Toffoloni v. LFP Publishing Group, LLC

Filing 254

TRANSCRIPT of Jury Trial Proceedings (Volume IV) held on June 16, 2011, before Judge Thomas W. Thrash, Jr. Court Reporter/Transcriber Susan C. Baker, Telephone number 404-215-1558. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Transcriber before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Redaction Request due 7/28/2011. Redacted Transcript Deadline set for 8/8/2011. Release of Transcript Restriction set for 10/5/2011. (Attachments: # 1 Notification of Filing of Official Transcript) (kac)

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
MAUREEN TOFFOLONI, as
Administrator and Personal
Representative of the Estate
of Nancy E. Benoit,

)
)
)
)
)
Plaintiff,
)
)
-vs)
)
LFP PUBLISHING GROUP, LLC,
)
doing business as Hustler
)
Magazine,
)
)
Defendant.
)
______________________________ )

Docket No. 1:08-CV-421-TWT
June 16, 2011
Atlanta, Georgia
2:46 p.m.

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TRANSCRIPT OF THE JURY TRIAL PROCEEDINGS
BEFORE THE HONORABLE THOMAS W. THRASH, JR.,
U.S. DISTRICT COURT JUDGE, AND A JURY

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VOLUME IV

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APPEARANCES OF COUNSEL:
On behalf of the Plaintiff:

Richard Decker
Francis Edwin Hallman, Jr.
HALLMAN & WINGATE

On behalf of the Defendant:

Derek Bauer
Barry Armstrong
MCKENNA, LONG & ALDRIDGE

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Proceedings recorded by mechanical stenography
and computer-aided transcript produced by
SUSAN C. BAKER, RMR, CRR
2194 U.S. COURTHOUSE
75 SPRING STREET, S.W.
ATLANTA, GA 30303
[phone]

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I N D E X

Page

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Verdict

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Punitive Damages Phase

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Witness on Behalf of the Plaintiff:

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DONNA HAHNER
Cross (By Mr. Decker)

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Witness on Behalf of the Defendant:

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DONNA HAHNER
Direct (By Mr. Bauer)
Cross (By Mr. Decker)

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481
492

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(Proceedings held in Atlanta, Georgia, June 16, 2011,
2:46 p.m., in open court.)

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THE COURT:

All right.

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from the jury.

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not" within the sentence "Attorneys' fees may not be awarded if

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you find that the Defendant actually and reasonably believed

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that it had the right to publish the Benoit images without

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first seeking the Plaintiff's permission" mean cannot?

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It says:

I have received another note

On page 8, line 7 and 8, does "may

The page numbers are not going to correspond to what

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you have because that's referring to the page of the transcript

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that I gave them.

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What do you say, Mr. Decker?

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MR. DECKER:

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course.

Judge, I disagree with the charge, of

I would say that it's not mandatory; it's permissive.

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THE COURT:

What do you say, Mr. Bauer?

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MR. BAUER:

Your Honor, there's no wiggle room in may

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not.

There's nothing permissive about it.

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may, it would be permissive.

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answer to this question is that is exactly what it means.

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means may not means the same thing as cannot.

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MR. DECKER:

If it just said

But it doesn't.

So I think the
It

Judge, I think it's permissive; and I

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think that if you were to respond to it I think you should do

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it by recharging on attorneys' fees so they would get the whole

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charge.

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THE COURT:

Well, Garner's Dictionary of Modern Legal

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Usage said:

Can/may, the distinction between these words has

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been much discussed.

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ability and sometimes -- "may" expresses permission or

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authorization and sometimes possibility.

Generally, "can" expresses physical

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That's not particularly helpful to me.

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MR. DECKER:

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That's my point, Judge.

May is always

permissive, and in this context I think it is.

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MR. BAUER:

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that's the modifier.

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THE COURT:

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question by saying:

But not if the word "not" follows it, and

All right.

I'm going to answer the

"Yes, may not means cannot."

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We're ready for the jury.

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(Jury entered the courtroom.)

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THE COURT:

Ladies and Gentlemen, I've received your

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note that says:

On page 8, line 7 and 8, does "may not" within

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the sentence "Attorneys' fees may not be awarded if you find

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that the Defendant actually and reasonably believed that it had

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the right to publish the Benoit images without first seeking

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the Plaintiff's permission" mean cannot?

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The answer to that is yes, may not means cannot.

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So I'll ask you to resume your deliberations.

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(Jury exited the courtroom.)

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THE COURT:

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MR. DECKER:

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Any other objections, Mr. Decker?
Well, Judge, I would simply reiterate

that may is permissive and shall is mandatory.

And in this

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situation, if the instruction was meant to mean that they

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mandatorily could not it would have used the word "shall".

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of course, objected to the entire charge in any case; and I

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object to it now.

I,

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THE COURT:

Any objections, Mr. Bauer?

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MR. BAUER:

No, Your Honor.

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THE COURT:

We will be in recess to await the verdict

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of the jury.

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(A recess was taken from 2:52 p.m. to 3:41 p.m. to
await the verdict of the jury.)

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(Jury entered the courtroom.)

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THE COURT:

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Mr. Cooper, has the jury reached a

verdict?

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THE FOREPERSON:

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THE COURT:

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If you will hand the verdict to the court

security officer, he will hand it to the clerk.

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Yes, sir, we have.

All right.

I'll ask the clerk to publish the

verdict.

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-

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VERDICT

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THE CLERK:

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In the United States District Court for

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the Northern District of Georgia, Atlanta Division, Maureen

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Toffoloni, as administrator and personal representative of the

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estate of Nancy E. Benoit, versus LFP Publishing Group, LLC,

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doing business as Hustler Magazine, Civil Action File Number

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1:08-CV-421-TWT, Verdict, compensatory damages:

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We, the jury, award the Plaintiff the sum of $125,000
in compensatory damages.

