In a trial that spanned three days and two courtrooms within the White Plains, New York, courthouse, Drain overheard a litany of concerns from Sears’ unsecured creditors, who pointed to potential flaws in ESL’s business plan and its previous failures running the retail giant. The creditors attacked the bankruptcy sale that Sears ran as it looked for a buyer and argued that ESL’s bid was deficient.
As Drain read his ruling Thursday, he outlined the obligations before him, as laid out by the bankruptcy code. He said he had to determine whether the deal made “good business sense,” which the judge said he believed it did. He said the auction process conducted by Sears, though expedited, was fair considering the time-limits imposed by its liquidity constraints. Despite Lampert’s unique status as Sears’ chairman and largest investor, Drain believes Lampert’s acquisition of Sears was thoroughly and independently evaluated by an independent committee appointed for the process.
Drain was unhappy, though, with a letter Lampert sent to the independent committee during the auction, in which Lampert threatened legal action for breach of fiduciary duty after it rejected several of his offers. Drain said, that when notified of that letter, he “made it clear in no uncertain terms that the letter was a mistake and should be ignored by all parties, including those who were handling the sale on behalf of the debtor.” He said he believed his advice had been heeded.
As Drain closed his ruling, he addressed Lampert directly, though the reclusive billionaire was not in attendance, opting instead to listen by dial-in from his office in Bay Harbor Islands, Florida.
Lampert’s mysticism, combined with the magnitude of Sears’ fall and the finger-pointing that has accompanied it, has set the groundwork for the “verbal abuse” Drain believes Lampert has been subject to. In addition to the accusations lobbed by the company’s unsecured creditors during the course of Sears’ bankruptcy, Lampert has also been a target of presidential candidate Sen. Elizabeth Warren, angry former Sears’ workers, as well as retail pundits. He has been accused of not only making decisions that led to the retailer’s troubles, but doing so with an intent to profit from them.
With Sears’ revival, said Drain, Lampert “has the opportunity not to be a cartoon character … he should do that.”
The judge urged Lampert to continue to have a clear communication process with the company and its employees as he guides the emerged business.