Originally created 08/13/97

Ward accuses Sears of poaching employees; receives temporary halt

CHICAGO - Montgomery Ward & Co. executives on Tuesday accused Sears, Roebuck & Co. of punching below the belt, contending Sears had sought to lure key managers away in an attempt to hasten Ward's potential demise.

U.S. Bankruptcy Judge Peter Walsh in Wilmington, Del., who is overseeing Ward's bankruptcy proceedings, granted the retailer a temporary restraining order stopping Sears from "approaching, contacting or soliciting for employment any current management employee of Montgomery Ward."

Ward contended Sears, in an "action plan" sent via e-mail to field locations, undertook illegal predatory recruiting practices designed to "hasten the weakening state of Montgomery Ward" and "make it even more difficult for them to do business."

The company, the nation's largest privately held retailer, sought bankruptcy court protection from its creditors on July 7. It is the biggest retailer to seek bankruptcy protection since Macy's filing five years ago.

Ward said in a statement that Sears' "action plan" targeted for recruiting efforts key Ward positions that would have further undermined the company if the employees left.

"Based on this `action plan,' we believe that Sears has crossed the line between healthy competition and unethical activities," said Roger Goddu, Ward's chairman and chief executive.

Sears spokeswoman Jan Drummond said the plan Ward contended was drafted specifically to target the ailing company may have been the "overzealous reaction of an employee in a highly competitive environment," although she declined to say whether in fact such a plan existed.

The alleged document, attached to the court filing, urges employees to "be predatory about people" and "be very predatory in the field."

Employment law specialist Michael Karpeles, a partner at a Chicago law firm, said companies generally are free to solicit employees of other companies except in cases where those employees may bring privileged information with them.

"It sounds like what started to concern the court was that Sears was going to try to take advantage of Ward's precarious position in some substantial predatory way, and the court has some sense of obligation to protect the (Ward) estate," Mr. Karpeles said. "The language that was used in the memo was unfortunate from Sears' standpoint."

The next hearing on the matter was scheduled for Aug. 22.

The two Chicago-based retailers, once run by brothers, have gone in vastly different directions over the past decade. Ward and Sears began languishing in the 1980s as customers went upscale or chose discounters like Wal-Mart, Kmart and Target.

But under the leadership of Arthur Martinez, who succeeded Edward A. Brennan, Sears jettisoned its famed Big Book catalog, retooled and closed many of its stores and came up with its successful "softer side" campaign.

Ward, under the leadership of the recently ousted Bernard F. Brennan, held its course despite declining catalog sales and an eroding customer base as even more competitors, including Best Buy and Circuit City, joined the national marketplace.

Ward has run up a $1.4 billion debt while struggling to compete. The Chapter 11 filing allowed Ward to stay in business while creating a recovery plan under bankruptcy court supervision without the threat of lawsuits from lenders.

The retailer already has announced it will close its 44 Lechmere, Home Image by Lechmere and Electric Avenue & More stores. Analysts say a series of department store closings should follow. It has 356 of those stores in 39 states.


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