• by Erik Sass  @eriksass1, June 3, 2011

Just when you thought the Tribune Co. bankruptcy case couldn't possibly get more convoluted or controversial, another team has jumped into the fray.

This round it's a group of former high-ranking employees of the Tribune Co. and the former Times Mirror Co., which published the Los Angeles Times before Tribune bought it. The former executives, including publishers and editors, are suing current Tribune shareholders to recover $109 million in retirement benefits they lost after the company went bankrupt.

Most of the plaintiffs in the latest lawsuit worked for the Times Mirror Co. before its merger with the Tribune Co. in 2000. Like other aggrieved parties, they are arguing that the 2007 buyout engineered by Sam Zell was doomed to insolvency from the start, and therefore a "fraudulent conveyance."

The defendants named in the case include the Robert R. McCormick Foundation, Chandler Family trusts and the Cantigny Foundation.

As noted, the list of groups suing each other as part of the larger bankruptcy proceedings seems to get bigger and bigger. Junior creditors and bondholders have sued Tribune's current and former management for planning and agreeing to the deal. Various parties are also suing the banks that funded the deal and the independent financial consultants who gave it their seal of approval, alleging professional negligence.

Also, in 2008 a class action suit was filed against Zell and his partners on behalf of 11,000 Tribune Co. employees.

Back in October, Tribune bondholders Angelo, Gordon & Co. and Oaktree Capital Management LP (which both purchased distressed Tribune debt) reached a deal with senior lenders, including JP Morgan Chase and Bank of America, allowing Tribune to exit Chapter 11 bankruptcy protection.

The agreement preserved a multipart plan agreed to (at great length) by various parties, which calls for settling claims related to the $6 billion "Step 1," but allows claims related to the $2 billion "Step 2" to be decided in separate litigation, now in motion.

The deal essentially anticipated lawsuits against members of Tribune's former management, their advisors and other parties by the unsecured creditors.

This agreement placed all of the claims related to the $2 billion "Step 2" transaction in a litigation trust -- a legal device created to allow the uncontested parts of the bankruptcy reorganization to proceed while leaving others unresolved, pending further legal wrangling.

According to Tribune, the unsecured creditors could recover up to 50% of their claim in cash from this plan.