SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 5, 1997
SEARS, ROEBUCK AND CO.
(Exact name of registrant as specified in charter)
New York
(State or Other
Jurisdiction of
Incorporation)
1-416
(Commission File Number)
36-1750680
(IRS Employer Identification No.)
3333 Beverly Road, Hoffman Estates, Illinois
(Address of principal executive offices)
60179
(Zip Code)
Registrant's telephone number, including area code (847) 286-2500
<PAGE>
Item 5. Other Events.
On June 5, 1997, the registrant issued a press release outlining the terms
of agreements with the class action plaintiffs and Attorneys General resolving
legal issues stemming from improper handling of certain debt reaffirmation
agreements. These agreements were outlined at a hearing before the United
States District Court for the District of Massachussets. A copy of the press
release is attached hereto as Exhibit 99(a). Also attached as Exhibit 99(b)
and Exhibit 99(c) are executed copies of the registrant's Consent Order with
the Federal Trade Commission and the settlement agreement with the class action
plaintiffs referred to in the attached press release.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
99(a) Sears, Roebuck and Co. press release dated June 5, 1997.
99(b) Registrant's Consent Order with the Federal Trade Commission.
99(c) Registrant's settlement agreement with the class action plaintiffs.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEARS, ROEBUCK AND CO.
Date: June 5, 1997 By: /s/ Michael D. Levin
MICHAEL D. LEVIN
Senior Vice President, General
Counsel and Secretary
<PAGE>
EXHIBITS
99(a) Sears, Roebuck and Co. press release dated June 5, 1997.
99(b) Registrant's Consent Order with the Federal Trade Commission.
99(c) Registrant's settlement agreement with the class action plaintiffs.
E-1
CONTACT
Jan Drummond
847-286-8316
FOR IMMEDIATE RELEASE
SEARS REACHES SETTLEMENTS IN DEBT REAFFIRMATION ACTIONS
RESOLVES ISSUES WITH ATTORNEYS GENERAL, CLASS ACTION PLAINTIFFS,
OTHERS
BOSTON -- Sears, Roebuck and Co. today outlined terms of
agreements with Attorneys General and class action plaintiffs
aimed at resolving legal issues stemming from improper handling
of certain debt reaffirmation agreements.
Sears detailed its comprehensive settlements in U.S. Bankruptcy
Court for the District of Massachusetts. The settlements cover
unfiled debt reaffirmation agreements made between 1979 and
April 1, 1997, and include a restitution process for debtors who
could not be identified by Sears, but who can show that they are
entitled to restitution.
While some financial consequences are undetermined, Sears said
the settlements will have a material effect on both the
company's second quarter and full-year results. Second quarter
results will be announced in mid-July.
In the settlement, Sears will refund directly to debtors the
amounts collected through reaffirmation agreements that were not
filed with bankruptcy courts. While the company still is in the
process of identifying these debtors, it estimates that 30 to 65
percent of the reaffirmation agreements were not properly filed.
Although precise amounts of improper collections have not yet
been determined, the expected range is between $90 million and
$160 million for the post-January 1, 1992 period.
-more-
The company also will pay accrued interest on the amounts at a
10 percent annual rate, while waiving the company's security
rights to the financed purchases. The expected range of these
payments is between $23 million and $40 million.
Sears also will provide a $25 million fund to be distributed to
parties to the class action litigation, based on pro-rated
shares of the total amount of restitution paid to all members of
the class. As a result of the negotiation of the settlement,
Sears agreed to set up the special fund in lieu of its original
proposal to provide each affected debtor with a $100 gift
certificate, which was part of the company's voluntary
restitution plan announced on April 9.
In its agreement with the Massachusetts Attorney General, which
is expected to be signed tomorrow and will serve as the model
for separate agreements with other states, Sears agrees to pay
$40 million to be shared among the states, to be used in part to
fund consumer education programs nationwide.
If the total restitution paid to affected debtors does not
reach $100 million, Sears will contribute the balance to states
to support bankruptcy education programs.
Massachusetts Chief Bankruptcy Judge Carol Kenner took under
advisement whether the class will be notified and whether to set
a date for a fairness hearing. The Attorneys General agreements
are subject to approval by state courts in each state.
