The lead plaintiffs in a lawsuit that had accused Sears Holdings Corp. and its chairman, Edward Lampert, of securities fraud said Friday they would appeal a judge’s dismissal of the case.
This story first appeared in the August 24, 2009 issue of WWD. Subscribe Today.
Former Kmart investors filed the suit against Lampert and onetime Kmart chief executive officer Julian Day in 2006, but a judge threw the case out last month.
On Friday, plaintiffs Fred Campo, The Plumbers and Pipefitters National Pension Fund and the Mississippi
Public Employees’ Retirement System gave notice to the court that they sought an appeal with the U.S. Court of Appeals’ Second Circuit.
The shareholders alleged the two executives knowingly undervalued Kmart’s real estate holdings in statements and filings during the retailer’s reorganization following a 2002 bankruptcy. According to the plaintiffs’ complaint, Lampert and Day tried to hide that Lampert’s investment fund, ESL Investments, had taken control of the retailer below market value.
Kmart and Sears Roebuck & Co. merged in 2005 and became Sears Holdings Corp.
In a July 21 ruling, Judge Lewis Kaplan of U.S. District Court in Manhattan granted the defendants’ motion to dismiss the case and called the suit’s allegations “too speculative.”
“Plaintiffs allege that defendants represented that the fair market value of Kmart’s real estate was $10 million when, in reality, it was $9 [billion] to $18 billion,” Kaplan wrote in his July 21 ruling. “This rather dramatic assertion is not borne out by plaintiffs’ well-pleaded factual allegations.”