Thursday, March 24, 2011

Zell Pressures Tribune Committee to Drop Claims

By Bill Rochelle

Sam Zell is pressuring the Tribune Co. creditors’ committee to drop parts of the lawsuit filed against him in November. The committee filed the lawsuit to insure claims against Zell wouldn’t be lost arising from the $13.7 billion leveraged buyout for Tribune that he carried out in 2007.

Zell says that three counts in the complaint don’t have any basis in Delaware law. On a fourth count for piercing the corporate veil, Zell says the complaint is “bereft of any factual allegations.”

Zell filed papers this week asking the bankruptcy court for permission to initiate a process that could end in sanctions against the creditors’ committee or its lawyers if the objectionable counts are later dismissed by the court.

Under Rule 9011 of the bankruptcy rules of procedure, a party can demand that part or all of a complaint be withdrawn. If they aren’t, the party who doesn’t withdraw can be saddled with monetary sanctions if the claims are later dismissed by the court.

When the committee filed the complaint last year, it was to stop time from running out on the claims. The bankruptcy judge signed an order saying the lawsuit would be stayed pending the outcome of the plan-confirmation process. The lawsuit would go ahead if a plan isn’t confirmed that settles the claims against Zell.

Zell wants the bankruptcy court to declare that he can serve his demands for partial withdrawal under Rule 9011 without offending the order that the lawsuit is stayed.

The bankruptcy judge held two weeks of trial to decide whether to confirm the Tribune plan or the competing plan from creditor Aurelius Capital Management LP. The trial will resume April 11. The company’s plan is co-sponsored by the official creditors’ committee and senior lenders Oaktree Capital Management LP, Angelo Gordon & Co. LP, and JPMorgan Chase & Co.



The Tribune plan would largely impose settlements with regard to claims arising from the LBO. The Aurelius plan would allow the LBO lawsuits to proceed after the plan is confirmed.

Tribune is the second-largest newspaper publisher in the U.S. It listed $13 billion in debt for borrowed money and assets of $7.6 billion in the Chapter 11 reorganization begun in December 2008. It owns the Chicago Tribune, Los Angeles Times, six other newspapers and 23 television stations.

The case is In re Tribune Co., 08-13141, U.S. Bankruptcy Court, District of Delaware (Wilmington).

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