                              In the

United States Court of Appeals
               For the Seventh Circuit

No. 10-3285

R OBERT F. B OOTH T RUST and
R ONALD G ROSS, derivatively on behalf of
S EARS H OLDING C ORPORATION,
                                       Plaintiffs-Appellees,
                             v.

W ILLIAM C. C ROWLEY, et al.,
                                               Defendants-Appellees.
A PPEAL OF:

    T HEODORE H. F RANK,
                                                             Intervenor.


             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
              No. 09 C 5314—Ronald A. Guzmán, Judge.



        A RGUED M AY 30, 2012—D ECIDED JUNE 13, 2012




  Before E ASTERBROOK, Chief Judge, and B AUER and
P OSNER, Circuit Judges.
 E ASTERBROOK , Chief Judge. When Sears, Roebuck & Co.
merged with Kmart Corp. in 2005, the holding company
2                                                 No. 10-3285

formed as the parent (Sears for short) inherited directors
from both businesses. This suit concerns two of them:
William C. Crowley and Ann N. Reese. Crowley also
serves on the boards of AutoNation, Inc., and AutoZone,
Inc., and Reese on the board of Jones Apparel Group,
Inc. Two of Sears’s shareholders contend that the con-
solidated business competes with those other firms
and that §8 of the Clayton Act, 15 U.S.C. §19, forbids
the interlocking directorships.
  This is a shareholders’ derivative action rather than a
suit directly under §8. The theory in a derivative suit is
that a corporation’s board has been so faithless to inves-
tors’ interests that investors must be allowed to pursue
a claim in the corporation’s name. Sears is incorporated
in Delaware, whose law determines whether investors
may litigate derivatively on its behalf. See Kamen v.
Kemper Financial Services, Inc., 500 U.S. 90 (1991). Sears
asked the district court to dismiss the suit, observing
that Delaware usually allows investors to sue derivatively
only if, after a demand for action, the board cannot make
a disinterested decision. See Braddock v. Zimmerman,
906 A.2d 776, 784–85 (Del. 2006) (collecting authority). The
two investors—Robert F. Booth Trust and Ronald
Gross—filed this suit without first demanding that
the board address the §8 issue. Sears observed that a
majority of the board has no stake in the §8 question
and can decide where the corporation’s interests lie. But
the district court refused to dismiss the suit, accepting
the investors’ assertion that a demand would have been
futile. 2010 U.S. Dist. L EXIS 18355 (N.D. Ill. Feb. 26, 2010).
No. 10-3285                                                  3

  Later the judge concluded that, despite Brunswick Corp.
v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977), and its
successors, §8 can be enforced through derivative litiga-
tion, even though cooperation with a competitor should
benefit the investors. The concern of antitrust law, after
all, is that producers will cooperate and raise prices
to the detriment of consumers. Higher prices mean
lower output and a social loss through misallocation of
resources. Yet no consumer has complained about the
other directorships held by members of Sears’s board,
nor has the Department of Justice or the Federal Trade
Commission raised an eyebrow. It seems odd to allow
investors, who stand to gain if producers with market
power cooperate, to invoke an antitrust doctrine that is
designed for strangers’ benefit. The problem is not only
that perpetrators of antitrust offenses lack standing to
complain about their own misconduct (which inures to
their profit), but also that, when such people do invoke
the antitrust laws, likely they have other objectives in
view. In Brunswick the antitrust claim had been used
to give one producer an advantage by shuttering a rival,
at the expense of customers; the Supreme Court replied
that this abuse of antitrust law must not be tolerated.
It created the antitrust-injury doctrine, under which
private antitrust litigation is limited to suits by those
persons for whose benefit the laws were enacted. See
also Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S.
328 (1990); Cargill, Inc. v. Monfort of Colorado, Inc., 479
U.S. 104 (1986).
  Plaintiffs rely on Protectoseal Co. v. Barancik, 484 F.2d 585
(7th Cir. 1973), for the proposition that private plaintiffs
4                                              No. 10-3285

