONOR, I DON'T OBJECT NORMALLY TO 

        20    ORAL ARGUMENT, BUT THAT'S SCANDALOUS AND I MOVE THAT IT BE 

        21    STRICKEN. 

        22               THE COURT:  WELL, I DON'T THINK HE WAS REFERRING TO 

        23    MR. SIAS.  I THINK HE MISSPOKE. 

        24               ARE YOU REFERRING TO THAT INDIVIDUAL WHO IS 

        25    MENTIONED? 

                                                                         2352
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  YEAH.  WELL, WE WEREN'T CLEAR WHO IT 

         2    WAS.  FIRST HE WAS IDENTIFIED AS ONE PERSON. 

         3               THE COURT:  RIGHT. 

         4               MR. ALIOTO:  MR. ROSENBERG.  THEN HE WAS IDENTIFIED 

         5    AS MR. NICHOLS.  THEN HE WAS IDENTIFIED AS SOMEBODY ELSE. 

         6               THE COURT:  I THINK MR. ROSCH THOUGHT YOU WERE 

         7    REFERRING TO MR. SIAS. 

         8               MR. ALIOTO:  HOWEVER, THE CHRONICLE ITSELF FELT -- 

         9    IT WAS OF THE VIEW THAT MR. SIAS WAS GIVING INFORMATION TO 

        10    HEARST.  THAT'S A WRITTEN DOCUMENT THAT IS IN AUGUST -- 

        11               THE COURT:  WELL . . . 

        12               MR. ALIOTO:  OKAY. 

        13               THE COURT:  BUT THAT'S NOT OUR LAWSUIT. 

        14               MR. ALIOTO:  NO, NO. 

        15               THE COURT:  THAT MAY BE ANOTHER LAWSUIT. 

        16                              (LAUGHTER) 

