44 Cal.App.5th 952
Cal. Ct. App.2020Background:
- San Francisco Print Media (owner of the Examiner) sued Hearst/Chronicle alleging violations of the Unfair Practices Act (UPA §§17043–17045) and the Unfair Competition Law (UCL §17200) based on alleged below‑cost pricing of full‑run, run‑of‑press (FRROP) display advertising after 2011.
- Plaintiff relied on economist Richard Eichmann to (a) compute the Chronicle’s fully allocated cost per advertising page, (b) show aggregate below‑cost sales, and (c) estimate damages via regression and a yardstick analysis.
- Eichmann heavily relied on a 2010 Chronicle finance analysis by John Sillers for cost allocations; Eichmann admitted gaps in his own foundational knowledge and did not independently verify Sillers’s methods or purpose.
- The trial court granted Hearst’s Sargon motion and excluded Eichmann’s cost, regression, and yardstick opinions, concluding Eichmann lacked the foundational basis required under Sargon (Evid. Code §§801–802).
- The court then granted summary judgment on the UPA claims (below‑cost sales, loss‑leader, secret/unearned discounts) and the UCL claim; plaintiff appealed.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| 1) Admissibility of Eichmann’s fully allocated cost opinion (Sargon gatekeeping) | Eichmann’s methodology (aggregate cost model) was sufficient; reliance on Sillers was reasonable and industry practice supports allocations | Eichmann lacked foundational knowledge, relied on Sillers without understanding his methods or UPA relevance, creating too great an analytical gap | Court affirmed exclusion as non‑abuse of discretion; Eichmann’s opinion lacked adequate foundation under Sargon |
| 2) Section 17043 (below‑cost sales) — proof of below‑cost sales | Eichmann’s aggregate cost analysis and price comparison showed majority of Chronicle sales below cost; no need to rely on transaction‑by‑transaction proof | Plaintiff had disclaimed reliance on specific transactions and, with Eichmann excluded, had no admissible evidence of below‑cost sales | Summary judgment affirmed for defendants because plaintiff’s sole cost evidence was excluded and plaintiff had disclaimed transaction‑level proof |
| 3) Section 17044 (loss leaders) — identification of loss‑leader sales | Plaintiff could proceed on aggregate proof and cited some example transactions as support | Defendants showed plaintiff failed to identify the specific loss‑leader sales and experts gave no loss‑leader opinion | Summary judgment affirmed; plaintiff had represented it would not try the claim transaction‑by‑transaction and therefore waived specific identification |
| 4) Section 17045 (secret/unearned discounts) and UCL claim | Eichmann’s regression/yardstick would establish injury and tendency to destroy competition; UCL could survive even if UPA claims failed | Regression/yardstick were excluded; regression did not address secret/unearned discounts; plaintiff offered no other admissible evidence of injury or tendency to destroy competition | Summary judgment affirmed on §17045 and §17200; plaintiff failed to show admissible evidence linking conduct to required elements |
Key Cases Cited
- Sargon Enterprises, Inc. v. University of Southern California, 55 Cal.4th 747 (Cal. 2012) (trial court gatekeeping role under Evid. Code §§801–802 for expert testimony; exclude opinions with analytical gaps)
- Turnbull & Turnbull v. ARA Transportation, Inc., 219 Cal.App.3d 811 (Cal. Ct. App. 1990) (UPA uses a fully allocated cost standard to determine below‑cost sales)
- Pan Asia Venture Capital Corp. v. Hearst Corp., 74 Cal.App.4th 424 (Cal. Ct. App. 1999) (cost allocation methodologies can be factual disputes for jury; different reasonable allocation methods exist)
- Aguilar v. Atlantic Richfield Co., 25 Cal.4th 826 (Cal. 2001) (summary judgment burden shifting: defendant may show lack of an essential element; plaintiff must then show triable issue)
- ABC Internat. Traders, Inc. v. Matsushita Electric Corp., 14 Cal.4th 1247 (Cal. 1997) (§17045 requires proof of injury to competitor and a tendency to destroy competition)