Las Vegas Sun, Inc. v. Adelson

District Court, D. Nevada·Decided May 27, 2021·No. 2:19-cv-01667·Unknown

Opinion

1 UNITED STATES DISTRICT COURT

2 DISTRICT OF NEVADA

3 LAS VEGAS SUN, INC., ) 4 ) Plaintiff, ) Case No.: 2:19-cv-01667-GMN-BNW 5 vs. ) 6 ) ORDER SHELDON ADELSON, et al., ) 7 ) Defendants. ) 8 ) 9 10 Pending before the Court is the Motion for Certificate of Appealability, (ECF No. 251), 11 filed by Defendants News+Media Capital Group, LLC; Las Vegas Review Journal, Inc.; 12 Sheldon Adelson; and Patrick Dumont (collectively, “Defendants”). Plaintiff Las Vegas Sun, 13 Inc. (“LVS”) filed a Response, (ECF No. 293), and Defendants filed a Reply, (ECF No. 311). 14 For the reasons discussed below, the Court DENIES the Motion for Certificate of 15 Appealability. 16 I. BACKGROUND 17 This is an antitrust action. LVS’s Complaint alleges the following: 18 A. The Parties 19 LVS is a Nevada corporation that publishes a daily newspaper in Clark County, Nevada. 20 (Compl. ¶ 1, ECF No. 1). LVS first published its newspaper, the “Las Vegas Sun” (“Sun”), in 21 1950, making it the second-longest-running daily newspaper in Las Vegas. (Id. ¶ 2). Defendant 22 Las Vegas Review-Journal, Inc. (“LVRJ”) is a Delaware corporation that also publishes a daily 23 newspaper in Clark County, Nevada. (Id. ¶ 5). LVRJ first published its newspaper—the “Las 24 Vegas Review-Journal” (“RJ”)—in 1929, making it the longest-running daily newspaper in Las 25 1 Vegas. (Id.). LVRJ is a wholly owned subsidiary of Defendant News+Media Capital Group, 2 LLC (“News+Media”). (Id. ¶¶ 5, 7). 3 Defendant Sheldon Adelson is an individual and, according to LVS, the owner and alter 4 ego of News+Media. (Id. ¶ 8). Defendant Adelson purportedly exercises significant influence 5 over LVRJ’s affairs and the editorial content of its newspaper. (Id. ¶ 9). 6 Defendant Patrick Dumont is an individual and an officer and owner of News+Media. 7 (Id. ¶ 11). Dumont is Defendant Adelson’s son-in-law. (Id.). According to LVS, Defendant 8 Dumont “orchestrated” the Adelson family’s purchase of LVRJ, at Defendant Adelson’s 9 direction. (Id.). 10 B. The Joint Operating Agreements 11 In the late 1980s, the Sun was operating at a substantial loss, which almost caused its 12 financial failure. (Id. ¶ 18). In 1989, LVS and LVRJ entered into a Joint Operating Agreement 13 (the “1989 JOA”). (Id.). Through the 1989 JOA, LVS and LVRJ sought “[t]o ensure the 14 continued publication of two separate and independent daily newspapers in Las Vegas[.]” (Id.). 15 To that end, the 1989 JOA allowed LVRJ to assume control of the print advertising and 16 circulation functions for both newspapers. (Id. ¶ 20). Further, the 1989 JOA permitted LVS to 17 print its newspaper using LVRJ’s publishing plant and equipment. (Id.). Despite these joint 18 operations, the newspapers maintained their editorial independence. (Id. ¶ 21). The Sun 19 ultimately became profitable under the 1989 JOA. (Id. ¶ 22). 20 The 1989 JOA was possible due to the Newspaper Preservation Act, 15 U.S.C. §§ 1801– 21 04 (the “NPA”), which exempts joint newspaper operations from certain antitrust trust laws 22 provisions. (Id. ¶ 17). In order to obtain the NPA’s protection, joint newspaper operations must 23 be conditioned on maintenance of separate editorial functions. (Id.). 24 In 2005, LVS and LVRJ allegedly amended the 1989 JOA (the “2005 JOA”). (Id. ¶ 23). 25 Under the 2005 JOA, the Sun and the RJ became a single-media product, meaning that both 1 newspapers remained separately branded publications, but the Sun was included as a separate 2 newspaper inside the RJ. (Id. ¶ 24). LVRJ continued to oversee “all accounting, management, 3 and operational control” of the Sun, “except for the operation of the Sun’s news and editorial 4 department.” (Id. ¶ 26). According to LVS, the 2005 JOA remains operative and runs for an 5 initial period ending on December 31, 2040. (Id. ¶ 32). The 2005 JOA, like the 1989 JOA, 6 imposed many obligations onto LVRJ. For example, the 2005 JOA provides for certain 7 formatting