        17               MR. ALIOTO:  ALL RIGHT.  BUT FOR THE RECORD, IF IT 

        18    PLEASE YOUR HONOR, IT'S EXHIBIT 134.  AND THIS IS THE LETTER 

        19    FROM MS. GREENTHAL TO THE CHRONICLE FOLKS.  AND SHE STATED IN 

        20    HER DOCUMENT -- SHE STATED THAT IN THE LAST -- IT LOOKS LIKE 

        21    IT'S AN E-MAIL SO IT'S THE LAST -- SECOND-TO-LAST SENTENCE, SHE 

        22    SAYS THAT, QUOTE: 

        23                   "IT'S VERY CLEAR TO ME THAT THE SUBSTANCE OF 

        24               OUR LAST DISCUSSION WITH JOHN ON THIS TOPIC 

        25               SOMEHOW GOT TO FRANK." 

                                                                         2353
                                 OPENING ARGUMENT \ ALIOTO 


         1               AND THEN SHE GOES ON.  AND WHEN SHE TESTIFIED SHE 

         2    FELT LIKE HE HAD GIVEN THEM INFORMATION -- 

         3               MR. ROSCH:  I OBJECT TO THAT AS WELL, YOUR HONOR.  

         4    IT MISCHARACTERIZES THE EVIDENCE.  AGAIN, THIS IS SCANDALOUS 

         5    MATERIAL WHICH IS ENTIRELY IRRELEVANT. 

         6               MR. ALIOTO:  WELL, I DIDN'T WRITE IT, YOUR HONOR. 

         7               MR. ROSCH:  AND I MOVE THAT IT BE STRICKEN. 

         8               THE COURT:  WELL, I AM GOING TO OVERRULE THE 

         9    OBJECTION.  MR. ALIOTO HAS POINTED TO EXHIBIT 134 AND HE HAS 

        10    MADE AN INTERPRETATION AND A FAIR INTERPRETATION GIVEN THE -- 

        11    GIVEN THE DOCUMENT.  THE OBJECTION IS OVERRULED. 

        12               MR. ALIOTO:  OKAY.  BUT REGARDLESS, YOUR HONOR, THAT 

        13    EVEN THOUGH THE CHRONICLE ITSELF OR THE STOCKHOLDERS MAY BE 

        14    HARMED BY THAT, TOO, AND TOOK THAT POSITION THAT IT'S NOT 

        15    COVERED -- AND WE WOULD SAY THIS, YOUR HONOR.  IF IT'S NOT 

        16    COVERED IT HAS TO GO BECAUSE IT WAS ALREADY REPUDIATED BY THE 

        17    SUPREME COURT. 

        18               THE COURT:  WELL, MY PROBLEM IS HOW IS YOUR CLIENT 

        19    HURT? 

        20               MR. ALIOTO:  OKAY.  THERE ARE TWO -- YOUR HONOR, 

        21    THERE ARE TWO ASPECTS.  FIRST OF ALL, IF THAT -- 

        22               THE COURT:  OR THREATENED TO BE HARMED? 

        23               MR. ALIOTO:  MY CLIENT -- FIRST OF ALL, I WISH TO 

        24    EMPHASIZE AGAIN, I BELIEVE THAT MY CLIENT MAY -- IS THREATENED 

        25    BY THAT, THAT THAT PREVENTS ON ITS FACE POTENTIAL NEW 

                                                                         2354
                                 OPENING ARGUMENT \ ALIOTO 


         1    COMPETITION, POTENTIAL COMPETITION FOR HIS BUSINESS, POTENTIAL 

         2    COMPETITORS COMING IN, AS BOTH OF THESE FOLKS HAVE RECOGNIZED.  

         3    IF THESE OTHER COMPETITORS COME IN, THERE IS THAT POTENTIAL OF 

         4    PRICE COMPETITION, OBVIOUSLY. 

         5               BUT I THINK IT'S MORE THAN THAT.  I THINK THAT WHEN 

         6    THE COURT IS DOING EQUITY, THE COURT HAS TO ENSURE THAT ALL OF 

         7    THESE RESTRAINTS ARE PROHIBITED AND THAT THE COURT HAS THE 

         8    POWER TO DO THAT. 

         9               SOMETIMES, FOR EXAMPLE, IN PROVING AN ANTITRUST CASE 

        10    NOT ALL OF THE ANTITRUST VIOLATIONS WILL NECESSARILY CALL 

        11    MONETARY DAMAGE TO A PLAINTIFF.  NONETHELESS, IN ORDER, AS THE 

        12    SUPREME COURT SAID IN CONTINENTAL OR TO GET THE FULL PICTURE OF 

        13    HOW THESE PEOPLE ARE OPERATING, EVERYTHING THEY DO IS WITH 

        14    RESTRAINTS, YOUR HONOR, THAT IF YOU GET THE FULL PICTURE, THE 

        15    COURT WHEN IT COMES TO SOMETHING IN EQUITY HAS THE RIGHT TO 

        16    STAMP OUT NOT ONLY THE DIRECT VIOLATIONS BUT ANY OF THOSE -- 

        17    EVEN THOSE THAT MIGHT OTHERWISE BE LEGAL, AND WHETHER OR NOT 

        18    THEY IMPACT ANYBODY. 

        19               (CONTINUED ON NEXT PAGE - NOTHING OMITTED.) 

