Exhibit 10.5
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
____________________________________
)
DOUGLAS O. BRIOSO, et al. )
Plaintiffs, )
) Adversary Proceeding
v. ) No. 97-1222-CJK
)
SEARS, ROEBUCK AND CO. and )
WESTERN AUTO SUPPLY )
COMPANY, )
Defendants. )
)
)
ANTONIO CALDAS, )
Plaintiff, )
)
v. )
)
SEARS, ROEBUCK AND CO., )
Defendant. )
_______________________________________ )
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
_______________________________________
)
DAVID CONLEY, et al., )
Plaintiffs, )
)
v. Civil No. 97-11149 PBS
)
SEARS, ROEBUCK AND CO., )
WESTERN AUTO SUPPLY )
COMPANY and JOHN DOES 1-10, )
Defendants. )
_______________________________________ )
AMENDED STIPULATION AND AGREEMENT OF
COMPROMISE AND SETTLEMENT
This Amended Stipulation and Agreement of Compromise and Settlement
(the "Stipulation" or "Settlement") is entered into between the plaintiffs in
the above-captioned consolidated adversary proceedings (the "Bankruptcy Court
Action") and civil action (the "District Court Action") (collectively, the
"Actions") now pending in the United States Bankruptcy Court for the District
of Massachusetts (the "Bankruptcy Court") and the United States District
Court for the District of Massachusetts (the "District Court"), respectively,
and Sears, Roebuck and Co. ("Sears"), subject to the approval of the
Bankruptcy Court and the District Court as provided for below:
WHEREAS:
A. The Bankruptcy Court Action was commenced in the Bankruptcy
Court on March 31, 1997, with the filing of the Brioso adversary proceeding
on behalf of a nationwide class of bankruptcy debtors who had entered into
reaffirmation agreements with Sears that were not filed with the appropriate
bankruptcy court as required by the U.S. Bankruptcy Code. The Caldas
adversary proceeding was subsequently consolidated with Brioso. The
complaints in the Bankruptcy Court Action, including as subsequently amended,
alleged that Sears, pursuant to a regular policy and practice, obtained
reaffirmation (or similar) agreements from individual debtors, by which the
debtors agreed to repay all or part of their pre-petition indebtedness to
Sears, and did not file such agreements with the bankruptcy court in which
the debtors' Chapter 7 proceedings were pending, as required by the
Bankruptcy Code. (The Bankruptcy Court Action also named Western Auto Supply
Company ("Western Auto"), a subsidiary of Sears, as a defendant based on
substantially the same allegations.) The complaints further alleged that
Sears, acting pursuant to its written policies and procedures, deceived
bankruptcy debtors by claiming or implying that such agreements would be
filed with bankruptcy courts, that the agreements had legal effect as
enforceable agreements, and that monies were due which were not in fact owed,
and by threatening actions that Sears either did not intend to take or was
not legally permitted to take.
B. The Bankruptcy Court Action further alleged that Sears policy
and practice in soliciting bankruptcy debtors to execute reaffirmation
agreements subject to the Bankruptcy Code without complying with the
provisions of the Code, in collecting monies pursuant to such agreements, and
by otherwise enforcing or attempting to enforce such agreements, abused the
process of the bankruptcy courts by violating Bankruptcy Code provisions
governing post-petition reaffirmation of debt, 11 U.S.C. 524, the automatic
stay provision of the Bankruptcy Code, 11 U.S.C. 362, and the discharge
injunction granted under 11 U.S.C. 524; constituted unfair and deceptive acts
and practices in violation of the Massachusetts Consumer Protection Act
(Mass. G.L. ch. 93A); and violated the state unfair and deceptive practices
law of each state in which Sears has engaged in such practice.
C. The Bankruptcy Court Action alleged that plaintiffs and class
members have been damaged by Sears conduct in that they have paid monies to
Sears under illegal and unenforceable agreements, and have unwittingly
deprived themselves of the protection of the Bankruptcy Code. For relief,
the complaints prayed, among other things, for judgment declaring Sears
conduct unlawful, ordering Sears to refund to debtors all payments made under
such agreements, and assessing exemplary or punitive damages against Sears
for its alleged willful violations of the Bankruptcy Code, as well as double
or treble damages.
D. The District Court Action was commenced on May 20, 1997 by
plaintiffs in that Action through the filing of a complaint in the District
Court, wherein there was previously pending an action entitled United States
of America v. Sears, Roebuck and Co., Civil No. 97-10839-JLT (the "United
States Action"). The United States Action was commenced against Sears on
April 17, 1997 by the United States acting through the United States Attorney
for the District of Massachusetts, and alleged, like the Bankruptcy Court
Action, that Sears induced individuals who filed for protection under the
Bankruptcy Code to enter into reaffirmation agreements and that Sears failed
to file all such agreements with the appropriate bankruptcy court. The
complaint in the United States Action further alleged that Sears obtained
unenforceable reaffirmation agreements by misrepresenting to debtors that the
agreements would be binding on them and collected debts through the U.S.
mails by virtue of reaffirmation agreements known by Sears to be
unenforceable, in violation of 18 U.S.C. 1341 and 1345. For relief, the
complaint sought, among other things, an injunction against Sears ordering it
to cease its practice and to file all reaffirmation agreements henceforth
obtained with the appropriate bankruptcy court prior to entry of the debtor's
order of discharge; an order requiring Sears to conduct a nationwide audit to
identify each and every debtor from whom it obtained a reaffirmation
agreement that was not filed with the bankruptcy court; an order that Sears
impose a moratorium on billing and collecting from each debtor so identified;
an order that Sears pay damages in the form of restitution to each debtor so
identified; and an order that Sears pay penalties in an unspecified amount to
the United States of America.
E. Plaintiffs commenced the District Court Action in the
District Court since the United States Action, which was previously pending
in that Court, arose out of the same subject matter as the Bankruptcy Court
Action and in the belief that their filing of the District Court Action would
facilitate their ability to further protect the interests of the class. In
addition, the broader jurisdiction of the District Court enabled the
plaintiffs' complaint in the District Court Action to assert additional
claims arising out of Sears (and Western Auto's) failure to file all
reaffirmation agreements with the appropriate bankruptcy court, over which
claims the Bankruptcy Court could not exercise jurisdiction. In addition to
the claims alleged in the Bankruptcy Court Action, the District Court Action
alleged, on behalf of a nationwide class of debtors, that defendants' conduct
constituted a violation of the federal Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. Sec. 1961 et seq. ("RICO"), and of the federal
Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq. For relief, the District
Court Action prayed, among other things, for judgment declaring defendants'
conduct unlawful, ordering defendants to refund to debtors all payments made
under the allegedly illegal and unenforceable reaffirmation agreements, and
assessing exemplary or punitive damages as well as double or treble damages.
F. The issues raised by the Bankruptcy Court Action and the
District Court Action first came to the attention of the senior management of
Sears on Friday, March 28, 1997. Sears represents that prior to March 28,
1997, no member of Sears senior management or of its board of directors knew
that Sears had failed to file reaffirmation agreements with the appropriate
bankruptcy courts in violation of the Bankruptcy Code or that Sears had
sought to collect upon agreements that had not been so filed or upon
reaffirmation agreements that had been filed but were subsequently
disapproved or rejected by the bankruptcy courts or rescinded by the debtor.
On that date, Sears senior management directed that an immediate audit be
commenced in an effort to ascertain the scope and nature of the manner in
which reaffirmation agreements had been handled by Sears, including the
failure to file with the appropriate bankruptcy court. On Monday, March 31,
1997, Sears senior management directed that all reaffirmation agreements
henceforth be filed with the appropriate bankruptcy court.
G. On April 9, 1997, Sears publicly acknowledged that the
company had exercised flawed legal judgment and execution in failing to file
all reaffirmation agreements with the appropriate bankruptcy court. In that
connection, Sears also indicated that it would compensate bankruptcy debtors
nationwide whose debt reaffirmations were not filed as required by the
Bankruptcy Code during the period 1992 to date.
H. Sears thereafter expressed its desire to effect a global
resolution of the reaffirmation agreement matter and discussions were
commenced with counsel for plaintiffs. Sears discussions have also included
the Attorney Generals of the United States; the United States Attorney for
the District of Massachusetts, who commenced the United States Action; the
Office of the United States Trustee for the District of Massachusetts; and
the Boston Regional Office and the Consumer Protection Bureau of the United
States Federal Trade Commission.
I. On April 14, 1997, the Bankruptcy Court entered an Order in
a related proceeding initiated by the Bankruptcy Court's own Order to Show
Cause Why Compensatory And Punitive Damages Should Not Be Imposed On Sears,
Roebuck and Co. for Wilful Violation Of The Discharge Order and Of 11 U.S.C.
302(a) (filed on April 9, 1997 in In re Travis Amalfitano and others, Case
No. 95-15260-CJK). The Bankruptcy Court's April 14, 1997 order, which was
issued following a hearing in that Court held on April 11, 1997, ordered on
the consent of Sears: (1) that Sears retain the services of Professor
Lawrence P. King, the Charles Seligson Professor of Law at New York
University School of Law and of counsel to the law firm of Wachtell, Lipton,
Rosen & Katz (one of the firm's representing Sears in the Actions), to
perform a legal review of Sears policies and procedures with regard to
reaffirmation agreements and that Sears adopt Professor King's
recommendations to assure future compliance with the requirements of Sec. 524
of the U.S. Bankruptcy Code; and (2) that no later than April 16, 1997 at
5:00 p.m., Sears cease sending billing statements and assessing interest
charges to the approximately 2,700 debtors identified in that proceeding as
having had reaffirmation agreements with Sears that were not filed with the
bankruptcy court.
J. By Order dated April 16, 1997, the Bankruptcy Court, on Sears
consent and noting that the plaintiffs and Sears had expressed a genuine
interest in achieving an equitable, appropriate, national resolution of the
issues raised in the Bankruptcy Court Action, conditionally certified a
nationwide class for settlement purposes only. The Order appointed the
plaintiffs in the Bankruptcy Court Action as class representatives and
plaintiffs' counsel (Grant & Roddy, Edelman & Combs, and The Law Office of
Claude LeFebvre) as class counsel.
K. On April 21, 1997, the District Court entered a Stipulated
Order by which Sears, without making any admissions relating to the
allegations in the United States Action and in furtherance of its stated
desire to cooperate with all parties to achieve an appropriate resolution of
the reaffirmation matter, assented to a preliminary injunction. The
Stipulated Order provided in summary: (1) that Sears henceforth file all
reaffirmation agreements with the appropriate bankruptcy court on or before
the date of the debtor's order of discharge; (2) that Sears complete its
then-ongoing national review to identify those debtors who filed Chapter 7
petitions in bankruptcy and from whom Sears obtained a reaffirmation
agreement that was not filed with the appropriate bankruptcy court from
January 1, 1992 to date; (3) that, specifically, Sears identify those debtors
in three stages (by May 9, 1997 -- those debtors from August 1996 to the
present; by June 3, 1997 -- those debtors from July 1994 through July 1996;
and by August 15, 1997 -- those debtors from January 1, 1992 through June
1994); (4) that Sears provide the United States Attorney's Office with status
reports every two weeks, beginning on May 1, 1997, regarding the
identification process and the names and addresses of the debtors so
identified; (5) that Sears cease all collection activities upon completion of
the identification of the individuals in the groups set forth above; and (6)
that Sears calculate the amounts charged and collected from the debtors as
identified, inclusive of interest, finance and other charges relating to each
such debtor's obligations to Sears as of the filing of the debtor's
bankruptcy petition.
L. Class counsel have sought and obtained substantial formal and
informal discovery from Sears. That discovery has included production of
documents, depositions of Sears employees, and interviews of Sears employees.
In addition, class counsel have conducted their own investigation into Sears
practices and procedures by contacting members of the class and various
debtors' counsel in other jurisdictions, and have engaged in extensive
discussions with counsel for Sears with regard to Sears prior practices and
procedures, its current practices and procedures, and other issues relevant
to the Actions.
M. Class counsel, furthermore, have consulted and shared
information and analyses regarding the Actions and this proposed Settlement
with the Office of the United States Trustee of the District of
Massachusetts, the United States Attorney's Office for the District of
Massachusetts, and the Office of the Massachusetts Attorney General; and
representatives of such governmental authorities have participated in
settlement discussions with Sears that facilitated the agreement to the
Settlement.
N. The Attorneys General of the United States support the
Settlement and believe that it provides a fair, reasonable and adequate
resolution of the claims of the nationwide class of debtors being settled.1
In addition, the Federal Trade Commission has approved, subject to a
statutory notice and comment period, and Sears has consented to an Agreement
Containing Consent Order which provides, among other things, that the FTC
will not institute action under Section 19 of the Federal Trade Commission
Act if consumers receive full redress; such requirement is satisfied under
the terms of the Settlement, so long as the amount paid in restitution is at
least $100 million (this amount could be adjusted upward or downward by not
more than 25 percent based on Sears on-going nationwide review to identify
eligible debtors).
1. These approvals are supported by the staffs of each office and are
subject to final approval. The state Attorneys General group previously
included 39 states and is anticipated to include 50 states.
O. Based on their review and analysis of the relevant facts and legal
principles, class counsel believe that the terms and conditions of the
Settlement are fair, reasonable and adequate, and beneficial to and in the
best interests of plaintiffs and the proposed Settlement Class (as defined
below). Class counsel have determined to execute this Stipulation and urge
approval by the Bankruptcy Court and the District Court of the Settlement
after considering the substantial damages that the Settlement Class will
receive pursuant to the Settlement; the fact that the Settlement provides for
members of the Settlement Class to receive such payments in the most
expeditious and efficient manner practicable, and thus much sooner than would
be possible were the claims asserted to be litigated through trial and appeal
even if such claims were to be found to be meritorious in all respects; the
fact that the Settlement provides for significant monetary benefits to the
Settlement Class beyond the restitution damages paid with respect to unfiled
(and otherwise unenforceable) reaffirmation agreements, including the amounts
to be distributed out of a $25 million fund being created by Sears, the
elimination of finance charges on post-petition purchases, Sears agreement
not to act upon its security interest in goods sold to members of the
Settlement Class prior to their bankruptcy filing, the payment of interest by
Sears, and Sears commitment to continue to extend credit to members of the
Settlement Class provided for herein; the provision of the Settlement that
obliges Sears, at its sole expense, to identify members of the Settlement
Class from January 1, 1992 to date and to provide the benefits of the
Settlement to such persons without their having to take any affirmative steps
(including provisions that require Sears to bear the onus of incomplete and
unavailable information by treating reaffirmation agreements for which there
is no direct evidence of their having been filed with the bankruptcy court as
having not been filed); the fact that the Settlement provides for payments to
members of the Settlement Class who executed reaffirmation agreements before
January 1, 1992 notwithstanding that such claims could be held barred by
applicable statutes of limitations and/or the doctrine of laches; the
defenses available to Sears for claims under state law that seek to go beyond
the unenforceability of unfiled reaffirmation agreements under the U.S.
Bankruptcy Code, including the possibility that any state law claims would be
deemed to be preempted by the Bankruptcy Code; the defenses available to
Sears for claims under the Bankruptcy Code, including whether persons whose
reaffirmation agreements were not filed could obtain recoveries for violation
of the discharge injunction; the defenses available to Sears for claims under
RICO, including defenses based on the 18 U.S.C. 1962(c) requirement of
establishing a RICO "enterprise" distinct from the defendant, Sears; the
defenses available to Sears with respect to the availability and amount of
any punitive relief; Sears consent to the certification of a nationwide class
of debtors; the provisions of the Settlement regarding Sears future practices
and policies with regard to reaffirmation agreements and the ability to
enforce such provisions by the Bankruptcy Court and the District Court that
the Settlement provides; and the fact that the Settlement allows members of
the Settlement Class to exclude themselves from the Settlement Class should
they so desire and thereby not be precluded by the Settlement from
individually seeking to pursue the claims alleged in the Actions or any other
claims relating to the conduct of Sears at issue in the Actions.
P. Sears has agreed to the Settlement consistent with its
acknowledgment that the company previously had exercised flawed legal
judgment and execution in failing to file reaffirmation agreements. Sears
considers it desirable that the Actions be settled on a global nationwide
basis in order to achieve what it believes is a fair, responsible, and final
resolution of the claims being settled.
In light of the foregoing, the parties propose to settle the Actions
in accordance with the terms, provisions and conditions of this Stipulation
as set forth below.
