Chapter 11 : Bankruptcy Case No. 09-10138(KG) Nortel Networks Inc., Et Al., : Jointly Administered : Debtors

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

In re : Chapter 11 : Bankruptcy Case No. 09-10138(KG) Nortel Networks Inc., et al., : Jointly Administered : Debtors. : : : Nortel Networks Inc., et al., : Appeals from the Bankruptcy Court : Civil Action No. 15-624 (LPS) Appellants and : Civil Action No. 15-586 (LPS) Cross-Appellees, : Civil Action No. 15-622 (LPS) : Civil Action No. 15-623 (LPS) v. : Civil Action No. 15-627 (LPS) : Civil Action No. 15-628 (LPS) Ernst & Young Inc., as Monitor and Foreign : Civil Action No. 15-635 (LPS) Representative of the Canadian Debtors, : Civil Action No. 15-636 (LPS) et al., : Civil Action No. 15-699 (LPS) : Civil Action No. 15-196 (LPS) Appellees and : Civil Action No. 15-197 (LPS) Cross-Appellants. : CONSOLIDATED APPEALS :

REPLY AND CROSS-APPEAL RESPONSE BRIEF OF APPELLANT STEPHEN TAYLOR, CONFLICTS ADMINISTRATOR FOR NORTEL NETWORKS S.A. (IN ADMINISTRATION)

SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Robert A. Weber 920 North King Street Wilmington, Delaware 19899-0636

- and -

George A. Zimmerman Susan L. Saltzstein Four Times Square New York, New York 10036-6522

Attorneys for Appellant Stephen Taylor, Conflicts Administrator for Nortel Networks S.A. (In Administration)

TABLE OF CONTENTS

PRELIMINARY STATEMENT ...... 1

ARGUMENT ...... 3

I. APPELLEES FAIL TO REBUT—AND IN MOST INSTANCES, FAIL TO ADDRESS—NNSA'S ARGUMENTS FOR REVERSAL...... 3

A. The Bankruptcy Court Failed To Value NNSA's Assets...... 3

B. MPR Violates The Versailles Commercial Court Order...... 7

II. THE APPELLEES FAIL TO DISTINGUISH MPR FROM SUBSTANTIVE CONSOLIDATION...... 8

III. THE COURT LACKS AUTHORITY TO IMPLEMENT MPR...... 10

A. MPR Exceeds The Court's Authority Under Section 105...... 10

B. Appellants' Due Process Rights Were Violated Because Appellants Never Had The Opportunity To Challenge MPR Below...... 14

IV. NNSA SHOULD NOT BE DEEMED TO HAVE WAIVED ARGUMENTS...... 16

V. THE BANKRUPTCY COURT ERRED BY CONDUCTING A JOINT TRIAL WITH A FOREIGN COURT...... 19

VI. CROSS APPEALS ...... 22

A. NNSA Does Not Oppose The Joint Administrators' Cross-Appeal...... 22

B. The Monitor's Cross-Appeal Should Be Denied...... 22

C. The CCC's Cross-Appeal Should Be Denied...... 24

CONCLUSION ...... 25

TABLE OF AUTHORITIES

Cases Page(s)

Board of Education of Hudson City School District v. Sargeant, Webster, Crenshaw & Folley, 539 N.Y.S.2d 814 (App. Div. 1989) ...... 18

Boughner v. Secretary of Health, Education & Welfare, 572 F.2d 976 (3d Cir. 1978) ...... 18

Carter v. Albert Einstein Medical Center, 804 F.2d 805 (3d Cir. 1986) ...... 18

Downey v. Ecore International Inc., [2012] ONCA 480 (Can.) ...... 23

Dunbar v. Triangle Lumber & Supply Co., 816 F.2d 126 (3d Cir. 1987) ...... 18

Ermini v. Vittori, 758 F.3d 153 (2d Cir. 2014) ...... 6

Freifield v. Hennessy, 353 F.2d 97 (3d Cir. 1965) ...... 19

Glover v. City of Wilmington, 966 F. Supp. 2d 417 (D. Del. 2013) ...... 4, 11

In re BH & P, Inc., 949 F.2d 1300 (3d Cir. 1991) ...... 18

In re BH & P, Inc., 119 B.R. 35 (D.N.J. 1990) ...... 18

In re Cajun Electric Power Cooperative, Inc., 119 F.3d 349 (5th Cir. 1997) ...... 13

In re Combustion Engineering Inc., 391 F.3d 190 (3d Cir. 2004) ...... 14

In re Complaint of Bankers Trust Co., 752 F.2d 874 (3d Cir. 1984) ...... 16

In re Federal-Mogul Global, Inc., No. 01-10578 AMW, 2002 WL 34946156 (Bankr. D. Del. Feb. 7, 2002) ...... 21

In re Ionica PLC, 241 B.R. 829 (Bankr. S.D.N.Y. 1999) ...... 20

In re LTV Steel Co., 285 B.R. 259 (Bankr. N.D. Ohio 2002) ...... 4, 16

In re Morristown & Erie Railroad Co., 885 F.2d 98 (3d Cir. 1989) ...... 10

In re Motors Liquidation Co., 430 B.R. 65 (S.D.N.Y. 2010) ...... 13

In re Nortel Networks Inc., 737 F.3d 265 (3d Cir. 2013) ...... 19

In re Owens Corning, 419 F.3d 195 (3d Cir. 2005) ...... 6, 9, 11

Johnson v. Zerbst, 304 U.S. 458 (1938) ...... 16

Law v. Siegel, 134 S. Ct. 1188 (2014) ...... 10, 12

Lukens Steel Co. v. United Steelworkers of America, 989 F.2d 668 (3d Cir. 1993) ...... 22

Martin v. Catholic Diocese of Wilmington, Inc. (In re Catholic Diocese of Wilmington, Inc.), 484 B.R. 629 (D. Del. 2012) ...... 10

Maxwell Communication Corp. plc v. Societe Generale (In re Maxwell Communication Corp. plc), 93 F.3d 1036 (2d Cir. 1996) ...... 20

Mission Iowa Wind Co. v. Enron Corp. (In re Enron Corp.), 291 B.R. 39 (S.D.N.Y. 2003) ...... 4, 5, 11

Mullane v. Central Hanover Bank & Trust, Co., 339 U.S. 306 (1950) ...... 15

Official Committee of Unsecured Creditors of Cybergenics Corp. v. Chinery, 330 F.3d 548 (3d Cir. 2003) ...... 14

Official Committee of Unsecured Creditors v. Transpacific Corp. Ltd. (In re Commodore International, Ltd.), 242 B.R. 243 (Bankr. S.D.N.Y. 1999), aff'd, No. 00CIV.1679(SAS), 2000 WL 977681 (S.D.N.Y. July 17, 2000) ...... 20

Pension Benefit Guaranty Corp. v. Braniff Airways, Inc. (In re Braniff Airways, Inc.), 700 F.2d 935 (5th Cir. 1983)...... 13

iii

Philadelphia Gear Corp. v. Philadelphia Gear de Mexico, S.A., 44 F.3d 187 (3d Cir. 1994) ...... 8

Pope v. Swanson, No. 07-652-GMS, 2009 WL 2507928 (D. Del. Aug. 17, 2009) ...... 4, 11

