Berlyn, Inc. v. Gazette Newspapers, Inc., CV S-01-606.

• Decision Date: 13 August 2002
• Docket Number: No. CV S-01-606.,CV S-01-606.
• Parties: BERLYN, INC., Montgomery Sentinel Publishing, Inc., Kenneth C. Rossignol, Plaintiffs, v. The GAZETTE NEWSPAPERS, INC., the Washington Post Co., the Baltimore Suburban Press Network, Defendants.
• Court: U.S. District Court — District of Maryland

214 F.Supp.2d 530

BERLYN, INC., Montgomery Sentinel Publishing, Inc., Kenneth C. Rossignol, Plaintiffs, v. The GAZETTE NEWSPAPERS, INC., the Washington Post Co., the Baltimore Suburban Press Network, Defendants.

No. CV S-01-606.

United States District Court, D. Maryland.

August 13, 2002.

George W. Liebmann, Law Office, Melvin J. Sykes, Law Office of Melvin J. Sykes, Baltimore, MD, for Plaintiffs.

William J. Kolasky, Alice M. Stoeppelwerth, Fiona W. Huang, Kyles M. DeYoung, Wilmer Cutler and Pickering, Washington, DC, David P. Donovan, Wilmer Cutler and Pickering, Tysons Corner, VA, for Defendants.

MEMORANDUM OPINION AND ORDER

SMALKIN, Chief Judge.

This case is before the Court on the defendants' motion to exclude the testimony of James B. Shaffer, whom the plaintiffs have designated as an expert qualified to testify to relevant matters in this case.

The plaintiffs are Berlyn, Inc. (Berlyn), Montgomery Sentinel Publishing, Inc. (Sentinel), and Kenneth C. Rossignol (Rossignol). Berlyn is wholly owned by Lynn Kapiloff (Kapiloff) and her husband. Kapiloff has served as the CEO and primary manager of Sentinel's newspapers in Montgomery and Prince George's Counties (the Montgomery County Sentinel and the Prince George's Sentinel) since December 1987. Plaintiff Rossignol publishes St. Mary's Today, a weekly paid newspaper published in Lexington Park, Maryland, which has a circulation of approximately 5,000, with most subscribers and advertisers located in St. Mary's County, Maryland.

The defendants in this case are The Washington Post Company (the Post), The Gazette Newspapers, Inc. (Gazette), and Baltimore Suburban Press Network, Inc. (Press Network). The Post is a publicly-held Delaware corporation. One of its operating units publishes the Washington Post newspaper. The Post owns all the stock of Gazette, but requires that Gazette operate as an independent entity. Gazette is a Maryland corporation that publishes approximately 44 newspapers in Montgomery, Frederick, Prince George's, Calvert, Charles, and St. Mary's Counties.

Press Network is a Delaware corporation which offers regional and national advertisers a "one contact/one bill" method of placing advertising in multiple newspapers around Washington, D.C.

The plaintiffs Berlyn and Sentinel operated the Prince George's Sentinel in that county, and received advertising clients through defendant Press Network. Eventually, Gazette launched publications in Prince George's County as well, and Press Network, which is half owned by Gazette, began recommending that advertisers direct their business to Gazette's publications instead of Sentinel's. The plaintiffs allege that the defendants' conduct amounts to an unreasonable restraint on trade, a conspiracy and an attempt to monopolize, unfair competition, breach of contract, and tortious interference. Also at issue is the defendants' acquisition of the Southern Maryland Division of The Chesapeake Publishing Company, which the plaintiffs argue resulted in a violation of Section 7 of the Clayton Act.

The events which gave rise to the plaintiffs' claims will be described with greater detail in the Opinion dealing with the defendants' motion for summary judgment, where the specific facts of this case are of greater importance. Clearly, the facts now relevant deal with Shaffer's qualifications to testify as an expert and the reliability of his opinions.

The defendants seek to prevent Shaffer from offering three opinions: (1) that the relevant product market, for antitrust purposes, is community newspapers and the zoned editions of metropolitan newspapers, and that the relevant geographic market is defined by county; (2) that, in a predatory pricing analysis, the value of certain of the Post's assets should be taken into account when determining whether the defendants were pricing below marginal cost; and (3) that Berlyn suffered lost profits, estimated between $700,000 and $850,000, as a result of Press Network's activities from 1997 to the present.

