When Is Peter Lichtman Not Peter Lichtman?

Monday, March 25, 2002

Page 7

PERSPECTIVES (Column)

When Is Peter Lichtman Not Peter Lichtman?

By ROGER M. GRACE

The Metropolitan News Company, which publishes this newspaper, in 1996 sued the Daily Journal Corporation, publisher of the Los Angeles Daily Journal, for anticompetitive conduct, including selling below cost. There was a hung jury at the first trial, which ended in January of 1999. On July 14, 1999, the second trial ended in a verdict for DJC. The judge two days later granted a motion for nonsuit which he had taken under submission prior to the defense presenting its case, and ultimately signed a judgment based both on the nonsuit and the jury verdict.

The judge presiding at the first trial was evenhanded and objective. No one could have asked for a better umpire.

The judge presiding at the second trial might just as well have been sitting at the table with the defense counsel. He was on their team. In one instance after another, he scuttled rulings made at the first trial in MNC’s favor. His bias was discernible, the outcome predictable.

Anomalously, the judge at the first trial and the judge at the second trial was the same person:

Peter Lichtman.

That same Peter Lichtman is now in contention for appointment to the U.S. District Court. I am not among those rooting for him to bag the judgeship.

Dismiss my grumblings, if you wish, as those of a disgruntled litigant. But bear in mind that every disgruntled litigant who claims the judge was biased is not wrong. Only the most naïve would contest the proposition that there are instances where judges, driven by bias, effect through manipulation the outcomes they desire. At the second trial of MNC v. DJC, Peter Lichtman did just that.

I have seen Peter Lichtman perform ably. I’ve seen him as one of the best of judges. Indeed, had the verdict gone against us at the first trial, I would have known that we lost notwithstanding superb representation by our trial lawyer and fair treatment by the judge.

But at the second trial, well, things were markedly different. DJC’s legal team was bolstered by the presence of Ronald Olson, the “Olson” in the name of DJC’s law firm, Munger, Tolles & Olson. Our lawyer was peeved at us for not settling, and was barely speaking to my wife and me. And—most significantly—the judge was outwardly antagonistic to us, and stacked the deck at every turn.

The word was spread among the judges (and I can only speculate who originated the notion) that our loss at the second trial was attributable to a California Supreme Court decision which came down after the first trial and before the second one. Not so.

Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Company (1999) 20 Cal.4th 163 heightened the burden for a plaintiff in an action for selling below cost by requiring that it show injurious “purpose” on the part of the defendant, rather than injurious “intent.” In order for conduct to take place for an anticompetitive “purpose,” it must be specifically aimed at causing a competitor injury; awareness that the injury was bound to result (enough to show “intent”) doesn’t suffice.

However, that requirement of Cel-Tech did not come into play. The issue of the mental element was never reached. The jury found that DJC had not sold below cost, ending the inquiry right there. (It was undisputed that one of its lines of business was engaged in selling below cost—and it was that activity which was the subject of the action. In contravention of case law, Lichtman allowed DJC to mix in offsetting profits from another line of business, creating the illusion that a violation was not occurring.)

By the way, we also sued for locality discrimination—which entails selling for less in one geographical area than in others in order to harm a competitor. Lichtman ruled that with respect to that cause of action, we also had to show injurious “purpose.” This is one of numerous lame rulings reflecting his determination to assure DJC victory. The high court said in Cel-Tech that injurious “purpose” must be shown in an action for selling below cost because the statute creating the tort says “purpose.” By contrast, however, the statute creating the cause of action for locality discrimination says “intent.” In his concurring and dissenting opinion, Justice Marvin Baxter noted the difference in statutory language, and remarked: “Under the majority construction, locality discrimination is an offense if the actor knew or reasonably should have known that the discrimination would injure competitors or destroy competition, but the same actor whose below-cost sales caused identical harm would be liable and subject to an injunction only if the actor’s purpose was to injure or destroy competition.” Anyway, Lichtman’s infirm ruling did not affect the result, given that the intent issue was not reached with respect to locality discrimination, either.

