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Tribune Company Employee Stock Ownership Plan Lawsuit

Dan Feinberg, Todd Jackson and Nina Wasow recovered $32 million in pension benefits for employees of the Tribune Company. The case involved an Employee Stock Ownership Plan (ESOP). ESOPs are retirement plans that invest primarily in employer stock and are supposed to motivate employees by giving them a stake in the companies where they work. Unfortunately, employers sometimes manipulate the complex legal rules for ESOPs so that the employees see little or no benefit from the ESOP. Employees at Tribune Company – which owned the Chicago Tribune, L.A. Times, WGN, and the Chicago Cubs – were left holding worthless stock after a leveraged buyout using their ESOP pushed Tribune into bankruptcy in 2008. GreatBanc, the ESOP trustee, had bought $250 million of Tribune stock with the employees’ ESOP funds as part of the leveraged buyout.

Dan Feinberg, Todd Jackson, and Nina Wasow led a legal team that represented these employee shareholders in a class action suit against GreatBanc and other ESOP fiduciaries over three years of aggressive litigation in the U.S. District Court for the Northern District of Illinois.

The District Court granted summary judgment in 2010 against GreatBanc, finding that the ESOP’s purchase of unregistered Tribune stock was an illegal transaction under the Employee Retirement Income Security Act of 1974 (ERISA) because there were other Tribune shares trading on the stock market. Even so, in 2011, the defendants tried to cap the damages they owed at $2.8 million or $15.3 million, arguing that the ESOP was similar to a gift from the employer to the employees. The class of employee shareholders responded that the ESOP’s entire payment for Tribune stock should be considered in the Court’s damages calculation, even though the ESOP used a loan to purchase the stock.

The District Court agreed with the employee shareholders’ argument. In January 2012, the Court approved a settlement which paid the ESOP $32 million in damages. The settlement payment was then allocated to the class members’ 401(k) plan accounts. There are several published decisions in the case: Neil v. Zell, 677 F.Supp. 2d 1010 (N.D. Ill. 2009); Neil v. Zell, 753 F.Supp. 2d 724 (N.D. Ill. 2010); and Neil v. Zell, 767 F.Supp. 2d 933 (N.D. Ill. 2011).

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