In re Tribune Media Co.
United States Court of Appeals for the Third Circuit
799 F.3d 272 (2015)
Real-estate investor Sam Zell orchestrated a leveraged buyout (LBO) of Tribune Media Co. (Tribune) (defendant), the financially troubled publisher of the Chicago Tribune and the Los Angeles Times. Before the LBO, Tribune had $5 billion in debt, whose holders had recourse only against Tribune. In contrast, the additional $8 billion in debt that Tribune took on as a result of the LBO was guaranteed by Tribune’s subsidiaries. Tribune went into Chapter 11 bankruptcy protection. Aurelius (plaintiff), a hedge fund, had acquired $2 billion of the pre-LBO debt. A committee of Tribune’s unsecured creditors sought to bring various causes of action against the parties to the LBO. However, the bankruptcy court confirmed a plan of reorganization under which the LBO-related causes of action would be settled rather than litigated—a course of action that the case’s examiner believed would offer more money than the possible litigation outcomes. The plan was substantially finalized, with many of the claims being settled. Aurelius, acting on a belief that the examiner underestimated the value of the LBO-related causes of action, appealed to the district court. Tribune moved to dismiss the appeal as equitably moot. The court granted the motion. Aurelius appealed. The United States Court of Appeals for the Third Circuit granted certiorari.
Rule of Law
Holding and Reasoning (Ambro, J.)
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