Sears Borrows $400 Million From Affiliate of CEO’s Hedge Fund & Stock Drops

Girard Gibbs LLP is investigating potential claims against the Board of Directors of Sears Holding Corporation (Nasdaq: SHLD) for possible breaches of fiduciary duty and other violations of state law.

On September 15, 2014, Sears entered into a $400 million loan agreement with affiliates of ESL Investments, Inc., a hedge fund wholly owned and controlled by Eddie Lambert, Sears’ Chairman and CEO (“Lambert’s Hedge Fund”). The loan requires Sears to pay Lambert’s Hedge Fund an upfront fee of 1.75%, carries an annual interest rate of 5%, and is scheduled to mature on December 31, 2014.  Sears can extend the loan to February 28, 2015 with an additional charge of 0.5% on principal amount.

Sears guaranteed the loan and secured it with 25 of its properties, and Lambert’s Hedge Fund “may exercise its reasonable determination to substitute one or more of the properties with substitute properties.” Because Sears has reportedly been selling properties for anywhere between $20 and $50 million over the last few years, potentially the loan collateral is worth considerably more than the amount borrowed. This puts at risk, via liens, Sears’ real estate at discounted values.

In addition, if Sears defaults, Lambert’s Hedge Fund may declare all or any portion of the outstanding indebtedness to be immediately due and payable, exercise any rights it might have under any of the Loan documents, including against the 25 properties, and instead of the 5% interest rate, Sears will be required to pay Lambert’s Hedge Fund a default rate equal to the greater of (i) 7.5% or (ii) the prime rate plus 1%.

This newly announced loan comes on the heels of an almost $1 billion loan Sears’ subsidiaries took out less than a year ago. Furthermore, in the second quarter of this year, Sears announced more than $500 million in net losses and the stock has lost more than 30% of its value year-to-date. Since news of the loan was released, the stock has dropped more than 10% in value.

If you are a Sears stockholder, or would like to learn more about the investigation and your legal rights, contact Girard Gibbs securities attorney Adam Polk at (415) 981-4800.


Judge Koh Rules In Favor of Girard Gibbs Client Michael Devine and Denies Preliminary Approval to Hi-Tech Employees Settlement

On August 8, 2014, U.S. District Court Judge Lucy H. Koh signed the Order denying Plaintiffs’ preliminary settlement in favor of Girard Gibbs client Michael Devine in the antitrust case against Adobe, Apple, Google and Intel.

In Re Hi-Tech Employee Antitrust Litigation Plaintiffs allege that Defendants entered into an overarching conspiracy not to solicit each other’s employees and thereby suppressing wages of Defendant employees.   A preliminary settlement was reached with three class representatives.  Girard Gibbs client Devine, the fourth class representative, opposed the settlement contending the settlement amount is inadequate.

About Girard Gibbs LLP

Girard Gibbs LLP is a national litigation firm based in San Francisco and New York representing plaintiffs in class and collective actions in state and federal courts, and in arbitration matters worldwide. The firm serves individuals, institutions and business clients in cases involving securitiesantitrust, personal injury, consumer protection, and employment laws.

Girard Gibbs was distinguished as a Tier 1 law firm for plaintiffs’ mass tort and class-action litigation in the 2014 “Best Law Firms” list, an annual survey published in the U.S. News & World Report’s Money Issue.  The National Law Journal (NLJ) named Girard Gibbs to its elite “Plaintiffs’ Hot List” for 2012, a selection of top U.S. plaintiffs’ firms recognized for wins in high-profile cases.  Three Girard Gibbs attorneys were selected by their peers for inclusion in The Best Lawyers in America 2012-2014, with Mr. Girard designated as the 2013 “Lawyer of the Year” in San Francisco for class action litigation. Martindale-Hubble has also recognized three Girard Gibbs’ attorneys with AV-Preeminent ratings, the highest class of attorneys for professional ethics and legal skills.


Daniel C. Girard to Participate in the HarrisMartin’s Antitrust Pay-for-Delay Litigation Conference

Dan Girard will participate in the HarrisMartin’s Antitrust Pay-for-Delay Litigation Conference on September 22, 2014 in Philadelphia, PA.  With Lisa J. Rodriguez, of Schnader Harrison Segal & Lewis LLP, Mr. Girard will speak on the topic of Consolidation and Coordination in Generic Drug Cases.  Their discussion will include MDL-related issues and strategies for coordinating between direct and indirect purchasers.

