New Twist in Attempt to Take ‘Santa Barbara News-Press’ Buildings into Bankruptcy

Wednesday’s hearing in the bankruptcy case of the Santa Barbara News-Press was one for all the marbles, with the judge ordering that the trustee may continue his pursuit of two buildings that the newspaper owner transferred to herself in 2014. If successful, the suit to take the buildings into the bankruptcy would add a potential $30 million to the pot, currently empty, to compensate the creditors.

A lot has happened since the News-Press’s parent company, Ampersand Publishing LLC, filed its motion to dismiss the trustee’s case in September 2024. A new president was elected and sworn in — after being twice endorsed by the News-Press — and chaos has erupted in government agencies, including from President Donald Trump’s firing of attorney Gwynne Wilcox, a member of the National Labor Relations Board (NLRB). The firing led to the lack of a quorum on the National Labor Relations Board, which had ordered the News-Press to pay its employees back wages, merit pay, union costs and expenses during bargaining, and for the employment of non-union workers in their stead.

The president’s reach hasn’t yet extended to Region 31 of the NLRB. Based in Los Angeles, Regional Director Danielle Pierce has remained on the job. On March 11, she issued a Compliance Specification that added former News-Press publisher Wendy McCaw, individually, as well as the two LLCs that hold the buildings — 715 Anacapa LLC and 725 Kellogg LLC — to the obligation of Ampersand Publishing to pay the $3.6 million still owed to the News-Press’s former employees. The new order directs that the payment be made with interest added and minus the withholding taxes. Those taxes are the key to the lawsuit in the midst of the bankruptcy proceedings.

In adding McCaw herself and the two buildings at issue, the NLRB acknowledges that their relationship to Ampersand Publishing’s backpay exposure is “a controversy.” It also makes new allegations regarding transfers of money that McCaw made from Ampersand Publishing to seven other LLCs she wholly owned, and to herself. Moved between January 2017 and February 2023, the amounts total more than $1.4 million. The Compliance Specification claims the transfers led to the newspaper’s insolvency.

When Ampersand Publishing filed for bankruptcy in July 2023, the company claimed assets of less than $170,000. The bankruptcy trustee’s adversarial lawsuit to recover the millions of dollars in the real estate — the historic offices in De la Guerra Plaza and the printing plant in Goleta — rests largely on what is owed to McCaw’s former employees. Because withholding taxes would be due, they make the IRS a creditor to the bankruptcy, the trustee, Jerry Namba, argued in his lawsuit.

During the bankruptcy hearing on Wednesday, McCaw’s attorneys asserted she had never paid what was due her employees. This meant she had no need to pay withholding taxes on the wages. Their argument was that the IRS was not a creditor and the trustee could not use the IRS’s statute of limitations to bring his case.

The judge observed that the precedent in federal bankruptcy law was to give the “broadest possible definition of claim [that] is designed to ensure that all legal obligations of the debtor, no matter how remote or contingent, will be able to be dealt with in the bankruptcy case.” The IRS was owed payroll taxes on the date of the property transfers, the judge said on Wednesday, and they have been owed ever since. His order also noted that questions remained regarding the IRS assessment, if any, and other factual issues.

Facts are decided at trial, a jury trial in this case. The attorneys to try that case for trustee Jerry Namba suddenly changed between the filing of this motion and Wednesday’s hearing. Namba’s attorney firm, Danning Gill, announced it was no longer engaged in the practice of law as of February 1. The trustee’s attorney, Eric Israel, moved to Levene Neal, as had his previous attorney, Michael D’Alba. The firm is listed in court records as representing Ampersand, but Israel explained that representation ended after the first creditors’ meeting in September 2023. Namba’s new attorneys are Michael D. Hays and Tinho Mang with Marshack Hays Wood of Irvine.

To the attorneys appearing on a video call, Judge Ronald Clifford indicated that he expected his order to be appealed, mentioning that the District Court tended to send cases back to the local courts for pretrial hearings.

At the NLRB, on March 6, the U.S. District Court in D.C. allowed Gwynne Wilcox to complete her five-year term. Trump has appealed.