Judge: Nortel EMEA debtors' appeal 'frivolous;' jurisdiction retained

By Jim Witters

Wilmington, Del., May 7 - A bankruptcy judge called the Nortel Networks Inc. joint administrators' appeal to the U.S. Court of Appeals for the Third Circuit seeking arbitration "frivolous" and ruled on May 7 that the bankruptcy court will retain jurisdiction in the case.

Judge Kevin Gross wrote that the appeal is frivolous because "the agreement at issue plainly did not call for arbitration and the circumstances dictate that the underlying dispute proceed."

Gross certified the appeal to the Third Circuit on May 1.

The joint administrators of the EMEA debtors and the Nortel Networks UK Pension Trust Ltd. are appealing Gross' April ruling that an interim funding and settlement agreement signed by the parties contains no provision for arbitration.

The EMEA debtors comprise 19 of Nortel's European affiliates under administrative control of individuals from Ernst & Young LLC.

The May 7 opinion allows litigation over the joint administrators' allocation claims to proceed while the Third Circuit determines whether to accept the appeal or reject it.

The allocation dispute affects all creditors awaiting distribution of about $7.5 billion of proceeds from the sale of Nortel's assets worldwide.

Nortel, a Brampton, Ont.-based manufacturer and supplier of telecommunications networking equipment, filed for bankruptcy on Jan. 14, 2009. Its Chapter 11 case number is 09-10138.

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