For more information about the conference, including its guest speakers and agenda, please visit the HarrisMartin Conference website.

Daniel C. Girard is the founder and managing partner of Girard Gibbs LLP, where he serves as the firm’s managing partner. Mr. Girard is nationally recognized as one of the top plaintiff-side lawyers in the United States with an expertise in class actions and complex business litigation including antitrust.  For more than 25 years, he has successfully represented plaintiffs in cases involving shareholder rights, securities, antitrust, consumer, telecommunications, and civil rights laws.


Thirteen Girard Gibbs Lawyers Selected by Northern California Super Lawyers for 2014

The law firm of Girard Gibbs LLP is pleased to announce that thirteen of the firm’s attorneys have been selected for inclusion in Northern California Super Lawyers® and Rising Stars for 2014.

According to its website, “Super Lawyers is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement.” Only five percent of lawyers practicing in Northern California are selected for inclusion in Super Lawyers annually.

The Girard Gibbs attorneys selected for inclusion in 2014 Northern California Super Lawyers include:

•    Daniel Girard: Super Lawyers, 2007-2014; Top 100, 2012-2013.
•    Eric Gibbs: Super Lawyers, 2010-2014; Top 100, 2012-2013.
•    Amanda Steiner: Super Lawyers, 2012-2014; Top 50 Women, 2013.
•    Dylan Hughes: Super Lawyers, 2012-2014.
•    A.J. De Bartolomeo: Super Lawyers, 2013-2014.
•    Michael Danko: Super Lawyers 2004-2014; Top 100, 2012-2014.

Selected for inclusion in 2014 Northern California Rising Stars:

•    Dena Sharp: Rising Stars, 2009-2014.
•    Geoffrey Munroe: Rising Stars, 2010-2014.
•    Matthew George: Rising Stars, 2011-2014.
•    Scott Grzenczyk: Rising Stars, 2013-2014.
•    Adam Polk: Rising Stars, 2013-2014.
•    David Stein: Rising Stars, 2013-2014.
•    Amy Zeman: Rising Stars, 2013-2014.

About Girard Gibbs LLP

Girard Gibbs LLP is a national litigation firm based in San Francisco and New York representing plaintiffs in class and collective actions in state and federal courts, and in arbitration matters worldwide. The firm serves individuals, institutions and business clients in cases involving securities, antitrust, personal injury, consumer protection, and employment laws.

Girard Gibbs was distinguished as a Tier 1 law firm for plaintiffs’ mass tort and class-action litigation in the 2013 “Best Law Firms” list, an annual survey published in the U.S. News & World Report’s Money Issue.  The National Law Journal (NLJ) named Girard Gibbs to its elite “Plaintiffs’ Hot List” for 2012, a selection of top U.S. plaintiffs’ firms recognized for wins in high-profile cases.  Three Girard Gibbs attorneys were selected by their peers for inclusion in The Best Lawyers in America 2012-2013, with Mr. Girard designated as the 2013 “Lawyer of the Year” in San Francisco for class action litigation. Martindale-Hubble has also recognized three Girard Gibbs’ attorneys with AV-Preeminent ratings, the highest class of attorneys for professional ethics and legal skills.

For more information, visit www.GirardGibbs.com.


Girard Gibbs LLP Appointed to the Plaintiffs Executive Committee in the Safeway Acquisition Litigation

Girard Gibbs LLP has been appointed to the Plaintiffs Executive Committee in a pending class action lawsuit on behalf of investors in Safeway, Inc.  On April 8, 2014, Vice Chancellor J. Travis Laster of the Delaware Court of Chancery entered an order consolidating several related cases and approving Plaintiffs’ proposed leadership structure.

The complaint, filed on behalf of four institutional investors, alleges that Safeway’s board of directors breached their fiduciary duties by failing to safeguard the best interests of Safeway’s shareholders when they entered a definitive merger agreement to sell Safeway to a subsidiary of the private equity firm Cerberus Capital Management.  Among other things, the complaint alleges that the Board agreed to onerous deal protections unreasonably favoring Cerberus over other strategic buyers, and that their actions favoring Cerberus are inconsistent with their obligation to reasonably seek out and obtain the highest value reasonably attainable for Safeway’s shareholders.

