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Nortel employees to take fight to SCC

|Written By Michael McKiernan

A group of dissident former Nortel Networks employees on long-term disability benefits is taking their fight to the Supreme Court of Canada after their payments were cut off and they were left to face an uncertain future.  

‘The situation facing Nortel’s disabled employees is dire,’ says Joel Rochon.

As part of a settlement approved by Ontario Superior Court Justice Geoffrey Morawetz in March 2010 between Nortel and its 19,000 former workers, the beleaguered company agreed to continue paying benefits to employees, including 360 of them on long-term disability, until the end of last year.

They would then split up the remaining assets of its health and welfare trust that was supposed to fund health benefits to employees and pensioners.

In return, the employees effectively agreed to release those responsible for the alleged breaches of trust that left the health and welfare trust with gaping holes in its finances.

It was terminated with $548 million in liabilities and just $80 million in assets. According to documents filed with the court, Nortel had underfunded the trust and owed it almost $40 million, information that was only revealed to employees on long-term disability after representative counsel for various groups of employees had reached an agreement. 

Toronto lawyer Joel Rochon of Rochon Genova LLP, working with actuaries and financial experts, has taken up the case of 40 dissenting employees on long-term disability on an unpaid retainer. He got involved in February 2010 after representative counsel for various groups of employees came to an agreement. He opposed the settlement in court.

Rochon is also working to increase the proportion of the remaining trust funds reserved for the employees on long-term disability, arguing they’ll be hardest hit by the cessation of benefits. “The situation facing Nortel’s disabled employees is dire,” he told Law Times.

“Through no fault of their own, they were being forced, under the duress of an imminent termination of vital disability income and medical benefits, to accept a settlement that provided very minimal benefits relative to what Nortel agreed to provide through the [trust] and what the trustees should have ensured was contributed to [it].

Many of the disabled have no other source of income, have very high medical expenses, and would be left to rely on social assistance after Dec. 31.”

In a separate decision, Morawetz approved the distribution of funds from the trust that will see employees on long-term disability receive about $30 million, a quarter of what they’re owed. The liability for income benefits alone stands at $80 million.

Nortel’s 11,000 pensioners will get $35 million to cover death benefits that would have been paid out for life insurance policies. Rochon argued the court should have accepted a different scenario contemplated by Ernst & Young, the court-appointed monitor. In that case, the employees on long-term disability would have received $58 million and the pensioners would receive nothing for their life insurance policies.

That scenario may look harsh on the pensioners, but on an individual level, they’d lose an average of $3,500 per person, compared with the $72,000 lost by each employee on long-term disability under the settlement, according to Rochon.

“We believe the imposition of an obligation on the [trust] to pay for death benefits to still-living pensioners upon the trust’s termination is in error, particularly as the assets of the [trust] are insufficient to pay for the actual incurred disability income claims of the [trust] for which the trust is incontrovertibly liable,” said Rochon, who believes the death-benefit payments may also violate the Income Tax Act.

Representative counsel for both employee groups advised them to accept the releases for Nortel directors because it would be risky and time-consuming to advance any claims and because they could end up with nothing or fighting among themselves.

Rochon said that claim was “exaggerated,” but Morawetz disagreed, finding the releases were fair and reasonable. The releases would “reduce the risk of delay caused by potentially complex litigation and associated depletion of assets to fund potentially significant litigation costs,” Morawetz wrote in his decision last year.

Rochon later appealed both of Morawetz’ decisions, seeking to eliminate the releases and change the trust allocations, but both were dismissed. “Granting leave to appeal would unduly hinder the progress of the action,” wrote Court of Appeal Justice Karen Weiler, who dismissed the appeal of the trust distribution on Jan. 7.

But according to Rochon, the dissenting employees intend to fight on. The case has already run up $47,000 in disbursements and almost $600,000 in docketed time, but Rochon has been instructed to appeal to the Supreme Court.

“We remain deeply committed to finding a remedy to ameliorate the dire circumstances faced by Nortel’s disabled,” he said. “We believe there are a number of issues of national importance raised by these proceedings.”

  • Survivor Recipient
    Ok, I have read more. I couldn't navigate around the Ernst Young site well enough to pull up any information by entering Motions & Materials with a date but did scoot around and read what I could from other sources including the Rochon Genova site.
    I understand now that very little notice was given to the ltd group - actually I myself received no notification at all until it was a 'done deal'. Perhaps this sounds incredibly niave but as money was 'removed' from the HWT and not replaced isn't that stealing?
    I am also now wondering what impact the Google bid on patents will have on the distribution of monies. I gather that this is considered a first bid and that others are expected. Isn't 900 million greater than the liabilities Nortel had? Does that mean we will all get ALL monies owed to us?
    I still very much need my money quickly but I also completely understand why the LTD group was unwilling to settle.
  • Another Survivor Benefit Recipient

    A Parkes
    The frustration is that it is so hard to get answers on what is happening. I am in total agreement with 'Clueless & Broke'. I find it ironic that the NRPC expects those of us who have lost our income to pay $30 in order to have access to answers but yet when I asked when the next interim payment is scheduled and when the Supreme Court will be ruling on the Leave to Appeal, my answer was "I do not know, we expect answers in the next few months". Is there a site that I am not aware of that can give me answers on what exactly is happening with the legal proceedings?
  • Reply to Survivor