can enforce §8. We don’t doubt this—but Protectoseal was
not a shareholders’ derivative suit, and the antitrust-
injury doctrine, which the Supreme Court adopted four
years after Protectoseal, limits which private parties can
pursue §8 claims.
  Antitrust suits are notoriously costly. See Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 557–60 (2007). To resolve
a case under §8, a district judge must define a market
and decide whether a merger between Sears and one of
the firms interlocked by the directorships would be
unlawful. After the district judge held that this case
must proceed, the investors and Sears proposed a settle-
ment: one of the two contested directors would resign, and
the lawyers representing the investors could request as
much as $925,000 in fees under a “clear sailing” clause
that prohibited Sears from objecting. Perhaps Sears con-
cluded that it was better to jettison one director and pay
up to $925,000 in legal fees to opposing counsel than to
dig in its heels and pay its own lawyers more than
$1 million to defend an antitrust suit. But Theodore H.
Frank, another of Sears’s investors, thought the settle-
ment a bad deal. It cost the firm cash out of pocket plus
a director the shareholders had re-elected in 2009 (four
years after the Kmart merger), without eliminating the
risk of a later §8 suit by someone else (since one of the
two directors would remain).
  The settlement of derivative litigation requires notice
to other investors, followed by judicial approval, see Fed.
R. Civ. P. 23.1(c). Frank moved for leave to intervene
so that he could oppose the settlement and appeal if
No. 10-3285                                                 5

necessary—for under the law of this circuit intervention
(and thus party status) is essential to an appeal in a
derivative suit. See Felzen v. Andreas, 134 F.3d 873 (7th Cir.
1998), affirmed by an equally divided Court under the
name California Public Employees’ Retirement System v.
Felzen, 525 U.S. 315 (1999). But the district court denied
this motion, stating that Booth Trust and Gross ade-
quately represent Frank’s interests. Frank immediately
appealed, which is proper when a district court denies
a motion for leave to intervene as of right under Fed. R.
Civ. P. 24(a). See Dickinson v. Petroleum Conversion Corp.,
338 U.S. 507 (1950).
  After the district judge denied Frank’s motion to inter-
vene, it also rejected the proposed settlement, though on
grounds that allowed the parties to try again. Plaintiffs
have asked us to dismiss the appeal as moot. Yet the
case remains pending, and the parties have submitted
another settlement for the district judge’s approval. Even
though the interlocks are gone—Crowley is no longer
on Sears’s board, and Reese has left the board of Jones
Apparel—the prospect of future interlocks prevents the
suit from being moot. See United States v. W.T. Grant Co.,
345 U.S. 629 (1953). Frank wants to oppose any settle-
ment (indeed, wants the district court to dismiss the
suit) and appeal if one should be approved. Both the
merits and the propriety of intervention are live issues.
The motion to dismiss is denied.
  The district judge’s reason for denying Frank’s motion
to intervene—that Booth Trust and Gross adequately
represent his interests—is unsound. Frank’s position is
6                                               No. 10-3285

entirely incompatible with the stance taken by Booth
Trust and Gross. Rule 23.1(c) requires judicial ap-
proval of settlements in derivative suits precisely be-
cause the self-appointed investors may be poor
champions of corporate interests and thus injure fellow
shareholders. That the plaintiffs say they have other in-
vestors’ interests at heart does not make it so. The district
judge did not find that plaintiffs are right, and Frank
wrong, about where the corporate interest lies. And even
if the judge had concluded that the plaintiffs have the
better of their dispute with Frank, still the judge should
have granted his motion to intervene—for given Felzen the
only way he can get appellate review is to become a
party. A district judge ought not try to insulate his deci-
sions from appellate review by preventing a person
from acquiring a status essential to that review. In
Crawford v. Equifax Payment Services, Inc., 201 F.3d 877,
881 (7th Cir. 2000), we told district judges to grant inter-
vention freely to persons who want to contest settle-
ments in class actions under Fed. R. Civ. P. 23; that is no
less true of derivative actions under Rule 23.1.
  Our conclusion that Frank is entitled to intervene
makes it unnecessary to decide whether Felzen survives
Devlin v. Scardelletti, 536 U.S. 1 (2002). Devlin holds that
a member of a class certified under Rule 23, who asks
the district court not to approve a settlement, need not
intervene in order to appeal an adverse decision. Our
opinion in Felzen gives several reasons why investors in
a derivative suit differ from members of a certified class.
See 134 F.3d at 875–76. For example: a class member
holds a personal claim for relief, which could be extin-
No. 10-3285                                                7