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Punitive damages:

Did the Defendant act with

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premeditation or knowledge and consciousness of the

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appropriation and in continuation sufficient to support an

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award of punitive damages?

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Yes.

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Did the Defendant act with a specific intent to harm

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the Plaintiff?

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Yes.

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Expenses of litigation:

Did the Defendant act in bad

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faith such as a dishonest person -- excuse me -- such as a

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dishonest purpose or breach of a known duty through such motive

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or interest or ill will?

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No.

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This 16th day of June, 2011; and it's signed by the

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foreperson.

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THE COURT:

Counsel, you wish to inspect the verdict

form?

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MR. DECKER:

Yes, Your Honor.

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THE COURT:

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(Counsel inspected the verdict form.)

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THE COURT:

All right.

All right.

Ladies and Gentlemen, let me

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ask you to go back to your jury room for a few minutes, please.

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(Jury exited the courtroom.)

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THE COURT:

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MR. DECKER:

What do we do now, Mr. Decker?
Judge, I didn't anticipate that result,

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a split like that.

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know what to do off the top of my head.

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I just have to think about it.

I don't

THE COURT:

Are you going to introduce any additional

MR. DECKER:

Oh, absolutely on the punitive damages

evidence?

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phase.

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contradiction between the two sections.

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I thought you were asking about what may be a

THE COURT:

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MR. DECKER:

I'm talking about what we do with

the punitive damages.

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No.

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I'm ready to go forward on that phase,

Your Honor.

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THE COURT:

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MR. DECKER:

How much evidence are you going to have?
Judge, I'm going to talk about the

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finances of LFP for the year 2008, the net -- I have some net

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worth information.

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submission of the Douglass versus Hustler case on the question

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of recidivism.

And I would ask the Court to reconsider the

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THE COURT:

What about you, Mr. Bauer?

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MR. BAUER:

Well, we would object to the Court

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reconsidering the Douglass v. Hustler case for the same reasons

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that we objected to its admission in the first phase of the

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case.

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that evidence.

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that financial information on the punitive damages claim.

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we'll respond to his evidence accordingly.

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renew our motion for judgment as a matter of law if it's

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necessary.

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We don't have any opposition to Mr. Decker putting on
I don't think we can contest the relevancy of

THE COURT:

And

We would like to

It's considered renewed.

I don't know if

it's necessary or not.
How long do you think it's going to take to present
your evidence, Mr. Decker?
MR. DECKER:
-- well, I'm sorry.

I would say hour or less.

I would also

An hour or less.

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I also have a question.

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THE COURT:

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Well, are you including your argument on

that or you just -MR. DECKER:

No, sir, I'm not.

That was my question.

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Will I be permitted to make an opening and a concluding

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argument in this phase?

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THE COURT:

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MR. DECKER:

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THE COURT:

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MR. DECKER:

No.

Just a closing argument.

Just a closing?
Correct.
All right.

My time estimate for the

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financial information, Your Honor, then is approximately a half

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an hour to 45 minutes.

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THE COURT:

You are not going to present any

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evidence, Mr. Bauer?

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MR. BAUER:

We will probably respond.

I'm sure he is

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going to do this through our witness, Ms. Hahner; and we will

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probably direct her afterwards briefly.

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THE COURT:

Okay.

Bring the jury back in.

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(Jury entered the courtroom.)

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THE COURT:

Ladies and Gentlemen, it will now be your

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responsibility to determine the amount of punitive damages to

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be awarded in the case.

So the attorneys are going to present

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some additional evidence to you, and they will have some

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additional argument for you.

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Mr. Decker?

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MR. DECKER:

Your Honor, at this time we would call

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Ms. Hahner, the LFP corporate representative, for the purpose

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of cross-examination.

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THE CLERK:

Ma'am, if you will raise your right

hand.

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(Witness placed under oath by the clerk.)

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THE CLERK:

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Please have a seat.

State your name for

the record.

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THE WITNESS:

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Donna Hahner.
-

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DONNA HAHNER,

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having been first duly sworn, was examined and testified as

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follows:

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CROSS-EXAMINATION

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BY MR. DECKER:

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Q.

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recall that testimony?

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A.

Yes.

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Q.

Would you tell the jury again what your position and

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duties at the LFP are.

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A.

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editorial, advertising, subscription, circulation departments

Ma'am, we discussed this case briefly on Monday.

You

I oversee the publishing division which includes the

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and my controller's department.

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Q.

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various financial documents and to verify their accuracy before

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they were submitted to me as the lawyer for the Plaintiff?

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A.

Yes.

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Q.

And did you do that?

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A.

Yes, I did, with the exception of one.

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I believe you are bringing in too that's the net worth that was

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provided by the chief financial officer.

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Q.

Did you familiarize yourself with that document?

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A.

I looked at it.

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but I did look at it.

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Q.

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documents, ma'am.

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Plaintiff's Exhibit 9, ask you if you can identify it.

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A.

In that position, ma'am, were you called upon to assemble

There's a document

I don't understand what everything means,

Let me ask you to look at some additional financial

Yes, I can.

Let me show you what has been marked as

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Q.

What is that, please, ma'am?

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A.

This is the Hustler operating statement in detail for the

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year ending December 31st, 2008.

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Q.

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Hustler Magazine for that period, for that year 2008?

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A.

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bottom?

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Q.

Total revenue, ma'am.

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A.

The total revenue was $15,516,000 for that year.

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Q.

All right.

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And for the year 2008, what was the total revenue of

The total net newsstand sales revenue or the total at the

Let me show you what has been marked --

Your Honor, I offer Plaintiff's Exhibit 9.

