If you read the response from Village Voice Media, owner of the Seattle Weekly, to all the legal drama that's erupted down in San Francisco between the Bay Guardian and the SF Weekly (background here, here, and here), you'll notice something interesting.
You'll notice that this case isn't just about the $20 million that a court says is owed to the Bay Guardian because the SF Weekly was found to have engaged in illegal predatory pricing of its ads. Nor is it solely about whether the Bay Guardian can now seize assets of publications like the Seattle Weekly in order to get its money. It's also a public relations war, an independently-owned David (the Bay Guardian) vs. a corporate-owned Goliath (Village Voice Media) in a race to see who can make the other look worse while both wait for an appeals court to hear their legal arguments all over again.
And VVM's public relations strategy so far shows that the company is in a bad perceptual bind.
In order to explain its belief that the Bay Guardian can't seize or sell off assets of VVM's entire alt-weekly empire in order to collect that $20 million, the people at VVM are having to explain the complex corporate structure that governs their alt-weekly operations around the country.
It's not what you might expect.
For example, you might have heard that in 2005 New Times bought Village Voice Media, creating "a chain of 17 free weekly newspapers around the country with a combined circulation of 1.8 million." But if you read the explanation for VVM's current position on what's owed the Bay Guardian, you learn this:
New Times is simply a holding company.
In effect, the Guardian has received an order for monies that don't exist.
Here's what's going on, as I understand it after talking to lawyers for both sides yesterday: The Bay Guardian has a $20 million judgment against both the the limited partnership that owns the SF Weekly—SF Weekly, LP—and the company that controls that limited partnership, New Times Media, LLC.
New Times Media, LLC, according to a declaration made as part of the ongoing legal machinations by John E. Brunst, its chief financial officer...
...owns the membership interests or limited partnership interests in various separately organized limited liability companies or limited partnerships that own, operate and publish weekly print publications, a classified internet web site, and an advertising representation firm in various cities in the United States (collectively, the "Operating Entities"). New Times is a holding company and does not conduct any business. There are sixteen (16) Operating Entities located throughout the United States. The Operating Entities include San Francisco Weekly, LP ("SF Weekly")
In other words, New Times Media, LLC, has its hands in a lot of smaller LLC and LP pots (or "operating entitites"), but isn't holding money from any of them. Among those 16 operating entities, according to the declaration: Seattle Weekly, the Village Voice, and LA Weekly.
But how is it that New Times Media, LLC, which controls so many money-making alt-weeklies across the country, and according to a document from the case had $190 million in assets in 2007, now has only "monies that don't exist," aka $0?
Neither attorney could completely answer this question, citing client confidentiality and/or sealed documents. But both made clear that part of the answer involves entities "upstream" of New Times Media, LLC. For example, Village Voice Media, LLC, which has an interest in Village Voice Media Holdings, LLC, which in turn is a member of New Times Media, LLC.
If stacks of money are sitting anywhere in the company, they're somewhere further up the chain than New Times Media, LLC, apparently.
But what about the fact that New Times Media, LLC, even if it has $0 on hand, still "owns the membership interest" in various alt-weeklies and other "operating entities" around the country? Can't the Bay Guardian take over that interest and seize or sell off those "operating entities"?
The lawyer for the Bay Guardian, Jay Adkisson, thinks it ultimately can. "Eventually we'll get there," he told me. In the meantime, Adkisson asked a San Francisco court this week to issue an order sending half the advertising revenue from the SF Weekly over to the Bay Guardian in order to start paying down the $20 million. The court has yet to rule on that request.
The lawyer for Village Voice Media, Randall S. Farrimond, thinks otherwise. He says the Bay Guardian's ability to collect stops at New Times, LLC's membership interest in San Francisco Weekly, LP. Which, again, involves $0. “New Times is just a holding company," he told me, repeating the line. "They don’t have any assets themselves.”
These issues will be sorted out by the courts in the near future, but in the public relations fight that's going on now, VVM is having to make something very clear:
A person who works for one of its alt-weeklies actually works for an LP (or an LLC) that's controlled by another LLC, that's controlled by still another LLC, and perhaps ultimately controlled by yet another LLC (or more) on top of that.
Bay Guardian editor Bruce Brugmann complained in a statement yesterday that, rather than pay what it owes (or post a $20 million bond pending appeal), "New Times has instead attempted to rely on its complex corporate structure to defeat the collection of the judgment while it pursues its appeal.
Replied Farrimond: "We’re entitled to rely on whatever we can, legitimately, to get the appeal heard and decided. If the complex corporate structure were to help with that somehow, there certainly wouldn’t be anything wrong with it.”