150= Q. DO THOSE INCLUDE BOTH FRONT LIST AND BACK LIST? 151= A. YES.
152= Q. AND HOW ABOUT AT YOUR FOURTH STREET STORE, WHAT TYPES OF 153= BOOKS DO YOU SELL THERE?
154= A. SAME KINDS OF BOOKS, HARDBACKS, TRADE PAPERBACKS, MASS 155= MARKET BOOKS, BOOKS ON TAPE, TECHNICAL BOOKS.
156= Q. HAVE THE CATEGORIES OF BOOKS THAT YOU SELL AT YOUR TELEGRAPH 157= STORE CHANGED SINCE 1994?
158= A. NO. 159= Q. HAVE THE CATEGORIES OF BOOKS THAT YOU SELL AT YOUR FOURTH
160= STREET STORE CHANGED SINCE 1997? 161= A. NO.
162= Q. AND CAN YOU GIVE ME A ROUGH ESTIMATE OF THE NUMBER OF TITLES 163= THAT YOU CURRENTLY HAVE AT THE TELEGRAPH STORE?
164= A. ABOUT 150,000. THAT'S ROUGH ESTIMATE. 165= Q. AND SINCE 1994, HAS THAT NUMBER RISEN, FALLEN OR REMAINED
166= CONSTANT? 167= A. IT TENDS TO CREEP UP A LITTLE BIT EVERY YEAR, SO IT'S GROWN.
168= Q. AND HOW MANY TITLES DO YOU HAVE AT YOUR FOURTH STREET STORE? 169= A. PROBABLY NINETY TO A HUNDRED THOUSAND TITLES.
170= Q. AND HAS THAT NUMBER CHANGED SINCE THE OPENING OF THAT STORE? 171= A. IT ALSO HAS CREEPED UP A LITTLE BIT. IT'S GROWN A BIT.
172= Q. ARE THERE ANY BARNES & NOBLE STORES CLOSE TO YOUR TELEGRAPH 173= STORE?
174= A. THE CLOSEST BARNES & NOBLE IS ON SHATTUCK. IT'S ABOUT FIVE
175= BLOCKS AWAY FROM OUR TELEGRAPH STORE. 176= Q. AND ARE THERE ANY BORDERS STORES CLOSE TO YOUR STORE ON
177= TELEGRAPH? 178= A. THE CLOSEST ONE WOULD BE IN EMERYVILLE, WHICH IS ABOUT
179= THREE MILES AWAY. 180= Q. WHEN DID THE BARNES & NOBLE ON SHATTUCK OPEN?
181= A. I BELIEVE IT OPENED IN 1992. 182= Q. AND WHEN DID THE BORDERS STORE OPEN?
183= A. I THINK IT WAS IN 1995. 184= Q. AND, AGAIN, THE BORDERS STORE IS THREE MILES AWAY FROM YOUR
185= TELEGRAPH AVENUE STORE? 186= A. YES.
187= Q. HOW FAR AWAY ARE THE TWO STORES THAT YOU HAVE FROM EACH 188= OTHER?
189= A. ABOUT THREE AND A HALF MILES FROM EACH OTHER. 190= Q. OKAY.
191= YOUR HONOR, IF I COULD APPROACH THE WITNESS WITH HIS 192= WITNESS BINDER.
193= THE COURT: YES. 194= MR. DAWSON: I'VE PREVIOUSLY GIVEN ONE FOR THE
195= COURT'S --THINK IT'S SITTING RIGHT BEHIND YOU. NO, IT'S --196= EXCUSE ME. IT'S TO YOUR RIGHT. RIGHT ON THE --SITTING RIGHT
197= THERE. 198= THE CLERK: OKAY.
199= MR. PETROCELLI: IS THERE A BINDER FOR US, COUNSEL?
200= MAY WE HAVE A BINDER ALSO? 201= MR. DAWSON: YOU WERE GIVEN THEM YESTERDAY.
202= MR. PETROCELLI: DO YOU HAVE AN EXTRA ONE? 203= MR. DAWSON: I DON'T.
204= MR. STEER: I HAVE ONE. MR. PETROCELLI, SINCE YOU'RE 205= GOING TO PROCEED FIRST, I'LL --
206= MR. PETROCELLI: THANK YOU. 207= BY MR. DAWSON:
208= Q. I'D LIKE TO SHOW YOU, MR. ROSS, WHAT'S BEEN PREVIOUSLY 209= MARKED AS DEMONSTRATIVE EXHIBIT 2490, WHICH IS IN THE FIRST TAB
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210= OF YOUR BINDER AND ASK YOU TO REVIEW THAT. 211= A. YES.
212= Q. DOES THIS MAP ACCURATELY REPRESENT THE AREA WHERE YOUR STORE 213= IS LOCATED?
214= A. YES, IT DOES. 215= Q. AND DOES THE --DOES IT ACCURATELY REPRESENT THE LOCATION OF
216= THE BARNES & NOBLE AND BORDERS STORES THAT YOU'VE JUST REFERRED 217= TO?
218= A. YES. 219= Q. NOW, THIS OBVIOUSLY DOES NOT SHOW ALL STORES IN YOUR AREA
220= THAT SELL BOOKS; IS THAT CORRECT? 221= A. THAT'S CORRECT.
222= Q. OKAY. IN FACT, THERE ARE OTHER BOOKSTORES IN YOUR AREA 223= THAT --THAT YOU COMPETE WITH, WOULDN'T YOU SAY?
224= A. YES, THERE ARE.
225= Q. ARE THERE ANY WALDENBOOKS THAT ARE CLOSE TO YOU? 226= A. THERE WERE BACK IN '95, I BELIEVE. THERE WERE TWO WALDENS
227= IN BERKELEY. THERE'S ONE ON TELEGRAPH, WHICH IS NO LONGER 228= THERE, AND I --I THINK THE ONE ON SHATTUCK IS ALSO NO LONGER
229= THERE. 230= Q. ARE THERE ANY B. DALTONS THAT ARE ANYWHERE NEAR TO YOU?
231= A. THEY'RE NOT IN BERKELEY, BUT THEY ARE IN THE EAST BAY. 232= Q. DO YOU HAVE A GENERAL SENSE ABOUT THE LOCATION OF ANY
233= EXISTING WALDENBOOKS? 234= A. THERE'S A LOT OF THEM IN SHOPPING CENTERS IN THE BAY AREA,
235= BUT I DON'T KNOW EXACTLY WHERE THEY'RE LOCATED NOW. 236= Q. RETURNING NOW TO THE BARNES & NOBLE THAT YOU'VE DISCUSSED
237= THAT IS LOCATED ON SHATTUCK, HAVE YOU EVER BEEN TO THAT STORE? 238= A. YES, I HAVE.
239= Q. AND HAVE YOU BEEN TO THE BORDERS IN EMERYVILLE THAT YOU 240= MENTIONED?
241= A. YES. 242= Q. WHEN HAVE YOU VISITED THOSE TWO STORES?
243= A. BOTH OF THEM I VISITED WITHIN THE LAST MONTH. 244= Q. PRIOR TO VISITING THEM WITHIN THE LAST MONTH, HAVE YOU
245= VISITED THEM PREVIOUS TO THAT POINT? 246= A. YES, I TRY TO GO IN THERE ONCE EVERY SIX MONTHS TO A YEAR TO
247= SEE WHAT'S GOING ON. 248= Q. HAVE YOU HAD AN OPPORTUNITY TO REVIEW OR TO SEE WHAT KIND OF
249= BOOKS THOSE STORES ARE SELLING?
250= A. YES, I HAVE. 251= Q. AND IN COMPARISON TO THE TYPES OF BOOKS THAT YOU'VE TOLD US
252= YOU SELL AT THE CODY'S STORES, WHAT KIND OF BOOKS DOES THE 253= BARNES & NOBLE ON SHATTUCK SELL?
254= A. THE SAME KINDS OF BOOKS THAT WE SELL. THEY SELL HARDBACKS, 255= TRADE PAPERBACKS, MASS MARKET BOOKS, AUDIO. THEY SELL SOME
256= TECHNICAL BOOKS. 257= Q. AND IN COMPARISON TO THE BOOKS THAT YOU SELL AT CODY'S, WHAT
258= KIND OF BOOKS DOES THE BORDERS STORE IN EMERYVILLE SELL? 259= A. VERY SIMILAR TO THE BOOKS AT CODY'S, HARDBACKS, TRADE
260= PAPERBACKS, MASS MARKET BOOKS. 261= Q. AND HAS THE --HAS THE TYPES OF BOOKS THAT EITHER OF THOSE
262= BARNES & NOBLE OR BORDERS STORES SELLS CHANGED SINCE YOU FIRST 263= VISITED THEM?
264= A. NOT THAT I'M AWARE OF. 265= Q. DO YOU HAVE A SENSE ABOUT WHAT MAKES A STORE COMPETITIVE, A
266= COMPETITOR WITH CODY'S? 267= A. WELL, THERE'S A FEW DIFFERENT INGREDIENTS THAT AFFECT
268= COMPETITION. THE FIRST WOULD BE PROXIMITY. AND I WOULD SAY 269= THAT THE CLOSER IT IS, THE MORE COMPETITIVE IT IS.
270= SECOND AND EQUALLY IMPORTANT WOULD BE IF THEY'RE 271= CARRYING THE SAME KINDS OF BOOKS THAT WE ARE. AND IF THEY
272= PROMOTE THEMSELVES HEAVILY IN THE AREA AND IF THEY HAVE THE SAME 273= CUSTOMER BASE. THAT'S COMPETITION.
274= Q. DO YOU CONSIDER THE BARNES & NOBLE STORES THAT YOU'VE
275= IDENTIFIED --THE STORE THAT YOU'VE IDENTIFIED AS A COMPETITOR 276= TO CODY'S?
277= A. YES, PRIMARY COMPETITOR. 278= Q. AND DO YOU CONSIDER IT --ARE THERE ANY OTHER BARNES & NOBLE
279= STORES IN THE AREA IN WHICH YOU BELIEVE COMPETITORS EXIST?
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280= A. YES, THERE ARE BARNES & NOBLE ALL OVER THE EAST BAY AND ALL 281= OVER THE BAY AREA, AND THEY --THEY DO COMPETE WITH US BECAUSE
282= THAT'S WHERE OUR CUSTOMER BASE IS, BUT I THINK THE FURTHER AWAY 283= THEY ARE, THE LESS A FACTOR THEY ARE TO COMPETITION.
284= Q. AND, SIMILARLY, DO YOU BELIEVE THAT THE STORE THAT YOU'VE 285= OUTLINED AS BEING IN EMERYVILLE, THE BORDERS STORE IS A
286= COMPETITOR TO THE CODY'S STORE? 287= A. YES, I DO FOR THE SAME REASONS.
288= Q. AND DO YOU BELIEVE THAT BOTH THAT TELEGRAPH --EXCUSE ME --289= THE SHATTUCK STORE OF BARNES & NOBLE AND THE BORDERS STORE AT
290= EMERYVILLE COMPETE WITH BOTH OF CODY'S TELEGRAPH STORE AND 291= FOURTH STREET STORE?
292= A. YES, THEY DO. 293= Q. ARE THERE ANY OTHER STORES THAT YOU COMPETE --THAT YOU
294= CONSIDER COMPETITORS TO CODY'S? 295= A. YES, THERE ARE NUMEROUS BOOK STORES IN THE EAST BAY ASK AND
296= THE BAY AREA AND TO SOME EXTENT THEY ALL COMPETE WITH CODY'S. 297= Q. YOU'VE MENTIONED THE BAY AREA, WHAT IS THE REGION THAT YOU
298= BELIEVE IS YOUR COMPETITIVE REGION? 299= A. WELL, WE DRAW CUSTOMERS FROM ALL OVER THE BAY AREA BUT MOST
300= OF OUR CUSTOMERS COME FROM THE EAST BAY. PARTICULARLY THE 301= TELEGRAPH STORE. FOURTH STREET STORE DRAWS --DRAWS MORE
302= REGIONAL CUSTOMERS, I BELIEVE. 303= Q. PREVIOUSLY, YOU IDENTIFIED BARNES & NOBLE AND BORDERS AS
304= BEING NOT JUST COMPETITORS BUT PRIMARY COMPETITORS? 305= A. YES.
306= Q. AND I WONDER WHY THAT IS. 307= A. WELL, SOME --IT'S SIMPLY THAT SOME STORES COMPETE MORE THAN
308= OTHER STORES. SOME STORES ARE MORE A FACTOR OF COMPETITION. 309= THE BARNES & NOBLE AND BORDERS ARE HUGE STORES. THEY ONLY SELL
310= NEW BOOKS AND THEY SELL MANY OF THE SAME BOOKS THAT WE DO. THEY 311= PROMOTE THEMSELVES HEAVILY IN ALL SORTS OF MEDIA AND THEY DRAW
312= UPON OUR CUSTOMER BASE, SO THEY ARE A VERY SIGNIFICANT 313= COMPETITORS.
314= Q. ARE THERE ANY DOCUMENTS OR OTHER INDICATIONS THAT YOU HAVE 315= REVIEWED THAT WOULD BOLSTER YOUR POINT OF VIEW THAT BARNES &
316= NOBLE IS A PRIMARY COMPETITOR OF CODY'S? 317= A. WELL, MY FINANCIAL STATEMENTS WOULD INDICATE THAT WHEN
318= BARNES & NOBLE ON SHATTUCK OPENED UP, ACTUALLY THERE WERE A 319= NUMBER OF BARNES & NOBLES THAT OPENED UP IN '92. OUR BUSINESS
320= IN '93 DECLINED SIGNIFICANTLY. 321= Q. I'D LIKE YOU TO LOOK AT WHAT'S BEEN PREVIOUSLY MARKED AS
322= PLAINTIFF'S 121, WHICH IS THE SECOND TAB IN YOUR BINDER. 323= A. YES.
324= Q. COULD YOU TELL THE --COULD YOU IDENTIFY THIS DOCUMENT?
325= A. THIS IS AN INCOME STATEMENT FROM CODY'S BOOKS DATED 326= DECEMBER 1993, AND IT'S COMPARING VARIOUS INDICES FROM THE
327= PREVIOUS YEAR. 328= Q. AND HOW IS IT THAT YOU'RE FAMILIAR WITH THIS DOCUMENT?
329= A. I'M GENERALLY FAMILIAR WITH ALL OF OUR FINANCIAL DOCUMENTS. 330= Q. HAVE YOU HAD AN OPPORTUNITY TO REVIEW THESE AT ANY TIME
331= RECENTLY? 332= A. YES, I'VE BEEN REVIEWING FINANCIAL DOCUMENTS IN PREPARATION
333= FOR THIS TRIAL. 334= Q. DOES THIS DOCUMENT, AS FAR AS YOU KNOW, FAIRLY REPRESENT --
335= FAIRLY AND ACCURATELY REPRESENT THE FINANCIAL HISTORY DURING THE 336= TIME PERIOD THAT'S COVERED?
337= A. YES. 338= Q. CAN YOU TELL THE COURT BASED ON THIS DOCUMENT WHETHER THERE
339= WAS AN INCREASE OR DECREASE IN SALES FROM THE 1992 TO 1993 TIME 340= PERIOD.
341= A. YES, THERE WAS A SIGNIFICANT DECREASE BETWEEN THE TWO YEARS. 342= OUR BUSINESS WENT FROM SLIGHTLY OVER $8 MILLION IN 1992 TO
343=$ 7,298,000 IN 1993. 344= Q. AND FOR OUR BENEFIT, COULD YOU POINT OUT WHERE ON THIS
345= DOCUMENT YOU GET THAT INFORMATION FROM? 346= A. THE --I'M USING THE NET SALES FIGURE, WHICH IS ABOUT FIVE
347= LINES DOWN FROM THE TOP OF THE PAGE. 348= Q. AND IS IT TRUE THAT FROM YOUR MEMORY, THIS COVERS THE TIME
349= WHEN THE SHATTUCK BARNES & NOBLE OPENED UP?
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350= A. YES. 351= Q. DID YOU EVER --WHEN THIS OCCURRED, DID YOU EVER ATTEMPT TO
352= DETERMINE WHAT WAS LEADING TO THE DECLINE IN SALES? 353= A. MY FEELING IS THAT THE OPENING OF THE BARNES & NOBLE STORES
354= WAS THE --WAS THE FACTOR THAT EXPLAINED IT. THERE WAS NO OTHER 355= FACTOR THAT I CAN COME UP WITH THAT WOULD HAVE CREATED THAT
356= DIAGRAM A CHANGE IN SALES. 357= Q. IT'S TRUE, ISN'T IT, THAT OTHER FACTORS EXIST THAT COULD AT
358= LEAST HAVE AFFECTED YOUR SALES? 359= A. WELL, THERE ARE OTHER FACTORS THAT ALWAYS AFFECT SALES, BUT
360= THERE'S NO FACTOR THAT --THERE WAS NO CHANGE --ANY KIND OF 361= DRAMATIC CHANGE FROM ONE YEAR TO THE OTHER THAT WOULD HAVE
362= AFFECTED SALES. 363= Q. DO YOU RECALL WHETHER IN 1993 YOUR EMPLOYEES UNIONIZED?
364= A. YES, THEY DID. 365= Q. DO YOU BELIEVE THAT THAT HAD AN AFFECT ON YOUR SALES?
366= A. NO, I DO NOT. 367= Q. AND WHY IS THAT?
368= A. THE --WE NEVER GOT TO A POINT OF HAVING A STRIKE OR EVEN A 369= PICKET LINE. THE --THE UNION ORGANIZERS WERE EMPHATIC ABOUT
370= TELLING OUR CUSTOMERS --THANKING THEM FOR SHOPPING AT CODY'S, 371= URGING THEM TO CONTINUE TO SHOP AT CODY'S.
372= Q. HAS THERE BEEN CRIME ON TELEGRAPH AVENUE FROM TIME TO TIME? 373= A. THERE IS CRIME FROM TIME TO TIME.
374= Q. WAS THERE A PARTICULAR AMOUNT OF CRIME IN 1993 OR 1992 THAT
375= YOU BELIEVE WOULD HAVE AFFECTED SALES? 376= A. I DON'T BELIEVE SO. THERE'S --IT'S --CRIME ON TELEGRAPH,
377= KIND OF THESE SORT OF SOCIAL UPHEAVALS OCCUR FROM TIME TO TIME. 378= SOMETIMES IT'S BETTER, SOMETIMES IT'S WORSE. I DON'T BELIEVE
379= ANY OF THEM WOULD HAVE AFFECTED SALES SIGNIFICANTLY. 380= Q. DO YOU BELIEVE THAT YOU HAVE ADEQUATE PARKING AT YOUR --AT
381= BOTH OF YOUR STORES, YOUR TELEGRAPH STORE AND AT YOUR FOURTH 382= STREET STORE?
383= A. OH, I DON'T THINK ANY BUSINESSMAN THINKS HE HAS ADEQUATE 384= PARKING, BUT PARTICULARLY AT TELEGRAPH, WE CERTAINLY HAVE
385= INADEQUATE PARKING. 386= Q. AND HAS THAT CHANGED SINCE THE 1993 TIME PERIOD?
387= A. NO, IT'S THE SAME. 388= Q. AT SOME POINT, DID YOU HAVE A CAFE IN OPERATION AT YOUR
389= TELEGRAPH STORE? 390= A. YES.
391= Q. DO YOU REMEMBER WHEN THAT WAS? 392= A. IT WAS IN THE --IN THE LATE '80S, I BELIEVE WE CLOSED IT
393= DOWN IN 1990. 394= Q. SO, AGAIN, AT THE TIME THAT WE'RE SPEAKING ABOUT NOW, THE
395= 1992 TO 1993 TIME PERIOD WHEN THE BARNES & NOBLE OPENED UP ON 396= SHATTUCK, YOU DID NOT HAVE A CAFE AND YOU HAD NOT HAD ONE FOR
397= SEVERAL YEARS? 398= A. THAT'S RIGHT.
399= Q. ISN'T THAT TRUE?
400= A. YES. 401= Q. GIVEN ALL THESE OTHER --THESE OTHER FACTORS WE'VE JUST BEEN
402= DISCUSSING, WHAT IS IT THAT MAKES YOU BELIEVE THAT IT WAS THE 403= OPENING OF THE BARNES & NOBLE THAT LED TO YOUR DECLINE OF SALES?
404= A. WELL, THE --OUR WALK-IN TRAFFIC DECLINED IN 1993 AND STAYED 405= AT A LOW LEVEL. IT NEVER REALLY CAME BACK. AND THAT'S THE ONLY
406= THING I CAN ACCOUNT FOR THAT WOULD HAVE KEPT IT AT THAT LEVEL. 407= OUR BUSINESS REALLY PEAKED IN 1992, PARTICULARLY OUR WALK-IN
408= TRAFFIC. AND ACTUALLY OUR BUSINESS WENT UP LATER ON, BUT IT WAS 409= NOT AS A RESULT OF WALK-IN TRAFFIC.
410= OUR WALK-IN TRAFFIC NEVER CAME BACK, AND SOME OF 411= THESE OTHER THINGS, CRIME ON TELEGRAPH, THEY --THERE WERE
412= JUST --THERE WERE NO CHANGES REALLY. THERE WERE --THERE WERE 413= JUST KIND OF FLUCTUATIONS.
414= Q. WHEN THE BARNES & NOBLE MOVED IN ON SHATTUCK, DID YOU TAKE 415= ANY BUSINESS STEPS IN REACTION TO THEM MOVING IN?
416= A. WELL, WE THOUGHT VERY CAREFULLY ABOUT THIS. WE WERE 417= CONCERNED ABOUT IT. IT WAS OBVIOUSLY SIGNIFICANT COMPETITION,
418= THREAT TO OUR BUSINESS. WE LOOKED AT OUR DISCOUNT POLICY. WE 419= HAD BEEN DISCOUNTING BESTSELLERS FOR SOME TIME, AND WE FELT THAT
420= WE COULD NOT AFFORD TO INCREASE OUR DISCOUNTING OR TO MATCH
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421= THEIR DISCOUNT. THAT WAS JUST --WOULD BE RUINOUS TO OUR 422= BUSINESS. SO WE COULDN'T DO THAT.
423= WHAT WE DID DO IS WE TALKED TO OUR EMPLOYEES. WE 424= TRIED TO MAKE SURE THEY WERE GIVING THE BEST POSSIBLE CUSTOMER
425= SERVICE. WE TRIED TO MAKE SURE THAT WE WERE SPECIAL ORDERING 426= EVERY BOOK IN PRINT. HAD THEM AVAILABLE --THE BOOKS THAT WE
427= DIDN'T HAVE, AND WE ALSO MADE SURE THAT WE WERE METICULOUS ABOUT 428= REORDERING BOOKS SO THAT WE WEREN'T OUT OF STOCK AND JUST IN
429= GENERAL KIND OF TIGHTENING UP ON OUR BUSINESS PROCEDURES. THAT 430= WAS ALL WE COULD DO.
431= Q. WAS THE EVENTUAL OPENING OF THE FOURTH STREET STORE 432= SOMETHING THAT YOU DID IN RELATION TO THE COMPETITION THAT YOU
433= FELT FROM BARNES & NOBLE AND BORDERS? 434= A. YES.
435= Q. DID YOU EVER CONSIDER WHETHER YOU OUGHT TO SPEND THE MONEY 436= THAT YOU SPENT OPENING THE FOURTH STREET STORE ON DOING
437= SOMETHING ELSE FOR THE --FOR YOUR EXISTING TELEGRAPH STORE? 438= A. WE THOUGHT ABOUT EVERYTHING THAT WE COULD DO THAT WE THOUGHT
439= WOULD WORK. BUT WE --YOU KNOW, WE GOT --YOU KNOW, IT JUST --440= NUMBERS DIDN'T WORK. WE THOUGHT OF BUILDING A PARKING LOT. WE
441= THOUGHT OF EXPANDING THE STORE, AND WE RAN THE NUMBERS, AND IT 442= JUST DIDN'T MAKE SENSE.
