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On Eve of Valassis vs. News America Trial in State Court, a Federal Judge Looks On ...

On May 27, Valassis will face off against News America Marketing in Michigan's Wayne County circuit court. As that trial progresses, the federal court case which covers substantially the same issues is on hold, according to page 21 of this SEC filing.

This is probably to the advantage of News America, because the state court is not online and thus it will be more difficult for the media to report on revelations in the trial. But it also raises the question of why the federal court should allow the state court to go first when discovery in both cases has already been combined for convenience.

Conspiracy theorists may want to look at the federal judge who is currently causing the delay -- Judge Arthur Tarnow. Tarnow has presided over the News America soap opera before. In 2007 he was asked to enforce a subpoena against Susan Griffin, a former employee of Floorgraphics Inc. who handled the Kmart account and later went to News America.

Floorgraphics alleged that News America had hacked into its computers to steal competitive information, and wanted to seize Griffin's personal home computer to see what information was on it. Valassis is alleging substantially similar claims against News America.

News America resisted the subpoena, claiming variously that the desktop was not used by Griffin, was broken, would not boot up and did not have a video monitor.

Tarnow ruled in favor of Floorgraphics, and Griffin's busted computer was (presumably) subjected to CSI-style forensic analysis.

Unfortunately, we don't know what Floorgraphics found. We do know that Floorgraphics went to trial on its evidence and extracted a settlement from News America after just a couple of days of testimony -- before the Griffin data made it into the trial. And we know that News America took out $1 billion in debt to pay for "general corporate purposes" right before that happened.

You can fill in the gaps yourselves: One possible interpretation is that Tarnow wants everything -- including the Griffin stuff -- to spill out in state court first, making his life easier if the matter gets to the federal venue. (The other, perhaps more reasonable, interpretation, is that Tarnow saw a chance to get a big piece of litigation off his docket and took it.)

Side note: It will be interesting to see if bankrupt News America whistleblower Robert Emmel shows up at the state trial. Here's why.

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