        20    

        21    

        22    

        23    

        24    

        25    

                                                                         2355
                                 OPENING ARGUMENT \ ALIOTO 


         1               BECAUSE THEY ARE PART AND PARCEL OF THE OVERALL 

         2    SCHEME. 

         3               NOW, HERE I WOULD SUBMIT TO YOUR HONOR THAT THE IDEA 

         4    THAT THEY WOULD HAVE THESE RESTRICTIONS ON POTENTIAL SELLERS, 

         5    BECAUSE, LOOK, IF WE GO BACK -- IF I CAN GO BACK, IF WE GO BACK 

         6    TO WHERE WE WERE WITH THE JOA RECOGNIZING THAT THE JOA WAS 

         7    MEANT TO INCREASE THE COMPETITORS, RECOGNIZING ALSO, YOUR 

         8    HONOR, THAT SECTION 7 AT LEAST WAS ALSO MANY TIMES, AS WE PUT 

         9    IN OUR BRIEFS, MEANT TO INCREASE COMPETITORS BECAUSE OF THE 

        10    THREATENED HARM, THEY FIGURE THE BEST WAY TO PRESERVE 

        11    COMPETITION WAS MORE COMPETITORS, THOSE WERE THOSE ORIGINAL 

        12    CASES, AND THOSE WERE WHICH WE CITED TO YOUR HONOR. 

        13               BUT SUPPOSE DURING THE COURSE OF ANY OF THIS, ONE OF 

        14    THE PARTIES WANTED TO SELL.  OKAY.  IF HE WANTED TO SELL, 

        15    SOMEONE WHO WANTED TO BUY OBVIOUSLY WOULD COME INTO THE MARKET 

        16    AND ONE WOULD THINK IF THEY WERE WILLING TO BUY, YOU KNOW, 

        17    THEY'D WANT TO DO A GOOD JOB. 

        18               SOMEONE MIGHT GET TIRED, AND IF THAT PERSON COULDN'T 

        19    COME IN BECAUSE OF THE 60 MILES OR IF THE PERSON COULDN'T COME 

        20    IN BECAUSE OF FIRST RIGHT OF REFUSAL, THAT POTENTIAL IS NEVER 

        21    THERE.  IT'S IMMEDIATELY WIPED OUT. 

        22               SUPPOSE THE EXAMINER -- SUPPOSE MR. BENNACK WANTED 

        23    TO CARRY THROUGH WITH HIS THREAT.  SUPPOSE HE DECIDED, "OKAY, 

        24    WE'RE LAYING DOWN.  YOU KNOW, WE'RE NOT DOING -- WE'RE NOT 

        25    TRYING TO HELP ANYBODY.  WE DON'T CARE WHAT THE SAN FRANCISCO 

                                                                         2356
                                 OPENING ARGUMENT \ ALIOTO 


         1    NEWSPAPER AGENCY DOES.  YOU KNOW, FORGET IT."  AND SUPPOSE THAT 

         2    THERE'S NOTHING -- AND HE WANTED TO LEAVE.  HE COULD LEAVE.  HE 

         3    COULD JUST LEAVE.  NOTHING IS HURT HERE BECAUSE THE CHRONICLE, 

         4    YOU KNOW, THEY DIDN'T DO ANYTHING FOR THAT. 

         5               BUT SUPPOSE THE EXAMINER REALLY WANTED TO LEAVE 

         6    LEGITIMATELY AND THEY WANTED TO SELL TO SOMEBODY.  SUPPOSE IT 

         7    WAS TONY RIDDER WHO'S DOWN IN SAN JOSE.  ALL RIGHT, 'I'M 

         8    GETTING OUT OF HERE.  I DON'T LIKE SAN FRANCISCO.  I'VE HAD IT.  

         9    I'M GOING TO HOUSTON CHRONICLE, WORLD CLASS NEWSPAPER." 

        10                              (LAUGHTER) 

