If you’re a Sears Holding Corporation (SHLD) shareholder like me, there’s a pretty big chance that you got a letter in the mail informing you of a derivative shareholder settlement where the attorneys got $925,000 and the shareholders got the privilege of paying the attorneys $925,000. The deadline for objecting was June 25.
All well and good, except that my particular notice letter arrived on June 28. That’s because, though the settlement occurred on April 28, and the court approved notice on May 11, the parties didn’t bother to ask brokers to provide a list of shareholders until June 1, and then, after receiving the list, didn’t bother to mail the notice to tens of thousands of shareholders until June 22 or June 23.
I was in Chicago yesterday to object to the problematic notice. While there I met another shareholder who didn’t object to the appalling settlement because she also got her notice after the deadline.
The parties initially argued that it was alright to structure notice so that half the shareholders would receive it only after the fact, but after they gauged the judge’s reaction to my argument, the parties volunteered to send new notice. The http://www.searsholdingsderivative.com/ website has not been updated as of Saturday morning, but the new deadline will be August 20, with a new fairness hearing August 27.
The law firm involved, Vianale & Vianale, brings zero-damages lawsuits against corporations alleging technical violations of Section 8 the Clayton Act antitrust law but seeking injunctive relief, and threatens to cost the defendants millions of dollars in litigation expenses if they don’t settle. This is of no benefit to shareholders, because the law in question, when it is enforced, results in the FTC politely requesting a corporation to correct the technical violation; there has not been a government fine issued for “interlocking directorates” in my adult lifetime, and for at least several years before. The Center will be objecting to this settlement: how can attorneys claim to represent the shareholders when rational shareholders would never agree ex ante to bring a lawsuit that is guaranteed to make them worse off, win or lose?
It generally seems that the majority of my readers are plaintiffs’ law firms checking up on me, but if you happen to stumble across this post and happen to own SHLD, you might get a postcard letting you know that you have another opportunity to object. Of course, unless you own hundreds of thousands of dollars worth of stock, it might be economically irrational to spend two 44-cent stamps to object; and if you did own that much stock, the opportunity cost of the time you spend objecting is probably pretty high, even if it’s just to say “My name is X, my address and phone is Y, I own Z shares of stock, and I join in the objection of Theodore H. Frank.” But unfortunately, plaintiffs’ attorneys regularly ask courts to view the rational silence of class members or shareholders as acquiescence in their extortionate theft of shareholder money.