U.S. top court suggests lower courts reconsider Tribune Co dispute

(Reuters) - The U.S. Supreme Court on Tuesday disclosed that it was unable to decide whether to take up a bid by creditors of Tribune Co to recover payments made to public shareholders in an $8 billion 2007 buyout of the former publishing company, apparently because some the justices may recuse themselves from the case.

FILE PHOTO: Police officers stand in front of the U.S. Supreme Court in Washington, DC, U.S., January 19, 2018. REUTERS/Eric Thayer/File Photo

In light of the unusual development, Justices Anthony Kennedy and Clarence Thomas issued a brief order urging lower courts to reconsider an earlier ruling that barred the creditors from recovering the payments. The two justices raised the “possibility that there might not be a quorum” on the Supreme Court to consider the case.

Six justices would be needed to act in the case.

According to the nonpartisan advocacy group Fix the Court, which pushes for Supreme Court transparency, seven of the justices would likely be recused because of their investments in funds handled by parties involved in the case.

The creditors, including units of Deutsche Bank AG and M&T Bank Co and nearly 200 company retirees, have said the buyout left them in the lurch when Tribune Co later filed for bankruptcy.

A little over a year after the buyout, which was led by real estate mogul Sam Zell, the former publisher of newspapers such as Chicago Tribune and Los Angeles Times filed for bankruptcy.

In Tuesday’s order, Kennedy and Thomas said the justices’ consideration of whether to hear the creditors’ appeal would be postponed to allow the lower courts time to reconsider the case in light of the Supreme Court’s February decision in a separate bankruptcy case that raised similar issues.

The Tribune Co emerged from bankruptcy in 2012 and junior creditors were repaid about a third of what they were owed. However, in a bid to recover more, these creditors have spent years battling in the courts.

The bank creditors have said they are owed more than $2 billion while the 186 former employees hold claims for more than $109 million in unpaid retirement benefits, according to court papers.

The creditors sued more than 2,500 former Tribune shareholders under state law in various courts. In 2016, the New York-based 2nd U.S. Circuit Court of Appeals Court upheld a trial court’s dismissal of the case.

The Tribune Co itself has ceased to exist. Its publishing division became Tronc Inc and its broadcasting interests became Tribune Media Co. Sinclair Broadcast Group is in the process of acquiring Tribune Media.

Reporting by Andrew Chung; Editing by Will Dunham