NOW, THEREFORE, IT IS STIPULATED AND AGREED, subject to approval by
the Courts as provided hereinbelow pursuant to Rule 23 of the Federal Rules
of Civil Procedure (and, in the case of the Bankruptcy Court Action,
Bankruptcy Rule of Procedure 7023), by and between Sears (and Western Auto),
and the plaintiffs for themselves and for the Settlement Class (defined
below), that all claims, rights and causes of action, damages, losses and
demands of any nature whatsoever, state or federal, including but not limited
to claims arising under the U.S. Bankruptcy Code, the Federal Rules of
Bankruptcy Procedure, or any state or federal law regarding consumer or
debtor fraud or unfair or deceptive trade practices, or otherwise (and
including but not limited to whether for compensatory damages, consequential
damages, restitution, punitive damages, contempt, sanctions, penalties,
injunctive relief, declaratory relief, or otherwise), whether known or
unknown, that are, could have been or might in the future be asserted by any
of the plaintiffs or any member of the Settlement Class, whether directly,
representatively or in any other capacity, against Sears, Western Auto or any
of their present and former officers, directors, shareholders, employees,
accountants, representatives, attorneys, subsidiaries, affiliated companies,
divisions, successors, heirs, agents and assigns (the "Released Persons"), in
connection with or that arise out of Sears (or Western Auto) obtaining of a
reaffirmation agreement from a member of the Settlement Class, the nonfiling
(or untimely filing) of any such agreement with the appropriate bankruptcy
court, the solicitation or billing of or collecting under or any steps to
enforce any such unfiled agreement (or any filed reaffirmation agreement that
was subsequently disapproved or rejected by the bankruptcy court (or that was
not approved by such court where approval was required for the enforceability
of such agreement) or that was subsequently rescinded by the debtor), or any
communications, representations or omissions by or on behalf of Sears (or
Western Auto) with respect to any of the foregoing, or any acts, facts,
transactions or occurrences, alleged or otherwise asserted or that could have
been asserted in either of the Actions (all of which are hereinafter referred
to as the "Settled Claims"), shall be compromised, settled, released and
discharged with prejudice, upon and subject to the following terms and
conditions:
1.1. Settlement Class. For settlement purposes only, the Actions
shall proceed on behalf of a class (the "Settlement Class") defined as all
individuals (a) who filed a petition for relief under the Bankruptcy Code;
(b) who listed Sears as a creditor, against whom Sears filed a claim, or who
owed a debt or alleged debt to Sears; (c) who, subsequent to the filing of
the bankruptcy petition, executed an agreement with Sears purporting to
reaffirm such debt or alleged debt or to redeem the applicable property, or
which agreement is otherwise subject to the provisions of 11 U.S.C. 524(c)
(collectively referred to herein as "reaffirmation agreements"); and (d) such
agreement either was not filed with the appropriate bankruptcy court in
accordance with 11 U.S.C. 524(c)(3) prior to the order of discharge, or was
filed with the bankruptcy court and was either (i) disapproved or rejected by
the bankruptcy court or not approved by such court when necessary to the
enforceability of such agreement, or (ii) rescinded by the debtor.
1.2. The Settlement Class is thus defined on a nationwide basis,
not limited to individuals whose petitions under the Bankruptcy Code were
filed in any particular jurisdiction or region.
1.3. Reaffirmation agreements referred to herein include all
agreements, whether written or oral; whether entered into during the pendency
of the debtor's bankruptcy proceeding or following the issuance of the
debtor's discharge by the bankruptcy court; and whether such agreements did
or did not provide for the continued extension of credit to the debtor by
Sears.
1.4. Excluded from the Settlement Class shall be any individuals
who validly request exclusion in accordance with the procedures set forth in
paragraph 17 of this Stipulation.
1.5. References to "Sears" in this paragraph (and paragraph 2)
include Sears subsidiary, Western Auto.
2. Filing of all reaffirmation agreements. Sears and its
agents, servants, employees, attorneys and all persons acting in concert and
participation with them, shall henceforth file all reaffirmation agreements
obtained from debtors pursuant to 524(c) and (d) of the U.S. Bankruptcy Code
(11 U.S.C.) with the appropriate U.S. Bankruptcy Court on or before the date
that the debtor's order of discharge is entered, provided that the
reaffirmation agreement is received by Sears not less than five business days
prior to the date that the debtor's order of discharge is entered.
3.1. Identification of members of the Settlement Class from
January 1, 1992 to date. Sears shall complete its ongoing national review to
identify those persons who, from January 1, 1992 to April 1, 1997 (the date
of the written directive that henceforth all reaffirmation agreements be
filed as required by the Bankruptcy Code), filed Chapter 7 petitions in
bankruptcy and from whom Sears obtained a reaffirmation agreement that was
not properly filed with the appropriate bankruptcy court (or that was filed
but later rescinded by the debtor or disapproved or rejected by the
Bankruptcy Court, or not approved by the court where approval was required
for the enforceability of the agreement) ("Identified Class Members").
3.2. Specifically, under the identification process, Sears has
identified members of the Settlement Class who filed for bankruptcy during
the period from August 1996 to the present, and during the period from July
1994 through July 1996. By August 15, 1997, Sears will identify members of
the Settlement Class who filed for bankruptcy during the period from January
1, 1992, through June 1994.
3.3. The time periods and methodologies set forth in paragraph 3.2
above reflect Sears best current belief as to its ability to make such
identifications and it is understood that Sears, in undertaking the tasks set
forth in this paragraph 3, will use its best efforts to identify all
individuals and to do so within the stated time periods.
3.4. Sears will provide class counsel a status report every two
weeks, in conjunction with its reports to the U.S. Attorney's Office in
accordance with the Stipulated Order in the United States Action, setting
forth its efforts to date in identifying such individuals, and providing the
names and last known addresses of each debtor so identified.
3.5. If after the dates specified above, Sears determines based
upon further review of available data that a debtor previously identified as
belonging to one of the above groups should not be so included or identifies
a debtor who should have been included in one of the above groups that was
not so included, Sears shall promptly delete or add such debtor as
appropriate and notify class counsel in its next status report of such
deletions or additions (and the reasons therefor).
3.6. In the identification process, Sears shall include in the
Settlement Class all debtors who filed for bankruptcy from January 1, 1992 to
April 1, 1997 whose Sears account records indicate the existence of a
reaffirmation agreement (e.g., payment activity after bankruptcy indicator
removed from the account; account codes indicating reaffirmation) even if no
original, copy or other evidence of the existence of such an agreement is
located, absent contrary direct evidence that the reaffirmation agreement was
filed with the bankruptcy court and not thereafter disapproved, rejected or
rescinded.
3.7.1. In the event that Sears is unable to determine from evidence
available to it whether a debtor's reaffirmation agreement was filed, Sears
shall assume that the reaffirmation agreement was not filed and therefore
shall include such debtor in the Settlement Class.
3.7.2. In the process of identifying members of the Settlement Class
from January 1, 1992 to April 1, 1997, Sears shall not treat as filed any
reaffirmation agreement unless it has a physical copy that is stamped with a
court stamp reflecting its pre-discharge filing or if a review of either the
actual court records or an electronic docket search conducted via PACER (or
similar database) reflects its pre-discharge filing and does not indicate its
disapproval or rejection by the Court. Sears may rely on PACER for
indications that a reaffirmation agreement was filed (and whether it was
subsequently disapproved or rejected by the court). Sears shall maintain
either an electronic or paper copy of such report(s) until the Settlement
becomes final. In the event that a reaffirmation agreement filed after an
order of discharge in a case was nonetheless accepted by the court, it shall
be treated by Sears as an unfiled reaffirmation (and therefore in the
Settlement Class).
3.8. The identification process has been and shall continue to be
conducted by Sears at its sole expense. The identification process will
require Sears to access and utilize information for each of the approximately
110 million active credit card accounts it maintained during the period
January 1, 1992 to April 1, 1997. Sears estimates that, for this period, it
obtained reaffirmation agreements in approximately 510,000 cases, with a
total dollar volume of reaffirmed debt (filed and unfiled) of approximately
$412 million. Sears estimates that the identification process (exclusive of
the costs of its own internal personnel) will cost Sears in excess of
$10 million, including the costs of outside vendors of bankruptcy filing and
related information being purchased by Sears.
3.9. The identification process conducted by Sears will be
assisted in by Sears Internal Audit and Deloitte & Touche LLP. Both Sears
Internal Audit and Deloitte & Touche LLP will participate in the testing of
data collection activities and findings from corporate records and will
assist Sears in managing the collection and analysis of data provided by
outside vendors. They will also review data-matching results for the debtor
identification process and review the application of payment methodologies
set forth in this Stipulation. Deloitte & Touche LLP shall periodically
report to class counsel as requested on these subjects.
4.1. Moratorium on billing. Within two business days after
identification of a debtor as an Identified Class Member, Sears has
implemented and shall continue to implement steps to cease all collection
activities on that individual's Sears account, including instructing any
collection agency to which the account of an Identified Class Member has been
referred to cease all collection activities and return the account to Sears.
4.2. As to such accounts, Sears shall suspend all billing,
including for both reaffirmed indebtedness and post-petition purchases, and
suspend the accrual of any finance charges. In addition, any available "open
to buy" credit for such accounts shall be maintained as available. Sears
shall notify Identified Class Members in writing of any such activities
relating to their accounts.
4.3. Following the calculation of the new balance of an individual
account pursuant to paragraph 5, Sears may recommence the billing and
collection of that account. No finance or other charges shall be made on
account of the moratorium on billing hereunder. Sears shall notify
Identified Class Members in writing of any such activities relating to their
accounts.
5.1. Payments to Identified Class Members. Sears shall remit to
Identified Class Members, as damages, all amounts paid by them to Sears with
respect to reaffirmed debt, with interest, as follows:
5.1.1. The amount of reaffirmed indebtedness for the account of each
Identified Class Member shall be treated as a nullity and reset to $0. All
post-petition payments shall be deemed to have been made first on account of
reaffirmed indebtedness (including all finance charges, late fee charges,
returned check charges or other similar charges with respect thereto)
(collectively, "finance charges"), and, to that extent, shall be payable back
to such member, with interest as provided below, and the balance of the
account shall be reset to reflect only the remaining balance on post-petition
purchases.
5.1.2. If such person made no post-petition purchases, the balance
of his or her account shall be reset to $0. If the person made post-petition
purchases, all finance charges attributable to such purchases shall be
eliminated and the new balance of such person's account shall equal the
amount of such post-petition purchases (as defined in paragraph 5.2.1).
5.1.3. If a person made post-petition payments in excess of the
amount of reaffirmed debt plus finance charges on account of such reaffirmed
debt, the amount payable to such person shall equal the sum of reaffirmed
debt and finance charges on account of reaffirmed debt, and such excess shall
reduce such person's new account balance calculated in accordance with
paragraph 5.1.2. In no case shall the amount of such person's new account
balance due exceed the balance of the account prior to giving effect to this
Settlement. (If such would occur but for the preceding sentence, the amount
by which the balance due is reduced as a result of the preceding sentence
shall reduce the amount payable under paragraph 5.1.1.)
5.2. In performing the calculation, the following definitions and
practices shall be followed:
5.2.1. Post-petition purchases shall consist of all purchases of
merchandise, services or insurance (excluding CAPP (Credit Account Protection
Plan) insurance) made on or after the date of the Identified Class Member's
bankruptcy filing net of all returns, cancellations and adjustments on such
purchases.
5.2.2. Post-petition payments shall consist of all payments (whether
on account of finance changes or otherwise) received by Sears on or after the
date of the Identified Class Member's bankruptcy filing.
5.2.3. The amount of finance charges on account of reaffirmed
indebtedness shall be calculated on the basis of the highest rate charged on
outstanding balances on or after the date of the Identified Class Member's
bankruptcy filing, and any post-petition payments will be deemed first to
apply to finance charges on account of reaffirmed amounts outstanding and
then to principal with respect to such amounts.
5.2.4. The calculation has (and is intended to have) the effect of
returning (with interest) finance charges previously assessed on reaffirmed
indebtedness, and of removing finance charges previously assessed on post-
petition purchases.
5.2.5. The interest payable under paragraph 5.1.1 shall be
calculated as follows: All post-petition payments shall be recognized as if
received by Sears on the first day of the billing cycle during which the
payments were actually received. If an individual payment was received on
account of reaffirmed indebtedness and is therefore payable in accordance
with paragraph 5.1.1, monthly interest at the annual rate of 10% shall be
added to the amount of such individual payment to calculate the total amount
payable under paragraph 5.1.1. Interest shall be calculated through the end
of the most recently completed billing cycle prior to the date on which
payment to the member of the Settlement Class is mailed.
5.3. The calculation of the compensation damages to Identified
Class Members shall be made as of the date of the next billing cycle of each
Identified Class Member (or, at Sears option, 30 days) following the date
that the Settlement becomes final (or, at Sears option, following approval of
the Settlement by the District Court).
5.4. Any amounts payable to an Identified Class Member shall be
paid by a Sears check mailed by first class mail to such person's last known
address. No part of such amounts may be paid in any other form (such as a
gift certificate or coupon even if so requested by a member of the Settlement
Class).
5.5. The damages to Identified Class Members shall be provided as
soon as practicable following the Settlement becoming final (or, at Sears
option, upon approval of the Settlement by the District Court).
5.6. Once the calculation of the new balance of an Identified
Class Member under this paragraph 5 has been properly made by Sears, Sears
shall be entitled to resume the billing and collecting of such account in the
ordinary course, and any activity in or with respect to such account after
such time shall for all purposes be unaffected by the Settlement.
5.7. Sears calculation of the compensation under this paragraph
5 (as well as paragraph 6 below) shall be overseen by the accounting firm of
Deloitte & Touche LLP. Deloitte & Touche LLP shall be retained for this
purpose by Sears at Sears sole expense, and shall periodically report to
class counsel on the calculation process as requested.
5.8. The parties shall also retain a nationally recognized firm
to act as Settlement Administrator, at Sears expense. The parties shall
agree on the choice of the Settlement Administrator within 30 days of the
execution of this Stipulation (and such choice shall be subject to reasonable
approval by the Attorneys General of the United States who support the
Settlement); absent such agreement, the parties shall submit their respective
proposals to the Court, whose decision shall be final. The Settlement
Administrator shall review the calculation of the amounts payable under
paragraphs 5, 6 and 7 and shall perform the other tasks assigned to it in
this Stipulation and the exhibits hereto.
5.9. In addition to the compensation described above, Sears shall
pay each of the named plaintiffs $2,500 for serving in the capacity of a
representative of the plaintiff class, subject to approval of the Courts.
6.1. Payments to members of the Settlement Class other than
Identified Class Members. Members of the Settlement Class other than
Identified Class Members, including individuals who executed reaffirmation
agreements with Sears prior to January 1, 1992 that were not filed with the
bankruptcy court (or if filed, were thereafter disapproved, rejected or
rescinded, or not approved where approval was required for enforceability),
shall be eligible for compensation damages on the same basis as Identified
Class Members, as follows:
6.2. Because Sears is unable as a practical matter to identify
such persons from either its own records or records available from other
sources, and does not have complete purchase and payment data for the pre-
1992 period, members of the Settlement Class other than Identified Class
Members may seek such compensation damages by filing a Proof of Claim in the
form annexed as Exhibit A hereto. The Proof of Claim, to be valid, must
comply with the requirements set forth in the Proof of Claim. Proofs of
Claim will be processed by the Settlement Administrator in accordance with
guidelines to be submitted by the parties to the Courts.
6.3. If the person filing a Proof of Claim is able to supply
acceptable documentary information in the form of account statements (or
other documentary evidence acceptable to the Settlement Administrator as)
reflecting the record of his or her post-petition purchases from and cash
payments to Sears, such person's Claim shall be calculated on the same basis
as Identified Class Members' set forth in paragraph 5.
6.4. If such person does not supply such documentation, Sears
shall use its reasonable best efforts to ascertain the record of such
person's post-petition purchases from and cash payments to Sears; and if such
information is obtained, such person's Claim shall be calculated on the same
basis as Identified Class Members' set forth in paragraph 5.
6.5.1. If the Settlement Class member does not supply the
information and Sears is not able using its reasonable best efforts to
produce the information necessary to calculate the person's Claim on the same
basis as Identified Class Members set forth in paragraph 5, the total amount
payable to such person under paragraphs 5 and 6 shall be calculated to
represent the same percentage of that person's reaffirmed indebtedness (which
must be established by documentary evidence) as the average percentage of
reaffirmed indebtedness that Sears provides as compensation damages to
Identified Class Members under paragraph 5. If the Settlement Class member
cannot prove the amount of reaffirmed indebtedness in accordance with the
guidelines to be submitted by the parties to the Courts, the total amount
payable to such member nevertheless shall be calculated to represent the same
percentage of that member's pre-petition indebtedness to Sears that was
discharged by a bankruptcy court (which, together with some post-petition
payment activity, must be established by documentary evidence as provided in
the guidelines) as the average percentage of pre-petition indebtedness that
Sears provides as compensation damages to Identified Class Members under
paragraph 5. The average percentages to be used in calculating compensation
damages under this paragraph shall be calculated by Sears as soon as
practicable following the completion of the calculation of the compensation
damages to be provided by Sears to Identified Class Members under
paragraph 5.
