Canadian “Sears Hometown” store dealers launch $100 million class action against Sears Canada and Sears, Roebuck
Published on July 5, 2013
Posted in: David Sterns, News, Sears
A “Sears Hometown” store owner in Woodstock, Ontario launched a class action lawsuit today on behalf of approximately 260 Sears Hometown dealers across Canada against Sears Canada Inc. (TSX: SCC) and its American affiliate, Sears, Roebuck and Co. (together, “Sears”). Sears Canada Inc. and Sears, Roebuck and Co. are subsidiaries of US-parent company Sears Holding Corporation (NASDAQ: SHLD), a company guided by U.S. billionaire and founder and CEO of hedge fund ESL Investments, Inc., Edward S. Lampert.
The lawsuit alleges that Sears has breached its legal obligations by depriving the dealers of the realistic opportunity to earn a living wage and make a reasonable profit from their Hometown store businesses. At the same time, Sears reaps the benefits of the dealers’ hard work and investment and enjoys significant profits from the dealer network.
Sears Hometown dealers are independent franchise operators in smaller markets in every province and territory of Canada. For millions of Canadians, they are the face of the colossal Sears brand.
The dealer agreement is structured so that Sears sets dealers’ compensation and work conditions, without regard to either minimum labour standards or franchise protection laws.
Over the past 3 years, Sears Hometown store dealers have seen a continuous erosion of sales and profits. Meanwhile, Sears is making substantial profits from each and every Hometown store.
As dealers across Canada exhaust their savings, struggle to stay in business, or close down and face personal financial ruin, Sears has responded by: lowering dealers’ commissions, reducing local store advertising, and bypassing dealers’ stores altogether by selling directly to customers located within the dealers’ contractually protected market areas. This story repeats across the country, with approximately 70% of dealer stores being unsustainable. Dealers typically work 50-60 hour weeks and are liable to landlords, employees, etc. for all costs associated with running their businesses.
Dealers have pleaded for meaningful changes, and worked to improve the model, to no avail.
Jim Kay, the class representative and owner of the Sears Hometown store in Woodstock, Ontario, describes the dealers’ desperate situation this way:
“We put our heart and soul into this business and the community it serves. We supported local charities, serviced our customers, and wore the Sears name with pride, all on a subsistence wage, often injecting money to meet payroll and keep the doors open.
We are tired of losing money. We are tired of disappointing our customers because we lack the resources to serve them properly. We are tired of facing the public without a smile, because we know there is no paycheck at the end of the week. We are tired of being fed scraps for the benefit of a U.S. hedge fund billionaire.”
The representative plaintiff brought the action under Ontario’s Class Proceedings Act, 1992. The claim seeks court certification on behalf of all Sears Hometown store dealers in Canada.
A copy of the court filed statement of claim is available at: https://www.sotosllp.com/class-actions/sears/
The dealers are represented by the Toronto law firm of Sotos LLP (www.sotosllp.com).