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On Monday May 12, 2014
the joint Canada-U.S. trial to determine how to allocate the remaining assets
of Nortel Networks began. Linked by
video conferencing, Mr. Justice Newbould of the Commercial List of the Ontario
Superior Court of Justice in Toronto, and U.S. Bankruptcy Judge Gross in
Wilmington, Delaware, simultaneously began hearing the opening submissions,
presented by two lawyers in Toronto and two in Wilmington. Nortel
Networks Limited and its subsidiaries and affiliates around the world are
parties to this action. About forty lawyers attended in Toronto, and
there was about the same number in the U.S.
The trial is expected to continue until late June, and there is another
trial for related claims shortly thereafter.
Although this author
knows of no precedent for a combined trial covering multiple jurisdictions,
there is provision for this in the Guidelines
Applicable to Court-to-Court Communications in Cross-Border Cases, which
was published by the American Law Institute in 2003, and which was adopted by
the Commercial List of the Ontario Superior Court of Justice in 2004. Guideline 9 provides for courts to conduct
joint hearings with other courts, subject to various requirements such as that
each court can simultaneously hear the proceedings in the other court, and all
filings in one court are to be available electronically and publicly in the
other court. Filing in one court does
not constitute attornment to the other court’s jurisdiction.
Presumably the rationale
for this joint trial is to reduce costs.
Already over one billion U.S. dollars has been spent in the bankruptcy
on professional fees of lawyers, accountants and others, since 2009. Various
efforts to resolve the dispute of how to divide the assets have failed.
It remains to be seen what
will happen if the two courts’ decisions conflict, which conflict may arise from differences
between Canadian and American bankruptcy law, or differences in fact-findings,
or both. There does not appear to have been a determination
of the proper, applicable substantive law – lex
causae -- to govern both the Canadian and American sides of this dispute. The Allocation Protocol, which sets the
ground rules for this trial, says nothing about choice of law.
As well, parties in
both countries have their “usual rights of appeal” from interlocutory and final
orders, which gives rise to further potential for a conflicting outcome.
I will try to follow developments
in the trial.
