In a complex verdict that left both sides claiming victory, a federal court jury yesterday found that five former owners of the Atlantic Monthly magazine breached their contract with real estate magnate Mortimer Zuckerman when they sold him the magazine in 1980 and awarded Zuckerman $500,000 in damages in the case.
But after six years of bitter and expensive litigation, and a hard-fought four-month trial in Boston, the verdict still leaves Zuckerman owing $1.31 million plus interest to the former owners, according to lawyers for the former owners. In addition, the jury rejected Zuckerman's claims of fraud in the case, prompting a lawyer for the former owners to call the verdict a "great victory" and a "100 percent" vindication of their claims.
"I'm frankly delighted," countered Zuckerman, who also owns U.S. News & World Report magazine. "After six years, to establish that principle -- that they gave me false and misleading financial information -- that's what this case was all about... . The court awarded me money and not them. Nothing is going to change that, and they can't get around it."
The conflicting claims yesterday typified the marathon legal contest, which had long since transcended the monetary issues at stake and turned into a battle of pride and ego fought against the backdrop of one of the country's most celebrated literary journals.
In April 1980, Zuckerman agreed to purchase the Atlantic, which was founded four years before the onset of the Civil War, for $3.6 million.
But the once amicable sale broke down the following year. The former owners -- led by an elderly New Yorker named Marion Campbell, whose family had long owned the magazine -- sued Zuckerman for breach of contract on the grounds that he was refusing to pay about $2.7 million of the negotiated price. Zuckerman then countersued for fraud, alleging that the former owners had deliberately deceived him about the poor financial condition of the magazine, forcing him to incur losses that he recently estimated at about $25 million.
The case has been bogged down ever since in discovery and legal maneuvering that has produced disclosures damaging to both sides.
Among the documents disclosed were copies of Zuckerman's tax returns, which showed that the developer, who is ranked by Forbes magazine as among the 400 wealthiest Americans, had paid no federal income taxes for the past five years by writing off tens of millions of dollars in so-called paper losses from his real estate business.
Zuckerman, making his first public comments about the tax returns yesterday, said yesterday: "I'm not embarrassed by my tax returns."
"I was only following the law," he said, citing tax laws that allow real estate developers to write off the cost of buildings on an accelerated basis.
Late last year, before the start of the trial, Zuckerman privately settled with another former Atlantic shareholder, one-time Atlantic editor Robert Manning, who had sued him separately in Massachusetts state court. Manning disclosed yesterday that he had received about $425,000 from Zuckerman but, under the terms of the settlement, was forbidden to talk about it until yesterday's verdict was in.
Zuckerman, however, dismissed the settlement with Manning. "That's evidence of only one thing -- that I didn't want to go through the expense of two trials."
Under instructions from U.S. Judge David Nelson, the jury was told that Nelson would order Zuckerman to pay the former owners what he owed them unless they found evidence of fraud, securities law violations or breach of warranty on the part of the former owners. The jury found only breach of warranty, giving Zuckerman $500,000.
But according to Randy Tucker, a lawyer for the former owners, that sum -- minus stipulated tax benefits -- now gets deducted from the $1.4 million in principal that Zuckerman owes the five former owners who are parties to this case. Thus, he said, the payment from Zuckerman will be $1.31 million plus interest for a total of about $2.5 million.
Zuckerman's lawyers, Joel and Matthew Kozol, yesterday disputed Tucker's arithmetic and said that, in any case, they will ask the judge to order the former owners to pay Zuckerman's legal fees, which they said were "in seven figures."