The opinion of the court was delivered by: HARVEY BARTLE
This action is a consolidation of three cases which were filed by various shareholders, as shareholder derivative and class actions, against Sears, Roebuck & Company ("Sears").
Plaintiffs alleged violations of to § 14(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78n(a), and Rule 14(a)-9 promulgated thereunder; § 404 of the Employee Retirement Income Security Act, 29 U.S.C. § 1104; and New York corporate law.
Plaintiffs allege a class consisting of:
(1) all persons who owned shares of Sears' common stock on March 21, 1991, and were eligible to vote at the 1991 Annual Meeting (the "1991 Proxy Class"); (2) all persons who owned shares of Sears' common stock on the record dates and who were eligible to vote at the 1989, 1990, or 1991 Annual Meetings (the "Proxy Class"); and (3) all persons who were participants in and/or beneficial owners of Sears common stock held in the Plans and who were entitled pursuant to the Plans' Trustees to vote those shares in the election of directors at the 1991 Annual Meeting. . . .
Consolidated Complaint P10.
According to plaintiffs' Consolidated Complaint, in the latter half of the 1980's, Sears began slipping from its first place ranking as "the largest merchandising business (measured by merchandising revenues) in the United States." Consolidated Complaint P17. Plaintiffs contend that in 1987, "against the back-drop of long-term mismanagement and amid speculation that Sears might be the target of a hostile take-over," Sears put into effect a plan for restructuring in order to fend off a possible unfriendly acquisition. Consolidated Complaint P23.
Following discovery and extensive negotiations in the Chicago action, the parties reached a settlement embodied in a Stipulation of Settlement dated October 23, 1991. (Defendant's motion, Exhibit A). Following a hearing, the Chicago court approved the Stipulation of Settlement, and on January 7, 1992, entered an Order and Final Judgment to that effect. (Defendant's motion, Exhibit D). Plaintiffs in the instant action were parties to the Stipulation of Settlement.
The settlement released and discharged certain claims that were or could have been asserted in the Chicago action. These so-called "Settled Claims" also included all those causes of action that are or could have been asserted in the case at bar, with the exception of three claims defined as the "Excluded Claims." Under the terms of the settlement of the Chicago action, plaintiffs would be permitted to pursue only these claims in the instant action.
Accordingly, it is only these three "Excluded Claims" that constitute plaintiffs' complaint in this action. They are defined as follows:
(1) a claim by Sears ESOP [Employee Stock Ownership Plan] participants for injunctive relief that it was a breach of fiduciary duty for the Company not to have mailed to them the solicitation materials of Mr. Monks in connection with the 1991 annual meeting of shareholders;
(2) a claim for injunctive relief that the change in the composition and size of the Sears Board of Directors in 1991 violated Section 702(b)(2) of the New York Business Corporation Law; and
(3) a proxy disclosure claim on behalf of Sears shareholders eligible to vote in 1989-1991 under the federal proxy laws for omission to disclose the existence of the [Chicago] Action and the underlying facts complained of in the Action as of the annual meeting of shareholders in such years.
The Chicago action settlement also specified that the Excluded Claims could be asserted solely against defendant Sears, and no individual defendants, and that the only relief sought as to any of the three claims would be equitable relief.
Now before this Court is the motion of defendant Sears to dismiss Counts I and II of plaintiffs' Consolidated Complaint, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, and for summary judgment with respect to Counts III and IV, pursuant to Rule 56 of the Federal Rules of Civil Procedure. Also before this Court is the motion of plaintiffs for partial summary judgment with respect to Counts I and II of their Consolidated Complaint.
Rule 12(b)(6) of the Federal Rules of Civil Procedure states in pertinent part:
. . . the following defenses may at the option of the pleader be made by motion: . . . (6) failure to state a claim upon which relief can be granted . . .
Fed. Rule Civ. P. 12(b)(6). When reviewing a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court must accept as true all allegations in the complaint, and all reasonable inferences that can be drawn therefrom. The allegations and inferences must be viewed in the light most favorable to the non-moving party. Sturm v. Clark, 835 F.2d 1009, 1011 (3d Cir. 1987); Federal Insurance Company v. Ayers, 741 F.Supp. 1179, 1182 (E.D.Pa. 1990).
Rule 56(c), relating to summary judgment motions, provides:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that ...