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.
Issue link: https://digital.carswellmedia.com/i/218955
BANKRUPTCY AND INSOLVENCY "[INDALEX] IS HIGHLY RELEVANT IN THE CROSS-BORDER ENVIRONMENT, BECAUSE ALMOST ALL OF CANADA'S BIG COMPANIES BORROW MONEY FROM US LENDERS. SO COMPANIES WITH LARGE PENSION SHORTFALLS COULD HAVE DIFFICULTY GETTING FINANCING FROM ACROSS THE BORDER." Kevin McElcheran > McCarthy Tétrault LLP are only the beginning. For example, admissibility of evidence questions will surely arise at trial, and since each judge is in theory at least making independent decisions, the two courts could come up with conflicting rulings. But the clash of culture isn't just legal in nature. A review of the pleadings indicates that national pride is an integral component of the arguments advanced on the merits. The Canadians are relying on a legal doctrine known as "substantive consolidation," an equitable remedy that consolidates the assets of all the companies involved, wherever located, and without regard to intra-corporate relationships. Counsel are expected to emphasize that Nortel was a true Canadian success story, the entity that funded the research and development behind the patents that were the heart of the company's success and that generated C$4.5 billion of the C$9 billion in play. The rest came from the sale of Nortel's four primary lines of business and of residual assets around the world. The Americans are honing in on the fact that Nortel generated most of its revenue in the US. "The Americans are internally focused and both they and the Europeans have a bit of a nose-up, 'it's just Canada' attitude, that is reflective of their cultures," says a lawyer familiar with the case. The Europeans' take includes allusions to North American-based corporate wrongdoing. "There's even been talk regarding allegations of shadow directors out to exploit Europe," one observer says. Still, counsel on the case remain hopeful. "There's no doubt that this case has unique aspects and challenges, but they will be overcome by coordination between the two jurisdictions and the application of the various cross-border protocols governing the case," says Benjamin Zarnett of Toronto's 24 | LEXPERT • December 2013 | www.lexpert.ca Goodmans LLP, who represents the monitor, Ernst & Young. So far, Zarnett's optimism seems justified. The lawyers involved report that the two courts have worked well and cooperatively on procedural matters to date. MARCIANO: HUGE US JURY AWARDS DO NOT BAR CANADIAN RECOGNITION OF US BANKRUPTCY The Québec Court of Appeal has ruled that a US bankruptcy judgment based on US jury awards that may be excessive by Canadian standards should nonetheless be recognized by Canadian courts. Georges Marciano, the founder of the Guess? retail fashion chain, had argued that jury awards of $360 million, mostly for emotional distress, reputational harm, hurt feelings and punitive damages that formed the basis of a US bankruptcy order against him, should not be recognized by Canadian courts on the grounds that it offended public policy contrary to s. 284 of the Bankruptcy and Insolvency Act. A Québec Superior Court judge agreed, but the Court of Appeal reversed the decision. "Although the Court of Appeal recognized that judgments of this magnitude were well beyond what Canadian courts would award, that by itself did not lead to the conclusion that they offended public policy," says Martin Desrosiers in Osler, Hoskin & Harcourt LLP's Montréal office, who represented PricewaterhouseCoopers in the case. "The court recognized that the international comity requires that the public policy exception be narrowly interpreted." Julius Melnitzer is a legal affairs writer in Toronto.