Separately, the Federal Trade Commission yesterday announced a
settlement agreement that is consistent with terms of today's
announcement. Discussions continue between the company and the
Department of Justice as part of the company's overall efforts
to promptly resolve this matter.
Sears, Roebuck and Co. is a leading U.S. retailer of apparel,
home and automotive products and services, with annual revenues
of more than $38 billion.
# # #
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
_________________________________
)
)
)
In the Matter of )
)
SEARS, ROEBUCK AND CO., ) DOCKET NO.
a corporation. )
)
________________________________)
COMPLAINT
The Federal Trade Commission, having reason to believe that
Sears, Roebuck and Co., a corporation ("respondent"), has
violated the provisions of the Federal Trade Commission Act, and
it appearing to the Commission that this proceeding is in the
public interest, alleges:
1. Respondent Sears, Roebuck and Co. is a New York corporation
with its principal office or place of business at 3333 Beverly
Road, Hoffman Estates, Illinois 60179. Respondent is engaged
in, among other things, the consumer retail business. In the
course and conduct of its business, respondent has regularly
extended credit for the purpose of facilitating consumers'
purchase of respondent's products and services (hereinafter
referred to as "consumer credit accounts").
2. The acts and practices of respondent alleged in this
complaint have been in or affecting commerce, as "commerce" is
defined in Section 4 of the Federal Trade Commission Act.
THE UNITED STATES BANKRUPTCY CODE
3. Under the United States Bankruptcy Code (11 U.S.C. Sec.
1-1330), a debtor may be granted a discharge in a Chapter 7
bankruptcy proceeding from debts that have arisen prior to the
filing of the bankruptcy petition (hereinafter referred to as
"pre-petition debts"), meaning that the debtor is no longer
individually liable for these debts. The granting of a
discharge "operates as an injunction against the commencement or
continuation of an action, the employment of process, or an act,
to collect, recover or offset any such debt as a personal
liability of the debtor, whether or not discharge of such debt
is waived . . . " 11 U.S.C. Section 523 (a) (2). The purpose of the
injunction is to protect the debtor's "fresh start" by ensuring
that no debt collection efforts are taken against the debtor
personally for pre-petition debts.
4. The United States Bankruptcy Code provides, however, that a
debtor may agree with a creditor that the creditor can enforce
what would otherwise be a discharged debt. In other words, a
debtor may reaffirm his or her pre-petition debts, as long as
certain requirements are met. These so-called "reaffirmation
agreements" are enforceable only if, among other things, the
agreement is filed with the bankruptcy court. If the debtor is
not represented by an attorney, the bankruptcy court must hold a
hearing to determine that the reaffirmation agreement would not
impose an undue hardship on the debtor and is in the best
interest of the debtor, and must approve the reaffirmation
agreement before it becomes enforceable. 11 U.S.C. Sec. 524 (c)
and (d).
5. If the requirements of 11 U.S.C. 524 (c) and (d) are not
met, an agreement to reaffirm a debt is not binding and a
creditor violates the bankruptcy code if it attempts to collect
that debt. 11 U.S.C. 524 (a).
VIOLATIONS OF SECTION 5(a) OF THE FEDERAL TRADE COMMISSION ACT
6. From at least 1985 to 1997, respondent regularly induced
consumers who had filed for protection under Chapter 7 of the
United States Bankruptcy Code to enter into agreements
reaffirming some or all of their pre-petition consumer credit
account debts that would otherwise be discharged through
bankruptcy proceedings.
7. In numerous instances, respondent represented, expressly or
by implication, to consumers that their reaffirmation agreement
would be filed with the bankruptcy courts, as required by the
United States Bankruptcy Code.
8. In truth and in fact, in may cases respondent did not intend
to file, and in fact did not file, the reaffirmation agreements
with the bankruptcy courts. Therefore, the representation made
in Paragraph 7 was, and is, false or misleading.
9. In numerous instances, respondent represented, expressly or
by implication, to consumers that their reaffirmation agreements
were legally binding on the consumers and that the consumers
were legally required to pay their pre-petition debts.