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THE COURT:

It's admitted without objection.

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BY MR. DECKER:

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Q.

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identify it.

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A.

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Group detail year ending December 31st, 2008.

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Q.

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a good deal more entries in it than Plaintiff's Exhibit 9; is

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that true?

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A.

Yes, correct.

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Q.

And do you know why?

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A.

Yes.

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Q.

Why is that?

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A.

This document represents the additional revenue from our

Show you Plaintiff's Exhibit 13, ask you if you can

Yes.

This is the operating statement for LFP Publishing

Now, Ms. Hahner, the document, Plaintiff's Exhibit 13, has

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intercompany affiliates, other divisions within the company

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that pay LFP Publishing Group for use of the Hustler trademark.

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And then the difference between the Hustler operating statement

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and this operating statement is other magazines.

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Q.

But it's all for LFP?

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A.

All for LFP Publishing Group, yes.

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Q.

Who is the Defendant in this case?

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A.

That's correct.

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Q.

All right.

I'd like you to take a look at the -- there's

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an entry at the bottom of the page of Plaintiff's Exhibit 13

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that says management fee, $592,000.

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What exactly is that?

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A.

Oh.

The umbrella of companies is managed by Flynt

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Management Group which includes finance department, it includes

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human resources and all the various other managers -- executive

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management that oversees all entities owned by Mr. Flynt.

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that is a fee that LFP Publishing Group must pay to Flynt

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Management Group for its services.

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Q.

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paying another Larry Flynt company a management fee of $592,000

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a month?

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A.

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royalty fee is other Larry Flynt companies paying LFP

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Publishing Group.

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Q.

And

So would it be fair to say that a Larry Flynt company is

Yes, that's correct, just like the affiliates trademark

So it's almost like trading dollars.

So that money is deducted on the P&L but which is really

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money paid to another Larry Flynt company?

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A.

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Flynt company.

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Q.

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100 percent?

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A.

Correct.

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Q.

So he is taking money out of one pocket and putting it

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into the other pocket?

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A.

Correct.

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Q.

All right.

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as Plaintiff's Exhibit 15 and ask you if you can identify it.

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A.

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through 2009 in U.S. dollars.

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Q.

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for you from some other office within Hustler Magazine?

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A.

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of Flynt Management Group.

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Q.

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Publishing Group was in the year 2008, the year the Nancy

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Benoit article was printed.

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A.

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There's intangible assets.

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Q.

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liabilities and equity.

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A.

Correct.

The management fee is paid to another Larry

And he owns the LFP 100 percent, and he owns that company

For the management fee, yes.
Let me show you again a document that's marked

This is the LFP Publishing Group balance sheets 2006

And is that the document that you said that was obtained

Yes.

This was obtained from the chief financial officer

All right.

Tell the jury what the net worth of the LFP

I have to apologize.

There's total current assets.
Do you want me to read the total --

The bottom line, ma'am, down there at the bottom, total

For 2008, 196 -- 196,036,000.

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Q.

$196,036,000?

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A.

Correct.

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Q.

And do you know what the net worth of the LFP company is

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for the year 2010, the year that we do not have figures for?

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A.

No, I do not.

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Q.

Of course, 2011 is not over yet?

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A.

That's correct.

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Q.

But you don't know the net worth of your employer for the

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year 2010?

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A.

No, I do not.

All I can tell you is that my group, LFP

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Publishing Group, our if you want to call it net worth has

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dropped 50 percent since 2008.

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Q.

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Plaintiff's Exhibit 11, ask you if you can identify it.

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A.

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statement for the year ending December 31st, 2006.

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Q.

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2006 that is the same as the one that we discussed earlier,

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Plaintiff's Exhibit 13, which is the March 2008 -- I'm sorry --

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the 2008 financial statement.

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the bottom line in the last paragraph.

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income before LCF comp.

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You see that line?

Let me ask you to look at what's been marked as

Yes, I can.

This is the LFP Publishing Group operating

Now, there's an adjustment on this financial statement for

And I'll draw your attention to
It says adjusted net

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A.

Yes, I do.

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Q.

And for the March of 2008, it was $708,000.

And then

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there was the management fee that we have talked about of

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$592,000 for that month.

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income before LCF comp means.

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A.

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Excuse me.

But tell the jury what adjusted net

Could we back up one second?

When you read the number, did you say 780 or did you say

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761?

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Q.

I said 780,000 for March of 2008.

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A.

Okay.

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accounting system we put the issue in the calendar month when

One thing I have to explain first is that in our

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it actually went on sale.

So for purposes of this trial, the

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actual -- the January 2008 columns is what applies to the March

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2008 issue because it went on sale in January 2008.

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adjusted net income before LCF comp is 761.

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Q.

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every month for the year 2008 was $592,000 that went to another

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Larry Flynt company?

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A.

Yes, correct.

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Q.

So it's the same number across the board?

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A.

Correct.

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Q.

The revenue for the January of 2008 where you say the

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Nancy Benoit edition was accounted for was 761,000, and for

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March it was 780,000.

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out?

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A.

Yes.

I realize it's minor, but I did want to clarify.

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Q.

Okay.

And my question is would you tell the jury what

So the

And the management -- the same management fee each and

We have already talked about that?

Is that the distinction you are pointing

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adjusted net income before LCF comp, dollar sign, what does

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that mean?

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A.

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area that I'm not a hundred percent clear on.

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at total revenue for all of the magazines and then we subtract

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the direct costs which are the production, the printing, et

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cetera -- the manufacturing, the editorial costs, the

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subscription costs, then we come up with a what's called a

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gross margin which is our revenue less our direct costs.

