The legal newspaper Metropolitan News-Enterprise is trying to gain approval to publish legal notices in 40 cities throughout Southern California, not just the city of Los Angeles where it is based.
The larger Los Angeles Daily Journal, which currently carries notices for the city and county of Los Angeles and could be hurt by its competitor’s expansion, has gone to court to prevent it.
“They’re trying to snuff us out, and we want to stay around,” said Metropolitan News Publisher Roger Grace, noting that billionaire Charles Munger, whose investment firm owns 39 percent of Daily Journal Corp., “would like to be the only paper specializing in legal notices in the city of Los Angeles. He’s trying to mow us down.”
It’s the latest skirmish among smaller specialized newspapers over the right to publish home foreclosures, fictitious business names and probate cases that bring in a steady revenue stream.
Publishing legal notices requires approval, or adjudication, from the jurisdiction that governs each type of notice usually county, city or judicial district. City adjudication is the hardest to get and one of the most lucrative because it allows newspapers to print foreclosure notices and public notices such as hearings and city council meetings.
The ads have become even more critical for local newspapers as national advertisers have shunned them in favor of trade magazines or the Internet.
“It’s a source of revenue you can count on; you can go to the bank on it,” said Jonathan Kotler, associate professor of journalism at USC’s Annenberg School for Communication. “There’s no doubt why people want it and why those adjudicated will fight like heck to make sure nobody muscles onto their territory.”
David Ganezer, publisher of the Santa Monica Observer, said that if Met News were able to provide legal notices in 40 cities in Los Angeles County, it would be devastating for the small newspapers in those cities.
The Metropolitan News application is gaining notice because it potentially threatens the status quo that prevents publishers from running legal notices in cities where they don’t have a significant subscriber base.
“There is a lot of competition in legal notices,” acknowledged Michael Kirby, a partner at Post Kirby Noonan & Sweat LLP, who represents the Daily Journal. “But there are some strict requirements for what you have to prove before you can give those notices. Under no stretch can you just do it in a manner that’s done here.”
As part of the approval process, newspapers must publish their intent so opponents will have the opportunity to challenge the application.
Newspapers already publishing in an area often try to prevent competitors from encroaching on their cash cow. The battles can get intense, even if no lawsuit is filed.
Josh Gross, publisher and chief executive of the Beverly Hills Weekly, said he realized early on that he needed to publish city legal notices in order to compete with the better-established Beverly Hills Courier.
But obtaining adjudication was not easy, especially since the Courier didn’t have competition for legal notices in more than 40 years, he said. The Courier’s publisher ran editorials admonishing the city for paying the Weekly a higher rate for legal notices (which Gross disputes).
“There was a lot riding on it,” Gross said. “They had a monopoly for many years.”
Clifton Smith, publisher of the Courier, said the city was unfair in determining how much it would pay each paper to publish legal notices. “The city started paying the other newspaper more than they were paying us, and we had six times their circulation,” he said.
Ross Furukawa, publisher of the three-year-old Santa Monica Daily Press, said he would like to get adjudication from the city but expects to face an expensive legal fight with his competitor, the Santa Monica Observer.
“If the Observer were not legally adjudicated they wouldn’t exist,” he said.
Ganezer refused to acknowledge any competition between the papers. But he admitted that legal notices have become a more significant source of income for newspapers.
Grace argues that since the Met News was established in 1901, long before many local cities were incorporated, it should be able to modify its adjudication status to be grandfathered into cities in L.A. County that were formed after 1923, when a law governing city legal notices was passed in California.
Grace has drawn opposition from the California Newspaper Publishers Association, which filed an amicus brief supporting the lawsuit filed by the Daily Journal in 2003 in L.A. Superior Court.
Thomas Newton, general counsel and legislative advocate of the CNPA, said “mass adjudication” particularly for small newspapers without paid subscribers in those cities goes against the law’s principle of publishing legal notices in a local newspaper.
“The idea here is the attempt to localize the notice to energize and deputize people in the community, to understand an important event in their community is about to occur,” he said. “If you allow that to go virtually countywide, that destroys the real ability of folks to access that notice.”
Half the cities in L.A. have at least one local newspaper, and only three in the region, including the Met News, are known to have attempted adjudication in more than one city.
Grace said one newspaper, the Riverside Press-Enterprise, succeeded in getting mass adjudication in 1995. “My daughter found out about that and thought about the law and concluded that was correct,” said Grace, whose daughter, Lisa Grace-Kellogg, is the newspaper’s lawyer. “That triggered her going to court.”
The Daily Journal argues the Met News should have published a notice of its application, not just modified its existing adjudication. Because there was no new application, it took the Daily Journal two years to discover the Met News’ modification effort.
After an L.A. Superior Court judge rejected the Daily Journal’s arguments, the newspaper appealed.
Last month, a panel in the 2nd Appellate District reversed the lower court’s ruling and determined that the Met News should have published notice of its intent and failed to show it has an adequate number of paid subscribers in those cities. The court sent the case back to Superior Court for a judge to decide on whether a newspaper can be legally adjudicated in more than one city.
