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LITIGATION BOUNDARIES cross-border class actions allows for parallel proceedings and does not require global settlements. Although Justice van Rensburg' s most recent decision means we will have to wait until the resolution of the Drywall case (described above) to find out whether the "wait and see" approach can result in a successful trial or global settlement, it does demonstrate the court's flexibility and willingness to revisit a global class certification order in appropriate circumstances. THE SIMULTANEOUS CROSS-BORDER TRIAL Insolvency courts have long been known for their cross-border and even global reach, and for coming up with creative solutions to deal with the related issues. The latest, involving the bankruptcy of Nortel in Nortel Networks (Re), 2013 ONSC 1470 (CanLII), may be the most ambitious yet. In March 2014, the Ontario Superior Court of Justice and the United States Bankruptcy Court for the District of Delaware are scheduled to hold a joint trial to decide the allocation of approximately C$9 billion generated from the sale of assets of the various Nortel entities. The courts will hear common evidence simultaneously and then come to independent (and ideally consistent) decisions on that evidence. At its peak, the Nortel corporate family was worth nearly C$300 billion and employed more than 90,000 people globally. The corporate group was hit hard by the bursting of the dot-com bubble, however, and saw its stock price plummet from C$124 to C$0.47 a share. On January 14, 2009, Nortel Networks Corporation filed for and obtained protection under the Companies' Creditors Arrangement Act (CCAA). Simultaneously, Nortel Networks Inc. filed a voluntary petition under Chapter 11 of the US Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Nortel entities also filed for protection from creditors in the United Kingdom and several other countries in Europe and the Middle East. The proceedings have involved more than 100 creditors and companies in 20 countries on every continent except Antarctica. In June 2009, Nortel announced that rather than try to restructure, it would liquidate to raise money to pay creditors. To begin this process, the Canadian debtors, the US debtors and certain European, Middle-Eastern and Asian debtors entered into an Interim Funding and Settlement Agreement, which provided for cooperation in the global sale of Nortel's business units. Although the upcoming trial has been getting a lot of attention, the entire Nortel insolvency proceeding has been conducted through joint hearings between the Canadian and American courts. Procedure has been governed by a "Cross-Border Protocol" that sets out rules to coordinate the parties and protect their rights. For example, joint hearings are conducted via telephone or video links, and the US and Canadian judges are entitled to communicate with one another in advance of, and during, any joint hearing (with or without counsel present). The cross-border proceedings have not always gone smoothly. One of the first joint hearings called to rule on the guidelines for the auction of Nortel's wireless division was supposed to proceed as outlined by the Cross-Border Protocol. The judges would sit in their respective courts and the video link would allow lawyers in both countries to make their submissions. However, shortly after Nortel's US lawyer finished explaining the planned auction guidelines, Chief Judge Kevin Gross approved the auction and ended the hearing. More than two dozen lawyers and Justice Geoffrey Morawetz were left in surprised silence in a Toronto courtroom. Justice Morawetz was able to get the proceeding back on track by calling an intermission during which he had a telephone conversation with Judge Gross. The hearing subsequently resumed and, following submissions from Canadian counsel, Justice Morawetz granted his approval of the auction plan. Following that rough start, however, the cross-border hearings have run much more smoothly. Over the next three years, the majority of Nortel's valuable assets were sold with the Canadian and American courts working together to rule on applications for the approval of sales processes and the sales themselves. In June 2011, Nortel completed the biggest sale of technology patents in history in which a consortium of six companies purchased approximately 6,000 Nortel patents for C$4.5 billion. Both the Canadian and American courts approved the sale – via video link – without incident. By April 2012, the central question became how to allocate the sales proceeds among the debtors. The challenge was that creditors could not negotiate and settle their claims prior to each business unit knowing how much money it had. The parties first attempted to mediate the issue, with Chief Justice Winkler holding a series of meetings with stakeholder groups between August and October 2012. A further mediation session was held the week of January 14, 2013, and was extended twice to try to resolve all matters. However, on January 24, 2013, Chief Justice Winkler concluded that efforts at mediation were no longer worthwhile. The termination of the mediation caused the matter to come back before the courts and on March 7 and 8, 2013, Judge Gross and Justice Morawetz agreed to a joint, cross-border trial to decide the allocation of sale proceeds currently held in escrow. The trial is scheduled to commence on March 31, 2014, and is expected to result in the division of the sale proceeds among Nortel's Canadian, American and European business units. Representatives for Nortel Networks UK Ltd., along with 24 international debtors, opposed the joint trial, instead preferring private arbitration. Their opposition, which was argued before Justice Morawetz, was based on two main grounds: the parties had agreed to arbitrate the allocation of sale proceeds; and the Ontario court did not have the jurisdiction to conduct a simultaneous cross-border trial (see Nortel Networks Corporation (Re), 2013 ONSC 1757 (CanLII)). Ultimately, Justice Morawetz dismissed the argument that the parties agreed to arbitrate on the basis that the parties had only, at best, an agreement to agree to arbitrate. With respect to the issue of jurisdiction, Justice Morawetz found that all parties had "irrevocably and unconditionally" submitted to the jurisdiction of the Canadian court and the US court, and that a cross-border trial would be consistent with the CCAA objectives of promoting efficiency and fairness by avoiding a multiplicity of inconsistent proceedings. Justice Morawetz also noted that raising potential procedural issues was not sufficient to sustain their objections. Rather, challenges of procedure would be addressed as they arise in the same way that procedural issues are addressed in numerous other proceedings that are brought before the court. Justice Morawetz also noted that despite different procedures in each court, both have worked together effectively with the result that billions of dollars have been made available for stakeholders. Justice Morawetz was confident that both courts would ensure that matters going forward would be dealt with in a fair and equitable manner. On appeal, the objecting group argued that the joint OntarioDelaware trial infringed the Ontario court's independence and sovereignty. The Court of Appeal for Ontario dismissed that argument, noting that "cooperation and communication between the two courts in accordance with the relevant protocols is not inconsistent with judicial independence, but rather is a sensible and effective rewww.lexpert.ca | LEXPERT • December 2013 | 47

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