S.F. Newspaper Ad Feud Kicked Out of Federal

SAN FRANCISCO (CN) - A federal judge sent a dispute between two San Francisco newspapers over advertising sales back to state court.

The San Francisco Newspaper Co., which bought the San Francisco Examiner in 2011, claimed that Hearst's San Francisco Chronicle paid the Fang family $60 million to buy the Examiner in 2000 and conspired to rig the market for daily newspaper sales by offering The Examiner's advertisers below-market rates for ads.

The lawsuit, which lists Hearst Corp. and Chronicle President Mark Adkins and Vice President for Advertising Jeff Bergin as defendants, calls the Fangs "a local family with no experience in owning or operating a daily newspaper."

"For many years, the chronicle has charged a much higher price for display advertising space in its newspaper than charged by the Examiner, due to the Chronicle's greater paid circulation and much higher costs," the San Francisco Newspaper Co. claimed in the original complaint. "Yet, since plaintiff purchased the Examiner, defendants have reversed that practice, by secretly offering advertising space to key customers of the Examiner at rates that are substantially lower than those of the Examiner - and far below defendants' cost for that space." (Emphasis in original.)

Though the case was filed in superior court, Hearst and the executives quickly removed it to the Northern District of California. U.S. District Judge Maxine Chesney found such removal improper last week and remanded the case.

To keep the case in federal, the Chronicle executives had argued that Bergin is not an officer of Hearst, but an employee.

"As plaintiff points out, however, at least one respected treatise on California law has observed that '[t]here is seldom any reason to distinguish between the service of an agent and that of an employee,' and that '[m]ost of the rules relating to duties, authority, liabilities, etc., are applicable to employees as well as to other agents,'" Chesney wrote. "Here, defendants have pointed to no case distinguishing employees from other agents in the context of the UPA [Unfair Practices Act]. Rather, as plaintiff further points out, no California court has addressed the question. Given the present lack of authority on the issue upon which the instant removal is predicated, the court finds defendants have failed to meet their burden of establishing removal is proper."

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