Nortel hearing a cross-border spectacle

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The unprecedented Nortel Networks Corp. bankruptcy trial will be conducted simultaneously by U.S. and Canadian judges in crowded courtrooms linked by $1.3-million worth of video equipment to live stream the complex event between two locations.

The process for conducting the rare cross-border trial, which begins Monday, has been the subject of months of wrangling and debate by dozens of lawyers representing groups with an interest in how the judges will allocate $7.3-billion from the sale of patents and other assets between Nortel divisions in Canada, the United States and Europe.

"As you can appreciate there are myriad logistical issues associated with this and they're all on a list to get resolved," said lawyer Alan Mark, who is representing the court-appointed Canadian monitor overseeing Nortel's liquidation. "This is going to require a degree of co-operation between the judges and amongst counsel to make it work."

The trial is one of the largest bankruptcy cases ever dealt with in Canadian courts, and will be closely watched in the legal community because of the unusual cross-border hearing conducted using closed-circuit video cameras before Justice Frank Newbold of the Ontario Superior Court and Judge Kevin Gross of the U.S. Bankruptcy Court for the District of Delaware.

David Ullmann, a Toronto insolvency lawyer with Minden Gross LLP who previously represented a client in the Nortel case but is no longer involved in the file, said joint hearings in cross-border insolvencies are nothing new, but a full trial of this size, being held simultaneously in courtrooms both north and south of the border, is unheard of.

He said the sheer size of the pot of money left over, and the number of creditors fighting for a share, means what would otherwise be small concerns in another case could become large battles in the Nortel proceeding. "When you add enough zeroes to it, every small issue has an impact."

The proceedings will follow legal practices in each country for portions of the trial conducted in each jurisdiction, which means witnesses will be questioned and cross-examined under rules in effect in whichever country they appear. There are 56 people on the witness list for the trial, but all may not end up being called to testify.

Under a protocol developed for the trial, lawyers can cross-examine witnesses remotely using the video technology, but Mr. Mark said they are expected to travel to the other country for any substantial questioning.

U.S. lawyers will not have to wear gowns to appear in the Canadian courtroom, where Canadian lawyers are required to wear long black robes with white shirts.

Bell Canada and a U.S. partner company have been hired to install a dedicated telecommunications link between the two courts "to provide for a reliable and high-capacity connection," which avoids the "variability" of streaming video on the Internet, according to an April document filed in court to explain the protocol for the trial. The filing says the cost of the technology will be about $1.3-million, with the costs shared by Nortel's U.S. and Canadian debtors.

Lawyers have sifted over three million documents produced during the discovery process prior to the trial, culling the list to 16,000 potential trial exhibits. There are also 100 transcripts from witness depositions, 49 reports from experts and 30 affidavits, along with lengthy opening briefs from all the parties.

Most of the documents in the case have been kept sealed under confidentiality agreements. Lawyers will attend a pretrial hearing Thursday to get approval to unseal many of them for use at the trial.

Mr. Ullmann said he was surprised that lawyers were dealing with the issue this late in the game with just days to go before the trial is scheduled to start.

"It doesn't bode well for how this is all going to unfold, if an issue like this, which on one hand could be seen miles off, is being dealt with at what seems like the last minute," Mr. Ullmann said. "I'm curious as to what other things might just pop up and derail this."

The trial is expected to be packed with dozens of lawyers representing pensioners, former employees, bondholders and other creditors, and both courtrooms have been retrofitted to add tables for the high number that will attend. There will also be an overflow room with a video screen in each courthouse where some lawyers, media and members of the public will have to sit because of the lack of space in the main courtrooms.

Don Sproule, president of an association representing Nortel's Canadian pension plan members, said his group has sought a guarantee its members will be able to get seats in the courtroom and will have access to a remote link to the hearing so they don't have to attend in person every day.

The main trial is expected to run until the end of June, with an extra portion until the end of July to deal with issues of intra-company claims between Nortel divisions.