Las Vegas Sun, Inc. v. Adelson
| Decision Date | 04 May 2020 |
| Docket Number | Case No. 2:19-cv-01667-RFB-BNW |
| Parties | Las Vegas Sun, Inc., Plaintiff, v. Sheldon Adelson, et al., Defendant. |
| Court | United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Nevada |
Before the Court is a motion to stay discovery (ECF No. 43) by defendants Las Vegas Review-Journal, Inc., News+Media Capital Group, LLC, Sheldon Adelson, and Patrick Dumont. Defendants ask this Court to stay discovery until the district judge resolves their motions to dismiss. Plaintiff Las Vegas Sun, Inc. ("LVS") opposes the request. This Court finds that defendants have failed to establish that their motions to dismiss are potentially dispositive. Further, after a preliminary peek at defendants' motions, the Court is not convinced that LVS will be unable to construct a claim for relief or that discovery would be a waste of effort. On these independent bases, and the considerations of Fed. R. Civ. P. 1, the Court will deny defendants' motion and discovery will begin.
LVS is a Nevada corporation that publishes a daily newspaper in Clark County, Nevada. ECF No. 1 at ¶ 1. LVS first published its newspaper—the "Las Vegas Sun" (the "Sun")—in 1950, making it the second-longest-running daily newspaper in Las Vegas. Id. at ¶ 2. LVS describes itself as a "left-leaning editorial voice" that has won numerous accolades, including the Pulitzer Prize for Public Service. Id. at ¶¶ 3-4.
Las Vegas Review-Journal, Inc. ("LVRJ") is a Delaware corporation that also publishes a daily newspaper in Clark County, Nevada. Id. at ¶ 5. LVRJ first published its newspaper—the "Las Vegas Review-Journal" (the "RJ")—in 1929, making it the longest-running daily newspaper in Las Vegas. Id. According to LVS, the RJ's paper "is known as a right-leaning newspaper." Id. at ¶ 6. LVRJ is a wholly owned subsidiary of defendant News+Media Capital Group, LLC ("News+"). Id. at ¶¶ 5, 7.
Defendant Sheldon Adelson is an individual and, according to LVS, the owner and alter ego of News+. Id. at ¶ 8. Adelson supposedly exercises significant influence over LVRJ's affairs and the editorial content of its newspaper. Id. at ¶ 9.
Defendant Patrick Dumont is an individual and an officer and owner of News+. Id. at ¶ 11. Dumont is Adelson's son-in-law. Id. Dumont facilitated Adelson's purchase of LVRJ, supposedly at Adelson's direction. Id.
The Sun and the RJ have a storied history in Southern Nevada. But by the late 1980s, the Sun was operating at a substantial loss that nearly caused its financial failure. Id. at ¶ 18. Thus, the Sun's and the RJ's storied histories became entwined when, in 1989, LVS and LVRJ entered into a Joint Operating Agreement (the "1989 JOA"). Id.
Through the 1989 JOA, LVS and LVRJ aimed "[t]o ensure the continued publication of two separate and independent daily newspapers in Las Vegas." Id. To that end, the 1989 JOA permitted LVRJ to assume control of the print advertising and circulation functions for both newspapers. Id. at ¶ 20. Further, the 1989 JOA permitted LVS to print its paper using LVRJ's publishing plant and equipment. Id. Despite these joint operations, the newspapers maintained their editorial independence. Id. at ¶ 21. The Sun became profitable under the 1989 JOA. Id. at ¶ 22.
The 1989 JOA was possible because of the Newspaper Preservation Act, 15 U.S.C. §§ 1801-04 (the "NPA"). Id. at ¶ 17. The NPA exempts joint newspaper operations from certain antitrust trust laws provisions. Id. To come within the NPA's protection, the joint newspaper operations must be conditioned on maintenance of separate editorial functions. Id.
LVS and LVRJ amended the 1989 JOA in 2005 (the "2005 JOA"). Id. at ¶ 23. Under the 2005 JOA, the Sun and the RJ became a single-media product: both newspapers remained separately branded publications, but the Sun was included as a separate newspaper inside the RJ. Id. at ¶ 24. LVRJ continued to oversee "all accounting, management, and operational control" of the Sun, "except for the operation of the Sun's news and editorial department." Id. at ¶ 26. LVS alleges that the 2005 JOA remains operative and runs for an initial period ending on December 31, 2040. Id. at ¶ 23.
Like the 1989 JOA, the 2005 JOA imposed many obligations onto LVRJ. It contains, for example, specific formatting specifications. Id. at ¶ 27. Further, it requires LVRJ to publish a "noticeable mention" for the Sun's lead story and specifies that the "noticeable mention" must generally be published above the RJ's own banner on its front page. Id. The RJ, furthermore, is required to market and promote the Sun in "equal prominence" to the RJ, using "commercially reasonable efforts to maximize circulation of both newspapers." Id. at ¶ 28. Both newspapers bear their respective editorial costs under the 2005 JOA. Id. And LVRJ pays an "annual profits payment" to the Sun before the first day of each month. Id. at ¶ 30.