6.5.2. If a person filing a Proof of Claim is able to supply
documentary information acceptable to the Settlement Administrator
substantiating his or her entitlement under the basis provided for Identified
Class Members to an amount greater than would result were such person's Claim
to be calculated under paragraph 6.5.1, such person's Claim shall be
calculated to be such greater amount.
7. $25 Million additional fund provided to Settlement Class
Members. In addition to the amount payable to Settlement Class members under
paragraphs 5 and 6, Sears shall provide a fund of $25 million to be
distributed to the members of the Settlement Class entitled to receive
payments under paragraphs 5 and 6, as follows: Each such member shall
receive the same share of the $25 million fund as such member's pro rata
share of the total amount payable by Sears to all Settlement Class members
under paragraphs 5 and 6 (such amounts shall not include interest calculated
under paragraph 5.3.5).
8. Cy pres fund for consumer education. In the event that the
total amounts payable by Sears as compensation to members of the Settlement
Class who executed reaffirmation agreements with Sears after January 1, 1992
ultimately aggregate less than $100 million (separate and apart from the
$25 million payable under paragraph 7), that difference shall not be retained
by Sears but rather shall be paid by Sears into a cy pres fund to be devoted
to consumer credit education (including personal bankruptcy education,
consumer finance and debt collection issues and debtor counsel education).
The cy pres fund shall be disbursed as directed by the Attorneys General of
the United States (who support the Settlement).
9.1 Treatment of members of the Settlement Class who are deceased
or cannot be located. Where a member of the Settlement Class is deceased,
Sears will, upon receipt of proper notification and documentation, make the
payment to such member's heirs or estate.
9.2 If a payment sent by Sears to a member of the Settlement
Class in accordance with paragraphs 5, 6 or 7 is returned with a forwarding
address provided by the Postal Service, Sears will cause it to be remailed to
the address or addresses provided. If a mailing is returned without a
forwarding address provided by the Postal Service, or is otherwise designated
by the Postal Service as being an invalid address, Sears shall take
reasonable steps (including skip-tracing) to locate the affected class
member. If the cost of such effort does not exceed the amount due to such
member by more than $25, then no such steps need be taken. Amounts that
cannot be paid to a member of the Class due to such an uneconomic tracing
expense or failure of such tracing to return a valid address shall be
directed to the Attorney General of the state of the last known address of
such member, as determined by the Settlement Administrator, to be applied by
the Attorney General for consumer protection purposes, or for other purposes
as required by law.
9.3. If a class member's check is not cashed within six months,
it shall be null and void (the checks may be stamped or printed with a legend
to that effect) and Sears shall have no further obligation to make payment to
such member. Amounts not paid due to failure of a member of the class to
cash such a check shall be directed to the Attorney General of the state of
the last known address of such member, as determined by the Settlement
Administrator, to be applied by the Attorney General for consumer protection
purposes, or for other purposes as required by law.
9.4. In the event that a check payable to a class member remains
outstanding for any reason described in this paragraph 9, then the
recipient's right to receive the amount payable shall terminate, and be
deemed to be assigned to the Attorneys General of the United States to be
applied as directed above, and Sears shall not have any obligation whatsoever
to any person or State with respect to such amounts.
10.1. Continuation of extension of credit by Sears; credit reports.
Sears shall continue to extend credit to members of the Settlement Class who
at the time of the calculation described in paragraph 5 have an "open to buy"
extension of credit, notwithstanding the voiding of reaffirmed debt amounts
previously owed by such persons, it being understood that Sears shall treat
its relationship with such persons on the same basis as its relationship with
its credit customers generally, including with respect to the maintenance and
adjustment of "open to buy" levels, fees, charges and all other matters.
10.2. Sears shall undertake to determine if it has made any
negative reports to credit bureaus or similar organizations on account of
nonpayments by members of the Settlement Class (whether Identified Class
Members or other class members who file Proofs of Claim as provided for in
the Settlement) based on reaffirmed indebtedness, and will advise such
bureaus or organizations to correct such reports. Sears will also notify
such members in writing of its communications with such organizations.
11. Waiver of Sears security interest. With respect to all
members of the Settlement Class, Sears shall not seek to recover any of the
goods sold by it in which Sears claimed a security interest prior to such
person's bankruptcy filing, and shall in all respects treat such security
interest as waived.
12. Revision of Sears policies and procedures. Class counsel
will review the revision of Sears policies and procedures regarding
reaffirmation agreements already implemented and to be implemented by Sears
pursuant to the recommendations of Professor King, and shall consult with
Professor King as to such matters.
13. Western Auto. Members of the Settlement Class who executed
reaffirmation agreements with Western Auto will be entitled to compensation
on the same terms as other members of the Settlement Class who are not
Identified Class Members.
14. Full settlement. The obligations of Sears under this
Stipulation shall be in full settlement, compromise, release and discharge of
the Settled Claims and each of them. Upon approval of the Settlement
provided for in this Stipulation by the District Court, Sears, the Released
Persons or any of them shall have no other or further liability or obligation
to any member of the Settlement Class in any court or forum (state or
federal) with respect to the Settled Claims, except as expressly provided
herein.
15. Motion for entry of initial Order. As soon as practicable
after this Stipulation has been executed, the parties shall jointly move the
Bankruptcy Court and the District Court for approval of the Settlement. The
parties shall apply jointly in each court for an order, in the forms annexed
hereto as Exhibit B (the "Order"), providing, among other things (the
provisions of subparagraph (d) being included only in the Order to be applied
for in the District Court):
(a) that for purposes of settlement only, the Actions shall be
maintained and proceed as a class action, pursuant to Rules 23(a) and (b)(3)
of the Federal Rules of Civil Procedure, on behalf of the Settlement Class;
(b) that (i) the Notice of Pendency of Class Actions, Class
Action Determination, Proposed Settlement of Class Actions, Settlement
Hearings, and Right to Appear, in the form annexed hereto as Exhibit C (the
"Notice"); (ii) the Summary Notice of Class Action Determination, Proposed
Settlement of Class Actions and Settlement Hearing in the form annexed hereto
as Exhibit D (the "Summary Notice"), and the Notice Insert to be inserted in
Sears billing statements in the form annexed hereto as Exhibit E (the "Notice
Insert"); and the Western Auto Notice Insert to be inserted in Western Auto
billing statements in the form annexed hereto as Exhibit F (the "Western Auto
Notice Insert"), are approved by the Court; and that the mailing of the
Notice in the manner and form set forth in the Order, the publication of the
Summary Notice in the manner and form set forth in the Order, the insertion
of the Notice Insert in Sears statements mailed to its credit customers for
a full billing cycle, and the insertion of the Western Auto Notice Insert in
Western Auto statements mailed to its credit customers for a full billing
cycle, meet the requirements of Rule 23 of the Federal Rules of Civil
Procedure and due process, constitute the best notice practicable under the
circumstances, and shall constitute due and sufficient notice to all persons
entitled thereto;
(c) that a hearing or hearings (the "Settlement Hearing") shall
be held before the Bankruptcy Court and the District Court, at the respective
time and date to be set by the Courts, to determine whether the proposed
Settlement of the Actions on the terms and conditions set forth in the
Stipulation is fair, reasonable and adequate and should be approved by the
Courts, and whether a judgment should be entered, and to consider such other
matters as may properly come before the Court in connection with the
Settlement Hearing; and
(d) that, pending decision by the Courts on whether to approve
the Settlement, each member of the Settlement Class is barred and enjoined
from instituting or prosecuting any action in state or other federal court
against Sears, Western Auto or any of their present or former officers,
directors, shareholders, employees, accountants, attorneys, representatives,
subsidiaries, affiliated companies, divisions, successors, heirs, agents and
assigns, which assert claims that are Settled Claims that would be released
and discharged upon approval of the Settlement.
16. Order and Final Judgment. If the Settlement (including any
modification thereto made with the consent of the parties as provided for
herein), shall be approved by the Courts following a hearing, the parties
shall jointly request the Courts each to enter an Order and Final Judgment
("Final Order"), among other things:
(a) approving the Settlement as fair, reasonable and adequate and
directing consummation of the Settlement in accordance with its terms and
provisions;
(b) dismissing the Bankruptcy Court Action and the District Court
Action as to Sears and Western Auto with prejudice as against all plaintiffs
and all members of the Settlement Class, without costs except as hereinafter
provided, such dismissal to be subject only to compliance by the parties with
the terms and conditions of the Stipulation and any order of the Courts with
reference to the Stipulation;
(c) permanently barring and enjoining the institution or
prosecution by plaintiffs or any member of the Settlement Class, either
directly or in any other capacity, of any action asserting claims that are
Settled Claims;
(d) releasing and discharging, on behalf of the Settlement Class
and the plaintiffs, the Released Persons from all Settled Claims;
(e) reserving continuing and exclusive jurisdiction over
implementation of the Settlement, and over enforcement, construction and
interpretation of this Stipulation; and
(f) awarding attorneys' fees and expenses to class counsel, or
reserving jurisdiction with respect thereto.
17.1. Requests for exclusion from the Settlement Class. Requests
for Exclusion from the Settlement Class shall list the name, address and
social security number or taxpayer identification number of the person
seeking exclusion.
17.2. If a Request for Exclusion does not include all of the
foregoing information, it shall not be a valid Request for Exclusion and the
person filing such an invalid Request for Exclusion shall be a member of the
Settlement Class. In addition, members of the Settlement Class requesting
exclusion shall be requested to provide the court and year of such person's
bankruptcy filing, Sears account number and the amount of indebtedness to
Sears that the person reaffirmed, albeit the failure to provide such
information shall not effect the validity of the Request for Exclusion. All
persons who properly file Requests for Exclusion from the Settlement Class
shall not be members of the Settlement Class and shall have no rights with
respect to the Settlement.
17.3. Each potential Settlement Class member who does not submit
a properly completed Request for Exclusion no later than twenty (20) days
prior to the Settlement Hearing shall be included in the Settlement Class.
For purposes of determining timeliness, a Request for Exclusion shall be
deemed to have been submitted when posted, if a postmark is indicated on the
envelope and it is mailed, postage prepaid and addressed in accordance with
the instructions in the Notice or, otherwise, when received. Requests for
Exclusion shall be submitted by mailing to the P.O. Box address referred to
in the Notice.
18. Definition of finality. The approval by the Courts of the
Settlement proposed by the Stipulation shall be considered final, and the
Settlement shall be considered final (and Sears obligations hereunder shall
arise) for purposes of this Stipulation, either (a) upon the entry by the
Courts of the Final Order and when the applicable period for the appeal of
such Final Orders shall each have expired without an appeal having been
filed; or (b) if an appeal is taken, upon entry of an order affirming the
Final Order and when the applicable period for the appeal of such affirmance
of the Final Order shall have expired without an appeal having been filed, or
upon entry of any stipulation dismissing any such appeal with no right of
further prosecution of the appeal; or (c) if an appeal is taken from any
decision affirming the Final Order, upon entry of an order in such appeal
finally affirming the Final Order without right of further appeal or upon
entry of any stipulation dismissing any such appeal with no right of further
prosecution of the appeal. None of the obligations of Sears pursuant to the
Settlement shall become effective until the Settlement becomes final.
Notwithstanding the above, Sears shall have the option to declare the
Settlement effective and final upon approval by the District Court (whether
or not then approved by the Bankruptcy Court) or upon such approval having
been finally affirmed on appeal or no appeal therefrom having been taken
within the applicable time period limiting the taking of such an appeal.
19.1. Class counsel application for attorneys' fees and expenses.
Provided that judicial approval of the Settlement has been obtained, class
counsel intend to jointly apply for court approval of an award of attorneys'
fees, plus reimbursement of expenses (including experts' fees). As an
additional benefit to the Settlement Class, any attorneys' fees and expenses
awarded to class counsel shall be paid by Sears and shall not diminish the
benefits of the Settlement to the class. Class counsel's application for
attorneys' fees and expenses may be made, at the option of class counsel, at
or subsequent to the Settlement Hearing. Any attorneys' fees and expenses so
awarded to class counsel shall not be payable unless and until the Final
Order shall become final. Any attorneys' fees and expenses awarded to class
counsel shall be paid as the Court may direct within ten business days after
the Settlement becomes final.
19.2. Sears will pay the costs of all notices and settlement
administration. Plaintiffs and their counsel shall have no responsibility
for any such costs regardless of whether the Settlement is consummated.
Except as provided in this Stipulation, Sears shall bear no other expenses,
costs, damages or fees incurred by any plaintiffs, by any member of the
Settlement Class, or by any of their attorneys, experts, advisors, agents or
representatives.
20. Sears options to withdraw from the Settlement. Sears shall
have the option to withdraw from the Settlement no later than three days
before the Settlement Hearing in the event that valid Requests for Exclusion
are received from persons who together number in excess of that number of
which plaintiffs and Sears have agreed upon or whose aggregate reaffirmed
indebtedness exceeds the amount that plaintiffs and Sears have agreed upon
(which number and amount shall be kept confidential by the parties). In
addition, Sears shall have the option to withdraw from the Settlement no
later than three days before the Settlement Hearing if (a) any action
asserting Settled Claims is allowed to be prosecuted notwithstanding the
Settlement and the Orders provided for herein, or (b) Sears determines in
good faith that the Settlement would not be effective to finally conclude all
of the Settled Claims intended to be finally concluded by the Settlement.
Sears shall also have the option to withdraw from the Settlement if the
Settlement has not become final by December 31, 1997. In the event that
Sears exercises such option to withdraw, a written notice of such withdrawal
and the grounds therefor shall be promptly delivered to all signatories to
this Stipulation. As a result of any such withdrawal, this Stipulation, the
Settlement proposed herein (including any modification thereto made with the
consent of the parties as provided for herein) and any action taken or to be
taken in connection therewith shall be terminated and shall become void and
have no further force and effect except for the obligation of Sears to pay
for any expense incurred in connection with the Notice and administration of
the Settlement.
21. Effect of Settlement not being final. In the event that the
Settlement as provided for in this Stipulation does not become final, or does
not become effective for any reason other than the failure of any settling
party to perform such party's obligations hereunder, then (except as the lack
of the Settlement becoming final because of any appeal may be waived by
Sears) the Stipulation shall become null and void and of no further force and
effect, and all negotiations, proceedings, and statements relating thereto
shall be without prejudice as to the rights of any and all parties hereto and
their respective predecessors and successors, and all parties and their
respective predecessors and successors shall be restored to their respective
positions existing at the date of the Stipulation.
22. No admissions. This Stipulation and all negotiations,
statements and proceedings in connection therewith shall not in any event be
construed as, or deemed to be evidence of, an admission or concession on the
part of Sears of any liability of or wrongdoing by it, and shall not be
offered or received in evidence in any action or proceeding, or used in any
way as an admission, concession or evidence of any liability or wrongdoing of
any nature on the part of Sears, and shall not be construed as, or deemed to
be evidence of, an admission or concession that the plaintiffs or any member
of the Settlement Class have suffered any damage; and shall not be construed
as, or deemed to be evidence of, an admission or concession on the part of
the plaintiffs or any member of the Settlement Class that any of their claims
asserted in the Actions are without merit or that damages recoverable in the
Actions do not exceed the aggregate of the amounts payable pursuant to this
Stipulation.
23. Due authority of attorneys. Each of the attorneys executing
this Stipulation on behalf of one or more parties hereto warrants and
represents that he or she has been duly authorized and empowered to execute
this Stipulation on behalf of each such respective party.
24. Periodic Reports of Settlement Administrator. The Settlement
Administrator shall submit to the Courts, quarterly reports concerning the
implementation of this Stipulation (with the first such report due three
months following this Stipulation becoming final) and a final report upon the
full and complete implementation of this Stipulation.
25. Entire agreement. This Stipulation, including all Exhibits
annexed hereto, constitutes the entire agreement among the parties with
regard to the subject matter thereof. This Stipulation may not be modified
or amended except in writing signed by all signatories hereto or their
successors in interest.
26. Successors. This Stipulation upon becoming operative shall
be binding upon and inure to the benefit of the settling parties hereto
(including the Settlement Class) and their respective heirs, executors,
administrators, successors and assigns and upon any corporation, partnership
or other entity into or with which any settling party hereto may merge or
consolidate.