I. Shaffer's Background

Shaffer, a long-time friend of the Kapiloffs, was employed in the newspaper business from 1970 to 1998. His only employment in Maryland involved a two-year stint from 1977-1979 at Stromberg Publications, the publisher of 13 weekly newspapers in Baltimore, Carroll, and Howard Counties. He considers himself an expert in the business side of the newspaper business.

Shaffer is not an economist or attorney by education, training, or experience, and, upon his first deposition in November, 2001, he had almost no knowledge of antitrust economics. His undergraduate degree was in engineering. He took a few economics courses between 1967-1969, after which he received a master's degree in business administration with a financial specialty from Indiana University. He has no other training in economics.

Shaffer has never published anything related to economics or the law of antitrust, nor has he taught any courses in either field. He subscribes to no journals (and, upon his first deposition, knew of no journals) that cover antitrust law or antitrust economics. He did not know what journals might be helpful in a case like this. He has read only the articles provided to him by plaintiffs' counsel.

Before this case, Shaffer had never performed a relevant market analysis. He was not conversant with economic formulae; he said if he spent enough time, he thought he "could figure [them] out," but that he would have to "go back to ... college textbooks and dig out some of the chapters on those kinds of equations." He was unfamiliar with basic terminology and concepts used by economists who deal with antitrust issues. Shaffer has never testified as an expert in economics or antitrust damages, and he has never been qualified as an expert on any subject in any court.

Shaffer, however, has performed and reviewed predatory pricing analyses for major national newspapers throughout his career. His positions with these newspapers were prominent, requiring a high level of business and financial sophistication. Shaffer served, for example, as Vice President and Chief Financial Officer (CFO) of The Los Angeles Times, Executive Vice President and CFO of the Sun Times Company (Chicago), and Chief Executive of Guy Gannett Communications. Shaffer also has taught media economics and newspaper costs and pricing structures at various colleges and universities throughout his career.

II. A Brief History of Shaffer's Relevant Market Opinion

Shaffer's first opinion, dealing with relevant market, and his knowledge of that subject have evolved over the course of litigation. At his first deposition on November 20, 2001, Shaffer demonstrated that he had just recently been exposed to antitrust economics and was unfamiliar with several economic terms.¹ Shaffer Dep. I at 165. Shaffer indicated, however, that he intended to study materials dealing with economics and relevant markets furnished to him by plaintiffs. On March 15, 2002, after this first deposition, Shaffer submitted an affidavit concluding that "the relevant product market for purposes of pricing and monopolization analysis [is] the market consisting of weekly community papers and the weekly zoned editions of daily papers, and that the relevant geographic market [is], in this instance, a market defined by county." Shaffer Aff. I at 3, ¶ 11. From all outward appearances, Shaffer made this conclusion based on a simple review of documents: "Subsequent inspection of the newspapers concerned and of documents confirms this view, as do recognized studies." Id.

After offering this opinion, Shaffer was deposed again, and he admittedly was just beginning to learn how to approach the questions of this case from an economist's viewpoint. Shaffer Aff. II at 116. Shaffer had not done any independent research on relevant markets and was relying on the plaintiffs' attorneys to furnish him with economic literature to study. Id. at 116-17.

Finally, after the defendants challenged his qualifications, Shaffer submitted a supplemental affidavit. This affidavit again expressed his conclusion that the relevant markets were community newspapers and the zoned editions of metropolitan newspapers (product market) and individual counties (geographic market). Although he had already reached this conclusion in his first affidavit, he explained in this second affidavit that, since his first two depositions, he had reviewed numerous deposition transcripts and exhibits submitted during discovery in this case.

III. Standards for Admitting Expert Testimony

Under Federal Rule of Evidence 702, if specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise, if (1) the testimony is based upon sufficient facts or data, (2) the testimony is the product of reliable principles and methods, and (3) the witness has applied the principles and methods reliably to the facts of the case.

In short, a two-step inquiry is relevant here: (1) whether the witness is qualified, and (2) if qualified, whether his opinion is reliable, in that it is based on sufficient facts and sound methodology.

(A) Witness Qualifications

This first prerequisite demands that the witness have specialized "knowledge, skill, experience, training, or education" regarding the subject to which he will offer an opinion. FED. R. EVID. 702. As the Fourth Circuit has pointed out, "[t]he witness' qualifications to render an expert opinion are ... liberally judged by Rule 702." Kopf v. Skyrm, 993 F.2d 374, 377 (4th Cir.1993). Indeed, when a witness's qualifications are challenged,

the test for exclusion is a strict one, and the purported expert must have neither satisfactory knowledge, skill, experience, training nor education on the issue for which the opinion is proffered. One knowledgeable about...