 


US Supreme Court Rules that Investors May Pursue Claims Related to Stanford’s Ponzi Scheme

Investors falling victim to the $7 billion Ponzi scheme orchestrated by Robert Allen Stanford may pursue state negligence and fraud claims against entities who allegedly aided and abetted Stanford in his illegal operation.  On February 26, 2014, the Supreme Court reaffirmed that the federal Securities Litigation Uniform Standards Act (“SLUSA”) does not preclude such state law class action claims for securities that are not traded on a national exchange.

SLUSA forbids the bringing of large securities class actions “based upon the statutory or common law of any State” in which a plaintiff alleges “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security.”  SLUSA defines “covered” securities as securities traded on a national exchange.  Stanford and his companies perpetrated their Ponzi scheme by representing that CDs purchased by investors were backed by SLUSA-covered securities that trade on a national exchange.

Plaintiffs alleged that two law firms, an insurance brokerage firm, and an investment firm aided Stanford in perpetrating the fraud.  The district court found the Plaintiffs’ allegations “reasonably imply that the Stanford scheme coincided with and depended upon the [] Plaintiffs’ sale of SLUSA-covered securities to finance [] CD purchases.”  Based on this finding, the district dismissed the state law claims on the ground that although the CDs themselves were not covered securities within the meaning of SLUSA, Plaintiffs were induced to purchase the CDs based on misrepresentations that the CDs were backed by SLUSA-covered securities, and thus SLUSA preempted Plaintiffs’ state law claims.

On March 19, 2012, a three-judge panel of the Fifth Circuit reversed the district court, holding that the SLUSA-covered securities backed by the CDs were “only tangentially related to the fraudulent scheme,” and thus because the CDs were not traded on a national exchange, SLUSA does not preclude Plaintiffs from using state class actions to pursue their claims.  In a 7-2 decision authored by Justice Breyer, the US Supreme Court agreed.

Going forward, this ruling further supports a mechanism for investors to seek relief under state law from parties who aided and abetted their losses in securities not traded on a national exchange.  ”We believe the basic consequence of our holding is that … it will permit victims of this (and similar) frauds to recover damages under state law,” Justice Breyer wrote.


Girard Gibbs Appointed as Lead Counsel in Strategic Realty Trust Securities Class Action Lawsuit

Girard Gibbs LLP has been appointed lead counsel in a pending securities class action lawsuit on behalf of investors in Strategic Realty Trust, Inc.  On January 27, 2014, the Honorable Jon S. Tigar of the United States District Court for the Northern District of California appointed the firm to serve as lead counsel for the proposed class.

The lawsuit alleges that Strategic Realty Trust, Inc., its former affiliate companies, and certain of the Company’s current or former officers and directors violated Sections 11, 12(a)(2) and 15 of the Securities Act of 1933.  Among other things, the complaint alleges that the offering materials for Strategic Realty Trust’s initial public offering contained material misrepresentations and omissions about the financial health of the Company and its affiliates and about the performance of earlier real estate programs sponsored by the Company’s affiliates.


The SEC Proposes New Pay Ratio Disclosure Rule

In September, the Securities and Exchange Commission proposed the long-awaited “pay ratio” disclosure rule as required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule would require public companies to disclose a median pay ratio for its chief executives and lower-level employees in shareholder proxy statements. Total compensation would include salary, bonus, stock and option awards, long-term incentive pay, and change in pension value. The proposed disclosure requirements, however, would not apply to emerging growth companies, smaller reporting companies, or foreign private issuers.

Mixed Reactions

In connection with the implementation of the pay ratio disclosure rule, the SEC sought commentary from the public about the proposal. These comments have provided a number of valuable perspectives on the new rule. Anne Simpson, a senior portfolio manager at the California Public Employees’ Retirement System, noted in a public comment that “information around compensation is obviously helpful because financial incentives clearly play a critical role in the recruitment, retention and motivation of employees.” Many argue that these pay disclosures would allow shareholders to understand what drives company and market performance, enabling them to make informed decisions when voting on executive compensation and evaluating the effectiveness of board oversight.

Measurement Flexibility

On the other hand, business groups have commented that the inclusion of part-time workers and employees based in foreign countries makes the calculation painstakingly difficult and needlessly expensive, citing the complex payroll, benefits and pension systems utilized by many companies, and the challenging reconciliation of pay practices between nations. However, as Simpson also points out, the SEC intends to include flexible measurement provisions that would allow companies to use the overall median of the company’s “annual total compensation,” statistical sampling, or any consistently applied compensation measure to determine median pay. That way, a company can choose a method that best fits its business model and budgetary constraints.