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Well, now we are getting into a little bit of a financial
But if we look

So

there's a figure there.

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Then we subtract our LFP Publishing Group overhead which

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is the other departments within LFP Publishing Group, our

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accounting department, our circulation department, on and on --

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that payroll, the fringe, our office rent, et cetera.

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come up with a net operating margin.

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there.

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Q.

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ma'am.

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A.

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since I'm not a controller or an accountant.

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operating margin; then there's interest income, interest

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expense.

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comes from.

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And I'm sorry I can't explain what all that means.

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Q.

Then we

So there's a figure

Now, we are still not answering the question I asked,

Oh, I'm sorry.

No.

I'm trying to answer the best way I can
So we have

Those particular numbers I'm not sure where that
There's interest income.

That's subtracted out.

All I want to know is what do the words "adjusted net

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income before LCF compensation," what does that mean?

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A.

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of a better phrase, written a check for that amount.

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Q.

I mean, his name is Larry Claxton Flynt.

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A.

Oh, absolutely.

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Q.

And it says adjusted net income before LCF compensation.

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And so you are not -- you are saying that doesn't mean Larry

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Claxton Flynt?

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A.

Oh.

I do know it does not mean Larry Flynt has, for lack

No, no.

Correct.

What I'm saying is he -- let me put it another

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way.

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to you what adjusted net income before LCF compensation.

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correct Larry Flynt owns the company.

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that, yes, that means that his company LFP Publishing Group --

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Q.

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revenue of the company?

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A.

Wait --

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Q.

That's all I am asking.

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A.

Say that again.

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What I'm saying -- yes, you are correct.

I can't explain
It's

So then I would deduce

Pays him $608,000 a month which is deducted from the

Do we pay him?

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Q.

Yeah, that's my question.

21

A.

No, we don't pay him that amount.

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Are you saying 761,000, if we paid him that?

23

Q.

For that year, it was $761,000 a month.

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to find out where it's going.

25

A.

Oh, okay.

I'm sorry.

I'm just trying

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I don't know all the corporate structures.

I know that

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the company does not write a check to Larry Flynt for $761,000.

3

Q.

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deducted from the revenue of the company.

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where it's going?

Somebody is getting $761,000 each and every month that is

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7

THE COURT:

Mr. Decker, if you are going to raise

your voice, you got to go back behind the podium.

8
9

Can you tell me

THE WITNESS:
corporation.

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I cannot tell you -- this is a big

It's very complex.

It's beyond my scope.

The $761,000 -- money moves around between the

11

companies.

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department.

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that the adjusted net income for LFP Publishing Group was

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$761,000 for the month of January 2008 which included Hustler

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Magazine -- not only Hustler Magazine, but it included Hustler

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Magazine.

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BY MR. DECKER:

18

Q.

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and that's what I'm trying to find out.

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I can't tell you how, why.
That's part of FMG.

That's our finance

But, yes, you are correct

Which is then reduced by this payment to this LCF person,

MR. BAUER:

And I'm going to object, Your Honor.

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These are gross mischaracterizations what the document shows.

22

And if Mr. Decker wants to put this on the screen so the jury

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can see it too, then my objection, I might withdraw it.

24

the way he is characterizing the document is grossly

25

mischaracterizing it.

But

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THE COURT:

Overruled.

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MR. BAUER:

Nothing says anything about a payment to

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any person on this document.

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THE COURT:

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THE WITNESS:

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Q.

Would you ask me again,

BY MR. DECKER:

8

I'm sorry.

please.

7

Overruled, Mr. Bauer.

I'm not sure where we are, ma'am.

9

What I am trying to find out is what is this monthly

10

deduction that's described -- and that's all I am trying to get

11

you to do is describe it to me -- adjusted net income before

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LCF comp, what does that mean?

13

A.

14

I'm trying to do is -- can we look at the document on screen?

15

Q.

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know.

17

A.

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I should be able to since I'm not an accountant or in the

19

finance department.

20

Q.

Well, if you know what that means, that's what I'm asking.

21

A.

I know that number is --

22

Q.

No, ma'am, I'm not asking about a number.

23

about what that description means.

24

A.

Adjusted net income before --

25

Q.

Let me ask you this.

Do you see -- I'm sorry I'm not -- I can't tell you.

What

All I want you to do is tell me what that means if you
If you don't know, then that's the answer.

I know, but I can't describe it to you in the manner that

I'm asking

Is that the money the magazine makes

478
1

before there is a payment in some amount of money and for the

2

year that we are talking about -- which document are you

3

looking at, ma'am?

4

A.

Oh, I'm looking at 13.

5

Q.

Okay.

6

A.

And --

7

Q.

With respect to 13, the company made an amount of money

8

that is shown on the line that is described as adjusted net

9

income before LCF comp.

And then there is a deduction of

10

$592,000, and then that results in net income of $288,000.

11

now what I'm asking you to tell the jury is what does that line

12

describe, adjusted net income before LCF comp.

13

comp?

14

A.

Well, I don't know.

15

Q.

Okay.

16

A.

But may I add something to it?

17

Q.

Sure.

18

A.

Okay.

19

time it was solely one company only publishing magazines.

20

ever since I have worked at the company and was privy to

21

financial documents, I always saw that line, adjusted net

22

income before LCF compensation -- comp.

23

That's the answer.

And

What is LCF

Thank you.

I have worked at the company for 27 years.

At one
And

I personally took that to mean compensation thinking, Oh,

24

I guess this is what Mr. Flynt gets every month.

25

not correct.

But that's

I can't tell you why it's not because it gets

479
1

into corporate structure and it's -- I can't.

2

qualified to do that, and I don't even have the information.

3

Our finance department would have that information.

4

Q.

So are you finished?

5

A.

