• Federal Court Provides Guidance on Timing of Disclosure of Merger Negotiations
  • February 16, 2010
  • Law Firm: Shearman & Sterling LLP - New York Office
  • In the recent decision of Levie v. Sears Roebuck & Co., the U.S. District Court for the Northern District of Illinois granted a motion for summary judgment, dismissing a class action claim that Sears and one of its stockholders, ESL Partners, L.P. violated § 10(b) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder. The plaintiffs claimed that five public statements made by Sears prior to the announcement of its merger with Kmart were materially misleading because they failed to disclose the existence of the merger negotiations. The plaintiffs also argued that ESL, a stockholder of Sears controlled by the CEO of Kmart, violated § 10(b) and Rule 10b-5 by failing to timely file a Schedule 13D once it formulated an intent to effect a change in control of Sears.