Remington Rand Corp.-Delaware v. Business System Inc., 830 F.2d 1260 (3d Cir. 1987) ...... 23, 24

Rogin v. Bensalem Township, 616 F.2d 680 (3d Cir. 1980) ...... 14, 16

Sattva Capital Corp. v. Creston Moly Corp., [2014] S.C.R. 633 (Can.) ...... 22, 23

Schroeder v. New Century Liquidating Trust (In re New Century TRS Holdings, Inc.), 407 B.R. 576 (D. Del. 2009) ...... 9

Stonington Partners, Inc. v. Lernout & Hauspie Speech Products N.V., 310 F.3d 118 (3d Cir. 2002) ...... 20

T. Copeland & Sons v. SLM International, Inc. (In re SLM International, Inc.), 248 B.R. 240 (D. Del. 2000) ...... 16

Tacynec v. City of Philadelphia, 687 F.2d 793 (3d Cir. 1982) ...... 19

United States v. Pepperman, 976 F.2d 123 (3d Cir. 1992) ...... 10

Weinman v. City of Pueblo (In re Adam Aircraft Industries, Inc.), No. 09-1481 MER, 2012 WL 993477 (Bankr. D. Colo. Mar. 23, 2012), aff'd in relevant part, 2013 WL 773044 (D. Colo. Feb. 28, 2013) ...... 4, 5

Statutes

11 U.S.C. § 105 ...... passim

11 U.S.C. § 541 ...... 11, 12

11 U.S.C. § 552 ...... 11

11 U.S.C. § 726 ...... 12

11 U.S.C. § 1129 ...... 12, 13

11 U.S.C. § 1525 ...... 20

11 U.S.C. § 1527 ...... 20

Other Authorities

Restatement (2d) of Conflict of Laws § 98 (1971) ...... 8

PRELIMINARY STATEMENT

NNSA is a separate Debtor estate. It is the only single-debtor, single-estate party to these appeals, and no longer aligned with or represented by the EMEA Debtor group.

Through its Conflicts Administrator, NNSA asserts independent, unique appellate arguments, including the Bankruptcy Court's failures to identify and value NNSA's sold assets and to honor a critical French court order that imposed conditions upon such sales, in addition to arguments shared among Appellants. NNSA also challenges the Bankruptcy Court's conduct of a joint trial with a foreign court, an argument that was presented to the Third Circuit and deferred by that

Court until the joint trial was completed.

The Bankruptcy Court intended MPR to be an equitable result,1 but MPR is emphatically not equitable to NNSA. As detailed in NNSA's opening brief, NNSA was one of a small group of Nortel companies that created Nortel's patent and intellectual property portfolio that sold for more than $4 billion. Op. Br. at 7.2 NNSA also held interests in other specific assets that were sold, such as the NNSA-dominated GSM business that sold for more than $100 million. Id. In addition, NNSA terminated its exclusive license to Nortel intellectual property to facilitate the Asset Sales, creating substantial value. See Allocation Op. at 85.

MPR is inequitable to NNSA because it wholly disregards NNSA's interests in and contributions to the assets sold to generate the Sales Proceeds. Rather than adopt any recognized valuation method, the Bankruptcy Court allocated value based upon the size of

NNSA's primary claims base, an arbitrary data point entirely detached from NNSA's interests in

1 See, e.g., Allocation Op. at 60 (explaining that court's mission was to determine "allocation approach which leads to an equitable result,"), 99 ("[t]he Court has toiled mightily to reach a correct and equitable result").

2 The Conflicts Administrator responds herein to the briefs submitted by each of the Appellees. References to "Op. Br." refer to the Conflicts Administrator's Opening Brief. Capitalized terms not otherwise defined herein have the meanings ascribed to them in the Conflicts Administrator's Opening Brief.

the assets. Indeed, based on available information, NNSA likely would receive only 25% -33% of the value of its assets sold in the Asset Sales3—far less than the recovery anticipated by most other parties.4 MPR's disparate treatment of NNSA is expressly acknowledged by the EMEA

Debtors5 and there is no dispute (as demonstrated by the absence of discussion in any Appellee brief), that NNSA is disproportionately hurt by MPR.

The inequity of MPR is exacerbated because it punishes creditors of well-run debtors while rewarding similarly situated creditors of debtors that held cash before bankruptcy.

NNSA's primary claims base6 is comparatively modest, a reflection of the undisputed fact that

NNSA was largely current with its creditors when the bankruptcy commenced in 2009. MPR punishes NNSA and its creditors for this efficiency, rewards debtors that left creditors unpaid, and rewards debtors, like NNUK, that by happenstance were incorporated in a jurisdiction whose laws impose statutory pension-related liabilities. See Op. Br. at 2, 9 & n.4.

The inequities of the unprecedented MPR valuation method are not merely economic in nature, but also extend to the flawed judicial process that led to the adoption of

MPR "by default" long after the conclusion of trial. Several parties at trial argued for global

3 NNSA estimates an approximate $145 million allocation under MPR, a far cry from the $431 million to $665 million that EMEA's experts calculated as the value of NNSA's assets sold in the Asset Sales. Op. Br. at 13-14.

4 CCC Br. at 4. For the EMEA Debtors, and in particular NNUK, their expected recoveries under MPR are a windfall because they will substantially exceed the amounts demanded by EMEA at trial. Op. Br. at 2.

5 See EMEA Objection and Response to Motion for Reconsideration [D.I. 15741] at ¶ 20 ("In reality, the creditors of several EMEA debtors, including NNSA and NNIR, residual profit entities ("RPEs") that made substantial contributions to the creation of Nortel's intellectual property, are likely to receive a distribution under the modified pro rata approach that will be far below what they would have expected under nearly every other allocation methodology presented by the parties at trial. NNSA's creditors are also likely to receive a distribution well below any return that the U.S. general unsecured creditors are likely to receive.") (emphasis added).

6 NNSA's secondary liabilities consist of "control group"-type claims asserted by the United Kingdom pension authorities for alleged statutory underfunding of the Nortel Networks UK pension plans. Those secondary liabilities potentially may dwarf NNSA's liabilities to its own creditors. However, MPR does not allocate Sales Proceeds to a debtor on account of such secondary liabilities. Allocation Op. at 112.

substantive consolidation (referred to as "pure" pro rata) as an allocation theory, but no party below argued for (or even articulated) MPR. As a result, NNSA had no opportunity to contest the merits of MPR or to introduce evidence in rebuttal. Even if this Court finds that "pure" pro rata gave notice of MPR, NNSA was denied the opportunity to contest that theory at trial because NNSA was jointly represented with the EMEA Debtors at the time, and conflicting interests were ignored deliberately, such that EMEA's counsel "took no position[,]" to NNSA's detriment.7

For the reasons set forth below and in NNSA's opening brief, and the briefs of other Appellants, the Allocation Rulings should be reversed.