        11               MR. ALIOTO:  AND HE SAYS, "I'M LEAVING."  HE SAYS 

        12    THAT.  TONY RIDDER CAN'T BUY IT. 

        13               NOW, BECAUSE OF THE 60-MILE LIMIT, YOUR HONOR, IF NO 

        14    ONE CLOSER WANTS TO BUY IT, THEN THE CHRONICLE GETS A MONOPOLY 

        15    BUT NOT BECAUSE OF NOTHING THEY DID BUT BECAUSE OF THE 60-MILE 

        16    LIMIT, AND SOMEONE LIKE REILLY IS HURT.  NOW, THIS WAS A FACT 

        17    IN THIS CASE. 

        18               THE COURT:  HOW? 

        19               MR. ALIOTO:  THIS WAS A FACT IN THIS CASE.  THE FACT 

        20    IN THIS CASE -- 

        21               THE COURT:  HOW WAS REILLY HURT? 

        22               MR. ALIOTO:  BECAUSE TONY RIDDER WAS SUPPOSED TO 

        23    HAVE OFFERED -- WE HAVE IT IN THE DOCUMENTS -- SUPPOSED TO HAVE 

        24    SAID THAT THEY WOULD BUY THE EXAMINER, BUT ONLY WITH THE JOA, 

        25    WHICH SHOULD HAVE BEEN DONE OBVIOUSLY, BUT ONLY WITH THE JOA 

                                                                         2357
                                 OPENING ARGUMENT \ ALIOTO 


         1    THEY WOULD HAVE PAID HEARST SOME MONEY. 

         2               TONY RIDDER WAS KNOCKED OUT FOR TWO REASONS.  ONE, 

         3    THE JOA AND THE 60 MILES.  HE'S GONE. 

         4               SO WHAT HAPPENS?  INSTEAD OF THE EXAMINER BEING RUN, 

         5    CONTINUING TO BE RUN AND RUN BY A MAJOR NEWSPAPER, THAT 

         6    POTENTIAL WAS LOST. 

         7               NOW, THAT WAS AN ACTUAL OFFER.  THAT WAS -- YOU 

         8    KNOW, THAT WAS AN ACTUAL OFFER. 

         9               NOW, THE FEWER THE PAPERS, THE HIGHER THE PRICES.  

        10    THAT'S WHAT WE'RE LOOKING AT. 

        11               THIS IS VERY -- I WOULD RESPECTFULLY SUBMIT WHAT THE 

        12    CONGRESS INTENDED TO DO HERE AND THE WAY IT ACTUALLY FUNCTIONS 

        13    IS THAT IF YOU CHOOSE VOLUNTARILY TO GO INTO A JOA, IF IT'S 

        14    GOING TO BE A SPRINGBOARD, IF THE COURT SAYS -- IF THE COURT 

        15    ALLOWS -- IF THE COURT DOES NOT PROHIBIT HEARST FROM BUYING THE 

        16    CHRONICLE, THEN IT'S A ROAD MAP FOR MONOPOLY IN ANY CITY, YOUR 

        17    HONOR, BECAUSE IT WOULD BE REAL SIMPLE. 

        18               ONE OF THE -- THE DOMINANT PAPER WILL SIMPLY SAY TO 

        19    THE OTHER PAPER, "WE'LL BUY YOU OUT OR WE'LL TAKE YOU OVER," OR 

        20    ANYTHING LIKE THAT, "AND WE'LL HAVE A MONOPOLY BECAUSE YOU'RE A 

        21    FAILING PAPER." 

        22               THE COURT:  WELL, LET'S JUST SPIN THIS OUT FOR A 

        23    MOMENT. 

        24               MR. ALIOTO:  OKAY. 

        25               THE COURT:  HOW IS COMPETITION IMPROVED IF 

                                                                         2358
                                 OPENING ARGUMENT \ ALIOTO 


         1    KNIGHT-RIDDER WERE THE PURCHASER RATHER THAN HEARST?  

         2    KNIGHT-RIDDER HAS AN 80 PERCENT SHARE IN SANTA CLARA COUNTY 

         3    WITH THE SAN JOSE MERCURY NEWS.  THEY HAVE A 38 PERCENT SHARE 

         4    IN CONTRA COSTA COUNTY WITH THE CONTRA COSTA TIMES.  IF THEY 

         5    WERE THEN TO ACQUIRE THE CHRONICLE, THEY WOULD HAVE A 

         6    65 PERCENT SHARE IN SAN FRANCISCO, 44 PERCENT SHARE IN MARIN, 

         7    53 PERCENT SHARE IN SAN MATEO COUNTY.  HOW IS THAT LIKELY TO 

         8    IMPROVE COMPETITION IF KNIGHT-RIDDER WERE THE PURCHASER? 

         9               MR. ALIOTO:  OKAY, I WAS DISCUSSING ABOUT THE 

        10    EVIDENCE FROM KNIGHT-RIDDER WITH REGARD TO THE EXAMINER.  

        11    YOU'RE SAYING WITH REGARD TO THE -- YOU'RE POSITING THE 

        12    QUESTION WITH REGARD TO THE CHRONICLE? 

        13               THE COURT:  YES. 

        14               MR. ALIOTO:  OKAY.  IF -- 

        15               THE COURT:  WELL, EVEN IF YOU TAKE THE EXAMINER AND 

        16    KNIGHT-RIDDER WERE THE PURCHASER OF THE EXAMINER WITHIN THE 

        17    JOA, THE EXAMINER HAS A 32 PERCENT SHARE IN SAN FRANCISCO. 

        18               MR. ALIOTO:  YES. 

        19               THE COURT:  HOW WOULD KNIGHT-RIDDER AS THE PURCHASER 

        20    OF EITHER OF THESE PAPERS WITH OR WITHOUT THE JOA IMPROVE THE 

        21    COMPETITIVE ENVIRONMENT? 

        22               MR. ALIOTO:  WELL, WHAT THE SUPREME COURT SAID IS 

        23    THAT ANYBODY IS BETTER THAN THE COMPETITOR IN THE MARKET DOING 

        24    IT.  THE SUPREME COURT SAID THAT THE FAILING -- IF IT'S A 

        25    FAILING COMPANY OR OTHERWISE, OR YOU JUST WANT TO LEAVE, IT'S 