443= THE FOURTH STREET STORE, ON THE OTHER HAND, WE --YOU 444= KNOW, WE WERE CONCERNED ABOUT LOSING SOME OF OUR MIDDLE CLASS
445= CUSTOMERS, AND WE REALLY FELT THAT WOULD HELP, AND IT HAS. 446= Q. DO YOU CONSIDER YOUR --THAT YOUR TELEGRAPH STORE ACTUALLY
447= COMPETES WITH YOUR FOURTH STREET STORE? 448= A. YES. IT CERTAINLY DOES.
449= Q. I'D LIKE TO MOVE ON TO HOW YOUR STORE ACTUALLY BUYS THE
450= BOOKS THAT IT PURCHASES. 451= A. YES.
452= Q. IN YOUR ROLE AS THE OWNER OF CODY'S, WHAT IS YOUR ROLE WITH 453= RESPECT TO PURCHASING BOOKS?
454= A. I AM ONE OF THE TWO PRIMARY BUYERS IN THE STORE. 455= Q. I'D LIKE TO SHOW YOU WHAT'S BEEN PREVIOUSLY MARKED AS
456= PLAINTIFF'S EXHIBIT 2591. IT'S ON THE THIRD TAB OF YOUR BINDER 457= AND IS A LIST OF VENDORS.
458= A. YES. 459= Q. TELL ME WHEN YOU'VE HAD AN OPPORTUNITY TO LOOK AT THAT.
460= A. YES. 461= Q. WHICH OF THOSE VENDORS ON THE LIST DOES YOUR CODY'S STORES
462= BUY FROM? 463= A. WE BUY FROM ALL OF THESE VENDORS.
464= Q. IS THAT TRUE FOR BOTH OF YOUR STORES? 465= A. YES.
466= Q. AND HAVE YOU PURCHASED FROM ALL OF THESE VENDORS SINCE 1994 467= TO THE PRESENT?
468= A. YES. SOME OF THESE PEOPLE HAVE BEEN MERGED WITH OTHER 469= PUBLISHERS BUT THEY --THE LINES STILL EXIST, AND WE DO PURCHASE
470= FROM THESE PUBLISHERS AND THESE LINES. 471= Q. AND DOES YOUR STORE --WHEN I SAY "STORE," I'M GOING TO MEAN
472= FOR THE NEXT FOUR QUESTIONS BOTH OF YOUR STORES. IF IT'S 473= DIFFERENT FOR EITHER ONE, COULD YOU EXPLAIN THAT --
474= A. YES.
475= Q. --AND HOW IT'S DIFFERENT. 476= A. YES.
477= Q. DOES YOUR STORE PURCHASE HARDCOVER BOOKS FROM THESE VENDORS? 478= A. THERE'S --THERE MAY BE ONE OR TWO VENDORS THAT DON'T SELL
479= HARDCOVER BOOKS, BUT IF THEY DO, WE PURCHASE THEM. 480= Q. DO YOU HAVE ONE IN MIND THAT YOU DON'T BELIEVE SELLS
481= HARDCOVER? 482= A. I DON'T BELIEVE AVON SELLS HARDCOVER BOOKS. BERKELEY IS A
483= MASS MARKET LINE, SO IT --IT MAY HAVE SOME SCIENCE FICTION 484= HARDCOVER. HEALTH COMMUNICATIONS MAY NOT HAVE HARDCOVER BOOKS.
485= Q. DOES YOUR STORE PURCHASE TRADE PAPERBACKS FROM THESE 486= VENDORS?
487= A. YES. 488= Q. FROM ALL OF THEM?
489= A. I BELIEVE WE DO, YES. 490= Q. AND DOES YOUR STORE PURCHASE MASS MARKET BOOKS FROM THESE
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491= VENDORS? 492= A. YES.
493= Q. AND HAS YOUR PURCHASING OF THE VARIOUS CATEGORIES WE'VE JUST 494= GONE THROUGH CHANGED FROM 1994 TO THE PRESENT?
495= A. NO, IT HAS NOT. 496= Q. DO YOU PURCHASE ANY AUDIO BOOKS FROM ANY OF THESE VENDORS?
497= A. YES, WE DO FROM THE VENDORS THAT SELL AUDIO BOOKS. 498= Q. AND DO YOU PURCHASE BOTH FRONT LIST AND BACK LIST FROM --
499= FROM THIS LIST OF VENDORS?
500= A. YES, WE DO. 501= Q. IN LOOKING AT THE LIST, CAN YOU GIVE ME A ROUGH
502= APPROXIMATION OF THE PERCENTAGE OF BOOKS YOU'VE PURCHASED SINCE 503= 1994 FROM ALL OF THESE VENDORS.
504= A. WELL, I CAN'T GIVE YOU A --ANYTHING MORE THAN A BALLPARK 505= FIGURE HERE, BUT THESE ARE OUR MAJOR PUBLISHERS, AND I WOULD SAY
506= 75 PERCENT OF OUR BOOKS ARE PURCHASED FROM THESE VENDORS. 507= Q. AND HOW OFTEN DO YOU ORDER BOOKS FOR YOUR STORES?
508= A. WE ORDER --WE PLACE ORDERS EVERY DAY. 509= Q. AND, SIMILARLY, HOW OFTEN DOES YOUR --DO YOUR STORES ORDER
510= BOOKS FROM THE PEOPLE THAT ARE ON THIS LIST, FROM THE PUBLISHERS 511= AND --AND WHOLESALERS THAT ARE ON THIS LIST?
512= A. PROBABLY ALMOST EVERY DAY. 513= Q. HOW DO YOU, IN GENERAL, PLACE YOUR ORDERS WITH RESPECT TO
514= THE LISTED VENDORS? 515= A. MOST OF THEM, WE --THE NEW TITLES, WE GENERALLY PLACE
516= THROUGH SALES REPS WHO CALL ON US PERIODICALLY. BACK LIST BOOKS 517= ARE MOST OF THEM ARE PLACED ELECTRONICALLY. EITHER THROUGH EDI
518= OR PUBNET. 519= Q. ON THIS LIST, THE VENDOR INGRAM IS LISTED.
520= A. YES. 521= Q. YOU SEE THAT? IS THERE ANY DIFFERENCE BETWEEN THE TERMS OF
522= SALE WHICH YOU RECEIVE FROM INGRAM AND THE TERMS OF SALE WHICH 523= YOU TYPICALLY RECEIVE FROM THE PUBLISHER VENDORS ON THIS LIST?
524= A. WELL, FOR MOST OF THESE PUBLISHERS, WE HAVE MUCH MORE
525= DESIRABLE TERMS FROM THE PUBLISHERS THAN FROM INGRAM. 526= Q. IN WHAT WAY ARE THEY MORE DESIRABLE?
527= A. BETTER DISCOUNTS. WE GENERALLY CAN TAKE A LITTLE BIT LONGER 528= TO PAY. THAT'S MOSTLY IT.
529= Q. DO YOU HAVE ANY --ANY SENSE OF HOW OFTEN YOU ORDER FROM 530= INGRAM?
531= A. THREE OR FOUR TIMES A WEEK. 532= Q. HOW IMPORTANT IS PURCHASING FROM INGRAM TO YOUR STORE'S
533= OPERATION? 534= A. VERY IMPORTANT. INGRAM IS A VERY IMPORTANT VENDOR FOR US.
535= Q. AND HOW DO YOU PLACE YOUR ORDERS TYPICALLY WITH INGRAM? 536= A. WE GIVE THEM ELECTRONIC ORDERS.
537= Q. DO YOU HAVE AN OPPORTUNITY TO COMBINE THE ORDERS FROM YOUR 538= FOURTH STREET STORE AND YOUR TELEGRAPH STORE IN ORDER TO GET
539= ADDITIONAL DISCOUNTS FROM INGRAM Could not acquire words on page 9
FOR A COMBINED ORDER? 540= A. NO, WE DO NOT COMBINE THOSE ORDERS.
541= Q. AND WHY IS THAT? 542= A. THERE'S NO ADVANTAGE IN DOING SO. AND THERE'S A LOT OF WORK
543= SORTING THE ORDERS OUT WHEN THEY COME IN AND THEN SHIPPING THEM 544= DOWN BETWEEN THE TWO STORES, SO IT'S A --IT'S MORE DESIRABLE
545= FOR US TO PLACE SEPARATE ORDERS. 546= Q. HAVE YOU HEARD OF A PROGRAM CALLED INGRAM'S VOR PROGRAM?
547= A. VENDOR OF RECORD, YES, I HAVE HEARD OF THAT. 548= Q. NOW, DO YOU PARTICIPATE IN THAT? HAVE YOU PARTICIPATED IN
549= THAT PROGRAM?
550= A. YES, WE PARTICIPATE IN IT NOW, VERY LIMITED DEGREE. MOSTLY 551= FOR VERY SMALL PUBLISHERS.
552= Q. WHY IS IT THAT YOU PARTICIPATE ONLY IN A LIMITED DEGREE? 553= A. BECAUSE WE GET A MUCH --FROM THE LARGE PUBLISHERS, WE GET
554= MUCH MORE DESIRABLE DISCOUNTS. THEY'RE IN-STOCK CONDITION IS 555= GENERALLY BETTER THAN INGRAM'S IS. IT --IT JUST DOESN'T
556= MAKE --THE NUMBERS DON'T MAKE SENSE. THE ONLY TIME THEY MAKE 557= SENSE IS FROM VERY SMALL PUBLISHERS.
558= Q. DO YOU EVER USE INGRAM AS THE EXCLUSIVE SOURCE OF 559= REPLENISHMENT OF BOOKS AT EITHER OF YOUR STORES?
560= A. WELL, WHEN WE PARTICIPATE IN VENDOR OF RECORDS, THEY REQUIRE
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631= COME FROM? 632= A. OUR PRIMARY WAREHOUSE WITH INGRAM IS IN OREGON. AND
633= SECONDARILY, IF WE DON'T --IF WE CAN'T GET THEM FROM THE 634= PRIMARY WAREHOUSE, WE WILL GET THEM FROM SOUTHERN CALIFORNIA.
635= Q. AND HOW DO THE BOOKS THAT ARE SHIPPED FROM ANY OF THESE 636= VENDORS ARRIVE AT YOUR STORES?
637= A. THEY ARRIVE IN USUALLY IN BOXES --638= Q. ARE THERE --
639= A. HOPEFULLY IN GOOD CONDITION. 640= Q. I'M SORRY.
641= ARE THE BOOKS DELIVERED TO ONE OF YOUR STORES, AND 642= THEN YOU DELIVER A SECTION OF THOSE BOOKS TO YOUR OTHER STORE,
643= OR DO THEY GO TO EACH --EACH STORE SEPARATELY? 644= A. WE DO IT BOTH WAYS. SOMETIMES WE HAVE THEM SHIPPED
645= SEPARATELY TO THE TWO DIFFERENT STORES, AND SOMETIMES THEY'RE 646= CONSOLIDATED AT ONE STORE AND THEN SPLIT UP AND SHIPPED DOWN TO
647= THE OTHER. 648= Q. AND WHAT DO YOU DO AFTER THE BOOKS ARRIVE IN THE BOXES?
649= WHAT'S THE NEXT STEP?
650= A. WE SORT THE BOXES. WE --THEN WE OPEN THEM. WE CHECK TO 651= SEE IF THERE'S AN INVOICE INSIDE. WE PUT THE BOOKS OUT. WE
652= RECEIVE THEM AGAINST A --AGAINST OUR COMPUTER. WE CHECK TO SEE 653= IF THERE ARE ANY BOOKS THAT WE WERE BILLED FOR THAT WE DIDN'T
654= RECEIVE, IF WE HAD ANY SHORT SHIPMENTS. 655= WE CHECK IF THE BOOKS ARE PRICED. IF THEY AREN'T, WE
656= HAVE TO PRICE THEM. WE CHECK TO SEE IF THERE'S ANY TITLES THAT 657= ARE --THAT ARE SHOP-WORN OR DEFECTIVE. IF THEY'RE SHORT-SHIPS
658= OR DEFECTIVE BOOKS, WE HAVE TO WRITE UP A LITTLE FORMS 659= REQUESTING CREDIT FROM THE PUBLISHER. WE ATTACH THEM TO THE
660= INVOICES AND SEND THEM UPSTAIRS. SEND THE INVOICES UPSTAIRS TO 661= OUR BUSINESS OFFICE.
662= Q. DO YOU HAVE A GENERAL SENSE ABOUT HOW LONG IT TAKES TO GO 663= THROUGH THIS PROCESS WITH RESPECT TO A SINGLE BOX OF BOOKS?
664= A. IT CAN BE PRETTY SLOW. I WOULD SAY IT COULD TAKE A HALF AN 665= HOUR TO AN HOUR PER BOX TO RECEIVE THEM.
666= Q. HOW DO YOU KNOW WHAT THE TRADE TERMS ARE THAT ARE GOING TO 667= BE APPLYING TO THE BOOKS THAT YOU'RE PURCHASING?
668= A. THE PRIMARY WAY WE KNOW IS FROM THE RED BOOK. WE ALSO 669= RECEIVE INFORMATION FROM TIME TO TIME FROM PUBLISHERS. USUALLY
670= IT'S PRINTED OUT. 671= Q. DO YOU UNDERSTAND THE RED BOOK TO BE A PUBLISHED COMPILATION
672= OF TERMS THAT ARE GENERALLY RELIED ON IN THE BOOKSELLING 673= INDUSTRY?
674= A. YES.
675= Q. AND HOW DO YOU USE IT? 676= A. WELL, IF WE DON'T KNOW WHAT THE TERMS ARE, WE LOOK IT UP IN
677= THE RED BOOK. 678= Q. HOW OFTEN DO THE TERMS CHANGE IN THE RED BOOK?
679= A. WELL, THEY PUBLISH --THEY CHANGE THE RED BOOK EVERY YEAR. 680= AND SO --SO THEY VARY FROM YEAR TO YEAR.
681= Q. ARE THERE INTERIM CHANGES BETWEEN ONE YEAR'S RED BOOK AND 682= ANOTHER YEAR'S RED BOOK?
683= A. PUBLISHER'S INTERIM CHANGES? 684= Q. YES.
685= A. YES. I DON'T KNOW IF THEY --IF THEY UPDATE THE RED BOOK IN 686= THE INTERIM, BUT PUBLISHERS DO MAKE CHANGES BETWEEN RED BOOKS
687= FOR SURE. 688= Q. WELL, HAVE YOU EVER RECEIVED SOMETHING THAT YOU BELIEVE WAS
689= A CHANGE FROM THE RED BOOK TERM FROM A PUBLISHER? 690= A. OH, YES, THAT HAPPENS.
691= Q. AND HOW DO YOU RECEIVE THEM? 692= A. THE SALES REP --SOMETIMES THE SALES REP CALLS US UP.
693= USUALLY THEY GIVE US SOME SORT OF PRINTED FORM ANNOUNCING THE 694= CHANGES, THAT SORT OF THING.
695= Q. HAVE YOU EVER ASKED ANY VENDOR FOR TRADE TERMS THAT YOU 696= WOULD --THAT YOU UNDERSTOOD OR WERE SEEKING THAT WOULD APPLY
697= SOLELY TO CODY'S? 698= A. JUST AN AD HOC FOR CODY'S, NO.
699= Q. WHY NOT?
700= A. 'CAUSE THAT ISN'T THE WAY THIS BUSINESS WORKS.
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701= Q. WHAT DO YOU MEAN BY THAT? 702= A. IT'S --IT'S NOT LIKE KIND OF A BIZARRE WHERE YOU BARGAIN
703= ENDLESSLY. THEY ARE PRETTY CLEAR ABOUT WHAT THEIR TERMS ARE. I 704= SOMETIMES KIND OF PRESS THEM TO TRY TO FIND OUT WHAT THEIR TERMS
705= ARE BECAUSE THAT'S NOT ALWAYS CLEAR TO ME. BUT THEY --YOU 706= KNOW, THEY HAVE TERMS, AND THEY TELL YOU WHAT YOU CAN GET.
707= Q. IN PRESSING THEM TO DETERMINE WHAT TERMS WERE, WERE YOU 708= TRYING TO NEGOTIATE TERMS THAT YOU UNDERSTOOD WOULD APPLY ONLY
709= TO CODY'S, OR WERE YOU SIMPLY TRYING TO DETERMINE WHAT TERMS 710= WERE AVAILABLE TO BOOKSELLERS?
711= A. THE LATTER. I'VE NEVER GOTTEN ANYTHING THAT'S JUST FOR 712= CODY'S.
713= Q. TO WHICH VENDOR DO THE --DO THE RED BOOK TERMS APPLY? TO 714= WHICH VENDORS ON THE LIST DO THE RED BOOK TERMS APPLY?
715= A. I BELIEVE THAT ALL OF THESE PUBLISHERS ON THE LIST HAVE A 716= SECTION IN THE RED BOOK.
717= Q. NOW, IT'S TRUE, IS IT NOT, THAT WITH RESPECT TO ANY GIVEN 718= PURCHASE, YOU WOULD ACTUALLY HAVE TO LOOK AT THE INVOICES FROM A
719= PARTICULAR VENDOR TO DETERMINE THE TERMS THAT APPLY TO THAT 720= PURCHASE?
721= A. WELL, NOT IF I KNOW THE TERMS, BECAUSE IT'S --IT'S USUAL 722= IT'S SAME.
723= Q. I'M SAYING, IN --724= A. YEAH.
725= Q. --PARTICULAR SITUATION FROM 1994, YOU WOULD NOT, AS YOU SIT 726= HERE TODAY, HAVE A MEMORY TO DETERMINE WHAT THE TERMS WERE WITH
727= RESPECT TO A PARTICULAR PURCHASE OF A PARTICULAR BOOK FROM A 728= PARTICULAR VENDOR?
729= A. NO, THAT, I COULDN'T DO. 730= Q. AND THE SOLE SOURCE, IS IT NOT, FOR DETERMINING THE
731= PARTICULAR TERMS FOR THE PARTICULAR PURCHASE FROM A PARTICULAR 732= VENDOR, IN YOUR DOCUMENTS, WOULD BE INVOICES?
733= A. THAT'S CORRECT. 734= THE COURT: WHY DON'T YOU EVER ASK FOR A SPECIAL DEAL
735= FOR CODY'S? 736= THE WITNESS: WELL, I ASK --I HAVE ASKED. I'M
737= PRETTY AGGRESSIVE ABOUT IT. BUT I ASK FOR WHAT DEALS ARE 738= AVAILABLE, WHAT'S THE BEST DEAL I CAN GET. I DON'T ASSUME THAT
739= EVERYTHING'S IN THE RED BOOK. 740= IN FACT, I KNOW THAT PUBLISHERS HAVE BEEN GIVING
741= DEALS TO CHAIN STORES THAT I HAVEN'T BEEN GETTING, SO I'M KIND 742= OF AGGRESSIVE ABOUT THAT. BUT THEY JUST --THEY JUST DON'T DO
743= THAT. THEY SAY THAT --THEY GENERALLY SAY, "THESE ARE OUR 744= TERMS." AND SOMETIMES, I SAY, "HEY, WAIT A MINUTE. I KNOW THAT
745= YOU'RE GIVING THE CHAINS THIS. I KNOW YOU'RE GIVING THE CHAINS 746= THAT."
747= BUT USUALLY THEY --THE SALES REPS SAID, WOULD SAY, 748=" WELL, I DON'T KNOW ABOUT THAT." THEY TEND NOT TO KNOW THAT.
749= BUT I TRY TO GET THE BEST DEAL I CAN GET.
750= BY MR. DAWSON: 751= Q. WITH REFERENCE TO THE INVOICES WE WERE JUST SPEAKING
752= ABOUT --753= A. YES.
754= Q. --HAVE YOU GIVEN THE DEFENDANTS COPIES OF ALL THE STORE'S 755= INVOICES?
756= A. YES, I HAVE. 757= Q. DID YOU HOLD ANY BACK?
758= A. NO. 759= Q. ARE THERE EVER TIMES WHEN CODY'S HAS RECEIVED TRADE TERMS
760= THAT ARE MORE FAVORABLE THAN THE STANDARD RED BOOK TERMS? 761= A. YES, I HAVE.
762= (CONTINUED NEXT PAGE; NOTHING OMITTED) 763=
764= 765=
766= 767=
768= 769=
770= 771=
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772= 773=
774=
775= BY MR. DAWSON: 776= Q. AND UNDER WHAT CIRCUMSTANCES, FROM 1997 TO THE PRESENT, HAS
777= CODY'S RECEIVED TRADE TERMS THAT ARE MORE FAVORABLE THAN WAS 778= PUBLISHED IN THE RED BOOK AT THAT TIME?
779= A. THE MOST FREQUENT EXAMPLES WOULD HAVE TO BE SEASONAL 780= OFFERS.
781= Q. AGAIN, ARE THESE THINGS, THE STOCK OFFERS, ARE THEY THINGS 782= THAT YOU HAVE AN UNDERSTANDING WERE ONLY AVAILABLE TO CODY'S?
783= A. NO, MY UNDERSTANDING IS THEY WERE --IN ALL THOSE 784= SITUATIONS THEY WERE AVAILABLE TO EVERYBODY.
785= Q. DID YOU --NORMALLY, HOW WERE STOCK OFFERS COMMUNICATED TO 786= YOU?
787= A. ALMOST INVARIABLY THEY'VE BEEN ON SOME SORT OF PRINTED 788= FORM.
789= Q. DID YOU EVER BECOME AWARE OF THE AVAILABILITY OF SOMETHING 790= CALLED THE RDC DISCOUNT?
791= A. YES, I'VE KNOWN ABOUT THAT. 792= Q. AND HOW LONG HAVE YOU KNOWN ABOUT THAT?
793= A. A LONG TIME, SINCE THE 80'S. 794= Q. DID YOU EVER RECEIVE AN RDC DISCOUNT?
795= A. YES, I HAVE, WHEN I OPENED THE NEW STORE I STARTED GETTING 796= SOME RDC DISCOUNTS.
797= Q. DID YOU EVER RECEIVE AN RDC DISCOUNT BEFORE THEN? 798= A. I DON'T BELIEVE I DID, NO.
799= Q. DID YOU EVER ASK FOR ONE?
800= A. YOU KNOW, I WAS CONCERNED ABOUT RDC DISCOUNTS AND WHY THEY 801= WEREN'T BEING MADE AVAILABLE TO ME, AND I MAY VERY WELL HAVE
802= ASKED FOR THEM. 803= Q. DO YOU HAVE AN UNDERSTANDING AS YOU SIT HERE TODAY WHY YOU
804= DID NOT RECEIVE AN RDC DISCOUNT PRIOR TO 1997 WHEN YOU OPENED 805= YOUR FOURTH STREET STORE?
806= A. PROBABLY BECAUSE I COULDN'T --YOU KNOW, I DIDN'T COME UP 807= TO THEIR TERMS.
808= Q. WHAT WERE THE TERMS THAT YOU UNDERSTOOD WERE APPLICABLE TO 809= RDC'S?
810= A. THERE WERE USUALLY THINGS LIKE, YOU HAD TO HAVE A LOADING 811= DOCK, YOU HAD TO HAVE MULTIPLE STORES, YOU HAD TO HAVE A
812= WAREHOUSE THAT WAS SEPARATE FROM THE BOOKSTORE, YOU HAD TO 813= ORDER IN CARTON QUANTITIES, THINGS LIKE THAT; OFTEN MANY OF
814= THOSE CONDITIONS, AND I COULDN'T MEET THOSE CONDITIONS. 815= Q. WHEN YOU STARTED RECEIVING RDC DISCOUNTS, DID YOU RECEIVE
816= THEM FROM ALL OF THE VENDORS ON YOUR LIST? 817= A. NO. I STILL DON'T RECEIVE THEM FROM ALL OF THE VENDORS.