27. Counterparts. This Stipulation may be executed in any number
of actual or telecopied counterparts and by the different settling parties
hereto on separate counterparts, each of which when so executed and delivered
shall be an original. The executed signature page(s) from each actual or
telecopied counterpart may be joined together and attached to one such
original and shall constitute one and the same instrument.
28. Waivers. The waiver by any party of any breach of this
Stipulation shall not be deemed or construed as a waiver of any other breach,
whether prior, subsequent, or contemporaneous, of this Stipulation.
29. Governing law. This Stipulation shall be construed and
enforced in accordance with the internal laws of the Commonwealth of
Massachusetts.
30. Retention of jurisdiction. The administration and
consummation of the Settlement as provided herein shall be under the
authority of the Bankruptcy Court and the District Court.
31. Additional discovery. Plaintiffs' obligations under this
Stipulation are subject to plaintiffs' taking additional discovery (to which
plaintiffs and Sears have agreed) within the next 30 days relating to the
subject matter of the Actions. Plaintiffs shall have the option to withdraw
from the Settlement in the event that they conclude in good faith, based upon
such additional discovery, that the Settlement is not fair, reasonable and
adequate, and beneficial to and in the best interests of the Settlement
Class. In that event, the provisions of the last sentence of paragraph 20
shall apply.
Dated: June 12, 1997
/S/John Roddy
_________________________________________
John Roddy
Frederic D. Grant, Jr.
GRANT & RODDY
44 School Street
Boston, MA 02108
(617) 248-8700
/S/Daniel A. Edelman
_________________________________________
Daniel A. Edelman
James O. Latturner
Cathleen M. Combs
EDELMAN & COMBS
135 South LaSalle Street
Suite 2040
Chicago, IL 60603
(312) 739-4200
/S/Christopher M. LeFebvre
_________________________________________
Christopher M. LeFebvre
LAW OFFICES OF CLAUDE LEFEBVRE
Two Dexter Street
Pawtucket, RI 02860
(401) 728-6060
Plaintiffs' Class Counsel
/S/Mark N. Polebaum
_________________________________________
Mark N. Polebaum
Stephen H. Oleskey
Paul P. Daley
HALE AND DORR LLP
60 State Street
Boston, MA 02109
(617) 526-6000
/S/Theodore N. Mirvis
_________________________________________
Theodore N. Mirvis
John F. Savarese
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, NY 10019
(212) 403-1000
Attorneys for Defendants
Sears, Roebuck and Co. and
Western Auto Supply Company
Exhibit A
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
__________________________________________
)
In Re: )
DOUGLAS O. BRIOSO, )
Debtor. ) Chapter 7
) Case No. 97-11503-CJK
__________________________________________ )
)
DOUGLAS O. BRIOSO and )
EILEEN F. REYNOLDS, )
Plaintiffs, )
) Adversary Proceeding
v. ) No. 97-1222-CJK
)
SEARS, ROEBUCK AND CO. and )
WESTERN AUTO SUPPLY COMPANY, )
Defendants. )
)
__________________________________________ )
)
In Re: )
ANTONIA CALDAS, )
Debtor. ) Chapter 7
) Case No. 96-18925-CJK
__________________________________________ )
)
ANTONIA CALDAS, )
Plaintiff, )
v. ) Adversary Proceeding
) No. 97-1229-CJK
SEARS, ROEBUCK AND CO., )
Defendant. )
)
__________________________________________ )
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
__________________________________________
)
DAVID CONLEY, et al., )
Plaintiffs, )
v. ) Civil No. 97-1149-PBS
)
SEARS, ROEBUCK AND CO., )
WESTERN AUTO SUPPLY COMPANY )
and JOHN DOES 1-10, )
Defendants. )
)
__________________________________________ )
PROOF OF CLAIM
This Proof of Claim relates to the proposed Settlement, subject to Court
approval, of a nationwide class action on behalf of individual bankruptcy
debtors who entered into reaffirmation agreements with Sears, Roebuck and
Co. or its subsidiary, Western Auto Supply Company, which were not filed
with the bankruptcy courts (or were filed but subsequently disapproved by
those courts or rescinded by the debtor, or were not Court-approved where
approval was required for enforceability of the agreement).
A description of the Settlement, its background, the Settlement Class, and
additional information is contained in the printed Notice of Pendency of
Class Actions, Class Action Determination, Proposed Settlement of Class
Actions, Settlement Hearings, Right to Request Exclusion, and Right to
Appear (the "Notice"), which is enclosed with this Proof of Claim.
IF YOU FILED YOUR BANKRUPTCY PETITION BEFORE JANUARY 1, 1992 AND THEREAFTER
ENTERED INTO A REAFFIRMATION AGREEMENT WITH SEARS, YOU MUST FILE THIS PROOF
OF CLAIM IN ORDER TO BE ELIGIBLE TO PARTICIPATE IN THE SETTLEMENT. IN
ADDITION, IF YOU FILED YOUR BANKRUPTCY PETITION AFTER JANUARY 1, 1992 BUT
HAVE NOT RECEIVED A COPY OF THE NOTICE IN THE MAIL PRIOR TO RECEIVING THIS
PROOF OF CLAIM, IT IS ADVISABLE FOR YOU TO FILE THIS PROOF OF CLAIM.
ALL MEMBERS OF THE SETTLEMENT CLASS WHO ENTERED INTO REAFFIRMATION
AGREEMENTS WITH WESTERN AUTO MUST FILE THIS PROOF OF CLAIM IN ORDER TO BE
ELIGIBLE TO PARTICIPATE IN THE SETTLEMENT.
IF YOU RECEIVED A COPY OF THE NOTICE IN THE MAIL PRIOR TO RECEIVING THIS
PROOF OF CLAIM, YOU NEED NOT FILE THIS PROOF OF CLAIM TO BE ELIGIBLE TO
PARTICIPATE IN THE PROPOSED SETTLEMENT.
You may obtain assistance in filling out this Proof of Claim by calling the
Settlement Administrator at 1-800-___-____(toll free). If you have any
questions as to whether or not you need to file this Proof of Claim, or
whether or not you are a member of the Settlement Class, or regarding the
proposed Settlement, you may call the Settlement Administrator for
assistance.
PLEASE DO NOT CALL OR WRITE TO THE COURTS FOR INFORMATION.
INSTRUCTIONS
THIS PROOF OF CLAIM MUST BE COMPLETED, SIGNED AND MAILED BY PRE-PAID, FIRST
CLASS MAIL, NO LATER THAN ________, 1997 [20 days before the earliest
settlement hearing] TO THE FOLLOWING ADDRESS:
SEARS INDIVIDUAL BANKRUPTCY DEBTOR LITIGATION
P.O. Box ___
Boston, Massachusetts _______
FAILURE TO SUBMIT YOUR CLAIM, FULLY COMPLETED AS SET OUT BELOW, BY ______,
1997 WILL SUBJECT YOUR CLAIM TO REJECTION AND PRECLUDE YOUR RECEIVING THE
BENEFITS OF THE SETTLEMENT. DO NOT MAIL OR DELIVER YOUR CLAIM TO THE
COURT, TO SEARS OR WESTERN AUTO, OR TO ANY OF THE PARTIES OR THEIR COUNSEL,
AS DOING SO WILL NOT BE DEEMED PROPER SUBMISSION OF THE CLAIM.
If you are a member of the Settlement Class, even if you fail to submit
this Proof of Claim in proper form, you will be bound by the Court's Final
Order and Judgment in this matter and will be forever barred from asserting
any claim against Sears or Western Auto or any related party that is being
settled unless you have properly requested exclusion from the class.
Please consult the Notice for additional information.
The telephone number referred to above has been established as part of the
settlement process, and is being handled by the Settlement Administrator
provided for under the terms of the Settlement, at Sears sole expense.
There will be no cost or obligation to you in calling that number.
STATEMENT OF CLAIM
TO COMPLETE THIS PROOF OF CLAIM, PLEASE READ THE FOLLOWING, FILL IN THE
INFORMATION REQUESTED AND ATTACH THE DOCUMENTS REQUESTED, AND SIGN BELOW
WHERE INDICATED (HAVING YOUR SIGNATURE NOTARIZED, AS INDICATED BELOW).
I. I did ___, I did not ___ [check one] file for personal
bankruptcy in a U.S. bankruptcy court.
II. I did ___, I did not ___ [check one] thereafter enter into
a reaffirmation agreement with Sears ____, Western Auto ____ [check one]
which provided for my payment to it of indebtedness owed by me to it prior
to my bankruptcy filing.
Note: If you entered into reaffirmation agreements with both Sears and
Western Auto, you should file a separate Proof of Claim for each.
I. Identification of Claimant.
__ __ __ __ __ __ __ __ __ __ __ __ __ __
Name __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
Street No. __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
and Address __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __ __
City _ _ _ _ _ _ _ _ _ _ State _ _ Zip Code _ _ _ _ _-_ _ _ _
Country __ __ __ __ __ __ __ __ __ Telephone (_ _ _) _ _ _-_ _ _ _
Number
Social Security _ _ _ - _ _ - _ _ _ _
Number or
Taxpayer _ _ - _ _ _ _ _ _ _
Identification
Number
Note: If your address was different at the time of your bankruptcy
filing or reaffirmation agreement, please provide that information:
Street No. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
and Address _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
City _ _ _ _ _ _ _ _ _ _ State _ _ Zip Code _ _ _ _ _-_ _ _ _
Country _ _ _ _ _ _ _ _ _ _ _ _
I. Information regarding bankruptcy filing and reaffirmation
agreement.
Year of your bankruptcy filing: _ _ _ _
Court in which your bankruptcy petition was filed:
______________________________
Amount you owed Sears (or Western
Auto) before your bankruptcy filing: $_ _ _ _ . _ _
Sears Account Number: _ _ _ _ _ _ _ _ _ _ _ _ _ _
Date of your reaffirmation agreement
(Month/Day/Year): _ _ - _ _ - _ _
Amount of reaffirmed
indebtedness: $_ _ _ _ . _ _
Amount of payments you made
to Sears (or Western Auto)
after your bankruptcy filing: $_ _ _ _ . _ _
Note: If you do not know the exact amounts requested, you may estimate the
amounts if you have a basis for doing so.
If you entered into a reaffirmation agreement, Sears may endeavor to check
available records to ascertain if the agreement was properly filed with the
bankruptcy court and enforceable. If your reaffirmation agreement was
properly filed and enforceable, then you are not a member of the Settlement
Class and are not eligible to participate in the Settlement.
Documents requested; review by Settlement Administrator.
Please attach a copy of the order of discharge in your bankruptcy case or,
if you do not have a copy of that order, copies of other filings from that
case. Please also attach a copy of your reaffirmation agreement or, if you
do not have a copy of that agreement, any other documents that evidence the
amount of reaffirmed debt. (If you do not have copies of these documents,
copies may be obtainable by you from the bankruptcy court, or from the
attorney who represented you in your bankruptcy filing if you were
represented by an attorney.)
Please also enclose any documents you have that evidence the amounts you
paid to Sears (or Western Auto), and the costs of any goods or services you
purchased from Sears (or Western Auto), after entering into the
reaffirmation agreement (such as copies of account statements you received
after your bankruptcy filing or your cancelled checks).
The Settlement Administrator will process all timely Proofs of Claims
pursuant to guidelines submitted to the Court. In order to facilitate the
processing of your Claim, you should submit all the documents requested if
they are available to you. If Sears has a documentary or other basis to
dispute your Claim, it will present that evidence to the Settlement
Administrator. The Settlement Administrator will decide whether to accept,
reject or modify your Claim. The Settlement Administrator may request
additional information, documents or verifications from you in certain
circumstances as a condition to processing your Claim. The Settlement
provides that, in order to process a Proof of Claim, the Settlement
Administrator must have documentary evidence of your having filed for
bankruptcy under Chapter 7 and of either the amount of reaffirmed
indebtedness to Sears (or Western Auto) or the amount of pre-petition
indebtedness to Sears (or Western Auto) discharged by the bankruptcy court
and post-petition payment activity in your account. You will be notified
in the event that your Claim is rejected or modified by the Settlement
Administrator.
By submitting this Proof of Claim, I state that I believe
in good faith that I am a member of the Settlement Class as defined in the
Notice; that I have read and understood the contents of the Notice; that I
have not filed a Request for Exclusion, seeking to be excluded from the
Settlement Class; and that I believe that I am entitled to, and that I
elect to, participate in the proposed Settlement described in the Notice.
I agree and understand that if the proposed Settlement is
approved by the Court and becomes effective, all claims, demands or causes
of action against Sears, Western Auto, and certain other persons which have
been or could have been asserted relating to the subject matter of the
litigation will be satisfied, discharged and extinguished forever in
accordance with the Release being provided on behalf of members of the
Settlement Class in the Stipulation of Settlement and by the terms of the
Final Order and Judgment.
My signature hereto constitutes a full and complete
release by me, and by my heirs, executors, administrators, successors,
affiliates and assigns, of Sears or Western Auto and their present and
former officers, directors, shareholders, employees, accountants,
representatives, attorneys, subsidiaries, affiliated companies, divisions,
successors, heirs, agents and assigns, in connection with or that arise out
of their obtaining of a reaffirmation agreement, the non-filing (or
untimely filing) of any such agreement with the appropriate bankruptcy
court, the solicitation or billing of or collecting under or any steps to
enforce any such unfiled agreement (or any filed reaffirmation agreement
that was subsequently disapproved or rejected by the bankruptcy court (or
that was not approved by such court where approval was required for
enforceability of such agreement) or that was subsequently rescinded by the
debtor), or any communications, representations or omissions by or on
behalf of Sears or Western Auto with respect to any of the foregoing, or
any acts, facts, transactions or occurrences, alleged or otherwise asserted
or that could have been asserted in the litigation that is being settled
(all of which are referred in the Settlement as the "Settled Claims").
Taxpayer Identification Number
Request for Taxpayer Identification Number: Enter your taxpayer
identification number below. For most individuals, this is your Social
Security number. The Internal Revenue Service requires such taxpayer
identification number. If you fail to furnish the correct taxpayer
identification, 20% of the interest portion of your share of the Settlement
will be withheld and/or your claim will be rejected.
_ _ _ - _ _ - _ _ _ _
Note: A Copy of the I.R.S. Guidelines or certification of Taxpayer
Identification Number on Substitute Form W-9 and a description of payees
subject to or exempt from the backup withholding requirements are included
as part of the Notice accompanying this Proof of Claim form.
Certification
UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT ALL OF THE
INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT AND COMPLETE.
I certify that I am NOT subject to backup withholding under the
provisions of Section 3406(a)(1)(c) of the Internal Revenue Code.
Note: If you have been notified by the Internal Revenue Service that you
are subject to backup withholding, please strike out the language that you
are not subject to backup withholding in the certification above.
Signature of Claimant:
Date:
(Signature)
Sworn to before me this
___ day of _________, 1997
_________________________
Notary Public
#_______________________
Note: As noted above, this Proof of Claim must be submitted no later than
__________, 1997. A properly completed Proof of Claim shall be deemed to
have been submitted when posted, if received subsequent to ____________,
1997 and if a postmark is indicated on the envelope dated such date or
earlier and it is mailed first class, postage prepaid, and addressed in
accordance with the above instructions. In all other cases a properly
completed Proof of Claim shall be deemed to have been submitted when
actually received.
If you wish to be assured that your Proof of Claim is actually
received, you should send it by Certified Mail, Return Receipt Requested.
Certified Mail may, however, require more time for delivery than first
class mail. No acknowledgment will be made as to the receipt of Proof of
Claim forms. You should be aware that it will take a significant amount of
time to process fully all of the Proofs of Claim and to administer the
Settlement. This work will be completed as promptly as time permits, given
the need to fully investigate and calculate each Proof of Claim.