                                                                         2359
                                 OPENING ARGUMENT \ ALIOTO 


         1    NOT FAILING BECAUSE THESE GUYS ARE MAKING MONEY, BUT IF YOU 

         2    WANT TO LEAVE, THE COURT SAYS THAT IT CANNOT BE APPLIED IN A 

         3    MERGER OR ANY OTHER CASE UNLESS IT IS ESTABLISHED THAT THE 

         4    COMPANY THAT ACQUIRES THE FAILING COMPANY OR BRINGS IT UNDER 

         5    DOMINION IS THE ONLY AVAILABLE PURCHASER.  FOR IF ANOTHER 

         6    PERSON OR GROUP COULD BE INTERESTED, A UNIT IN THE COMPETITIVE 

         7    SYSTEM WOULD BE PRESERVED AND NOT LOST TO MONOPOLY POWER.  IN 

         8    OTHER WORDS, AN OUTSIDER IS ALWAYS BETTER RATHER THAN -- IF 

         9    THAT'S THE ONLY THING AVAILABLE. 

        10               NOW, I WOULD SAY IN ORDINARY CIRCUMSTANCES, YOUR 

        11    HONOR, THAT I THINK THAT IF THE CHRONICLE OR THE EXAMINER WERE 

        12    PUT UP FOR SALE IN THE JOA, I THINK THAT THEY WOULD PROBABLY 

        13    ATTRACT MANY MORE PEOPLE AND I THINK THAT -- WHICH WOULD HELP 

        14    COMPETITION, AS THE SUPREME COURT SAYS, WHICH MEANS IT HELPS 

        15    THE SUBSCRIBERS AS WELL AS THE ADVERTISERS AND PRESERVES THE 

        16    ACT, PRESERVES THE ANTITRUST ACT, PRESERVES THE PRESERVATION 

        17    ACT.  BUT I WOULD SUBMIT THAT OTHERS WOULD HAVE A MORE LIKELY 

        18    CHANCE OF BEING ABLE TO DO IT. 

        19               THE COURT:  ONE MORE QUESTION. 

        20               MR. ALIOTO:  AS MANY QUESTIONS AS YOU WANT, YOUR 

        21    HONOR. 

        22               THE COURT:  IS THERE ANY CASE THAT YOU'RE AWARE OF 

        23    THAT DISCUSSES NEGATIVE PRICE TRANSACTIONS UNDER SECTIONS 1, 

        24    2 OR 7?  IS THERE ANY -- 

        25               MR. ALIOTO:  WELL, I WOULD SAY THIS:  SINCE THE 

                                                                         2360
                                 OPENING ARGUMENT \ ALIOTO 


         1    ILLUSTRIOUS EXPERTS FOR THE DEFENDANTS COULD ONLY COME UP WITH 

         2    THE GARBAGE EXAMPLE -- 

         3               THE COURT:  WELL, THAT'S -- 

         4               MR. ALIOTO:  -- THERE ARE A LOT OF GARBAGE CASES, 

         5    BECAUSE I'VE BEEN INVOLVED IN SOME OF THOSE.  BUT THE NEGATIVE 

         6    PRICE, YOUR HONOR, IS, IN WHICH YOU PAY A PRICE FOR SOMEONE 

         7    TO -- 

         8               THE COURT:  TAKE THIS THING OFF YOUR HANDS. 

         9               MR. ALIOTO:  YES.  OKAY.  I THINK YOU WOULD ONLY 

        10    FIND THAT KIND OF CONDUCT IN A CARTEL CASE.  I DON'T THINK THAT 

        11    IT COULD OTHERWISE -- I DON'T THINK THAT IT WOULD OTHERWISE 

        12    EXIST. 

        13               THE COURT:  HOW SO? 

        14               MR. ALIOTO:  WELL, BECAUSE -- 

        15               THE COURT:  HOW IS THAT CARTEL BEHAVIOR? 

        16               MR. ALIOTO:  WELL, IN A CARTEL, IN ORDER TO -- 

        17    SOMETIMES IN ORDER TO PARTICIPATE IN -- WELL, LIKE EVEN IN OUR 

        18    CASE RIGHT HERE, IN ORDER TO PARTICIPATE IN GAINING A MONOPOLY, 

        19    YOU MAKE PEOPLE -- YOU MAY PAY PEOPLE TO BASICALLY RUN 

        20    SOMETHING OUT; IN OTHER WORDS, TO TAKE IT OFF. 

        21               THE COURT:  IT'S EVIDENCE OF A CONSPIRACY BETWEEN 

        22    HEARST AND FANG. 

        23               MR. ALIOTO:  YES.  OH, YES.  CERTAINLY. 

        24               THE COURT:  AND A CONSPIRACY TO DO WHAT? 

        25               MR. ALIOTO:  BUT HERE'S THE DEAL -- 

                                                                         2361
                                 OPENING ARGUMENT \ ALIOTO 


         1               THE COURT:  PREDATORY PRICING?  WHAT?  PREDATORY 

         2    PRICING?  WHAT IS IT? 

         3               MR. ALIOTO:  NO.  CONSPIRACY TO ESTABLISH A MONOPOLY 

         4    BECAUSE THEY KNOW THEY'RE NOT GOING TO COMPETE AGAINST IT. 

         5               WHEN MR. REILLY, FOR EXAMPLE, MADE A BID ALSO 

         6    AFTERWARDS, WHEN HE WAS INVITED BY HEARST TO DO THAT, AND I 

         7    GUESS, YOU KNOW, THE EVIDENCE NOW SHOWS THAT THAT WAS KIND OF A 

         8    FAKE, BUT WHEN HE WAS INVITED TO DO THAT, HE WAS TALKING 

         9    ABOUT -- AND SO WAS FANG, MR. FANG -- THEY WERE TALKING ABOUT 

        10    AN AMOUNT THAT WOULD REALLY MAKE THEM COMPETITIVE.  REMEMBER, 

        11    THE FIRST OFFER BY MR. FANG WAS $210 MILLION.  THEY SAY, "WELL, 

        12    WAIT A MINUTE.  THE EXAMINER -- HEARST HAS TO -- WHY DOES 