I'm sorry.

6

guess I'm not.

7

Q.

8

14 and ask you if you can identify it.

9

A.

Yes, I am.

I'm not

I'm trying to be helpful, but I

Let me show you what's been marked as Plaintiff's Exhibit

This is the LFP Publishing Group operating statement for

10

the year ending December 31st, 2009.

11

Q.

And it has the income and the expenses of the company?

12

A.

Correct.

13

Q.

For the year 2009?

14

A.

Correct.

15

Q.

And then it has the same line that we have been talking

16

about, adjusted net income before LCF comp.

17

for each and every month there was a $608,000 deduction every

18

month from the revenue of the company --

19

A.

Yes.

20

Q.

-- which resulted in the net profit?

21

A.

Yes.

22

Q.

And, again, you don't know what LCF comp means?

23

A.

I can't -- I cannot answer -- no.

24

is no.

25

MR. DECKER:

And for that year

I'm sorry.

My answer

Your Honor, at this time I would offer

480
1

Plaintiff's Exhibit 9.

2

THE COURT:

3

MR. DECKER:

4

THE COURT:

5

MR. DECKER:

6

THE COURT:

7

MR. DECKER:

8

THE COURT:

9

MR. DECKER:

10

THE COURT:

11

MR. DECKER:

12

THE COURT:

13

Wait a minute.

14

It's admitted without objection.
Plaintiff's Exhibit 11.
Admitted without objection.
Plaintiff's Exhibit 13.
Admitted without objection.
Plaintiff's Exhibit 14.
Admitted without objection.
And Plaintiff's Exhibit 15.
Admitted without objection.
That's all I have, Your Honor.
You may step down, Ms. Hahner.
Wait a minute.

Are you through with

your evidence on punitive damages, Mr. Decker?

15

MR. DECKER:

Yes, Your Honor, I am.

16

Exhibit 23.

17

ruling on my resubmission.

18
19

THE COURT:

I don't recall the Court's

Same ruling as previously made, too

remote.

20
21

I would offer that.

We discussed the

MR. DECKER:

All right.

I am finished, Your Honor.

I rest.

22

THE COURT:

All right.

Mr. Bauer, are you going to

23

have questions for Ms. Hahner?

24

MR. BAUER:

I am, Your Honor.

25

THE COURT:

All right.

Ladies and Gentlemen, let's

481
1

take a quick ten-minute break.

2

During the break, don't talk

about the case.

3

Court's in recess for ten minutes.

4

(A short recess was taken.)

5

THE COURT:

6

We're ready for the jury.

7

(Jury entered the courtroom.)

8

THE COURT:

9

Ms. Hahner, you can come back up.

All right, Mr. Bauer.
-

10

-

-

DONNA HAHNER,

11

having been previously sworn, was examined and testified as

12

follows:

13

DIRECT EXAMINATION

14

BY MR. BAUER:

15

Q.

16

showing you what's been marked and admitted by Plaintiff as

17

Plaintiff's Exhibit 13 and direct your attention and the jury's

18

attention to the line I'm pointing to which you will recall

19

Mr. Decker referencing as adjusted net income before LCF comp.

20

Ms. Hahner, if you would take a look at your screen.

I'm

You see that?

21

A.

Yes.

22

Q.

Mr. Decker asked you a number of questions about what that

23

number reflects.

24

number $761,000 on that line is simply the sum of 1,055,000

25

reflected on the operating margin line minus the items listed

Let me ask you if you understand that that

482
1

below it.

2

MR. DECKER:

3

THE COURT:

Your Honor, he is leading the witness.
Overruled.

4

BY MR. BAUER:

5

Q.

6

minus 17,000, 226,000, plus 12,000, minus 63,000?

7

A.

Yes.

8

Q.

Okay.

9

simply a reflection of the operating margin number minus the

Ms. Hahner, do you understand that 761,000 is 1,055,000

And so adjusted net income before LCF comp is

10

interest expense and income number?

11

A.

Correct.

12

Q.

And then below that the net income or loss number which is

13

reflected as $168,000 is simply the amounts designated for

14

management fee and taxes subtracted from the adjusted net

15

income before LCF comp; is that correct?

16

A.

Yes.

17

Q.

So we know that adjusted net income before -- we know that

18

LCF comp as it's referenced there consists of the management

19

fee and taxes?

20

A.

Yes.

21

Q.

And the management fee is the fee that you described

22

that's paid by LFP Publishing Group, LLC, which is the entity

23

that this operating statement reflects?

24

A.

Yes.

25

Q.

Is the payment made by that company, the company you work

483
1

for, to I think you said a management company?

2

A.

Flynt Management Company.

3

Q.

And what does Flynt Management Company do?

4

A.

Flynt Management Company is the management company for all

5

of Larry Flynt's companies.

6

department, the finance department.

7

come to mind.

8

including Mr. Flynt.

9

Q.

That includes the human resources
Those are the two that

So it's the top executive branch of the company,

So the number that's reflected there as a management fee

10

for the year 2008 which is the year that Exhibit 13 relates to,

11

that management fee is for administrative services and

12

management services in the HR and finance sectors and Mr. Flynt

13

provided to LFP Publishing, LLC?

14

A.

I'm sorry.

15

Q.

The management company that you just described that gets

16

the management fee that you just described provides human

17

resources and financial services and management services to LFP

18

Publishing Group, LLC?

19

A.

Yes.

20

Q.

So these are administrative services to the company?

21

A.

Yes.

22

Q.

Okay.

23

what these categories are.

That number is?

I just want to make sure that the jury understands

24

Let me direct your attention now to actual January 2008.

25

What does actual January 2008 mean for purposes of the jury's

484
1

understanding what this document shows?

2

A.

