Sears Canada Inc., August 24, 2020
August 24, 2020
We are pleased to report that on July 27, 2020, a settlement agreement was reached with the director defendants in the Sears Canada litigation, for a total of CAD $50 million to be allocated among the plaintiff parties.
This settlement arises from the Sears Canada insolvency litigation involving lawsuits by four plaintiffs, as previously reported:
- Morneau Shepell, as Administrator of the Sears Registered Retirement Plan;
- the Monitor in the CCAA proceedings;
- the Hon. Douglas Cunningham, Litigation Trustee of Sears Canada; and
- the Sears Hometown and Outlet Store class action parties.
The settlement is with eight former directors of Sears Canada (the “Former Directors”). The settlement agreement is contingent on court approval. On August 25, 2020, the Superior Court of Justice (Commercial List) will hear a motion for approval of the settlement. In addition, the settlement is contingent on the plaintiffs “releasing” all claims against the Former Directors. The CCAA plan will be amended by the Monitor to reflect the release of the Former Directors.
As a term of the settlement, the Former Directors agree to cooperate in the ongoing litigation against the remaining defendants. If requested by the plaintiffs, the Former Defendants will appear as witnesses at trial. If successful in the litigation against the remaining non-settling defendants, the plaintiffs will be limited to recover only an amount attributable to those non-settling defendants, and not amounts attributable to the Former Directors.
As previously reported, on March 16, 2020 the Superior Court of Justice (Commercial List) approved a settlement reached with Sears Holding Corporation with respect to the 2013 Dividend Litigation.
The Sears Canada litigation continues to proceed against the remaining defendants who are not subject to the settlement, including Edward Lampert and ESL Investments Inc. The trial against the remaining defendants has been scheduled to start on September 8. 2020.