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CHICAGO A New York federal judge has shot down
an effort by creditors of the former Tribune Co to claw back $8
billion from shareholders who sold stock in the publisher’s 2007
buyout, bringing a long-running legal battle sparked by its
bankruptcy closer to an end.
The ruling stems from the tangled litigation following real
estate mogul Sam Zell’s leveraged buyout of the Chicago Tribune
and Los Angeles Times publisher, which creditors blame for its
In an attempt to recover money raised from the buyout,
Tribune creditors have spent years pursuing unusual claims in
court, such as trying to hold passive shareholders accountable
for the failed deal.
In a ruling published on Monday, Judge Richard Sullivan
dismissed such claims and absolved individual shareholders from
complying with creditors’ demands that they hand over the money
from the sale of their stock in the buyout.
The shareholders included retired employees, whose pension
funding was in the form of Tribune stock, and pension plans that
also held stock at the time of the buyout and sold their shares.
Sullivan said the deal was approved by independent directors
and that creditors lacked sufficient evidence to allege that
those directors had tried to defraud them through the buyout of
Lawyer Stephen Newman of Strook Strook & Lavin, which
represented a California pension fund in the matter, said the
opinion was significant because it protects shareholders and
provides companies with guidelines to ensure the validity of M&A
deals is not questioned later on.
“This litigation has been pending for a long time, but
today’s ruling is a major development that should put an end to
it and give some peace of mind to the thousands of retirees who
were dragged unwittingly into it,” Newman said.
Sullivan’s decision could be appealed, which could impact
similar litigation brought over Lyondell Chemical Co’s $12.5 billion buyout in 2007.
Lyondell filed for bankruptcy a little over a year after the
buyout and creditors filed clawback lawsuits against Lyondell’s
former shareholders. A decision on a motion to dismiss that
lawsuit is still pending.
The case is In Re Tribune Company Fraudulent Conveyance
Litigation, U.S. District Court for the Southern District of New
York, No. 11-MD-2296
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