In Re: Nortel Networks Inc., et al.

Filing 6

Recommendation that Bankruptcy Appeal be withdrawn from mandatory mediation. Signed by Judge Mary Pat Thynge on 6/6/16. (cak)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
IN RE: Nortel Networks Inc., et al.,

:
:
Debtors.
:
__________________________________ :
NORTEL NETWORKS INC.,
:
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Appellant,
:
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v.
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EMEA DEBTORS,
:
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Appellee.
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Chapter 11

C. A. No. 16-366-LPS
Bankruptcy Case No. 09-10138
ADV No. 11-53454
BAP 16-27

RECOMMENDATION
At Wilmington this 6th day of June, 2016.
WHEREAS, pursuant to paragraph 2(a) of the Procedures to Govern
Mediation of Appeals from the United States Bankruptcy Court for this District dated
September 11, 2012, the court conducted an initial review, which included information
from counsel, to determine the appropriateness of mediation in this matter;
WHEREAS, as a result of the above screening process, the issues
involved in this case are not amenable to mediation and mediation at this stage would
not be a productive exercise, a worthwhile use of judicial resources nor warrant the
expense of the process. This matter is related to the various appeals taken in the Nortel
Bankruptcy matter. The other appeals have undergone a series of mediation sessions
with Judge Farnan. The present matter relates to intercompany claims filed by the
EMEA Debtors (European affiliates) in their chapter 11 cases pending before the
Delaware Bankruptcy Court. In December 2013, the U.S. Debtors and the EMEA

Debtors entered into a settlement agreement that resolved these claims, which was
approved by the Bankruptcy Court on January 7, 2014. Per this settlement agreement,
the U.S. Debtors agreed to allow and pay claims in a certain amount to the EMEA
Debtors and the principal creditor of NNUK (Nortel Networks UK Limited), who also filed
separate claims against the U.S. debtors in their chapter 11 cases. In return, the U.S.
Debtors and EMEA Debtors exchanged mutual releases. At issue on appeal is the
scope of these releases. The Bankruptcy Court granted EMEA debtors’ motion for
judgment on the pleadings under Fed. R. Civ. P. 12(c) on May 2, 2016, and it is this
decision that is under consideration in this appeal. The result of that decision was that
the settlement agreement/release operated as a complete bar to the U.S. Debtors’
contribution claim regarding SNMP Research’s adversary proceeding against them for
alleged unpaid royalties under a licensing agreement during the prepetition period.
SNMP did not file claims against the EMEA Debtors. In July 2015, the U.S. Debtors
filed a motion for leave to implead EMEA debtors as third-party defendants in the
adversary proceedings, arguing that to the extent they were held liable for SNMP’s
claims, the U.S. Debtors would be entitled to contribution from the EMEA Debtors. The
Bankruptcy Court granted the impleader motion and the U.S. Debtors served their thirdparty complaint. The EMEA Debtors filed a motion to dismiss in November 2015. On
February 1, 2016, the Bankruptcy Court denied the motion to dismiss as premature.
After the decision was rendered on the motion to dismiss, the EMEA Debtors
filed their motion for judgment on the pleadings. The findings of this decision that the
U.S. debtors’ contribution claim is barred by the settlement agreement and release is
the focus of this appeal taken on May 16, 2016.
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Both parties agree that mediation would not be a worthwhile exercise because
the issues involved relate to a legal determination of a complete bar to liability and the
amount of any potential liability for contribution has not yet been determined, making the
basis for negotiation difficult to quantify.
THEREFORE, IT IS RECOMMENDED that, pursuant to paragraph 2(a)
Procedures to Govern Mediation of Appeals from the United States Bankruptcy Court
for this District and 28 U.S.C. § 636(b), this matter be withdrawn from the mandatory
referral for mediation and proceed through the appellate process of this Court. In light
of the parties’ mutual request, no objections to this Recommendation pursuant to 28
U.S.C. § 636(b)(1)(B), FED. R. CIV. P. 72(a) and D. DEL. LR 72.1 are expected to be
filed.
Local counsel are obligated to inform out-of-state counsel of this Order.
/s/ Mary Pat Thynge
UNITED STATES MAGISTRATE JUDGE

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