ARGUMENT

I. APPELLEES FAIL TO REBUT—AND IN MOST INSTANCES, FAIL TO ADDRESS—NNSA'S ARGUMENTS FOR REVERSAL.

A. The Bankruptcy Court Failed To Value NNSA's Assets.

As established in NNSA's8 opening brief, the unrebutted record evidence identified specific NNSA assets that were sold as part of the Asset Sales. In particular, NNSA was (i) responsible for approximately 4% of the patents sold in the Residual Sale, (ii) Nortel's sole source of products and technology for the Global System for Mobile Communications

("GSM") business, (iii) a Selling Debtor in each other operating business Asset Sales, and (iv) the holder of "exclusive rights to practice, sublicense and enforce NN Technology, including patents, in its territory." Op. Br. at 7-8; Allocation Op. at 80. As a result, NNSA held "an

7 The EMEA Debtors now criticize their own failure to act for NNSA when they argue that NNSA waived arguments against MPR by not raising them at trial. See Part IV infra.

8 Nortel Networks S.A. (in administration) ("NNSA") is represented on appeal by Stephen Taylor as Conflicts Administrator for NNSA and by his undersigned counsel.

economic and beneficial ownership interest in Nortel's assets and thereby [is] entitled to an equitable allocation of the Sales Proceeds[.]" Allocation Op. at 74, 80.

The Bankruptcy Court had a duty to value NNSA's ownership rights and interests in these valuable assets and allocate their value to NNSA's estate. See Mission Iowa Wind Co. v.

Enron Corp. (In re Enron Corp.), 291 B.R. 39, 43 (S.D.N.Y. 2003) (recognizing "the duty of bankruptcy courts to preserve the integrity of separate estates and allocate value to the estate that owns the asset sold, not its parent"); In re LTV Steel Co., 285 B.R. 259, 267-68 (Bankr. N.D.

Ohio 2002) ("Courts allocate sale proceeds between individual assets based upon each asset's portion of the total value of all of the assets. . . . Before determining each asset's portion of the cash proceeds, each asset must be valued."); Weinman v. City of Pueblo (In re Adam Aircraft

Indus., Inc.), No. 09-1481 MER, 2012 WL 993477, at *5 (Bankr. D. Colo. Mar. 23, 2012), aff'd in relevant part, 2013 WL 773044 (D. Colo. Feb. 28, 2013).

It is undisputed that no such valuation occurred and that MPR is "not ownership based." Reconsideration Op. [D.I. 15830] at 4. Appellees largely ignore NNSA's argument, and thus are deemed to concede the point.9 The Monitor alone responds, arguing that NNSA's authorities are irrelevant because the allocations concerned application of sale proceeds to a secured creditor's lien. See Monitor's Br. ("Mon. Br.") at 26-27. This is a factual distinction without a difference; indeed, the Monitor offers no explanation of why the underlying fundamental principle should not apply here.

The Monitor also argues that the Bankruptcy Court's duty to value assets for allocation purposes did not apply because the Bankruptcy Court allegedly found that the Sales

9 See, e.g., Glover v. City of Wilmington, 966 F. Supp. 2d 417, 428 (D. Del. 2013) ("[C]ounsel's choice not to respond to the [] argument was . . . the essence of a waiver."); Pope v. Swanson, No. 07-652-GMS, 2009 WL 2507928, at *2 (D. Del. Aug. 17, 2009).

Proceeds were derived solely from "shared assets." Id. The Monitor's premise is incorrect, however, because the Bankruptcy Court made no such sweeping finding. On the contrary, the

Bankruptcy Court rejected the Monitor's heavy-handed trial theory that the Canadian Debtors owned all Nortel intellectual property based upon bare legal title alone. The Court explained that pursuant to the MRDA, ownership of Nortel's intellectual property was divided between NNSA and the four other RPEs, and was not owned solely by the Canadian Debtors. See Allocation Op. at 74, 80, 85. The Court further ruled that each RPE, including NNSA, owned individual, exclusive license rights to Nortel IP in its geographical territory, and was entitled "to be paid fair market value for its exclusive license in an insolvency [proceeding]." Allocation Op. at 85

(emphasis added). The Monitor's contentions to the contrary distort and ignore the plain language of the Opinion. Nor does the Monitor address the fact that MPR manifestly does not represent "fair market value" of these license rights under any judicially recognized valuation theory. See In re Enron Corp., 291 B.R. 39 at 43.10

Importantly, even if the Court had made the "shared assets" finding that the

Monitor posits—and, to be clear, it did not—commingled asset ownership alone does not authorize a bankruptcy court to pool and then reallocate debtor assets instead of identifying and valuing them, as the Bankruptcy Court did below in ordering MPR:

[C]ommingling justifies consolidation only when separately accounting for the assets and liabilities of the distinct entities will reduce the recovery of every creditor—that is, when every creditor will benefit from the consolidation. Moreover, the benefit to creditors should be from cost savings that make assets

10 The Monitor asserts that In re Adam Aircraft is distinguishable because that court was identifying "specific, readily identifiable assets," but that assertion fails. In fact, Adam Aircraft supports NNSA's argument: "The record in the case is at times confusing and incomplete . . . Thus, valuation of the assets for purposes of allocating the Sales Proceeds is necessarily imperfect, but it falls to this Court to make the best determination it can in light of these difficulties." In re Adam Aircraft, 2012 WL 993477 at *2. Adam Aircraft makes clear that even in challenging cases, the Bankruptcy Court cannot abdicate its affirmative duty to value assets and choose a different approach by default.

available rather than from the shifting of assets to benefit one group of creditors at the expense of another. Mere benefit to some creditors, or administrative benefit to the Court, falls far short.

In re Owens Corning, 419 F.3d 195, 214 (3d Cir. 2005).11 As the Court explained, "[n]either the impossibility of perfection in untangling the affairs of the entities nor the likelihood of some inaccuracies in efforts to do so is sufficient to justify consolidation." Id. On remand, the Third

Circuit encouraged the district court to "properly order and oversee an accounting process that would sufficiently account for the interest and royalty payments owed among the OCD group of companies for purposes of evaluating intercompany claims—dealing with inaccuracies and difficulties as they arise and not in hypothetical abstractions." Id. at 215. Disentangling "shared" assets and intercompany obligations in the face of "imperfection in intercompany accounting" is the usual assignment for bankruptcy courts overseeing chapter 11 cases. Id.12 Indeed, the Joint

Administrators have recently acknowledged in NNSA's French insolvency proceedings that the

"nature and extent of " NNSA's rights in the assets and resulting proceeds can be "definitively decided by" a North American court. See Joint Administrators' Brief to the Versailles

Commercial Court at ¶¶ 240-41, 263-98 (Jan. 21, 2016) (excerpt attached as Appendix A).13

Lastly, the Monitor argues that EMEA's allocation approach failed to allocate value to NNSA's assets. Mon. Br. at 29 n.137. This contention is belied by the record. EMEA's

11 The Bankruptcy Court recognized that substantive consolidation could not occur in these cases under Owens Corning, but, as discussed in Section II, incorrectly concluded that MPR was different from substantive consolidation. As a result, the Bankruptcy Court made none of the predicate findings that would be required if the Court had intended to rely upon commingling to support MPR.

12 Similar arguments from other Appellees fail for the same reasons. See Joint Administrators' Br. ("J.A. Br.") at 15-18; UKPC Br. at 9-10; CCC Br. at 2, 18.

