Rubin Ad Agency in 5-Year Dispute With Broadcasters

In California politics, people know Thomas E. Rubin as a well-connected Studio City ad man whose clients have included Mayor Tom Bradley, former Gov. Edmund G. Brown Jr. and Los Angeles County Dist. Atty. Ira Reiner.

But the credit departments of more than 40 broadcast stations around the country know his agency, Tom Rubin & Associates, as something else--a debtor whose refusal to pay bills led some of them to band together to try to force the firm into involuntary bankruptcy.

The result is a 5-year-old case that may be the longest of its kind ever in Los Angeles; an estimated 10,000 hours of lawyers’ time, and a letter from Democratic Sen. Alan Cranston to a judge in the case who later disqualified himself because of it.

Rubin, 38, who declined to be interviewed, said in court papers that the stations want to force bankruptcy because he won’t pay when they foul up his clients’ advertising. He said the alleged debts are really disputed sums arising from the stations’ failure to run ads on time, in order and so forth.

But the stations tell a different story. They say that Rubin never raised any complaints until after they tried to collect and that he is doing everything possible to prolong the case in an effort to exhaust them.

“He’s been very successful in beating people down with litigation,” asserted Peter Szabo, whose Atlanta collection agency specializes in media accounts.

Daniel H. Slate, the creditors’ attorney, says his clients suspect that the Rubin agency usually paid local creditors but not distant broadcasters. Indeed, Michael Kincaid, local sales manager for KABC radio in Los Angeles, said: “As far as I know, they buy at every station in the market and have no problems.”

Political advertising is no problem either, because stations typically demand cash up front for campaign spots, no matter who does the buying.

But Szabo says his agency represents 51 stations around the country to whom the Rubin firm owes $550,000 plus interest on debts that are in some cases 8 years old. He estimates that the Rubin agency owes broadcasters nationwide about $2 million.

In 1979, for example, in a case still pending, NBC sued Rubin in Los Angeles Superior Court for $523,000 plus interest. Rubin sued first for breach of contract, charging that NBC contacted his clients to complain that he didn’t pay for their ads.

Other broadcasters also have tried to collect in court, to no avail.

Additional Plaintiffs

They are not the only ones to sue. American City Bank filed suit in December, 1980, alleging that Rubin defaulted on a $40,000 promissory note. The Century City financial institution failed in 1983, and its former attorney, Ernest S. Gould, said the suit never was resolved.

By most accounts, Tom Rubin is a charismatic figure known in political circles as a contributor, fund raiser and advertising buyer for Democratic candidates. In June, 1980, for instance, Rubin gave $5,000 to the Democratic National Committee, and in December, 1981, he donated $15,000 to the U.S. Senate Democratic Leadership Circle, according to federal election records.

He also helped raise money for Cranston, and federal records show that Rubin and his wife donated $4,000 to Cranston’s Senate campaign in 1979. In 1982, they gave $1,500 toward his presidential bid.

Now Rubin is doing media buying for Mayor Bradley’s gubernatorial campaign, according to campaign spokesman Ali Webb, who said Rubin also bought air time for Bradley during the 1985 mayoral race.

Rubin has also bought air time for other political candidates and campaigns. These include Brown’s 1980 presidential bid, according to federal election records, and Reiner’s 1981 city attorney candidacy, according to Reiner spokesman Schuyler Sprowles.

The grandson of Russian immigrants, Rubin grew up in San Diego and was captain of his high school football team. His father and grandfather were in the newspaper distribution business, and the young Rubin got started in business soon after graduating from Occidental College in 1970 with a degree in sociology.

In 1975, he formed an ad agency called Tom Rubin & Associates, and in 1983, in the midst of the bankruptcy proceedings, he incorporated another company: Focus Media Inc. Both listed the same address: 12345 Ventura Blvd.

“He’s a charming and enormously talented person,” said Assemblyman Gray Davis (D-Los Angeles), who ran Brown’s 1978 gubernatorial campaign and is now a Democratic candidate for state controller.

“An exciting personality,” agreed David Nathanson, another Studio City ad man. “Tom can outthink and outtalk anyone I know.”

But Rubin can be ferocious in a dispute, according to opponents such as Nathanson. The two have been battling since 1982, when Nathanson, who used to buy air time through the Rubin agency, held back $240,374 paid by Sanyo, a longtime client. Nathanson charged that Rubin hadn’t been paying broadcasters of Sanyo commercials.

Nathanson was renting office space from Rubin at the time, and he says in court papers: “Not only did Mr. Rubin change the locks on my personal office door and the front entrance door at said location, but he exhibited a weapon.” In an interview, Nathanson said the weapon was a gun. Rubin denies Nathanson’s account of what happened, according to Michael Kassan, his lawyer in the case.

In the bankruptcy case, 42 stations who say Rubin owes them money have chipped in to cover legal costs in an action officially brought by 10 of them, according to Slate.

They hope bankruptcy will help them get paid, but meanwhile the litigation grinds on. Filed in February, 1981, and only now about to be tried, veteran Los Angeles bankruptcy lawyers say they can’t remember a longer involuntary case.

