Nortel Bankruptcy

Brief

At its height, Canadian-based telecom giant Nortel enjoyed a market cap of approximately US$260 billion and accounted for more than one-third of the total of all companies listed on the Toronto Stock Exchange. In 2009, Nortel filed for protection from its creditors in multiple countries in an attempt to restructure its financial obligations. Nortel ultimately liquidated its assets, including its vast patent portfolio. The proceeds from these sales and the terms of the related intellectual property (IP) license agreements between the various legal entities/bankruptcy estates became the centerpiece of a US$7.3 billion dispute.

Considered one of the largest bankruptcy cases in Canadian history, the Nortel allocation trial involved a flurry of cross-border legal issues, with joint hearings and simultaneous trials held in the Ontario Superior Court of Justice, Commercial List (the “Canadian Court”) and the U.S. Bankruptcy Court for the District of Delaware (the “U.S. Court”).

The Canadian Creditors Committee selected IP and bankruptcy expert Thomas Britven to provide opinions and expert witness testimony in this multi-billion-dollar dispute. Additional key members of Mr. Britven’s team were Douglas Ellis, Lauren Koester, and Brandon Lloyd.

What we did

Mr. Britven led a team of over 50 professionals to analyze Nortel’s historical and projected global footprint and address related issues of IP ownership (including a patent portfolio consisting of nearly 6,000 patents and patent applications), IP license rights, and the value of those rights. Among other things, Mr. Britven testified that a pro rata allocation of Nortel’s liquidation proceeds was appropriate. Mr. Britven also presented a model intended to aid with estimates of recoveries to various creditor classes based on the different allocation theories advanced by each party.

Outcomes

The Canadian and U.S. bankruptcy judges released their decisions on May 12, 2015. They accepted Mr. Britven’s testimony as an “expert valuer” and ordered a modified pro rata allocation similar to what Mr. Britven proposed. The Canadian Court accepted this allocation as “doing what is just in the unique circumstances” of Nortel’s case and the U.S. Court accepted it as “a fair and equitable mechanism” that “yields the most acceptable result.”

In May 2016, the Court of Appeal for Ontario denied leave to appeal Justice Frank J.C. Newbould’s allocation of the proceeds.