Sears CEO Settles Shareholder Lawsuit With $40 Million Payment Pledge

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Sears has been a mainstay of the US retail economy since the 19th century, and while it is no longer the dominant force it was once was, it is still the twelfth largest retailer in the company. But in a move to maintain the company’s financial strength, the company sold 235 of its stores to a real-estate investment trust company called Seritage Growth Companies in 2015. These types of reorganizations and restructuring are of course by no means uncommon in this rapidly changing company, but Sears shareholders balked at the fact that Seritage was created by Sears CEO Eddie Lampert, meaning he was on both sides of the transaction. The shareholders brought suit against Seritage and Lampert, and the shareholder suit was settled earlier this month with an agreement that Lampert and Seritage would pay $40 million back to Sears on account of its shareholders.

The Questioned Deal Between Sears and Seritage

Seritage paid $2.6 billion to purchase the 235 Sears locations in 2015, and Sears agreed to pay rent to Seritage for continued use of the stores. The Sears shareholders who filed the lawsuit against the directors of Sears who approved the deal, among others, alleged that this deal was not in the interest of the shareholders but rather served to benefit Seritage. The complaint noted that Sears has neared bankruptcy in the intervening time since the deal was made while Seritage has profited off the deal.

The shareholders alleged that Lampert facilitated the deal and was the “driving force” behind it to benefit himself at the expense of the Sears shareholders by stripping the company of “its valuable core assets” in the form of the company’s real estate holdings in the store. The shareholders further alleged that other Sears directors ignored the interests of shareholders and were “acting at the behest” of Lampert in approving the deal.

The $40 million to be paid in the deal will come from the defendants and their insurers and the four named shareholders in the action will receive $10,000 apiece.

Experienced Representation in Your Shareholder Litigation Matter

The business litigation attorneys at Wagenseller Law Firm in downtown Los Angeles have extensive experience in representing businesses, corporations, directors, officers, and shareholders in shareholder disputes. We have worked with businesses and individuals throughout Southern California across a wide range of industries, including financial service entities, manufacturers, importers, retail stores, restaurants, entertainment entities, law firms, and more. Contact us today to discuss your breach of fiduciary duty matter.

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