13 The Court may take judicial notice of a court filing made by a party to this appeal. See Ermini v. Vittori, 758 F.3d 153, 156 n.2 (2d Cir. 2014) (taking judicial notice on appeal of a foreign court decision under Federal Rule of Evidence 201).

expert reports specifically value NNSA's assets at $431 million to $665 million, and include separate charts that provide entity-specific detail for each EMEA Debtor under the contribution and license theories. See Op. Br. at 13-14; Malackowski Report, TR 00033 at 7, Huffard Report,

TR00030 Chart 23.1.14

B. MPR Violates The Versailles Commercial Court Order.

NNSA is a debtor in two foreign proceedings—a foreign main proceeding in the

United Kingdom, and a foreign secondary proceeding in Versailles, France. See Op. Br. at 4-5.

NNSA obtained permission from the French Court to accede to the IFSA, the post-bankruptcy agreement that facilitated the Nortel worldwide sales process.15 The French Court's permission was limited, however, by a requirement that offers for NNSA's assets must state the amounts that

NNSA would receive. See Op. Br. at 8 (quoting July 7, 2009 Order of the Versailles

Commercial Court and English translation) (the "Versailles Order"). MPR, an allocation formula adopted by the Bankruptcy Court after trial, is inconsistent with the Versailles Order. Id.

No Appellee disputes this point.16 Indeed, only a single Appellee (the Monitor) addresses the argument at all, and, tellingly, ignores the argument's merits. In a footnote, the

Monitor incorrectly asserts that NNSA failed to argue below that the Versailles Order "was relevant to allocation," resulting in a waiver of the argument. See Mon. Br. at 29 n.137. The

Monitor's contention should be rejected because the Versailles Order was before the Bankruptcy

14 Malackowski's license approach chart is recreated in the Joint Administrators' pre-trial brief. See J.A. Pre-Trial Br. at 67. Additionally, a chart valuing the assets of each EMEA debtor, including NNSA, under the contribution approach is included in the Joint Administrators' post-trial brief. J.A. Post-Trial Br. at 209.

15 See Declaration of Kevin Francis Lloyd in Opposition to Joint Motion for Entry of an Order Establishing an Allocation Protocol Pursuant to the Interim Funding and Settlement Agreement, and in Support of Cross- Motion to Compel Arbitration (the "Lloyd Declaration") at ¶ 42 [D.I. 5532].

16 Four Appellees (the EMEA Debtors, the Canadian Creditors Committee (the "CCC"), the UK Pension Claimants (the "UKPC"), and Wilmington Trust (the "WT")) concede the point by failing to address it in their responsive briefs. See supra n.9.

Court as part of the Allocation Trial and was entitled to recognition. Specifically, the Versailles

Order was filed with the Court as part of EMEA's pretrial submissions via the sworn declaration of EMEA's counsel. See Lloyd Declaration, Ex. A at 782-85 [D.I. 5532-5] (attaching Versailles

Order dated July 7, 2009 and English translation). The Versailles Order was entitled to comity in the Bankruptcy Court.17 See Restatement (2d) of Conflict of Laws § 98 (1971) ("A valid judgment rendered in a foreign nation after a fair trial in a contested proceeding will be recognized in the United States so far as the immediate parties and the underlying cause of action are concerned.") (emphasis added). See Op. Br. at 8. A formal motion to extend comity to a foreign court's order is not necessary in the Third Circuit. See Philadelphia Gear Corp. v.

Philadelphia Gear de Mexico, S.A., 44 F.3d 187, 192 (3d Cir. 1994). Accordingly, the Versailles

Order was entitled to recognition, and there is no issue of waiver.

II. THE APPELLEES FAIL TO DISTINGUISH MPR FROM SUBSTANTIVE CONSOLIDATION.

NNSA, along with each of the other Appellants, contends that MPR effects an impermissible substantive consolidation because it redistributes Sale Proceeds, in which each

Selling Debtor has specific rights, among all Debtor estates (including many that are not Selling

Debtors) based upon nothing more than the comparative magnitude of creditor claims. See Op.

Br. at 19-21; see also UCC Br. at 24-25, Bondholders Br. at 14-19, NNI Br. at 40-60, Trade

Claims Consortium Br. at 7-9, PBGC Br. at 10. In response, Appellees argue that substantive consolidation does not occur unless every known attribute of substantive consolidation is present, and, because MPR ostensibly lacks certain features, it cannot amount to substantive

17 In addition, as explained further in Section IV, NNSA lacked the capacity to waive arguments.

consolidation. See, e.g., J.A. Br. at 30-31; Mon. Br. at 33-34; UKPC Br. at 17-18; CCC Br. at

15.

The Third Circuit rejected Appellees' "checklist" argument in Owens Corning:

Too often the factors in a checklist fail to separate the unimportant from the important, or even to set out a standard to make the attempt . . . . This often results in rote following of a form containing factors where courts tally up and spit out a score without an eye on the principles that give the rationale for substantive consolidation (and why, as a result, it should so seldom be in play).

419 F.3d at 210. The critical attribute of substantive consolidation is its revaluation of creditor claims. See Op. Br. at 20-21. Thus, the relevant question is whether MPR results in "[t]he bad news for certain creditors [] that, instead of looking to assets of the subsidiary with whom they dealt, they now must share those assets with all creditors of all consolidated entities, raising the specter for some of a significant distribution diminution." In re Owens Corning, 419 F.3d at

206. MPR causes NNSA's creditors to share the proceeds of NNSA's assets with creditors of other Nortel entities, and the Monitor's attempts to justify MPR with the "checklist" argument should be rejected here just as in Owens Corning.18

Finally, Appellees contend that MPR is distinguishable from substantive consolidation because MPR does not cause increased competition for a consolidated pool of assets, and because creditor distributions are to be made on a Debtor-by-Debtor basis according to each Debtor's own process. See Mon. Br. at 34; UKPC Br. at 18-19; CCC Br. at 14-15.

Appellees again elevate form over substance because they fail to acknowledge that MPR's method of allocation inextricably controls all ultimate distributions. Specifically, each Debtor is

18 See also Schroeder v. New Century Liquidating Trust (In re New Century TRS Holdings, Inc.), 407 B.R. 576, 591 (D. Del. 2009) (rejecting proposed plan that offered variation of substantive consolidation with atypical features because plan caused "creditors [to] face increased competition for a consolidated pool of assets and a re-valued claim that is less precise than if the creditors were dealing with debtors individually. This is the 'rough justice' against which Owens Corning warns[.]").

capable of distributing to its creditors only the Sale Proceeds that it receives pursuant to MPR.

In order to apply MPR, one must first collect all Sale Proceeds—including those that belong to specific Debtor Estates—and re-allocate those Sale Proceeds among all Debtors. MPR thus bears the red flag of substantive consolidation because it results in the revaluation of creditor claims and increased competition among creditors for the same consolidated pool of assets.

III. THE COURT LACKS AUTHORITY TO IMPLEMENT MPR.

A. MPR Exceeds The Court's Authority Under Section 105.

The Bankruptcy Court relied on Bankruptcy Code §105(a) to adopt MPR. See

Allocation Op. at 98. Appellants, including NNSA, contend that Section 105(a) does not authorize such a result.

