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Compliance August 23, 2011
Settlement Reached in ESOP Fiduciary Breach Suit
L.A. Times employees of media company Tribune who sued over the 2007 Sam Zell-led takeover of the company have won a $32 million settlement.
Reported by Rebecca Moore
The settlement was made with GreatBanc Trust, the trustee for Tribune Company’s employee stock ownership plan.
In March, U.S. District Judge Rebecca Pallmeyer of the U.S. District Court for the Northern District of Illinois refused to cap damages against GreatBanc Trust Co. for purchasing $250 million in unregistered shares from Tribune Co. rather than buying Tribune stock on the open market in the first stage of the $8-billion deal that bankrupted the media conglomerate.
In December 2009, Pallmeyer dismissed claims against several Tribune board members, ruling they had delegated their fiduciary duty to Greatbanc, and moved forward claims against the trustee (see “Tribune ESOP Fiduciary Breach Suit Moves Forward“). Last year, the judge also relieved Zell of liability in the suit.
Six workers filed the suit alleging that the buyout deal was imprudent because of the great amount of debt Tribune took on. The company filed for bankruptcy protection about a year after the buyback, and it was announced that the ESOP would be terminated.