We have discussed how the Tribune Company Filed for Bankruptcy and how the Tribune ESOP is Being Terminated. A group of current and former employees filed a lawsuit on September 16, 2009. In a December 17, 2009 Memorandum Opinion and Order (Neil v. Zell, N.D. Ill. 2009, No. 08 C 6833), a federal judge dismissed some claims and ruled that other parts of the lawsuit can proceed. Employee Benefits Developments February 2010 discusses the case:

The court in this case dismissed direct claims against the CEO and board of directors for actions taken in their business capacity as managers of the company's business. These decisions include the decision to create the ESOP and to enter a transaction with the ESOP. On the other hand, the ESOP trustee will have to defend its decisions to complete various transactions as the ESOP fiduciary, and the officers and directors could be held liable for knowingly participating in a deal that the officers and directors knew would breach fiduciary obligations and thus be prohibited transactions.

The February 2010 ESOP report analyzes the case and discusses how 1) obtaining a fairness opinion may not be enough to satisfy your fiduciary obligations, 2) a corporate redemption of stock could be interpreted as an indirect transaction with the ESOP and be subject to the prohibited transaction rules, and 3) the right to vote considered a plan asset:

The first is that trustees should separately consider the question of whether the company can survive under reasonable economic conditions when it takes on significant debt to finance an ESOP purchase of a substantial percentage of a company's stock (and document their findings). Just getting a fairness opinion may not be enough. Second, consideration should be given to whether the facts and circumstances surrounding a corporate redemption might cause the redemption to be viewed as an indirect transaction with the ESOP that might violate the prohibited transaction rules. The trustee and the seller should consider whether the redemption transaction could pass a prohibited transaction screen if the purchase were made directly by the ESOP. Finally, this is another case holding that voting rights are plan assets. ESOP transactions often involve agreements relating to voting and these agreements should be reviewed in light of the potential prohibited transaction concern.