The 2005 JOA sets forth certain conditions for its termination. Under the 1989 JOA, LVRJ could terminate the JOA if the joint operation failed to turn a profit for two consecutive years. Id. at ¶ 34. That provision was omitted from the 2005 JOA, which permits termination only if 1 of 3 events occurs: (1) the expiration of the initial term (December 31, 2040); (2) bankruptcy or default by LVRJ or LVS; or (3) a change in controlling ownership interest in LVS away from any lineal descendants of Hank Greenspun—the Sun's founding editor and publisher until 1989—without prior approval from the RJ. Id.
LVS alleges that defendants engaged in an anticompetitive scheme to eliminate the RJ's sole competitor—the Sun—from the market for daily local newspapers in Clark County. Id. at ¶ 48. Adelson acquired the RJ in December 2015, apparently because he desired to exert "unfettered editorial control" over its content and produce press coverage sympathetic to his business and personal interests. Id. at ¶ 49. Adelson began to exert this control immediately upon his acquisition of the RJ. Id. at ¶ 53. The Sun, however, continued to express attitudes contrary to Adelson's and published pieces that took direct aim at Adelson himself. Id. at ¶ 54.
LVS alleges four different actions by defendants that together comprise defendants' predatory conduct and anticompetitive scheme. Id. at ¶ 56.
First, LVS claims that Adelson removed non-party Jason Taylor from his position as publisher of the RJ in an effort to harm LVS. Id. Taylor, according to LVS, was publisher of the RJ for about seven months starting in July 2015. Id. at ¶ 57. Prior to Adelson's acquisition of the RJ, Taylor had implemented a plan to help increase the RJ's revenue, and he was on track to increase the Sun's profit payments under the 2005 JOA, too. Id. at ¶ 59. Further, Taylor identified that the RJ's owner prior to Adelson "had been dishonest in calculating profit payments" to LVS under the 2005 JOA, and he raised this issue to Adelson but to no avail. Id. at ¶ 60. Taylor endeavored to insulate the RJ's newsroom from Adelson's influence, which supposedly resulted in Taylor's removal as publisher of the RJ, the abandonment of Taylor's plan to increase the RJ's revenue, and the hiring of a new publisher who would execute on defendants' "strategy to financially starve the Sun and to force it out of business." Id. at ¶ 64.
Second, LVS alleges that LVRJ abused its control over operations, advertising, and accounting, with the goal of either ending the Sun's existence or diminishing the Sun's value and forcing a sell to the RJ "at a fire-sale price." Id. at ¶ 56. Defendants allegedly achieved this by increasing the JOA's operating expenses and recording—for the first time in the joint operation's history—a negative EBITDA1 in the amount of $2.25 million for the fiscal year ending on March 31, 2017. Id. at ¶ 70. The negative EBITDA led to lower profit payments to the Sun. Id. at ¶ 71. Compounding the problem, LVRJ charged editorial and certain advertising costs against the joint operation, in derogation of the 2005 JOA. Id. at ¶¶ 72, 83.
Third, LVRJ redesigned the RJ's front page to make the Sun's presence less noticeable. Id. at ¶ 56. In 2017, LVRJ deviated from the 2005 JOA's requirements for the RJ's "noticeable mention" of the Sun's lead story. Id. at ¶ 87. Similarly, LVRJ strategically obscured the Sun's front-page presence in the RJ with advertising stickers. Id. at ¶ 90. These stickers covered, for example, the Sun's endorsements for public office. Id. at ¶ 90. Further, in or around January 2018, LVRJ began omitting the Sun from the electronic replica editions of its newspaper—also in derogation of the 2005 JOA—which further reduced the Sun's visibility. Id. at ¶¶ 99-100.
Fourth, and finally, defendants threatened involuntary termination of the JOA. Id. at ¶ 56. LVRJ sought to terminate the 2005 JOA in Nevada state court (the "state court action") by claiming that the Sun failed "to meet the JOA's required high standard of newspaper quality." Id. at ¶ 108. This is an improper basis for termination of the JOA, LVS alleges, because it is not one of the grounds for termination set forth in the 2005 JOA. Id. at ¶ 108.2
LVS alleges that if defendants are allowed to continue with their predatory conduct, defendants will control and monopolize 100% of the sale of local daily newspapers in Clark County. Id. at ¶ 110.
LVS filed the underlying complaint in September 2019. ECF No. 1. In it, LVS asserts five causes of action: (1) monopolization, in violation of Section 2 of the Sherman Act;3 (2) attempted monopolization, in violation of Section 2 of the Sherman Act; (3) conspiracy to monopolize, in violation of Section 2 of the Sherman Act; (4) violation of Section 7 of the Clayton Act;4 and (5) violation of Nevada's Unfair Trade Practices Act.5 Id. at 28-33.
LVRJ and News+ filed a joint motion to dismiss on October 30, 2019, in which Adelson and Dumont have joined. ECF Nos. 20 and 22. That...
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