    You are not clueless, you are as you say lacking in information. This is the fault of Nortel and the insolvency court and process.
    I am the wife of a Nortel LTD former employee with secondary progressive MS, and I am disgusted by this whole fiasco. As such, I chose to become informed by reading everything I could about the abandonment of LTD and former employees in corporate bankruptcy. You can find it all on-line, including on Kosky Minsky's and Ernst Young's site. Granted, some things are easier to read than others. The LTD objection motions, factums, and affidavits are on Ernst Young's site, under Motions and Materials or Other Motions and Materials. Enter a keyword of the date - i.e., 2010 or 2011 as the easiest way to pop up documents. The E&Y site refers to all this as Project Copperhead in the document titles, I believe. I mention the LTD legal documents specifically because they are easier to read than the other lawyer's documents.
    I also suggest you call Anne-Clarke Stewart of the NRPC, also an on-line site. She purports to care about what she calls the "widows", I believe, yet she is part of the NRPC, a pensioner, and a court-appointed rep, thus one of those agreeing to this pensioner's claim for over half of what remains in the Health and Welfare TRUST. She also has some confusion about what that bill in the Senate was for, with respect to the LTDers.
    You also need to complain that the two Survivor groups appear to have no court-appointed legal rep in the CCAA(insolvency) court, unless you are somehow subsumed under the pensioner's group, in which case they are in conflict of interest with you just as they are with the LTDers over the allocation of HWTRUST funds.
    I wish to further clarify that Rochon Genova chose an allocation scenario put forth by the Monitor as one possible way to allocate the HWTrust funds that would give both the LTDers and the 2 Survivor groups about twice the income settlement than they wii get if the pensioners are successful in maintaining their claim on over half the trust fund assets. I would think this would be worth some possible disturbances in the short term, which would be a result of the court's choice, as per usual. Rochon Genova is also trying to get the court to allocate the funds to the LTD and Survivors ASAP based on the court's initial estimates given the pensioners' claim, as there is no reason not to from Rochon Genova's and the LTDers point of view.
  • @ JDignum -Thank you

    Survivor Benefit recipient
    The two paragraphs above gave me more information than I have received in the past year. I am guessing that you are a lawyer because I had to read it 3 times to 'sorta - kinda' understand what was written :-)

    If I am understanding it correctly people who are still alive are wanting death benefits from the meager coffers of the HWT which would of course mean less for those of us who not only do not have death benefits but will have drastically reduced 'living benefits'.

    May I ask how does someone such as myself finds out more information?

    I am still very concerned though as the interim money received is gone and there will be a minimum of 6 weeks before anything more will happen. I was told that the Monitor has 30 days to do whatever it is that is done next and then Mr. Rochon will have 10 days to do whatever he has to do but no idea what exactly each of them is to do and then again, no idea of the time frame for what happens next.

    I'm am going to change my name from Survivor benefir recipient to 'Clueless and Broke'
  • JDignum
    The LTD group is not holding up the distribution of the HWT funds. This was supposed to occur in 2010. The Objecting LTD employees are fighting a claim by the pensioners for more than half of what remains in the HWT. That claim is for death benefits for living pensioners! It is only by this legal action that these LTD employees highlighted that both the Survivors and the LTD are the only groups entitled to the trust fund assets that remain in the HWT. It is the pensioners that are trying to take money from your Survivor trust funds, as well as the LTD trust funds. Your delay in receiving your allocation is not the fault of the Objecting LTD employees. The other lawyers are blaming them for this delay, but that is because they are allowed by the settlement agreement, also signed by the pensioner group reps, to which the these LTD employees also
    objected, to take money from the HWT for defending their position. Also, the HWT has still not been audited, and the final calculations have not yet been performed, which is not the fault of the Objecting LTD employees. I would advise you to complain to KM and the pensioners' group with respect to their lack of attention to the Survivor's plight, as you seem to have even less true representation in Nortel's CCAA court than do the LTD employees. In summary, the LTD employees are only attempting to get what is owed them by a company that represented themselves as acting like an insurance company with respect to their company self-insured LTD plan, a plan into which many paid extra for more so-called LTD coverage.
  • For shame!

    Survivor Benefit recipient
    While I appreciate the hardships I would like to point out that there are a great many of us involved in the distribution of these funds. While the LTD group wants more for themselves the rest of us are being held hostage by their actions.

    It is terrible the way things worked out and I would certainly have preferred to continue to recieve a lifetime income but that is not to be. Now I am in danger of losing my home because a small group want more for themselves. I hope this gets tossed out very quickly!
  • Hero

    nortel disabled
    Mr. Rochon is a true hero with integrity and ethics of highest degree. Disabled paid into an insurance plan and were guaranteed income for life by Nortel. A company MUST live up to its obligation or we are going down a downhill spiral of corruption,abuse and greed.
  • Wife of Nortel LTD employee

    Thank you Mr. Rochon and your team at Rochon Genova. At least some lawyers are standing up for Canadian LTD employees abandoned in corporate insolvency to antiquated employee-unfriendly insolvency laws with an underfunded, mishandled, and corporate self-insured HWTrust LTD plan. This case is of general importance to the about 1.1 million Canadians whose LTD plans are self-insured by their companies.
  • What a Shame

    Sharon Caverly
    Imagine, a country as rich as Canada, treating their most vulnerable citizens in such a manner. I can only assume that the judicial system reflects the opinion of our government. Our government sends money to other countries who have experienced disasters, spends money on fighter jets - only to name a couple of recent expenditures, but our disabled in this country are expected to live on $1200 per month. Perhaps we should be looking in our own back yard before we pat ourselves on the back telling the world how caring we are. Thank God for lawyers like Joel Rochon who obviously believes in doing the morally responsibly thing versus the politically advantageous thing.
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