WILMINGTON, Del May 12 Judges in Wilmington, Delaware, and Toronto jointly kicked off a novel cross-border trial on Monday to divvy up the $7.3 billion that was raised in the liquidation of once-mighty telecoms equipment maker Nortel Networks, which went bust in 2009.
U.S. Bankruptcy Judge Kevin Gross and Ontario Superior Court Justice Frank Newbould heard opening arguments on Monday morning from four attorneys: two in Wilmington and broadcast in Toronto, and two in Toronto and broadcast in Wilmington.
The judges must decide how to allocate the money among former Nortel businesses in Canada, the United States and Europe. Administrators overseeing those former Nortel business units cannot repay creditors, make up pension shortfalls or pay off Nortel bonds until they know how much money they will receive.
The gallery pews in Gross's Delaware courtroom were replaced with eight large desks, each with two monitors, that allowed the attorneys to follow Newbould and oral argument in Toronto.
"Good morning Judge Gross, it's good to see you so clearly," said Matt Gottlieb, a lawyer at Lax O'Sullivan Scott Lisus, as he began his oral argument in Toronto. He appeared in one of three windows on each of the desktop monitors in Wilmington as well as on two large wall displays installed in the court.
At the company's height, Nortel's businesses spanned the globe, employed 93,000 people and had a market value of $250 billion. After accounting problems and a sluggish response to changing technology, the company filed for bankruptcy in 2009 and liquidated. Nothing remains but the billions raised, and disputes over how to divide it.
U.S. and Canadian courts occasionally hold joint bankruptcy hearings, but a full-blown trial with scores of witnesses has never been attempted, according to legal experts.
The trial, which runs till June 27, comes after the regional Nortel businesses have spent years in failed negotiations and mediation.
"The debtors fight like jackals over the carcass," Brian O'Connor told the Wilmington court on Monday. The Willkie Farr & Gallagher attorney represents British pensioners, who are owed $3 billion and "must painfully watch as their ability to support themselves in retirement hangs in the balance," O'Connor said.
While creditors wait, lawyers and other professionals have gobbled up $1.3 billion, according to papers filed by the British pensioners.
"This case is so over-lawyered," Newbould said at a pretrial hearing on Thursday, when he called the litigation tactics and money required "completely shocking".
The outcome could dramatically affect various creditors. The U.S. estate could receive as little as 11 percent of the billions, or as much as 73 percent.
The European estates want to divide the money based on each region's research-and-development spending, while the 36,000 British retirees want all creditors to divide the money equally based on what they are owed.
The Canadian estate has said it deserves the bulk of the money because Nortel's patents were registered in Canada, while the U.S. business has argued that it deserves most of the money because it "was the engine that drove the Nortel Group". (Reporting by Tom Hals in Wilmington, Delaware; Editing by Peter Galloway)