Exhibit B(1)
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
HEARING ORDER
__________________________________________
)
DOUGLAS O. BRIOSO, et al. )
Plaintiffs, )
) Adversary Proceeding
v. ) No. 97-1222-CJK
)
SEARS, ROEBUCK AND CO. and )
WESTERN AUTO SUPPLY COMPANY, )
Defendants. )
)
__________________________________________ )
)
ANTONIO CALDAS, )
Plaintiff, )
)
v. )
)
SEARS, ROEBUCK AND CO., )
Defendant. )
______________________________________________ )
The parties to the above-captioned consolidated actions (the
"Action"), having made application pursuant to Rule 7023 of the Federal
Rules of Bankruptcy Procedure, Rule 23 of the Federal Rules of Civil
Procedure and 105 of the U.S. Bankruptcy Code, for an order approving the
proposed settlement of the Action in accordance with a Stipulation and
Agreement of Compromise and Settlement filed with the Court (the
"Settlement" or the "Stipulation"), which sets forth the terms and
conditions for the proposed settlement of the Action and for the dismissal
of the Action with prejudice upon the terms and conditions set forth in the
Stipulation; and the Court having read and considered the Stipulation and
accompanying documents; and all parties having consented to the entry of
this Order:
NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
1. The Action shall, for the purposes of the Settlement only,
be maintained and proceed as a class action with the named plaintiffs in
the Action as class representatives and their counsel as class counsel,
pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil
Procedures, on behalf of the following class (the "Settlement Class") as
set forth in the Stipulation:
all individuals (a) who filed a petition for relief under the
Bankruptcy Code; (b) who listed Sears, Roebuck and Co. ("Sears")
as a creditor, against whom Sears filed a claim, or who owed a
debt or alleged debt to Sears; (c) who, subsequent to the filing
of the bankruptcy petition, executed an agreement with Sears
purporting to reaffirm such debt or alleged debt or to redeem the
applicable property, or which agreement is otherwise subject to
the provisions of 11 U.S.C. 524(c) (collectively defined in the
Stipulation as a reaffirmation agreement); and (d) such agreement
either was not filed with the appropriate bankruptcy court in
accordance with 11 U.S.C. 524(c)(3) prior to the order of
discharge, or was filed with the bankruptcy court and was either
(i) disapproved or rejected by the bankruptcy court (or not
approved by such court when necessary to the enforceability of
such agreement), or (ii) rescinded by the debtor.
(As set forth in the Stipulation, references to "Sears" in such definition
includes Sears subsidiary, Western Auto Supply Company ("Western Auto")).
The Court determines, for purposes of the Settlement only, that the
requirements of Rules 23(a) and 23(b)(3) of the Federal Rules of Civil
Procedure are satisfied.
2. A hearing (the "Settlement Hearing") shall be held before
the Court on October 28, 1997, at 10 a.m. at the Courthouse, Federal Office
Building, 10 Causeway Street, Boston, Massachusetts 02222: (a) to determine
whether the proposed Settlement of the Action on the terms and conditions
provided for in the Stipulation is fair, reasonable and adequate and should
be approved by the Court, and whether a judgment as provided in the
Stipulation should be entered thereon; and (b) to consider such other
matters as may properly come before the Court in connection with the
Settlement Hearing. The Court may adjourn the Settlement Hearing, or any
adjournment thereof, without further notice to members of the Settlement
Class other than by announcement at the Hearing or any adjournment thereof.
3. The Court approves, in form, the Notice of Pendency of
Class Actions, Class Action Determination, Proposed Settlement of Class
Actions, Settlement Hearings, Right to Request Exclusion and Right to
Appear (the "Notice"), attached as Exhibit C to the Stipulation; the
Summary Notice of Class Action Determination, Proposed Settlement of Class
Actions and Settlement Hearing (the "Summary Notice"), attached as Exhibit
D to the Stipulation; the Notice Insert to be inserted in Sears statements
to customers, attached as Exhibit E to the Stipulation (the "Notice
Insert"); the Notice Insert to be inserted in the statements to customers
of Western Auto, attached as Exhibit F to the Stipulation (the "Western
Auto Notice Insert"), and finds that the dissemination of the Notice, the
Summary Notice, the Notice Insert and the Western Auto Notice Insert in
substantially the manner and form set forth in paragraph 4 of this Order
meets the requirements of Rule 23 of the Federal Rules of Civil Procedure
and due process, is the best notice practicable under the circumstances,
and shall constitute due and sufficient notice to all persons entitled
thereto.
4. (a) Beginning 40 days following entry of this Order
(or, if later, the similar order being moved for in the District Court
Action, as defined in the Stipulation), Sears shall cause a copy of the
Notice to be mailed by first class mail to all persons who are identified
as members of the Settlement Class pursuant to the identification process
provided for in the Stipulation and in accordance with the Stipulated Order
entered on April 21, 1997 in United States of America v. Sears, Roebuck and
Co., Civil No. 97-10839-JLT (D. Mass.). Sears shall continue to make such
mailings as additional members of the Settlement Class are so identified,
as soon as practicable following such additional identifications, up
through 40 days prior to the date of the Settlement Hearing.
(b) The Summary Notice, substantially in the form
annexed to the Stipulation as Exhibit C, shall be published by Sears within
20 days of the first mailing of the Notice as follows: (i) twice within a
seven-day period in the national edition of USA Today; and (ii) twice
within a seven-day period in the following newspapers in the 24 major
metropolitan areas: Los Angeles Times, Washington Post, Chicago Tribune,
Boston Globe, New York Daily News, Philadelphia Inquirer, Minneapolis Star
Tribune, Newark Star Ledger, Houston Chronicle, San Francisco
Chronicle/Examiner, Phoenix Republic/Gazette, Saint Louis Post Dispatch,
Cleveland Plain Dealer, Miami Herald, Seattle Times/Post Intelligencer,
Baltimore Sun, Milwaukee Journal/Sentinel, San Diego Union Tribune, Denver
Post, Pittsburgh Post Gazette, Saint Petersburg Times, Atlanta
Journal/Constitution, Nashville Tennessean/Banner, and Dallas Morning News.
(c) The Notice Insert and the Western Auto Notice
Insert, substantially in the form annexed to the Stipulation as Exhibits E
and F, respectively, shall be inserted by Sears in Sears and Western Auto
statements being mailed to their respective credit customers for a full
billing cycle commencing as soon as practicable within 20 days of the first
mailing of the Notice.
(d) On or before October 14, 1997, at 4:00 p.m., Sears
shall file proof, by affidavit, of such publications and mailings.
5. Any member of the Settlement Class who has not requested
exclusion from the Settlement Class may appear at the Settlement Hearing
personally or by counsel, provided that an appearance is served and filed
as hereinafter provided, and show cause, if any, why the Settlement of the
Action should not be approved as fair, reasonable, and adequate, why
judgment should not be entered dismissing with prejudice and releasing all
claims of all plaintiffs and all members of the Settlement Class against
Sears and the other Released Persons (as provided for in the Stipulation),
or why the Court should not grant an allowance of reasonable fees and
expenses to plaintiffs' counsel (to be payable, as may be awarded by the
Court, by Sears and not in any respect to diminish the benefits to the
Settlement Class of the Settlement) for their services herein and actual
expenses incurred. However, unless the Court otherwise directs, no member
of the Settlement Class, or any person (excluding a party), shall be heard
or shall be entitled to contest the approval of the terms and conditions of
the Settlement or (if approved) the judgment to be entered thereon, or the
allowance of fees and expenses to plaintiffs' counsel, and no papers or
briefs submitted by any member of the Settlement Class or any other person
(excluding a party) shall be received and considered, except by order of
the Court for good cause shown, unless, no later than twenty (20) days
prior to the Settlement Hearing, the following documents are served and
filed in the manner provided below: (a) a notice of intention to appear;
(b) a detailed statement of such person's specific objections to any matter
before the Court; (c) proof of membership in the Settlement Class; and (d)
the grounds for such objections and any reasons why such person desires to
appear and to be heard, as well as all documents and writings which such
person desires this Court to consider. Such documents shall be served upon
the following counsel prior to filing such documents with the Court:
John Roddy
Frederic D. Grant, Jr.
GRANT & RODDY
44 School Street
Boston, MA 02108
On Behalf of All Plaintiffs
Mark N. Polebaum
Stephen H. Oleskey
Paul P. Daley
HALE AND DORR LLP
60 State Street
Boston, MA 02109
On Behalf of Defendants
Sears, Roebuck and Co. and
Western Auto Supply Company
Any person who fails to object in the manner provided herein shall be
deemed to have waived his or her objections and shall forever be barred
from making any such objections in this Action or in any other action or
proceeding.
6. All members of the Settlement Class have the option of
excluding themselves from the Settlement Class by mailing a timely and
valid Request for Exclusion postmarked not later than twenty (20) days
prior to the Settlement Hearing addressed to Sears Personal Bankruptcy
Debtor Class Litigation, P.O. Box ____, Boston, Massachusetts, _____ (which
P.O. Box shall be obtained by the parties). A Request for Exclusion must
set forth the following information with respect to the person requesting
exclusion: name; address; social security number or taxpayer identification
number. All Requests for Exclusion must be signed by or on behalf of the
person so requesting exclusion.
7. If a Request for Exclusion does not include all of the
foregoing information, it shall not be a valid Request for Exclusion and
the person filing an invalid Request for Exclusion shall be a member of the
Settlement Class. (In addition, members of the Settlement Class requesting
exclusion may be asked to provide the year of the individual's bankruptcy
filing; the bankruptcy court in which the filing was made; Sears Account
Number; and the amount of indebtedness to Sears that the individual
reaffirmed, although the failure to provide such information shall not
affect the validity of the Request for Exclusion.) All persons who
properly submit valid Requests for Exclusion from the Settlement Class
shall not be members of the Settlement Class and shall have no rights with
respect to the Settlement and no interest in the Settlement.
_________________________________
June __, 1997
Exhibit B(2)
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
______________________________________________
)
DAVID CONLEY, et. al., )
)
Plaintiffs, )
)
v. ) Civil No. 97-11149-PBS
)
SEARS, ROEBUCK AND CO., )
WESTERN AUTO SUPPLY COMPANY )
and JOHN DOES 1-10, )
)
Defendants. )
)
______________________________________________ )
HEARING ORDER
The parties to the above-captioned action (the "Action"), having
made application pursuant to Rule 23 of the Federal Rules of Civil
Procedure for an order approving the proposed settlement of the Action in
accordance with a Stipulation and Agreement of Compromise and Settlement
filed with the Court (the "Settlement" or the "Stipulation"), which, sets
forth the terms and conditions for the proposed settlement of the Action
and for the dismissal of the Action with prejudice upon the terms and
conditions set forth in the Stipulation; and the Court having read and
considered the Stipulation and accompanying documents; and all parties
having consented to the entry of this Order:
NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
1. The Action shall, for the purposes of the Settlement only,
be maintained and proceed as a class action with the named plaintiffs in
the Action as class representatives and their counsel as class counsel,
pursuant to Rules 23(a) and 23(b)(3) of the Federal Rules of Civil
Procedures, on behalf of the following class (the "Settlement Class") as
set forth in the Stipulation:
all individuals (a) who filed a petition for relief under
the Bankruptcy Code; (b) who listed Sears, Roebuck and Co.
("Sears") as a creditor, against whom Sears filed a claim,
or who owed a debt or alleged debt to Sears; (c) who,
subsequent to the filing of the bankruptcy petition,
executed an agreement with Sears purporting to reaffirm
such debt or alleged debt or to redeem the applicable
property, or which agreement is otherwise subject to the
provisions of 11 U.S.C. 524(c) (collectively defined in
the Stipulation as a reaffirmation agreement); and (d)
such agreement either was not filed with the appropriate
bankruptcy court in accordance with 11 U.S.C. 524(c)(3)
prior to the order of discharge, or was filed with the
bankruptcy court and was either (i) disapproved or
rejected by the bankruptcy court (or not approved by such
court when necessary to the enforceability of such
agreement), or (ii) rescinded by the debtor.
(As set forth in the Stipulation, references to "Sears" in such definition
includes Sears subsidiary, Western Auto Supply Company ("Western Auto")).
The Court determines, for purposes of the Settlement only, that the
requirements of Rules 23(a) and 23(b)(3) of the Federal Rules of Civil
Procedure are satisfied.
2. A hearing (the "Settlement Hearing") shall be held before
the Court on ________________, 1997, at ________ __.m. at the John W.
McCormack P.O. and Courthouse, Boston, Massachusetts 02109: (a) to
determine whether the proposed Settlement of the Action on the terms and
conditions provided for in the Stipulation is fair, reasonable and adequate
and should be approved by the Court, and whether a judgment as provided in
the Stipulation should be entered thereon; and (b) to consider such other
matters as may properly come before the Court in connection with the
Settlement Hearing. The Court may adjourn the Settlement Hearing, or any
adjournment thereof, without further notice to members of the Settlement
Class other than by announcement at the Hearing or any adjournment thereof.
3. The Court approves, in form, the Notice of Pendency of
Class Actions, Class Action Determination, Proposed Settlement of Class
Actions, Settlement Hearings, Right to Request Exclusion and Right to
Appear (the "Notice"), attached as Exhibit C to the Stipulation; the
Summary Notice of Class Action Determination, Proposed Settlement of Class
Actions and Settlement Hearing (the "Summary Notice"), attached as Exhibit
D to the Stipulation; the Notice Insert to be inserted in Sears statements,
attached as Exhibit E to the Stipulation (the "Notice Insert"); and the
Notice Insert to be inserted in Western Auto statements, attached as
Exhibit F to the Stipulation (the "Western Auto Notice Insert"), and finds
that the dissemination of the Notice, the Summary Notice, the Notice Insert
and the Western Auto Notice Insert in substantially the manner and form set
forth in paragraph 4 of this Order meets the requirements of Rule 23 of the
Federal Rules of Civil Procedure and due process, is the best notice
practicable under the circumstances, and shall constitute due and
sufficient notice to all persons entitled thereto.
4. (a) Beginning 40 days following entry of this Order
(or, if later, the similar order being moved for in the Bankruptcy Court
Action, as defined in the Stipulation), Sears shall cause a copy of the
Notice, substantially in the form annexed to the Stipulation as Exhibit C,
to be mailed by first class mail to all persons who are identified as
members of the Settlement Class Pursuant to the identification process
provided for in the Stipulation and in accordance with the Stipulated Order
entered on April 21, 1997 in United States of America v. Sears, Roebuck and
Co., Civil No. 97-10839-JLT (D. Mass.). Sears shall continue to make such
mailings as additional members of the Settlement Class are so identified,
as soon as practicable following such additional identifications, up
through 40 days prior to the date of the Settlement Hearing.
(b) The Summary Notice, substantially in the form
annexed to the Stipulation as Exhibit D, shall be published by Sears within
20 days of the first mailing of the Notice as follows: (1) twice within a
seven-day period in the national editions of USA Today; and (ii) twice
within a seven-day period in the following newspapers in 24 major
metropolitan areas: Los Angeles Times, Washington Post, Chicago Tribune,
Boston Globe, New York Daily News, Philadelphia Inquirer, Minneapolis Star
Tribune, Newark Star Ledger, Houston Chronicle, San Francisco
Chronicle/Examiner, Phoenix Republic/Gazette, Saint Louis Post Dispatch,
Cleveland Plain Dealer, Miami Herald, Seattle Times/Post Intelligencer,
Baltimore Sun, Milwaukee Journal/Sentinel, San Diego Union Tribune, Denver
Post, Pittsburgh Post Gazette, Saint Petersburg Times, Atlanta
Journal/Constitution, Nashville Tennessean/Banner, and Dallas Morning News.
(c) The Notice Insert and the Western Auto Notice
Insert, substantially in the form annexed to the Stipulation as Exhibits E
and F, respectively, shall be inserted by Sears in Sears and Western Auto
statements being mailed to their respective credit customers for a full
billing cycle commencing as soon as practicable within 20 days of the first
mailing of the Notice.
(d) On or before October 14, 1997, at 4:00 p.m., Sears
shall file proof, by affidavit, of such publications and mailings.
5. Any member of the Settlement Class who has not requested
exclusion from the Settlement Class may appear at the Settlement Hearing
personally or by counsel, provided that an appearance is served and filed
as hereinafter provided, and show cause, if any, why the Settlement of the
Action should not be approved as fair, reasonable, and adequate, why
judgment should not be entered dismissing with prejudice and releasing all
claims of all plaintiffs and all members of the Settlement Class against
Sears and the other Released Persons (as provided for in the Stipulation),
or why the Court should not grant an allowance of reasonable fees and
expenses to plaintiffs' counsel (to be payable, as may be awarded by the
Court, by Sears and not in any respect to diminish the benefits to the
Settlement Class of the Settlement) for their services herein and actual
expenses incurred. However, unless the Court otherwise directs, no member
of the Settlement Class, or any person (excluding a party), shall be heard
or shall be entitled to contest the approval of the terms and conditions of
the Settlement or (if approved) the judgment to be entered thereon, or the
allowance of fees and expenses to plaintiffs' counsel, and no papers or
briefs submitted by any member of the Settlement Class or any other person
(excluding a party) shall be received and considered, except by order of
the Court for good cause shown, unless, no later than twenty (20) days
prior to the Settlement Hearing, the following documents are served and
filed in the manner provided below: (a) a notice of intention to appear;
(b) a detailed Statement of such person's specific objections to any matter
before the Court; (c) proof of membership in the Settlement Class; and (d)
the grounds for such objections and any reasons why such person desires to
appear and to be heard, as well as all documents and writings which such
person desires this Court to consider. Such documents shall be served upon
the following counsel prior to filing such documents with the Court:
John Roddy
Frederic D. Grant, Jr.