10. In truth and in fact, in many cases, the reaffirmation
agreements were not legally binding on the consumers and the
consumers were not legally required to pay their pre-petition
debts for reasons including, but not necessarily limited to, the
following: (a) respondent did not file the reaffirmation
agreements with the bankruptcy courts; or (b) respondent filed
the reaffirmation agreements, but the agreements were then not
approved by the bankruptcy courts. Therefore, the
representation made in Paragraph 9 was, and is, false or
misleading.
11. In the course and conduct of its business, respondent
regularly collected from consumers debts that had been legally
discharged in bankruptcy proceedings and that respondent was not
permitted by law to collect. Respondent's actions have caused
or were likely to cause substantial injury to consumers that is
not avoidable by these consumers. 15 U.S.C. Sec. 5 (n).
Therefore, respondent's collection of debts that it was not
permitted by law to collect was, and is, unfair.
12. The acts and practices of respondent as alleged in this
complaint constitute unfair or deceptive acts or practices in or
affecting commerce in violation of Section 5(a) of the Federal
Trade Commission Act.
THEREFORE, the Federal Trade Commission this day of
, has issued this complaint against
respondent.
By the Commission.
Donald S. Clark
Secretary
SEAL:
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
_____________________________________
)
)
In the Matter of )
) FILE NO. 972 3187
SEARS, ROEBUCK AND CO. )
a corporation. ) AGREEMENT CONTAINING
) CONSENT ORDER
)
)
___________________________________)
The Federal Trade Commission has conducted an investigation of
certain acts and practices of Sears, Roebuck and Co. ("proposed
respondent"). Proposed respondent, having been represented by
counsel, is willing to enter into an agreement containing a
consent order resolving the allegations contained in the
attached draft complaint. Therefore,
IT IS HEREBY AGREED by and between Sears, Roebuck and Co., by
its duly authorized officers, and counsel for the Federal Trade
Commission that:
1. Proposed respondent Sears, Roebuck and Co. is a New York
corporation with its principal office or place of business at
3333 Beverly Road, Hoffman Estates, Illinois 60179.
2. Proposed respondent admits all the jurisdictional facts set
forth in the draft complaint.
3. Proposed respondent waives:
a. Any further procedural steps;
b. The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law; and
c. All rights to seek judicial review or otherwise to challenge
or contest the validity of the order entered pursuant to this
agreement.
4. This agreement shall not become part of the public record of
the proceeding unless and until it is accepted by the
Commission. If this agreement is accepted by the Commission,
it, together with the draft complaint, will be placed on the
public record for a period of sixty (60) days and information
about it publicly released. The Commission thereafter may
either withdraw its acceptance of this agreement and so notify
proposed respondent, in which event it will take such action as
it may consider appropriate, or issue and serve its complaint
(in such form as the circumstances may require) and decision in
disposition of the proceeding.
5. The Commission reserves the right to file an action for
consumer redress pursuant to Section 19 of the Federal Trade
Commission Act, 15 U.S.C. Sec. 57b, based on the order issued in
this proceeding. Proposed respondent hereby waives its right to
assert a defense based on the statute of limitations (as
provided by 15 U.S.C. Sec. 57b(d)) on account of the running of
time from today forward, in any action brought by the Commission
pursuant to Section 19 of the Federal Trade Commission Act.
This wavier shall expire one year following the resolution of
the action filed by the United States Attorney for the District
of Massachusetts in United States of America v. Sears, Roebuck
and Co., Civil No. 97-10839JLT, allegations made by the
Attorneys General of various states and any other currently
pending legal actions by government entities not cited herein,
and all currently pending class action lawsuits, that challenge
conduct similar to that challenged by the Commission in this
proceeding, but in any event not before July 1, 1999. However,
the Commission will not bring any action against proposed
respondent pursuant to Section 19 of the Federal Trade
Commission Act provided that, by January 1, 1999, proposed
respondent makes available redress payable to consumers
consisting of either cash refunds or reductions in credit
balances, including interest and additional cash payments, of
not less than $100 million, not including attorney fees,
administrative costs, and punitive or exemplary damages.
Notwithstanding previous sentence, the said amount of $100
million shall be adjusted upward or downward by not more than
twenty-five percent (25%), based on proposed respondent's
on-going national review to identify those debtors eligible to
receive such redress in the actions referenced above (such
adjustment being referred to as "Maximum Payment Adjustment").
