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Levie v. Sears Roebuck & Co.

December 18, 2009


The opinion of the court was delivered by: Robert W. Gettleman United States District Judge

Judge Robert W. Gettleman


Co-lead plaintiffs Maurice Levie and H. Robert Monsky, "individually and on behalf of all others similarly situated," have brought a three count amended class action complaint against defendants Sears Roebuck & Co and its Chief Executive Officer, President and Chairman of the Board Alan J. Lacy (together, the "Sears defendants"), and ESL Partners, L.P. and its controlling person Edward S. Lampert (the "ESL defendants") alleging violations of §§10(b) and 20(a) of the Exchange Act, 15 U.S.C. §§ 78j(b) and 78t(a) and Rule 10b-5 promulgated thereunder by the Securities Exchange Commission ("SEC"), 17 C.F.R. § 240.10b-5. After denying defendants' motion to dismiss, Levie v. Sears Roebuck & Co., 2006 WL 756063 (N.D. Ill. 2006), the court certified a class consisting of: (1) investors who sold Sears stock during the class period (September 9, 2004 through the close of trading on November 16, 2004) and the "in-and-out" investors, but excluding short sellers except those who were in a short position at the close of trading on November 16, 2004; (2) sellers of Sears' call options during the class period whose call option positions remained open (were not re-purchased) after the close of trading on November 16, 2004; (3) buyers of Sears' put options who purchased their put options during the class period, and whose put options position remained open as of the close of trading on November 16, 2004; (4) buyers of Sears' call options during the class period whose call options expired worthless before the last day of the class period; and (5) sellers of Sears' put options during the class period who covered (re-purchased) those put options during the class period. Levie v. Sears, 496 F. Supp.2d 944 (N.D. Ill. 2007); Levie v. Sears Order dated August 28, 2007 (Docket No. 145).

After extensive discovery, each set of defendants has filed a separate motion for summary judgment. In addition, defendants have filed joint motions to strike plaintiffs' L.R. 56.1 Statements and to decertify the class. For the reasons explained below, defendants' motion to strike is granted, and both motions for summary judgment are granted. The motion to decertify the class is denied as moot.

Summary Judgment Standards

A movant is entitled to summary judgment under Fed. R. Civ. P. 56 when the moving papers and affidavits show that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(b); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once a moving party has meet its burden, the nonmoving party must go beyond the pleadings and set forth specific facts showing that there is a genuine issue for trial. Fed. R. Civ. P. 56(e); Becker v. Tenenbaum-Hill Associates, Inc., 914 F.2d 107, 110 (7th Cir. 1990). The court considers the record as a whole and draws all reasonable inferences in the light most favorable to the party opposing summary judgment. Fisher v. Transco Services-Milwaukee, Inc., 979 F.2d 1239, 1242 (7th Cir. 1992).

A genuine issue of material fact exists when "the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The non-moving party, however "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson, 477 U.S. at 252.

To help ease the court's task in cases such this, with extensive factual records, the Northern District of Illinois has adopted Local Rule ("L.R.") 56.1, which requires certain filings in support of and in opposition to motions for summary judgment. L.R. 56.1(a)(3) requires the movant to provide a statement of material facts as to which it contends there is no genuine issue. The statement must be in the form of numbered paragraphs with specific references to the parts of the record or other supporting materials relied upon. The non-movant must reply to each paragraph, either admitting that the statement is uncontested or stating that it disagrees, specifically citing to supporting materials showing that there is a genuine factual dispute. L.R. 56.1(b)(3)(A), (B). The non-movant may also supply a statement of additional facts, if any, that would defeat summary judgment, again in the form of numbered paragraphs with supporting citations to the record. L.R. 56.1(b)(3)(C). The moving party must then reply to the statement of additional facts, paragraph by paragraph, admitting the statement or contesting it with specific citations to supporting materials.

