The Lexpert Guides to the Leading US/Canada Cross-Border Corporate and Litigation Lawyers in Canada profiles leading business lawyers and features articles for attorneys and in-house counsel in the US about business law issues in Canada.
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BANKRUPTCY AND INSOLVENCY cross-border trial that will determine the fate of over C$9 billion company and its subsidiaries were left with approximately $9 of Nortel Networks' residual assets could proceed as scheduled in billion now being held in an escrow account. The difficulty is that January 2014. there is C$12 billion in outstanding claims: Canadian creditors At that time, teams of lawyers representing Canadian, US seek C$4.5 billion, the Americans are looking for C$3 billion and European creditors will square off in a cross-border joint and the Europeans are claiming up to C$10 billion. trial of unprecedented size and complexity aimed at allocatThe four failed mediations are an indication of just how ing Nortel's remaining assets among its Canadian, US and entrenched the parties are in their positions and how hard this European creditors. case will be fought. As if the multi-party nature of the proceed"There's hardly a case of any significance that doesn't have a ings and the complexity of the substantive and procedural issues cross-border element in it, but what is novel about the proceed- did not make the prospect of a trial sufficiently daunting, the ing is its magnitude, the number of jurisdictions engaged and the clash of law, procedure, advocacy styles and culture suggest that number of claimants," Huff says. "It's not that cooperation of this only disciplined and firm judicial oversight will avoid scenarios type has failed to occur on other occasions, but there's nothing approaching chaos. that approaches the sheer size of what's going on in Nortel." "It's going to be very difficult to manage the different cultures, Justice Geoffrey Morawetz of the Ontario Superior Court of the different sets of laws and the relevant conflicts laws," McElchJustice and Judge Kevin Gross of the US Bankruptcy Court for eran says. the District of Delaware will preside over the trial pursuant to an US pleadings, for example, routinely include references to the Allocation Protocol that sets out the terms of the joint trial. "You'll have two courts with independent jurisdiction that will hear the common evidence simultaneously and have to arrive at independent decisions on that evidence," says Mark Zigler of Toronto's Koskie Minsky TOOK A VERY CONSERVATIVE LLP, who represents the Canadian Creditors APPROACH IN ASSESSING THEIR Committee. "That's never been done before." RISK WHILE AWAITING THE INDALEX The Joint Administrators of Nortel DECISION. NOW IT'S CLEAR Networks UK Ltd. and 24 debtors from around the world had appealed from the THAT THEY'RE GOING TO FACE A Allocation Protocol order. They told the PRIORITY ISSUE AND THERE IS Court of Appeal that the joint trial was "a NO GUARANTEE THAT THEY CAN violation of the Ontario court's indepenREVERSE THAT PRIORITY AS PART dence and sovereignty and will be fraught with irresolvable procedural and substanOF A RESTRUCTURING. SO I'M tive problems." Despite four earlier failed NOT AT ALL SURE THE ISSUE IS attempts at mediation, two with the same GOING TO GO AWAY." mediator, they took the position that a proper approach was further mediation followed by private arbitration if necessary. But the Court for Appeal denied the applicants leave to appeal from the order mandating a joint trial. The court ruled that the protocol did not law and legal argument, while Canadian pleadings tend to stick infringe the Superior court's independence and sovereignty. to the facts. Canadian lawyers are accustomed to amending their "Cooperation and communication between the two courts pleadings with regularity and often a minimum of fuss, while in accordance with the relevant protocols is not inconsistent Americans take a more aggressive approach in opposing changes. with judicial independence, but rather is a sensible and effective "So your first shot at the pleadings had better be your best response to a significant interjurisdictional commercial case," the shot," says one lawyer close to the case. court wrote. At a joint hearing earlier this year, other difficulties were Also salient was the fact that "the majority of the key stake- manifest. There were significant issues over what needs to be holders" were prepared to proceed with the joint trial. "Granting disclosed on discovery because the approaches are so different. leave to appeal would impose additional costs and threaten American practice, for example, includes depositions from third further delay in proceedings that have already experienced too parties and witnesses, a practice that is the exception rather than much of both," the court stated. the rule in Canada. Indeed, by press time a protective order Estimates of the legal costs so far range from C$755 million addressing the difference in rules relating to privilege and confito C$861 million. But there's a great deal at stake. Following the dentiality had already issued. surprisingly successful sale of Nortel's intellectual property, the Arguably, the differences in pleading and discovery rules "SOME LENDERS www.lexpert.ca | LEXPERT • December 2013 | 23