GRANT & RODDY
44 School Street
Boston, MA 02108
On Behalf of All Plaintiffs
Mark N. Polebaum
Stephen H. Oleskey
Paul P. Daley
HALE AND DORR LLP
60 State Street
Boston, MA 02109
On Behalf of Defendants
Sears, Roebuck and Co. and
Western Auto Supply Company
Any person who fails to object in the manner provided herein shall be
deemed to have waived his or her objections and shall forever be barred
from making any such objections in this Action or in any other action or
proceeding.
6. All members of the Settlement Class have the option of
excluding themselves from the Settlement Class by mailing a timely and
valid Request for Exclusion postmarked not later than twenty (20) days
prior to the Settlement Hearing addressed to Sears Personal Bankruptcy
Debtor Class Litigation, P.O. Box ______, Boston, Massachusetts, ______,
(which P.O. Box shall be obtained by the parties). A Request for Exclusion
must set forth the following information with respect to the person
requesting exclusion: name; address; social security number or taxpayer
identification number. All Requests for Exclusion must be signed by or on
behalf of the person so requesting exclusion.
7. If a Request for Exclusion does not include all of the
foregoing information, it shall not be a valid Request for Exclusion and
the person filing an invalid Request for Exclusion shall be a member of the
Settlement Class. (In addition, members of the Settlement Class requesting
exclusion may be asked to provide the year of the individual's bankruptcy
filing; the bankruptcy court in which the filing was made; Sears Account
Number; and the amount of indebtedness to Sears that the individual
reaffirmed, although the failure to provide such information shall not
affect the validity of the Request for Exclusion.) All persons who
properly submit valid Requests for Exclusion from the Settlement Class
shall not be members of the Settlement Class and shall have no rights with
respect to the Settlement and no interest in the Settlement.
8. Pending decision by the Court on whether to approve the
Settlement, each member of the Settlement Class is barred and enjoined from
instituting or prosecuting any action in state or other federal court
against Sears or Western Auto (or any of their present or former officers,
directors, shareholders, employees, accountants, attorneys,
representatives, subsidiaries, affiliated companies, divisions, successors,
heirs, agents, and assigns) which assert claims that are Settled Claims
that would be released and discharged upon approval of the Settlement.
June __, 1997
Exhibit C
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
NOTICE OF PENDENCY OF CLASS ACTIONS, CLASS
ACTION DETERMINATION, PROPOSED SETTLEMENT OF
CLASS ACTIONS, SETTLEMENT HEARINGS, RIGHT TO REQUEST
EXCLUSION, AND RIGHT TO APPEAR
______________________________________________
)
DOUGLAS O. BRIOSO, et al. )
Plaintiffs, )
) Adversary Proceeding
v. ) No. 97-1222-CJK
)
SEARS, ROEBUCK AND CO. and )
WESTERN AUTO SUPPLY )
COMPANY, )
Defendants. )
)
)
ANTONIO CALDAS, )
Plaintiff, )
)
v. )
)
SEARS, ROEBUCK AND CO., )
Defendant. )
______________________________________________ )
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
______________________________________________
)
DAVID CONLEY, et al., )
)
Plaintiffs, )
) Civil No. 97-11149-PBS
v. )
)
SEARS, ROEBUCK AND CO., )
WESTERN AUTO SUPPLY COMPANY )
and JOHN DOES 1-10, )
)
Defendants. )
______________________________________________ )
TO: ALL INDIVIDUALS WHO PREVIOUSLY FILED FOR PERSONAL BANKRUPTCY AND
ENTERED INTO REAFFIRMATION AGREEMENTS WITH SEARS, ROEBUCK AND CO.
OR ITS SUBSIDIARY, WESTERN AUTO SUPPLY COMPANY.
AS SET OUT BELOW (SEE PP. _____), OCTOBER 8, 1997 AT 4:00 P.M. IS
THE DEADLINE FOR SUBMITTING PROOFS OF CLAIM, OR FOR EXERCISING YOUR RIGHT
TO APPEAR OR REQUESTING EXCLUSION FROM THE SETTLEMENT CLASS.
This Notice is given pursuant to Rule 23 of the Federal Rules of
Civil Procedure and Orders (the "Hearing Orders") entered by the United
States Bankruptcy Court for the District of Massachusetts, Eastern
Division, and the United States District Court for the District of
Massachusetts (the "Courts"). The purpose of this Notice is to inform you
of these pending lawsuits (the "Actions"), to advise you of a proposed
settlement of the Actions (the "Settlement"), and of your rights, if you
are a member of the class covered by the proposed Settlement (defined below
as the "Settlement Class"), among other things, to receive monetary
benefits in the Settlement if it is approved by the Courts, to exclude
yourself from the proposed Settlement, or to object to the proposed
Settlement; and to give you notice of Court hearings to be held on October
28, 1997, at 10 a.m., in the U.S. Bankruptcy Court, Federal Office
Building, 10 Causeway Street, Boston, Massachusetts 02222, and on
___________, 1997, at __.m. in the U.S. District Court, J. W. McCormack
P.O. and Courthouse, Boston, Massachusetts 02109, to determine whether the
proposed Settlement, on a national class-wide basis, should be approved by
the Courts as fair, reasonable and adequate and to consider such other
matters as may properly come before the Courts in connection with the
hearings.
NO OPINIONS EXPRESSED BY
THE COURTS AS TO THE MERITS
This Notice is not an expression by any court as to the merits of
the claims or defenses of the parties in the Actions. This Notice was
prepared by the parties to the Actions, who are joining in urging the
Courts to approve the proposed Settlement, and is being disseminated
pursuant to the Hearing Orders entered by the Courts.
DEFINITION OF SETTLEMENT CLASS
The proposed Settlement is on behalf of the following class of
persons: all individuals (a) who filed a petition for relief under the U.S.
Bankruptcy Code; (b) who listed Sears, Roebuck and Co. ("Sears") or its
subsidiary, Western Auto Supply Company ("Western Auto") as a creditor,
against whom Sears (or Western Auto) filed a claim, or who owed a debt or
alleged debt to Sears (or Western Auto); (c) who, subsequent to the filing
of the bankruptcy petition, executed an agreement with Sears (or Western
Auto) purporting to reaffirm such debt or alleged debt or to redeem the
applicable property, or which agreement is otherwise subject to the
provisions of 11 U.S.C. 524(c) (collectively referred to herein as
"reaffirmation agreements"); and (d) such agreement either was not filed
with the appropriate bankruptcy court in accordance with 11 U.S.C.
524(c)(3) prior to the order of discharge, or was filed with the bankruptcy
court and was either (i) disapproved or rejected by the bankruptcy court or
not approved by such court when necessary to the enforceability of such
agreement, or (ii) rescinded by the debtor.
This group of individuals is referred to as the "Settlement
Class." The Settlement Class is thus defined on a nationwide basis, not
limited to individuals whose petitions under the Bankruptcy Code were filed
in any particular jurisdiction or region. A reaffirmation agreement is an
agreement by which an individual who has filed for personal bankruptcy
under the U.S. Bankruptcy Code agrees nonetheless to repay, in whole or in
part, indebtedness to a creditor (such as Sears) that the individual debtor
incurred before his or her bankruptcy. Reaffirmation agreements referred
to herein include all agreements, whether written or oral; whether entered
into during the pendency of the debtor's bankruptcy proceeding or following
the issuance of the debtor's discharge by the bankruptcy court; and whether
such agreements did or did not provide for the continued extension of
credit to the debtor by Sears.
As part of the settlement process, the parties to the Actions have
stipulated that the Actions shall proceed on behalf of the Settlement Class
for settlement purposes only, and the Courts' Hearing Orders so provide.
IF YOU PREVIOUSLY FILED FOR PERSONAL BANKRUPTCY AND ENTERED INTO A
REAFFIRMATION AGREEMENT WITH SEARS OR WESTERN AUTO, YOU MAY BE
WITHIN THE SETTLEMENT CLASS COVERED BY THE PROPOSED SETTLEMENT
WHICH WILL AFFECT YOUR RIGHTS, AND THIS NOTICE ACCORDINGLY APPLIES
TO YOU.
YOU SHOULD READ THIS NOTICE CAREFULLY. IF YOU HAVE ANY QUESTIONS
AS TO WHETHER YOU ARE A MEMBER OF THE SETTLEMENT CLASS, OR REGARDING THE
PROPOSED SETTLEMENT OR THIS NOTICE, YOU MAY CALL THE SETTLEMENT
ADMINISTRATOR AT 1-800-___-____ (TOLL- FREE). THE SETTLEMENT ADMINISTRATOR
CAN ALSO ADVISE YOU WHETHER OR NOT YOU NEED TO SUBMIT A SEPARATE "PROOF OF
CLAIM" IN ORDER TO PARTICIPATE IN THE BENEFIT OF THE SETTLEMENT (AS FURTHER
EXPLAINED BELOW, THAT STEP WILL BE NECESSARY FOR ALL SETTLEMENT CLASS
MEMBERS WHO FILED FOR BANKRUPTCY BEFORE JANUARY 1, 1992 AND FOR SOME
SETTLEMENT CLASS MEMBERS WHO FILED FOR BANKRUPTCY AFTER JANUARY 1, 1992).
PLEASE DO NOT CONTACT THE COURTS FOR INFORMATION.
IMPORTANT NOTE: IF YOU RECEIVED THIS COPY OF THE NOTICE
IN THE MAIL WITHOUT YOUR REQUESTING IT, THEN YOU HAVE BEEN IDENTIFIED BY
SEARS AS A MEMBER OF THE SETTLEMENT CLASS AND YOU DO NOT NEED TO DO
ANYTHING TO PARTICIPATE IN THE BENEFITS OF THE SETTLEMENT.
IF YOUR BANKRUPTCY FILING WAS BEFORE JANUARY 1, 1992 (OR IF YOU
DID NOT RECEIVE THIS NOTICE WITHOUT REQUESTING IT), YOU WILL NEED TO SUBMIT
A "PROOF OF CLAIM" IN ORDER TO PARTICIPATE IN THE BENEFITS OF THE
SETTLEMENT. THE "PROOF OF CLAIM" FORM MAY BE INCLUDED WITH THIS NOTICE; IF
IT IS NOT, YOU MAY OBTAIN A COPY OF THE FORM BY CONTACTING THE SETTLEMENT
ADMINISTRATOR AT 1-800-___-____. THE DEADLINE FOR SUBMITTING PROOFS OF
CLAIM IS OCTOBER 8, 1997.
IF YOU ARE IN DOUBT AS TO WHETHER YOU NEED TO FILE A PROOF OF
CLAIM FORM, PLEASE CONTACT THE SETTLEMENT ADMINISTRATOR.
BACKGROUND AND DESCRIPTION OF THE ACTION
The following is a summary description of the facts and procedural
history of the Actions and the Settlement. It is followed by a description
of the terms and conditions of the Settlement, including the reasons of the
parties for the Settlement; additional information concerning the Court
hearings and your right to request exclusion from the Settlement Class or
to appear (including to object to the Settlement); and information on how
you can obtain additional information and related documents should you so
desire.
The Settlement has been reached between the parties in the two
Actions: the above-captioned consolidated adversary proceedings now
pending in the U.S. Bankruptcy Court (the "Bankruptcy Court Action"), and
the above-captioned civil action now pending in the U.S. District Court
(the "District Court Action").
The Bankruptcy Court Action was commenced on March 31, 1997, with
the filing of the Brioso adversary proceeding on behalf of a nationwide
class of bankruptcy debtors who had entered into reaffirmation agreements
with Sears that were not filed with the appropriate bankruptcy court as
required by the U.S. Bankruptcy Code. The Caldas adversary proceeding was
subsequently consolidated with Brioso. The complaints in the Bankruptcy
Court Action, including as subsequently amended, alleged that Sears,
pursuant to a regular policy and practice, obtained reaffirmation (or
similar) agreements from individual debtors, by which the debtors agreed to
repay all or part of their pre-petition indebtedness to Sears, and did not
file such agreements with the bankruptcy court in which the debtors'
Chapter 7 proceeding was pending, as required by the Bankruptcy Code. (The
Bankruptcy Court Action also named Western Auto, a subsidiary of Sears, as
a defendant based on substantially the same allegations.) The complaints
further alleged that pursuant to Sears written policies and procedures,
Sears deceived bankruptcy debtors by claiming or implying that such
agreement would be filed with bankruptcy courts, that the agreements had
legal effect as enforceable agreements, and that monies were due which were
not in fact owed, and by threatening actions that Sears either did not
intend to take or was not legally permitted to take.
The Bankruptcy Court Action further alleged that Sears policy and
practice in soliciting bankruptcy debtors to execute reaffirmation,
redemption or other agreements subject to the Bankruptcy Code without
complying with the provisions of the Code, in collecting monies pursuant to
such agreements, and by otherwise enforcing or attempting to enforce such
agreements, abused the process of the bankruptcy courts by violating
Bankruptcy Code provisions governing post-petition reaffirmation of debt,
11 U.S.C. 524, the automatic stay provision of the Bankruptcy Code, 11
U.S.C. 362, and the discharge injunction granted under 11 U.S.C. 524;
constituted unfair and deceptive acts and practices in violation of the
Massachusetts Consumer Protection Act (Mass. G.L. ch. 93A); and violated
the state unfair and deceptive practices law of each state in which Sears
has engaged in such practice. For relief, the complaints prayed, among
other things, for judgment declaring Sears conduct unlawful, ordering Sears
to refund to debtors all payments made under such agreements, and assessing
exemplary or punitive damages against Sears for its alleged willful
violations of the Bankruptcy Code, as well as double or treble damages.
The District Court Action was commenced on May 20, 1997. In
addition to the claims alleged in the Bankruptcy Court Action, the District
Court Action alleged, on behalf of a nationwide class of debtors, that
Sears conduct constituted a violation of the federal Racketeer Influenced
and Corrupt Organizations Act, 18 U.S.C. 1961 et seq. ("RICO"), and of the
federal Truth in Lending Act, 15 U.S.C. 1601 et seq. For relief, the
District Court Action prayed, among other things, for judgment declaring
Sears conduct unlawful, ordering Sears to refund to debtors all payments
made under the allegedly illegal and unenforceable reaffirmation
agreements, and assessing exemplary or punitive damages as well as double
or treble damages against Sears.
SETTLEMENT DISCUSSIONS; COURT ORDERS AND
OTHER MATTERS PRECEDING THE SETTLEMENT;
AND THE PARTIES' REASONS FOR THE SETTLEMENT
The issues raised by the Bankruptcy Court Action and the District
Court Action first came to the attention of the senior management of Sears
on March 28, 1997. Sears represents that prior to March 28, 1997, no
member of Sears senior management or of its board of directors knew that
Sears had failed to file reaffirmation agreements with the appropriate
bankruptcy courts in violation of the Bankruptcy Code or that Sears had
sought to collect upon agreements that had not been so filed or upon
reaffirmation agreements that had been filed but were subsequently
disapproved or rejected by the bankruptcy courts or rescinded by the
debtor. On that date, Sears senior management directed that all
reaffirmation agreements henceforth be filed with the appropriate
bankruptcy court and that an immediate audit be commenced in an effort to
ascertain the scope and nature of the manner in which reaffirmation
agreements had been handled by Sears, including the failure to file with
the appropriate bankruptcy court.
On April 9, 1997, Sears publicly acknowledged that the company had
exercised flawed legal judgment and execution in failing to file all
reaffirmation agreements with the appropriate bankruptcy court. In that
announcement, Sears also indicated that it would compensate bankruptcy
debtors nationwide whose debt reaffirmations were not filed as required by
the Bankruptcy Code during the period 1992 to date.
Sears thereafter expressed its desire to effect a global
resolution of the reaffirmation agreement matter and discussions were
commenced with counsel for plaintiffs. Sears discussions have also
included the Attorneys General of the United States; the United States
Attorney for the District of Massachusetts; the Office of the United States
Trustee for the District of Massachusetts; and the Boston Regional Office
and the Consumer Protection Bureau of the United States Federal Trade
Commission.