“Involuntary proceedings,” noted Joseph A. Eisenberg, a bankruptcy lawyer for 14 years, “are supposed to be quickly adjudicated.”

Rubin’s lawyers deny it, but Slate says their foot dragging has prolonged the case five years. Certainly, Rubin has fought hard. His lawyers, for example, demanded depositions from chairmen and other senior executives at far-off media conglomerates whose stations are among Rubin’s creditors, according to court papers. They demanded similar depositions in the Sanyo case.

By contrast, Slate’s firm says in court papers, Rubin’s side repeatedly skirted requests for documents and depositions, ignored court orders, gave contradictory information and tried to bury the creditors in paper work requests. For example, Rubin’s lawyers allegedly asked for all contracts made by the creditors with advertising agencies.

1982 Ruling Overturned

But Herbert Wolas, Rubin’s attorney, says there was no foot dragging. He points to a decision by the U.S. 9th Circuit Court of Appeals that overturned a 1982 bankruptcy court ruling that would have imposed bankruptcy.

“We conclude that Rubin’s conduct was not egregious enough to warrant the harsh sanctions of default,” the ruling by the Court of Appeals says, adding that there were only three clear violations of court orders, which Rubin remedied.

The case is marked not only by its extraordinary duration but by a March 6, 1981, letter from Cranston addressed directly to Judge John E. Bergener, who was presiding.

“I know Tom Rubin very well,” it says. “It is my judgment that he is a man of the very highest integrity. He has earned great respect in both political and business circles. In working closely with him on a number of projects, he has also earned my admiration, respect and friendship.

“If you have any further questions about Tom, please do not hesitate to call me.”

Cranston, a liberal Democrat now seeking reelection, wrote the letter at the request of fellow Democrat Conway Collis, said Collis deputy John Meade. He said Collis, a former Cranston aide, was Rubin’s roommate at Occidental. Collis is now vice chairman of the state Board of Equalization, which is responsible for collecting sales taxes.

Bergener never disclosed the letter. Slate’s law firm, Gendel, Raskoff, Shapiro & Quittner, said it only learned of it two weeks later on March 20, when a copy arrived with other documents from Robinson, Wolas & Diamant, Rubin’s lawyers. On March 23, Gendel, Raskoff demanded that Bergener step aside, and he did.

In a statement, Cranston said he regretted that the letter caused controversy in the case.

“The letter was not an attempt to exercise any political influence,” he said, adding that “despite my perfectly proper intention, the letter should not have been sent directly to the judge, and I regret that the matter was handled in that fashion.”

Cranston spokesman Murray Flander said that the senator and Rubin are friends but that the letter “was a mistake.” He added that Cranston, who could not be reached for elaboration, is not a lawyer.

Bergener, who is now retired, said he didn’t immediately disqualify himself or disclose the letter because it had no influence on him. An Eisenhower appointee, the judge described himself as “apolitical” and added that he never met Cranston. He said he stepped aside because a party in the case questioned his impartiality.

“I’m amazed that this thing is still pending,” he said.

Although Rubin said in court papers that the case has hurt his business, it also has insulated his agency from creditors’ suits. The NBC suit, for example, is in abeyance until the bankruptcy case is resolved.

Experts say that’s one irony of involuntary bankruptcy. While the case is pending, lawsuits against the debtor are held in abeyance. But unlike firms declared bankrupt, Rubin’s firm can operate more or less as Rubin chooses, without court approval.

Eisenberg summed it up: “You’re subject to the protections of the bankruptcy laws, but you’re not subject to its restrictions.”

Creditors’ Reasoning

Slate said the stations chose involuntary bankruptcy anyway because they believed they couldn’t get paid any other way. Before the involuntary proceedings, several stations that were owed a few thousand dollars each tried routine lawsuits in Los Angeles Municipal Court. They were stymied, however, when Rubin filed $20,000 cross-complaints against each, alleging breach of contract.

The $20,000 was enough to take the cases out of Municipal Court. Rather than tangle with the higher legal fees arising from a Superior Court suit, some creditors just gave up.

In the case of NBC, Rubin sued first. The agency went to court charging the network with interference with business relations, unfair competition, trade libel and breach of contract, mainly for contacting some of Rubin’s clients and complaining that it hadn’t been paid for their ads.

Most of the litigation doesn’t involve the advertisers, though, because of the nature of media buying: In general, major advertisers buy air time through an advertising agency or media-buying service.

Ad agencies bill advertisers for the air time and deduct a 15% discount before paying broadcasters. If the time is purchased by a media-buying service that didn’t do the creative work, the service gets a third to a half of the 15% fee.

Media-buying agencies also can make money by charging a premium for the time they buy. But media buyers say they can save clients money because rates for air time are negotiable and because the buying agency can help target the advertising by choosing the right time to run it.

In any case, when a broadcast station is owed money for air time, the first place it goes to collect is the agency that bought it.

But industry sources say broadcast stations don’t often foul up advertising the way Rubin says his creditors have. Dennis Holt, president of Western International Media in Los Angeles, the largest media-buying service in the country, says disputes are extremely rare.