A federal bankruptcy judge in New York has approved an agreement that would resolve years-long litigation between Sears Holdings and former CEO Eddie Lampert as well as other former executives and investors with the company, according to reports in Law360 and Bloomberg Law and confirmed by a source with knowledge of the case.
The $175 million settlement, to be paid in large part by insurers, clears the way for an end to Sears Holdings’ Chapter 11 case, which was filed in October 2018. The parties were ordered to mediation earlier this year.
Plaintiffs, including unsecured creditors to Sears Holdings — many of them its former suppliers — alleged that Lampert and the other defendants stripped Sears Holdings of billions of dollars in value to enrich themselves in the years leading up to the company’s bankruptcy. Lampert and his hedge fund, ESL Investments, repeatedly denied the allegations in court papers and press statements.
As part of the agreement, Lampert and the other defendants did not admit to any liability, and the plaintiffs acknowledged that the defendants acted in good faith.
Lampert took control of the remaining Sears and Kmart stores from Sears Holdings in a 2019 deal and operates them under Transform Holdco, (which is listed as a defendant in the litigation). Just a few Kmart and Sears department stores are left in the U.S. today.
Its length and complexity made Sears Holdings Chapter 11 the most expensive retail bankruptcy of the “retail apocalypse” era, according to Debtwire data.
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