A group of disabled former Nortel employees who saw their benefits slashed after the company’s demise have filed a lawsuit seeking $60-million from the two trust companies charged with administering the onetime telecommunications giant’s health fund.
It’s the latest move in the long fight waged by pensioners left out in the cold after the company collapsed, some stripped of medical benefits as they cope with debilitating diseases.
The lawsuit, filed in Ontario Superior Court by Toronto lawyer Joel Rochon, seeks class-action status on behalf of all Nortel pensioners. It alleges the Canadian branch of Chicago-based Northern Trust Co. and The Royal Trust Co. (part of Royal Bank of Canada) of “acting fraudulently” and “knowingly, intentionally, recklessly and willfully” breached their “fiduciary duties” by leaving Nortel’s health and welfare trust “significantly underfunded.”
None of the lawsuit allegations have been proven in court. Northern Trust took over administering the fund from the Royal Trust in 2005.
Northern Trust issued a statement by e-mail on Tuesday denying the allegations: “Given the extensive judicial oversight, review and approval, there is no basis for this action and we will defend against this litigation vigorously.”
Royal Bank of Canada declined to comment.
The lawsuit alleges the two trust companies wrongly allowed Nortel to remove $32-million from the trust to cover certain employee benefits it was supposed to pay for itself. Plus, the lawsuit alleges, the trust companies allowed Nortel to make contributions to the trust in the form of an “IOU,” rather than cash, amounting to another $28-million shortfall.
The lawsuit claims the shortcomings only came to light long after Nortel went into court-protection from its creditors in 2009. In 2010, Nortel settled the benefits issue with its pensioners, in return for a limited extension of certain benefits. About 40 people on long-term disability challenged this deal, but efforts to appeal it to higher courts failed.
Among those who support the lawsuit is Greg McAvoy, 59, who worked for Nortel in Calgary as a wireless manager until his multiple sclerosis forced him to stop. He said he was stunned to learn in 2009 his benefits were being slashed.
“We were just totally flabbergasted that this would happen,” he said. “I worked for a company like Nortel, that was in existence for over 100 years.”