S.F. Print Media Co. v. Hearst Corp.

• Decision Date: 31 January 2020
• Docket Number: A152930
• Citation: 44 Cal.App.5th 952,258 Cal.Rptr.3d 180
• Court: California Court of Appeals Court of Appeals
• Parties: SAN FRANCISCO PRINT MEDIA COMPANY, Plaintiff and Appellant, v. The HEARST CORPORATION et al., Defendants and Respondents.

44 Cal.App.5th 952

258 Cal.Rptr.3d 180

SAN FRANCISCO PRINT MEDIA COMPANY, Plaintiff and Appellant,

v.The HEARST CORPORATION et al., Defendants and Respondents.

A152930

Court of Appeal, First District, Division 3, California.

Filed January 31, 2020

Certified for Partial Publication.^*

Horvitz & Levy, Jeremy B. Rosen, Burbank, Joshua C. McDaniel ; Jenner & Block, Rick Richmond, Los Angeles, Jeffrey A. Atteberry, Los Angeles, for Plaintiff and Appellant.

Greenberg Traurig, Karin L. Bohmholdt, Los Angeles, Alan Mansfield (pro hac vice), San Diego, Stephen L. Saxl (pro hac vice) for Defendant and Respondent.

Fujisaki, J. Plaintiff San Francisco Print Media Company, owner of the San Francisco Examiner (the Examiner), sued the corporate owner, a subsidiary, and employees of the San Francisco Chronicle (the Chronicle), claiming, in sum, that defendants sold a certain type of print advertising in the Chronicle at prices that violated California’s Unfair Practices Act (UPA, Bus. & Prof. Code, § 17000 et seq.¹ ) and Unfair Competition Law (UCL, § 17200 et seq.). Plaintiff now appeals from judgment after the trial court granted defendants’ motion for summary judgment.

This case turns in part on the application of Sargon Enterprises, Inc. v. University of Southern California (2012) 55 Cal.4th 747, 149 Cal.Rptr.3d 614, 288 P.3d 1237 ( Sargon ), which sets out standards concerning the admissibility of expert opinion testimony. In the published portion of this decision, we conclude the trial court properly granted summary judgment as to plaintiff’s cause of action for below-cost sales under the UPA (§ 17043) after granting defendants’ Sargon motion and excluding the opinion of plaintiff’s expert on costs. Among other things, plaintiff had disclaimed reliance on specific transactions to prove the Chronicle’s alleged underpricing of its print advertising, leaving only the aggregate cost analysis prepared by that expert to establish the occurrence of alleged below-cost sales. As the trial court correctly determined, however, the record established that plaintiff’s expert lacked the foundational knowledge to conduct the requisite cost analysis and that he based his analysis on another individual’s non-UPA-related pricing analysis without understanding its foundations, such as some of the included cost components.

In the unpublished portion of this decision, we conclude summary judgment was properly granted as to plaintiff’s cause of action for unlawful use or sale of loss leaders under the UPA (§ 17044) because plaintiff failed to identify the loss leader sales on which this claim was based. We further conclude in the unpublished portion that the trial court did not err in granting summary judgment on plaintiff’s cause of action for secret and unearned discounts under the UPA (§ 17045) and its UCL cause of action.

The judgment is affirmed.

FACTUAL AND PROCEDURAL BACKGROUND

A. Plaintiff’s Lawsuit

In June 2013, plaintiff filed its original complaint against the Chronicle’s corporate owner and a subsidiary, Hearst Corporation and Hearst Communications, Inc., and three Chronicle employees. The operative third amended complaint alleged three causes of action under the UPA: below-cost sales (§ 17043); unlawful use or sale of loss leaders (§ 17044); and secret and unearned discounts (§ 17045). The complaint also alleged defendants violated the UCL (§ 17200) by its conduct violating the UPA. Plaintiff sought damages and injunctive relief.

The conduct underlying all these causes of action was, in essence, the Chronicle’s alleged underpricing of its full-run run-of-press print advertising² beginning in 2011, when plaintiff bought the Examiner. During the course of the litigation, defendants had a protracted discovery dispute with plaintiff, trying to ascertain the specific advertisers at issue in the case. Then, in a December 2016 joint case management statement, plaintiff asserted its expert, Richard Eichmann, would testify about "costs, causation, and damages" by analyzing all of the Chronicle’s print advertising transactions, not just particular transactions, to show the Chronicle sold below cost, and by conducting a statistical analysis to show the economic injury caused by the Chronicle’s below-cost pricing and to calculate the Examiner’s estimated lost profits. In light of Eichmann’s methodology, plaintiff represented that defendants’ proposed depositions of particular advertisers were unnecessary and irrelevant. In the same joint case management statement, defendants responded, based on plaintiff’s representations, that they did not intend to depose the hundreds of advertisers they initially thought they would. Defendants said that after completing expert discovery, they would file a Sargon motion challenging the admissibility of Eichmann’s expert opinion testimony and a summary judgment motion. Before discussing these motions, we summarize Eichmann’s expert evidence.