Appellees' response begins with a misstatement of the applicable scope of review.

The exercise of a bankruptcy court's power under Section 105 is a legal question reviewed de novo, not reviewed for abuse of discretion. See, e.g., United States v. Pepperman, 976 F.2d 123,

126 (3d Cir. 1992) (reviewing de novo bankruptcy court's exercise of equitable power under 11

U.S.C. § 105); Martin v. Catholic Diocese of Wilmington, Inc. (In re Catholic Diocese of

Wilmington, Inc.), 484 B.R. 629, 640 & n.12 (D. Del. 2012) (under de novo review, bankruptcy court exceeded authority under 11 U.S.C. § 105(a)). The Bankruptcy Court's adoption of MPR thus should be reviewed de novo.

Appellants contend that the Bankruptcy Court lacked authority under Section 105 to implement an allocation methodology that conflicts with other sections of the Bankruptcy

Code and impermissibly creates substantive rights. See, e.g., Law v. Siegel, 134 S. Ct. 1188,

1194 (2014) ("It is hornbook law that § 105(a) 'does not allow the bankruptcy court to override explicit mandates of other sections of the Bankruptcy Code.'") (citation omitted); In re

Morristown & Erie R.R. Co., 885 F.2d 98, 100 (3d Cir. 1989) ("[S]ection 105(a) is not a

substantive source of rights."). Appellants further contend that MPR is inconsistent with other provisions of the Bankruptcy Code, including sections 541 and 552. Section 541 provides that proceeds from a debtor's asset sale become property of that debtor's bankruptcy estate. See 11

U.S.C. § 541(a)(6). If those same assets are subject to a secured creditor's lien, Section 552(b)(1) provides that such lien attaches to the proceeds from the sale of those assets. Op. Br. at 10-11.

MPR is inconsistent with both sections because it eschews entirely the determination and valuation of each Debtor's property rights in the Sales Proceeds in favor of a claims-based allocation that ignores those rights.

The Monitor, UKPC and CCC argue that MPR is consistent with Section 541 because the Bankruptcy Court recognized the Debtors' property interests, but was unable to value them. See Mon. Br. at 25-28; UKPC Br. at 9; CCC Br. at 12 n.10. This argument is both illogical and reliant upon technicalities.19 As discussed above, it was error for the Court not to value each Debtor's assets, and Appellees' proffered justification of judicial inability to do so is neither accurate nor legally sufficient.20 See In re Owens Corning, 419 F.3d at 214 (rejecting commingling as basis for consolidation); In re Enron Corp., 291 B.R. 39 at 43. The UKPC additionally argues, without explanation, that the "creditors are now the 'owners' of the Sales

Proceeds . . . and their claims provide an appropriate proxy for that ownership." UKPC Br. at 9.

19 Appellees contend that Appellants' Section 541 arguments were waived, but cite no authority for their remarkable premise that parties must make arguments at trial in opposition to novel legal theories not actually litigated. NNSA disagrees with this premise for the obvious reason that lawyers generally are not prescient, the additional reasons stated in Section IV, infra, and because Section 541 was actually argued at trial. See, e.g., U.S. Interests Pre-Trial Brief [D.I. 13551] at 1-2; U.S. Debtors Post-Trial Br. [D.I. 14263] at 129 n.448.

20 EMEA similarly argues that the Bankruptcy Court appropriately recognized the U.S. Debtors' property interest in accordance with Section 541, but says nothing of NNSA's interests and therefore concedes the issue as to NNSA. J.A. Br. at 15-18; see Glover, 966 F. Supp. 2d at 428 ("[C]ounsel's choice not to respond to the [] argument was . . . the essence of a waiver."); Pope, 2009 WL 2507928, at *2 ("[T]he defendants['] failure to address Pope's arguments demonstrates that they concede [the point.]").

Even if that were true, MPR is still inconsistent with Section 541 because it fails to recognize creditors' interests in the property of their respective Debtor estates.

Appellants also contend that MPR conflicts with the absolute priority rule, codified at 11 U.S.C. §§ 726(a) and 1129(b)(2)(B)(ii), because MPR lacks a mechanism to ensure that Sales Proceeds arising from the sale of NNSA's specific property interests (identified in NNSA's opening brief and not disputed in this appeal) are not distributed to NNSA's shareholder, NNL, before NNSA's creditors are paid in full. Appellees argue that NNL will receive its allocation under MPR as a Debtor, not as NNSA's equity holder, see J.A. Br. at 35;

Mon. Br. at 24-25; UKPC Br. at 12; CCC Br. at 30; WT Br. at 6, but in fact, MPR makes no distinction regarding the capacity in which a Debtor receives Sales Proceeds. By ignoring each

Debtor's individual assets and interests, MPR fails entirely to ensure that proceeds from NNSA's property interests flow to its creditors before equity, as the Bankruptcy Code requires.

Appellees further argue that MPR cannot violate the absolute priority rule because it is technically not a bankruptcy plan. J.A. Br. at 34-35; Mon. Br. at 34-35; UKPC Br. at 12;

CCC Br. at 29-30. Of course MPR is not a plan; the question is not whether there is an actual violation of the absolute priority rule, but whether the Bankruptcy Court's invocation of

Section 105(a) to adopt MPR is inconsistent with the absolute priority rule. See Law, 134 S. Ct. at 1194. For the reasons outlined above, it is, and Appellees simply ignore that inconsistency.

Appellees also ignore MPR's inconsistency with Section 726(a), the Bankruptcy

Code's priority provision. MPR is inconsistent with Section 726(a) because it reallocates proceeds from NNSA's property to other Debtors rather than to NNSA and its creditors in the order of priority set forth in Section 726(a). These inconsistencies between MPR and the

Bankruptcy Code establish that MPR is an abuse of Section 105(a)'s equitable powers.

Appellants contend that MPR constitutes an improper sub rosa plan because it establishes the parameters of creditor recoveries without providing the creditor protections inherent in the chapter 11 plan process. See, e.g., Pension Benefit Guar. Corp. v. Braniff

Airways, Inc. (In re Braniff Airways, Inc.), 700 F.2d 935, 939-40 (5th Cir. 1983) (reversing approval of transaction that "had the practical effect of dictating some of the terms of any future reorganization plan" as an improper sub rosa plan). MPR limits creditor recoveries and dictates plan terms without a supporting disclosure statement (§ 1125), voting (§ 1126), or satisfaction of the best interest of creditors test (§ 1129(a)(7)). Even the Bankruptcy Court's Allocation Opinion recognizes that there will be little to do after MPR is complete other than to distribute the allocated Sales Proceeds to creditors. See Allocation Op. at 112.

In response, Appellees cite In re Cajun Electric Power Cooperative, Inc., 119

F.3d 349 (5th Cir. 1997) and In re Motors Liquidation Co., 430 B.R. 65 (S.D.N.Y. 2010), but those cases are distinguishable. Cajun Electric involved a small portion (approximately 10%) of the estate's assets, and, as a result, could not dictate either recoveries or plan terms. In re Cajun

Elec., 119 F.3d at 355. MPR, in contrast, allocates the proceeds from the sale of substantially all

Nortel businesses and intellectual property—the primary source of nearly all of NNSA's remaining assets—and necessarily will dictate overall recoveries and plan content. See

Allocation Op. at 112. Motors is inapposite because the sale documents provided that "there will be no distribution or allocation of any estate assets or sale proceeds to any creditors[.]" In re

Motors Liquidation Co., 430 B.R. at 85 (emphasis added). Motors recognizes that an allocation of assets outside of a Chapter 11 plan (as occurs under MPR) may constitute an improper sub rosa plan.

