Three lawsuits were filed in December by the parties seeking the best possible outcome for former Sears Canada Inc. employees with regard to the funding deficit of their defined benefit pension plan.
Collectively, the suits were filed by the monitor in the Sears Companies’ Creditors Arrangement Act proceedings; the Hon. Douglas Cunningham, the litigation trustee appointed by the CCAA court; and Morneau Shepell Ltd., the replacement plan administrator for the Sears registered retirement plan.
The claims are seeking to recoup the amount paid out to Sears Canada shareholders in dividends on Dec. 6, 2013. The $5.00 per share dividend, claims the suit, was a transfer at undervalue, meaning a transfer of an asset for less than it’s worth or for no consideration at all, as well as being void against the monitor.
Further, Morneau Shepell, in its capacity as the replacement plan administrator, is making a damages claim against Sears Canada’s directors for breach of fiduciary duty and negligence. The claim is seeking $260 million in damages, which is the amount the pension plan is in deficit on a windup basis, as determined by the most recent actuarial report.
At the end of November 2018, Sears Canada pensioners reached a settlement after they were denied priority over the company’s other creditors. While the settlement is subject to certain conditions, Koskie Minsky LLP, the firm representing Sears’ retirees in the proceedings, said it was dropping the deemed trust option that would have placed pensioners as priority creditors, referring to the legal expenses and uncertainty of outcome.