A court decision has given Sears Canada retirees hope they can recoup some of the millions of dollars missing from the now-defunct retailer’s underfunded pension plan.
An Ontario Superior Court judge on Monday gave the green light to two lawsuits targeting U.S. billionaire businessman, Eddie Lampert and his hedge fund, ESL Investments, in connection with $509 million in dividends paid to Sears Canada shareholders in 2013.
The lawsuits — each initiated on behalf of Sears creditors including pensioners — centre on the same claim that the $509-million payout was detrimental to the company and orchestrated by Sears Canada’s largest shareholders — Lampert and ESL — for their own benefit.
The plaintiffs also allege that Sears Canada’s board of directors at the time failed to do their “due diligence” before authorizing the dividend payment, which “crippled the retailer’s ability to remain in business.”
Two former directors, William Harker and William Crowley, are also named in the suits.
“It angers me because it has all the appearances of just taking the money without consideration for the company,” said Ken Eady, a pensioner and vice-president of the Sears Canada Retiree Group, a volunteer organization representing retirees.
“If it had been a balanced approach, they would have said, ‘No, we shouldn’t have paid this dividend,'” said Eady.
In court documents, lawyers for the two former directors claim that “it is an illogical stretch to conclude that the 2013 dividend” in any way contributed to Sears’ insolvency which didn’t occur until June 2017.
ESL takes a similar stance, stating the lawsuits’ claims are “without merit.”
The dividend payment was “properly authorized” by the board of directors, “which was in no way controlled or directed by ESL,” said the hedge fund in a statement.
After the dividends were paid in 2013, Sears had “minimal debt” and $514 million in cash on its balance sheet, said the company.
Lampert is chair and CEO of ESL as well as chair of Sears Holdings in the U.S., which filed for bankruptcy protection last month with plans to restructure.