818= Q. DO YOU KNOW WHETHER THE VENDORS, ANY OF THE VENDORS ON THAT 819= LIST THAT YOU DON'T RECEIVE THEM FROM, DO HAVE RDC DISCOUNTS?
820= A. CAN I LOOK AT THE LIST? 821= Q. PLEASE DO. AGAIN, IT'S UNDER TAB 3 OF YOUR BINDER.
822= A. THANK YOU. WELL, I DON'T HAVE AN ENCYCLOPEDIC MEMORY, SO I 823= DON'T KNOW --I KNOW THAT NORTON HAS AN RDC DISCOUNT AND THAT I
824= CAN'T GET IT. I'VE ASKED FOR IT.
825= Q. DO YOU KNOW WHY YOU CAN'T GET IT? 826= A. I BELIEVE THEY SAY THAT YOU HAVE TO HAVE FIVE OR MORE
827= STORES, BUT I'M NOT TOTALLY SURE OF THAT. I KNOW THEY HAVE 828= SOME CONDITIONS THAT I CAN'T MEET.
829= Q. ARE THERE ANY CATEGORIES OF BOOKS WHICH YOU TYPICALLY ORDER 830= THAT ARE SUBJECT TO THE RDC DISCOUNT?
831= A. WELL, I HAVE AN RDC ACCOUNT, AND IF I CAN MEET THE 832= CONDITIONS, I COULD THEORETICALLY GET EVERYTHING, BUT IN
833= GENERAL, AS A PRACTICAL MATTER, IT USUALLY ONLY WORKS ON NEW 834= TITLE ORDERS.
835= Q. WHICH IS WHAT PERCENTAGE OF --LET ME STRIKE THAT. WHAT 836= PERCENTAGE OF THE BOOKS THAT YOU PURCHASE CURRENTLY DO YOU
837= RECEIVE AN RDC DISCOUNT ON, FOR BOTH STORES COMBINED? 838= A. WELL, AGAIN, THIS IS A VERY BALLPARK FIGURE, BUT PROBABLY
839= 10 PERCENT. 840= Q. AND YOU MENTIONED PREVIOUSLY CARTON QUANTITIES. WHAT IS
841= THAT?
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842= A. CARTON QUANTITIES MEANS THAT THE PUBLISHER SHIPS YOU BOOKS 843= FROM THE CARTONS THAT THEY HAVE THEM PACKED IN COMING FROM THE
844= PRINTER, OR THE BINDER. 845= Q. AND AS FAR AS YOU'RE AWARE, ARE THE VARIOUS REQUIREMENTS OF
846= THE VENDORS RELATING TO CARTON QUANTITIES ENFORCED BY THOSE 847= VENDORS?
848= A. YES. 849= Q. EVER HAD ANYONE WAIVE THAT CARTON QUANTITY REQUIREMENT?
850= A. NO. 851= Q. WE WERE TALKING ABOUT THE WAYS IN WHICH YOU RECEIVED TERMS
852= THAT WERE DIFFERENT FROM THE BASIC RED BOOK TERMS, AND YOU 853= MENTIONED STOCK OFFERS.
854= A. YES. 855= Q. HAS CODY'S EVER RECEIVED STOCK OFFERS?
856= A. OH, YEAH. WE'RE AGGRESSIVE ABOUT STOCK OFFERS. 857= Q. AND WHAT ARE TYPICALLY THE BENEFITS THAT ARE OFFERED
858= THROUGH A STOCK OFFER? 859= A. THEY VARY FROM OFFER TO OFFER, BUT USUALLY THEY GIVE YOU A
860= BETTER DISCOUNT. SOMETIMES THEY GIVE YOU EXTENDED DAYS. THEY 861= LET YOU PAY IN 90 TO 120 DAYS. THAT'S PRETTY TYPICAL OF STOCK
862= OFFERS. 863= Q. SINCE 1994 TO THE PRESENT, CAN YOU ESTIMATE FOR ME THE
864= PERCENTAGE OF BOOKS PURCHASED BY CODY'S THAT WERE SUBJECT TO 865= STOCK OFFERS?
866= A. LESS THAN 10 PERCENT. 867= Q. AND HOW DO YOU DECIDE.... WELL, LET ME ASK YOU THIS: DO
868= YOU TAKE ADVANTAGE OF EVERY SINGLE STOCK OFFER THAT'S PROVIDED 869= TO CODY'S?
870= A. WELL, NOT EVERY SINGLE ONE, BUT MOST OF THEM. WE, AS I 871= SAID, WE'RE QUITE AGGRESSIVE ABOUT THESE STOCK OFFERS.
872= Q. AND ARE --IN SITUATIONS WHERE YOU DECIDE NOT TO TAKE 873= ADVANTAGE OF A STOCK OFFER, WHAT TYPICALLY ARE YOUR REASONS?
874= A. PROBABLY IT'S A PUBLISHER THAT --WITH BOOKS THAT WE DON'T
875= CARRY. SOMETIMES STOCK OFFERS ARE LIMITED TO CERTAIN LINES OF 876= BOOKS, AND WE MAY NOT BE SELLING THOSE LINES VERY WELL. SO
877= IT'S JUST A PRACTICAL MATTER. WE'RE NOT GOING TO ORDER BOOKS 878= THAT WE CAN'T SELL, REGARDLESS OF THE DISCOUNT.
879= Q. HOW ARE THE STOCK OFFERS THAT YOU RECEIVE INVOICED TO 880= CODY'S BOOKS?
881= A. JUST LIKE EVERYTHING ELSE, ON A REGULAR INVOICE. 882= Q. THE INVOICES INDICATE THAT THEY ARE THE SUBJECT OF A STOCK
883= OFFER? 884= A. NO, THEY JUST HAVE --IF THERE'S AN ADDITIONAL DISCOUNT, IT
885= WOULD BE REFLECTED ON THE INVOICE, BUT THEY DON'T USUALLY SAY 886=" STOCK OFFER" ON IT.
887= Q. I'D LIKE TO SHOW YOU WHAT'S BEEN PREVIOUSLY MARKED AS 888= PLAINTIFF'S EXHIBITS 2339, 2340 AND 2341, WHICH ARE THE LAST
889= THREE TABS OF THE BINDER, 6, 7 AND 8. 890= A. YES.
891= Q. WITH RESPECT TO THE FIRST INVOICE IN THAT LIST, IT APPEARS 892= TO ME.... WELL, FIRST OF ALL, DO THESE APPEAR TO BE TRUE AND
893= ACCURATE COPIES OF INVOICES TO CODY'S BOOKS FROM THE RECORDS 894= PUBLISHERS?
895= A. YES. 896= Q. AND ARE YOU FAMILIAR ENOUGH THROUGH YOUR OPERATION OF THE
897= STORES WITH INVOICES TO MAKE THAT STATEMENT? 898= A. YES.
899= Q. LOOKING AT THE FIRST DOCUMENT, 2339, WHICH IS BEHIND TAB 6,
900= IT APPEARS, BASED ON THIS, THAT YOU WERE RECEIVING A DISCOUNT 901= OF 50 PERCENT ON A VARIETY OF BOOKS. DO YOU SEE THAT?
902= A. YES, I SEE THAT. 903= Q. HOW WOULD YOU EXPLAIN THE 50 PERCENT?
904= A. WELL, THIS IS FROM SIMON & SCHUSTER, AND IT IS AT VARIANCE 905= WITH OUR NORMAL TERMS FROM THEM, SO I WOULD ASSUME THAT THIS IS
906= A STOCK OFFER. 907= Q. ANY OTHER REASON THAT IT COULD BE AT VARIANCE, AS FAR AS
908= YOU'RE AWARE? 909= A. NOT THAT I CAN THINK OF.
910= Q. SIMILARLY WITH RESPECT TO EXHIBIT 2340, WHERE IT AGAIN 911= APPEARS AS THOUGH YOU'VE RECEIVED A 50 PERCENT DISCOUNT, IS
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912= THIS REPRESENTATIVE OF A STOCK OFFER? 913= A. NOT NECESSARILY.
914= Q. AND WHAT WOULD BE THE EXPLANATION WITH RESPECT TO THIS 915= PARTICULAR INVOICE?
916= A. THESE ARE ALL COMPUTER BOOKS, AND FREQUENTLY COMPUTER 917= BOOKS --CERTAIN LINES OF BOOKS HAVE BETTER DISCOUNTS.
918= COMPUTER BOOKS FREQUENTLY GIVE YOU 50 PERCENT DISCOUNT, BUT I 919= CAN'T SAY FOR SURE. IT MIGHT ALSO BE A STOCK OFFER.
920= Q. IT'S EITHER A SPECIAL RELATING TO THAT LINE OF BOOKS OR A 921= STOCK OFFER; IS THAT YOUR TESTIMONY?
922= A. YES, IN ALL PROBABILITY. YOU KNOW, I DON'T REMEMBER THIS 923= INVOICE, THOUGH. I DON'T REMEMBER THE DETAILS OF --FROM BACK
924= THEN, BUT I CAN'T THINK OF ANOTHER REASON --ANOTHER --I CAN'T
925= THINK OF ANYTHING ELSE IT WOULD BE. 926= Q. AGAIN, YOU NEVER, IN YOUR MEMORY, RECEIVED A DISCOUNT WHICH
927= WAS AT VARIANCE WITH TERMS THAT YOU UNDERSTOOD WERE GENERALLY 928= AVAILABLE TO OTHER BOOKSELLERS, IS THAT ACCURATE?
929= A. THAT'S ACCURATE. 930= Q. ON THE FINAL INVOICE, AGAIN, AND THIS IS UNDER TAB 8, IT
931= APPEARS THAT YOU RECEIVED 52 PERCENT DISCOUNT WITH RESPECT TO 932= SOME OF THE LISTED BOOKS. DO YOU SEE THAT?
933= A. I SEE IT. 934= Q. AND DOES THAT, AGAIN, REPRESENT, TO THE BEST OF YOUR
935= UNDERSTANDING, A STOCK OFFER DISCOUNT? 936= A. IT LOOKS TO ME LIKE IT WOULD BE A STOCK OFFER, YES. I JUST
937= CAN'T THINK OF ANOTHER EXPLANATION FOR IT. 938= Q. DO YOU UNDERSTAND THE TERM "INCENTIVE PROGRAM"?
939= A. YES. 940= Q. WHAT DOES THAT MEAN?
941= A. IT GENERALLY MEANS, IF YOU INCREASE YOUR SALES BY A CERTAIN 942= SPECIFIED PERCENTAGE OR YOU REDUCE YOUR RETURNS IN A CERTAIN
943= WAY, YOU WILL BE ENTITLED TO SOME KIND OF REBATE AT THE END OF 944= THE YEAR.
945= Q. HAVE YOU EVER RECEIVED ANY INCENTIVE PAYMENTS FROM ANY OF 946= THE VENDORS THAT ARE LISTED ON EXHIBIT 2591, TAB 3 OF YOUR
947= BINDER? 948= A. WELL, YES, I HAVE.
949= Q. WHICH PARTICULAR VENDOR?
950= A. I MAY HAVE RECEIVED THEM FROM A COUPLE OF VENDORS. I 951= REMEMBER AT ONE TIME GETTING THEM FROM SIMON & SCHUSTER, AND
952= FROM BANTAM, I THINK FROM PENGUIN MASS MARKET. I MIGHT HAVE 953= BEEN GETTING THEM A LONG TIME AGO, BUT I REALLY DON'T REMEMBER
954= THE DETAILS. 955= Q. CAN YOU BALLPARK FOR ME THE PERCENTAGE OF BOOKS THAT THE
956= INCENTIVES HAVE APPLIED TO IN THE LAST SIX YEARS? 957= A. LIKE, ALL INCENTIVES?
958= Q. INCENTIVES THAT WE'VE JUST BEEN DISCUSSING. 959= A. I DON'T EVEN KNOW IF THEY'RE GOING ON NOW. IT WOULD BE
960= VERY HARD TO DO THAT. IT WOULD HAVE TO BE LESS THAN 5 PERCENT. 961= BUT ACTUALLY, I COULDN'T SAY. I JUST DON'T KNOW.
962= Q. HAVE YOU EVER RECEIVED ANY PERCENTAGE INCENTIVE FROM 963= INGRAM?
964= A. NO, I HAVE NOT. 965= Q. ARE YOU FAMILIAR WITH THE TERM "CASH DISCOUNT"?
966= A. YES, I AM. 967= Q. OKAY. CAN YOU GIVE ME AN EXAMPLE OF WHAT A CASH DISCOUNT
968= WOULD CONSIST OF? 969= A. A CASH DISCOUNTS USUALLY CONSISTS OF 1 OR 2 PERCENT, WHICH
970= YOU CAN TAKE OFF YOUR PAYMENT, IF YOU PAY YOUR BILLS QUICKLY, 971= USUALLY 10 DAYS AFTER YOU RECEIVE THE STATEMENT.
972= Q. AND HAS YOUR STORE EVER RECEIVED CASH DISCOUNT PAYMENTS 973= FROM ANY PUBLISHERS OR WHOLESALERS?
974= A. RIGHT NOW I KNOW THAT INGRAM IS THE ONLY PUBLISHER WE'RE
975= TAKING CASH DISCOUNTS FROM. 976= Q. ARE THERE PARTICULAR TERMS FROM INGRAM THAT APPLY TO THE
977= CASH DISCOUNTS THAT YOU'RE RECEIVING? 978= A. WE GET 2 PERCENT 10 E. O. M., WHICH MEANS 10 PERCENT IF WE
979= PAY 10 DAYS AFTER WE RECEIVE A STATEMENT AT THE END OF THE 980= MONTH.
981= Q. AND IS IT YOUR UNDERSTANDING THAT THIS DISCOUNT IS
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982= SOMETHING THAT IS UNIQUE TO CODY'S, OR IS IT GENERALLY 983= AVAILABLE TO ALL BOOKSELLERS?
984= A. IT'S AVAILABLE TO ALL BOOKSELLERS. IT'S IN THE RED BOOK. 985= Q. DO YOU EVER RECEIVE ANY CASH DISCOUNTS FROM PENGUIN?
986= A. I DON'T REMEMBER. I DON'T THINK SO. 987= Q. HOW ABOUT MACMILLAN?
988= A. I DON'T THINK SO. 989= Q. HOW DO YOU KNOW, AT ANY GIVEN TIME, WHETHER A VENDOR HAS A
990= CASH DISCOUNT AVAILABLE TO YOU? 991= A. I LOOK IT UP IN THE RED BOOK.
992= Q. WE'VE BEEN DISCUSSING TERMS WHICH AFFECT THE EVENTUAL COST 993= OR BENEFITS TO CODY'S, AND ARE THERE ANY OTHER TERMS WHICH
994= AFFECT THOSE COSTS OR BENEFITS? 995= A. SHIPPING HAS A PRETTY BIG IMPACT ON OUR COSTS, YES.
996= Q. ARE YOU TALKING SHIPPING, THE FREIGHT? 997= A. FREIGHT, YES.
998= Q. WHO PAYS FOR FREIGHT? 999= A. SOME PUBLISHERS PAY FOR FREIGHT AND SOME PUBLISHERS SHIP
1000= FREIGHT FREE. 1001= Q. AND HOW, AGAIN --
1002= A. EXCUSE ME. SOME PUBLISHERS PAY FOR FREIGHT AND SOMETIMES 1003= WE PAY FOR FREIGHT.
1004= Q. HOW DO YOU KNOW AT ANY GIVEN TIME WHICH VENDOR IS FREIGHT 1005= FREE AND WHICH ONE CHARGES FREIGHT?
1006= A. IT WOULD BE IN THE RED BOOK. 1007= Q. AND TO YOUR KNOWLEDGE, HAVE YOU EVER RECEIVED FREE FREIGHT
1008= TERMS FROM ANY VENDORS THAT WERE NOT AVAILABLE TO OTHER 1009= BOOKSELLERS?
1010= A. NO, WE HAVE RECEIVED FREE FREIGHT TERMS ON SEASONAL 1011= SPECIALS AND STOCK OFFERS, BUT NOT THAT THEY WEREN'T AVAILABLE
1012= TO OTHER BOOKSELLERS, NO. 1013= Q. AND HAS ANY VENDOR EVER PAID YOU TO SHIP YOUR BOOKS FROM
1014= ONE OF YOUR STORES TO THE OTHER STORE? 1015= A. NEVER.
1016= Q. NOW, ONCE YOU RECEIVE THE BOOKS AT EITHER OF YOUR STORES, 1017= DOES SOMEONE CHECK THE BOOKS TO DETERMINE WHETHER ALL OF THE
1018= BOOKS THAT YOU PURCHASED ARE ACTUALLY CONTAINED WITHIN THE 1019= BOXES YOU'VE RECEIVED?
1020= A. YES. 1021= Q. AND ARE THEIR SHIPMENTS ALWAYS ACCURATE?
1022= A. NO, SHIPMENTS ARE NOT ALWAYS ACCURATE AT ALL. 1023= Q. WHAT PROBLEMS HAVE YOU ENCOUNTERED TYPICALLY WITH RESPECT
1024= TO SHIPMENTS THAT YOU'VE RECEIVED FROM VENDORS?
1025= A. SOMETIMES THEY'RE --THE PRICE IS DIFFERENT ON THE BOOK 1026= THAN ON THE INVOICE. MOST FREQUENT PROBLEM WOULD PROBABLY BE
1027= SHORTAGES. THEY BILL US FOR A BOOK THAT ISN'T IN THE SHIPMENT. 1028= SOMETIMES THE BOOKS ARE SHOPWORN OR DEFECTIVE. THAT SORT OF
1029= THING IS TYPICAL. 1030= Q. WHEN YOU HAVE RECEIVED WHAT I UNDERSTAND ARE CALLED SHORT
1031= SHIPMENTS, DO YOU UNDERSTAND THAT TO MEAN WHEN BOOKS ARE NOT 1032= INCLUDED THAT YOU'VE ORDERED THAT SHOULD BE INCLUDED?
1033= A. UM, WELL, AND THAT GET BILLED TO US, YES, THAT'S A SHORT 1034= SHIPMENT.
1035= Q. AND HAVE THERE BEEN SITUATIONS IN WHICH YOU'VE RECEIVED 1036= SHORT SHIPMENTS?
1037= A. YES. 1038= Q. WHAT DO YOU DO WHEN YOU RECEIVE SHORT SHIPMENTS?
1039= A. WE FILL OUT A SHORT SHIPMENT PERFORM, WE ATTACH IT TO THE 1040= INVOICE, THEY SEND IT UP TO THE BUSINESS OFFICE, THE BUSINESS
1041= OFFICE ENTERS IT IN, THEY DATA ENTER IT IN AND THEY TRY TO 1042= COLLECT FROM THE PUBLISHER.
1043= Q. HAS YOUR STORE EVER RECEIVED A SHORTAGE ALLOWANCE FROM ANY 1044= VENDOR BASED ON AN ESTIMATE OF SHORTAGE RATHER THAN
1045= DOCUMENTATION OF THE ACTUAL SHORTAGES RECEIVED? 1046= A. NO.
1047= Q. ARE ALL OF THE BOOKS THAT YOU PURCHASE RETURNABLE BOOKS? 1048= A. NO, BUT ALMOST ALL OF THEM ARE.
1049= Q. WHAT ARE THE ONES THAT AREN'T?
1050= A. I BELIEVE THERE IS --TRYING TO THINK OF ONE PUBLISHER WE 1051= MAY PURCHASE FROM NON-RETURNABLE, BECAUSE IT'S --THEY GIVE A
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1052= VERY DESIRABLE DISCOUNT. I BELIEVE IT'S O'REILLY. AND ALSO 1053= PUBLISHERS SELL NEW TITLES FROM TIME TO TIME, VERY RARELY,
1054= USUALLY VERY EXPENSIVE ART BOOKS, ON A NON-RETURNABLE BASIS. 1055= OTHER THAN THAT, WE MOSTLY BUY RETURNABLE.
1056= Q. WHEN YOU'RE PURCHASING THEM, YOU KNOW AT THAT TIME WHETHER 1057= THEY ARE RETURNABLE OR NON-RETURNABLE, IS THAT CORRECT?
1058= A. YES. 1059= Q. WHAT IS TYPICALLY THE DIFFERENCE, IF THERE IS ONE, IN THE
1060= PRICING TO CODY'S FROM A RETURNABLE VERSUS A NON-RETURNABLE 1061= BOOK?
1062= A. WELL, I KNOW THAT MANY PUBLISHERS HAVE NON-RETURNABLE 1063= DISCOUNTS, AND USUALLY THERE'S A 2 OR 3 PERCENT DISCOUNT
1064= ADVANTAGE PURCHASING NON-RETURNABLE. 1065= Q. WITH RESPECT TO RETURNABLE BOOKS THAT YOU'VE PURCHASED,
1066= HAVE YOU EVER RECEIVED CREDIT FROM ANY VENDOR FOR RETURNING THE 1067= BOOKS?
1068= A. FOR RETURNABLE BOOKS? 1069= Q. YES.
1070= A. YES. 1071= Q. HAS YOUR STORE --EITHER OF YOUR STORES EVER DEDUCTED FOR
1072= RETURNED BOOKS OFF AN INVOICE BEFORE YOU'D ACTUALLY SHIPPED 1073= THOSE BOOKS BACK TO THE VENDOR?
1074= A. NO.
1075= Q. HAVE YOU EVER RECEIVED ANY INCENTIVE OR ALLOWANCE FOR 1076= COMBINING THE BOOKS THAT YOU'RE GOING TO BE RETURNING FROM YOUR
1077= TWO STORES? 1078= A. NO.
1079= Q. NOW, WITH RESPECT TO OUT-OF-PRINT BOOKS, DO YOU HAVE AN 1080= UNDERSTANDING WITH RESPECT TO WHETHER OUT-OF-PRINT BOOKS ARE
1081= TYPICALLY RETURNABLE OR NOT? 1082= A. FROM ONE OR TWO PUBLISHERS, YOU MAY BE ABLE TO RETURN
1083= OUT-OF-PRINT BOOKS. FOR MOST PUBLISHERS THEY ARE NOT 1084= RETURNABLE.
1085= Q. AT ANY GIVEN TIME, ARE YOU ALWAYS AWARE OF WHETHER AN 1086= OUT-OF-PRINT --WHETHER A BOOK IS OUT OF PRINT?
1087= A. IT'S SOMETIMES DIFFICULT TO DETERMINE. IT'S PRINTED ON A 1088= FOOTNOTE IN PUBLISHERS WEEKLY WHEN THEY PUT A BOOK OUT OF
1089= PRINT. 1090= Q. HAVE YOU EVER ATTEMPTED TO RETURN WHAT YOU LEARNED TO BE AN
1091= OUT-OF-PRINT BOOK? 1092= A. YOU MEAN --
1093= Q. BEFORE OR AFTER UNDERSTANDING THAT IT WAS OUT OF PRINT. 1094= A. FREQUENTLY, WE JUST DON'T KNOW. WE JUST RETURN BOOKS AND
1095= WE FIND OUT LATER IF THEY'RE OUT OF PRINT. 1096= Q. HOW DO YOU FIND OUT LATER?
1097= A. THEY DON'T GIVE US CREDIT. 1098= Q. HAVE YOU EVER RECEIVED CREDIT FROM A VENDOR FOR THE RETURN
1099= OF AN OUT-OF-PRINT BOOK?
1100= A. IF THE VENDOR PERMITS THE RETURN OF AN OUT-OF-PRINT BOOK, 1101= WE GET CREDIT, BUT MORE OFTEN THAN NOT, THEY JUST EITHER OFFER
1102= TO SHIP THE BOOK BACK TO US AT OUR EXPENSE OR THEY JUST DON'T 1103= CREDIT IT, THROW IT AWAY.
1104= Q. IS IT YOUR UNDERSTANDING THAT YOU'VE NEVER RECEIVED CREDIT 1105= FOR THE RETURN OF AN OUT-OF-PRINT BOOK FROM A VENDOR WHOSE
1106= POLICY IT WAS TO NOT ALLOW THE RETURN OF OUT-OF-PRINT BOOKS? 1107= A. NO, WE HAVE NOT.
