Wednesday, October 26, 2011

Judge OKs $32 Million Settlement for Tribune Employees in the Defunked ESOP

A federal judge has granted preliminary approval of the $32 million settlement — announced in August — for former Los Angeles Times auto writer Dan Neil and Tribune employees. The final hearing is set for January 30. The plaintiffs contended that the leveraged buyout that resulted in creation of an employee ownership plan violated federal pension law. Tribune staffers became owners of the company when it was taken private by Sam Zell in 2007. The company filed for bankruptcy protection one year later.

Plaintiffs’ press release

Hundreds Of Writers, Editors And Other Employees Will Recapture Money For Their Employee Stock Ownership Plan
CHICAGO – Judge Rebecca Pallmeyer of the United States District Court for the Northern District of Illinois granted preliminary approval of a $32 million settlement in the class action case of Dan Neil, et al. v. Samuel Zell, et al. The defendants in this case are GreatBanc Trust Company, Samuel Zell and EGI-TRB, LLC. Tribune Company was dropped from the case after its bankruptcy filing, but they are a party to the settlement. The Tribune Company includes the Chicago Tribune, the Los Angeles Times, the Baltimore Sun, other major newspaper and media outlets. The final hearing on the settlement is on January 30, 2012.

The lawsuit, which was filed in November 2008 following the purchase of the Tribune Co. by Sam Zell and his company, raised claims on behalf of participants and beneficiaries of the Tribune Company Employee Stock Ownership Plan (ESOP). 

The lawsuit challenged the Leveraged ESOP buy-out of the company. The complaint alleged Defendants breached their fiduciary duties by causing the ESOP to pay more than fair market value for the Tribune stock purchased in April, 2007 by Sam Zell. 

Also alleged was that Defendants caused the ESOP to purchase unregistered stock at a time when the Tribune stock was trading on the public market and engaged in prohibited transactions under ERISA. 

The U.S. Department of Labor commenced an investigation of the Leveraged ESOP Transaction and asserted claims against Tribune which were also raised. 

Under the terms of the settlement, Tribune and GreatBanc will collectively pay the settlement amount of $32 million to the employees in the ESOP. The suit was handled by Cotchett, Pitre & McCarthy of Burlingame, Meites, Mulder & Glink of Chicago, and Lewis, Fineberg, et al., of Oakland. 

The lead plaintiffs were Dan Neil, a Pulitzer Prize winning journalist formerly with the Los Angeles Times, and Eric Bailey, also a former Los Angeles Times journalist. Hundreds of writers, editors and other employees will recapture money for their ESOP.

Phil Gregory of Cotchett, Pitre & McCarthy, LLP said, “This is a wonderful vindication for all the newspaper people who dedicate their careers to journalism only to have their retirement plans diminished by unscrupulous purchasers of their papers.”

The Case is Dan Neil, et al. v. Sam Zell, et al. (08-cv-06833) ND. ILL.

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