        13    HEARST HAVE TO DO THIS IN THE FIRST PLACE?"  HEARST SAYS THEY 

        14    HAD TO DO IT FOR POLITICAL REASONS.  THAT'S WHAT THEY'RE 

        15    SAYING. 

        16               THE COURT:  DO YOU DISBELIEVE THAT? 

        17               MR. ALIOTO:  NO, BECAUSE IT WORKED.  THE DEPARTMENT 

        18    OF JUSTICE SENT IN, AND THEY SAID, "HEY, YEAH, YOU GUYS GOT TWO 

        19    COMPETING NEWSPAPERS."  AND IT'S NOT TRUE, BUT THEY DIDN'T KNOW 

        20    THAT, THE DEPARTMENT DIDN'T KNOW THAT. 

        21               THE COURT:  ARE YOU SURE? 

        22               MR. ALIOTO:  WELL, IT WOULD BE PRETTY ROUGH TO SEND 

        23    SOMETHING TO THE FEDERAL -- WELL, PRETTY ROUGH TO MAKE A 

        24    STATEMENT LIKE THAT. 

        25               THE COURT:  THEY HAD MR. FANG'S DEPOSITION.  DID 

                                                                         2362
                                 OPENING ARGUMENT \ ALIOTO 


         1    FANG -- 

         2               MR. ALIOTO:  YOUR HONOR, I'LL TELL YOU THIS -- 

         3               THE COURT:  DID FANG IN THAT DEPOSITION DESCRIBE 

         4    WHAT HE TESTIFIED TO WITH RESPECT TO HIS PLANS FOR THIS 

         5    NEWSPAPER? 

         6               MR. ALIOTO:  FIRST OF ALL, HE DIDN'T HAVE ANY PLANS, 

         7    YOUR HONOR.  YOU KNOW, REMEMBER WE HAD THAT.  HE DIDN'T HAVE 

         8    ANY BUSINESS PLANS. 

         9               BUT THERE'S -- YOU MAY HAVE ANOTHER POINT.  THEY MET 

        10    WITH HIM FIVE TIMES.  YOU WONDER WHO'S WORKING FOR WHO.  THEY 

        11    NEVER MET WITH ANYONE ELSE.  IT WAS LIKE THEY WERE REPORTING TO 

        12    HIM ALMOST.  IT WAS VERY UNUSUAL. 

        13               BUT, IN ANY EVENT, WHEN THE GOVERNMENT ISSUED THEIR 

        14    PRESS RELEASE AND SAID TO EVERYONE THAT FOR THE FIRST TIME IN 

        15    35 YEARS THERE WILL BE COMPETITIVE NEWSPAPERS, THAT WAS THE 

        16    LINE -- THAT WAS, IN FACT, THE LINE THAT HEARST WAS GIVING 

        17    EVERYWHERE, INCLUDING TO YOUR HONOR. 

        18               THE COURT:  CORRECT. 

        19               MR. ALIOTO:  OKAY.  THEN MR. ASHER GETS ON THE STAND 

        20    AND SAYS, "WE NEVER HAD AN INTENTION THERE WOULD BE A 

        21    FULLY-COMPETITIVE NEWSPAPER.  AND NOT ONLY THAT, NEITHER DID 

        22    THE FANGS."  THAT WAS WILD I THOUGHT BECAUSE IT WAS PLAIN THAT 

        23    IT WAS A SHAM.  I MEAN, IT WAS AN ADMISSION.  THESE ARE NOT 

        24    BAREFOOT BOYS.  THESE ARE PEOPLE THAT ARE VERY, VERY POWERFUL 

        25    AND THEY KNOW WHAT THEY'RE DOING.   

                                                                         2363
                                 OPENING ARGUMENT \ ALIOTO 


         1               AND IT WAS TO GAIN A MONOPOLY THAT THEY WERE MAKING 

         2    THESE REPRESENTATIONS.  YOU CAN NEVER BE SURE WHETHER OR NOT 

         3    WHAT THEY'RE SAYING IS TRUE BECAUSE THEY CHANGE ON THEIR OWN SO 

         4    OFTEN AND IT DOESN'T BOTHER THEM.  THEY WILL -- THEY'RE LIKE A 

         5    CHAMELEON.  THEY CAN FASHION THEIR STATEMENTS TO THE OCCASION 

         6    AND THEY DO, AS WE SAW AGAIN AND AGAIN. 

         7               THE COURT:  IS COMPETITION HARMED?  LET'S ASSUME 

         8    THAT THE CHRONICLE PURCHASED BY HEARST GOES FORWARD.  IS 

         9    COMPETITION HARMED BY SPINNING OFF THE EXAMINER ASSETS TO THE 

        10    FANGS?  AND IF SO, HOW? 

        11               MR. ALIOTO:  YES, IT'S HARMED BOTH WAYS.  I MEAN, 

        12    IT'S HARMED IF THE COURT ALLOWS THE HEARST CORPORATION TO BUY 

        13    THE CHRONICLE. 

        14               THE COURT:  BUT THAT'S -- 

        15               MR. ALIOTO:  IT ELIMINATES A NEWSPAPER. 

        16               THE COURT:  PUT THAT ASIDE FOR A MOMENT. 

        17               MR. ALIOTO:  OKAY.  THEN THE OTHER ONE IS IF THEY 

        18    SELL THEIR ASSETS. 

        19               THE COURT:  CORRECT.  THE EXAMINER-FANG TRANSACTION 

        20    OR THE HEARST-FANG TRANSACTION ON ITS OWN, DOES THAT CREATE 

        21    COMPETITIVE INJURY?  AND IF SO, WHAT IS THAT COMPETITIVE INJURY 

        22    AND WHO SUFFERS IT? 

        23               MR. ALIOTO:  IN OTHER WORDS, IF HEARST WERE REQUIRED 

        24    TO GIVE OVER ITS ASSETS TO THE FANGS TO -- 

        25               THE COURT:  IF THEY -- 

                                                                         2364
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  -- PUBLISH IT? 