1108= Q. ANY VENDORS THAT, ON THE LIST THAT I'M REFERRING TO, TAB 3, 1109= THAT IMPOSE RETURN PENALTIES ON CODY'S?
1110= A. WELL, INGRAM, AND I BELIEVE ALL THE WHOLESALERS HAVE RETURN 1111= PENALTIES.
1112= Q. WHAT DO THESE PENALTIES CONSIST OF, TYPICALLY? 1113= A. INGRAM IS --I BELIEVE THEY ALLOW YOU TO RETURN BOOKS
1114= PURCHASED AT INGRAM AT 50 PERCENT. SO IF WE PURCHASE THE BOOK 1115= AT 41 PERCENT, THEY WOULD CREDIT US AT 50 PERCENT. THAT'S A
1116= PRETTY STIFF PENALTY. PLUS THEY ONLY PERMIT RETURNS UP TO A 1117= CERTAIN PERCENTAGE OF ALL PURCHASES DURING THE YEAR. AFTER
1118= THAT, THEY WON'T ACCEPT THEM. 1119= Q. HAS INGRAM EVER WAIVED THAT RETURN PENALTY FOR YOU?
1120= A. NO. 1121= Q. HAVE ANY OF THE VENDORS THAT YOU'RE FAMILIAR WITH FROM TAB
1122= 3 WHO HAVE RETURN POLICIES EVER WAIVED THEIR REQUIREMENTS?
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1123= A. CAN I GO BACK TO YOUR PREVIOUS QUESTION? 1124= Q. YES.
1125= A. I BELIEVE THAT IN THE VENDOR OF RECORD PROGRAM, THEY WAIVE 1126= THE RETURN PENALTIES, INGRAM DOES.
1127= Q. AND AGAIN, THE VENDOR OF RECORD PROGRAM IS ONE THAT YOU 1128= UNDERSTAND IS NOT UNIQUE TO CODY'S BUT IS AVAILABLE TO OTHER
1129= BOOKSELLERS AS WELL, IS THAT CORRECT? 1130= A. THAT'S CORRECT, YES.
1131= Q. SO WITH RESPECT TO THE WAIVER OF ANY PENALTIES FROM ANY OF 1132= THE VENDORS, HAVE YOU EVER RECEIVED ANY WAIVER THAT YOU
1133= UNDERSTOOD WAS UNIQUE TO CODY'S AND NOT AVAILABLE TO OTHER 1134= PEOPLE UNDER, FOR INSTANCE, THE VENDOR OF RECORD PROGRAM?
1135= A. NO. 1136= Q. DO YOU HAVE A PREFERENCE WITH RESPECT TO HOW BOOKS ARE
1137= SHIPPED TO YOUR STORES? 1138= A. YOU MEAN SHIPPING COMPANIES OR CONDITION?
1139= Q. PACKAGING? 1140= A. PACKAGING? WELL, WE LIKE THEM PACKAGED IN STURDY CARTONS.
1141= WE LIKE THEM TO USE CERTAIN TYPES OF --WHAT DO THEY CALL 1142= THEM --STUFFING THAT'S EASY TO DEAL WITH. WE LIKE INVOICES TO
1143= BE IN THE BOXES; WE LIKE THEM TO BE READABLE. WE LIKE THE 1144= BOOKS THAT HAVE PRICES PRE-PRINTED ON THEM, YES.
1145= Q. HAVE VENDORS ALWAYS FOLLOWED YOUR PREFERENCES? 1146= A. NO, THEY NEVER FOLLOW OUR PREFERENCES.
1147= Q. HAVE YOU EVER CHARGED A PUBLISHER OR RECEIVED A CREDIT FROM 1148= A PUBLISHER OR ANY OTHER VENDOR BECAUSE THAT VENDOR DID NOT
1149= COMPLY WITH YOUR SHIPPING PREFERENCES?
1150= A. NO, WE HAVE NOT. 1151= Q. FROM TIME TO TIME I ASSUME THAT CODY'S HAS HAD DISPUTES
1152= WITH VENDORS RELATING TO A VARIETY OF THINGS HAVING TO DO WITH 1153= THE BOOKS THAT HAVE BEEN SOLD TO CODY'S. IS THAT ACCURATE?
1154= A. YES. 1155= Q. TYPICALLY WHEN YOU HAVE A DISPUTE WITH THE VENDORS RELATING
1156= TO THE AMOUNT OF MONEY THAT CODY'S OWES TO THAT VENDOR, WHAT 1157= PROCESS DO YOU GO THROUGH TO REACH A CONCLUSION WITH RESPECT TO
1158= THAT DISPUTE? 1159= A. IT'S USUALLY BASED ON AN INVOICE THAT WE THINK --OUR
1160= RECORDS SHOW WE NEVER RECEIVED AND THEIR RECORDS SHOW THEY 1161= SHIPPED. SO THE FIRST THING WE DO IS ASK THEM TO SEND US A
1162= COPY OF THE INVOICE ALONG WITH PROOF OF DELIVERY, AND IF THEY 1163= DO THAT, AND THIS HAPPENS IN MOST OF THE SITUATIONS, WE WILL
1164= PAY THE BILL. IF THEY DON'T, WE WILL CLAIM WE NEVER RECEIVED 1165= IT AND WE WILL TELL THEM WE DON'T THINK WE SHOULD PAY IT.
1166= Q. HAVE THERE EVER BEEN SITUATIONS IN WHICH A PUBLISHER, 1167= ABSENT THAT KIND OF DOCUMENTATION, HAS SIMPLY SAID, IN EFFECT,
1168= WE'LL FORGIVE YOU FOR THIS DISPUTED AMOUNT? 1169= A. YOU KNOW, THERE'S REALLY ONLY TWO SITUATIONS, THOSE WHICH
1170= WE --WHERE THEY CAN'T PROVIDE PROOF OF DELIVERY AND THOSE 1171= WHERE THEY CAN. COULD YOU REPEAT THE QUESTION? I DON'T THINK
1172= I --1173= Q. I'M SIMPLY WONDERING, WHERE YOU HAVE A DISPUTE WITH A
1174= PUBLISHER OR VENDOR --
1175= A. YES. 1176= Q. --RELATING TO THE AMOUNT OF MONEY THAT YOU OWE THEM,
1177= WHETHER THEY'VE EVER JUST SAID TO YOU, DON'T WORRY ABOUT IT, 1178= WE'LL JUSCould not acquire words on page 18
T FORGIVE THIS AMOUNT?
1179= A. NO, THAT ISN'T WHAT HAPPENS. 1180= Q. ARE YOU FAMILIAR WITH THE TERM "COOPERATIVE ADVERTISING"?
1181= A. YES, I AM. 1182= Q. AND DO YOU PLACE ADVERTISEMENTS FOR YOUR STORE IN PRINT
1183= MEDIA? 1184= A. YES, WE DO.
1185= Q. DID YOU AT SOME POINT COME TO AN UNDERSTANDING THAT CERTAIN 1186= VENDORS WERE OFFERING COOPERATIVE ADVERTISING MONEY?
1187= A. YES, I'M PRETTY MUCH AWARE OF CO-OP ADVERTISING. 1188= Q. AND HAVE YOU EVER, INDEED, RECEIVED ANY COOPERATIVE
1189= ADVERTISING MONEY FROM ANY VENDORS? 1190= A. YES, I HAVE.
1191= Q. DO YOU HAVE A MEMORY, AS YOU SIT HERE TODAY, OF WHEN YOU 1192= FIRST RECEIVED COOPERATIVE ADVERTISING?
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19
18
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20
1263= A. I'M NOT AWARE OF THAT. 1264= Q. HAVE YOU EVER RECEIVED INFORMATION FROM INGRAM RELATING TO
1265= A VISITING AUTHORS PROGRAM? 1266= A. I'VE HEARD OF IT. I DON'T REALLY REMEMBER VERY MUCH ABOUT
1267= IT. I THINK I HEARD OF IT IN THE 80'S OR EARLY 90'S. IT 1268= DIDN'T SEEM TO WORK VERY WELL FOR US.
1269= MR. DAWSON: THANK YOU. NO FURTHER QUESTIONS. 1270= THE COURT: ALL RIGHT, CROSS-EXAMINATION.
1271= MR. PETROCELLI: I'M GOING TO BE HANDING THE 1272= WITNESS, YOUR HONOR, A NOTEBOOK SIMILAR TO YOURS.
1273= THE COURT: ALL RIGHT. 1274= MR. PETROCELLI: YOUR HONOR, I'M ALSO HANDING UP THE
1275= THREE-VOLUME DEPOSITION IN THE EVENT THAT I NEED TO REFER TO 1276= IT.
1277= CROSS-EXAMINATION 1278= BY MR. PETROCELLI:
1279= Q. GOOD MORNING, MR. ROSS. 1280= A. GOOD MORNING, MR. PETROCELLI.
1281= MR. DAWSON: YOUR HONOR, BEFORE WE GET STARTED, I'D 1282= LIKE TO GET THE BINDER THEY'RE GOING TO BE USING WITH MR. ROSS.
1283= THE COURT: YES. 1284= MR. PETROCELLI: OKAY, WE'RE SET.
1285= THE COURT: ALL RIGHT, YOU MAY PROCEED. 1286= BY MR. PETROCELLI:
1287= Q. NOW, MR. ROSS, YOU DO NEGOTIATE FOR THE BEST TERMS YOU CAN 1288= GET, CORRECT?
1289= A. I TRY TO GET THE BEST TERMS I CAN GET, YES, SIR. 1290= Q. AND SO YOU HAVE NO PROBLEM AS A MEMBER OF THE ABA
1291= NEGOTIATING FOR TERMS, CORRECT? 1292= A. NO.
1293= Q. AND THERE IS NO ABA RULE OR RESTRICTION AGAINST MEMBERS 1294= NEGOTIATING FOR TERMS, CORRECT?
1295= A. NO. 1296= Q. AND AS A MEMBER OF THE --WELL, WITHDRAW. NOW, YOU
1297= INDICATED THAT YOU WILL NEGOTIATE FOR THE BEST TERMS, BUT THAT 1298= WHERE YOU DRAW THE LINE IS, YOU WON'T NEGOTIATE FOR ANY
1299= EXCLUSIVE CODY'S-ONLY TERMS, CORRECT?
1300= A. I WOULDN'T SAY I WOULDN'T DO IT. I JUST SAY THAT IT'S 1301= JUST --IT'S NEVER HAPPENED. YEAH.
1302= Q. WELL, IN ANSWER TO THE JUDGE'S QUESTION ABOUT, WHY DON'T 1303= YOU NEGOTIATE CODY'S-ONLY DEALS, YOU'RE SAYING, IT'S NOT THAT
1304= YOU WOULDN'T DO IT, IT'S JUST THAT THE OCCASION HASN'T ARISEN. 1305= IS THAT YOUR TESTIMONY?
1306= A. YES. 1307= Q. WHEN YOU ARE NEGOTIATING, SIR, FOR THE BEST TERM AVAILABLE,
1308= AND YOU GET WHAT YOU THINK IS THE BEST TERM AVAILABLE, DO YOU 1309= DO ANYTHING TO VERIFY WHETHER EVERY OTHER BOOKSELLER IS GETTING
1310= THE SAME DEAL YOU'RE GETTING? 1311= A. NO.
1312= Q. AND I TAKE IT BY YOUR ANSWER, THEN, THAT YOU ASK FOR NO 1313= PROOF, NO VERIFICATION FROM THE PUBLISHER OR THE VENDOR WHETHER
1314= YOUR DEAL IS BEING MADE AVAILABLE TO ANYBODY ELSE, CORRECT? 1315= A. IN MOST SITUATIONS I KNOW THAT THESE DEALS ARE GENERALLY
1316= AVAILABLE. 1317= Q. MY QUESTION IS WHETHER YOU ASK FOR ANY VERIFICATION --
1318= A. NO. 1319= Q. --FROM THE PUBLISHER.
1320= A. NO. 1321= Q. AND AS YOU INDICATED AND AS WE --WE'LL GET INTO, YOU'RE
1322= VERY AGGRESSIVE ABOUT GETTING TERMS, CORRECT? 1323= A. WELL, YES, I THINK I AM.
1324= Q. OKAY. NOW, LET'S TALK ABOUT HOW YOU DO GET THOSE TERMS.
1325= A. YEAH. 1326= Q. BEFORE I DO GO THERE, LET ME ASK YOU SOMETHING ELSE ON THIS
1327= ISSUE OF NEGOTIATION. YOU HAVE EVEN ASKED PUBLISHERS, IN 1328= CONDUCTING NEGOTIATIONS, TO MEET COMPETITION FROM OTHER
1329= PUBLISHERS, CORRECT? 1330= A. I'VE DONE IT RARELY, BUT I'VE DONE IT, YES.
1331= Q. OKAY, AND SO WHEN YOU DO SO, YOU REALIZE WHEN YOU'RE 1332= GETTING THE PRICE FROM THE PUBLISHER WITH WHOM YOU'RE
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1333= NEGOTIATING THAT YOU'RE GETTING A PRICE THAT'S, FOR EXAMPLE, 1334= NOT IN THE RED BOOK.
1335= A. THAT'S POSSIBLE, YES. 1336= Q. AND YOU THINK IT'S APPROPRIATE, IN CONDUCTING YOUR
1337= BUSINESS, TO NEGOTIATE ON A MEETING-COMPETITION BASIS. YOU 1338= DON'T SEE ANYTHING WRONG WITH THAT, CORRECT?
1339= A. NO, NOT REALLY. 1340= Q. OKAY. SO I TAKE IT, THEN, THAT YOU DO NOT AGREE WITH THE
1341= VIEW THAT A PUBLISHER SHOULD NOT DEVIATE FROM ITS PUBLISHED 1342= TERMS, EVEN IF THE PUBLISHER IS TOLD BY ITS CUSTOMERS THAT ITS
1343= TERMS ARE NOT COMPETITIVE WITH THE TERMS OF OTHER PUBLISHERS. 1344= I TAKE IT YOU DON'T AGREE WITH THAT.
1345= A. WELL, I THINK PUBLISHERS SHOULD BE FAIR AND CONSISTENT WITH 1346= THE LAW, BUT, YOU KNOW, I TRY TO FOLLOW THE LAW.
1347= Q. LISTEN TO MY QUESTION. 1348= A. I DIDN'T UNDERSTAND IT. GO AHEAD.
1349= Q. OKAY, FAIR ENOUGH. MY QUESTION WAS, YOU DO NOT AGREE WITH
1350= THE VIEW THAT A PUBLISHER SHOULD NOT DEVIATE FROM ITS PUBLISHED 1351= TERMS, EVEN IF THE PUBLISHER IS TOLD BY ITS CUSTOMERS THAT
1352= THOSE TERMS ARE NOT COMPETITIVE WITH OTHER PUBLISHERS' TERMS. 1353= A. WELL, IF THEY'RE NOT --I BELIEVE, IN MEETING THE
1354= COMPETITION, IF THAT'S APPROPRIATE, SURE. 1355= Q. AND WOULD YOUR ANSWER BE THE SAME IF I TOLD YOU THAT THE
1356= VIEW THAT I JUST READ TO YOU WAS THE VIEW OF YOUR OWN INDUSTRY 1357= EXPERT, GAIL SEE?
1358= A. WOULD I BE --1359= Q. WOULD YOUR OPINION CHANGE IF I TOLD YOU THAT WAS HER VIEW?
1360= A. WELL, I ALWAYS ADMIRED AND RESPECT GAIL SEE. I DON'T KNOW. 1361= Q. YOU DON'T KNOW?
1362= A. OH --1363= Q. DO YOU REALIZE THAT THAT IS THE VIEW OF YOUR EXPERT
1364= WITNESS, YOUR INDUSTRY EXPERT WITNESS, THAT IT IS NOT 1365= APPROPRIATE --
1366= A. I DO NOT KNOW HER OPINIONS, NO. I HAVEN'T HEARD HER 1367= TESTIMONY.
1368= Q. OKAY. AND IF SHE GIVES THAT TESTIMONY LATER ON TODAY, YOU 1369= CERTAINLY WOULD DISAGREE WITH IT, CORRECT?
1370= A. I'M GETTING KIND OF CONFUSED. 1371= Q. WELL, LET'S TURN TO ANOTHER SUBJECT.
1372= A. OKAY. 1373= Q. RED BOOK TERMS. YOU AGREE THAT THE RED BOOK DOES NOT
1374= CONTAIN ALL THE OPERATIVE PURCHASE TERMS THAT GOVERN
1375= BOOKSELLERS' PURCHASES FROM PUBLISHERS AND VENDORS, CORRECT? 1376= A. CORRECT.
1377= Q. AND YOU'VE INDICATED THERE ARE A VARIETY OF OTHER MEANS AND 1378= WAYS IN WHICH TERMS GET COMMUNICATED, CORRECT?
1379= A. YES. 1380= Q. AND THEY INCLUDE STOCK OFFERS, CORRECT?
1381= A. THAT'S RIGHT. 1382= Q. AND BY THE WAY, WHEN WE TALK ABOUT STOCK OFFERS, STOCK
1383= OFFERS COME THEMSELVES IN A VARIETY OF WAYS, AREN'T THEY? 1384= A. YES.
1385= Q. THERE ARE SEASONAL STOCK OFFERS, RIGHT? 1386= A. YES.
1387= Q. THERE'S HOLIDAY STOCK OFFERS, RIGHT? 1388= A. YES.
1389= Q. BACK TO SCHOOL? 1390= A. YES.
1391= Q. OKAY, AND A STOCK OFFER IS WHEN A PUBLISHER WANTS TO PUSH A 1392= PARTICULAR LINE OR TYPE OF BOOKS, RIGHT?
1393= A. USUALLY, YES. 1394= Q. MOVE SOME INVENTORY, RIGHT?
1395= A. YES. 1396= Q. AND THEY OFFER PRICES THAT ARE NOT IN THE RED BOOK IN THOSE
1397= OCCASIONS, CORRECT? 1398= A. YES.
1399= Q. THEY OFFER PRICES THAT ARE DIFFERENT FROM THEIR PRICE
1400= SCHEDULES, RIGHT? 1401= A. YES.
1402= Q. WHEN YOU GET STOCK OFFERS, DO YOU KEEP THE STOCK OFFER
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1403= DOCUMENTS IN ORDER TO PROVE THAT SOME PRICE THAT YOU PAID THAT 1404= WAS NOT ACCORDING TO THE RED BOOK CAN BE DOCUMENTED?
1405= A. NO. 1406= Q. AND INDEED, NOT ALL STOCK OFFERS EVEN COME IN WRITING, DO
1407= THEY? 1408= A. MOST OF THEM DO. THERE MAY BE AN EXCEPTION TO THAT,
1409= THOUGH, I DON'T KNOW. 1410= Q. I WAS LISTENING CAREFULLY TO YOUR DIRECT EXAMINATION, AND
1411= YOU KEPT USING WORDS LIKE "USUALLY" AND "TYPICALLY" THEY'RE 1412= COMMUNICATED IN WRITING, AND I TOOK FROM YOUR ANSWER THAT THAT
1413= MEANT THAT SOMETIMES THEY'RE NOT IN WRITING, THEY'RE VERBALLY 1414= COMMUNICATED. CORRECT?
1415= A. THEY COULD BE. I DON'T REALLY KNOW. 1416= Q. AND INDEED, WHEN THEY ARE VERBALLY COMMUNICATED, THE ONLY
1417= EVIDENCE THAT ONE WOULD HAVE ABOUT THE TERMS OF THAT PARTICULAR 1418= STOCK OFFER WOULD BE CONTAINED IN THE INVOICE ITSELF, CORRECT?
1419= A. WELL, YOU'RE --HYPOTHETICALLY, YES. BUT SIR, I DON'T 1420= REMEMBER ANY THAT WERE JUST VERBALLY COMMUNICATED. I JUST
1421= DON'T KNOW. 1422= Q. NOW, STOCK OFFERINGS AND OTHER PUBLISHER OFFERINGS OUTSIDE
1423= OF THEIR ORDINARY PRICE SCHEDULES ARE ALSO COMMUNICATED, FOR 1424= EXAMPLE, IN TRADE SHOWS, CORRECT?
1425= A. YES. 1426= Q. AND YOU ATTEND THE NORTHERN CALIFORNIA INDEPENDENT
1427= BOOKSELLERS ASSOCIATION, NCIBA, TRADE SHOW FROM TIME TO TIME? 1428= A. YES.
1429= Q. OR REPRESENTATIVES OF YOUR COMPANY? BY THE WAY, YOUR 1430= COMPANY IS A CORPORATION, RIGHT?
1431= A. CORRECT. 1432= Q. AND YOU ARE THE SOLE STOCKHOLDER, CORRECT?
1433= A. THAT IS TRUE. 1434= Q. AND AT THE NCIBA TRADE ASSOCIATION SHOW, STOCK OFFERS ARE
1435= OFFERED THERE BY NUMEROUS VENDORS, CORRECT? 1436= A. RIGHT.
1437= Q. AND YOU HAVE PARTICIPATED FROM TIME TO TIME IN VOLUME 1438= DISCOUNT PROGRAMS, AS WELL, CORRECT?
1439= A. WHAT DO YOU MEAN BY VOLUME DISCOUNT PROGRAMS? ALL 1440= PUBLISHERS HAVE VOLUME DISCOUNTS, YES.
1441= Q. BEYOND WHAT'S IN THE PUBLISHED TERMS? 1442= A. HOW IS THAT DIFFERENT THAN A STOCK OFFER? I'M SORRY, I'M
1443= NOT SUPPOSED TO ASK YOU QUESTIONS, BUT --1444= Q. YOU'VE RECEIVED OFFERINGS FROM TIME TO TIME THAT THE MORE
1445= YOU BUY, THE LESS YOU PAY, CORRECT? 1446= A. YES, THAT'S TRUE, WE HAVE.
1447= Q. AND YOU'VE ALSO RECEIVED NEW STORE OPENING TERMS NOT 1448= CONTAINED IN PUBLISHERS' PRICE SCHEDULES, CORRECT?
1449= A. WHEN WE OPENED OUR NEW STORE, WE MAY HAVE GOTTEN A FEW --A
1450= FEW EXTENDED DAY PROGRAMS, I THINK. 1451= Q. AN EXTENDED DAY PROGRAMS MEANS WHAT?
1452= A. YOU CAN PAY IN LONGER THAN 30 DAYS. 1453= Q. AND THAT'S WHEN YOU OPENED THE FOURTH STREET STORE?
1454= A. FOURTH STREET STORE. 1455= Q. IN 1997.
1456= A. YES. 1457= Q. IN NOVEMBER, RIGHT?
1458= A. THAT'S CORRECT. 1459= Q. OKAY. AND THERE ARE NUMEROUS OCCASIONS WHEN YOU, CODY'S,
1460= DOES NOT PAY FOR BOOKS ON THE TERMS THAT ARE IN THE RED BOOK, 1461= CORRECT?
1462= A. WELL, I'D STILL SAY THAT THE VAST MAJORITY OF TERMS ARE 1463= CONSISTENT WITH THE RED BOOK, BUT THERE ARE EXAMPLES AND
1464= PROBABLY NUMEROUS EXAMPLES, WHICH ARE DIFFERENT THAN THE BOOK, 1465= YES.
1466= Q. I THINK YOU SAID AT LEAST 10 PERCENT ARE STOCK OFFERS 1467= ALONE, CORRECT?
1468= A. WELL, NO MORE THAN 10 PERCENT. 1469= Q. WELL, LET ME ASK YOU ABOUT A FEW OTHER INVOICES.