Appellees' attempt to defend the Bankruptcy Court's use of its equitable powers under Section 105 as a statutory "gap-filler" also fails. The Bankruptcy Court based its adoption of MPR solely on Section 105, but neither the Bankruptcy Court nor any Appellee has identified an applicable "gap" in other Code provisions. Compare Official Comm. of Unsecured Creditors of Cybergenics Corp. v. Chinery, 330 F.3d 548, 567-69 (3d Cir. 2003) (en banc) (using Section

105 as a gap filler to grant relief consistent with another Bankruptcy Code section, Section 544), with In re Combustion Eng'g Inc., 391 F.3d 190, 238 (3d Cir. 2004) (vacating injunction in favor of non-debtor third parties under §105(a) as inconsistent with §524(g)).

B. Appellants' Due Process Rights Were Violated Because Appellants Never Had The Opportunity To Challenge MPR Below.

NNSA and other Appellants contend that the Allocation Rulings' adoption of

MPR violated their due process rights because MPR was never proposed or litigated below, and thus no party had a meaningful ability to contest it. See Op. Br. at 24-25; see also NNI Br. at 58-

60. Under applicable Third Circuit law, due process requires: (1) adequate notice; (2) a neutral arbiter; (3) an opportunity to make an oral presentation; (4) a means of presenting evidence; (5) an opportunity to cross-examine witnesses or to respond to written evidence; (6) the right to be represented by counsel; and (7) a decision based on the record with a statement of reasons for the result. Rogin v. Bensalem Twp., 616 F.2d 680, 694 (3d Cir. 1980).

Multiple due process elements are lacking here. First, the parties were not provided adequate notice of the Bankruptcy Court's development of MPR.21 Constitutionally

21 The EMEA Debtors contend that that adequate notice was provided before trial of a claims-based allocation theory, providing the functional equivalent of notice of MPR. Their actions prove the reverse, however, since they only sought appointment of the Conflicts Administrator due to the conflict of interests affecting NNSA after the trial, when MPR appeared in the Bankruptcy Court's Allocation Ruling. Stated differently, if notice of "pure" pro rata was constitutionally sufficient to satisfy due process with respect to the adoption of MPR (and it plainly was not), the resulting conflict of interest vis-à-vis NNSA should have been acted on at that time, before trial, not pushed under the rug to NNSA's detriment. See Section IV, supra.

sufficient notice must be "reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Mullane v. Central Hanover Bank & Trust, Co., 339 U.S. 306, 314 (1950).

Appellees acknowledge that MPR itself was not proposed below. See J.A. Br. at 33; Mon. Br. at

37-38; CCC Br. at 25-27; UKPC Br. at 26-28. Appellees instead rely on arguments that some parties advocated for a "pure" pro rata approach,22 but that argument fails on its face, because

"pure" pro rata (also an inappropriate creditor-based approach23) is a radically different allocation theory from MPR. Under MPR, creditors of different estates will not receive a common dividend;24 instead, each Debtor will receive a lump-sum allocation based on the claims against it. In addition, because Debtors like NNSA are accountable to creditors with secondary claims for which MPR does not allow an allocation, creditors of those Debtors will be disproportionately harmed because all creditors will have to share in the smaller allocation.

Appellees do not contend that any party advocated for an approach that would produce these results below, and cannot establish that notice of MPR was constitutionally sufficient.

In addition, the Allocation Rulings do not satisfy the due process element of "a decision based on the record with a statement of reasons for the result." As described above,

MPR is a claims-based formula; at its core, it is the ratio of claims against one Debtor versus claims against all Debtors. MPR was developed and adopted on a judicial record that intentionally lacked evidence of the Nortel debtors' claims bases. As NNSA pointed out in its opening brief, the Bankruptcy Court specifically refused to permit the presentation of evidence

22 See CCC Br. at 25-27; UKPC Br. at 26-31; J.A. Br. at 31-33; WT Br. at 7-8.

23 See Section VI.C, infra discussing why the Court should reject the CCC's cross-appeal.

24 See Bazelon Report at TR00039 at 2.

concerning the Debtors' respective claims bases, see Op. Br. at 15, and acknowledged that MPR was simply a "default" methodology. Allocation Op. at 86. MPR violates due process because of the lack of evidence of the Debtors' respective claims bases. Rogin, 616 F.2d at 694.

Due process also includes a basic fairness component. See In re Complaint of

Bankers Trust Co., 752 F.2d 874, 890-91 (3d Cir. 1984). Courts generally decline to decide litigations using theories and models never presented or litigated by the parties. See In re LTV

Steel, 285 B.R. at 267 ("[I]t would be unfair to apply a model that has not been considered or argued by the parties.") MPR fails on this count as well, particularly in NNSA's case, where it stands to receive a mere $145 million despite evidence that its assets were worth $431 million to

$665 million. See supra n.3. Because the parties had no notice of such an inequitable allocation theory, the Allocation Rulings should be reversed.

IV. NNSA SHOULD NOT BE DEEMED TO HAVE WAIVED ARGUMENTS.

Appellees assert that Appellants have waived certain attacks on MPR.25 As noted above and in NNSA's opening brief, the concept of waiver cannot logically apply where the decision involves a court's post-trial development and adoption of a legal theory that was neither argued nor litigated.26 Waiver is the "intentional relinquishment of a known right[.]" See, e.g.,

T. Copeland & Sons v. SLM Int'l, Inc. (In re SLM Int'l, Inc.), 248 B.R. 240, 247 (D. Del. 2000)

(quoting Johnson v. Zerbst, 304 U.S. 458, 464 (1938)). No Appellant could have waived arguments in opposition to the as-yet-unarticulated MPR formula.27

25 See J.A. Br. at 15, n.21 (asserting that Appellants waived arguments based on Bankruptcy Code section 541); see also Mon. Br. at 25 n.123, 37; CCC Br. at 28; UKPC Br. at 28-29.

26 Due process and waiver are two sides of the same coin—if an issue has not been fully and fairly raised for adjudication, a party cannot be deemed to have waived arguments opposing that issue. See Rogin, supra.

27 In SLM Int'l, Judge Robinson further determined that the bankruptcy court should have examined the totality of the circumstances surrounding an alleged waiver. 248 B.R. at 248.

As to NNSA, the concept of waiver is problematic for a second, more troubling reason—when the EMEA Debtors argue that NNSA waived rights by failing to object to certain arguments at trial, and that due process was satisfied, they are in essence arguing that they waived NNSA's rights for it, because NNSA and the EMEA Debtors were part of a jointly- represented group.

