United Steel

Court File No. 37284 IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO) B E T W E E N: UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION, USW LOCAL 8782 and USW LOCAL 1005 Applicants (Appellants) - and - U. S. STEEL CANADA INC., UNITED STATES STEEL CORPORATION, HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO AND THE SUPERINTENDENT OF FINANCIAL SERVICES (ONTARIO), and REPRESENTATIVE COUNSEL TO THE NON-USW ACTIVE AND RETIRED EMPLOYEES OF U. S. STEEL CANADA INC. Respondents (Respondents) MEMORANDUM OF ARGUMENT OF THE RESPONDENT, UNITED STATES STEEL CORPORATION (Pursuant to Rule 27 of the Rules of the Supreme Court of Canada) BLAKE, CASSELS & GRAYDON LLP Barristers & Solicitors 199 Bay Street, Suite 4000 Toronto, ON M5L 1A9 Michael Barrack LSUC #21941W Email: [email protected] Jeff Galway LSUC #28423P Email: [email protected] Max Shapiro LSUC #60602U Email: [email protected] John Mather LSUC #63766O Email: [email protected] Tel: 416-863-2400 Fax: 416-863-2653 Lawyers for the Respondent, United States Steel Corporation ORIGINAL TO: ROGER BILODEAU, Q.C. Registrar of the Supreme Court of Canada Supreme Court of Canada 301 Wellington Street Ottawa, ON K1A 0J1 COPIES TO: Paliare Roland Rosenberg Rothstein LLP McCarthy Tétrault LLP 155 Wellington Street West, 35th Floor Toronto Dominion Bank Tower Toronto, ON M5V 3H1 66 Wellington Street West, Suite 5300 Toronto, ON M5K 1E6 Gordon Capern LSUC #32169H Tel: 416-646-4311 Paul Steep Fax: 416-646-4301 Tel: 416-601-7998 [email protected] Fax: 416-868-0673 Email: [email protected] Kristian Borg-Olivier LSUC #53041R Tel: 416-646-7490 Sharon Kour Fax: 416-646-4301 Tel: 416-601-8305 [email protected] Fax: 416-868-0673 Email: [email protected] Denise Cooney LSUC #64358R [email protected] Lawyers for Respondent, Tel: 416-646-7122 U. S. Steel Canada Inc. Fax: 416-646-4301 Lawyers for the Applicants, United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW), agents for the Applicant USW Local 8782 Inch Hammond Professional Corporation Conway Baxter Wilson LLP/s.r.l. 500-One King Street West 401-1111 Prince of Wales Drive Hamilton, ON L8P 4X8 Ottawa, ON K2C 3T2 Sharon L.C. White Colin S. Baxter Email: [email protected] Tel: 613-288-0149 Tel: 905-525-4481 Fax: 613-688-0271 Fax: 905-525-0031 [email protected] Lawyers for the Applicant, Ottawa Agent for the Applicants USW Local 1005 Goodmans LLP Koskie Minsky LLP Bay Adelaide Centre 20 Queen Street West 333 Bay Street, Suite 3400 Suite 900 Toronto, ON M5H 2S7 Toronto, ON M5H 3R3 Alan Mark Andrew J. Hatnay Tel: 416-597-4264 Tel: 416-595-2083 Fax: 416-979-1234 Fax: 416-204-2872 Email: [email protected] Email: [email protected] Tamryn Jacobson Barbara Walancik Tel: 416-597-4293 Tel: 416-542-6288 Fax: 416-979-1234 Fax: 416-204-2906 Email: [email protected] Email: [email protected] Lawyers for the Respondent, Lawyers for the Respondent, Her Majesty the Queen in Right of Ontario Representative Counsel to the non-USW and the Superintendent of Financial Services active and retired employees of U.S. Steel (Ontario) Canada Inc. - i - TABLE OF CONTENTS CONTENT PAGE PART I - OVERVIEW AND STATEMENT OF FACTS......................................................... 1 PART II - QUESTIONS IN ISSUE ......................................................................................... 10 PART III - STATEMENT OF ARGUMENT .......................................................................... 11 A. The Status of Equitable Subordination is Clear ........................................................... 11 B. There is No Confusion Regarding the Power of Courts Under the CCAA vs. BIA ............................................................................................ 17 PART IV - SUBMISSIONS AS TO COSTS ........................................................................... 19 PART V - ORDER SOUGHT ................................................................................................. 19 PART VI - TABLE OF AUTHORITIES PART VII - RELEVANT STATUTES Court File No. 37284 IN THE SUPREME COURT OF CANADA (ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO) B E T W E E N: UNITED STEEL, PAPER AND FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION, USW LOCAL 8782 and USW LOCAL 1005 Applicants (Appellants) - and - U. S. STEEL CANADA INC., UNITED STATES STEEL CORPORATION, HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO AND THE SUPERINTENDENT OF FINANCIAL SERVICES (ONTARIO), and REPRESENTATIVE COUNSEL TO THE NON-USW ACTIVE AND RETIRED EMPLOYEES OF U. S. STEEL CANADA INC. Respondents (Respondents) MEMORANDUM OF ARGUMENT OF THE RESPONDENT, UNITED STATES STEEL CORPORATION (Pursuant to Rule 27 of the Rules of the Supreme Court of Canada) PART I - OVERVIEW AND STATEMENT OF FACTS Overview 1. This application for leave to appeal arises from the Order of Mr. Justice Wilton-Siegel of the Ontario Superior Court (the “CCAA Judge”) in the context of proceedings under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (“CCAA”), by U. S. Steel Canada Inc. (“USSC”) in which the CCAA Judge determined that, as a matter of statutory interpretation, the CCAA does not grant a court authority to apply the doctrine of equitable subordination. The Court of Appeal for Ontario unanimously agreed with that determination, though for different reasons, and dismissed an appeal from that Order. The Applicants (together, the “Union”) seek - 2 - leave to appeal that decision. The proposed issues raised by the Applicants, however, do not raise matters of such public importance as to warrant an appeal to this Court. 