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In re Nortel Networks Inc.

United States Court of Appeals, Third Circuit

December 6, 2013

In re Nortel Networks Inc., et al., Debtors
v.
JOINT ADMINISTRATORS FOR NORTEL NETWORKS UK LIMITED AND CERTAIN OF ITS AFFILIATES LOCATED IN THE REGION KNOWN AS EMEA, Appellants

Argued: October 8, 2013

On Appeal from the United States Bankruptcy Court for the District of Delaware (Case No. 09-10138) Bankruptcy Judge: Honorable Kevin Gross

Edwin J. Harron Robert S. Brady John T. Dorsey Jaime Luton Chapman Young Conaway Stargatt & Taylor, LLP., Derek J.T. Adler [Argued] Amera Z. Chowhan Gabrielle Glemann Charles H. Huberty Hughes Hubbard & Reed LLP, Attorneys for Appellants Joint Administrators for Nortel Networks UK Limited and Certain of its Affiliates Located in the Region Known as EMEA.

Howard S. Zelbo [Argued] James L. Bromley Lisa M. Schweitzer Cleary Gottlieb Steen & Hamilton LLP., Derek C. Abbott Ann C. Cordo Morris, Nichols, Arsht & Tunnell LLP, Attorneys for Appellees Nortel Networks Inc., et al.

Fred Hodara David Botter Abid Qureshi Akin Gump Strauss Hauer & Feld LLP., Patricia A. Millett [Argued] Akin Gump Strauss Hauer & Feld LLP., L. Rachel Lerman Akin Gump Strauss Hauer & Feld LLP. Attorneys for Appellee The Official Committee of Unsecured Creditors of Nortel Networks Inc., et. al.

Before: FUENTES, GREENBERG, and BARRY, Circuit Judges

OPINION

FUENTES, Circuit Judge.

After the multinational telecommunications firm Nortel Networks declared bankruptcy in 2009, various debtors comprising the Nortel brand auctioned their business lines and intellectual property. They raised $7.5 billion. Since the auctions, the selling debtors have disputed whether or not they had previously agreed to allocate the auction funds through arbitration. As it stands, the debtors have $7.5 billion and no agreed-upon method for dividing it.

The U.S. Bankruptcy Court for the District of Delaware determined that the parties did not agree to arbitrate their disputes about allocation. Because the contract at the center of this controversy does not reflect the parties' intent to arbitrate disputes about the auction funds, we will not compel the parties to do so. We therefore affirm.

We do not consider the Joint Administrators' related, but distinct, challenge to the Bankruptcy Court's decision to allocate the contested funds. A panel of this Court declined to certify that question for appeal. In any event, the Bankruptcy Court has not yet held the hearing to allocate the funds, so review would be premature.

I. Background of the Case

A. The Facts

In early 2009, Nortel entities around the world declared bankruptcy and filed petitions in U.S., Canadian, English, and French courts to begin insolvency proceedings. See In re Nortel Networks, Inc., 669 F.3d 128, 130-31 (3d Cir. 2011) (summarizing history of the Nortel bankruptcy). The following day, the U.S. Bankruptcy Court for the District of Delaware and the Superior Court of Ontario, Canada, each approved a cross-border protocol for coordinating U.S. and Canadian proceedings.

As a transnational company with numerous subsidiaries located in multiple jurisdictions, Nortel's insolvency posed challenges of coordination and timing. Among them, multiple Nortel entities owned the business lines and intellectual property that comprised the global Nortel brand. Thus, any plan to sell or reorganize Nortel property would have to accommodate multiple, and possibly conflicting, interests. At the same time, the value of Nortel's business and intellectual property stood to diminish over time. Therefore, any plan to sell or reorganize Nortel's assets had to be formed quickly in order to maximize ...


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