Employees telling Zell where to go


And that place would be the courtroom. One current and five former employees of the Los Angeles Times are suing Tribune and its relatively new honcho Sam Zell for actions detrimental to the employee-owned stock ownership plan and employee pensions. The plaintiffs are seeking class action status. The plaintiffs are alleging that Zell and other Tribune executives have been attempting to enrich themselves at the expense of the employee owners, and are destroying Tribune and its assets in the process.

In a release, the plaintiffs summarized their complaint, saying “…since completing his takeover of the Tribune Company in December 2007, Sam Zell’s illegal and irresponsible actions and public statements have damaged the reputation and business of the company he purports to want to preserve. According to the filed complaint, through both the structure of his takeover and his subsequent conduct, Zell and his accessories have diminished the value of the employee-owned company to benefit himself and his fellow board members. It alleges further that through their destructive management and self-dealings at the expense of employees, Zell and his co-fiduciaries have repeatedly breached their fiduciary duties to beneficiaries of the Tribune Employee Stock Ownership Plan (ESOP).”

Zell responded forcefully, saying, “The lawsuit filed yesterday is filled with frivolous and unfounded allegations, and I hope every partner in this company is as outraged as I am at having to spend the time and money required to defend ourselves against it.The media industry is in crisis, the advertising environment is extremely difficult and the economy is in turmoil. The overwhelming majority of our employees have taken up the challenge—they are working hard, leading by example, and devoting themselves to re-inventing our businesses by developing new and innovative products for our readers, viewers and advertisers. As a company we are attacking our problems and revolutionizing the media industry. This lawsuit is a mere distraction, and we will work quickly to see that it is dismissed. It will not deter us from completing the work ahead.”

The lawsuit, filed in a federal court in Los Angeles, is being handled by Joseph Cotchett and Philip Gregory of the law firm of Cotchett, Pitre & McCarthy.

Tribune owns numerous newspapers and television stations, and still has one radio station. It is expected to sell the MLB Chicago Cubs sooner rather than later. The company has large debt service hurdles in the face of a challenging media business environment.

RBR/TVBR observation: We are not legal experts, and thus do not have an expert opinion as to the viability of this suit. However, we suspect that as attractive as this idea may be for employees at other companies who also think management is running their company – and with it their person future – into the ground, that it may not have as good a chance as it might for Tribune. That ESOP structure implies employee ownership, an obvious wedge unavailable at most other companies.