A group of former publishers, executives and editors of the Tribune Co. and Times Mirror Co. filed suit Thursday against major shareholders who benefited from the $8.2 billion takeover of the media conglomerate.
The group is seeking to recover $109 million in retirement benefits that were stripped after the company that publishes the Los Angeles Times and the Chicago Tribune filed for bankruptcy in the wake of the buyout, which had enriched some shareholders.
The buyout deal in 2007 “lined the pockets of certain Tribune insiders and controlling shareholders with billions of dollars” while rendering Tribune insolvent, or nearly so, according to a copy of one of the lawsuits.
Burdened by debt incurred during the buyout, Tribune filed for bankruptcy in 2008. The retirees named in the lawsuit — most of them from Times Mirror, which merged with Tribune in 2000 — were told after the bankruptcy that their retirement payouts would be suspended.
The plaintiffs “gave their lives” to the company, the lawsuit says, and were relying on those retirement plans.
But the buyout deal, which nearly doubled the company’s debt, led Tribune to file for the bankruptcy.
The plaintiffs “had the rug pulled out from under them,” the lawsuit said.
The lawsuit follows a class action suit filed in 2008 on behalf of 11,000 Tribune employees against real estate developer Sam Zell, who orchestrated the takeover.
The primary defendants of the lawsuits filed Thursday are the major stockholders who benefited from the 2007 takeover, according to the plaintiffs’ attorney, Jay Teitelbaum. In the takeover, the shareholders were paid $34 a share.
Among the key defendants in the action, according to a press release issued by the plaintiffs, are the Robert R. McCormick Foundation, various Chandler Family trusts and the Cantigny Foundation.
Calls left for representatives of those defendants Thursday afternoon were not immediately returned.
The basis of the lawsuit is that the company was insolvent at the time of the buyout and should have honored its obligations to retirees before paying off shareholders, Teitelbaum said.
“In today’s world, with large corporations facing the financial difficulties that they’re facing, everyone’s retirement funds are at risk,” Teitelbaum said. He said the suit will address retiree rights in such situations.
Many have blamed Zell for saddling the newspaper group with unmanageable debts.
In retrospect, Zell has called it “the deal from hell.”