On April 14, 1997, the Bankruptcy Court entered an Order in a
related proceeding initiated by the Bankruptcy Court's own Order to Show
Cause Why Compensatory And Punitive Damages Should Not Be Imposed On Sears,
Roebuck and Co. for Wilful Violation Of The Discharge Order and Of 11
U.S.C. 302(a) (filed on April 9, 1997 in In re Travis Amalfitano and
others, Case No. 95-15260-CJK). The Bankruptcy Court's April 14, 1997
order, which was issued following a hearing in that Court held on April 11,
1997, ordered on the consent of Sears: (1) that Sears retain the services
of Professor Lawrence P. King, the Charles Seligson Professor of Law at New
York University School of Law and of counsel to the law firm of Wachtell,
Lipton, Rosen & Katz (one of the firms representing Sears in the Actions),
to perform a legal review of Sears policies and procedures with regard to
reaffirmation agreements and that Sears adopt Professor King's
recommendations to assure future compliance with the requirements of 524 of
the U.S. Bankruptcy Code; and (2) that no later than April 16, 1997 at 5:00
p.m., Sears cease sending billing statements and assessing interest charges
to the approximately 2,700 debtors identified in that proceeding as having
had reaffirmation agreements with Sears that were not filed with the
bankruptcy court.
By Order dated April 16, 1997, the Bankruptcy Court, on Sears
consent and noting that the plaintiffs and Sears had expressed a genuine
interest in achieving an equitable, appropriate, national resolution of the
issues raised in the Bankruptcy Court Action, conditionally certified a
nationwide class for settlement purposes only. The Order appointed the
plaintiffs in the Bankruptcy Court Action as class representatives and
plaintiffs' counsel (Grant & Roddy, Edelman & Combs, and The Law Office of
Claude LeFebvre) as class counsel.
Class counsel have sought and obtained substantial formal and
informal discovery from Sears. That discovery has included production of
documents, depositions of Sears employees, and interviews of Sears
employees. In addition, class counsel have conducted their own
investigation into Sears practices and procedures by contacting members of
the class and various debtors' counsel in other jurisdictions, and have
engaged in extensive discussions with counsel for Sears with regard to
Sears prior practices and procedures, its current practices and procedures,
and other issues relevant to the Actions.
Class counsel, furthermore, have consulted and shared information
and analyses regarding the Actions and this proposed Settlement with the
Office of the United States Trustee of the District of Massachusetts, the
United States Attorney's Office for the District of Massachusetts, and the
Office of the Massachusetts Attorney General, and representatives of such
governmental authorities participated in settlement discussions with Sears
that facilitated the agreement to the Settlement.
SUPPORT OF THE SETTLEMENT BY
INVOLVED FEDERAL AND STATE
GOVERNMENTAL AUTHORITIES, AND THE PARTIES
The Attorneys General of the United States support the Settlement
and believe that it provides a fair, reasonable and adequate resolution of
the claims of the nationwide class of debtors being settled. In addition,
the Federal Trade Commission has approved, subject to a statutory notice
and comment period, and Sears has consented to an Agreement Containing
Consent Order which provides, among other things, that the FTC will not
institute action under Section 19 of the Federal Trade Commission Act if
consumers receive full redress; such requirement is satisfied under the
terms of the Settlement, so long as the amount paid in restitution is at
least $100 million (this amount could be adjusted upward or downward by not
more than 25 percent based on Sears ongoing nationwide review to identify
eligible debtors). [To be updated at the time of mailing.]
Based on their review and analysis of the relevant facts and legal
principles, class counsel believe that the terms and conditions of the
Settlement are fair, reasonable and adequate, and beneficial to and in the
best interests of plaintiffs and the Settlement Class. Class counsel have
determined to execute this Stipulation and urge approval by the Bankruptcy
Court and the District Court of the Settlement after considering the
substantial damages that the Settlement Class will receive pursuant to the
Settlement; the fact that the Settlement provides for members of the
Settlement Class to receive such payments in the most expeditious and
efficient manner practicable, and thus much sooner than would be possible
were the claims asserted to be litigated through trial and appeal even if
such claims were to be found to be meritorious in all respects; the fact
that the Settlement provides for significant monetary benefits to the
Settlement Class beyond the restitution damages paid with respect to
unfiled (and otherwise unenforceable) reaffirmation agreements, including
the amounts to be distributed out of a $25 million fund being created by
Sears, the elimination of finance charges on post-petition purchases, Sears
agreement not to act upon its security interest in goods sold to members of
the Settlement Class prior to their bankruptcy filing, the payment of
interest by Sears, and Sears commitment to continue to extend credit to
members of the Settlement Class notwithstanding that no such credit would
have been extended but for the existence of the reaffirmation agreements;
the provision of the Settlement that obliges Sears, at its sole expense, to
identify members of the Settlement Class from January 1, 1992 to date and
to provide the benefits of the Settlement to such persons without their
having to take any affirmative steps (including provisions that require
Sears to bear the onus of incomplete and unavailable information by
treating reaffirmation agreements for which there is no direct evidence of
their having been filed with the bankruptcy court as having not been
filed); the fact that the Settlement provides for payments to members of
the Settlement Class who executed reaffirmation agreements before January
1, 1992 notwithstanding that such claims could be held barred by applicable
statutes of limitations and/or the doctrine of laches; the defenses
available to Sears for claims under state law that seek to go beyond the
unenforceability of unfiled reaffirmation agreements under the U.S.
Bankruptcy Code, including the possibility that any state law claims would
be deemed to be preempted by the Bankruptcy Code; the defenses available to
Sears for claims under the Bankruptcy Code, including whether persons whose
reaffirmation agreements were not filed could obtain recoveries for
violation of the discharge injunction; the defenses available to Sears for
claims under RICO, including defenses based on the 18 U.S.C. 1962(c)
requirement of establishing a RICO "enterprise" distinct from the
defendant, Sears; the defenses available to Sears with respect to the
availability and amount of any punitive relief; Sears consent to the
certification of a nationwide class of debtors; the provisions of the
Settlement regarding Sears future practices and policies with regard to
reaffirmation agreements and the ability to enforce such commitments by the
Bankruptcy Court and the District Court that the Settlement provides; and
the fact that the Settlement allows members of the Settlement Class to
exclude themselves from the Settlement Class should they so desire and
thereby not be precluded by the Settlement from individually seeking to
pursue the claims alleged in the Actions or any other claims relating to
the conduct of Sears at issue in the Actions.
Sears has agreed to the Settlement consistent with its
acknowledgment that the company previously had exercised flawed legal
judgment and execution in failing to file reaffirmation agreements. Sears
considers it desirable that the Actions be settled on a global nationwide
basis in order to achieve what it believes is a fair, responsible, and
final resolution of the claims being settled.
THE STIPULATION AND AGREEMENT
OF COMPROMISE AND SETTLEMENT
In light of the foregoing, the parties entered into a Stipulation
and Agreement of Compromise and Settlement (the "Stipulation of
Settlement") on June 5, 1997, which they have filed with the Bankruptcy
Court and the District Court. The Stipulation of Settlement details the
terms and conditions of the Settlement, which are summarized below. The
parties are urging the Courts to approve the Settlement.
THE SETTLEMENT
The following is a summary of the terms and conditions of the
proposed Settlement, which are set forth in detail in the Stipulation of
Settlement.
Filing of all reaffirmation agreements. The Stipulation of
Settlement provides that Sears and its agents, servants, employees,
attorneys and all persons acting in concert and participation with them,
shall henceforth file all reaffirmation agreements it obtains from debtors
pursuant to 524(c) and (d) of the U.S. Bankruptcy Code (11 U.S.C.) with the
appropriate U.S. bankruptcy court on or before the date that the debtor's
order of discharge is entered.
Identification of members of the Settlement Class from January 1,
1992 to date. The Stipulation of Settlement provides that Sears shall
complete its ongoing national review to identify those persons who, from
January 1, 1992 to April 1, 1997 (the date upon which Sears senior
management directed that henceforth all reaffirmation agreements be filed
as required by the Bankruptcy Code), filed Chapter 7 petitions in
bankruptcy and from whom Sears obtained a reaffirmation agreement that was
not filed with the appropriate bankruptcy court (or that was filed but
later rescinded by the debtor or disapproved or rejected by the Bankruptcy
Court, or not approved by the court where approval was required for the
enforceability of the agreement) ("Identified Class Members"). The
identification process is anticipated to be completed, subject to Sears
best efforts, by August 15, 1997. Sears is providing class counsel a
status report on the identification process every two weeks, in conjunction
with its reports to the U.S. Attorney's Office in accordance with the
Stipulated Order in the United States Action.
Moratorium on billing. Within two business days after
identification of a debtor as an Identified Class Member, Sears has
implemented and will continue to implement steps to cease all collection
activities on that individual's Sears account. As to such accounts, Sears
will suspend all billing, including for both reaffirmed indebtedness and
post-petition purchases, and suspend the accrual of any finance charges.
In addition, any available "open to buy" credit for such accounts will be
maintained as available. Following the calculation of the new balance of
an individual pursuant to the Settlement, Sears may recommence the billing
and collection of that account. No finance or other charges will be made
on account of the moratorium on billing.
Payments to Identified Class Members. Pursuant to the Settlement,
Sears will remit to Identified Class Members, as damages, all amounts paid
by them to Sears with respect to reaffirmed debt, with interest.
The Stipulation of Settlement contains detailed provisions
regarding the calculation of the amounts to be remitted by Sears. In
general, the amount payable for the account of each Identified Class Member
will be calculated as follows: The amount of reaffirmed indebtedness will
be treated as a nullity and reset to $0. All post-petition payments will
be deemed to have first been made on account of reaffirmed indebtedness
(including all finance charges, late fee charges, returned check charges or
other similar charges with respect thereto), and, to that extent, will be
payable back to such member, with interest as provided below, and the
balance of the account will be reset to reflect only the remaining balance
on post-petition purchases. If such person made no post-petition
purchases, the balance of his or her account shall be reset to $0. If the
person made post-petition purchases, all finance charges attributable to
such purchases shall be eliminated and the new balance of such person's
account shall equal the amount of such post-petition purchases.
If a person made post-petition payments in excess of the amount of
reaffirmed debt plus finance charges on account of such reaffirmed debt,
the amount payable to such person will equal the sum of reaffirmed debt and
finance charges on account of reaffirmed debt, and such excess will reduce
such person's new account balance calculated in accordance with the
previous paragraph. In no case will the amount of such person's new
account balance due exceed the balance of the account prior to giving
effect to the Settlement. The calculation has the effect of returning
(with interest) finance charges previously assessed on reaffirmed
indebtedness, and of removing finance charges previously assessed on
post-petition purchases.
The Settlement provides that the interest payable to the
Identified Class Members will be calculated as follows: All post-petition
payments will be recognized as if received by Sears on the first day of the
billing cycle during which the payments were actually received. If an
individual payment was received on account of reaffirmed indebtedness and
is therefore payable to such Member, monthly interest at the annual rate of
10% will be added to the amount of such individual payment to calculate the
total amount payable. Interest will be calculated through the end of the
most recently completed billing cycle prior to the date on which payment to
the member of the Settlement Class is mailed.
Any amounts payable to an Identified Class Member shall be paid by
a Sears check mailed by first class mail to such person's last known
address. The damages to Identified Class Members will be provided as soon
as practicable following the Settlement becoming final (or, at Sears
option, upon approval of the Settlement by the District Court).
In addition to the compensation described above, Sears will pay
each of the named plaintiffs $2,500 for serving in the capacity of a
representative of the plaintiff class, subject to approval of the Courts.
Payments to members of the Settlement Class other than Identified
Class Members. Pursuant to the Settlement, members of the Settlement Class
other than Identified Class Members, including individuals who executed
reaffirmation agreements with Sears prior to January 1, 1992 that were not
filed with the Bankruptcy Court (or if filed, were thereafter disapproved,
rejected or rescinded, or not approved where approval was required for
enforceability), will be eligible for compensation damages on the same
basis as Identified Class Members, in accordance with detailed provisions
contained in the Stipulation of Settlement. The following is a summary of
those provisions.
Because Sears is unable as a practical matter to identify such
persons from either its own records or records available from other
sources, and does not have complete purchase and payment data for the
pre-1992 period, members of the Settlement Class other than Identified
Class Members may seek such compensation damages by submitting a "Proof of
Claim" form. (NOTE: PLEASE REFER TO THE NOTE ON PAGE __ OF THIS NOTICE
FOR INFORMATION ON WHETHER YOU NEED TO SUBMIT A "PROOF OF CLAIM" FORM IN
ORDER TO PARTICIPATE IN THE BENEFITS OF THE SETTLEMENT.)
If the person filing a Proof of Claim is able to supply acceptable
documentary information in the form of account statements (or other
documentary evidence acceptable to the Settlement Administrator as)
reflecting the record of his or her post-petition purchases from and cash
payments to Sears, such person's Claim will be calculated on the same basis
as the compensation payable to Identified Class Members as described above.
If such person does not supply such documentation, Sears shall use its
reasonable best efforts to ascertain the record of such person's post-
petition purchases from and cash payments to Sears; and if such information
is obtained, such person's Claim will likewise be calculated on the same
basis as Identified Class Members.
If the Settlement Class member does not supply the information and
Sears is not able using its reasonable best efforts to produce the
information necessary to calculate the person's Claim on the same basis as
Identified Class Members, the total amount payable to such person will be
calculated to be the same percentage of that person's reaffirmed
indebtedness (which must be established by documentary evidence) as the
average percentage of reaffirmed indebtedness that Sears provides as
compensation damages to Identified Class Members as described above. If
the Settlement Class member cannot prove the amount of reaffirmed
indebtedness in accordance with the guidelines to be submitted by the
parties to the Courts, the total amount payable to such member nevertheless
will be the same percentage of that member's pre-petition indebtedness to
Sears that was discharged by a bankruptcy court (which, together with some
post-petition payment activity, must be established by documentary evidence
as provided in the guidelines) as the average percentage of pre-petition
indebtedness that Sears provides as compensation damages to Identified
Class Members.
$25 million additional fund provided to Settlement Class Members.
In addition to the amount payable to Settlement Class members as described
above, Sears will provide a fund of $25 million to be distributed to the
members of the Settlement Class otherwise entitled to receive payments
under the Settlement, as follows: Each such member will receive the same
share of the $25 million fund as such member's pro rata share of the total
amount otherwise payable by Sears to all Settlement Class members under the
Settlement (such amounts shall not include interest calculated as described
above).
Cy pres fund for consumer education. In the event that the total
amounts payable by Sears as compensation to members of the Settlement Class
who executed reaffirmation agreements with Sears after January 1, 1992
ultimately aggregate less than $100 million (separate and apart from the
$25 million payable as described in the previous paragraph), that
difference will not be retained by Sears but rather will be paid by Sears
into a cy pres fund to be devoted to consumer credit education (including
personal bankruptcy education, consumer finance and debt collection issues
and debtor counsel education).
Process of calculation of compensation. Sears calculation of the
compensation to members of the Settlement Class will be overseen by the
accounting firm of Deloitte & Touche LLP. Deloitte & Touche LLP will be
retained for this purpose by Sears at Sears sole expense, and will
periodically report to class counsel as requested on the calculation
process. In addition, the parties have also retained [name of firm] to act
as Settlement Administrator, at Sears expense. The Settlement
Administrator will review the calculation of the compensation to members of
the Settlement Class and otherwise administer the Settlement.
Continuation of extension of credit by Sears; credit reports. The
Settlement provides that Sears will continue to extend credit to members of
the Settlement Class who, at the time of the calculation of amounts payable
to them, have an "open to buy" extension of credit, notwithstanding the
voiding of reaffirmed debt amounts previously owed by such persons, it
being understood that Sears will treat its relationship with such persons
on the same basis as its relationship with its credit customers generally,
including with respect to the maintenance and adjustment of "open to buy"
levels, fees, charges and all other matters.
In addition, the Settlement provides that Sears will undertake to
determine if it has made any negative reports to credit bureaus or similar
organizations on account of nonpayment by members of the Settlement Class
(whether Identified Class Members or other class members who file Proofs of
Claim as provided for in the Settlement) based on reaffirmed indebtedness,
and will advise such bureaus or organizations to correct such reports.
Waiver of Sears security interest. The Settlement provides that,
with respect to all members of the Settlement Class, Sears will not seek to
recover any of the goods sold by it in which Sears claimed a security
interest prior to such person's bankruptcy filing, and will in all respects
treat such security interest as waived.
Revision of Sears policies and procedures. Class counsel have
reviewed and shall continue to review the revision of Sears policies and
procedures regarding reaffirmation agreements already implemented and to be
implemented by Sears pursuant to the recommendations of Professor King, and
shall consult with Professor King as to such matters.
Western Auto. Members of the Settlement Class who executed
reaffirmation agreements with Western Auto will be entitled to compensation
on the same terms as other members of the Settlement Class who are not
Identified Class Members.
