If it wasn’t before, the bankruptcy of the Santa Barbara News-Press got personal for Wendy McCaw on Wednesday. Bankruptcy Court Judge Ronald A. Clifford III ruled that McCaw, who bought the newspaper in 2000, is added to the complaint that seeks to gain possession of both the historic building in De la Guerra Plaza and the printing press building in Goleta.
The two buildings now carry an assessed value of $28 million, which would go a long way to cover the debts owed to creditors left in the cold when McCaw’s wholly owned company Ampersand Publishing LLC filed for Chapter 7 in July 2023.
Among those creditors are more than 40 employees who had formed a union under the Teamsters umbrella back in 2006. Federal district and appeals court rulings penalized the News-Press for depriving employees of pay raises, failing to bargain in good faith, and charging employees more for health care than it was allowed, penalties that now total $3.6 million with interest that continues to mount. (A second similar ruling for employer actions after 2017 earned a contempt ruling from a federal magistrate two weeks ago, with the amount yet to be determined.)
At the time bankruptcy was declared, liabilities were said to be between $1 million and $10 million to more than 200 creditors, while assets were listed at less than $50,000.
In the issue before the court on Wednesday, bankruptcy trustee Jerry Namba, an attorney in Santa Maria, was adding McCaw personally to his complaint regarding two pieces of property that had belonged to Ampersand. He asks the court to void the transfers of ownership of the two buildings in 2014 from Ampersand to two limited liability companies also wholly owned by McCaw. The justification, according to the trustee, was that he now was acting as Ampersand and that McCaw had breached her fiduciary duty to the company, now including the trustee, by the transfers.
The back-and-forth between the attorneys for the two LLCs — 715 Anacapa and 725 Kellogg — and the trustee’s attorneys revolved around the “statute of repose” in the UFTA (Uniform Fraudulent Transfer Act). (The statute of repose states that the period in which to make a claim starts at the time of a defendant’s action, even if the plaintiff is not yet injured.) Also at issue was the fact that the two LLCs are not involved in the addition of McCaw to the lawsuit, as well as the addition of the trustee acting as Ampersand regarding the UVTA (Uniform Voidable Transactions Act).
This sea of acronyms is likely to come down to the effect of the statute of limitations (SOL) for McCaw’s transfers of the real-property assets without any payment to Ampersand in September 2014, nine years and 10 months before McCaw, whose personal wealth is reported to be north of $1 billion, put Santa Barbara’s longest-lived newspaper into bankruptcy. The theory the trustee is pursuing is that he stands for the IRS, which has a 10-year statute.
That statute-of-limitations argument might boil down to whether the trustee may void these real-property transfers almost a decade after they occurred. Before that trial comes up, however, is first the Motion to Dismiss over the statute brought by the defendants, who now include McCaw. Judge Clifford set it on calendar for October 23. The LLCs’ attorney, Ashlee Lin of the Eisner law firm in Beverly Hills, said it was likely her firm would represent McCaw.
In the main bankruptcy matter, events are also trailing. The testimony of the company’s accountant, originally set for this past February, now might occur on August 22. The viewing and auction of the physical archive of the 155-year-old daily newspaper has yet to be arranged.
Correction: It is the Motion to Dismiss, not the Complaint, that is set for hearing on October 23.