         2               THE COURT:  IF THEY COMPLETE A -- 

         3               MR. ALIOTO:  THEY DIDN'T WANT THOSE ASSETS, JUDGE.  

         4    THEY DIDN'T WANT IT.  THEY DIDN'T WANT THE PRESSES OR ANYTHING.  

         5    THIS IS WHERE THEY CAME UP MAGICALLY TWO DAYS BEFORE THE 

         6    AGREEMENT WITH A BUDGET OF $15 MILLION WHICH JUST HAPPENED TO 

         7    FIT INTO THE 5-MILLION-DOLLAR DEAL. 

         8               THEY USED TO HAVE -- WE DIDN'T GET A DIFFERENT 

         9    BUDGET.  YOUR HONOR MAY REMEMBER, WE TOOK MR. FANG'S DEPOSITION 

        10    THE DAY BEFORE THIS TRIAL STARTED. 

        11               THE COURT:  COME BACK TO THE POINT. 

        12               MR. ALIOTO:  YES. 

        13               THE COURT:  HOW IS COMPETITION HARMED? 

        14               MR. ALIOTO:  IF THEY DON'T HAVE ASSETS? 

        15               THE COURT:  NO.  HOW IS COMPETITION HARMED BY 

        16    COMPLETION OF THE TRANSACTION CONTEMPLATED IN THE MARCH 16 

        17    CONTRACT? 

        18               MR. ALIOTO:  HIGHER PRICES. 

        19               THE COURT:  HOW SO?  HOW ARE HIGHER PRICES LIKELY TO 

        20    RESULT? 

        21               MR. ALIOTO:  BECAUSE THERE'S NO COMPETITION.  THEY 

        22    ALREADY PUT IN DOCUMENTS THEMSELVES THAT THEY CAUGHT -- THEY 

        23    GOT CAUGHT WITH IN WHICH THEY SHOWED THAT THERE WOULD BE NO -- 

        24    FIRST OF ALL, THAT THEIR OWN DOCUMENTS SAY THAT THEIR PRICES 

        25    WOULD EITHER REMAIN THE SAME IN A MONOPOLY POSITION OR NEVER 

                                                                         2365
                                 OPENING ARGUMENT \ ALIOTO 


         1    LOWER BECAUSE THEY DON'T HAVE TO COMPETE EVEN THOUGH THEY TAKE 

         2    OFF THE COSTS FOR THE AFTERNOON NEWSPAPER COMPLETELY.  THAT'S 

         3    THE SAME AS -- I MEAN, THAT'S THE ABSOLUTE WHAT LEARNED HAND 

         4    SAID WAS A CINEMAGRAPHIC VIEW OF THE INTENT, MONOPOLY INTENT. 

         5               WHEN YOU HAVE TWO COMPETITORS AND YOU MAINTAIN THE 

         6    SAME REVENUE BUT SIMPLY DEDUCT, IN OTHER WORDS, IT'S MONOPOLY.  

         7    IT'S A PRICE THAT THEY COULD NEVER ACHIEVE ON THEIR OWN.  THEY 

         8    HAVE A DOUBLE, YOU KNOW, BOTH OF THEM, AND THEN THEY JUST 

         9    ELIMINATE THE COSTS OF ONE.  THEY KEEP THE PRICE UP THERE. 

        10               IF THEY HAD TO COMPETE, THEY WOULD HAVE TO COMPETE.  

        11    THEY CAN'T COMPETE, YOUR HONOR.  I THINK THE EVIDENCE IS CLEAR 

        12    THE FANGS CANNOT COMPETE AGAINST THE CHRONICLE.  AND BECAUSE OF 

        13    THAT, THERE'S NOT GOING TO BE THIS PRICE COMPETITION THAT BOTH 

        14    HEARST AND THE CHRONICLE ARE BASICALLY SAYING IS GOING TO 

        15    HAPPEN.  THEY'RE SAYING IT'S GOING TO HAPPEN, AND THEY ARE 

        16    EXPRESSING THEIR INTENT THAT IT DOES HAPPEN. 

        17               THE COURT:  ALL RIGHT.  LET'S ASSUME THAT IS CORRECT 

        18    AND WHAT HAPPENS AT THE END OF THE THREE-YEAR PERIOD IS THAT 

        19    FANG GOES OUT OF BUSINESS, THEY QUIT PUBLISHING THE EXAMINER, 

        20    THEY BURY HIM.  WHAT IS THE HARM IN THE THREE-YEAR PERIOD OF 

        21    TIME THAT THEY'VE GONE AHEAD WITH THAT ENTERPRISE, CONTINUED TO 

        22    PUBLISH A NEWSPAPER CALLED THE EXAMINER, TO BE SURE NOW A 

        23    METROPOLITAN DAILY BUT SOMETHING THAT'S CALLED AN EXAMINER, AND 

        24    THEY SELL IT IN SAN FRANCISCO PRIMARILY, WHAT'S THE HARM IN 

        25    THAT? 