1470= AND I'M GOING TO NOW TURN TO THE BOOK THAT YOU HAVE 1471= IN FRONT OF YOU, YOUR HONOR. THE FIRST ONE WOULD BE EXHIBIT
1472= 6503. TO TRY TO SPEED THIS UP, YOUR HONOR, WHAT WE HAVE DONE 1473= FOR BOTH YOU AND THE WITNESS IS HIGHLIGHTED THE --SOME OF THE
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1474= MATERIAL, AND THEN ALSO WE PUT A COPY OF THE APPLICABLE RED
1475= BOOK PAGE THAT PERTAINS TO THE INVOICE PERIOD OF TIME, AND WE 1476= HAVE TABBED THAT, SO THAT YOU CAN EASILY TURN TO IT. THAT'S
1477= WHAT THAT TAB IS, YOUR HONOR. 1478= THE COURT: ALL RIGHT.
1479= BY MR. PETROCELLI: 1480= Q. OKAY, SO LOOKING AT EXHIBIT 6503, DO YOU HAVE THAT?
1481= A. YES, I DO. 1482= Q. OKAY, NOW, THERE'S A SITUATION WHERE YOU'RE GETTING
1483= 50 PERCENT DISCOUNT IN 1996 IN OCTOBER FOR TRADE BOOKS, 1484= CORRECT?
1485= A. THAT IS CORRECT. 1486= Q. OKAY, AND IF YOU LOOK TO THE APPLICABLE RED BOOK PAGE,
1487= WHICH IS IN THE SAME TAB, SIR, IN THE SAME TAB --1488= A. RIGHT.
1489= Q. --YOU'LL SEE IT'S RIGHT BEHIND THERE. 1490= A. UM-HUM.
1491= Q. AND YOU'LL SEE THAT THE APPLICABLE RATE THERE IS, WHAT, 1492= 47 PERCENT, CORRECT?
1493= A. CORRECT. 1494= Q. OKAY. AND THERE'S NOTHING --BY LOOKING AT THIS RED BOOK
1495= PAGE, YOU CAN'T DETERMINE THAT YOU PAID --YOU GOT A 50 PERCENT 1496= DISCOUNT AS OPPOSED TO A 47 PERCENT DISCOUNT, CORRECT?
1497= A. NOT FROM THE RED BOOK, NO. 1498= Q. YOU COULD TELL FROM THE INVOICE, THOUGH.
1499= A. THAT IS TRUE.
1500= Q. AND BY THE WAY, I THINK YOU ANSWERED THIS, BUT, YOU DON'T 1501= SAVE THE STOCK OFFERS THAT SUPPORT THE HIGHER DISCOUNT AND FILE
1502= THEM WITH YOUR INVOICES, DO YOU? 1503= A. NO.
1504= Q. OKAY, LET'S TURN TO THE NEXT ONE, WHICH IS --AND THEY 1505= SHOULD BE IN ORDER, THERE --EXHIBIT 6504.
1506= A. YES, SIR. 1507= Q. OKAY, THAT'S A OCTOBER 20 --AN OCTOBER, 1997 --OCTOBER,
1508= 1997 INVOICE. DO YOU SEE THAT? AND THERE'S 52 PERCENT 1509= DISCOUNTS THERE.
1510= A. YES. 1511= Q. AND IF YOU GO TO THE RED BOOK PAGE, YOU'LL SEE THE
1512= APPLICABLE RATES. 1513= AND BY THE WAY, WE ACTUALLY COUNTED UP THE NUMBER OF
1514= UNITS ORDERED, AND IT COMES TO 432 TITLES --432 UNITS, I 1515= SHOULD SAY. SO ASSUMING THAT IT'S 432, THE APPLICABLE RATE
1516= WOULD HAVE BEEN WHAT, SIR, BETWEEN --1517= A. YOU KNOW, I'M SORRY, BUT, YOU KNOW, THIS IS --MACMILLAN
1518= HAD BECOME AT THAT TIME A VERY COMPLICATED PUBLISHER, AND THEY 1519= MAY HAVE HAD SEPARATE DISCOUNTS FOR COMPUTER BOOKS. IT MAY
1520= HAVE EVEN BEEN A SEPARATE COMPUTER --1521= Q. THIS IS THE COMPUTER.
1522= A. THIS IS COMPUTER. 1523= Q. YES, I HAVE PUT IN FRONT OF YOU THE RED BOOK PAGE FOR THE
1524= COMPUTER PUBLISHING IMPRINT, AND YOU'LL SEE THAT FOR ORDERS
1525= UNDER 500 IT'S 46 PERCENT, AND FOR ORDERS OF 500 OR MORE IT'S 1526= 48 PERCENT.
1527= A. I SEE THAT, YES, SIR. 1528= Q. OKAY. AND YOU GOT 52 PERCENT.
1529= A. AND I SEE THAT, TOO, YES. 1530= Q. AND AGAIN, YOU CANNOT TELL WHAT PRICE YOU WOULD HAVE PAID,
1531= OR DID PAY, I SHOULD SAY, FOR THE ORDER BY JUST LOOKING AT THE 1532= RED BOOK TERMS, CORRECT?
1533= A. THAT'S CORRECT. 1534= Q. LET'S TURN TO THE NEXT ONE, EXHIBIT 6505. THERE YOU SEE AN
1535= APRIL '95 INVOICE, AND I BELIEVE YOUR COUNSEL SHOWED YOU THIS 1536= ONE ON DIRECT EXAMINATION.
1537= A. YES. 1538= Q. AND HE ASKED YOU ABOUT THE 50 PERCENT DISCOUNT, AND I THINK
1539= YOU SAID THAT COMPUTER BOOKS ARE TYPICALLY PRICED AT 1540= 50 PERCENT. DO YOU SEE THAT?
1541= A. SOMETIMES THEY'RE PRICED THAT WAY, YES. 1542= Q. AND GO TO THE APPLICABLE RED BOOK PAGE FOR MACMILLAN
1543= COMPUTER PUBLISHING.
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24
1544= A. YES. 1545= Q. AND YOU'LL SEE THAT THE DISCOUNT RATE IS NOT 50 PERCENT FOR
1546= COMPUTER BOOKS, BUT 45 PERCENT. DO YOU SEE THAT? 1547= A. I SEE THAT.
1548= Q. OKAY. AND AGAIN, BY LOOKING AT THE RED BOOK, YOU COULD NOT 1549= TELL WHAT YOU ACTUALLY PAID FOR THE BOOKS.
1550= A. THAT'S CORRECT. 1551= Q. TURN TO EXHIBIT 6506, NEXT ONE, AND THAT'S A MCGRAW-HILL
1552= INVOICE, CORRECT? 1553= A. RIGHT, THAT'S CORRECT.
1554= Q. AND THERE YOU ORDERED A TOTAL OF 64 BOOKS, AT A 52 PERCENT 1555= DISCOUNT, AND THE CORRESPONDING RED BOOK ENTRY IS 46 PERCENT,
1556= CORRECT? 1557= A. THAT IS CORRECT.
1558= Q. AND WITHOUT LOOKING AT THE INVOICES OR SOME BUSINESS RECORD 1559= THAT SUMMARIZES THE INVOICES, THERE WOULD SIMPLY BE NO WAY TO
1560= KNOW WHAT YOU ACTUALLY PAID FOR THE BOOKS, CORRECT? 1561= A. YOU'D HAVE TO LOOK AT THE INVOICE, YES.
1562= Q. DOES YOUR COMPANY HAVE SOME KIND OF BUSINESS RECORD THAT 1563= SUMMARIZES INVOICE DATA?
1564= A. WELL, WE HAVE A COMPUTER SYSTEM THAT YOU COULD GET SOME 1565= SUMMARIES, YES.
1566= Q. I'LL SHOW YOU ONE MORE, SIR, THAT'S EXHIBIT 6509, AND THEN 1567= I'LL STOP ON THE INVOICES.
1568= A. OKAY. 1569= Q. THAT'S HARPER-COLLINS, NOVEMBER 21, 1996, SHOWING A
1570= 50 PERCENT DISCOUNT. IF YOU TURN TO THE APPLICABLE RED BOOK 1571= PAGE THERE, YOU'LL SEE IT'S 45 PERCENT, AND IF YOU ORDERED
1572= ELECTRONICALLY, ANOTHER 1 PERCENT, SO THE MOST YOU COULD DERIVE 1573= WOULD BE 46 PERCENT, CORRECT?
1574= A. ACCORDING TO YOUR RED BOOK, BUT I SEEM TO REMEMBER THAT --
1575= WELL, YES, I THINK THAT'S --1576= Q. WELL, IT'S NOT MY RED BOOK, SIR, TRUST ME.
1577= (LAUGHTER.) 1578= A. IT'S MY RED BOOK, I ACCEPT. I WILL ANSWER THE QUESTION.
1579= Q. LET'S GET THAT CLEAR. 1580= A. I'LL ANSWER YOUR QUESTION. THAT IS CORRECT, SIR.
1581= Q. OKAY, NO MORE WITH THOSE INVOICES. 1582= THE COURT: ALL RIGHT, I THINK WE'LL TAKE THE
1583= MORNING RECESS. 1584= MR. PETROCELLI: OKAY, YOUR HONOR.
1585= THE COURT: TILL 10: 15. 1586= THE CLERK: ALL RISE.
1587=( RECESS TAKEN FROM 9: 58 A. M. TO 10: 20 A. M.) 1588=( CONTINUED ON FOLLOWING PAGE. NOTHING OMITTED.)
1589= 1590=
1591= 1592=
1593= 1594=
1595= 1596=
1597= 1598=
1599=
1600= THE COURT: ALL RIGHT. FURTHER CROSS-EXAMINATION. 1601= BY MR. PETROCELLI:
1602= Q. MR. ROSS, WHEN WE WERE TALKING ABOUT HOW PUBLISHERS 1603= COMMUNICATE TERMS TO BOOKSELLERS, ONE OF THE THINGS THAT HAPPENS
1604= IS THAT PUBLISHERS HAVE SALES REPS, AND SALES REPS PICK UP THE 1605= PHONE AND CALL YOU OR YOU CALL THEM, CORRECT?
1606= A. YES. 1607= Q. AND SOMETIMES YOU VISIT WITH SALES REPS, RIGHT?
1608= A. YES. 1609= Q. AND IT'S WHEN YOU'RE IN THAT INTERACTION WITH SALES REPS
1610= WHEN YOU DISCUSS TERMS, NEGOTIATE TERMS, ET CETERA, CORRECT? 1611= A. YES.
1612= Q. AND THAT'S, FOR EXAMPLE, WHEN STOCK OFFER OPPORTUNITIES MAY 1613= BE DISCUSSED, CORRECT?
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1614= A. YES. 1615= Q. NOW, A STOCK OFFER IS TYPICALLY 1 TO 2 PERCENT ADDITIONAL
1616= PRICE DISCOUNT, IN THAT RANGE, CORRECT? 1617= A. YES, THERE ARE DIFFERENT KINDS OF STOCK OFFERS, BUT THAT'S
1618= ONE OF THEM, YEAH, SURE. 1619= Q. WOULD YOU SAY THAT 1 TO 2 PERCENT IS A SOMEWHAT TYPICAL
1620= RANGE? 1621= A. YES.
1622= Q. OKAY. NOW, ON THE LAST EXHIBIT I SHOWED YOU, THE 1623= HARPERCOLLINS EXHIBIT, WHICH WAS 6509, THE INVOICE THERE --
1624= A. UM-HMM.
1625= Q. --NOT DEALING WITH COMPUTER BOOKS, WE SAW A --A GAP OF 1626= 5 PERCENT BETWEEN WHAT THE RED BOOK SAID, 45 PERCENT, AND WHAT
1627= WAS STATED ON THIS INVOICE, WHICH WAS 50 PERCENT? 1628= A. RIGHT.
1629= Q. AND YOU SPECULATED THAT THAT MIGHT BE A STOCK OFFER 1630= PURCHASE?
1631= A. YES. 1632= Q. THAT'D BE KIND OF HIGH FOR JUST A STRAIGHT-OUT STOCK OFFER,
1633= WOULDN'T IT? 1634= A. THERE HAVE BEEN STOCK OFFERS FOR 50 PERCENT DISCOUNT.
1635= Q. ONE OTHER EXPLANATION IS THAT THE SALES REP OFFERED A 1 TO 2 1636= PERCENT PRICE DISCOUNT ON THE STOCK OFFER, AND YOU NEGOTIATED
1637= HIM UP TO 5 PERCENT? 1638= A. NO.
1639= Q. THAT'S CERTAINLY A --1640= A. NO, I WOULD NOT.
1641= Q. --SOMETHING THAT --YOU WOULD NOT HAVE DONE THAT? 1642= A. NO. IT JUST DOESN'T HAPPEN IN OUR BUSINESS.
1643= Q. BUT YOU HAVE NO EXPLANATION LOOKING AT THE --AT THE INVOICE 1644= WHAT THAT ADDITIONAL --OR WHAT THAT ENTIRE DISCOUNT IS REALLY
1645= ATTRIBUTABLE TO, DO YOU? 1646= A. NO.
1647= Q. WOULD YOU NOT AGREE WITH ME THAT THE ONLY REALLY WAY TO FIND 1648= OUT WHAT YOUR ACTUAL PURCHASES ARE, YOUR ACTUAL PURCHASES PRICES
1649= ARE AND YOUR ACTUAL DISCOUNTS ARE, IS TO LOOK AT THE INVOICES,
1650= CORRECT? 1651= A. CORRECT.
1652= Q. AND THAT USING THE INVOICES WOULD BE THE MOST ACCURATE WAY 1653= TO COMPARE WHAT CODY'S PURCHASES AND THE PRICES THEY PAY AND THE
1654= DISCOUNTS THEY RECEIVE WITH THOSE OF BARNES & NOBLE OR BORDERS, 1655= CORRECT?
1656= A. YES. 1657= Q. HAVE YOU PREPARED A SUMMARY OF THAT INVOICE DATA TO BE
1658= PRESENTED IN COURT? 1659= A. HERE TODAY?
1660= Q. YES. 1661= A. NO.
1662= Q. YOU RECEIVE, I BELIEVE, AS WAS ELICITED ON DIRECT 1663= EXAMINATION DISCOUNTS APPLICABLE TO RETAIL DISTRIBUTION CENTERS
1664= OR RDC'S, CORRECT? 1665= A. YES.
1666= Q. AND YOU HAVE A SOMEWHAT SMALL FACILITY, CORRECT? 1667= A. YOU MEAN MY BUSINESS?
1668= Q. NO, YOUR --YOUR RDC. 1669= A. UM, WHAT DO YOU MEAN --I GUESS, YEAH, SURE.
1670= Q. BUT YOU RECEIVE THE SAME PERCENTAGE DISCOUNT THAT THE 1671= RETAILERS WITH --WITH EXTREMELY LARGE FACILITIES RECEIVE,
1672= CORRECT? 1673= A. I DON'T KNOW WHAT THEY RECEIVE.
1674= Q. IF --ASSUME IT'S RED BOOK. THE RED BOOK HAS THE SAME
1675= PERCENTAGE WHETHER IT'S A SMALL FACILITY OR A VERY, VERY LARGE 1676= FACILITY, CORRECT?
1677= A. YES. 1678= Q. AND THE ONLY FACILITY THAT HAS ANY SORT OF RDC CAPABILITY,
1679= AS YOU TESTIFIED, IS TELEGRAPH --IS FOURTH STREET, CORRECT? 1680= A. NO, NOT NECESSARILY BECAUSE ALL RDC'S DON'T REQUIRE A
1681= LOADING DOCK. 1682= Q. WELL, YOU'RE AHEAD OF ME NOW.
1683= A. OKAY.
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1684= Q. MY QUESTION WAS THE ONLY RDC-TYPE FACILITY THAT YOU HAVE IS 1685= AT WHAT STORE?
1686= A. I DON'T KNOW WHAT AN RDC-TYPE FACILITY --1687= Q. LOADING DOCK WAREHOUSE.
1688= A. LOCATED DOCK IS AT FOURTH STREET. 1689= Q. WAREHOUSE?
1690= A. WE DON'T HAVE A SEPARATE WAREHOUSE. 1691= Q. OKAY. SO YOU HAVE THE LOADING DOCK AT FOURTH STREET, RIGHT?
1692= A. YES. 1693= Q. AND UNDER THE TERMS OF MOST OF THE PUBLISHERS, THAT'S THE
1694= ONLY LOCATION THAT'S ELIGIBLE TO RECEIVE THE RDC DISCOUNTED 1695= SHIPMENTS, CORRECT?
1696= A. I DON'T BELIEVE THAT'S TRUE. 1697= Q. YOU GET THEM AT THE OTHER STORE AS WELL, CORRECT?
1698= A. YES. 1699= Q. EVEN THOUGH THERE'S NO LOADING DOCK THERE, CORRECT?
1700= A. YES. 1701= Q. AND YOU'VE BEEN ABLE TO TAKE ADVANTAGE OF PUBLISHER TERMS
1702= THAT PERMIT YOU TO RECEIVE THEM AT THE OTHER FACILITY, CORRECT? 1703= A. WHEN THE TERMS WARRANT IT, I CAN DO THAT, YES.
1704= Q. NOW, BANTAM DOUBLEDAY, FOR EXAMPLE, REQUIRES YOUR 1705= DISTRIBUTION CENTER TO BE A FREE-STANDING OPERATION, WHOSE
1706= PRIMARY FUNCTION IS WAREHOUSING AND DISTRIBUTION OF BOOKS, 1707= CORRECT?
1708= A. I DON'T REMEMBER THEIR SPECIFIC TERMS. I DON'T KNOW. 1709= Q. BUT WE KNOW THIS: YOUR FOURTH STREET FACILITY WHERE THE
1710= LOADING DOCK IS IS NOT A FREE-STANDING DISTRIBUTION CENTER, 1711= CORRECT?
1712= A. THAT'S CORRECT. 1713= Q. AND EVEN THOUGH IT'S NOT A FREE --AND FURTHERMORE, THE
1714= FOURTH STREET STORE'S MAIN FUNCTION IS TO SELL BOOKS. IT'S A 1715= BOOKSTORE, CORRECT?
1716= A. YES. 1717= Q. YET YOU DO RECEIVE RDC SHIPMENTS THERE FROM THE BANTAM
1718= DOUBLEDAY, CORRECT? 1719= A. I DON'T KNOW IF I RECEIVE THEM ON FOURTH STREET OR ON
1720= TELEGRAPH. I JUST DON'T KNOW RIGHT NOW. 1721= Q. WELL, LET'S TURN TO EXHIBIT 6 IN THE BINDER IN FRONT OF YOU.
1722= 'CAUSE I'M HAVING TROUBLE SEEING THESE, I'VE HANDED 1723= OUT SOME MAGNIFYING GLASSES, YOUR HONOR.
1724= THE COURT: THANK YOU.
1725= (PAUSE IN THE PROCEEDINGS.) 1726= BY MR. PETROCELLI:
1727= Q. AND I PUT THE --I PUT THE BANTAM DOUBLEDAY --I PUT THE 1728= BANTAM DOUBLEDAY RED BOOK IN FOR THE YEAR 1999 SINCE THAT'S
1729= FAIRLY CURRENT, AND YOU INDICATED ON YOUR DIRECT EXAMINATION 1730= THAT THAT IS ONE OF THE VENDORS FROM WHOM YOU BUY BOOKS,
1731= CORRECT? 1732= A. YES.
1733= Q. AND YOU WILL SEE HERE ON EXHIBIT 6 UNDER THE TERMS 1734= APPLICABLE TO RETAIL DISTRIBUTION CENTER, THAT THE REQUIREMENTS
1735= INCLUDE A FREE-STANDING OPERATION WHOSE PRIMARY FUNCTION IS 1736= WAREHOUSING AND DISTRIBUTION OF BOOKS, CORRECT? DO YOU SEE
1737= THAT? 1738= A. YES, I SEE THAT.
1739= Q. OKAY. AND YOU DON'T HAVE ANY RDC FACILITY THAT MEETS THOSE 1740= REQUIREMENTS, CORRECT? IS THAT CORRECT?
1741= A. I'D HAVE TO READ THIS CAREFULLY. WE DON'T --1742= Q. NO.
1743= A. WE --1744= Q. WELL, DO YOU HAVE ANY RDC FACILITY THAT WHOSE PRIMARY
1745= FUNCTION IS TO WAREHOUSE BOOKS, AND THAT'S FREE-STANDING? 1746= A. WE DON'T HAVE A FREE-STANDING FACILITY.
1747= Q. OKAY. 1748= A. THAT'S CORRECT.
1749= Q. SO TO THE EXTENT THAT YOU RECEIVE ANY RDC DISCOUNTS FROM
1750= BANTAM DOUBLEDAY DELL, YOU ARE DOING SO IN VIOLATION OF THEIR 1751= POLICY, CORRECT?
1752= A. I WOULD NOT ADMIT TO THAT, SIR, BECAUSE WE HAVE READ THEIR 1753= POLICIES --
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1754= Q. OKAY? 1755= A. --VERY CAREFULLY AND WE ARE IN COMPLIANCE. I DO NOT KNOW
1756= IF THIS IS --1757= Q. YOU WON'T --
1758= A. --OR NOT. 1759= Q. YOU HAVE NO EXPLANATION AS YOU SIT HERE ON THE STAND HOW IT
1760= IS YOU CAN RECEIVE RDC-DISCOUNTED SHIPMENTS AT YOUR FACILITY IN 1761= VIEW OF THIS STATED POLICY, CORRECT?
1762= A. THAT IS CORRECT. 1763= Q. I'M GOING TO TURN TO THE SUBJECT OF VOLUME DISCOUNTS FOR A
1764= SECOND. I ASKED YOU ABOUT VOLUME DISCOUNTS THAT YOU MAY RECEIVE 1765= FROM TIME TO TIME. YOU ALSO GIVE AS A BOOKSELLER VOLUME
1766= DISCOUNTS, CORRECT? 1767= A. WE HAVE FROM TIME TO TIME, YES.
1768= Q. AND YOU GIVE VOLUME DISCOUNTS TO CUSTOMERS BECAUSE SELLING 1769= IN VOLUME IS LESS LABOR INTENSIVE AND THUS SAVES YOU MONEY,
1770= CORRECT? 1771= A. THAT WOULD --YES.
1772= Q. LET'S TALK ABOUT A BIT ABOUT CO-OP ALLOWANCES. YOU HAVE 1773= BEEN QUITE AGGRESSIVE IN NEGOTIATING FOR CO-OP FUNDS, CORRECT?
1774= A. YES.
1775= Q. AND YOU ALSO NEGOTIATE FOR CO-OP FUNDS FOR IN-STORE DISPLAY 1776= OR PLACEMENT OF BOOKS, CORRECT?
1777= A. YES. 1778= Q. LET'S LOOK AT EXHIBIT 6520, IF YOU WOULD, PLEASE, MR. ROSS.
1779= A. 6520. 1780= Q. YES.
1781= A. THAT IT? 1782= Q. THAT WAS A MULTI-PAGE DOCUMENT. IF YOU LOOK AT THE VERY
1783= END, AFTER THE PAPER CLIP, YOU WILL SEE A LETTER FROM YOU TO 1784= AVON BOOKS DATED JANUARY 26, 1996. DO YOU SEE THAT, MR. ROSS?
1785= A. YES, I DO. 1786= Q. AND THERE YOU ARE SEEKING CO-OP ALLOWANCE FOR IN-STORE
1787= PLACEMENT FROM AVON BOOKS, CORRECT? 1788= A. IS --THE LETTER IS THIS --I'M SORRY. (REVIEWING
1789= DOCUMENT.) 1790= THAT'S WHAT IT LOOKS LIKE, YES, SIR.
1791= Q. AND AT THE TIME THAT YOU'RE ASKING FOR THIS --WELL, LET ME 1792= ASK YOU THIS: WHY DIDN'T YOU JUST GO TO THE RED BOOK AND LOOK
1793= IT UP? WHY DID YOU WRITE THIS LETTER? 1794= A. AT THE TIME IN 1996, I'M NOT AWARE THAT PLACEMENT ALLOWANCES
1795= WERE PUBLISHED IN THE RED BOOK. 1796= Q. OKAY. BUT EVEN THOUGH THEY WERE NOT PUBLISHED, YOU DID NOT
1797= BELIEVE THAT WAS AN IMPEDIMENT TO YOUR ASKING FOR CO-OP, 1798= CORRECT?