guished or cashed out by a settlement; but an investor
does not hold any kind of personal stake in a derivative
suit. The chose in action belongs to the corporation.
Intervention separates an objecting investor from the
thousands or even millions of shareholders, bondholders,
employees, suppliers, and customers who could be af-
fected, more or less directly, by the resolution of a deriva-
tive action.
   The Supreme Court affirmed Felzen without opinion
by a vote of 4–4. Devlin was decided by a vote of 6–3.
This suggests that one or two Justices see a difference
between the Rule 23 situation and the Rule 23.1 situation.
It is thus hard for a court of appeals to be confident that
the Supreme Court as a whole would conclude that
Devlin controls derivative actions as well as class actions.
We think it best to leave the status of Felzen to another
day—a day that, if district judges grant party status to
serious objectors as they should, need never arrive.
   We could stop at this point and leave the parties to slug
it out in the district court, with an appeal by whoever
loses (or objects to a settlement). But this litigation is so
feeble that it is best to end it immediately, as both Sears
and Frank unsuccessfully asked the district judge to do.
The only goal of this suit appears to be fees for the plain-
tiffs’ lawyers. It is impossible to see how the investors
could gain from it—and therefore impossible to see how
Sears’s directors could be said to violate their fiduciary
duty by declining to pursue it. See Schechtman v. Wolfson,
244 F.2d 537, 540 (2d Cir. 1957) (refusing, for this reason,
to award attorneys’ fees to the plaintiffs in a derivative
suit based on a §8 claim).
8                                                No. 10-3285

  We have mentioned that Booth Trust and Gross did
not make a demand on the directors before filing suit,
and that neither plaintiff nor any other investor (in his role
as investor) suffers antitrust injury. Plaintiffs say that
investors still can gain from this suit, because removing
interlocking directors from the board will eliminate any
chance that the United States will file a §8 suit to
remove them. We don’t get it. In order to avoid a risk
of antitrust litigation, the company should be put
through the litigation wringer (this suit) with certainty_
How can replacing a 1% or even a 20% chance of a bad
thing with a 100% chance of the same bad thing make
investors better off?
   Actually, the chance of suit by the United States or the
FTC is not even 1%. The national government rarely sues
under §8. Borg-Warner Corp. v. FTC, 746 F.2d 108 (2d Cir.
1984), which began in 1978, may be the most recent con-
tested case. See ABA Section of Antitrust Law, I Antitrust
Law Developments 425–31 (6th ed. 2007). When the
Antitrust Division or the FTC concludes that directorships
improperly overlap, it notifies the firm and gives it a
chance to avoid litigation (or to convince the enforcers
that the interlock is lawful). For more than 30 years, this
process has enabled antitrust enforcers to resolve §8
issues amicably—either avoiding litigation or entering
consent decrees contemporaneous with a suit’s initiation.
It is an abuse of the legal system to cram unnecessary
litigation down the throats of firms whose directors
serve on multiple boards, and then use the high costs
of antitrust suits to extort settlements (including unde-
served attorneys’ fees) from the targets.
No. 10-3285                                              9

   Plaintiffs told the district judge that a demand on
directors would have been futile—and surely they are
right, because, if they had made a demand, conscientious
directors acting in investors’ interests would have nixed
this suit. That’s a reason to require demand, not to excuse
it. The suit serves no goal other than to move money
from the corporate treasury to the attorneys’ coffers,
while depriving Sears of directors whom its investors
freely elected. Directors other than Crowley and Reese
would not have violated their fiduciary duty of loyalty
by concluding that these two directors benefit the
firm. Usually serving on multiple boards demonstrates
breadth of experience, which promotes competent and
profitable management. If the Antitrust Division or the
FTC sees a problem, there will be time enough to work
it out. Derivative litigation in the teeth of the demand
requirement and the antitrust-injury doctrine is not the
way to handle this subject.
  The judgment of the district court is reversed, and
the case is remanded with instructions to grant Frank’s
motion for leave to intervene and to enter judgment for
defendants.




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