Debevoise Obtains Dismissal of Putative Securities Class Action for Tribune Media Company

27 January 2020

Debevoise & Plimpton LLP secured the dismissal of a putative securities class action filed against Tribune Media Company and certain of its officers and directors. Judge Charles P. Kocoras of the Northern District of Illinois dismissed the complaint in its entirety, with prejudice.

The claims relate to the failed acquisition of Tribune by Sinclair Broadcast Group, which Tribune terminated in August 2018 after the Federal Communications Commission (FCC) issued an order referring the matter to an administrative law judge to determine whether Sinclair’s FCC applications included misrepresentations or showed a lack of candor. Plaintiffs asserted claims under the Securities Exchange Act of 1934 and the Securities Act of 1933 based on allegations that Tribune made false or misleading statements regarding Sinclair’s negotiations with the Department of Justice (DOJ) Antitrust Division – in particular, Sinclair’s refusal to divest television stations as demanded by the DOJ – and when the transaction was expected to close.

The Court dismissed these claims on multiple grounds: first, the Court held that Tribune’s statements were either accurate descriptions of Sinclair’s contractual obligations under the merger agreement (and not representations as to Sinclair’s actual intent or conduct) or forward-looking statements protected by the Private Securities Litigation Reform Act’s “safe harbor” provision; second, the Court held that Plaintiffs failed to plead scienter, as the events that allegedly contradicted Tribune’s public statements occurred weeks after those statements were made, and the more plausible inference was that Tribune consistently worked to resolve regulatory issues with the aim of closing the merger; third, the Court held that Plaintiffs failed to plead loss causation because the event alleged to have caused the loss – a statement by the FCC Chairman – was unrelated to any representation regarding negotiations with DOJ, a separate regulatory authority. Indeed, Plaintiffs’ theory of causation was so facially flawed that the Court also dismissed the Securities Act claims on this basis, even though loss causation is an affirmative defense for those claims.

The Debevoise team representing Tribune Media Company in the lawsuit was led by litigation partner Mark Goodman and counsel Elliot Greenfield and included associates Anna Gressel, Nathan Richards, Samuel Rosh and Kate Walsh.