1799= A. WELL, I KNEW THAT CHAINS WERE GETTING PLACEMENT ALLOWANCE.
1800= Q. SO --AND YOU DIDN'T THINK THERE WAS ANYTHING WRONG WITH 1801= YOUR GETTING CO-OP, EVEN THOUGH IT WAS NOT A PUBLICLY STATED
1802= TERMS? 1803= A. I BELIEVE THAT IT WAS RIGHT FOR THE US TO GET WHAT WAS
1804= AVAILABLE TO THE CHAINS. 1805= Q. AND YOU KNEW OF NO REASON WHY YOU SHOULDN'T ASK FOR IT
1806= EITHER, CORRECT? 1807= A. CORRECT.
1808= Q. SO THE IDEA THAT SOMETHING IS NOT PUBLISHED ISN'T A STOP 1809= SIGN FOR YOU, IS IT?
1810= A. NO. OKAY. 1811= Q. NOW, IF YOU LOOK AT THE RED BOOK, BY THE WAY, WHICH IS THE
1812= NEXT DOCUMENT WITH THE YELLOW TAB THAT FOLLOWS THIS LETTER UNDER 1813= CO-OP ADVERTISING POLICY, IT SAYS "CONTACT THE SALES REP FOR
1814= DETAILS." DO YOU SEE THAT? 1815= A. YES.
1816= Q. AND YOU WROTE THIS LETTER, AND YOU TOLD THEM WHAT KIND OF 1817= DOCUMENTATION YOU WOULD PROVIDE IN ORDER TO SUPPORT THE CO-OP
1818= ALLOWANCE, CORRECT? 1819= A. YES.
1820= Q. AND YOU ALSO SAID THAT NO OTHER DOCUMENTATION THAN THE TYPE 1821= THAT YOU WANTED TO PROVIDE WOULD BE REQUIRED, CORRECT?
1822= A. YES. 1823= Q. SO, IN EFFECT, YOU WERE DICTATING A TERM TO AVON?
1824= A. NOT EXACTLY.
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1825= Q. OKAY. 1826= A. IT HAD BEEN MY UNDERSTANDING THAT THE CHAINS DID NOT PROVIDE
1827= DOCUMENTATION IN THE FORM OF, YOU KNOW, PICTURES, THINGS LIKE 1828= THAT. SO I FELT THAT WE WERE --IT WAS REASONABLE FOR US TO
1829= REQUEST THE SAME --THE SAME KINDS OF TERMS. 1830= Q. ISN'T IT TRUE THAT THE REASON WAS NOT JUST BECAUSE THE
1831= CHAINS DID IT, BECAUSE YOU DIDN'T WANT TO BE BURDENED WITH 1832= BURDENSOME DOCUMENTATION REQUIREMENTS, CORRECT?
1833= A. IT WOULD HAVE BEEN A BURDENSOME DOCUMENTATION REQUIREMENT. 1834= Q. AND THAT WAS ONE OF THE REASONS YOU WROTE THAT IN YOUR
1835= LETTER, CORRECT? 1836= A. I WOULD NOT HAVE ASKED FOR IT IF I HAD NOT HAVE KNOWN THAT
1837= OTHER PEOPLE WEREN'T BEING BURDENED BY IT AS WELL. 1838= Q. DID YOU NOT TESTIFY AT YOUR DEPOSITION THAT WHAT YOU WERE
1839= THINKING ABOUT WAS THAT YOU DIDN'T WANT TO BE BURDENED WITH 1840= BURDENSOME DOCUMENTATION EVEN IF THE PUBLISHER REQUIRED
1841= BURDENSOME DOCUMENTATION? 1842= A. THAT'S TRUE.
1843= Q. OKAY. LET'S TURN TO THE SUBJECT OF CO-OP FOR PLACEMENT WITH 1844= REGARD TO BANTAM DOUBLEDAY.
1845= A. WHERE IS THAT? IS THAT THE NEXT PAGE? 1846= Q. YEAH. LOOK AT EXHIBIT 6521.
1847= A. (REVIEWING DOCUMENTS.) 1848= Q. NOW, THERE, SIR, YOU HAVE A SIMILAR LETTER, THIS TIME TO
1849= BANTAM DOUBLEDAY, CORRECT?
1850= A. YES. 1851= Q. AND, AGAIN, YOU COULDN'T GO TO THE RED BOOK FOR THE CO-OP
1852= PLAN, CORRECT? 1853= A. I DON'T REMEMBER.
1854= Q. WASN'T IN THE RED BOOK, WAS IT? 1855= A. I DON'T REMEMBER. BUT --
1856= Q. WELL, IF IT WAS, YOU WOULD HAVE JUST FOLLOWED WHAT THE RED 1857= BOOK SAID, RIGHT?
1858= A. YES. 1859= Q. 'CAUSE YOU DON'T DEVIATE FROM THE RED BOOK, RIGHT?
1860= A. PARDON ME. 1861= Q. YOU DON'T DEVIATE FROM THE RED BOOK, DO YOU?
1862= A. WELL, I HAVE. 1863= Q. NOW, LOOK AT THE LAST --LOOK AT THE LAST PARAGRAPH OF THIS
1864= LETTER DATED JANUARY 29, 1996. IT SAYS "THIS PLAN IS COMPARABLE 1865= TO ARRANGEMENTS CURRENTLY IN PLACE WITH OTHER MAJOR PUBLISHERS
1866= INCLUDING PENGUIN U. S. A., HARPERCOLLINS AND SIMON & SCHUSTER." 1867= DO YOU SEE THAT?
1868= A. YES. 1869= Q. NOW, IN FACT, THAT WAS NOT A TRUE STATEMENT, CORRECT?
1870= A. I BELIEVE IT WAS A TRUE STATEMENT. 1871= Q. IN FACT, THOSE CO-OP ARRANGEMENTS WITH THOSE OTHER
1872= PUBLISHERS HAD NOT TAKEN PLACE AT THE TIME YOU WROTE THIS 1873= LETTER. YOU WERE TRYING TO CREATE THE IDEA THAT THERE WAS A
1874= COMPETITIVE OFFER THAT THE PUBLISHER HAD TO MATCH, WHEN, IN
1875= FACT, YOU DID NOT HAVE SUCH AN OFFER, CORRECT? 1876= A. I DON'T BELIEVE THAT'S TRUE, SIR.
1877= Q. IT IS TRUE THAT THE ARRANGEMENTS THAT YOU SAID WERE 1878= CURRENTLY IN PLACE, IN FACT, HAD NOT BEGUN UNTIL A POINT LATER
1879= IN TIME, CORRECT? 1880= A. I WOULD --I DON'T KNOW, BUT I KNOW I WOULD NOT HAVE --I
1881= WOULD NOT HAVE LIED. 1882= Q. WELL, CAN WE TURN TO PAGE 330 OF YOUR DEPOSITION. THAT'S --
1883= THAT'S RIGHT THERE. YOU HAVE TO GO TO THE VOLUME THAT HAS PAGE 1884= 330 IN IT, MR. ROSS, AND LET'S GO TO PAGES (SIC) 8 AND 9, THE
1885= BEGINNING. 1886= A. (REVIEWING DOCUMENT.)
1887= THE COURT: HE SAID TO GO TO PAGES (SIC) 8 AND 9. 1888= MR. PETROCELLI: PAGE 330, YOUR HONOR.
1889= THE COURT: OH, I SEE. 1890= MR. PETROCELLI: AND LINE --LINE 8 AND 9.
1891= THE COURT: YEAH. 1892= MR. PETROCELLI: THE QUESTION IS:
1893= "DOES THIS REFRESH YOUR RECOLLECTION THAT AS OF 1894= JANUARY 29TH, 1996, CODY WAS RECEIVING CO-OP FOR
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1895= PLACEMENT FROM PENGUIN U. S. A., HARPERCOLLINS AND 1896= SIMON SCHUSTER?
1897= "ANSWER: WELL, MY RECOLLECTION IS THAT IT DIDN'T 1898= BEGIN UNTIL LATER, BUT I DON'T REMEMBER THE EXACT
1899= DATES."
1900= YOU SEE THAT? 1901= A. YES.
1902= Q. OKAY. NOW, ISN'T IT --ISN'T IT TRUE THAT YOU SORT OF 1903= STRETCHED THE TRUTH IN YOUR DEALINGS WITH YOUR PUBLISHERS?
1904= A. NO. NO, SIR. 1905= Q. OKAY. CAN YOU TURN TO PAGE 331, LINES 3 TO 9?
1906= A. YES. 1907= Q.
1908= "Q. WOULD YOU HAVE MISREPRESENTED TO 1909= MR. SHAOUP AT BDD THAT YOU WERE, IN FACT,
1910= RECEIVING CO-OP FOR PLACEMENT FROM PENGUIN, 1911= HARPERCOLLINS AND SIMON & SCHUSTER?
1912= "A. NOT --NO. NO. ALTHOUGH I MIGHT 1913= HAVE --I WOULD NOT HAVE MISREPRESENTED IT --
1914= MISREPRESENTED IT. I MIGHT HAVE --I MIGHT HAVE 1915= STRETCHED IT. BUT I JUST CAN'T REMEMBER."
1916= A. SIR, I CAN --1917= Q. TURN TO EXHIBIT --
1918= A. YES. 1919= Q. --6525, PLEASE.
1920= THIS IS RANDOM HOUSE. OUT OF YOUR DEPOSITION, SIR. 1921= WE'RE NOW BACK INTO THE EXHIBIT BINDER.
1922= A. YES, SIR. 1923= Q. NOW, THIS IS AN EXAMPLE OF A LETTER YOU RECEIVED FROM RANDOM
1924= HOUSE, AND I'VE HIGHLIGHTED THE PORTIONS THAT I WANT TO DIRECT
1925= YOUR ATTENTION TO IN THE MIDDLE, WHERE IT SAYS THAT "THIS CLAIM 1926= IS BEING REIMBURSED ON A ONE TIME ONLY BASIS. IN THE FUTURE
1927= PLEASE PROVIDE THE FOLLOWING INFORMATION." AND THEY ASK FOR AN 1928= ACTUAL PHOTOGRAPH OF THE IN-STORE PLACEMENT.
1929= DO YOU SEE THAT? 1930= A. YES.
1931= Q. AND THEN YOU SUBMITTED ANOTHER CLAIM WITHOUT PROVIDING 1932= THE --THE REQUISITE DOCUMENTATION, AND THEY THEN SENT YOU
1933= ANOTHER A LETTER, CORRECT? 1934= A. YES.
1935= Q. AND IF YOU TURN TO THE NEXT EXHIBIT, YOU'LL SEE THAT LETTER. 1936= A. (REVIEWING DOCUMENT.)
1937= Q. YOU SEE THAT, SIR? 1938= A. YES.
1939= THE COURT: 6527? 1940= MR. PETROCELLI: FOR THE RECORD, THAT IS
1941= EXHIBIT 6527. 1942= THE WITNESS: RIGHT. YES.
1943= BY MR. PETROCELLI: 1944= Q. AND EVEN THOUGH YOU DIDN'T PROVIDE THE DOCUMENTATION, THEY
1945= NONETHELESS PAID YOUR CLAIM BUT TOLD YOU THAT THEY'RE NOT GOING 1946= TO DO IT AGAIN UNLESS YOU PAY THE --UNLESS YOU PROVIDE THE --
1947= A. RIGHT. 1948= Q. --THE PHOTOS, CORRECT?
1949= A. THAT'S CORRECT.
1950= Q. NOW, TURN TO EXHIBIT 6528. AND ONCE AGAIN, YOU MAKE A CLAIM 1951= WITHOUT PROVIDING THE DOCUMENTATION, AND THEY ONCE AGAIN PAY,
1952= CORRECT? 1953= A. YES.
1954= Q. AND FINALLY ON CO-OP, YOU ASKED FOR AND RECEIVED 1955= REIMBURSEMENT BECAUSE YOU PLACED ADS ON THE INTERNET, CORRECT?
1956= A. YES. 1957= Q. AND IN COMING UP WITH SOME DOLLAR FIGURE, YOU SIMPLY PICKED
1958= AN ARBITRARY FIGURE, CORRECT? 1959= A. PRETTY MUCH, YES.
1960= Q. AS YOU SAID, CO-OP IS VERY LOOSE, ISN'T IT? 1961= A. IT'S COMPLICATED.
1962= Q. IT'S LOOSE, I THINK WAS THE WORD YOU USED, RIGHT? 1963= A. I MAY HAVE USED THAT WORD, THAT'S POSSIBLE, YES, SIR.
1964= Q. YOU ALSO SAID THAT IN YOUR DIRECT EXAMINATION THAT YOU
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1965= SOMETIMES PAY YOUR BILLS A LITTLE LATE. RECALL THAT? 1966= A. YES.
1967= Q. IN FACT, YOU PAY YOUR BILLS QUITE A BIT LATE, DON'T YOU? 1968= A. IN SOME CASES.
1969= STPHAOP: I'M SORRY, YOUR HONOR, I THINK I'M GOING TO 1970= HAVE TO INTERPOSE THE FIRST OBJECTION. THIS WAS A MOTION IN
1971= LIMINE IN WHICH THE TERMS OF SALES WERE EXCLUDED AS BEING PART 1972= OF WHAT WE'RE HEARING TODAY. SO THIS SEEMS TO GO DIRECTLY TO
1973= THAT POINT. 1974= MR. PETROCELLI: MAY I RESPOND?
1975= THE COURT: YES. 1976= MR. PETROCELLI: FIRST OF ALL, I'M NOT OFFERING THIS
1977= TO CALCULATE OR PROVE UP ANY DIFFERENTIAL BUT TO SHOW HIS 1978= DEPARTURE FROM RED BOOK TERMS. AND SECONDLY, HE TESTIFIED IN
1979= HIS DIRECT EXAM, RESPONSE TO THE QUESTIONING OF HIS LAWYERS, 1980= THAT HE PAID JUST A LITTLE LATE OR WORDS TO THAT EFFECT.
1981= THE COURT: THE OBJECTION'S OVERRULED. 1982= BY MR. PETROCELLI:
1983= Q. IN FACT, SIR, YOUR AVERAGE TIME TO PAY A 30-DAY INVOICE IS 1984= 75 DAYS, CORRECT?
1985= A. I DON'T HAVE THE EXACT FIGURE, BUT THAT SEEMS REASONABLE, 1986= YES, SIR.
1987= Q. THAT'S WHAT YOU TESTIFIED AT YOUR DEPOSITION? 1988= A. RIGHT.
1989= Q. SEVENTY-FIVE DAYS? 1990= A. YES.
1991= Q. AND YOU ALSO SEEK OUT --AS OFTEN AS YOU CAN EXTENDED DATING 1992= TERMS, CORRECT?
1993= A. YES, SIR. IF THEY'RE AVAILABLE. 1994= Q. THAT ALLOW TO YOU PAY ONE --NINETY TO A HUNDRED TWENTY DAYS
1995= OR BEYOND, CORRECT? 1996= A. YES.
1997= Q. I'M NOT GOING TO TAKE THE TIME UP TO GO THROUGH THE INGRAM 1998= PROGRAMS BECAUSE YOU'VE TESTIFIED TO THOSE, AND SO I WILL THEN
1999= TURN TO ONE OF THE LAST TOPICS HERE, AND THAT'S COMPETITION.
2000= YOU WERE SHOWN THE MAP THAT HAS THE BARNES & NOBLE, 2001= BORDERS AND CODY'S STORES ON IT. I'D NOW LIKE TO SHOW YOU THE
2002= MAP WITH ALL THE BOOKSELLERS IN THE AREA, AND THAT WOULD BE 2003= EXHIBIT 7842.
2004= A. YES, SIR. 2005= THE COURT: I'M SORRY. WHAT WAS THE NUMBER?
2006= MR. PETROCELLI: 7842, YOUR HONOR. 2007= THE COURT: OKAY.
2008= BY MR. PETROCELLI: 2009= Q. INCIDENTALLY, WHAT STORE IS CLOSER TO THE BARNES & NOBLE ON
2010= SHATTUCK? 2011= A. TELEGRAPH IS CLOSER.
2012= Q. TELEGRAPH? 2013= A. (NODS HEAD.)
2014= Q. WHAT'S THE DISTANCE BETWEEN THE TELEGRAPH STORE AND THE 2015= BARNES & NOBLE STORE?
2016= A. I THINK ABOUT FIVE BLOCKS. 2017= Q. AND THEN BETWEEN THE FOURTH STREET STORE AND BARNES & NOBLE?
2018= A. ON SHATTUCK? PROBABLY THREE MILES. 2019= Q. THREE MILES?
2020= A. YES. 2021= Q. THE MAP SHOWS A NUMBER OF BOOKSELLERS WITH WHOM YOU COMPETE
2022= TO ONE DEGREE OR ANOTHER, CORRECT? 2023= A. SOME OF THEM I DON'T RECOGNIZE. BUT MOST OF THEM THAT WOULD
2024= BE TRUE.
2025= Q. AND --AND YOU ALSO COMPETE, OF COURSE, WITH AMAZON, RIGHT? 2026= A. YES.
2027= Q. AND, IN FACT, YOU SAY THEY DOMINATE THE INTERNET FOR BOOK 2028= SALES, RIGHT?
2029= A. YES, BUT THAT REALLY DIDN'T START UNTIL 1998 OR SO. 2030= Q. NOT ONLY DO YOU COMPETE WITH SIGNIFICANT NUMBER OF THESE
2031= BOOKSELLERS BUT YOU ALSO HAVE LOST SALES TO THEM, HAVEN'T YOU? 2032= A. PROBABLY.
2033= Q. YOU --YOU LOST SALES TO COSTCO IN RICHMOND, CORRECT? 2034= A. PROBABLY.
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2035= Q. YOU'VE LOST SALES TO MOE'S BOOKS, CORRECT? 2036= A. YES.
2037= Q. YOU'VE LOST SALES TO GAIA, THAT'S G-A-I-A, BOOKS, CORRECT? 2038= A. YES, THEY'RE NO LONGER IN BUSINESS.
2039= Q. YOU'VE LOST SALES TO SHAMBHALA, S-H-A-M-B-H-A-L-A, BOOKS? 2040= A. YES.
2041= Q. AND YOU'VE LOST SALES TO BLACK OAK BOOKS, CORRECT? 2042= A. YES.
2043= Q. AND YOU'VE LOST SALES TO ASUC, HAVEN'T YOU? 2044= A. YES.
2045= Q. AND ALSO TO SOME OF THESE OTHERS, SUCH AS UNIVERSITY PRESS 2046= AND PEGASUS, CORRECT?
2047= A. YES. 2048= Q. AND YOU ALSO COMPETE WITH AND HAVE LOST SALES TO HALF PRICE
2049= BOOKS AND RECORDS, CORRECT?
2050= A. PROBABLY, BUT THEY'RE MOSTLY A USED BOOK STORE. THEY'RE A 2051= LITTLE BIT DIFFERENT.
2052= Q. BEFORE CROWN WENT OUT OF BUSINESS, YOU COMPETED WITH AND 2053= LOST SALES TO THEM, RIGHT?
2054= A. YES. 2055= Q. AND YOUR FOURTH STREET STORE COMPETES WITH AND LOSES SALES
2056= TO BUILDERS BOOKSOURCE, CORRECT? 2057= A. YES. AGAIN, THAT'S A SPECIALTY BOOK STORE, IT'S VERY
2058= LIMITED COMPETITION. 2059= Q. NOW, THE SEQUENCE OF EVENTS HERE IS THAT BARNES & NOBLE --
2060= FIRST YOUR STORE IS THERE ON TELEGRAPH, RIGHT? 2061= A. YES.
2062= Q. AND YOU'RE NOT WITHOUT ANY REAL ROBUST COMPETITION FOR A 2063= LONG TIME.
2064= A. WELL, THERE WERE OTHER STORES IN THE AREA, FOR SURE. 2065= Q. NONE OF WHAT YOU CALLED, THOUGH, YOUR PRIMARY COMPETITORS
2066= UNTIL BARNES & NOBLE COMES ALONG IN 1992, CORRECT? 2067= A. RIGHT.
2068= Q. THEN FOR THE FIRST TIME IN A LONG TIME, YOU HAVE A PRIMARY 2069= COMPETITOR, AND THAT'S BARNES & NOBLE, AND NOW IT'S 1992?
2070= A. NO, THAT ISN'T WHAT I TESTIFIED TO, SIR. 2071= Q. YOUR SALES WENT DOWN AFTER BARNES & NOBLE OPENED UP IN 1992?
2072= A. YES. 2073= Q. AND IT WENT DOWN, I THINK FROM ABOUT 8 MILLION, YOU SAID, TO
2074= ACCORDING TO YOUR RECORDS, ABOUT 7.2 MILLION FOR YEAR-END '93?
2075= A. YES. 2076= Q. OKAY.
2077= TO MAKE THIS A LITTLE EASIER, YOUR HONOR, UNDER 2078= THE --UNDER EXHIBIT 7764 --AND YOU CAN TURN TO IT ALSO --WE
2079= HAVE, BASED ON YOUR OWN FINANCIAL RECORDS, PREPARED A CHART OR A 2080= GRAPH, I SHOULD SAY, OF YOUR NET SALES FROM '92 --ACTUALLY FROM
2081= '93 TO '99. YOU SEE THAT? 2082= A. YES.
2083= Q. OKAY. 2084= AND, YOUR HONOR, THE --THIS WAS BASED ON HIS
2085= FINANCIAL DOCUMENTS, ALL OF WHICH ARE INCLUDED UNDER THE VERY 2086= LAST TAB IN THAT NOTEBOOK, WHICH BEARS THE HEADING "FINANCIAL
2087= STATEMENTS." 2088= THESE NUMBERS WERE SIMPLY TAKEN OFF YOUR FINANCIAL
2089= STATEMENTS. OKAY? 2090= A. YES.
2091= Q. NOW, YOU WILL SEE THAT BEFORE BARNES & NOBLE --WELL, LET ME 2092= ASK YOU THIS BEFORE I GET TO THE GRAPH: YOU WERE REAPING
2093= WINDFALL PROFITS IN THE LATE '80S, CORRECT? 2094= A. I WAS DOING QUITE WELL, YES, SIR.
2095= Q. THE WORD YOU USED IN YOUR DEPOSITION WAS "WINDFALL PROFITS," 2096= CORRECT?
2097= A. I BELIEVE IT WAS, YES, SIR. 2098= Q. AND THEN YOU SAW A DECLINE, WHICH YOU ATTRIBUTED TO THE
2099= APPEARANCE OF BARNES & NOBLE, CORRECT?
2100= A. YES. 2101= Q. AND AS YOU ACKNOWLEDGE IN YOUR DEPOSITION, AND I WON'T GO
2102= THROUGH THE DETAILS, THERE WERE SIGNIFICANT PROBLEMS ON 2103= TELEGRAPH AVENUE AT THE TIME, INCLUDING RIOTS, AND SO FORTH,
2104= RIGHT?
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2105= A. YES. 2106= Q. AND YOU BELIEVE THAT THOSE HAD AN ADVERSE EFFECT ON YOUR
2107= SALES, CORRECT? 2108= A. YES.
2109= Q. NOW, AFTER BARNES & NOBLE SETTLES IN, STARTING IN 1993, YOUR 2110= SALES BEGIN TO RISE, AND THEY GO FROM 7.2 MILLION TO 7.3 MILLION
2111= IN 1994, DO YOU SEE THAT? 2112= A. YES.
2113= Q. AND THEY GO UP TO 7.9 MILLION IN 1995. DO YOU SEE THAT? 2114= A. I SEE THAT, YES, SIR.