It was not Cel-Tech that gave DJC victory—its was the combined skill of its two champions, Ron Olson and Peter Lichtman.

Lichtman’s misconduct was a relatively minor ground for our motion for a new trial, though the judge’s obsession with the issue took up most of the two-hour hearing on the motion.

A theme of a case repeatedly cited by DJC in the litigation was that “a rose is a rose.” In the course of the colloquy with Lichtman, I told him:

“At the first trial, the court made some rulings for us, some against us. There was an obvious effort to be objective and to be impartial.

“At the second trial, [MNC’s general manager] Mr. [S. John] Babigian said that, as a layman sitting there, he couldn’t believe it was the same judge. Same face, same name, different judge.

“A rose may be a rose, but a Peter Lichtman is not a Peter Lichtman, when at the second trial Peter Lichtman has an agenda, and that agenda is to rule in favor of the defendant.”

I have never learned, for sure, what it was that turned Lichtman against us.

Here’s my declaration in support of the motion:

I, ROGER M. GRACE, say:

I am an attorney for the plaintiff in this matter. I was personally present in court throughout the second trial in this action.

It became increasingly clear to me over the course of the trial that judge presiding, Peter Donald Lichtman, had lost objectivity and fairness and was determined to hand victory to the defendants. I base this not only on the actions taken by him, as set forth here and in the moving papers, but by his attitude and manner.

Some weeks after the break-down of voluntary mediation (DJC refused to consider a resolution not entailing buying out MNC), my wife, daughter and I met with our trial attorney, Thomas V. Girardi, who relayed yet another offer entailing the purchase of MNC. He related that he had been in touch with the mediator, Charles G. Bakaly Jr., who had reported that Judge Lichtman had telephoned him three times urging that a settlement be effected.

Judge Lichtman in June postponed the trial and ordered the parties into mediation with Bakaly. The judge said that Mr. Bakaly had telephoned him. (Mr. Girardi advised me that, according to Mr. Bakaly, it was a matter of the judge having phoned.)

Mr. Girardi related at the outset of this court-ordered “mediation” that Mr. Bakaly was in communication with the judge on the progress of the mediation. He further related that at that point, Mr. Bakaly was telling the judge that it was Mr. [Charles T.] Munger [chairman of the board of DJC] who was being, as Mr. Girardi put it, “the asshole.” From that, I infer that at a later point when an offer was made and I declined it, with Mr. Bakaly expressing disapproval of that decision, he conveyed a negative characterization of me to the judge of a like nature.

After three days of my wife and me sitting idly in a conference room at Mr. Bakaly’s office, with no communications from the mediator, there at last came the occasion when portions of a written offer were revealed to us by the mediator. (We were never shown the written offer despite requests to Mr. Bakaly.) It entailed a purchase of all our newspapers, but consent to us publishing a weekly newspaper, to be printed by DJC in a quantity of 5,000, which could contain no legal advertising, and would “deal primarily with political news not aimed primarily at the legal market.” It could be called “Metropolitan News” under a perpetual license from DJC. MNC declined the offer, desiring as it does to continue publishing newspapers, and in particular one dealing with legal news. I regard that as our choice to make, and only ours to make. Judge Lichtman apparently thought it was his place to approve or disapprove of our decision, and discernibly disapproved. From that point on, he was solidly behind DJC in his rulings.

Upon our rejection of the offer, Mr. Bakaly advised that we were to be in court in the morning. It was after court hours and I inquired how the court would know that we would be coming in. He said he would phone Judge Lichtman at home.

The extent of the communications between Mr. Bakaly and Judge Lichtman can only be speculated upon. I do know that my wife and I received two ex parte communications from the judge through Mr. Bakaly. At the court-ordered mediation, Mr. Bakaly related that the judge wanted us to know that the recent decision of the California Supreme Court in Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Company (1999) 20 Cal.4th 163 was extremely detrimental to us. After the trial started, Mr. Girardi wrote to us urging settlement, reporting that the judge thought my wife and I had done badly in testifying.

