Las Vegas Sun, Inc. v. Adelson

• Decision Date: 24 March 2022
• Docket Number: 2:19-cv-01667-GMN-BNW
• Court: U.S. District Court — District of Nevada
• Parties: LAS VEGAS SUN, INC., Plaintiff, v. SHELDON ADELSON; PATRICK DUMONT; NEWS+MEDIA CAPITAL GROUP, LLC; LAS VEGAS REVIEW-JOURNAL, INC., Defendants. LAS VEGAS REVIEW-JOURNAL, Counterclaimant, v. LAS VEGAS SUN, INC., a Nevada corporation; BRIAN GREENSPUN, an individual and as the alter ego of Las Vegas Sun, Inc.; GREENSPUN MEDIA GROUP, LLC, a Nevada limited liability company, as the alter ego of Las Vegas Sun, Inc., Counterclaim Defendants.

LAS VEGAS SUN, INC., Plaintiff,
v.
SHELDON ADELSON; PATRICK DUMONT; NEWS+MEDIA CAPITAL GROUP, LLC; LAS VEGAS REVIEW-JOURNAL, INC., Defendants.

LAS VEGAS REVIEW-JOURNAL, Counterclaimant,
v.
LAS VEGAS SUN, INC., a Nevada corporation; BRIAN GREENSPUN, an individual and as the alter ego of Las Vegas Sun, Inc.; GREENSPUN MEDIA GROUP, LLC, a Nevada limited liability company, as the alter ego of Las Vegas Sun, Inc., Counterclaim Defendants.

No. 2:19-cv-01667-GMN-BNW

United States District Court, D. Nevada

March 24, 2022

ORDER

GLORIA M. NAVARRO, DISTRICT JUDGE UNITED STATES DISTRICT COURT.

Pending before the Court is the Motion to Dismiss Counterclaims, (ECF No. 363), filed by Plaintiff/Counterclaim Defendants Las Vegas Sun, Inc. (“LVS”), Brian Greenspun, and Greenspun Media Group, LLC (“GMG”) (collectively, “Counterclaim Defendants”). Defendant/Counter Claimant Las Vegas Review Journal, Inc. (“RJ”) filed a Response, (ECF No. 373), and Counterclaim Defendants filed a Reply, (ECF No. 388).

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Also pending before the Court is the Motion for Leave to File Excess Pages, (ECF No. 372), filed by RJ. LVS does not oppose the Motion. (See Order Granting Stipulation ¶ 7, ECF No. 381).^[1]

Also pending before the Court is the Motion to Substitute Party, (ECF No. 380), filed by LVS. RJ filed a Response, (ECF No. 386), and LVS filed a Reply, (ECF No. 392).

Also pending before the Court is the Report and Recommendation, (ECF No. 394), by Magistrate Judge Cam Ferenbach. Defendants Sheldon Adelson, Patrick Dumont, RJ, and News+Media Capital Group, LLC (collectively, “Defendants”) filed an Objection, (ECF No. 395). LVS filed a Response to the Objection, (ECF No. 401).

Also pending before the Court is the Motion for Leave to File a Reply in Support of Objection to the Report and Recommendation, (ECF No. 413), filed by Defendants. LVS filed a Response, (ECF No. 422), and RJ filed a Reply, (ECF No. 429).^[2]

For the reasons discussed below, the Court GRANTS in part and DENIES in part Counterclaim Defendants' Motion to Dismiss, GRANTS RJ's Motion for Leave to File Excess Pages, GRANTS LVS's Motion to Substitute Party, ADOPTS in full the Report and Recommendation, and GRANTS Defendants' Motion for Leave to File a Reply.

I. BACKGROUND

This is an antitrust action. LVS's Complaint alleges the following:

A. THE PARTIES

LVS is a Nevada corporation that publishes a daily newspaper in Clark County, Nevada. (Compl. ¶ 1, ECF No. 1). LVS first published its newspaper, the “Las Vegas Sun” (“Sun”), in 1950, making it the second-longest-running daily newspaper in Las Vegas. (Id. ¶ 2). Defendant

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Las Vegas Review-Journal, Inc. (“LVRJ”) is a Delaware corporation that also publishes a daily newspaper in Clark County, Nevada. (Id. ¶ 5). LVRJ first published its newspaper-the “Las Vegas Review-Journal” (“RJ”)-in 1929, making it the longest-running daily newspaper in Las Vegas. (Id.). LVRJ is a wholly owned subsidiary of Defendant News+Media Capital Group, LLC (“News+Media”). (Id. ¶¶ 5, 7).

Defendant Sheldon Adelson is an individual and, according to LVS, the owner and alter ego of News+Media. (Id. ¶ 8). Defendant Adelson purportedly exercises significant influence over LVRJ's affairs and the editorial content of its newspaper. (Id. ¶ 9).