Those are the final numbers.

3

Q.

But actual means the actual month of January 2008?

4

A.

Oh, yes, yes.

5

went on sale in January 2008.

6

Q.

Not just Hustler Magazine?

7

A.

Correct.

8

Q.

How many other titles does LFP Publishing Group, LLC,

9

publish?

It also means for all the magazines that

10

A.

At that time, 10, 15.

11

Q.

How many does it publish now?

12

A.

Five, seven.

13

Q.

So the numbers between 10 and 15 publications, that's what

14

all the numbers -- when we are talking about the operating

15

statement for LFP Publishing Group, LLC, we are not just

16

talking about Hustler Magazine; we are talking about 10 to 15

17

publications, including Hustler?

18

A.

Correct.

19

Q.

And net newsstand sales in this category reflects just

20

what it says, right, sales of the magazine from the newsstand?

21

A.

Correct.

22

Q.

And would that include -- all of them, not just Hustler?

23

A.

Yes.

24

Q.

And that would include a customer who is perhaps

25

interested in a specific story and wants to go find a magazine

All the magazines.

485
1

because of it?

2
3

MR. DECKER:

Your Honor, he is leading the witness.

I object.

4

THE COURT:

Overruled.

5

BY MR. BAUER:

6

Q.

7

newsstand sales, would that reflect the customers who are

8

interested in purchasing a specific issue for a specific story?

9

A.

Yes.

10

Q.

Because subscribers get the magazine no matter what?

11

A.

Correct.

12

Q.

Without regard to what stories are in it?

13

A.

Correct.

14

Q.

The next category, advertising revenue, that's advertising

15

revenue for all the magazines published in 2008 by LFP

16

Publishing Group, LLC, not just Hustler?

17

A.

Yes.

18

Q.

Next number, subscriptions, those are for all the

19

magazines you just described, not just Hustler?

20

A.

Correct.

21

Q.

Okay.

22

You can answer the question.

Would this number, the

For the month of January, yes.

And so on.

And direct sales, could you tell the jury what direct

23

sales means.

24

A.

25

to individual retailers, and then there are what we call direct

Yes.

Those go -- there are wholesalers that then deliver

486
1

sales.

2

be in one particular region, one particular state.

3

the term direct sales because they don't go through the big

4

wholesalers.

5

Q.

6

the magazines?

7

A.

8

them.

9

Q.

Back-issue sales, I think, is probably self-explanatory?

10

A.

Well, not really.

11

warehouse what we call remainder copies.

12

six to eight months; and then after that time period then there

13

are some very small, independent companies that buy them and

14

repackage them.

15

that particular month was $29,000.

16

probably from 2006 or 2007, a combination of many different

17

titles.

18

Q.

19

They are much smaller operations.

And they might just
So we use

And are direct sales driven by any particular content in

No, no.

Okay.

They just -- the same numbers are distributed to

Back-issue sales, we receive in our
And those we hold for

So, for example, the back-issues sales for
But that represented issues

Thank you.

Can you tell the jury what affiliates' trademark royalties

20

are.

21

A.

22

has a casino.

23

broadcasting group.

24

Publishing Group a royalty for the use of the Hustler brand

25

name.

Within the company, Larry Flynt has an apparel group.
He has a video group, an internet group, a
And those companies must pay LFP

He

487
1

Q.

And other brands owned by LFP Publishing Group?

2

A.

That's the -- primarily the only one.

3

Q.

Okay.

4

do with the content in any specific magazine?

5

A.

6

within the organization pay publishing.

7

Q.

8
9

No.

And, obviously, that revenue would have nothing to

It's just intercompany payments.

Other companies

Thank you.
And those we have now just described and explained what

all the revenue lines mean?

10

A.

Correct.

11

Q.

Okay.

12

lines were for Hustler Magazine in 2008, we could look at

13

Plaintiff's Exhibit 9 which you were shown?

14

A.

Yes.

15

Q.

And we can see the same categories, correct?

16

A.

Correct.

17

Q.

So for actual January 2008, what issue of the magazine

18

would that reflect primarily the sales of?

19

A.

The March 2008 issue which went on sale that month.

20

Q.

And, of course, advertising, subscription, direct sales,

21

back-issues sales, trademark royalty with respect to actual

22

revenues in January 2008 would not have anything to do with any

23

content in the March 2008 issue of Hustler Magazine; is that

24

correct?

25

A.

And if we wanted to know what the specific revenue

Correct.

The advertising, subscription, yes.

488
1

Q.

Okay.

2

costs?

3

A.

Correct.

4

Q.

Okay.

5

A.

Correct.

6

Q.

Ms. Hahner, let me show you a document marked LFP 0001.

7

will represent to you and to you, Mr. Decker, that it's

8

attached to your Plaintiff's Exhibit 21 and ask you if you can

9

identify that document.
Yes.

And then the remaining categories below reflect the

For the March 2008 issue?

10

A.

11

distribution company.

12

Q.

And what sales does it reflect?

13

A.

Sales for Hustler Magazine.

14

Q.

From what dates?

15

A.

It covers the January 2007 issue through the September

16

2009 issue.

This is a sales analysis document from our national

17

MR. BAUER:

18

I'm going to mark this exhibit -- well, actually, I

19

would ask Ms. Sewell if she doesn't mind marking this exhibit

20

if you have a sticker.

Thank you.

21

THE CLERK:

Your last number was 36.

22

MR. BAUER:

We can do Defense 37.

23

I am going to ask the Court if we can admit it at

24
25

I

Thank you.

this time.
THE COURT:

It's admitted without objection.

489
1

MR. BAUER:

May I publish it to the jury?

2

THE COURT:

Yes, sir.

3

MR. BAUER:

Thank you, Your Honor.

