Judge Easterbrook sees through “feeble” antitrust claims raised by Sears shareholders

A three-judge panel for the 7th Circuit threw out a derivative suit brought by two Sears shareholders. They claim that two Sears directors, William C. Crowley and Ann N. Reese, also sit on other boards of competing businesses in violation of §8 of the Clayton Act. The district court in February 2010 did not dismiss the lawsuit, allowing §8 to be enforced by a private shareholder derivative suit.

The 7th Circuit, in an opinion written by Judge Easterbrook, joined by Judges Posner and Bauer, reversed the district court’s judgment, finding “this litigation is so feeble that it is best to end it immediately.” Judge Easterbrook noted that the shareholders did not make a demand on the board before bringing its lawsuit. Moreover, the antitrust-injury doctrine requires plaintiffs to have suffered harm from anticompetitive conduct. Shareholders would instead gain from collusion. “The problem is not only that perpetrators of antitrust offenses lack standing to complain about their own misconduct (which inures to their profit),” Easterbrook writes, “but also that, when such people do invoke the antitrust laws, likely they have other objectives in view.”

The opinion reserves sharp words for what it perceived to be these “other objectives”:

It is an abuse of the legal system to cram unnecessary litigation down the throats of firms whose directors serve on multiple boards, and then use the high costs of antitrust suits to extort settlements (including undeserved attorneys’ fees) from the targets.

Full content: WSJ Law Blog

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