Sears 2009 Annual Report Download - page 95

SEARS HOLDINGS CORPORATION
Notes to Consolidated Financial Statements—(Continued)
February 25, 2003 misrepresented Kmart’s assets, particularly its real estate holdings, as evidenced by the prices
at which Kmart subsequently sold certain of its stores in June 2004 to Home Depot and Sears. Plaintiffs seek
damages for alleged misrepresentations. On December 19, 2006, the Court consolidated the actions and plaintiffs
filed their consolidated complaint. On July 21, 2009, the Court granted defendants’ second motion to dismiss and
entered a final order of dismissal. Plaintiffs filed a notice of appeal on August 20, 2009. Briefing on the appeal
has concluded and the matter has been set for oral argument on March 25, 2010.
AIG Annuity Insurance Company, et al. v. Sears, Roebuck and Co.—On October 12, 2004, an action was
filed against Sears in the District Court, 192nd Judicial District, Dallas County, Texas by several holders of
certain bonds issued by Sears from 1991 through 1993. Plaintiffs allege under theories of breach of contract and
misrepresentation that Sears prematurely redeemed the bonds in 2004 following Sears’ sale of the credit business
in 2003. On February 2, 2007, a jury in the case reached a verdict against Sears and the Court subsequently
awarded plaintiffs $61 million plus post-judgment interest. Sears then filed a notice of appeal. On August 21,
2008, the Texas Court of Appeals reversed the trial court’s judgment and entered judgment in favor of Sears on
all counts. Plaintiffs’ subsequent motion for rehearing was denied as was their petition for review and motion for
rehearing with the Texas Supreme Court. On January 26, 2010, the Texas Court of Appeals issued a mandate
consistent with its prior order reversing the judgment, thereby concluding this matter.
Robert F. Booth Trust, derivatively v. William C. Crowley, et al.—In August 2009, a shareholder derivative
lawsuit was filed in United States District Court for the Northern District of Illinois against current and former
directors William C. Crowley, Edward S. Lampert, Steven T. Mnuchin, Richard C. Perry, Ann N. Reese, Kevin
B. Rollins, Emily Scott and Thomas Tisch, and nominally Sears Holdings Corporation. Plaintiff alleges that by
nominating for re-election to the Sears Holdings Corporation board Mr. Crowley and Ms. Reese while they were
also members of the boards of AutoNation, Inc. (Crowley), AutoZone, Inc. (Crowley), and Jones Apparel Group,
Inc. (Reese), defendants violated Section 8 of the Clayton Act prohibiting “interlocking directorships” and
breached their fiduciary duty to the Company. Plaintiff seeks injunctive relief and recovery of its costs, including
reasonable attorney fees. Defendants’ motion to dismiss was denied and thus their answer is due on or before
March 16, 2010. Plaintiff filed a motion for preliminary injunction seeking various injunctive relief concerning
the upcoming nomination and election of directors. The parties are engaged in limited discovery in anticipation
of a hearing on this matter, which has not yet been scheduled.
We are a defendant in several lawsuits containing class-action allegations in which the plaintiffs are current
and former hourly and salaried associates who allege various wage and hour violations and unlawful termination
practices. The complaints generally seek unspecified monetary damages, injunctive relief, or both. Further, certain
of these proceedings are in jurisdictions with reputations for aggressive application of laws and procedures against
corporate defendants. One of these class-action lawsuits described above is Moldowan, et al. v. Sears, Roebuck and
Company, et al., a lawsuit filed on August 12, 2004 in the Superior Court of the State of California, County of
Sonoma in which plaintiffs alleged that Sears failed to pay them for all hours worked and otherwise failed to pay
them correctly for work performed in accordance with California law. Plaintiffs sought monetary damages in an
unspecified amount, together with attorneys’ fees, interest, statutory penalties and punitive damages. The parties
settled the matter and the Court approved the settlement. Administration of the settlement has concluded. In
agreeing to the settlement, defendants did not admit any wrongdoing and denied committing any violation of law.
Defendants agreed to the settlement solely to eliminate the uncertainties, burden and expense of further protracted
litigation. We previously established a reserve for the expected settlement and it did not have a material adverse
effect on our annual results of operations, financial position, liquidity or capital resources.
We are subject to various other legal and governmental proceedings, many involving litigation incidental to
our businesses. Some matters contain class action allegations, environmental and asbestos exposure allegations
and other consumer-based claims, each of which may seek compensatory, punitive or treble damage claims
(potentially in large amounts), as well as other types of relief.
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