The plaintiffs in a long-running class action against Sears, Roebuck & Co. over its merger with Kmart Corp. had reason to be optimistic. Their case survived a motion to dismiss, and they managed to win class certification. But they suffered a potentially fatal setback last week when Chicago federal district court Judge Robert Gettleman granted Sears' motion for summary judgment.
The plaintiffs alleged that Sears and its CEO, Alan Lacy, had made misleading statements by failing to disclose merger discussions with Kmart before and through the class period leading up to the deal's consummation in November 2004. Sears and Lacy, represented by Wachtell, Lipton, Rosen & Katz, had argued that they had no duty to disclose the negotiations. Gettleman found that the case had to be decided on the facts, so he let it proceed through discovery. But when the record became complete, he found that the defendants had not made any material omissions or misleading statements.
Gettleman also granted summary judgment to Sears Holdings Chairman Edward Lampert and investment fund ESL Partners, which became a controlling shareholder of Sears. The plaintiffs had alleged that ESL had a duty to make a securities filing regarding its intent to effect change in the ownership of Sears prior to the class period. Gettleman disagreed.
Lee Squitieri, an attorney for the plaintiffs, said he would likely file a motion for reconsideration.
Representing Sears and Lacy were Paul Vizcarrondo Jr. of Wachtell and Christopher King of Sonnenschein Nath & Rosenthal. ESL and Lampert had Craig Primis and Tom Yannucci of Kirkland & Ellis.
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