Non-Economic Implications

As the SEC highlighted in its economic analysis of the proposed rule, some commenters have suggested that a comparison of executive compensation to employee compensation would allow investors to evaluate employee morale and productivity, as well as provide a measure of a particular company’s investment in human capital. Certain investors weigh these social factors as part of their investment decisions, and strongly value the non-economic benefits associated with them.

The SEC is aware of the potential costs and benefits of the proposed rule, and the agency is currently working to formulate a rule that will comply with the existing executive compensation disclosure regime. An ideal rule will provide flexibility that will help lower the costs of compliance, but will also create a metric that is meaningfully informative to shareholders.

The proposed rule’s 60-day commentary period ended on December 2, 2013. The SEC should reveal whether and when the new rule will take effect in the upcoming weeks.

Daniel Girard to Participate in American Bar Association India Committee Conference

Dan Girard will participate in the American Bar Association’s annual India Committee Conference on February 13-15, 2014 in New Delhi, India.  Mr. Girard will serve as a speaker on the ABA India conference panel, “Shareholder Class Action Lawsuits under the New Companies Act, 2013: Lessons Learned from the U.S. Experience.”  In 2013, India passed legislation that introduced shareholder class actions into Indian courts.  Speaking from the plaintiffs’ perspective on class actions, Dan will examine the types of claims that investors may bring against companies, and their officers, directors, auditors, accountants, bankers, and advisors in the United States.

For more information about the program, including its guest speakers and agenda, please visit the ABA India Conference website.


Girard Gibbs LLP Partner Eric H. Gibbs Appointed to Consumer Attorneys of California (CAOC) 2014 Board of Governors

Girard Gibbs LLP is pleased to announce that partner Eric H. Gibbs has been appointed to the Consumer Attorneys of California (CAOC) 2014 Board of Governors.  Mr. Gibbs has also been nominated by CAOC as a Consumer Attorney of the Year for his contributions in the In Re Chase Bank USA, N.A. “Check Loan” Contract Litigation which successfully challenged increased monthly minimum payments unilaterally imposed by Chase after promising low interest rates on balance transfers.

The appointment of Mr. Gibbs to the CAOC Board of Governors recognizes his commitment to individual consumers spanning nearly twenty years of class and non-class litigation addressing myriad fraudulent and unfair business practices of corporate entities adversely impacting California consumers.

In addition to his new leadership position within CAOC, Mr. Gibbs has been recognized by his peers for inclusion in The Best Lawyers in America 2012 guide for Mass Tort Litigation/ Class Actions, and was honored as a Northern California Super Lawyer (2010-2013) (Top 100 in Northern California). Mr. Gibbs has also earned an AV-Preeminent rating from Martindale-Hubbell, recognizing him in the highest class for professional ethics and legal skills.

Consumer Attorneys of California is a professional organization of plaintiffs’ attorneys representing consumers seeking accountability against wrongdoers in cases involving personal injury, product liability, environmental degradation and other causes.  To learn more about CAOC, visit http://www.caoc.org.

Eric Gibbs: Super Lawyers, 2010-2013; Top 100, 2012-2013.

 

  • Amanda Steiner: Super Lawyers, 2012-2013; Top 50 Women, 2013.
  • Dylan Hughes: Super Lawyers, 2012-2013.
  • A.J. De Bartolomeo: Super Lawyers, 2013.
  • Jonathan Levine: Super Lawyers, 2013.
  • Michael Danko: Super Lawyers 2004-2013; Top 100, 2012-2013.

 

Selected for inclusion in 2013 Northern California Rising Stars:

  • Dena Sharp: Rising Stars, 2009-2013.
  • Geoffrey Munroe: Rising Stars, 2010-2013.
  • Matthew George: Rising Stars, 2011-2013.
  • Scott Grzenczyk: Rising Stars, 2013.
  • Adam Polk: Rising Stars, 2013.
  • David Stein: Rising Stars, 2013.
  • Amy Zeman: Rising Stars, 2013.

Girard Gibbs Files $120 Million Proposed Settlement of Lehman Brothers/UBS Class Action Lawsuit

Girard Gibbs filed papers with the U.S. District Court in Manhattan to initiate the approval process of a proposed $120 million settlement. If approved by the Court, the settlement would end the class action lawsuit alleging claims that UBS misled investors about the financial condition of Lehman Brothers Holdings Inc. in connection with the sale of structured notes.