Defendant Patrick Dumont is an individual and an officer and owner of News+Media. (Id. ¶ 11). Dumont is Defendant Adelson's son-in-law. (Id.). According to LVS, Defendant Dumont “orchestrated” the Adelson family's purchase of LVRJ, at Defendant Adelson's direction. (Id.).

B. THE JOINT OPERATING AGREEMENTS

In the late 1980s, the Sun was operating at a substantial loss, which almost caused its financial failure. (Id. ¶ 18). In 1989, LVS and LVRJ entered into a Joint Operating Agreement (the “1989 JOA”). (Id.). Through the 1989 JOA, LVS and LVRJ sought “[t]o ensure the continued publication of two separate and independent daily newspapers in Las Vegas[.]” (Id.). To that end, the 1989 JOA allowed LVRJ to assume control of the print advertising and circulation functions for both newspapers. (Id. ¶ 20). Further, the 1989 JOA permitted LVS to print its newspaper using LVRJ's publishing plant and equipment. (Id.). Despite these joint operations, the newspapers maintained their editorial independence. (Id. ¶ 21). The Sun ultimately became profitable under the 1989 JOA. (Id. ¶ 22).

The 1989 JOA was possible due to the Newspaper Preservation Act, 15 U.S.C. §§ 1801- 04 (the “NPA”), which exempts joint newspaper operations from certain antitrust trust laws

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provisions. (Id. ¶ 17). In order to obtain the NPA's protection, joint newspaper operations must be conditioned on maintenance of separate editorial functions. (Id.).

In 2005, LVS and LVRJ allegedly amended the 1989 JOA (the “2005 JOA”). (Id. ¶ 23). Under the 2005 JOA, the Sun and the RJ became a single-media product, meaning that both newspapers remained separately branded publications, but the Sun was included as a separate newspaper inside the RJ. (Id. ¶ 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. ¶ 26). According to LVS, the 2005 JOA remains operative and runs for an initial period ending on December 31, 2040. (Id. ¶ 32). The 2005 JOA, like the 1989 JOA, imposed many obligations onto LVRJ. For example, the 2005 JOA provides for certain formatting specifications. (Id. ¶ 27). In addition, it requires that LVRJ 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. ¶ 28). The RJ and the Sun both bear their respective editorial costs under the 2005 JOA. (Id.). Additionally, LVRJ pays an “annual profits payment” to the Sun before the first day of each month. (Id. ¶ 30).

The 2005 JOA specifies certain conditions for its termination. (Id. ¶ 34). Under the 1989 JOA, LVRJ could terminate the JOA if the joint operation failed to turn a profit for two consecutive years. (Id.). That provision was omitted from the 2005 JOA, which permits termination only if one of three events takes place: (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 (i.e., the Sun's founding editor and publisher until 1989) without prior approval from the RJ. (Id.).

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C. THE ALLEGED PREDATORY CONDUCT

LVS claims 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. ¶ 48). Defendant 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. ¶ 49). Defendant Adelson began to exert this control immediately upon his acquisition of the RJ. (Id. ¶ 53). The Sun, however, continued to express attitudes contrary to Adelson's and published pieces that took direct aim at Defendant Adelson himself. (Id. ¶ 54).

LVS alleges four different actions by Defendants that together comprise Defendants' predatory conduct and anticompetitive scheme. (Id. ¶ 56). First, LVS claims that Defendant Adelson removed Jason Taylor from his position as publisher of the RJ in an effort to harm LVS. (Id.).^[3] Taylor, according to LVS, was publisher of the RJ for about seven months starting in July 2015. (Id. ¶ 57). Prior to Defendant 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. (Id. ¶ 59). Further, Taylor identified that the RJ's owner prior to Defendant 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. ¶ 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. ¶ 64).

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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 sale to the RJ “at a fire-sale price.” (Id. ¶ 56). Defendants allegedly endeavored to achieve this by increasing the JOA's operating expenses and recording-for the first time in the joint operation's history-a negative EBITDA^[4] in the amount of $2.25 million for the fiscal year ending on March 31, 2017. (Id. ¶ 70). The negative EBITDA led to lower profit payments to the Sun. (Id. ¶ 71). Adding to the problem, LVRJ charged editorial and certain advertising costs against the joint operation, in derogation of the 2005 JOA. (Id. ¶¶ 72, 83).

Third, LVRJ redesigned the RJ's front page to make the Sun's presence less noticeable. (Id. ¶ 56). In 2017, LVRJ deviated from the 2005 JOA's requirements for the RJ's “noticeable mention” of the Sun's lead story. (Id. ¶ 87). Similarly, LVRJ strategically obscured the Sun's front-page presence in the RJ with advertising stickers. (Id. ¶ 90). These stickers covered, for example, the Sun's endorsements for public office. (Id.). Further, in or around January 2018, LVRJ began omitting the Sun from the electronic replica editions of its newspaper, which further reduced the Sun's visibility. (Id. ¶¶ 99-100).

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