When the Allocation Ruling was released in May 2015, the EMEA Debtors and their professionals disclosed that NNSA's interests regarding the Allocation Ruling had diverged from those of the other EMEA Debtors, warranting Mr. Taylor's immediate appointment.28 In particular, NNSA is severely harmed by MPR due to its much more modest claims base. NNSA could not appeal from the Allocation Ruling without both an independent administrator and separate counsel.

Incredibly, the EMEA Debtors now proclaim that the prospect of a claims-based allocation methodology was obvious and of record much earlier, as early as May 2013, and that they "took no position" regarding such an allocation theory at trial. See J.A. Br. at 12, 31. If the claims-based MPR caused a conflict of interest vis-à-vis NNSA of such import that Mr. Taylor's appointment was warranted, then so too did the supposed disclosure of a claims-based allocation theory before trial.29 Boiled down, the EMEA Debtors' argument is that NNSA's right to contest

28 See Joint Designation by Appellants of Items to be Included in the Record on Appeal, Ex. E [D.I. 16002-5] (attaching June 2, 2015 order of England's High Court of Justice, Chancery Division appointing Stephen Taylor as Conflicts Administrator for Nortel Networks, S.A. (in Administration)); Joint Administrators' Objection and Response to Motions for Reconsideration [D.I. 15741] at ¶ 4 ("[T]he impact of [MPR] on NNSA is likely to be so different from the other EMEA entities that a conflicts administrator has been appointed for NNSA.").

29 EMEA's counsel also appears to have recognized in their post-trial brief that a conflict would result from the positions advocated by the UKPC and CCC. See EMEA Post-Trial Br. at ¶ 173 n.319 ("It is worth noting that the pro rata approach advocated by the UKPC and the CCC would also have the likely effect of giving a number of EMEA Debtors no allocation for their contributions to the lockbox. In cases where treasury cash on hand for a given entity is sufficient to exceed the fixed distribution percentage, that entity would receive a lower percentage allocation, and possibly nothing, from the lockbox under a pro rata approach."). However, the Conflicts Administrator was not appointed until after the Allocation Rulings were issued.

MPR was waived through the inaction of the shared EMEA/NNSA lawyers, in the face of a conflict of interest where the interests of NNSA diverged.

This remarkable concession of a disregarded conflict before trial must have consequences. NNSA contends, as noted above, that waiver cannot apply since MPR was a surprise ruling after trial. If the Court should nonetheless conclude that waiver may be relevant to arguments made by Appellants in general, the Court should not preclude NNSA from raising facts or arguments on appeal because its former attorneys failed timely to act in the presence of a conflict of interest. See Carter v. Albert Einstein Med. Ctr., 804 F.2d 805, 807-08 (3d Cir. 1986)

(reinstating plaintiff's previously-dismissed complaint where "absence of [client's] personal responsibility for his attorney's behavior seems clear"); Boughner v. Sec'y of Health, Ed. &

Welfare, 572 F.2d 976, 978 (3d Cir. 1978) (reversing denial of relief under Rule 60(b)(6), holding that "appellants are not bound by the acts of their attorney").30

The Court should utilize its inherent power to reject any waiver and notice arguments made against NNSA. See, e.g., Dunbar v. Triangle Lumber & Supply Co., 816 F.2d

126, 129 (3d Cir. 1987) (noting that the "responsibility of the courts to the general public require[s] us to invoke our supervisory power" over district courts to protect blameless clients from their attorneys' misconduct). The Court may also rely upon its powers to prevent a miscarriage of justice to permit arguments on appeal that were not raised below. See Boughner,

30 See also In re BH & P, Inc., 949 F.2d 1300, 1315 (3d Cir. 1991) ("'[T]he 'actuality' of the conflict . . . was the possibility that the parties would favor one estate over the other in their attempt to serve all of them.'" (quoting In re BH & P, Inc., 119 B.R. 35, 43 (D.N.J. 1990))); Board of Educ. of Hudson City School Dist. v. Sargeant, Webster, Crenshaw & Folley, 539 N.Y.S.2d 814, 819 (App. Div. 1989) (when agent acts for multiple parties "'whose interests are or can become adverse, as a reasonable man might foresee, knowledge of facts arising from the transaction is not deemed the knowledge of the principal to operate as a waiver or to work otherwise to his detriment . . .'") (quotation omitted). The Third Circuit in Carter v. Einstein Medical Center recognized that a separate action against former counsel may not provide a satisfactory remedy and that "public confidence in the administration of justice is weakened when a party is prevented from presenting his case" because of his lawyer's conduct. 804 F.2d 805, 808 (3d Cir. 1986).

572 F.2d at 979 ("To permit these judgments to stand, in light of [attorney's] conduct and the absence of neglect by the parties, would be unjust."); Freifield v. Hennessy, 353 F.2d 97, 99 (3d

Cir. 1965) (reversing and remanding for a new trial "[w]here it is apparent on the face of the record that counsel failed to object to a fundamental and highly prejudicial error, and this failure may have resulted in a miscarriage of justice"). Waiver should not be invoked against NNSA— least of all by those of whom represented NNSA's interests at the time.31

V. THE BANKRUPTCY COURT ERRED BY CONDUCTING A JOINT TRIAL WITH A FOREIGN COURT.

NNSA contends on appeal that the Bankruptcy Court was not authorized by any provision of the Bankruptcy Code to conduct a joint trial with a foreign court. See Op. Br. at 23-

24. Once again, most parties concede the point by failing to address it. See supra n.9. The responses of the Monitor and the UKPC lack merit and ought to be rejected.

First, as a threshold matter, there is no debate that all questions concerning the propriety of the joint trial have been preserved for appeal. In fact, this precise issue was raised before trial by the Joint Administrators on behalf of the EMEA Debtors (including NNSA), and on appeal to the Third Circuit. See Op. Br. at 5, 23 (citing In re Nortel Networks Inc., 737 F.3d

265, 272-73 (3d Cir. 2013)). The Third Circuit concluded that "[t]he Joint Administrators' challenge to the joint hearing and its procedures would more appropriately follow the hearing, when the parties have developed the record and raised their procedural objections to the

Bankruptcy Court." In re Nortel Networks Inc., 737 F.3d 265, 273 (3d Cir. 2013).

31 Courts have also considered arguments raised for the first time on appeal that raise constitutional issues, such as NNSA's arguments concerning due process and the Bankruptcy Court's sharing of adjudicative power with a foreign court. See Tacynec v. City of Philadelphia, 687 F.2d 793, 796 n.2 (3d Cir. 1982) ("Although we do not ordinarily consider arguments raised for the first time on appeal . . . this rule may be waived to consider constitutional questions.") (citation omitted).

NNSA established in its opening brief that no provision of the Bankruptcy Code, including Section 105(a), the sole statutory authority cited by the Bankruptcy Court, authorized a joint trial with a foreign court. Op. Br. at 23-24. NNSA further explained that even the inapplicable Sections 1525 and 1527, which authorize "cooperation" and "communication" between a bankruptcy court presiding over a Chapter 15 case and a foreign court, on notice to parties, have never been construed to permit a joint adjudication. Id. Neither the Bankruptcy

Court in this case, nor any other court in any uncovered decision, has suggested otherwise.

