Ontario court rejects Nortel settlement to former and disabled employees

Justice Morawetz of the Ontario Superior Court of Justice has rejected a proposed settlement in the Nortel insolvency proceedings involving the claims of Nortel's terminated employees, pensioners and employees on long term disability.


The settlement set aside $57 million (CAN) to pay benefits to the company's former and disabled employees until year-end. Nortel's funding of such benefits is set to expire on March 31. In exchange, the agreement provided that the former and disabled employees would not sue parties involved in the management and funding of Nortel's pension and health and welfare funds. The agreement also provided that any such claims of the former and disabled employees would rank as being equal to the claims of ordinary unsecured creditors.

Rochon Genova LLP, a leading class action firm dedicated to providing access to justice for Canadians, appeared at the settlement approval hearing on behalf of some 36 dissenting Nortel employees with long-term disabilities. The group was opposed to certain terms of the settlement agreement, including a requirement that disabled employees give up their rights to sue the trustees and Nortel's directors and officers governing the Health and Welfare Trust in relation to a funding shortfall of in excess of $100 million.

“From our perspective, we are pleased that the deal did not get approved because of the extreme prejudice that would have resulted to our clients,” said the group's lawyer Joel Rochon. “Any deal struck must respect the dignity of the LTD employees – none of the stakeholders wants to see this vulnerable group reduced to poverty through the CCAA process.

“I remain optimistic that all stakeholders can come together to negotiate an agreement that adequately protects the legitimate interests of the disabled employees without disrupting the bankruptcy process and materially affecting the other creditor groups."

Jennifer Holley, one of the objecting employees on LTD, says, "While I am disappointed with the uncertainty as to what will happen to my benefits, more worrisome is the fact that my family would be condemned to poverty for the rest of our lives if the proposed agreement was approved without further consideration of our interests. I am also deeply concerned that a judge could approve tens of millions of dollars in executive bonuses one week, yet be prepared to dismiss the rights of disabled employees to recover the millions of dollars taken from us the next. I pray that Canada will do something to keep disabled employees from becoming victims of our outdated bankruptcy laws."

For further information, contact Joel Rochon,Rochon Genova LLP,  (416) 363-1867, www.rochongenova.com.

Source: CNW