Zaslav’s Superlawyer on Biden, Cuomo, & Bryan Freedman

Daniel Petrocelli
Attorney Daniel Petrocelli. Photo: Nicholas Kamm/Getty Images
Eriq Gardner
July 18, 2022

On August 1, the Department of Justice will begin a trial aimed at blocking the $2.1 billion sale of Simon & Schuster to Penguin Random House. It’s easy to look at this case, as my Puck partner Bill Cohan recently did, and mock how the Biden administration has decided to go to the mattresses to maximize the money paid up front to authors for book publishing rights. I mean, launching an antitrust war over book advances at a time of $5-a-gallon gas—seriously?! 

That said, I’d argue that this case is potentially very significant, and maybe just as big as the government’s ongoing pursuits against Big Tech. OK, perhaps not quite as huge as the F.T.C.’s fight to break up Facebook, but nevertheless this case is a very important bid to sharpen regulatory teeth against so-called monopsony—that being any market where a single buyer dominates. Guess who cares about market consolidation of buyers? That would be anyone selling. Particularly, anyone selling labor services. That’s why unions throughout the nation will be following this trial closely. For many years, they’ve argued that the government should scrutinize proposed mergers for their impact on jobs; up until now, many antitrust cops have focused instead on the effect of mergers on consumer prices. In other words, there’s more on the line here than just book advances.

On Friday, the D.O.J. and Random House submitted their pre-trial briefs. Some of it’s under seal, but not everything. Witnesses for the government include bestselling author Stephen King, S&S chief Jonathan Karp, Hachette CEO Michael Pietsch, Macmillan CEO Don Weisberg and many other luminaries in the book business. Besides book executives, the defense plans to call top literary agents like Jennifer Walsh, Andrew Wylie, and Gail Ross plus The Power of Habit author Charles Duhigg. They will appear at a trial overseen by District Court Judge Florence Pan, and arguments will also be made in voluminous post-trial briefs. A decision should follow in autumn.

Additionally, there is a provocative D.O.J. motion to preclude Random House from presenting evidence about how it allows its publishing imprints to bid against each other for the acquisition of books. The Justice Department argues that internal rules treating divisions of a corporation almost as if they were separate companies don’t create any legally-binding pro-competitive commitments. “The substance of Defendants’ argument amounts to ‘don’t worry about allowing us to get market power; we promise not to use it,’” states the government motion. “But competition—not ephemeral corporate promises—ensure that markets deliver competitive prices, better quality and more choices for Americans.” 

The court is essentially being asked to address whether the solution to a dominant buyer in the market should be structural. Or whether a company’s historical policies, plus pledges to behave, may be a factor. Judge Pan will likely rule on the motion at the final pretrial conference next week.

Random House opposes the motion, telling the judge that it will show that editors at the company’s different brands have long competed against each other for authors. The company also has economic experts lined up who would testify about the profit-maximizing impact of allowing intra-firm competition. Random House adds: “The government cites no case—not one—holding that a merging party’s post-merger policy commitment is not relevant to the court’s analysis of post-merger competitive conditions. To the contrary, many decisions have considered and given weight to such commitments.”

Petrocelli Time

The attorney representing Random House, of course, is Daniel Petrocelli, who I’ve known personally ever since I started writing about legal affairs. The 68-year-old attorney has had a storied career. He broke into mainstream awareness by representing Fred Goldman in the successful civil case against O.J. Simpson. Since then, he’s represented a wide range of high-profile figures including Jeffrey Skilling and Donald Trump, though it is his entertainment clientele that has provided the backbone of his practice. He’s been the fighter who saved Superman for Warner Bros. and Winnie the Pooh for Disney. (The latter case had him up against Bert Fields, an entertainment law legend who remains active at 93.) Throughout it all, Petrocelli cultivates a reputation as someone who can turn around a losing situation.

Although I speak semi-regularly with him, the last time I saw Petrocelli face-to-face was the pre-pandemic antitrust trial over the AT&T-Time Warner merger, which the government attempted to block. Petrocelli won that case—although history might have a different verdict given how AT&T quickly spun off WarnerMedia—and continues to play a prominent role for its progeny, Warner Bros. Discovery, under the auspices of David Zaslav. Among other matters, he represents the Warners movie division in an important case with Village Roadshow, which co-financed The Matrix and dozens of other big movies, and is handling WBD’s battle against Chris Cuomo over CNN’s termination of the former 9 p.m. host.

I expect to see Petrocelli again when he comes to D.C. for the Simon & Schuster trial. In the meantime, I got him on the phone to discuss what’s ahead for him. Here’s an edited transcript…

Eriq Gardner: How do you expect this Simon & Schuster antitrust trial to be different from the AT&T-Time Warner case?

Daniel Petrocelli: These merger cases are very stimulating both intellectually and forensically. This case is a horizontal merger case. AT&T was a vertical merger case. In that sense, they’re different, but in most respects, it’s not all that different because you are describing a vision for a transaction and how it will affect the competitive landscape looking out into the future. The types of witnesses who testify are similar. You are calling a competitor’s executives, company executives and economists and industry experts. There are a lot of common aspects to how they are litigated and extensive post-trial admission. In this case, we have a trial estimated to last three weeks, which is about half the time of the AT&T trial, so it will move at a brisk pace. Of course, we are very confident about our chances of success.

