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Wednesday, June 13, 2012

Ind. Decisions - "Seventh Circuit Slams Plaintiffs’ Lawyers in Sears Lawsuit"

Joe Palazzolo of the WSJ Law Blog has this entry on the opinion today by Chief Judge Easterbrook in the case out of Illinois. From the WSJ blog:

The lawsuit claims that two members of Sears’s board have directorships at other companies that compete with Sears, in violation of antitrust law. The two investors who filed the lawsuit – Robert F. Booth Trust and Ronald Gross — did so without first demanding that the board fix the situation, presumably by booting the directors.
From the opinion:
Plaintiffs told the district judge that a demand on directors would have been futile—and surely they are right, because, if they had made a demand, conscientious directors acting in investors’ interests would have nixed this suit. That’s a reason to require demand, not to excuse it.

The suit serves no goal other than to move money from the corporate treasury to the attorneys’ coffers, while depriving Sears of directors whom its investors freely elected. Directors other than Crowley and Reese would not have violated their fiduciary duty of loyalty by concluding that these two directors benefit the firm. Usually serving on multiple boards demonstrates breadth of experience, which promotes competent and profitable management. If the Antitrust Division or the FTC sees a problem, there will be time enough to work it out. Derivative litigation in the teeth of the demand requirement and the antitrust-injury doctrine is not the way to handle this subject.

Posted by Marcia Oddi on June 13, 2012 12:34 PM
Posted to Ind. (7th Cir.) Decisions