SCOPE OF PROPOSED DISMISSAL
OF THE ACTIONS AND RELEASE
OF SEARS, WESTERN AUTO AND RELATED PERSONS
Pursuant to the proposed Settlement, plaintiffs in the Action have
agreed to dismiss, release and discharge the Settled Claims (as defined
below) against Sears, Western Auto and the Related Persons (as defined
below) on behalf of themselves and on behalf of the Settlement Class.
Thus, the Stipulation of Settlement provides that, if the Settlement is
approved by the Courts, all claims, rights and causes of action, damages,
losses and demands of any nature whatsoever, state or federal, including
but not limited to claims arising under the U.S. Bankruptcy Code, the
Federal Rules of Bankruptcy Procedure, or any state or federal law
regarding consumer or debtor fraud or unfair or deceptive trade practices,
or otherwise (and including but not limited to whether for compensatory
damages, consequential damages, restitution, punitive damages, contempt,
sanctions, penalties, injunctive relief, declaratory relief, or otherwise),
whether known or unknown, that are, could have been or might in the future
be asserted by any of the plaintiffs or any member of the Settlement Class,
whether directly, representatively or in any other capacity, against Sears
(or Western Auto) and any of their present and former officers, directors,
shareholders, employees, accountants, representatives, attorneys,
subsidiaries, affiliated companies, divisions, successors, heirs, agents
and assigns (the "Released Persons"), in connection with or that arise out
of Sears (or Western Auto) obtaining of a reaffirmation agreement from a
member of the Settlement Class, the nonfiling of any such agreement with
the appropriate bankruptcy court, the solicitation or billing of or
collecting under or any steps to enforce any such unfiled agreement (or any
filed reaffirmation agreement that was subsequently disapproved or rejected
by the bankruptcy court (or that was not approved by such court where
approval was required for the enforceability of such agreement) or that was
subsequently rescinded by the debtor), or any communications,
representations or omissions by or on behalf of Sears or Western Auto with
respect to any of the foregoing, or any acts, facts, transactions or
occurrences, alleged or otherwise asserted or that could have been asserted
in either of the Actions (all of which are hereinafter referred to as the
"Settled Claims"), shall be compromised, settled, released and discharged
with prejudice.
NOTICE OF SETTLEMENT HEARINGS
NOTICE IS HEREBY GIVEN that hearings have been scheduled in the
Courts, on October 28, 1997, at 10:00 a.m., in the U.S. Bankruptcy Court,
Federal Office Building, 10 Causeway Street, Boston, Massachusetts 02222,
and on _________, 1997, at __.m. in the U.S. District Court, J. W.
McCormack P.O. and Courthouse, Boston, Massachusetts 02109, respectively,
for the purposes of: (a) determining whether the proposed Settlement of
the Actions is fair, reasonable and adequate, and should be approved by the
Courts, and whether judgment should be entered thereon; and (b) considering
such other matters as may properly come before the Courts in connection
with the hearings, which may include an application by class counsel for an
award of attorneys' fees and expenses and reimbursement of expenses (see
"Attorneys' Fees and Expenses" below).
Each of the Courts has reserved the right to adjourn the hearing
before it or any adjournment thereof, without further notice to members of
the Settlement Class other than by announcement at the hearing or any
adjournment thereof.
If the Settlement (including any modification thereto made with
the consent of the parties as provided for in the Stipulation) is approved
by the Courts following the hearings, the parties will jointly request the
Courts each to enter an Order and Final Judgment ("Final Order"), among
other things: (a) approving the Settlement as fair, reasonable and
adequate and directing consummation of the Settlement in accordance with
its terms and provisions; (b) dismissing the Bankruptcy Court Action and
the District Court Action as to Sears (and Western Auto) with prejudice as
against all plaintiffs and all members of the Settlement Class, without
costs except as therein provided, such dismissal to be subject only to
compliance by the parties with the terms and conditions of the Stipulation
and any order of the Courts with reference to the Stipulation of
Settlement; (c) permanently barring and enjoining the institution or
prosecution by plaintiffs or any member of the Settlement Class, either
directly or in any other capacity, of any action asserting claims that are
Settled Claims; (d) releasing and discharging, on behalf of the Settlement
Class and the plaintiffs, the Released Persons from all Settled Claims;
(e) reserving continuing and exclusive jurisdiction over implementation of
the Settlement, and over enforcement, construction and interpretation of
the Stipulation; and (f) awarding attorneys' fees and expenses to class
counsel if application therefor has been made, or reserving jurisdiction
with respect thereto.
RIGHT TO REQUEST EXCLUSION
All members of the Settlement Class have the option of excluding
themselves from the Settlement Class by mailing a timely and valid Request
for Exclusion postmarked not later than October 8, 1997, [twenty (20) days
prior to the first settlement hearing] addressed to Sears Personal
Bankruptcy Debtor Class Litigation, P.O. Box _____, Boston, Massachusetts
________. A Request for Exclusion must set forth the following information
with respect to the person requesting exclusion: name; address; social
security number or taxpayer identification number. All Requests for
Exclusion must be signed by or on behalf of the person so requesting
exclusion.
If a Request for Exclusion does not include all of the foregoing
information, it shall not be a valid Request for Exclusion and the person
filing an invalid Request for Exclusion shall be a member of the Settlement
Class. In addition, members of the Settlement Class requesting exclusion
are requested to provide the year of the individual's bankruptcy filing,
the bankruptcy court in which the filing was made and the amount of
indebtedness to Sears that the individual reaffirmed, although the failure
to provide such information shall not affect the validity of the Request
for Exclusion.
All persons who properly submit valid Requests for Exclusion from
the Settlement Class shall not be members of the Settlement Class and shall
have no rights with respect to the Settlement and no interest in the
Settlement. As set forth above, the Settlement provides for the release
and discharge as to members of the Settlement Class of the Settled Claims
as against Sears, Western Auto and the other Released Person. By
submitting a valid Request for Exclusion, a member of the Settlement Class
will not be precluded from individually seeking to pursue any of the
Settled Claims at his or her own expense.
RIGHT TO APPEAR
Any person who has not requested exclusion from the Settlement
Class who objects to the Settlement, the judgment to be entered thereon, or
the award of attorneys' fees and expenses to plaintiffs' counsel, or who
otherwise wishes to be heard, may appear in person or by his attorney at
the settlement hearings and present any evidence or argument that may be
proper and relevant. However, no such person shall be heard and no papers,
briefs, pleadings or other documents submitted by any person shall be
received and considered by either of the Courts (unless the Court in its
discretion shall thereafter otherwise direct, upon application of such
person and for good cause shown), unless no later than twenty (20) days
prior to the hearing, such persons shall file with the Court (a) a notice
of intention to appear; (b) a detailed statement of such person's specific
objections to any matter before the Court; (c) proof of membership in the
Settlement Class; and (d) the grounds for such objections and any reasons
why such person desires to appear and to be heard, as well as all documents
or writings which such person desires this Court to consider. Such
documents shall be served upon the following counsel prior to filing such
documents with the Court:
John Roddy
Frederic D. Grant, Jr.
GRANT & RODDY
44 School Street
Boston, MA 02108
On Behalf of All Plaintiffs
Mark N. Polebaum
Stephen H. Oleskey
Paul P. Daley
HALE AND DORR LLP
60 State Street
Boston, MA 02109
On Behalf of Defendants
Sears, Roebuck and Co. and
Western Auto Supply Company
Any person who fails to object in the manner prescribed above shall be
deemed to have waived his or her objections and shall forever be barred
from making any such objections in the Actions or in any other action or
proceeding. In light of the scheduling of the settlement hearings in each
of the Courts, persons who wish to file objections should do so in both of
the Courts.
In its Hearing Order scheduling the hearing before it, the
District Court has ordered that, pending decision by the Courts on whether
to approve the Settlement, each member of the Settlement Class is barred
and enjoined from instituting or prosecuting any action in state or federal
court against Sears or Western Auto or any of their present or former
officers, directors, shareholders, employees, accountants, attorneys,
representatives, subsidiaries, affiliated companies, divisions, successors,
heirs, agents and assigns, which assert claims that are Settled Claims that
would be released and discharged upon approval of the Settlement.
FINALITY OF AND
CONDITIONS TO THE SETTLEMENT
The Stipulation provides that the approval by the Courts of the
Settlement will be considered final, and the Settlement will be considered
final (and Sears obligations thereunder will arise), either (a) upon the
entry by the Courts of the Final Order and when the applicable period for
the appeal of such Final Orders shall each have expired without an appeal
having been filed; or (b) if an appeal is taken, upon entry of an order
affirming the Final Order and when the applicable period for the appeal of
such affirmance of the Final Order shall have expired without an appeal
having been filed, or upon entry of any stipulation dismissing any such
appeal with no right of further prosecution of the appeal; or (c) if an
appeal is taken from any decision affirming the Final Order, upon entry of
an order in such appeal finally affirming the Final Order without right of
further appeal or upon entry of any stipulation dismissing any such appeal
with no right of further prosecution of the appeal. None of the
obligations of Sears pursuant to the Settlement shall become effective
until the Settlement becomes final. Notwithstanding the above, Sears shall
have the option to declare the Settlement effective and final upon approval
by the District Court (whether or not then approved by the Bankruptcy
Court) or upon such approval having been finally affirmed on appeal or no
appeal therefrom having been taken within the applicable time period
limiting the taking of such an appeal.
ATTORNEYS' FEES AND EXPENSES
Provided that judicial approval of the Settlement has been
obtained, class counsel intend to jointly apply for court approval of an
award of attorneys' fees, plus reimbursement of expenses (including
experts' fees). As an additional benefit to the Settlement Class, any
attorneys' fees and expenses awarded to class counsel will be paid by Sears
and will not diminish the benefits of the Settlement to the class. Class
counsel's application for attorneys' fees and expenses may be made, at the
option of class counsel, at or subsequent to the settlement hearings.
The Stipulation also provides that Sears will pay the costs of all
notices and settlement administration.
SCOPE OF THIS NOTICE
AND FURTHER INFORMATION
The foregoing description of the Actions, the terms of the
Settlement and other matters described herein are only summaries. For the
full details of the Actions and the terms and conditions of the Settlement,
you are referred to the Stipulation of Settlement, and the pleadings and
the other documents on file with the Courts in the Actions. These
documents may be examined by you or your attorney during regular business
hours of each business day at the office of the Clerk of the Courts, at the
U.S. Bankruptcy Court, 10 Causeway Street, Boston, Massachusetts 02222 (for
the Bankruptcy Court Action), and the J. W. McCormack P.O. and Courthouse,
Boston, Massachusetts 02109 (for the District Court Action).
Alternatively, you may request copies of these documents from, or direct
any questions or communications concerning the Settlement to the Settlement
Administrator at 1-800-___-____ (toll-free).
PLEASE DO NOT CONTACT THE COURTS FOR INFORMATION.
Dated: Boston, Massachusetts
_____________, 1997 [date of initial mailing of Notice]
By orders of the United States Bankruptcy
Court for the District of Massachusetts,
Eastern Division, and of the United States
District Court for the District of Massachusetts.
Exhibit D
SUMMARY NOTICE OF CLASS ACTION
DETERMINATION, PROPOSED SETTLEMENT
OF CLASS ACTIONS AND SETTLEMENT HEARINGS
TO: ALL INDIVIDUALS WHO PREVIOUSLY FILED FOR PERSONAL BANKRUPTCY AND
ENTERED INTO REAFFIRMATION AGREEMENTS WITH SEARS, ROEBUCK AND CO. (OR
WESTERN AUTO SUPPLY COMPANY)
This summary notice relates to the proposed settlement,
subject to court approval, of nationwide class action litigation on behalf
of a class (the "Settlement Class") of individual bankruptcy debtors who
entered into reaffirmation agreements with Sears, Roebuck and Co. (or Sears
subsidiary, Western Auto Supply Company), that were not filed with the
bankruptcy courts (or were filed but subsequently disapproved by those
courts or rescinded by the debtor, or were filed but not approved by the
court where approval was necessary to the enforceability of the agreement).
A reaffirmation agreement is an agreement by which an individual who has
filed for personal bankruptcy under the U.S. Bankruptcy Code agrees
nonetheless to repay, in whole or in part, indebtedness to a creditor (such
as Sears) that the individual debtor incurred before his or her bankruptcy.
OCTOBER 8, 1997 IS THE DEADLINE FOR SUBMITTING PROOFS OF
CLAIM, OR FOR EXERCISING YOUR RIGHT TO APPEAR OR REQUESTING EXCLUSION FROM
THE CLASS.
If you previously filed for personal bankruptcy and
entered into a reaffirmation agreement with Sears (or Western Auto), you
may be a member of the Settlement Class covered by the proposed settlement
which will effect your rights, and this notice accordingly applies to you.
A description of the settlement, its background and
additional information is contained in the printed Notice of Pending Class
Actions, Class Action Determination, Proposed Settlement of Class Actions,
Settlement Hearings, and Right to Appear. IF YOU HAVE NOT RECEIVED A COPY
OF THE PRINTED NOTICE IN THE MAIL, YOU MAY REQUEST THAT A COPY BE MAILED TO
YOU BY CALLING 1-800-___-____ (TOLL-FREE). You will then be mailed a copy
of the printed Notice together with a form of Proof of Claim that may apply
to you, with instructions, at no cost to you.
PLEASE DO NOT CONTACT THE COURTS FOR INFORMATION.
The litigations proposed to be settled are entitled
Douglas O. Brioso v. Sears, Roebuck and Co., Adversary Proceeding No. 97-
1222-CJK, consolidated with Antonia Caldas v. Sears, Roebuck and Co.,
Adversary Proceeding No. 97-1229-CJK, pending in the U.S. Bankruptcy Court,
District of Massachusetts, Eastern Division, and David Conley v. Sears,
Roebuck and Co., Civil No. 97-11149-PBS, pending in the U.S. District
Court, District of Massachusetts.
YOU ARE HEREBY NOTIFIED, pursuant to Rule 23 of the
Federal Rules of Civil Procedure, that hearings have been scheduled in
these courts on October 28, 1997, at 10:00 a.m., in the U.S. Bankruptcy
Court, Federal Office Building, 10 Causeway Street, Boston, Massachusetts
02222, and on ________________, 1997, at ____ _.m., in the U.S. District
Court, J.W. McCormack P.O. and Courthouse, Boston, Massachusetts 02109,
respectively, for the purposes of: (a) determining whether the proposed
settlement of the actions, on a national class-wide basis, is fair,
reasonable and adequate, and should be approved by the courts, and whether
judgment should be entered thereon; and (b) considering such other matters
as may properly come before the courts in connection with the hearings,
which may include an application by class counsel for an award of
attorneys' fees and reimbursement of expenses. Each of the courts may
adjourn the hearings, or any adjournment thereof, without further notice to
members of the class other than by announcement at the hearing or any
adjournment thereof. If you are a member of the Settlement Class, you may
be entitled to monetary benefits pursuant to the settlement if it is
judicially approved.
You may request to be excluded from the Settlement Class
by mailing a written request for exclusion postmarked no later than October
8, 1997 to Sears Personal Bankruptcy Debtor Class Litigation, P.O. Box ___,
Boston, Massachusetts ______. As is further explained in the printed
Notice, any requests for exclusion must state your name, address, and
social security number or taxpayer identification number. Any Settlement
Class member who requests exclusion will not be entitled to share in the
benefits of the proposed settlement and will not be bound by any judgment
entered in the litigation affecting the Settlement Class. If you elect to
be excluded from the Settlement Class, you may pursue, at your own expense,
whatever legal rights you may have on an individual basis. As is also
described in the printed Notice, any member of the Settlement Class who has
not requested exclusion and who objects to the proposed Settlement may
appear in person or by his or her attorney at the hearings and present any
evidence or argument that may be proper or relevant, by following the
procedures set forth in the Notice. Such objections are required to be
served and filed no later than October 8, 1997 at 4:00 p.m.
Exhibit E
NOTICE INSERT
[for inclusion in statements
being mailed by Sears]
NOTICE: If you previously filed for personal bankruptcy under
Chapter 7 and entered into a reaffirmation agreement with Sears, you may be
a member of a Settlement Class in a proposed class action settlement. For
information, please call 1-800-____-______. There are deadlines as early
as October 8, 1997 applicable to the settlement.
Exhibit F
WESTERN AUTO
NOTICE INSERT
NOTICE: If you previously filed for personal bankruptcy under
Chapter 7 and entered into a reaffirmation agreement with Western Auto, you
may be a member of a Settlement Class in a proposed class action
settlement. For information, please call 1-800-____-______. There are
deadlines as early as October 8, 1997 applicable to the Settlement.