Palo Alto paper's peril

By: Palo Alto paper's peril
Daily News partners to press their cases in court
When David Danforth helped launch the free Palo Alto (Calif.) Daily News in December 1995 with partners James Pavelich and David Price, he thought the trio would make a successful partnership out of a difficult challenge.
Well, less than four years later, that partnership is in court after Danforth filed a lawsuit Aug. 13 that accuses his partners of diverting up to $400,000 in revenue to themselves, suppressing stories that might hurt potential advertisers, and unfairly ousting Danforth from the paper's management team.
"As a result ? the reputation of the Palo Alto Daily News has suffered irreparable damage," says the suit, filed in Santa Clara County Superior Court. "The paper has devolved from being viewed as a respected news journal to a novelty."
The suit seeks unspecified compensatory and punitive damages, as well as court and attorneys' fees.
Danforth, who has not worked in day-to-day operations at the paper since his ouster in August 1996, says the lawsuit is aimed at making his partners pay back money they did not deserve and return the newspaper to credibility.
"I think they need to be accountable to the readers of Palo Alto," says Danforth, who spoke from his home in nearby San Francisco. "The readers are too talented to have stories slammed and resources limited."
Pavelich says Danforth's allegations are false and calls the lawsuit "silly."
"We are three guys who started a company and found out it was difficult to work together and voted Danforth out," says Pavelich. "He doesn't like that, so he is a disgruntled shareholder at this point."
In a statement to E&P, Price offers a similar response. "Any claim that we don't cover the news is ridiculous," he writes. "We regularly scoop our competitors."
Among the stories Danforth contends were killed or opposed by his partners are: two reports on a lawsuit against Pacific Bell; settlement of a membership fee lawsuit involving a local dating service; and a lawsuit against a nearby country club.
"Danforth went into this with the idea that it would be a hard-hitting newspaper," says Danforth's attorney, Chris Wanger, adding, "He feels it has strayed from that."
Pavelich says he and Price have sought to have hard-hitting news, and claim that Danforth is the one who failed to properly report some stories. "A lot of times he never submitted a completed story," he says.
Danforth still owns 40% of the newspaper, but has spent most of his time in recent months involved in the creation of another free daily paper in Berkeley, Calif. ? The Daily Planet ? which launched several months ago and continues to publish.
Pavelich also controls 40% of the Palo Alto paper, while Price owns the remaining 20%. None of the partners would comment on the newspaper's current profitability, but the lawsuit states that the publication began to break even after its first year and currently averages more than $2 million in annual revenue.
When Danforth, Price, and Pavelich started the paper, veteran journalists gave the small paper little chance of surviving, especially since it was born just a few years after the death of the city's previous daily paper, The Peninsula Times-Tribune.
But, with a focus on local coverage, investigative reporting, and free subscriptions, the partnership took the feisty paper from a full-time staff of three and a circulation of 3,500 to a 30-person staff and circulation topping 25,000 today.
Danforth came to the partnership as a veteran publisher who had used a similar formula to create the Aspen (Colo.) Daily News several years ago. He says he met Pavelich in Colorado where Pavelich had started the Vail Daily in 1981.
All three partners say they have found they can't work together and hope that the Palo Alto newspaper can continue to flourish despite the legal problems.
"We can't understand what he is trying to gain. I think he is trying to undermine the paper," Pavelich says of Danforth. "He is insulting the integrity of the newsroom."
Danforth's response? "I guess I just picked bad partners."
(Editor & Publisher WebSite:http:www.mediainfo.com) [Caption]
(copyright: Editor & Publisher August 28, 1999) [Caption]