The Commission reserves the right to seek to intervene in the
actions referenced above for he purpose of opposing any
settlement that the Commission does not deem to be in the public
interest (except the Commission will not object to the amount of
any such settlement, so long as the aggregate amount of such
settlements, as described above, is not less than $100 million
as adjusted by the Maximum Payment Adjustment). Proposed
respondent reserves the right to oppose any attempt by the
Commission to intervene in any such class action lawsuit or
other legal actions.
6. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn
by the Commission pursuant to the provisions of Section 2.34 of
the Commission's Rules, the Commission may, without further
notice to proposed respondent, (1) issue its complaint
corresponding in form and substance with the attached draft
complaint and its decision containing the following order in
disposition of the proceeding, and (2) make information about it
public. When so entered, the order shall have the same force
and effect and may be altered, modified, or set aside in the
same manner and within the same time provided by statute for
other orders. The order shall become final upon service.
Delivery of the complaint and the decision and order to proposed
respondent by any means specified in Section 4.4 of the
Commission's Rules shall constitute service. Proposed
respondent waives any right it may have to any other manner of
service. The complaint may be use in construing the terms of
the order. No agreement, understanding, representation, or
interpretation not contained in the order or in the agreement
may be used to vary or contradict the terms of the order.
7. Proposed respondent has read the draft complaint and consent
order. It understands that it may be liable for civil penalties
in the amount provided by law and other appropriate relief for
each violation of the order after it becomes final.
ORDER
DEFINITIONS
For purposes of this order, the following definitions shall
apply:
1. Unless otherwise specified, "respondent" shall mean Sears,
Roebuck and Co., a corporation, its successors and assigns, and
its officers, agents, representatives, and employees.
2. "Debt" shall mean any obligation or alleged obligation of a
consumer to pay money arising out of any transaction.
3. "Reaffirmation Agreement" shall mean any agreement between a
creditor and debtor in bankruptcy whereby a debt that is
otherwise dischargeable with respect to the personal liability
of the debtor is reaffirmed by the debtor.
4. "Commerce" shall mean as defined in Section 4 of the Federal
Trade Commission Act, 15 U.S.C. Sec. 44.
I.
IT IS ORDERED that respondent, directly or through any
corporation, subsidiary, division, or other device, in
connection with the collection of any debt, shall not:
A. Misrepresent, expressly or by implication, to consumers who
have filed petitions for bankruptcy protection under the United
States Bankruptcy Code that reaffirmation agreements will be
filed in bankruptcy court;
B. Misrepresent, expressly or by implication, to consumers who
have filed petitions for bankruptcy protection under the United
States Bankruptcy Code that any reaffirmation agreement is
legally binding on the consumer; or
C. Collect any debt (including any interest, fee, charge, or
expense incidental to the principal obligation) that has been
legally discharged in bankruptcy proceedings and that respondent
is not permitted by law to collect.
II.
IT IS FURTHER ORDERED that respondent, directly or through any
corporation, subsidiary, division, or other device, shall not
make any material misrepresentation, expressly or by
implication, in the collection of any debt subject to a pending
bankruptcy proceeding.
III.
IT IS FURTHER ORDERED that respondent Sears, Roebuck and Co.,
and its successors and assigns, for five (5) years after the
date of issuance of this order, shall maintain and upon request
make available to the Federal Trade Commission business records
demonstrating their compliance with the terms and provisions of
this order, including but not limited to all reaffirmation
agreements signed by consumers and records sufficient to show
that such reaffirmation agreements were filed in bankruptcy
courts and were subsequently approved by bankruptcy courts as
part of the underlying bankruptcy proceedings, if required by
the United States Bankruptcy Code.
IV.
IT IS FURTHER ORDERED that respondent Sears, Roebuck and Co.,
and its successors and assigns, for five (5) years after the
date of issuance of this order, shall deliver a copy of this
order to all current and future principals, officers, directors,
managerial employees, and bankruptcy court representatives
having debt collection responsibilities with respect to the
subject matter of this order, and shall secure from each such
person a signed and dated statement acknowledging receipt of the
order. Respondent shall, for five (5) years after each such
statement acknowledging receipt of the order is signed and
dated, maintain and upon request make available to the Federal
Trade Commission for inspection and copying such statements.