specifications. (Id. ¶ 27). In addition, it requires that LVRJ publish a “noticeable 8 mention” for the Sun’s lead story and specifies that the “noticeable mention” must generally be 9 published above the RJ’s own banner on its front page. (Id.). The RJ, furthermore, is required 10 to market and promote the Sun in “equal prominence” to the RJ, using “commercially 11 reasonable efforts to maximize circulation of both newspapers.” (Id. ¶ 28). The RJ and the Sun 12 both bear their respective editorial costs under the 2005 JOA. (Id.). Additionally, LVRJ pays 13 an “annual profits payment” to the Sun before the first day of each month. (Id. ¶ 30). 14 The 2005 JOA specifies certain conditions for its termination. (Id. ¶ 34). Under the 1989 15 JOA, LVRJ could terminate the JOA if the joint operation failed to turn a profit for two 16 consecutive years. (Id.). That provision was omitted from the 2005 JOA, which permits 17 termination only if one of three events takes place: (1) the expiration of the initial term 18 (December 31, 2040); (2) bankruptcy or default by LVRJ or LVS; or (3) a change in controlling 19 ownership interest in LVS away from any lineal descendants of Hank Greenspun (i.e., the 20 Sun’s founding editor and publisher until 1989) without prior approval from the RJ. (Id.). 21 C. The Alleged Predatory Conduct 22 LVS claims that Defendants engaged in an anticompetitive scheme to eliminate the RJ’s 23 sole competitor—the Sun—from the market for daily local newspapers in Clark County. (Id. 24 ¶ 48). Defendant Adelson acquired the RJ in December 2015, apparently because he desired to 25 exert “unfettered editorial control” over its content and produce press coverage sympathetic to 1 his business and personal interests. (Id. ¶ 49). Defendant Adelson began to exert this control 2 immediately upon his acquisition of the RJ. (Id. ¶ 53). The Sun, however, continued to express 3 attitudes contrary to Adelson’s and published pieces that took direct aim at Defendant Adelson 4 himself. (Id. ¶ 54). 5 LVS alleges four different actions by Defendants that together comprise Defendants’ 6 predatory conduct and anticompetitive scheme. (Id. ¶ 56). First, LVS claims that Defendant 7 Adelson removed Jason Taylor from his position as publisher of the RJ in an effort to harm 8 LVS. (Id.).1 Taylor, according to LVS, was publisher of the RJ for about seven months starting 9 in July 2015. (Id. ¶ 57). Prior to Defendant Adelson’s acquisition of the RJ, Taylor had 10 implemented a plan to help increase the RJ’s revenue, and he was on track to increase the Sun’s 11 profit payments under the 2005 JOA. (Id. ¶ 59). Further, Taylor identified that the RJ’s owner 12 prior to Defendant Adelson “had been dishonest in calculating profit payments” to LVS under 13 the 2005 JOA, and he raised this issue to Adelson but to no avail. (Id. ¶ 60). Taylor endeavored 14 to insulate the RJ’s newsroom from Adelson’s influence, which supposedly resulted in Taylor’s 15 removal as publisher of the RJ, the abandonment of Taylor’s plan to increase the RJ’s revenue, 16 and the hiring of a new publisher who would execute on Defendants’ “strategy to financially 17 starve the Sun and to force it out of business.” (Id. ¶ 64). 18 Second, LVS alleges that LVRJ abused its control over operations, advertising, and 19 accounting, with the goal of either ending the Sun’s existence or diminishing the Sun’s value 20 and forcing a sale to the RJ “at a fire-sale price.” (Id. ¶ 56). Defendants allegedly endeavored 21 to achieve this by increasing the JOA’s operating expenses and recording—for the first time in 22 the joint operation’s history—a negative EBITDA2 in the amount of $2.25 million for the fiscal 23

24 1 Jason Taylor is not a party to the instant action. 25

2 EBITDA means “earnings before interest, taxes, depreciation, and amortization.” 1 year ending on March 31, 2017. (Id. ¶ 70).

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Las Vegas Sun, Inc. v. Adelson, (D. Nev. 2021).

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