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Fighting to Survive, Democrat-Gazette Sues Alleged Turncoat

4 min read

Walter Hussman Jr. was blunt, but it wasn’t exactly a business secret: “We can’t just lose money year after year, and that’s the way it’s going.”

The Arkansas Democrat-Gazette publisher was talking this month to Mark Jacob of the Medill Local News Initiative at Northwestern University. The subject was Hussman’s strategy of turning print readers into subscribers to a digital replica, cutting daily production of the print newspaper to Sunday, its only profitable day.

Readers will get their weekday news on an e-tablet, and to make that enticing, the paper is supplying iPads to digital subscribers who want one.

So far, 27,000 iPads have been distributed, and 87% of subscribers have converted, though skeptics note that many readers are older and perhaps not a great long-term bet.

The paper also announced the layoffs last week of 28 non-newsroom employees “as part of an overall plan to reduce expenses,” according to Lynn Hamilton, the paper’s president and general manager. The cuts came as Hamilton announced the completion of the digital transition in 63 of the state’s 75 counties. “The 12 counties served by the Northwest Arkansas Democrat-Gazette are not included,” he said in a memo to all employees that was obtained by Arkansas Business.

“This transition … allows us to be-come profitable and sustains our ability to provide high-quality local journalism into the foreseeable future,” the memo said. “Unfortunately, in order to realize this bottom-line improvement,” the job cuts were necessary, Hamilton said.

The news came as Arkansas Business was preparing a list of the state’s oldest surviving businesses. Since the last such list appeared in 2016, eight of the companies that vanished were newspapers.

Gone are the Ozark Journal of Imboden (Lawrence County), the Nevada County Picayune in Prescott, the Gurdon Times, the Little River News of Ashdown, the Daily Siftings Herald of Arkadelphia, the Carlisle Independent, the White River Journal in Des Arc and the Modern News of Harrisburg. The Stuttgart Daily Leader has ceased publication, but a new owner has promised a resurrection early this year.

Against this backdrop comes a lawsuit from the Democrat-Gazette accusing a former employee of its digital marketing subsidiary, Flypaper, of stealing company secrets and violating a noncompetition agreement by quitting his position and using the paper’s customer list and business plan to start a company directly competing with his old firm.

A complaint filed in Pulaski County Circuit Court last month alleges that Ben Davis founded Over Town LLC of St. Louis shortly after resigning from Flypaper, which provides digital marketing services like website design, search engine optimization, branding, lead generation and email marketing consulting.

Over Town offers much the same services as Flypaper, and the lawsuit accuses Davis of resigning on Nov. 18, 2018, to accept “a great job in St. Louis,” beginning there Nov. 27. “Davis did not disclose to ADG that the ‘great job’ was with his own digital marketing agency (Over Town) that he planned to base in Little Rock, or that he intended to directly compete with ADG in the Little Rock market in violation of the agreement,” the suit said.

The complaint was filed by Alec Gaines of the now-defunct Williams & Anderson firm but was taken over this month by Ryan Owlsley of Steel Wright Gray PLLC. As of Thursday, Davis had filed no response to the complaint and had not named his counsel.

The complaint includes an exhibit, the noncompetition and confidentiality agreement signed by Davis in March 2017 as a condition of his continued employment with Flypaper, which like the Democrat-Gazette is a division of Wehco Media Inc. of Little Rock, chaired by Hussman.

While still working for Flypaper, the suit says, Davis used the Democrat-Gazette’s confidential information for his own gain “in a continued effort to divert the patronage of ADG’s customers to Over Town.” Davis was also accused of soliciting Flypaper colleagues to join his venture and break their own noncompetition agreements.

Though Over Town was established as a Missouri LLC, its home base is in Little Rock, though the company isn’t registered with the Arkansas Secretary of State’s office, the lawsuit says.

Several Flypaper customers broke away to do business with Davis, said the lawsuit, which asks for an unspecified amount of damages, legal fees and an injunction prohibiting Davis and his company from continuing to compete with Flypaper.

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