What would appear to be a simple enough procedure for the orderly presentation of a summary judgment motion has proven to be anything but. All too often compliance with the Local Rule has led to extensive, expensive, and unnecessary satellite litigation that does nothing to advance the case or aid the court. See Thompson v. Waukesha State Bank, 510 F. Supp.2d 453, 455-56 (N.D. Ill. 2007).

In the instant case, both the Sears and ESL defendants filed proper L.R. 56.1 statements in support of their motions for summary judgment. As defendants point out in their joint motion to strike, however, plaintiffs' responses to those statements are completely noncompliant. Rather than simply admit that a particular numbered statement is uncontested or deny that it is uncontested with a supporting citation to the record, plaintiffs' statements are lengthy and argumentative, essentially presenting their version of the "facts." The citations provided to support that "version" fail to do so in any meaningful way, at least without the convoluted and improper argument added to each response. An L.R. 56.1(b) response is not a platform, however, to present a party's argument. Portis v. City of Chicago, 510 F. Supp.2d 461, 463 (N.D. Ill. 2007). This failure to comply with the Local Rule justifies granting the joint motion to strike, and would also justify deeming each of defendants' statements of fact to be uncontested. Thompson, 510 F. Supp.2d at 456; Bordelon v. Chicago School Reform Board of Trustees, 233 F.3d 524, 528 (7th Cir. 2000). "[D]istrict courts are not obliged in our adversary system to scour the record looking for factual disputes." Greer v. Board of Education, 267 F.3d 723, 727 (7th Cir. 2001).

Nonetheless, rather than decide the case on the failings of lawyers, the court has endeavored to examine plaintiffs' citations in support of their denial of the facts presented by defendants. Having immersed itself in the rather extensive record, the court concludes that the following facts are uncontested:

(1) In February 2004, Lacy (of Sears) began to explore a potential transaction between Sears and Kmart. He was considering potentially acquiring Kmart by buying Kmart shares. He reached out to Lampert, who was Chairman of Kmart's Board of Directors. Both Lacy and Lampert agreed that Lampert explicitly stated that he was acting solely on behalf of Kmart and not on behalf of ESL Partners, which at that time owned greater than 5% of Sears.

(2) On March 10, 2004, Lacy told the Sears' Board of Directors that he had had very preliminary discussions with Kmart about a Sears' acquisition.

(3) On March 16, 2004, Sears and Kmart executed a one way "Confidentiality Agreement" by which Kmart would disclose certain confidential information to Sears to allow Sears to evaluate Kmart. At this time there had been no discussion of Kmart acquiring Sears.

(4) By late April 2004 both sides agreed that there would be no broad transaction of Sears acquiring Kmart in its entirety. Instead, the parties began discussion of an "alternative transaction" with Sears purchasing specific Kmart (stand alone) stores. The Sears' Board of Directors described this alternative plan ("Plan B") as just a smaller test of the original "Plan A," in which Sears would acquire all of Kmart.

(5) On April 28, 2004, Kmart requested that Sears return or destroy the confidential information given to it pursuant to the March 16, 2004, agreement because the Sears acquisition of Kmart was no longer on the table.

(6) The following day, April 29, 2004, Lacy reported to the Sears' Board of Directors on the status of what had been termed "Project Bay" (the potential acquisition of Kmart).

"Bay" was the code name for Kmart and "Harbor" was the code name for Sears. Lacy reviewed the original intent of Project Bay as a retail merger with "opportunity for a significant number of conversions into the Harbor (Sears) format." He commented on valuation estimates and expectations and governance issues, the result of which was that the "management team has reached the conclusion that a merger ("Plan A") would not be an appropriate transaction at this point in time." Lacy then described "Plan B" and the opportunity for a Sears off-mall expansion, and a report was presented regarding the purchase of Kmart stores. Sears started with 329 stores, Kmart countered with 200 stores. After modification there was a discussion in the Sears' Board ...

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