'L.A. Times' Refugees Sue for Control of Paper

It would be hard to argue that Sam Zell really knows his way around the newspaper business. But does his floundering constitute grounds for legal action?

A group of former Los Angeles Times staffers say it does. Calling Zell's takeover of Tribune "a scam" and "a classic grift," they filed a class-action suit in federal court today, seeking to force Zell to hand over control of the company.

"This is basically a workers'-rights issue," says Dan Neil, an automotive columnist* who won a Pulitzer Prize for his work at the Times. The suit hinges on what he and his fellow plaintiffs allege is Zell's misuse of the employee stock ownership plan through which Zell was able to acquire a controlling interest in Tribune for a mere $500 million. "The ESOP law was not written so companies could be taken over like this. It's an abuse of the ESOP structure and, I think, a fairly obvious effort to avoid paying taxes."

Among the other named plaintiffs are Corie Brown, a former Times wine and food writer; Myron Levin, a former consumer affairs writer; former writer Walter Roche Jr.; and former D.C. bureau chief Jack Nelson; and Henry Weinstein, the legal-affairs writer often described by colleagues as "the conscience of the paper." All Tribune employees are eligible to join, says Neil.

It was Weinstein who first came up with the idea for the suit following a wave of layoffs in early summer. "It occurred to us that we, the employee-owners, had little or nothing to say over the way the company was being managed," says Neil. "We could see there were some mistakes being made, at least on the editorial side. So people started to buckle on their armor."

While layoffs and buyouts are the order of the day at virtually every big newspaper, what's happening at the Times and other Tribune newspapers is particularly egregious, says Neil. Tribune's papers, he says, are profitable; there would be no need for layoffs were it not for the "absurdly untenable" debt Zell piled on the company in making the deal.

"Zell is a corporate raider," says Neil. "He's not a publisher. Newspapers are too important to the public to be treated as just pieces on a financial chessboard."

A Tribune spokesman said the company had not yet reviewed the complaint and had no comment for now.

Update, 9/17/08: In answer to StephenKMack's question in the comments below, Dan Neil says monetary contributions aren't being sought right now, but anyone with an interest in assisting the lawsuit can contact the plaintiffs' law firm, Cotchett, Pitre & McCarthy.

*Correction: The original version of this item called Dan Neil a "former car critic." Neil is still at the Times.