                                                                         2366
                                 OPENING ARGUMENT \ ALIOTO 


         1               MR. ALIOTO:  FEWER -- HIGHER PRICES AGAIN, HIGHER 

         2    PRICES THAT WOULD OTHERWISE NOT EXIST. 

         3               THE COURT:  IS ENTRY FORECLOSED?  IS THERE A 

         4    POSSIBILITY OF ENTRY BY SOME OTHER PUBLISHER THAT IS FORECLOSED 

         5    BY THIS TRANSACTION? 

         6               MR. ALIOTO:  WELL, I WOULD SAY THIS, YOUR HONOR:  

         7    ACCORDING TO MR. ROSSE, AND I THINK IT WAS IN ANSWER TO YOUR 

         8    HONOR'S QUESTION, YOUR HONOR ASKED HIM ABOUT THAT AND MR. ROSSE 

         9    SAID -- 

        10               THE COURT:  I REMEMBER DISTINCTLY.  IT WAS QUITE 

        11    EXTRAORDINARY. 

        12               MR. ALIOTO:  YES.  HE SAID THAT THE BARRIERS WERE 

        13    SUBSTANTIALLY HIGH AND THAT THEY COULDN'T GET IN. 

        14               THE COURT:  WELL, DEAD-WEIGHT LOSS WAS HIS 

        15    DESCRIPTION. 

        16               MR. ALIOTO:  I BELIEVE THAT THE COURT -- I'LL GET IT 

        17    FOR YOUR HONOR, BUT IT WAS MR. ROSSE AND HE DID -- AND YOUR 

        18    HONOR ASKED HIM, "ARE YOU SAYING THAT THE VARIOUS ENTRIES ARE 

        19    HIGHER OR NOT?"  AND HE SAID, "YES, THEY ARE.  THEY'RE STILL 

        20    HIGH, THAT'S CORRECT."  THAT'S WHAT HE SAID.  THAT WAS THEIR 

        21    GUY.  I DON'T HAVE THAT RIGHT NOW.   

        22               BUT THEN IN ADDITION, AS WE POINTED OUT BEFORE, AND 

        23    AS WE HAVE HERE, THAT THE COURT MAY REMEMBER THIS, THIS WAS 

        24    ABOUT A NEW ENTRANT, AND THIS WAS HEARST'S POSITION AND THESE 

        25    WERE IN THE RESPONSES TO THE GOVERNMENT -- 

                                                                         2367
                                 OPENING ARGUMENT \ ALIOTO 


         1               THE COURT:  YES. 

         2               MR. ALIOTO:  -- AND THEY USE THESE EXTRAORDINARY 

         3    WORDS.  IT SAYS HEARST DOES NOT BELIEVE THAT ENTRY INTO THE 

         4    METROPOLITAN DAILY NEWSPAPER BUSINESS IN THE RELEVANT AREA IN 

         5    DIRECT COMPETITION WITH THE COMBINED SAN FRANCISCO CHRONICLE 

         6    AND EXAMINER NEWSPAPERS OR THE CHRONICLE ALONE. 

         7               THE COURT:  ISN'T THAT YOUR EVIDENCE THAT THE 

         8    DEPARTMENT'S PRESS RELEASE WAS MISLEADING? 

         9               MR. ALIOTO:  AMONG OTHER THINGS. 

        10               THE COURT:  THIS WAS A STATEMENT BY HEARST ITSELF TO 

        11    THE DEPARTMENT OF JUSTICE WHICH -- 

        12               MR. ALIOTO:  YES. 

        13               THE COURT:  -- COMPLETELY CONTRADICTED THE 

        14    DEPARTMENT'S PRESS RELEASE. 

        15               MR. ALIOTO:  YES.  YES, IT DOES.  YOUR HONOR IS 

        16    RIGHT.  IT DOES. 

        17               THE COURT:  THUS, YOU SAY, THERE'S SOMETHING ELSE 

        18    GOING ON HERE. 

        19               MR. ALIOTO:  OH, WE'VE SAID THAT.  YES, SIR.  YEAH, 

        20    BECAUSE -- 

        21               THE COURT:  AND WHAT IS IT? 

        22               MR. ALIOTO:  WELL, WE THINK THAT THE EVIDENCE AND WE 

        23    THINK THAT THE COURT CAN CLEARLY UNDERSTAND THAT THE EVIDENCE 

        24    OR PART OF THE EVIDENCE IS THAT THE DEAL WAS THAT THERE WOULD 

        25    BE NO OPPOSITION SO LONG AS HEARST CORPORATION SOLD THE 

                                                                         2368