B. Plaintiff’s Expert, Richard Eichmann

Plaintiff’s expert, Eichmann, an economist and economic consultant, authored his initial report in November 2016. As relevant here, Eichmann first calculated the Chronicle’s "fully allocated cost"³ for print advertising. Then comparing that amount to what he calculated was the average price paid for print advertising in the Chronicle, he concluded that a majority of the Chronicle’s advertising customers paid below cost for a majority of advertising between 2011 and 2015. Second, Eichmann conducted a regression analysis using information about print advertising sales from the two newspapers, devising an equation to statistically estimate the relationship between the Examiner’s advertising revenue with its own print advertising prices and the Chronicle’s print advertising prices (also referred to as the own-price elasticity of demand and cross-price elasticity of demand, respectively). With these elasticity estimates derived from the regression analysis, Eichmann opined that the Examiner lost millions of dollars in profits from 2012 onward due to the Chronicle’s below-cost pricing. Third, Eichmann purported to corroborate the results of his regression analysis with a "yardstick" analysis that estimated what the Examiner’s print advertising revenue would have been had it realized nationwide industry growth rates for newspaper advertising revenue.

Defense expert Daniel Rubinfeld filed a report criticizing Eichmann’s analyses on numerous grounds. Conceding the validity of Rubinfeld’s criticism that he used incorrect data in his regression analysis, Eichmann submitted a supplemental report in April 2017 in which he updated his regression analysis and re-evaluated damages. Eichmann concluded his updated analysis supported his earlier conclusions regarding the effect of the Chronicle’s below-cost pricing on the Examiner’s revenue. Rubinfeld filed a supplemental report that again raised numerous criticisms of Eichmann’s analyses.

C. Defendants’ Motion to Exclude Eichmann’s Testimony and Motion for Summary Judgment or Summary Adjudication

Over defense opposition, the trial court granted defendants’ motion to exclude Eichmann’s cost, regression, and yardstick analyses pursuant to Sargon , supra , 55 Cal.4th 747, 149 Cal.Rptr.3d 614, 288 P.3d 1237, then granted defendants’ motion for summary judgment. We summarize the latter ruling here.

With regard to the section 17043 (below-cost sales) cause of action, the trial court found that plaintiff failed to show a triable issue as to the element of below-cost sales. In particular, the court found plaintiff had disclaimed reliance on specific transactions (citing to plaintiff’s separate statement responses and December 2016 joint case management statement), leaving only Eichmann’s excluded cost analysis to support the element. The court also found that plaintiff failed to present evidence supporting a triable issue as to the element of injurious purpose. Finally, the court determined that Eichmann’s excluded testimony provided the only evidence of causation and damages, but also indicated that plaintiff need not demonstrate harm for the section 17043 cause of action to survive summary judgment.

With regard to the section 17044 (loss leader sales) cause of action, the trial court explained that although plaintiff had committed itself to trying this action on an aggregate basis, plaintiff made no attempt to aggregate the Chronicle’s prices with regard to loss leader sales and instead provided only a few anecdotal examples of such sales. Further, plaintiff presented no evidence that the Chronicle made such unspecified loss leader sales with the requisite intent to harm competition.

As for the section 17045 (secret unearned discounts) cause of action, the trial court determined that, even accepting plaintiff’s contention that all of the Chronicle’s sales below rate card rates could properly be treated as secret unearned discounts, plaintiff’s aggregate proof of harm hinged on Eichmann’s regression analysis, which was not only inadmissible but not even directed at secret unearned discounts.

Finally, regarding the UCL cause of action, the trial court determined that, although plaintiff implied it could proceed even if the three UPA claims failed, plaintiff failed to suggest or refer to evidence supporting that claim.

Plaintiff appealed from judgment entered in defendants’ favor.

DISCUSSION

Plaintiff challenges the trial court’s grant of summary judgment. The rules governing our review of plaintiff’s contentions are well established. A "motion for summary judgment shall be granted if all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." ( Code Civ. Proc., § 437c, subd. (c).) A defendant carries the initial burden of showing that a cause of action has no merit by demonstrating that one or more elements of the cause of action cannot be established or a complete defense to it exists. ( Id. , § 437c, subd. (p)(2).)...