2. Equitable subordination is a doctrine that is applied in American bankruptcy law pursuant to section 510 of the U.S. Bankruptcy Code. It proceeds on the basis that it is equitable to subordinate in whole or in part an otherwise valid debt claim based on some form of inequitable conduct on the part of a creditor which has resulted in loss to the other creditors of a debtor corporation generally, or that has conferred an unfair advantage on the creditor. 11 U.S. Code § 510 Reasons for Decision of the CCAA Judge dated August 13, 2015 (“Reasons”) at para. 40, Application Record (“AR”) Tab 2, p. 16 3. Nowhere in the CCAA is there authority, express or implied, to apply the doctrine of equitable subordination. Moreover, equitable subordination does not further the remedial purpose of the CCAA, namely avoiding the social and economic losses resulting from liquidation of an insolvent company. 4. No Canadian court in a CCAA proceeding has ever subordinated an otherwise valid debt claim on the basis of the doctrine of equitable subordination. Facts 5. In the underlying proceeding, USSC was granted protection under the CCAA pursuant to an initial order of the Ontario Superior Court of Justice (Commercial List) dated September 16, 2014 (the “Initial Order”). USSC is an integrated steel manufacturer that conducts most of its - 3 - business from two steel plants in Ontario. It has been an indirect wholly-owned subsidiary of United States Steel Corporation (“USS”) since it was acquired by USS in 2007. Second and Restated Initial Order dated November 26, 2014 (“Initial Order”) at para. 2, AR Tab 9, p. 105 Seventh Report of the Monitor dated March 9, 2015 (“Seventh Report”) at paras. 9, 18-19, AR Tab 10, pp. 133-134 6. The Initial Order appointed Ernst & Young Inc. as monitor of USSC (the “Monitor”), and set out an expedited procedure for motions and specified that any party wishing to object to the relief sought must serve responding motion material or a notice stating the grounds for such objection (a “Notice of Objection”). Initial Order at paras. 29, 55-57, AR Tab 9, pp. 116, 126 7. On November 13, 2014, the court granted a Claims Process Order setting out the procedure for filing proofs of claim, the Monitor’s role in review of claims, and the procedure for the resolution of claims. Claims Process Order dated November 13, 2014, AR Tab 15, p. 246 8. The Claims Process Order set out a specific procedure for the review and determination of the claims of USSC’s indirect parent company, USS, and USS’ affiliates. While most other claims are determined by the Monitor, the Claims Process Order provided that claims of USS and its affiliates would be determined by the court. Claims Process Order dated November 13, 2014 at paras. 20-28, AR Tab 15, pp. 260-263 - 4 - 9. In accordance with the Claims Process Order, USS and its affiliates filed proofs of claim against USSC with the Monitor (the “USS Claims”). The USS Claims included unsecured claims totalling approximately C$1.8 billion and US$124 million, and secured claims totaling approximately US$122 million. Seventh Monitor Report at paras. 2, 35, AR Tab 10, pp. 131, 137-138 10. The Monitor reviewed USS’ proofs of claim and recommended that the USS Claims be approved. USS moved for court approval of the USS Claims.1 Seventh Monitor Report at para. 17, AR Tab 10, p. 134 USS Notice of Motion dated March 13, 2015, AR Tab 16, p. 287 11. Four parties served Notices of Objection to USS’ motion (together, the “Objectors”): (i) the Union, (ii) the Province of Ontario and the Superintendent of Financial Services (the “Province”), (iii) representative counsel on behalf of the non-USW active salaried employees and retirees of USSC (“Representative Counsel”), and (iv) Robert and Sharon Milbourne (the “Milbourne Objectors”). Notice of Objection of the Union dated April 14, 2015, AR Tab 14, p. 208 Notice of Objection of the Province dated April 14, 2015, AR Tab 17, p. 292 1 Contrary to what is stated at paragraph 3 of the Applicants’ Memorandum of Argument, there is no basis, and no authority cited, for the assertion that “many of the Union’s members risk loss of their pensions, and other post- employment benefits if the USS Claims are accepted as proven claims pursuant to the Claims Process Order.” As indicated at note 3 of the Applicants’ Memorandum, the USS Claims have already been accepted by the CCAA Judge.

Load more