Respondent shall deliver this order to current personnel within
thirty (30) days after the date of service of this order, and to
future personnel within ninety (90) days after the person
assumes such position or responsibilities.
V.
IT IS FURTHER ORDERED that respondent Sears, Roebuck and Co.,
and its successors and assigns, shall notify the Commission at
least thirty (30) days prior to any change in the corporation(s)
that may affect compliance obligations arising under this order,
including but not limited to a dissolution, assignment, sale,
merger, or other action that would result in the emergence of a
successor corporation; the creation or dissolution of a
subsidiary, parent, or affiliate that engages in any acts or
practices subject to this order; the proposed filing of a
bankruptcy petition; or a change in the corporate name or
address. Provided, however, that, with respect to any proposed
change in the corporation about which respondent learns less
than thirty (30) days prior to the date such action is to take
place, respondent shall notify the Commission as soon as is
practicable after obtaining such knowledge. All notices
required by this Part shall be sent by certified mail to the
Associate Director, Division of Enforcement, Bureau of Consumer
Protection, Federal Trade Commission, Washington, D.C. 20580.
VI.
IT IS FURTHER ORDERED that respondent, and its successors and
assigns, shall provide notification of all proposed settlement
terms relating to the action filed by the United States Attorney
for the District of Massachusetts in United States of America v.
Sears, Roebuck and Co., Civil No. 97-10839JLT, allegations made
by the Attorneys General of various states and any other
currently pending legal actions by government entities not cited
herein, and all currently pending class action lawsuits, against
respondent or any of its predecessors or affiliates, that
challenge conduct similar to that challenged by the Commission
in this proceeding, to the Associate Director, Division of
Enforcement, Bureau of Consumer Protection, Federal Trade
Commission, in writing, at least ten (10) days before any such
proposed settlement is submitted to a court for final approval.
VII.
IT IS FURTHER ORDERED that respondent Sears, Roebuck and Co.,
and its successors and assigns, shall, within sixty (60 days
after the date of service of this order, and at such other times
as the Federal Trade Commission may require, file with the
Commission a report, in writing, settling forth in detail the
manner and form in which they have complied with this order.
VIII.
This order will terminate twenty (20) years from the date of
its issuance, or twenty (20) years from the most recent date
that the United States or the Federal Trade Commission files a
complaint (with or without any accompanying consent decree) in
federal court alleging any violation of the order, whichever
comes later; provided however, that the filing of such a
complaint will not affect the duration of:
A. Any Part in this order that terminates in less than twenty
(20) years;
B. This order's application to any respondent that is not named
as a defendant in such complaint; and
C. This order if such complaint is filed after the order has
terminated pursuant to this Part.
Provided further, that if such complaint is dismissed or a
federal court rules that the respondent did not violate any
provision of the order, and the dismissal or ruling is either not
appealed or upheld on appeal, then the order will terminate
according to this Part as though the complaint had never been
_______________________________
JOHN T. DUGAN
Counsel for the Federal Trade
Commission
APPROVED:
_________________________________
PHOEBE D. MORSE
Director
Boston Regional Office
_________________________________
LUCY E. MORRIS
Assistant Director
Division of Credit Practices
_________________________________
DAVID MEDINE
Associate Director
Division of Credit Practices
_________________________________
JOAN Z. BERNSTEIN
Director
Bureau of Consumer Protection
Exhibit 99(c)
UNITED STATES BANKRUPTCY COURT
DISTRICT OF MASSACHUSETTS
EASTERN DIVISION
_______________________________________
)
In Re: )
DOUGLAS O. BRIOSO, ) Chapter 7
Debtor. ) Case No. 97-11503-CJK
__________________________________)
)
DOUGLAS O. BRIOSO, et al. )
Plaintiffs, )
) Adversary Proceeding
v. ) No. 97-1222-CJK
)
SEARS, ROEBUCK AND CO. and )
WESTERN AUTO SUPPLY )
COMPANY, )
Defendants. )
_______________________________________________)
)
In Re: )
ANTONIA CALDAS, ) Chapter 7
Debtor. ) 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. 97-11149-PBS
)
SEARS, ROEBUCK AND CO., )
WESTERN AUTO SUPPLY )
COMPANY and JOHN DOES 1-10, )
Defendants. )
_______________________________________________)
STIPULATION AND AGREEMENT OF
COMPROMISE AND SETTLEMENT
This 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. 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 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 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).
