Wednesday, May 11, 2016
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C.A. Finds Heir’s Suit Against Law Firm Untimely
Panel Says Carlos McClatchy’s Knowledge of Relevant Facts Barred Doe Amendment
By a MetNews Staff Writer
A member of the family that controls the Sacramento Bee and other media properties waited too long to sue a San Francisco law firm whose senior partner was a trustee of a family trust, the First District Court of Appeal ruled yesterday.
Div. Five said Carlos McClatchy improperly attempted to use a Doe amendment to have his claims against Coblentz, Patch, Duffy and Bass LLP relate back to his action against several trustees and ex-trustees of an irrevocable trust created by Eleanor McClatchy. Code of Civil Procedure §474, which provides for the Doe procedure, didn’t apply because the facts that allegedly made the firm liable were known to Carlos McClatchy when he filed his original action, Justice Henry Needham Jr. wrote for the Court of Appeal.
Carlos McClatchy is a beneficiary of one of four trusts that Eleanor McClatchy established for the benefit of family members while serving as president of McClatchy Newspapers. The handpicked successor to her father, C.K. McClatchy, she ran the company from 1936 to 1978 and died in 1980.
The trusts reportedly were given more than 40 percent of the company’s common stock.
In 1974, Eleanor McClatchy established the Trust for the Primary Benefit of James B. McClatchy. Income from the trust was paid periodically to James McClatchy until his death in 2006, when his sons, Carlos and William McClatchy, became the sole beneficiaries.
In 2012, Carlos McClatchy sued four current and former trustees and the heirs of William Coblentz, who had resigned as trustee in 2009 and died the following year. He alleged he had lost income as a result of mismanagement by the respondents.
In 2014, he filed his Doe amendment against Coblentz’s law firm, alleging that the attorney acted on the firm’s behalf in his capacity as trustee. McClatchy further alleged that he was unaware of that fact until after he filed the original petition, when he saw an SEC filing that identified Coblentz as a partner of the firm.
The firm responded with a demurrer and motion to quash. It noted that Coblentz had used the firm’s business address and letterhead for trust business for years, and offered evidence that McClatchy was aware of this when he sued two years earlier.
San Francisco Superior Court Judge Peter J. Busch credited that evidence in granting the motion to quash, and found the demurrer moot in light of that ruling.
Needham, in concluding that the trial judge was correct, said there was substantial evidence supporting Busch’s ruling. McClatchy, he said, “knew of the professional relationship between Coblentz and the Firm when he filed his original petition, and was aware that Coblentz had used the Firm’s office and letterhead when handling the affairs of the Trust.”
The SEC filing, the justice said, made no difference. Nor did additional facts brought out in discovery, such as the existence of a firm malpractice policy covering Coblentz’s activities as trustee or Coblentz’s exemption from a firm policy that generally prohibited its lawyers from serving as trustees, “tend to show that Coblentz was acting on behalf of the firm when he engaged in his duties as a trustee.”
Needham rejected the contention that the Doe amendment was permissible because the firm’s liability did not appear “probable” to McClatchy at the time of the original filing, regardless of whether he discovered new material facts later. The trial judge, Needham said, employed the correct legal standard.
Justice Mark Simons concurred in the opinion. Presiding Justice Barbara J.R. Jones concurred separately, writing:
“The phrase ‘liability is probable’ suggests a level of proof sufficient to meet the preponderance of the evidence standard. This would authorize delay in seeking amendment under section 474 until well after a plaintiff became aware of facts indicating the existence of a potential cause of action against the Doe defendant. I believe that the proper interpretation of section 474 requires a plaintiff to substitute a fictitiously named defendant’s true name once the plaintiff becomes aware of the facts giving him a cause of action against that defendant.”
The case is McClatchy v. Coblentz, Patch, Duffy and Bass LLP, A144391.
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