'Futile' appeal by former Nortel workers could imperil settlement

Two former Nortel workers who lost their disability benefits when the company collapsed could delay or even derail a multi-billion-dollar settlement as they seek leave to appeal their case to the Supreme Court of Canada.

Nortel pensioners and other former workers won the settlement last October. The agreement to divvy up Nortel's $10-billion estate expires Aug. 31.

The deal grants employees who were on long term disability (LTD) leave between 45 and 49 per cent of whatever Nortel still owes them.

Greg McAvoy, a former manager in Calgary, and Jennifer Holley, a former employee in Ottawa, were among hundreds of Nortel workers with chronic or terminal illnesses who were on LTD when the company filed for bankruptcy protection in 2009.

Charter challenge

In January McAvoy and Holley argued in court that Nortel's bankruptcy settlement should comply with the Canadian Charter of Rights and Freedoms, and that they should be granted the full amounts of their original claims.

McAvoy and Holley asked that $44 million be set aside for former employees who were on LTD when the company folded, but so far Ontario courts haven't agreed with their arguments.

On Monday the Ontario Court of Appeal dismissed the motion for leave to appeal, saying it was filed past a court deadline and was "not meritorious."

Undeterred, McAvoy and Holley say they're ready to take their case to the Supreme Court of Canada.

"I think it's a really important case," said McAvoy. "It has a lot of merit, not only for us, but [for] anyone else that's going to be in bankruptcy, any of the other disabled people, how they're treated."

'A 1 in a million chance'

But the Toronto lawyer who has for years represented former Nortel workers with disabilities said McAvoy, Holley and their advisers are putting the entire settlement in jeopardy, and driving up legal costs for other.

"Basically at this point you have a one in a million chance the Supreme Court of Canada will even hear this," said Mark Zigler, a partner at Koskie Minsky LLP. "The interests of so many thousands of people are at stake because these two individuals are proceeding with what looks like a futile exercise. I feel sorry for them."

Zigler said the latest delay is frustrating for former Nortel workers with disabilities who had expected the settlement money to start flowing by April. 

Affected creditors include those in the United States and Europe as well as Canada, Zigler said.

"They've been told by four judges it has no merit. It's sad, it really is. It serves no positive end."

McAvoy, who suffers from multiple sclerosis, has had to move into an assisted-care facility. Holley, who lives in Ompah, Ont., has Crohn's disease and is also unable to work.

McAvoy and Holley now have 60 days to find a constitutional lawyer to take on their case, then must seek leave to appeal to the Supreme Court.