Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
Tribune Co. to Drop Certain Clawback Lawsuits Against Executives
Author: Joel R. Glucksman
Date: February 7, 2013
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Clawback Lawsuits to be Dropped, but NOT for all Executives
The Tribune Co., owner of several notable newspapers and television stations, announced that it plans to drop some lawsuits against the executives that it asserts contributed to its bankruptcy.
Following upon its recent emergence from bankruptcy protection, the company said it plans to drop the majority of its 170 lawsuits against senior media executives who profited from the privatization of Tribune Co. The leveraged buyout undertaken by Sam Zell in 2007 eventually forced the Tribune Co. to file for Chapter 11 protection under bankruptcy law. Following the company’s collapse, it sued several executives whom it argued had misinterpreted key facts in order to complete the sale with Zell.
The Tribune Co. relied on a report written by bankruptcy examiner Kenneth Klee, who was commissioned by the court to help the company navigate its proceedings. In the report, Klee wrote that the company’s executives were unrealistic when they calculated the company’s 10-year projections, and that they also failed to inform the board of the risks involved with the sale, according to the Chicago Tribune. The report also noted that it was likely executives had engaged in “intentional fraudulent conveyance” that not only left the company facing insolvency, but may have also been intentionally done in order to “hinder, delay or defraud” creditors, the Tribune added. In response to the report, many creditors – such as Aurelius Capital Management – campaigned for larger settlements, and the company itself sought to claw back tens of millions in payments executives had received following the close of the deal.
Not all lawsuits will be dropped, however, and many high-level executives will continue to face clawback litigation. This includes the lawsuit against former Chief Executive Dennis FitzSimons, who pocketed $47 million out of the deal, according to Dow Jones Newswires.
The Tribune Co. emerged from bankruptcy on December 31, nearly four years after its initial filing.
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