Do you have a favorite place to stay in D.C.?

St. Regis because it’s right across the street from O’Melveny’s office there.

Another trial ahead for you is the Dr. Luke defamation case against Kesha. Hard to believe they’ve now been in court for almost a decade ever since she wanted out of a record and publishing deal and alleged being raped by him. This coming trial has a dynamic that’s similar to the recent Johnny Depp case. Plaintiff claiming defamation over an allegation of long-running abuse. 

I think I’m one of the few people who didn’t watch a single second of the Depp trial. By the way, the same was true for the O.J. Simpson criminal trial. I didn’t watch a second of that except for when they announced the verdict. I was so busy with my practice.

OK, I understand, but from what you’ve read, I’m wondering if there are any lessons you’d draw from the Depp trial that might be applied to the Kesha defense.

I don’t believe there is any particular secret sauce to trying these cases. I believe—maybe I’m old school—that every trial comes down to the facts of the case, and juries typically get it right. I don’t have any reason to believe that won’t happen in the Kesha case. It’s just a matter of making sure you do your best to have facts come out clear and not muddled. In many cases that could easily happen. Obviously, we’re going to have two witnesses with very different versions of events, and it will become a credibility contest in large part. In addition, corroborating evidence will be presented that will aid the jury in deciding who is lying and who is telling the truth. I don’t want to get into specifics, but just like any trial, it’s a matter of preparation and execution in the courtroom.

A few years ago, you told me that a very hot aspect of your practice, particularly in arbitration, involved affiliate transactions—like when a studio licenses a show to a sister company’s distribution arm. Is that still so, or have some of the issues that creators have with streaming cooled just a bit?

It is still a very active issue in our representation of our studio clients, but I will say that as new deals [for new TV shows and movies] are put into place, and these issues [of how to properly account for profits] are being addressed up front, we will start to see a leveling off of claims. Mainly, right now, we are seeing challenges to affiliate transactions in legacy deals that go back many decades. The other phenomenon is that as some rulings come in arbitration, and some settlements are occurring too, I think participants on both sides [of the dispute] are getting more confidence in the benchmarks for how to resolve these issues. We are not only talking about fair pricing on affiliate transactions but also about changes in distribution models with new and different windowing.

Speaking of arbitration, I keep getting asked about the status of Chris Cuomo’s in the wake of his CNN firing.

Yeah, it’s slow. We’re just kind of getting the pieces put together in the arbitration process in the CNN-Cuomo case. It takes time to get an arbitrator appointed, to get a schedule in place, to start the process of discovery. That’s just started to get going.

A couple months ago, I wrote a piece about how Chris Cuomo’s claim that CNN failed to instruct its employees not to disparage him echoed a very similar claim that Michael Jackson’s heirs made against HBO over a documentary. Both these cases were Bryan Freedman v. Daniel Petrocelli, which I thought was ironic. 

It figures you’d notice. The Michael Jackson case really has been inactive a bit. It’ll get worked out one way or another.

Another matchup we’re seeing repeatedly is you vs. Marc Toberoff on the issue of copyright termination. It feels like this topic has really exploded of late. Those antitrust cases have you looking towards the future, but these ones—the Avengers cases or the Top Gun case—have you litigating something that happened 35 years ago, if not longer. 

Exactly right. I just finished a jury trial where we were litigating things in the 1800s. It was an insurance coverage case involving environmental contamination from how homes were heated back then. The copyright termination cases don’t go back so far but they do present challenges in presenting evidence when many of the witnesses are deceased. Copyright termination is a hot topic these days as termination windows for older properties are opening up. We were involved 10 years ago or so in a number of cases. And then there was a quiet period. There’s now an uptick again. Most of them get worked out. Studios typically have a first right of exclusive negotiation with the author and heirs, and generally speaking, a deal is often made. The ones you see are the times when a deal is not struck.

Are you surprised that the Goldman family is still in court with O.J. Simpson?

No, I’m not. From day one, they told me they wanted justice for Ron Goldman and they were going to pursue Simpson until the end of time. They are never going to forget their deceased son. I don’t know if there is any realistic expectation of recovering actual money but it was never about money. I don’t think Fred Goldman is just going to sit by and forget what’s happened. He wants to proceed against Simpson as a reminder of what he did in the memory of his son.

Give me one case you’re not involved in that you’re watching.

I can’t think of any. I’m so wrapped up in my own work, I don’t follow other cases. I can’t keep up with my own work.

OK, but you do keep up with the New York Yankees, right?

That’s something I do follow. I record every game, and late at night, I fast forward through the game. I keep myself from finding out the score because I can’t watch if I know the outcome. This looks like the year for them.

Is this the best Yankees team you have ever watched?

No, the 1998 team is the best.

The rumor going around is that your son is a baseball phenom.

Whoa, you did your homework. Yeah, I don’t want to say phenom, but yeah he’s a pitcher at Notre Dame High School and he’s working hard.

You’re now in your late 60s. Sorry, I got to ask: How long do you intend to keep practicing?

I don’t want to compare myself to Bert Fields but whatever his record is, I’m going to try like hell to beat it.