Lawyers face off over who should represent Nortel employees

TORONTO - Former employees of Nortel Networks Corp. (TSX:NT) should be represented in court by one court-sanctioned legal team because that's the most efficient way to protect them without being an undue drain on the company's resources, an Ontario judge was told Monday.

Mark Zigler, a lawyer for the firm Koskie Minsky, told the court it made no sense to have multiple groups of lawyers representing different groups of former employees of the insolvent telecommunications equipment maker.

"You'll just have more and more lawyers working on the same file," Zigler said.

Koskie Minsky has been retained by a group representing Nortel pensioners, who Zigler said could number between 17,000 and 18,000.

The company and the court-appointed monitor support having Koskie Minsky chosen as a court-recognized legal team for all employees that would be paid by Nortel.

Several other groups of employees or ex-employees want different legal representation, saying their needs are different from those of the pensioners, and their lawyers were in court Monday seeking court orders that they should also be paid by Nortel.

But Zigler argued that Koskie Minsky is well positioned to represent all groups because it has a broad mandate and could use economies of scale to handle and avoid duplication of effort.

Nortel and a court-appointed monitor both say a single law firm should represent all former employees to minimize the drain on Nortel's resources, which would be used to pay the lawyers.

However, a lawyer for about 500 people who recently lost their jobs disagreed, saying their issues -- such as unpaid severance and health benefits -- are fundamentally at odds with the interests of pensioners.

Janice Payne said the needs of the recently axed workers could be overwhelmed by the much larger group that is primarily interested in preserving pensions.

Very few of the people let go by Nortel shortly before or since its Jan. 14 bankruptcy-protection filing have any interest in the pension, she said, either because they've not entitled to benefits or because they asked to take their money out when they left Nortel.

In contrast to pensioners, who have continued to receive payments despite the insolvency, the laid-off employees were cut off as soon as Nortel got court protection from creditors, she said.

"We submit there is no duplication when the groups have such divergent interests," said Payne, a partner in Ottawa firm Nelligan O'Brien Payne, working with two other firms on the case.

She also said it's troubling that Koskie Minsky's position is supported by Nortel, which she said creates the impression that the company is choosing the employees' counsel.

"The optics are terrible," Payne said.

Lawyers for Nortel argued in court that the company, the monitor and the court had an obligation to preserve Nortel's limited financial resources.

They said it was more efficient for one firm to be the court-recognized legal representative for all the employees, so it was in favour of having Koskie Minsky get that designation.

Other groups can still hire lawyers to represent their interests but they shouldn't be paid out of the company's funds because the multiple legal teams would be less efficient and more costly, they said.

"This is really not about people's right to choose their counsel," said Derrick Tay, one of Nortel's lawyers.

The Canadian Auto Workers is also seeking to represent not only the active union members at Nortel but also about 600 who have retired. The union wasn't seeking fees from Nortel.

Nortel said it had never recognized the CAW's assertion that it represented retired members and opposed the union's application on Monday on that ground.

Justice Geoffrey Morawetz reserved his decision and didn't indicate when it would be released.

The iconic Canadian telecom technology company, which originated as part of Bell Canada and has a history stretching back a century, has suffered multiple blows in recent years.

It currently employs about 6,000 people in Canada.

It had about 30,000 employees worldwide as of last September, but there have been two major reductions since then.