Village Voice Media sues East Bay Express ownersBy Tim Redmond
The newspaper chain that owns SF Weekly is suing the independent owners of the East Bay Express for $500,000 in a case that, ironically, shows how the big media outfit is trying to duck its own debts.
The lawsuit comes out of the 2007 deal under which Steve Buel, Hal Brody and a few other investors bought the Express from Village Voice Media, the national alternative press chain that owns the Weekly and 14 other papers.
As part of the deal, the local owners put up an undisclosed amount in cash and agreed to pay VVM $500,000 two years later. Buel, the longtime editor of the Express, and Brody, who formerly owned a weekly in Kansas City, had to guarantee the half-million-dollar note with their personal assets.
The sales agreement was a bit complicated. VVM owned both the SF Weekly and the Express, and the two papers had been selling joint ad buys to clients. So divorcing that partnership, and allowing the newly independed Express to compete effectively in the market, required some unusual terms. Among other things, VVM agreed not to use its position as the former owner of the Express, with full access to account records and sales contacts to poach Express clients.
However, Brody told us, the big chain started to violate that agreement almost immediately. “We have massive claims against them for violating those terms,” he said.
“The SF Weekly is not supposed to solicit our advertisers in Alameda and Contra Costa, and they’ve been doing it, over and over.”
Brody put those claims at more than $1 million. VVM also owes the new Express owners more than $100,000 in bad debt left over after the purchase, he said.
When Brody contacted Scott Spear, vice president of VVM and the point person on the deal, “he told me he couldn’t believe VVM actually signed that agreement,” Brody said.
Under normal conditions, the Express would simply have filed suit against VVM, demanding payment for the violations of the sales contract. But Brody realized that would be almost impossible: VVM, in response to a Bay Guardian lawsuit, has has essentially declared itself a deadbeat and insisted that all of its assets are hidden and it doesn’t have to pay any debts.
“It’s almost like, what’s the point,” Roger Myers, a prominent media lawyer representing Buel and Brody, told us. “They have sent a message that says, go ahead and sue us, even if we lose you’ll have a terrible time collecting.”
So Buel and Brody did the only thing left: They suspended payment on the $500,000 note. “That’s the only leverage we have,” Myers said.
And instead of filing suit against the Express, VVM is going after Buel and Brody personally.
The suit claims that Brody and Buel agreed at the time of purchase -- May 17, 2007 -- to pay off the $500,000 noted on May 17, 2009. “On or about May 19, 2009, written demand was delivered to defendants Brody and Buel that they pay all amonts due under the note,” the lawsuit, filed June 4 in U.S. District Court in Oakland, states.
Spear did not respond to emails requesting comment. Neither did VVM Executive Editor Mike Lacey or Chief Executive Officer Jim Larkin.
Interestingly, the plaintiff in the lawsuit isn’t Village Voice Media; it’s East Bay Express Publishing LP, the name of the VVM subsidiary which used to own the Express. For all intents and purposes, that Delaware corporation has been inactive since 2007, and VVM has expressed to the Bay Guardian that the shell has no assets.
Randall S. Farrimond, attorney for VVM, sent the following statement by email:
"As is set forth in our complaint, Eastbay Express Publishing has not been paid over $500,000 that is past due on a promissory note guaranteed by Mr. Brody and Mr. Buel. Eastbay Express Publishing is not aware that it has violated the terms of any its agreements with the current publisher of the East Bay Express or with Mr. Brody or Mr. Buel. We believe that any judge or jury who reviews the facts of this matter will conclude that Mr. Brody and Mr. Buel owe us the amounts stated in our complaint. We would prefer to present the details of our case at the appropriate time in court."
Brody told us he has warned VVM numerous times in writing of the violations, and at this point just wants to convince VVM to come to the table and settle all the claims. Myers wouldn’t speculate on whether his clients will countersue, saying that “we’re examining all the options.”
But if the whole mess winds up in a courtroom, the trial could be fascinating. Among the issues that might get raised are the claims that VVM made about the financial condition of the Express at the time of the sale and the details of the financial information Buel and Brody had when they agreed to buy the paper. And the owners of the Express would have a chance to show, in public, just how often VVM violated its non-compete clause.
The chain’s lawyers may try to argue that the claims Brody and Buel have against VVM and the SF Weekly are separate from the claims this otherwise inactive corporation has against the two Express owners.
“But I think we can show,” Myers said,” that they are all significantly related.”
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Comments (2)
F*CK VVM!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Posted by Ben we be Jammin | June 9, 2009 03:41 PM
If the Bay Guardian or The New York Times ignored a jury verdict and tried to hide its assets from creditors, Lacey's minions would be all over their ass. But it is okay in hypocritical New Times-speak to behave like organized crime when it protects the deadbeat LACEY.
Up here in heaven we are preparing to unleash a karmic thunderbolt ensuring that Phoenix will never rise again.
Stay tuned,
MO
Posted by Marney O | June 11, 2009 09:34 AM