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 The U.S. Court of Appeals for the Third Circuit in Philadelphia
upheld a bankruptcy court ruling in March that there was never an
agreement to use arbitration to divide the pile of cash among
various Nortel estates around the world.
Nortel sought protection from creditors in courts around the world
in 2009 and its businesses were quickly sold, reducing a once-global
corporate giant to little more than a pile of cash. But it was never
decided how to allocate the money raised between different
insolvency and bankruptcy proceedings in different countries.
An agreement governing the money refers to undefined "dispute
resolvers" that Nortel's European estates argued was arbitration.
The U.S. Bankruptcy Court in Wilmington, Delaware disagreed, and the
Court of Appeals affirmed that ruling.
"In context, the words 'dispute resolver(s)' indicate that the
parties allowed themselves latitude to select courts or arbitrators
or others to adjudicate the parties' disputes," wrote Judge Julio
Fuentes in a 17-page opinion. "To respect that contractual latitude,
we reject the idea that the parties must arbitrate disputes over
asset allocation."
He was joined by Judges Maryanne Trump Barry and Morton Greenberg.
Derek Adler, an attorney with Hughes Hubbard & Reed in New York, who
represents Nortel's European estates, did not immediately respond to
a request for comment.
Creditors of Nortel, once a telecoms giant with a $250 billion
market value and 93,000 employees, cannot be paid until the estates
in Canada, the United States and Europe know how much money they
will have to distribute.
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Kevin Gross, a bankruptcy judge in Wilmington, and Ontario Superior
Court Justice Geoffrey Morawetz in Toronto have scheduled a joint
trial for next year to decide the dispute. The two have been holding
joint hearings linked by video since Nortel sought creditor
protection four years ago.
An administrator for the European estates has said the unusual
trial arrangement would lead to "chaos" in part because there is no
appeals court that binds both courts.
The European estates also wanted the appeals court to weigh in on
whether the joint trial was appropriate, but Fuentes said that
challenge should be taken after the trial.
The case is In re Nortel Networks Inc, U.S. Court of Appeals for the
Third Circuit, No. 13-2739. The bankruptcy case is In re Nortel
Networks Inc, U.S. Bankruptcy Court for the District of Delaware,
No. 09-10138.
(Reporting
by Tom Hals in Wilmington, Del.; editing by Grant McCool)
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