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Former Tribune Co shareholders notch legal victory

Sam Zell, Chairman and President, Equity Group Investments LLC and Chairman and CEO, Tribune Company, speaks during a panel discussion on "C
Sam Zell, Chairman and President, Equity Group Investments LLC and Chairman and CEO, Tribune Company, speaks during a panel discussion on "C

By Tom Hals

(Reuters) - Investors who sold Tribune Co stock in a 2007 buyout led by developer Sam Zell won a legal battle on Monday that protects them from being sued twice over that deal, which has been blamed for the media conglomerate's bankruptcy.

A New York federal judge ruled that individual Tribune creditors cannot pursue a novel lawsuit to recover money investors received by selling into the Zell deal because another case was pursuing the same claims.

Creditors blame Zell's $8.2 billion leveraged buyout for loading the Tribune with so much debt that it made the publisher's 2008 bankruptcy inevitable. The creditors want some of the money that was raised by issuing that debt, which went to buy Tribune stock.

While the Tribune emerged from bankruptcy last year, the legal troubles for former Tribune stockholders are far from over. Judge Richard Sullivan dismissed the cases by individual creditors because of the similarity to a lawsuit by a trustee who is also working on behalf of creditors from the Tribune bankruptcy.

The lawsuits that Sullivan dismissed were led by Aurelius Capital Management, a notoriously litigious investment fund that is also involved in the fight over Argentina's debt default.

Sullivan's decision could be appealed, which could impact similar litigation brought over Lyondell Chemical Co's $12.5 billion buyout in 2007.

Lyondell filed for bankruptcy a little over a year after the buyout and creditors filed clawback lawsuits against Lyondell's former shareholders. The defendants have been waiting for three years for a decision on a motion to dismiss that lawsuit.

The case is In Re Tribune Company Fraudulent Conveyance Litigation, U.S. District Court for the Southern District of New York, No. 11-MD-2296

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Bob Burgdorfer)

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