2115= Q. AND THEN BORDERS OPENS UP IN EMERYVILLE IN 1995, CORRECT? 2116= A. YES.
2117= Q. AND YOU THEN GO FROM 7.9 MILLION TO 8.5 MILLION? 2118= A. WELL, THERE'S AN OUTSIDE EXPLANATION FOR THAT.
2119= Q. WE'LL GET TO THAT? 2120= A. YES.
2121= Q. YOU HAVE IN ADDITION TO BOOK SALES, YOU HAVE COOPERATE 2122= SALES?
2123= A. RIGHT. 2124= Q. AND YOU HAD A BIG GOVERNMENT CONTRACT CALLED BRIDGE OF ASIA,
2125= WHICH BROUGHT IN COUPLE OF MILLION DOLLARS OF BUSINESS, RIGHT? 2126= A. 1.3 MILLION.
2127= Q. 1.3 MILLION AND THAT HELPED EXPLAIN THIS INCREASE FROM 7.9 2128= TO 8.5, CORRECT?
2129= A. YES. 2130= Q. AND THEN THE CONTRACT WAS OVER, AND YOU DIDN'T HAVE THAT
2131= INSTITUTIONAL REVENUE, AND YOU WERE BASICALLY DOWN TO YOUR BOOK 2132= STORE REVENUE AND YOUR SALES DROPPED A LITTLE BIT, CORRECT?
2133= A. RIGHT. 2134= Q. AND IT DROPPED FROM 8.5 OR 8.6 MILLION DOWN TO 8.0?
2135= A. MAY I ASK YOU A QUESTION NOW 'CAUSE I CAN'T --2136= Q. NO, I ASK THE QUESTIONS.
2137= A. OH, OKAY. 2138= Q. NOW, FOURTH STREET STORE OPENS UP IN LATE --LATE 1997,
2139= CORRECT? 2140= A. YES.
2141= Q. AND WE'VE CLIMBED UP TO 9.1 MILLION. DO YOU SEE THAT? 2142= 1998, AROUND THEREABOUTS?
2143= A. YES. 2144= Q. AND THEN IN 1999, YOUR BIGGEST YEAR EVER --I DON'T KNOW
2145= WHAT 2000 IS, SIR, BUT AS OF YEAR END 1999, YOU WERE UP TO 2146= 9.6 MILLION. DO YOU SEE THAT?
2147= A. YES. 2148= Q. I NOTICE THAT YOUR LAWYER DID NOT ASK YOU ANY QUESTIONS
2149= ABOUT YOUR PROFIT MARGIN. YOUR PROFIT MARGIN DID NOT DECREASE
2150= AT ALL THROUGHOUT THIS ENTIRE PERIOD OF TIME FROM 1992 THROUGH 2151= 1999, CORRECT?
2152= A. THAT'S NOT MY RECOLLECTION, SIR. NO. 2153= Q. YOU TESTIFIED ON DIRECT THAT YOU WERE ALREADY DISCOUNTING
2154= AND SO WHEN BARNES & NOBLE CAME ALONG, YOU MADE THE STRATEGIC 2155= BUSINESS CHOICE NOT TO DO ANY FURTHER DISCOUNTING, DO YOU RECALL
2156= THAT? 2157= A. THAT'S RIGHT, YES.
2158= Q. SO YOU DIDN'T LOSE ANY SALES TO --YOU DIDN'T LOSE PROFITS 2159= TO BARNES & NOBLE BECAUSE YOU DECIDED TO FURTHER DISCOUNT. DID
2160= YOU RECALL THAT? 2161= A. OUR PROFIT DECLINED BECAUSE OUR SALES DECLINED.
2162= Q. WELL, WE'RE GOING TO TALK ABOUT THAT. YOU KNOW WHAT GROSS 2163= PROFIT MARGIN IS, SIR?
2164= A. YES, I DO. 2165= Q. OKAY. I'M NOT AN ACCOUNTANT, BUT WHAT I THINK IT MEANS, AND
2166= CORRECT ME IF I'M WRONG, IS NET SALES --HERE "NET SALES" 2167= MEANING NET OF RETURNS?
2168= A. UH-HUH. 2169= Q. LESS COSTS OF BOOKS SOLD?
2170= A. YES. 2171= Q. OKAY. LET'S CALL THAT GROSS PROFIT.
2172= NOW, ALL OF THE GROSS PROFIT FIGURES ARE PROVIDED IN 2173= YOUR FINANCIAL STATEMENTS WHICH ARE LOCATED IN THE NEXT TAB.
2174= AND IF YOU WANT TO TURN TO THEM, I CAN GO OVER THE NUMBERS WITH
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2175= YOU. 2176= A. UM --
2177= Q. DO YOU HAVE THAT LAST TAB THERE, SIR? 2178= A. FINANCIAL STATEMENTS. OKAY. GO AHEAD. YES.
2179= Q. OKAY. AND IF WE LOOK AT THE FIRST PAGE, WHICH BEARS 2180= EXHIBIT 120 AT THE BOTTOM, DO YOU SEE THAT?
2181= A. UM-HMM. 2182= Q. AT THE TOP, THE 1993 GROSS PROFIT MARGIN WAS 2.63 MILLION.
2183= DO YOU SEE THAT? 2184= A. UM --
2185= Q. MAKE SURE WE'RE LOOKING AT THE SAME LINE. OKAY? 2186= MAY I APPROACH, YOUR HONOR?
2187= THE COURT: YES. 2188= BY MR. PETROCELLI:
2189= Q. RIGHT HERE, THIS IS 1993, 2.63, AND THIS IS '94, AND THEN 2190= WE'RE GOING TO LOOK AT THE ENSUING YEARS.
2191= A. YES. 2192= Q. OKAY?
2193= A. YES. 2194= Q. SO IN 1993, YOU'RE AT 2.6. 1994, YOU'RE JURY AT 2.6 AGAIN.
2195= A. THAT'S CORRECT. 2196= Q. LET'S TURN TO THE NEXT EXHIBIT IN HERE, WHICH IS THE NEXT
2197= PAGE, WHICH IS EXHIBIT 119. 2198= A. UM-HMM.
2199= Q. AND WHAT I'VE DONE --AND I HOPE THEY'RE ON YOUR COPIES AS
2200= WELL --DO YOU HAVE ANY YELLOW HIGHLIGHTED FIGURES? 2201= A. YES, I HAVE YELLOW HIGHLIGHTING.
2202= Q. OKAY. I TRIED TO HIGHLIGHT THE NUMBERS. WE'RE ON THE 2203= SECOND PAGE UNDER THE LAST TAB, YOUR HONOR.
2204= OKAY. THE GROSS PROFIT THERE FOR YEAR-END 1994 IS --2205= 1995 --EXCUSE ME --IS 2.97 MILLION. DO YOU SEE THAT?
2206= A. YES. 2207= Q. OKAY. SO LET'S TURN THE PAGE.
2208= FOR YEAR-END 1996, WHICH IS REFLECTED ON YOUR EXHIBIT 2209= 118, THE GROSS PROFIT IS 3.15 MILLION. DO YOU SEE THAT?
2210= A. YES. 2211= Q. TURN THE PAGE, EXHIBIT 117, AND THE GROSS PROFIT MARGIN
2212= THERE IS 3.02 MILLION. SEE THAT? 2213= A. YES.
2214= Q. AND YOU TURN THE PAGE FOR YEAR ENDING 1998, WHICH IS ON YOUR 2215= EXHIBIT 116, AND IT'S UP TO 3.45 MILLION IN GROSS PROFIT.
2216= A. (REVIEWING DOCUMENTS.) 2217= Q. AND THEN FINALLY ON EXHIBIT 115, YOU'RE UP TO $3.64 MILLION.
2218= DO YOU SEE THAT? 2219= A. YES.
2220= Q. AND IF YOU RUN THE PERCENTAGES, MOST OF WHICH ARE ON YOUR --2221= YOUR OWN FINANCIAL STATEMENTS, SIR, YOU'LL SEE THAT FROM 1993
2222= THROUGH 1999, YOUR GROSS PROFIT MARGIN RANGED FROM 36.1 PERCENT 2223= TO 37.9 PERCENT. FAIRLY CONSISTENT?
2224= A. YES.
2225= Q. DURING THAT PERIOD OF TIME, AS RECENTLY AS 1998, YOU BLAMED 2226= CRIME AND HOMELESSNESS ON TELEGRAPH AVENUE FOR ANY DECLINE IN
2227= YOUR PROFITS IN BUSINESS, CORRECT? 2228= A. I BELIEVE IN 1998, I BLAMED THE CRIME SITUATION AS BEING A
2229= PROBLEM, YES, IT WAS FOR SURE. 2230= Q. AND, IN FACT, YOU WERE QUOTED IN A NOVEMBER 3, 1998,
2231= NEW YORK TIMES ARTICLE SAYING THAT YOUR BUSINESS HAD DROPPED 2232= 15 PERCENT IN THE DAY AND 75 PERCENT AT NIGHT BECAUSE OF CRIME
2233= AND HOPELESSNESS (SIC) ON TELEGRAPH AVENUE, CORRECT? 2234= A. WE WERE HAVING A VERY DIFFICULT TIME WITH THE SOCIAL
2235= SITUATION OUTSIDE THAT YEAR; THAT'S TRUE. 2236= Q. AND YOU WERE URGING ACTION TO BE TAKEN TO CLEAN UP THE
2237= PROBLEM, RIGHT? 2238= A. YES.
2239= Q. BECAUSE IT WAS HAVING AN ADVERSE EFFECT ON YOUR BUSINESS, 2240= CORRECT?
2241= A. WELL, THERE WERE A NUMBER OF REASONS FOR CLEANING UP THE 2242= PROBLEM, YES.
2243= Q. BUT THAT WAS ONE OF THEM, CORRECT? 2244= A. CERTAINLY WAS, YES.
2245= Q. THAT IT WAS HAVING AN ADVERSE EFFECT ON YOUR BUSINESS,
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2246= CORRECT? 2247= A. THAT'S CORRECT.
2248= MR. PETROCELLI: NOTHING FURTHER, YOUR HONOR. 2249= THE COURT: MR. STEER?
2250= (PAUSE IN THE PROCEEDINGS.) 2251= MR. STEER: YOUR HONOR, I'M PASSING OUT COPIES OF A
2252= THREE-RING BINDER CONTAINING THE EXHIBITS THAT I BELIEVE I WOULD 2253= USE. IT'S THIN TO BEGIN WITH. WHAT I'M GOING TO REFER TO IS
2254= EVEN THINNER. 2255= IN LIGHT OF THE TESTIMONY UNDER DIRECT AND
2256= CROSS-EXAMINATION DONE BY MR. PETROCELLI, I WON'T NEED TO USE 2257= MOST OF THESE EXHIBITS.
2258= CROSS-EXAMINATION 2259= BY MR. STEER:
2260= Q. MR. ROSS, WE'VE MET. I'M REG STEER, COUNSEL FOR BORDERS 2261= BOOKS.
2262= A. GOOD MORNING, MR. STEER. 2263= Q. THANK YOU.
2264= I JUST HAVE A FEW QUESTIONS FOR YOU. LITTLE BIT MORE 2265= ABOUT THE HISTORY OF YOUR OWNERSHIP AND OPERATION OF CODY'S
2266= BOOKS. YOU BOUGHT THE BOOK STORE IN 1978; ISN'T THAT CORRECT? 2267= A. 1977.
2268= Q. 1977 FROM MRS. CODY? 2269= A. FROM THE CODY FAMILY, YES, MR. AND MRS.
2270= Q. AND I THINK YOU TESTIFIED THAT THERE WERE A COUPLE OF 2271= WALDENBOOKS WITHIN --WALDEN BOOK STORES WITHIN RELATIVELY SHORT
2272= DISTANCES OF CODY'S BACK IN THE 1980'S; IS THAT CORRECT? 2273= A. AND INTO THE '90'S.
2274= Q. AND INTO THE '90'S. BOTH OF THOSE STORES CLOSED IN 1995,
2275= RIGHT? 2276= A. I BELIEVE SO.
2277= (CONTINUED NEXT PAGE; NOTHING OMITTED.) 2278=
2279= 2280=
2281= 2282=
2283= 2284=
2285= 2286=
2287= 2288=
2289= 2290=
2291= 2292=
2293= 2294=
2295= 2296=
2297= 2298=
2299=
2300= BY MR. STEER: 2301= Q. BUT THEY WERE BOTH IN OPERATION --WELL, LET ME ASK YOU,
2302= HOW FAR AWAY WAS THE CLOSING OF THE STORES TO CODY'S? 2303= A. THERE WAS ONE ON TELEGRAPH, WHICH WAS TWO BLOCKS AWAY.
2304= Q. AND THE OTHER STORE WAS HOW FAR AWAY? 2305= A. IT WAS ON SHATTUCK, PROBABLY 10 BLOCKS AWAY.
2306= Q. DID YOU CONSIDER THEM TO BE COMPETITORS? 2307= A. YES.
2308= Q. JUST LIKE ALL THE OTHER BOOKSELLERS IN THE AREA? 2309= A. WELL, AS I SAID EARLIER, SOME COMPETITORS ARE MORE
2310= FORMIDABLE THAN OTHERS. 2311= Q. YOU DIDN'T CONSIDER THE WALDENBOOKS TO BE PARTICULARLY
2312= FORMIDABLE COMPETITORS, DID YOU? 2313= A. NOT THE MOST FORMIDABLE, NO.
2314= Q. WELL, THEIR COMPETITION DIDN'T PREVENT YOU FROM MAKING THE 2315= WINDFALL PROFITS THAT YOU JUST TESTIFIED ABOUT, IN THE LATE
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2316= 1980'S, IS THAT CORRECT? 2317= A. I WOULD HAVE TO SAY THAT'S CORRECT.
2318= Q. NOW, I WANT TO TALK TO YOU A LITTLE BIT ABOUT CODY'S 2319= REQUEST FOR AND RECEIPT OF RETAIL DISTRIBUTION CENTER OR RDC
2320= DISCOUNTS. AND TO DO THAT, I WANT TO CALL YOUR ATTENTION TO 2321= SOME OF THE EXHIBITS THAT I HAVE IN THIS BINDER.
2322= MAY I APPROACH THE WITNESS, YOUR HONOR? 2323= THE COURT: YES.
2324= MR. STEER: THANK YOU.
2325= Q. IF YOU WOULD PLEASE TURN TO THE TAB FOR EXHIBIT 11063, THE 2326= DOCUMENT IS A PHOTOGRAPH. YOU SEE IT?
2327= A. YES. 2328= Q. AND YOU RECOGNIZE IT?
2329= A. IT LOOKS LIKE CODY'S BOOKS ON TELEGRAPH TO ME. 2330= Q. IT'S, IN FACT, THE FRONT ENTRANCE TO CODY'S BOOKS, IS IT
2331= NOT, ON TELEGRAPH? 2332= A. YES, IT IS.
2333= Q. OKAY. AND NOW IF YOU'D LOOK AT THE PHOTOGRAPH THAT HAS TAB 2334= NUMBER 11744, CAN YOU IDENTIFY THAT?
2335= A. I'M SORRY, 11744? 2336= Q. THAT'S RIGHT.
2337= A. I'M LOST, SORRY. OH, HERE IT IS, OKAY. THIS IS THE CODY'S 2338= BOOKSTORE ALLEY ON TELEGRAPH.
2339= Q. AND IS THAT WHERE YOU RECEIVE BOOKS? 2340= A. THAT IS WHERE THE BOOKS --YES, THAT'S WHERE THE BOOKS COME
2341= IN. 2342= Q. THAT'S WHERE THEY'RE DELIVERED, RIGHT?
2343= A. THAT'S WHERE THEY'RE DELIVERED, THAT'S CORRECT. 2344= Q. LET'S LOOK AT 11745, WHICH IS THE NEXT PHOTOGRAPH. CAN YOU
2345= IDENTIFY THAT? 2346= A. YES, THAT IS A FREIGHT ELEVATOR. WE PUT --THE SHIPMENTS
2347= GO INTO THE FREIGHT ELEVATOR AND THEN GO UPSTAIRS. 2348= Q. OKAY. NOW, THESE PHOTOGRAPHS, 11744 AND -745, DO THEY
2349= DEPICT THE ONLY BOOK LOADING AREA FOR THE TELEGRAPH AVENUE
2350= STORE? 2351= A. WELL, IT'S THE PRIMARY AREA WHERE THE BOOKS GET --GET
2352= DELIVERED IN, YES. 2353= Q. OKAY.
2354= A. WE ALSO HAVE A REGULAR ELEVATOR, AND SOMETIMES THEY GO IN 2355= THAT WAY.
2356= Q. BUT THAT'S IN THE STORE, RIGHT? 2357= A. IT'S IN ONE OF THE BUILDINGS, IT'S NOT IN THE RETAIL AREA.
2358= Q. BUT IF A TRUCK COMES TO THAT STORE LOADED WITH BOOKS, THE 2359= BOOKS WOULD COME OFF THE TRUCK AND THEY WOULD GO IN THROUGH THE
2360= ALLEYWAY THAT'S SHOWN IN EXHIBIT 11744, AND THEN ON THE 2361= ELEVATOR SHOWN AT 11745, CORRECT?
2362= A. YES, YES. 2363= Q. OKAY. NOW, IN 1997, WHEN YOU FIRST RECEIVED RDC DISCOUNTS,
2364= ACCORDING TO YOUR TESTIMONY, DID YOU MAKE ANY INVESTMENT IN 2365= THIS AREA, IN IMPROVING IT, SO THAT YOU WOULD MAKE IT EASIER TO
2366= RECEIVE BOOK SHIPMENTS? 2367= A. NO.
2368= Q. NOW I'D LIKE TO DRAW YOUR ATTENTION TO ANOTHER EXHIBIT IN 2369= THAT BINDER. IT'S EXHIBIT 10919.
2370= A. YES. 2371= Q. AND THIS APPEARS TO BE A COMPILATION OF DOCUMENTS PRODUCED
2372= BY CODY'S, AND THE FIRST DOCUMENT IS ENTITLED, "RANDOM HOUSE, 2373= INC. DISTRIBUTION CENTER APPLICATION AND PROFILE." IT SEEMS TO
2374= HAVE THE DATE OF 8/ 2/ 99 ON IT, AND THERE IS A SIGNATURE BLOCK
2375= IN THE LOWER RIGHT-HAND CORNER, WHERE IT SAYS, "STORE OWNER." 2376= IS THAT YOUR SIGNATURE?
2377= A. THAT IS, YES. 2378= Q. TELL ME, IS THIS A DOCUMENT THAT YOU FILLED OUT?
2379= A. NO, IT LOOKS LIKE A DOCUMENT THAT THE SALES REP FILLED OUT, 2380= OR THAT SOMEONE OTHER THAN ME FILLED OUT. I DON'T SEE THE --
2381= IT'S NOT MY HANDWRITING. 2382= Q. BUT YOU DID SIGN IT AFTER IT WAS FILLED OUT, CORRECT?
2383= A. YES. 2384= Q. NOW, ATTACHED TO THIS DOCUMENT ARE SOME OTHER DOCUMENTS,
2385= CORRESPONDENCE AND COPIES OF INVOICES, IS THAT RIGHT?
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2386= A. YES. 2387= Q. WHEN YOU SIGNED THIS DOCUMENT, YOU UNDERSTOOD, DIDN'T YOU,
2388= THAT YOU WERE REPRESENTING THAT THE FACTUAL STATEMENTS 2389= CONTAINED ON THE DOCUMENT ARE TRUE AND CORRECT, ISN'T THAT
2390= RIGHT? 2391= A. RIGHT, YES.
2392= Q. LET'S GO THROUGH THE DOCUMENT. IT REFERS, FIRST OF ALL, TO 2393= DISTRIBUTION, SHIP TO ADDRESS. DO YOU SEE THAT UP IN THE FIRST
2394= BLOCK NEAR THE TOP OF THE PAGE? AND IT HAS AN ADDRESS FOR 2395= CODY'S BOOKS, INC., AT 2454 TELEGRAPH AVENUE.
2396= A. YES. 2397= Q. THAT'S THE ADDRESS OF YOUR TELEGRAPH AVENUE STORE THAT
2398= WE'VE JUST SEEN IN PHOTOGRAPHS, CORRECT? 2399= A. YES.
2400= Q. AND GOING ON, FARTHER DOWN, AT THE MIDDLE OF THE PAGE, 2401= THERE IS A QUESTION, AND THE QUESTION IS, "HOW LONG HAS THIS
2402= WAREHOUSE FACILITY BEEN IN EXISTENCE?" TO WHICH THE ANSWER IS, 2403=" THREE YEARS."
2404= THERE IS NO WAREHOUSE FACILITY AT 2454 TELEGRAPH 2405= AVENUE, IS THERE?
2406= A. WELL, WE HAVE A WAREHOUSE FACILITY, BUT NOT A FREE-STANDING 2407= FACILITY. WE WAREHOUSE BOOKS.
2408= Q. HOW LONG HAS THAT FACILITY BEEN IN EXISTENCE? 2409= A. AS LONG AS THE STORE.
2410= Q. SO THERE IS NO WAREHOUSE FACILITY THAT'S BEEN IN EXISTENCE 2411= AT THAT SITE FOR THREE YEARS, ISN'T THAT CORRECT?
2412= A. YES, THAT'S CORRECT. 2413= Q. IN THE NEXT QUESTION IT ASKS,
2414= "IS THIS LOCATION A FREE-STANDING DISTRIBUTION 2415= OPERATION WITH DOCK LOADING FACILITIES CAPABLE OF
2416= RECEIVING FULL SKIDS OF MERCHANDISE?" 2417= TO WHICH THE QUESTION IS, "YES."
2418= NOW, MY QUESTION TO YOU IS, WHEN YOU ATTESTED THAT 2419= THIS --THE ANSWER TO THAT QUESTION IS "YES," YOU WERE
2420= REFERRING TO THE FACILITY THAT WE'VE JUST SEEN PHOTOGRAPHED IN 2421= THE TWO EXHIBITS I'VE SHOWN YOU, 11744 AND -745, ISN'T THAT
2422= RIGHT? 2423= A. YES.
2424= Q. THE NEXT SENTENCE ASKS, "DOES THE DISTRIBUTION CENTER
2425= PERFORM ANY FUNCTION OTHER THAN THE WAREHOUSING AND 2426= DISTRIBUTION OF BOOKS?" TO WHICH THE ANSWER IS "NO." ISN'T
2427= THAT CORRECT? 2428= A. RIGHT.
2429= Q. THOSE WERE NOT TRUTHFUL ANSWERS, WERE THEY? 2430= A. I WOULD HAVE TO SAY HERE THAT THEY ARE NOT TRUTHFUL. I
2431= DON'T REMEMBER FILLING THIS OUT, SO I DON'T KNOW THE 2432= CIRCUMSTANCES. I JUST DON'T REMEMBER.
2433= Q. YOU DID SIGN IT. 2434= A. I DID SIGN IT, THOUGH. YES, SIR, I DID.
2435= Q. AND THIS WAS IN 1999? 2436= A. YES, IT APPEARS TO BE, YES.
2437= Q. LESS THAN TWO YEARS AGO? 2438= A. YES.
2439= Q. AND THE NEXT DOCUMENT HERE ATTACHED APPEARS TO BE AN 2440= AUGUST 2, 1999 LETTER FROM YOURSELF TO MR. DON WEISBERG AT
2441= RANDOM HOUSE. DOES THAT BEAR YOUR SIGNATURE? 2442= A. YES, IT DOES.
2443= Q. THAT'S A COPY OF A LETTER THAT YOU SENT TO MR. WEISBERG, IS 2444= THAT CORRECT?
2445= A. YES, IT IS. 2446= Q. AND THE LETTER SAYS,
2447= "WE ARE IN RECEIPT OF YOUR LETTER DATED 2448= JULY 28TH, 1999 INFORMING US THAT WE NO LONGER
2449= QUALIFY FOR YOUR RDC TERMS."
