ERISA Lawsuits: Los Angeles Times Makes the News

Los Angeles, CAThe Los Angeles Times is used to reporting on the news, not being in it—but some of its writers are making headlines with a lawsuit claiming ERISA law violations on the part of the paper's owner. Current and former employees of Tribune Company, which owns a variety of newspapers, say their employer has violated the Employee Retirement Income Security Act (ERISA) by breaching its duty of loyalty.

Plaintiffs in the lawsuit allege that Tribune Chairman and Chief Executive Officer Sam Zell has diminished Tribune's value and the value of its Employee Stock Ownership Plan (ESOP). According to the lawsuit, Tribune's stock was turned over to Tribune's ESOP, essentially making the employees the owners. However, plaintiffs say they actually have no say in how the business is run, no seats on the board of directors and no input on the sale of Tribune.

The lawsuit alleges that the purchase of Tribune was an "imprudent transaction" which amounts to a breach of fiduciary duty to Tribune's employee-owners. "[Zell] took the Tribune Company private with the intention of breaking up and selling the assets because he saw a collection of assets worth billions of dollars that he could purchase at a bargain price with a minimal outlay of his own money," the lawsuit claims.

Furthermore, it says that the breach has been made worse because Tribune directors used money from the employee's pension fund to finance buyouts and severance packages.

Named in the lawsuit along with Zell are current and former members of Tribune's board of directors and trustees for Tribune's ESOP. The lawsuit seeks to recover losses to the employee stock-option plan and to replace Zell, Tribune's board of directors and the ESOP trustee.

Zell bought Tribune Company in 2007 for $8.2 billion and plaintiffs say he has run down the company since he bought it. In fact, his purchase of the company and his move to take the company private, resulted in an increase of Tribune's debt by $13 billion. Zell responded to the lawsuit, via statement, by saying that the lawsuit contains "frivolous and unfounded allegations," and that he is "outraged…at having to spend the time and money required to defend" against it.

In addition to the Los Angeles Times, Tribune Company owns the Chicago Cubs, KTLA-TV Channel 5 and various other television stations and daily newspapers.

Many companies use stock options as a form of compensation for employees. However, some employees say even though they pay into stock option plans, their employers are violating ERISA duties by not acting in the best interest of the employees.

The Employee Retirement Income Security Act is a federal law that is designed to protect workers who receive benefits through their employment. This includes benefits such as retirement plans and stock options. Although employees pay into these plans expecting that the money will be there for them when they need it, sometimes employers breach their fiduciary duties and the employees are the ones who suffer.