Footnote 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. Extensions of time. Without further order of the
Courts, the parties may agree to reasonable extensions of time
to carry out any of the provisions 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 5, 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 (by JR)
_________________________________________
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 did ___, I did not ___ [check one] file for personal
bankruptcy in a U.S. bankruptcy court.
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
II. 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.
III. 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
__________________________________________
)
In Re: )
DOUGLAS O. BRIOSO, )
Debtor. ) Chapter 7
) Case No. 97-11503-CJK
)
__________________________________________)
)
DOUGLAS O. BRIOSO, et al., )
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. )
)
__________________________________________)
HEARING ORDER
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 Sec. 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 __________________, 1997, at __ _.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) At or prior to the Settlement Hearing, 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
Daniel A. Edelman
EDELMAN & COMBS
135 South LaSalle St.
Suite 2040
Chicago, IL 60603
Christopher M. Lefebvre
LAW OFFICES OF CLAUDE LEFEBVRE
Two Dexter Street
Pawtucket, RI 02860
On Behalf of All Plaintiffs
Mark N. Polebaum
Stephen H. Oleskey
Paul P. Daley
HALE AND DORR LLP
60 State Street
Boston, MA 02109
Theodore N. Mirvis
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, NY 10019
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 DUES 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) At or prior to the Settlement Hearing, 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
Daniel A. Edelman
EDELMAN & COMBS
135 South LaSalle St.
Suite 2040
Chicago, IL 60603
Christopher M. Lefebvre
LAW OFFICES OF CLAUDE LEFEBVRE
Two Dexter Street
Pawtucket, RI 02860
On Behalf of All Plaintiffs
Mark N. Polebaum
Stephen H. Oleskey
Paul P. Daley
HALE AND DORR LLP
60 State Street
Boston, MA 02109
Theodore N. Mirvis
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, NY 10019
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
__________________________________
)
In Re: )
DOUGLAS O. BRIOSO, ) Chapter 7
Debtor. ) Case No. 97-11503-CJK
__________________________________)
)
DOUGLAS O. BRIOSO, et al., )
Plaintiffs, )
) Adversary Proceeding
v. ) No. 97-1222-CJK
)
SEARS, ROEBUCK AND CO. and )
WESTERN AUTO SUPPLY )
COMPANY, )
Defendants. )
__________________________________)
)
In Re: )
ANTONIA CALDAS, ) Chapter 7
Debtor. ) 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, )
) Civil No. 97-11149-PBS
v. )
)
SEARS, ROEBUCK AND CO., )
WESTERN AUTO SUPPLY COMPANY )
and JOHN DOES 1-10, )
)
Defendants. )
__________________________________________)
NOTICE OF PENDENCY OF CLASS ACTIONS, CLASS
ACTION DETERMINATION, PROPOSED SETTLEMENT OF
CLASS ACTIONS, SETTLEMENT HEARINGS, RIGHT TO REQUEST
EXCLUSION, AND RIGHT TO APPEAR
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.
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
_________, 1997, at __.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-___-____.
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 __________, 1997, at __.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 __________, 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
Daniel A. Edelman
EDELMAN & COMBS
135 South LaSalle Street
Suite 2040
Chicago, IL 60603
Christopher M. Lefebvre
LAW OFFICES OF CLAUDE LEFEBVRE
Two Dexter Street
Pawtucket, RI 02860
On Behalf of All Plaintiffs
Mark N. Polebaum
Stephen H. Oleskey
Paul P. Daley
HALE AND DORR LLP
60 State Street
Boston, MA 02109
Theodore N. Mirvis
WACHTELL, LIPTON, ROSEN & KATZ
51 West 52nd Street
New York, NY 10019
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). In addition,
any questions or communications concerning the Settlement may be directed
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.
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 ________________, 1997, at ____ _.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 ______
[20 days prior to the first hearing] 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
_______________, 1997 [20 days prior to the first hearing].
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-____-______.
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-____-______.
