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Home / Case News / Sears Estate Wants To Avoid $194M Clawback Fight in Canada

Sears Estate Wants To Avoid $194M Clawback Fight in Canada

May 19, 2019, New York – Sears Holdings Corp is urging a New York bankruptcy judge to reject an attempt to bring the company to a Canadian court to clawback more than $194 million in dividends it received from Sears Canada. Sears Holdings Corp wants the dispute to be settled in the U.S. court. According to the documents filed in the Court, Sears requested the court to reject the request by the Canadian parties in relation to their motion for relief from the automatic stay for the purpose of joining Sears Holdings Corporation as a defendant in existing litigation pending before the Ontario Superior Court of Justice and to liquidate certain claims against Sears Holdings Corporation in such existing litigation filed by Eric C. Daucher on behalf of FTI Consulting Canada Inc., in its capacity as court-appointed monitor for Sears Canada Inc. and certain of its affiliates.

In its reply in support of motion for relief from automatic stay, the Canadian Plaintiffs have alleged that their claims against Sears Holdings will need to be resolved in one forum or another and the most appropriate and equitable forum is the Canadian Court, which is a specialized tribunal with Canadian insolvency and corporate law expertise in which the Canadian Plaintiffs, as fiduciaries to a Canadian insolvency estate, a Canadian pension plan, and a potential class (certified under Canadian law) of harmed entities, are already proceeding under Canadian law as against fourteen non-Debtor defendants.

The Canadian Plaintiffs further asserted that the Canadian Court intends to move that litigation forward towards a trial currently scheduled for early next year regardless of whether relief from the stay is granted. The only question is whether the Canadian litigation should be conducted only once, before the Canadian Court, so as to resolve the Canadian Plaintiffs’ claims as against all defendants, or whether it should be split across two different courts, in two different countries, to try the same issues of Canadian law and fact, first against the fourteen existing Canadian Defendants in Canada and then later against Sears Holdings in the US Court. They further argued that there are one set of facts, so one trial is better than two, which would be an extraordinary waste of judicial and estate resource. They added that if the stay is not modified as requested, the Canadian Plaintiffs will be required to try the same facts and law twice—first before the Canadian Court and then again before the US Court – thus incurring substantial unnecessary costs and needlessly consuming judicial resources.

With these contentions, the Canadian Plaintiffs have urged the US bankruptcy court to grant its motion and enter an order in its favor lifting the stay. The case is In re SEARS HOLDINGS CORPORATION, et al., Case No. 18-23538 (RDD).