During the course of the trial, the judge repeatedly ruled in a manner contrary to his rulings at the first trial. Each of the changes in rulings set forth in the memorandum of points and authorities is accurately stated based on my personal knowledge of the rulings.

I was called to testify by defendant DJC. I was asked if MNC had received any offers of purchase. The only correct answer was “yes,” because Mr. Munger had made an offer to purchase. I so stated. My direct and necessary response was ordered stricken by Judge Lichtman. Although statements made in mediation are generally inadmissible, my answer was necessitated by the question, and the very asking of that question by Mr. Olson—who knew of the offer by Mr. Munger—waived any privilege that might have existed as to the mediation offer.

I was present when Mr. Munger testified. I heard him say that he did not want MNC to cease operations because “[i]f the paper were discontinued, we would get a new competitor.” That competitor, he said, might be “way more of a tough cookie.” Under DJC’s acquisition proposal, MNC would no longer compete in legal advertising. In answer to a question as to whether, by virtue of its editorial content, the Metropolitan News-Enterprise was a “real thorn in your foot,” Mr. Munger answered “no.” When asked if he would recommend that MNC fold the Metropolitan News-Enterprise, Mr. Munger said, “I’d prefer that they don’t.” Yet, under his settlement proposal, the Metropolitan News (as it would have to be re-named) could not compete editorially with the Daily Journal—i.e., it would have to “deal primarily with political news not aimed primarily at the legal market.” The court apparently knew from discussions with Mr. Bakaly of what had transpired in the supposed “mediation,” and knew that testimony as to the purchase offer would have served the permissible purpose of impeaching the untruthful testimony of Mr. Munger. The striking of my testimony and the exasperation and disdain evinced by the judge at the time he did so were entirely unwarranted and prejudicial.

I was also present when the judge gave instructions to the jurors in connection with their advisory verdict—which I have characterized in the memorandum of points and authorities as “a pep talk on the virtues of unfettered competition.” The instructions were given as set forth in the memorandum. I believe any objective reading of Cel-Tech will show those instructions to have been totally unwarranted, prejudicial, and reflective of a mangling of Cel-Tech to reach a result.

I believe it is noteworthy that at the first pre-trial hearing after the judge had read Cel-Tech, he commented that the case seemed to have something in it for everybody. From that, I assumed he was referring to the fact that it somewhat increased the plaintiff’s burden in so far as showing the mental element, but rendered it far easier to prevail under the Unfair Competition Law. Whatever he meant, his subsequent treatment of Cel-Tech at trial was to use the case entirely as a weapon against MNC. Whatever he saw in the case that assisted MNC he no longer saw after MNC refused the buy-out offer, thereby forcing the case to trial.

Following the jury verdict against MNC, Judge Lichtman proceeded to grant a judgment of nonsuit to DJC on the First, Second, and Fourth Causes of Action. Though the procedure was highly unusual, it is not wholly irrational for a judge to proclaim at the posttrial stage, upon reflection, that the issues were resolvable as a matter of law. However, Judge Lichtman on Aug. 2 proceeded to sign a judgment which reflected both a judgment of nonsuit and a judgment pursuant to a jury verdict—which are irreconcilable. I view this as nothing less than an effort to bludgeon a corpse. The apparent intended effect is that if the causes of action are resurrected on appeal through reversal of the nonsuits, MNC will still be faced with a second death of the causes of action, in the form of the jury verdict. I have thoroughly researched case law and have found no precedent for this double-death maneuver. The action is reflective of the desire on the part of the judge to cause injury to MNC, whether by fair means or, as in this instance, foul.

In appearing before Judge Lichtman for pretrial motions prior to the first trial, I felt at ease, and sensed that I had rapport with him. At a hearing on pretrial motions before the second trial, antagonism on his part was evident, as it was when I testified at the second trial.

I state the foregoing as a matter of personal knowledge, and if called upon to testify as to these matters, I could and would do so competently. I declare under penalty of perjury, under the laws of the State of California, that the foregoing is true and correct.

Executed this 9th day of August, 1999, at Los Angeles, Calif.