4

BY MR. BAUER:

5

Q.

6

let's see if I can make it so the jury can understand what the

7

lines are.

8
9

Ms. Hahner, can you tell from looking at this document --

Can you tell us what these columns mean so the jury can
translate what they are seeing on the screen.

10

A.

Yes.

The far left column is the issue, and the numbers

11

mean the year and then the month.

12

Q.

So the very top entry issue 070100, what does that mean?

13

A.

January 2007 issue.

14

Q.

So if we were interested in identifying from this document

15

sales of the March 2008 issue of Hustler Magazine, could we get

16

that information?

17

A.

Yes.

18

Q.

And what would be the entry on the left column under

19

issue?

20

A.

Yes.

21

Q.

Okay.

Would that be 080300?

Let me see if I can make this easy.

22

Have I correctly put this piece of paper under 080300 so

23

that just above the blocked-out portion of the exhibit we can

24

see --

25

A.

I can't see --

490
1

Q.

2

Yeah, hold on.

I'm going to fix that.

Is that correct?

3

A.

Yes.

4

Q.

Okay.

5

has U.S. at the top?

6

A.

Yes.

7

Q.

What does this show us about the sales of the 2008 issue

8

of Hustler Magazine?

9

A.

Starting with this first section on the left, it

It shows what was the draw, the return and the actual sale

10

within the United States to -- from all the retailers that

11

received a copy from wholesalers.

12

Q.

What were the total U.S. sales?

13

A.

The U.S. sales were 66,767 copies.

14

Q.

And then the column that says foreign on the other side on

15

the right side of the screen, that's for everything else

16

outside the United States and Canada; is that right?

17

A.

Can you slide it over?

18

Q.

I will, but I just want you to explain what the column

19

means first.

20

A.

Yes, that's correct.

21

Q.

And is there a reason that the Canadian sales are not

22

referenced on this LFP Publishing Group Hustler sales chart?

23

A.

24

That's published by a licensee.

25

Q.

Yes.

Because we don't publish the Canadian edition.

Very good.

Thank you.

491
1

All right.

So if we slide the document all the way over,

2

are we now looking at total sales by LFP Publishing Group, LLC,

3

of the March 2008 issue of Hustler Magazine?

4

A.

Yes.

5

Q.

And what were those total sales?

6

A.

The total sales is 110,445 copies.

7

Q.

That's worldwide?

8

A.

Yes.

9

Q.

And what was the difference between the sales of the March

10

2008 issue and the February 2008 issue?

11

A.

12

that.

13

Q.

14

of the issue worldwide to any particular content in the

15

magazine?

16

A.

Not really.

17

Q.

And what typically drives sales?

18

A.

Well, usually it's the cover model.

19

Q.

Was there anything unique about -- other than the model

20

about the cover of the 2008 March issue of Hustler Magazine?

21

A.

22

especially on the newsstand, was when a 73-inch Mitsubishi

23

television which we put on the roof line which is just above

24

the logo and can be seen from all the newsstands no matter

25

where the magazine is placed; and it was in large yellow type

About between 10 and 11 thousand, 10,800, something like

And can you attribute those additional almost 11,000 sales

It could be a variety of factors.

Well, something I thought was of interest to our readers,

492
1

on a black background trying to draw attention.

2

MR. BAUER:

Your Honor, my copy of Plaintiff's

3

Exhibit 2 which is the cover is black and white; but I have a

4

color copy here.

5

with your permission.

6

I'd like to show that to the jury on screen

THE COURT:

7

BY MR. BAUER:

8

Q.

9

All right.

just describing.

Ms. Hahner, can you identify on the screen what you were

10

A.

Yes.

11

Q.

And what was that again?

12

A.

It's what we call a roof line above the logo.

13

says:

14

Q.

And was that a one-time roof-line offer for Hustler?

15

A.

Yes.

16

Q.

It just happened to be the same month that the Benoit

17

feature was published?

18

A.

And it

Win a 73-inch Mitsubishi High-Definition -- HDTV.

Yes.

19

MR. BAUER:

That's all I have, Your Honor.

20

THE COURT:

Cross-examination, Mr. Decker?

21

-

22

-

-

CROSS-EXAMINATION

23

BY MR. DECKER:

24

Q.

25

ascertain what the reference to LCF compensation means?

Ms. Hahner, since the break, have you been able to

493
1

A.

No.

If I could have, I would have called our corporate

2

office and asked someone in finance to describe it to me or

3

give me an answer that would satisfy you; but I did not have

4

the time.

5

Q.

6

mean?

7

A.

8

ten minutes.

9

Q.

I did not do that.

You couldn't call and ask them, Hey, what does this LCF

I could have.

I didn't know if I could reach someone in

I thought about it.

The document you have got for magazine sales that you just

10

described that was a Plaintiff's exhibit that you are now

11

talking about is just for Hustler Magazine, right?

12

A.

Are you talking about the screen sales?

13

Q.

The one that Mr. Bauer just showed you.

14

A.

Yes.

15

Q.

Yes.

16

A.

And at the top it says Hustler Magazine?

17

Q.

Yes.

18

A.

Yes.

19

Q.

By the way, is this the national distributor that handles

20

all of the sales of Hustler Magazine?

21

A.

22

that LFP Publishing Group publishes.

23

Q.

24

you got my letter --

25

THE COURT:

The one from our national distributor?

That's just for Hustler Magazine.

Yes, all of the U.S. edition that we -- all of the sales

And was this the person that you could have called after

We're not going to get into that,

494
1

Mr. Decker.

This is -- well, I will let you do it.

2

I take that back.

3

BY MR. DECKER:

4

Q.

5

we better stop selling this magazine because it's got some

6

content in it, we may not be entitled to it?