2450= YOU GO ON TO STATE, 2451= "WE CURRENTLY HAVE RDC ACCOUNTS WITH A NUMBER OF
2452= YOUR COMPETITORS, INCLUDING VON HOLTZBRINCK, 2453= PENGUIN-PUTNAM AND SIMON & SCHUSTER. WE WISH TO
2454= REQUEST THAT YOU MEET YOUR COMPETITION BY EXTENDING 2455= TO US YOUR RDC DISCOUNT."
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2456= AND YOU GO ON AND SAY, 2457= "I AM ENCLOSING INVOICES FROM PENGUIN-PUTNAM AND
2458= FROM SIMON & SCHUSTER SHOWING THAT WE RECEIVE 2459= 48 PERCENT DISCOUNT FREIGHT FREE ON RDC ORDERS."
2460= THERE THEN ARE TWO ATTACHED --NO, I'M SORRY --2461= THREE ATTACHED DOCUMENTS, BUT THE TWO INVOICES THAT ARE
2462= ATTACHED YOU UNDERSTOOD YOU WERE PROVIDING IN ORDER TO PROVE 2463= THAT THE COMPETITORS, OR AT LEAST SOME OF THEM, WERE ALLOWING
2464= YOU THE RDC DISCOUNT, ISN'T THAT CORRECT? 2465= A. YES, SIR.
2466= Q. NOW, I NOTICE HERE THAT THE FIRST OF THESE SHOWS THAT THE 2467= RDC WAS EXTENDED BY --WELL, LET'S SEE. WHO IS THE FIRST
2468= VENDOR? SIMON & SCHUSTER. ON A SHIPMENT TO CODY'S BOOKS AT 2469= 1730 FOURTH STREET, BERKELEY, DIFFERENT LOCATION, RIGHT?
2470= A. THAT'S CORRECT. 2471= Q. AND THE SECOND ONE INDICATES THAT PENGUIN PUTNAM WAS
2472= SHIPPING TO 2460 TELEGRAPH. 2460 TELEGRAPH IS SIMPLY THE BACK 2473= DOOR, THE BACK ENTRANCE, IS THAT NOT CORRECT, OF THE BUILDING?
2474= A. NO, THAT IS INCORRECT. CODY'S ON TELEGRAPH HAS TWO
2475= DIFFERENT BUILDINGS, AND TWO DIFFERENT ADDRESSES. 2476= Q. NOW, IF YOU LOOK AT THE NEXT PAGE, IT IS A ST. MARTIN'S
2477= PRESS RETAIL DISTRIBUTION CENTER DOCUMENT. NOW, IS THIS 2478= SOMETHING THAT WAS EXECUTED ON BEHALF OF CODY'S?
2479= A. WELL, IT'S NOT MY HANDWRITING, BUT IT IS ON BEHALF OF 2480= CODY'S, THAT'S FOR SURE.
2481= Q. SURE, AND IT'S SOMETHING THAT YOU SENT ON TO RANDOM HOUSE 2482= AS PROOF THAT ITS COMPETITORS WERE GRANTING YOU RETAIL
2483= DISTRIBUTION CENTER TERMS, CORRECT? 2484= A. YES.
2485= Q. YOU CONSIDERED SIMON & SCHUSTER, PENGUIN PUTNAM AND 2486= ST. MARTIN'S PRESS TO BE COMPETITORS OF RANDOM HOUSE, IS THAT
2487= CORRECT? 2488= A. YES.
2489= Q. AND YOU DO, AS YOU SIT HERE TODAY, CONSIDER THEM TO BE 2490= COMPETITORS.
2491= A. YES. 2492= Q. HOW MUCH MONEY HAVE YOU INVESTED IN A RETAIL DISTRIBUTION
2493= CENTER? 2494= A. NOTHING.
2495= Q. DID YOU INQUIRE OF RANDOM HOUSE WHETHER IT WOULD BE 2496= COST-JUSTIFIED FOR RANDOM HOUSE TO EXTEND TO YOU A RETAIL
2497= DISTRIBUTION CENTER DISCOUNT? 2498= A. NO, I JUST ASKED IF IT WAS AVAILABLE TO ME.
2499= Q. SAME QUESTION WITH RESPECT TO EACH OF THESE OTHER
2500= PUBLISHERS. DID YOU ASK SIMON & SCHUSTER WHETHER IT WOULD BE 2501= COST-JUSTIFIED?
2502= A. NO, I DID NOT. 2503= Q. NOR DID YOU ASK ANY OTHER PUBLISHER FROM WHOM YOU REQUESTED
2504= THE RDC DISCOUNT, ISN'T THAT CORRECT? 2505= A. THAT'S CORRECT.
2506= MR. STEER: I HAVE NO FURTHER QUESTIONS. THANK YOU. 2507= THE WITNESS: THANK YOU.
2508= THE COURT: REDIRECT. 2509= REDIRECT EXAMINATION
2510= BY MR. DAWSON: 2511= Q. MR. ROSS, AS A RESULT OF YOUR YEARS OF EXPERIENCE IN THE
2512= BOOKSELLING INDUSTRY, DO YOU BELIEVE THAT YOU HAVE A GENERAL 2513= AWARENESS OF THE TERMS THAT ARE AVAILABLE TO OTHER RETAILERS
2514= FROM PUBLISHERS? 2515= A. IN GENERAL I DO, YES.
2516= Q. AND HOW DO YOU FIND OUT WHAT'S AVAILABLE TO OTHER 2517= RETAILERS?
2518= A. I LOOK IT UP IN THE RED BOOK, I TALK TO PUBLISHERS' SALES 2519= REPS. IN THE CASE OF THE CHAINS, I JUST HEAR ABOUT IT FROM
2520= TALKING TO PUBLISHERS. 2521= Q. BASED ON THIS GENERAL AWARENESS, HAVE YOU EVER SOLICITED
2522= ANY DEALS FROM PUBLISHERS WHICH YOU BELIEVE WERE NOT AVAILABLE 2523= TO OTHER PEOPLE --TO OTHER BOOKSELLERS?
2524= A. NO, I HAVE NOT.
2525= Q. AND BASED ON YOUR AWARENESS OF WHAT WAS AVAILABLE TO OTHER
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2526= BOOKSELLERS, HAVE YOU EVER RECEIVED ANY DEALS THAT WERE NOT 2527= AVAILABLE TO OTHER BOOKSELLERS?
2528= A. NO. 2529= Q. YOU TESTIFIED THAT YOU'VE BEEN VERY AGGRESSIVE WITH RESPECT
2530= TO SPEAKING TO PUBLISHERS ABOUT THEIR AVAILABLE TERMS. DO YOU 2531= MEAN BY THAT THAT YOU HAVE ATTEMPTED TO GET THEM TO DEVIATE
2532= FROM WHAT THEIR TERMS ARE THAT ARE AVAILABLE TO OTHER 2533= BOOKSELLERS?
2534= A. NO, I HAVE NOT. 2535= MR. PETROCELLI: THE QUESTION IS LEADING, YOUR
2536= HONOR. 2537= THE COURT: YES.
2538= MR. DAWSON: EXCUSE ME, I'LL REPHRASE THE QUESTION. 2539= Q. IN YOUR NEGOTIATIONS WITH VENDORS, HAVE YOU ATTEMPTED TO
2540= DEVIATE FROM WHAT YOU UNDERSTOOD WAS GENERALLY AVAILABLE TO 2541= OTHER BOOKSELLERS?
2542= A. NO. 2543= Q. IS THIS TRUE WITH RESPECT TO.... YOU'VE TESTIFIED THAT IN
2544= CERTAIN INSTANCES, AND YOU'VE SEEN SOME DOCUMENTS TODAY, WHERE 2545= YOU'VE GIVEN INDICATIONS THAT YOU WERE ATTEMPTING TO HAVE A
2546= PUBLISHER MEET COMPETITION. AS YOU UNDERSTAND, DID YOU EVER 2547= RECEIVE, AS A RESULT OF ANY OF THOSE SOLICITATIONS, ANY TERMS
2548= THAT WERE NOT AVAILABLE TO OTHER BOOKSELLERS? 2549= A. NO, I DID NOT.
2550= Q. WERE YOU ATTEMPTING, IN TELLING THEM WHAT YOU WERE 2551= RECEIVING FROM OTHER PUBLISHERS OR VENDORS, TO RECEIVE DEALS
2552= THAT WERE NOT AVAILABLE TO OTHER BOOK SELLERS? 2553= A. NO.
2554= Q. YOU WERE SHOWN A SERIES OF INVOICES BY MR. PETROCELLI, AND 2555= THEY INCLUDED INVOICES FROM SIMON & SCHUSTER, MACMILLAN,
2556= MCGRAW-HILL AND HARPER COLLINS. DO YOU RECALL THAT? 2557= A. YES.
2558= Q. AND HAS CODY'S EVER RECEIVED STOCK OFFERS FROM SIMON & 2559= SCHUSTER, MACMILLAN, MCGRAW-HILL, AND HARPER COLLINS?
2560= A. YES. 2561= Q. IS THERE A TIME OF THE YEAR DURING WHICH YOU TEND TO
2562= RECEIVE MORE STOCK OFFERS THAN OTHERS? 2563= A. THE FALL WOULD BE THE MOST COMMON.
2564= Q. I THINK --IS IT YOUR TESTIMONY --WELL, THE STOCK OFFERS 2565= THAT YOU RECEIVED, TO YOUR KNOWLEDGE, HAVE THEY BEEN STOCK
2566= OFFERS THAT HAVE EVER BEEN UNIQUELY OFFERED SOLELY TO CODY'S? 2567= A. NO.
2568= Q. AND IN ORDER TO DETERMINE WHETHER AN INVOICE HAS A STOCK 2569= OFFER VERSUS A NON-STOCK OFFER, THE INVOICE ITSELF, WILL IT
2570= TELL YOU? 2571= A. NO, THE INVOICE WILL USUALLY NOT TELL YOU. IT MAY NEVER
2572= TELL YOU. 2573= Q. HOW MANY INVOICES IN THE LAST 10 YEARS DO YOU BELIEVE THAT
2574= YOUR STORE HAS GONE THROUGH?
2575= A. TENS OF THOUSANDS. 2576= Q. SO THE FIVE INVOICES THAT YOU WERE SHOWN TODAY, THE
2577= PERCENTAGE OF THOSE WOULD BE WHAT? 2578= A. MINIMAL.
2579= Q. WE SPOKE A LITTLE BIT ABOUT RDC DISCOUNTS. DO ALL RDC 2580= POLICIES FROM ALL PUBLISHERS REQUIRE THAT YOU HAVE A LOADING
2581= DOCK IN ORDER TO BE ABLE TO OBTAIN THE RDC BENEFITS? 2582= A. NO, THEY DO NOT.
2583= Q. DO DIFFERENT PUBLISHERS, IN FACT, HAVE DIFFERENT 2584= REQUIREMENTS FOR RDC BENEFITS?
2585= A. YES. 2586= Q. AND DO THOSE INCLUDE WHETHER OR NOT YOU HAVE A LOADING
2587= DOCK? 2588= A. SOME INCLUDE A LOADING DOCK, SOME DO NOT.
2589= Q. YOU WERE ASKED A QUESTION ABOUT WHETHER YOU HAVE A 2590= WAREHOUSE. DO YOU HAVE A WAREHOUSE AT YOUR TELEGRAPH AVENUE
2591= STORE? 2592= A. NO, BUT WE DO HAVE WAREHOUSING FACILITIES THERE.
2593= Q. DO YOU KNOW WHETHER PUBLISHERS, IN SPEAKING TO YOU OR IN 2594= THEIR PUBLISHED TERMS, EVER DIFFERENTIATE IN THE WAY THEY SPEAK
2595= ABOUT WAREHOUSING, I. E., SOME MIGHT EXIST --Could not acquire words on page 38
SOME MIGHT ACCEPT 2596= WAREHOUSE FACILITIES, SOME MIGHT REQUIRE A DIFFERENT BUILDING?
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2667= A. YES. I GRADUATED IN 1949 FROM MOUNT HOLYOKE COLLEGE IN 2668= SOUTH HADLEY, MASSACHUSETTS, WITH AN HONORS DEGREE IN
2669= PHILOSOPHY. 2670= Q. AND HOW DID YOU FIRST BECOME INVOLVED IN THE BOOK
2671= PROFESSION? 2672= A. WELL, I'VE BEEN A BOOK PERSON MOST OF MY LIFE, AND WHEN OUR
2673= CHILDREN WERE IN SCHOOL, MY VOLUNTEER ACTIVITIES WERE IN 2674= LIBRARIES. I WORKED IN AN ACADEMIC LIBRARY, AND I'VE JUST
2675= ALWAYS BEEN VERY INTERESTED IN BOOKS. 2676= Q. WHAT TIME PERIOD WAS THAT WHEN YOU WERE INVOLVED IN THE
2677= LIBRARIES? 2678= A. IN THE 50'S AND 60'S.
2679= Q. NOW, I TAKE IT THERE CAME A TIME WHEN YOU OPENED YOUR OWN 2680= BOOKSTORE, IS THAT RIGHT?
2681= A. YES. I, AS WITH MANY PEOPLE, I ALWAYS HAD A DREAM OF 2682= OPENING A BOOKSTORE, AND SO IN 1972 I BOUGHT AN EXISTENT
2683= BOOKSTORE IN WAYZATA, MINNESOTA. 2684= Q. WHAT WAS THE NAME OF THAT BOOKSTORE?
2685= A. "THE BOOKCASE." 2686= Q. NOW, WAYZATA IS A SUBURB OF MINNEAPOLIS?
2687= A. YES, IT'S JUST A FEW MILES WEST OF MINNEAPOLIS. 2688= Q. WHAT TYPE OF BOOKSTORE IS THE BOOKCASE?
2689= A. IT'S A GENERAL --GENERAL INTEREST TRADE BOOKSTORE. IT'S 2690= NOT A SPECIALTY STORE.
2691= Q. AND HOW BIG WAS THE BOOKSTORE WHEN YOU FIRST PURCHASED IT 2692= IN 1972?
2693= A. THE ORIGINAL STORE THAT I PURCHASED WAS ABOUT 1400 SQUARE 2694= FEET.
2695= Q. DID THE BOOKSTORE GROW OVER THE PERIOD THAT YOU OWNED IT? 2696= A. YES, IT CERTAINLY DID.
2697= Q. AND HOW BIG DID IT BECOME? 2698= A. WELL, I MOVED AFTER A FEW YEARS TO A STORE AT ABOUT
2699= 4500 SQUARE FEET.
2700= Q. HOW LONG DID YOU OWN THE BOOKCASE? 2701= A. I OWNED THE BOOKCASE FOR 18 YEARS, FROM 1972 TO 1990.
2702= Q. WHAT WERE YOUR RESPONSIBILITIES AS THE OWNER OF THE 2703= BOOKCASE?
2704= A. MY RESPONSIBILITIES WERE --COVERED ABOUT EVERYTHING; 2705= CERTAINLY THE BUYING OF THE BOOKS, THE MANAGEMENT OF THE STORE,
2706= THE FINANCIAL MANAGEMENT, AND JUST ALL OF THE TASKS THAT GO 2707= WITH OWNING A SMALL BUSINESS.
2708= Q. DID YOU DO ANY MARKETING, AS THE OWNER? 2709= A. I CERTAINLY DID, THE MARKETING, THE ADVERTISING.
2710= Q. AND YOU SPOKE ABOUT BUYING, BOOK BUYING. WHAT DID THE 2711= BUYING RESPONSIBILITY ENTAIL?
2712= A. WELL, THE BUYING RESPONSIBILITY ENTAILED DECIDING WHAT 2713= BOOKS WE WOULD CARRY IN THE STORE, AND SO I WOULD MEET WITH
2714= PUBLISHERS' REPS, AND I HAD TO MAKE THOSE DECISIONS ON THEM, ON 2715= BOTH A DAILY AND SEASONAL BASIS.
2716= Q. HOW DID YOU FIND OUT, DURING THE TIME THAT YOU OWNED THE 2717= BOOKCASE, HOW DID YOU FIND OUT THE TERMS AT WHICH YOU WOULD BUY
2718= THE BOOKS? 2719= A. WELL, I HAD THE AMERICAN BOOKSELLERS ASSOCIATION RED BOOK,
2720= WHICH WAS THE MANUAL FOR LEARNING THE TERMS. 2721= Q. DID YOU HAVE TO BE FAMILIAR WITH THOSE TERMS?
2722= A. CERTAINLY. 2723= Q. AND HOW DID YOU BECOME FAMILIAR WITH THOSE TERMS?
2724= A. WELL, I WOULD OPEN THE BOOK UP AND LOOK AT IT, AND SEE WHAT
2725= THE DISCOUNT SCHEDULES WERE, WHAT THE NUMBERS WERE, QUANTITIES. 2726= Q. I GUESS WHAT I'M ASKING IS, WHAT ABOUT YOUR
2727= RESPONSIBILITIES REQUIRED YOU TO USE THE RED BOOK? 2728= A. WELL, YOU HAVE TO DECIDE WHEN YOU'RE BUYING BOOKS HOW
2729= YOU'RE GOING TO BUY THEM AND HOW MANY YOU'RE GOING TO BUY, AND 2730= FREQUENTLY YOUR DECISIONS ARE BASED ON WHAT YOUR DISCOUNT IS
2731= GOING TO BE, AND SO I WOULD USE THE RED BOOK TO SEE, IF I WAS 2732= PLACING AN ORDER, HOW MANY BOOKS I NEEDED TO, AND IF I ORDERED
2733= ONE MORE BOOK, I MIGHT GO UP ONE DISCOUNT POINT. 2734= Q. OKAY, AND SO YOU CONSULTED THE RED BOOK FREQUENTLY, I TAKE
2735= IT? 2736= A. OH, VERY FREQUENTLY.
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2737= Q. NOW, YOU MENTIONED THAT YOU DID SOME MARKETING AS AN OWNER. 2738= WHAT DID MARKETING ENTAIL?
2739= A. IT ENTAILED A NUMBER OF DIFFERENT THINGS. I PLACED SOME 2740= NEWSPAPER ADS, AND WE HAD AN IN-STORE NEWSLETTER, AND WE DID
2741= QUIT A FEW OUT-OF-STORE EVENTS. 2742= Q. AND DID YOU HAVE AN UNDERSTANDING, IN DOING THAT MARKETING,
2743= OF THE PUBLISHERS' COOPERATIVE ADVERTISING POLICIES? 2744= A. YES, I DID.
2745= Q. NOW, WHILE YOU OWNED YOUR BOOKSTORE, DID YOU BECOME 2746= INVOLVED IN ANY BOOK INDUSTRY ORGANIZATIONS OR ACTIVITIES?
2747= A. YES, I DID. I BECAME INVOLVED WITH THE AMERICAN 2748= BOOKSELLERS ASSOCIATION.
2749= Q. ANY OTHERS?
2750= A. WELL, I WAS INVOLVED WITH THE INTERNATIONAL BOOKSELLERS 2751= FEDERATION. I APPEARED ON A PANEL WITH A. A. P., THE
2752= PUBLISHERS --2753= Q. WOULD IT ASSIST YOU, MS. SEE, TO SEE A COPY OF YOUR RESUME?
2754= A. YES, AND I HAVE ONE RIGHT HERE. 2755= MR. SPIVA: AND JUST FOR EVERYBODY ELSE'S BENEFIT,
2756= MS. SEE'S RESUME IS ATTACHED TO TODAY'S BOOKLET AT 2281. 2757= I THINK IT'S THE VERY LAST EXHIBIT IN THE BOOKLET,
2758= YOUR HONOR. 2759= THE WITNESS: AND DURING THAT TIME I WAS INVOLVED --
2760= MR. SPIVA: ONE MOMENT, MS. SEE, WHILE EVERYBODY 2761= GETS TO THE SAME PLACE.
2762= I'M SORRY, I MISSPOKE. IT'S NOT 2281, IT'S 2609, 2763= YOUR HONOR, AND IT IS THE LAST EXHIBIT IN THE BOOK. SORRY,
2764= THIS BOOKLET, IF YOURS IS AS DIFFICULT TO TURN THE PAGES AS 2765= MINE.
2766= Q. ALL RIGHT, IF YOU COULD PLEASE CONTINUE, MS. SEE. 2767= A. FINE. DURING THAT TIME I WAS A MEMBER OF --ON THE BOARD
2768= OF GRAYWOLF PRESS, WHICH WAS A SMALL NONPROFIT PRESS IN 2769= MINNESOTA.
2770= Q. NOW, YOU SPOKE ABOUT YOUR INVOLVEMENT IN THE AMERICAN 2771= BOOKSELLERS ASSOCIATION. WHAT WAS YOUR INVOLVEMENT IN THE ABA?
2772= A. I WAS PRESIDENT OF THE AMERICAN BOOKSELLERS ASSOCIATION 2773= FROM 1984 TO 1986, AND I WAS ON THE BOARD FROM 1983 TO 1989.
2774= Q. WERE YOU INVOLVED IN THE ABA'S BOOKSELLERS' SCHOOLS?
2775= A. AND I WAS --CERTAINLY, I WAS ON THE FACULTY OF THE 2776= AMERICAN BOOKSELLERS SCHOOL DURING MOST OF --MOST OF MY
2777= BOOKSELLING CAREER. 2778= Q. I WANT TO ASK YOU A COUPLE QUESTIONS ABOUT YOUR PRESIDENCY
2779= AND YOUR TIME ON THE BOARD AT ABA. WHAT WERE ABA'S MAJOR 2780= INITIATIVES DURING THE TIME THAT YOU WERE PRESIDENT, AND ON THE
2781= BOARD? 2782= A. WELL, WE STARTED A COMMITTEE CALLED THE PUBLISHER PLANNING
2783= COMMITTEE AND WE WOULD MEET WITH PUBLISHERS TO DISCUSS WAYS 2784= THAT THE INDUSTRY COULD IMPROVE.
2785= Q. WHAT TYPES OF THINGS DID YOU DISCUSS WITH THE PUBLISHERS? 2786= A. WE DISCUSSED --WE DISCUSSED FREIGHT POLICIES. WE
2787= DISCUSSED WAYS WE COULD HELP ALL OF US WITH OUR PAPERWORK, 2788= HAVING SOME KINDS OF PROCEDURES THAT WERE UNIFORM AND THINGS --
2789= FOR EVERYBODY. 2790= Q. DID THAT RESULT IN ANY TYPES OF CHANGES IN THE INDUSTRY?
2791= A. PARDON? 2792= Q. DID THOSE DISCUSSIONS RESULT IN ANY CHANGES IN THE
2793= INDUSTRY? 2794= A. YES, BECAUSE THE FREIGHT PASS-THROUGH PROGRAM CAME DURING
2795= THAT TIME. WE ALSO DID SOMETHING TO HELP WITH SPECIAL ORDERS. 2796= WE CREATED SOMETHING CALLED THE SINGLE TITLE ORDER PLAN.
2797= Q. WOULD IT BE FAIR TO SAY THAT AS YOUR TIME --DURING YOUR 2798= TIME AS PRESIDENT OF THE ABA, ESSENTIALLY, YOU DISCUSSED
2799= SEVERAL ISSUES OF INDUSTRY STANDARDS AND PRACTICES WITH THE
2800= PUBLISHERS? 2801= A. YES, YES.
2802= Q. OKAY. NOW, YOU SPOKE OF THE BOOKSELLER SCHOOLS, THAT YOU 2803= WERE ON THE FACULTY OF THE BOOKSELLERS' SCHOOLS. WHAT ARE THE
2804= BOOKSELLERS' SCHOOLS? 2805= A. WELL, ABA HAD BOOKSELLERS' SCHOOLS AT DIFFERENT LEVELS.
2806= THEY WOULD HAVE A PROSPECTIVE BOOKSELLERS' SCHOOL FOR THOSE
40