[PEN-L:11732] More on Montgomery Ward's bankruptcy

[Jim Westrich <westrich@xxxxxxx>]

<bold><bigger>Sears blocked on Wards hiring

Bankruptcy judge orders retailer to stop recruiting

</bigger></bold>

                      By Genevieve Buck

                      Chicago TRIBUNE STAFF WRITER

                      Web-posted: Wednesday, August 13, 1997


                        In a highly unusual move, a bankruptcy court
has

                      ordered Sears, Roebuck and Co. to stop recruiting

                      Montgomery Ward & Co.'s employees, halting an
alleged

                      attempt by Sears to weaken its struggling retail
competitor.


                      Acting on a complaint by Wards, the U.S. Bankruptcy
Court

                      in Delaware granted a temporary restraining order
barring

                      Hoffman Estates-based Sears from approaching,
contacting

                      or soliciting for employment any management
employees

                      of Chicago-based Wards.


                      Montgomery Ward Holding Corp. sought the order
after

                      obtaining a copy of an undated e-mail message sent
to

                      some Sears employees by Mary Conway, vice president
of

                      Sears' northeast region stores.


                      The message, referring to a discussion with Robert
Mettler,

                      president of Sears merchandising, outlined an
"action plan"

                      to "be predatory about people" and to be "very
predatory

                      in the field -- another place we can hurt them."


                      The e-mail message continued: "We have some
recent

                      Wards escapees (my words, not Bob's) and we are
working

                      with them to find some good candidates,
particularly in the

                      planning and placement areas where the loss of
people

                      would hasten their weakening state.


                      "Remember, the taking of their people accomplishes
two

                      things," said the memo, which was distributed by
Wards. It

                      "makes it even harder on them to do business and
assists

                      us with the constantly challenging hiring
situation."


                      But while the language of the memo was pointed,
lawyers

                      said that they could see nothing illegal, or even
improper,

                      about Sears' tactics.


                      Noting that companies often woo employees from

                      competitors, they speculated that Wards won the
court

                      order because the company is operating under
Chapter 11

                      bankruptcy protection. Deep in debt, Wards filed
for

                      Chapter 11 on July 7.


                      "It's beautiful language, but picking off the
carcass of a

                      competitor is not a legal problem," said Stephen
Presser, a

                      professor at Northwestern University's law school
and at

                      Northwestern's J.L. Kellogg Graduate School of

                      Management. "Let's just call it good
merchandising."


                      "Nothing precludes a company from attempting to
hire

                      employees from a competitor's company," said
employment

                      law attorney Michael Karpeles, a partner with

                      Chicago-based Goldberg, Kohn, Bell, Black,
Rosenbloom &

                      Moritz Ltd.


                      Karpeles and other attorneys said the only time
poaching

                      can be illegal is if a company is trying to obtain
trade

                      secrets or confidential information from
competitors, or if it

                      is attempting to induce employees to break
non-compete

                      agreements with their current employer.


                      Sears spokesman Ron Culp said the company could
not

                      comment on the order until it studied the court
document.


                      Sears has a "crystal-clear policy and guidelines in
place"

                      regarding recruitment, Culp said, adding that the

                      guidelines were re-issued to all employees Tuesday.


                      "If this occurred," he said, "it was
overzealousness on an

                      individual's part and we will take appropriate
actions."


                      Attempts to reach Mary Conway, who is vacationing,
were

                      unsuccessful.


                      In its filing with the bankruptcy court, Wards said
it needed

                      a temporary restraining order because Sears'
actions could

                      interfere with the court's jurisdiction over the
Chapter 11

                      case "and (pose) the threat of irreparable harm
to

                      Montgomery Ward."


                      Clint Francis, a professor at Northwestern
University's law

                      school, said the order seems "consistent with (the)
spirit of

                      Chapter 11 bankruptcies, which deal with
reorganization.

                      The judge is acting as a guardian and in this
capacity may

                      issue an order to keep companies from going after
assets

                      of a company which are frozen against claims.


                      "It's probably a fine line," he continued, which
indicates

                      that "you can recruit, but when you start to cross
the line,

                      trying to interfere with operation of creditors
by

                      sabotaging their efforts," it's another matter.


                      Roger Goddu, chairman and chief executive of
Montgomery

                      Ward, said in a statement: "Obviously our first
priority is to

                      fix our business and we believe that we can compete
with

                      any retailer in a fair business environment.
However, based

                      on this 'Action Plan,' we believe that Sears has
crossed the

                      line between healthy competition and unethical
activities."


                      Sears may be vulnerable to charges of unethical
behavior.

                      In April, a bankruptcy court in Boston discovered
that

                      Sears had been illegally seeking payments from
bankrupt

                      credit card holders. Sears admitted it had used
"flawed

                      legal judgment" and promised to pay hundreds of
millions

                      in restitution and penalties.


                      At that time, Sears Chairman Arthur Martinez said
there

                      would be "zero tolerance" for any unethical actions
of any

                      type.


                      Sears' Culp said Tuesday: "He still has zero
tolerance for

                      anything unethical."


                      Sears has until Monday to respond to the
temporary

                      restraining order; Wards must reply by Aug. 21. A

                      preliminary hearing is slated for Aug. 22.



Zero tolerance for corporate hypocrisy,


Jim




(Interviewer:) Your comments bring up a lot of class issues.  Are you a
Marxist?

(Stephen J. Raphael:)  Well I suppose I am a bit of a Karl Marxist.  I am
also a bit of a Groucho Marxist.  But mostly I'm a Bernard Marxist.


[Note:  August 12th was the 65th Anniversary of the publishing of Aldous
Huxley's *<bold>Brave New World</bold>*