7

person?

8

A.

9

the issue that went off sale February 4th, I think it was 2008.

You can ask that question.

I'm sorry.

Go ahead.

Is this the person that you could have called to say, Hey,

Is that the same

Yes, that is the same person that I could have called for

10

I know before you claimed 39 days, but that was -- that had

11

nothing to do with us.

12

I could have called and I did not.

13

Q.

14

are just a part of the revenue of the LFP Publishing Group,

15

LLC, which is the Defendant in this case?

16

A.

Okay.

So, yes, after we received your letter,

These magazine sales for Hustler Magazine, however,

That's correct.

17

MR. DECKER:

Okay.

Excuse me.

18

Thank you.

That's all I have, Judge.

19

THE COURT:

Anything else, Mr. Bauer?

20

MR. BAUER:

No, Your Honor.

I just want to make sure

21

that Plaintiff's exhibit that we just marked makes its way into

22

the record.

23

THE COURT:

Ms. Hahner, you may step down.

24

Any additional evidence, Mr. Decker?

25

MR. DECKER:

No, Your Honor.

495
1
2
3
4

THE COURT:

How much time you think you need for

MR. DECKER:

Well, Judge, I'm not very good at

argument?

estimating time; but I am going to say 15 minutes.

5

THE COURT:

You, Mr. Bauer?

6

MR. BAUER:

Five or ten minutes.

7

THE COURT:

Ladies and Gentlemen, I'm going to have

8

to meet with the lawyers and figure out what additional

9

instructions I give you.

So I think what we are going to have

10

to do is adjourn for the day.

We will have the closing

11

arguments from the attorneys on the amount of punitive damages

12

first thing in the morning.

13

instructions, then you will retire to deliberate.

I will give you brief

14

So you are excused until 9:30 tomorrow morning.

15

(Jury exited the courtroom.)

16

THE COURT:

I don't think either side submitted an

17

instruction on what I should say, if anything, to the jury at

18

this stage regarding the amount of damages.

19
20
21

Have you got anything you want me in particular to
say, Mr. Decker?
MR. DECKER:

Judge, I thought that my original

22

submission had covered the issue of punitive damages and the

23

things the jury should consider.

24

to locate it.

25

include a request that the things the jury can consider in

I could be wrong.

I'll try

But I was under the impression that it did

496
1

awarding punitive damages in this context.

2

apologize and I'd like to submit something by nine o'clock

3

tomorrow morning.

4
5

THE COURT:

All right.

But if I did not, I

I've got your requests,

Mr. Decker.

6

What do you say, Mr. Bauer?

7

MR. BAUER:

Your Honor, we would like -- if I could

8

direct the Court's attention to Attachment H2 which was the

9

pretrial order which was Defendant's trial brief, page 52 and

10

53 of the pretrial order, we would like to have the Court

11

include among its charges to the jury the last full paragraph

12

on page -- bottom of page 52 that starts with, "Any award of

13

punitive damages must be limited by the procedural and

14

substantive constitutional limitations on such awards," and

15

continue from there through the middle of page 53, the bulk of

16

which consists of language taken directly from the U.S. Supreme

17

Court decision State Farm Mutual Auto Insurance Company versus

18

Campbell, 538 U.S. 408.

19
20
21

THE COURT:

Have you got a case that says that a jury

should be told to apply all those factors?
MR. BAUER:

Your Honor, that's the Supreme Court's

22

direction on how all punitive damages awards must be

23

calculated.

24
25

THE COURT:

Well, I know those are the factors to be

considered by the Court in deciding whether a punitive damages

497
1

award is appropriate.

2

pattern jury charge says:

3

That's not what the pattern has.

The

"You may assess punitive damages against the

4

Defendant as punishment and as a deterrent to others.

5

assessing punitive damages, you must be mindful that punitive

6

damages are meant to punish the Defendant for the specific

7

conduct that harmed the Plaintiff in the case and for only that

8

conduct.

9

the Defendant being a distasteful individual or business.

10

When

For example, you cannot assess punitive damages for

Punitive damages are meant to punish the Defendant

11

for this conduct only and not for conduct that occurred at

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another time.

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the actions it took in this particular case.

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punitive damages should be assessed against the Defendant, you

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may consider the financial resources of the Defendant in fixing

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the amount of such damages."

Your only task is to punish the Defendant for
If you find that

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That's what I would propose to give.

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MR. DECKER:

That's acceptable to the Plaintiff, Your

THE COURT:

Now, I'm reading from the 2005 edition of

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Honor.

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the pattern jury charges.

I may look at the latest edition

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which might have some minor differences from that, but that's

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what I would propose doing.

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What do you say, Mr. Bauer?

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MR. BAUER:

I think that almost gets us to where we

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need to be, Your Honor.

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instructs the jury on all the guideposts to award punitive

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damages that the Supreme Court says ought to be followed.

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if the Court's not inclined to consider the language from the

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U.S. Supreme Court's decision in State Farm Mutual, then we'll

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accept the Court's instruction as you have just quoted them.

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THE COURT:

I'm not sure that it adequately

Well, unless I have a major change of

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mind, that's what I'm going to do.

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minutes for argument.

And each side has 15

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Court's in recess until 9:30 tomorrow morning.

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(Proceedings adjourned at 4:54 p.m.)

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But

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C E R T I F I C A T E

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UNITED STATES DISTRICT COURT:

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NORTHERN DISTRICT OF GEORGIA:

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I hereby certify that the foregoing pages, 459

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through 498, are a true and correct copy of the proceedings in

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the case aforesaid.

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This the 5th day of July, 2011.

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Susan C. Baker, RMR, CRR
Official Court Reporter
United States District Court