In response, the Monitor and the UKPC cite a number of inapposite cases that neither hold nor even suggest that a bankruptcy court may conduct a joint trial with a foreign court. See, e.g., Maxwell Commc'n Corp. plc v. Societe Generale (In re Maxwell Commc'n

Corp. plc), 93 F.3d 1036, 1054-55 (2d Cir. 1996) (affirming U.S. court's dismissal of avoidance actions based on U.S. bankruptcy law); Official Comm. of Unsecured Creditors v. Transpacific

Corp. Ltd. (In re Commodore Int'l, Ltd.), 242 B.R. 243, 260 (Bankr. S.D.N.Y. 1999) (applying

Maxwell and dismissing complaint because the "Bahamas Supreme Court is the more appropriate forum"), aff'd, No. 00CIV.1679(SAS), 2000 WL 977681 (S.D.N.Y. July 17, 2000); In re Ionica

PLC, 241 B.R. 829, 838 (Bankr. S.D.N.Y. 1999) (deferring to English insolvency proceedings).

None of these cases establish that a bankruptcy court may conduct a joint trial with a foreign court.32

Appellees also cite to court orders approving cross-border protocols, but none of those address the bankruptcy court's authority to share its adjudicative power with a foreign court

32 The Monitor also cites Stonington Partners, Inc. v. Lernout & Hauspie Speech Products N.V., 310 F.3d 118 (3d Cir. 2002), but in that case, the Third Circuit encouraged communication with a Belgian court and permitted a creditor to proceed on its claims in the parallel Belgian proceeding. Id. at 132-33 (reversing anti-suit injunction to allow creditor to pursue claims in parallel Belgian proceedings under Belgian law, and encouraging bankruptcy court to communicate with Belgian court). Stonington Partners, like the other cases Appellees cite, lacks any discussion of the propriety of a joint trial with a foreign court.

in a joint trial. See Mon. Br. at 36 n.160 (citing In re Fed.-Mogul Global, Inc., No. 01-10578

AMW, 2002 WL 34946156, at *1-2 (Bankr. D. Del. Feb. 7, 2002)); UKPC Br. at 32 n.36 (citing

In re Pope & Talbot Inc., No. 07-11738 (CSS) (Bankr. D. Del. Nov. 21, 2007); In re Progressive

Molded Prods., Inc., No. 08-11253 (KJC) (Bankr. D. Del. July 14, 2008)). A lower court's approval of a cross-border protocol simply has no bearing on whether a reviewing court should find that the lower court has the authority to conduct a joint trial with a foreign court. Indeed, none of the cited provisions from either Pope & Talbot or Progressive Molded Products were challenged below,33 let alone reviewed by an appellate court.34

Finally, the UKPC attempts to recast NNSA's argument as a challenge to the

Bankruptcy Court's jurisdiction to conduct the Allocation Trial. See UKPC Br. at 32. NNSA has never argued that the Bankruptcy Court lacked the power to conduct the Allocation Trial, but rather only that the Bankruptcy Court's sharing that power with a foreign court was improper, and resulted in the development of an unprecedented allocation formula without adequate notice to or participation by the parties. See Op. Br. at 23-24. The UKPC's response misses the mark and should be disregarded.

33 Notably, the Pope & Talbot transcript reveals that the parties and the courts were concerned about the language in the protocol concerning communications between the courts. Bankruptcy Judge Sontchi stated that the courts could conduct inter-court procedural communications, but "matters of substance are certainly the types of matters that need to be decided on notice and a hearing, and everyone needs an opportunity to be heard. It's certainly not my intent to conspire with the Canadian Court to do anything other than hopefully have the procedures run in an appropriate manner." Hr'g Tr. at 65, In re Pope & Talbot, Inc., No. 07-11738 (CSS) (Bankr. D. Del. Dec. 14, 2007) (attached as Appendix B). The word "procedural" was hand-written into the protocol approved by the court to address that concern. See id. at 83; Cross-Border Insolvency Protocol at ¶ 10(i), In re Pope & Talbot, No. 07-11738 (CSS) (Bankr. D. Del. Dec. 14, 2007), ECF No. 184-1.

34 Importantly, the relevant provisions of each protocol provide that the protocols are not intended to reduce the independence, sovereignty or jurisdiction of the courts. See Nortel Cross-Border Protocol [D.I. 990-1] ¶ 9(a); Cross-Border Insolvency Protocol at ¶ 7(i), In re Pope & Talbot, Inc., No. 07-11738 (CSS) (Bankr. D. Del. Dec. 14, 2007), ECF No. 184-1; Cross-Border Insolvency Protocol at ¶ 8(a), In re Progressive Molded Prods., Inc., No. 08-11253 (KJC) (Bankr. D. Del. July 14, 2008), ECF No. 132-1.

VI. CROSS APPEALS

A. NNSA Does Not Oppose The Joint Administrators' Cross-Appeal.

NNSA does not oppose EMEA's cross-appeal, which seeks to apply either of

EMEA's two allocation theories from trial (contribution or license) if MPR is overturned.

Indeed, NNSA argues for precisely the same relief in its appeal in chief.35

B. The Monitor's Cross-Appeal Should Be Denied.

In its cross-appeal, the Monitor argues that if the Court disagrees with MPR, it should instead apply an "ownership-based" allocation based on the Canadian Court's reading of the MRDA. The cross-appeal hinges on overturning the Bankruptcy Court's findings of fact supporting its interpretation of the MRDA, but such facts are entitled to deference on appeal.

See Lukens Steel Co. v. United Steelworkers of Am., 989 F.2d 668, 672 (3d Cir. 1993) ("clearly erroneous" standard of review applies to findings of fact supporting interpretation of contract).

Accordingly, the Monitor's cross-appeal should be denied.36

The Monitor's argument that the Bankruptcy Court's interpretation of the MRDA ignored or supplanted the contractual language fails because under applicable Ontario law, as recognized by the Bankruptcy Court, consideration must be given to the "factual matrix" and surrounding circumstances of the MRDA. See Sattva Capital Corp. v. Creston Moly Corp.,

[2014] S.C.R 633, at ¶ 46 (Can.) (under Canadian law, courts consider "the surrounding circumstances of the contract – often referred to as the factual matrix – when interpreting a

35 The contribution approach advocated by NNSA recognizes the substantial contribution by NNSA and the other RPEs to Nortel's valuable IP that resulted in the majority of the Sales Proceeds and is consistent with the Nortel Group's pre-bankruptcy allocation of sales proceeds in the 2006 UMTS sale to Alcatel. Op. Br. at 12-13. Alternatively, the Court should allocate the Sales Proceeds under the license approach based upon the value of NNSA's and each other RPE's licenses of Nortel IP as detailed in the Malackowski expert report. Malackowski Report, TR00033 at 7; Huffard Report, TR00030 Chart 23.1. No party at trial objected to or rebutted Malackowski's relief-from-royalty approach to license valuation.

36 The Bankruptcy Court correctly applied Ontario law to interpret the MRDA. See Mon. Br. at 43.

written contract").37 The "factual matrix" inquiry looks to the factual "knowledge of both parties at or before the date of contracting." Id. at ¶ 58. The Monitor does not suggest that the

Bankruptcy Court improperly considered evidence of the MRDA's "factual matrix" that was outside the scope of the inquiry required under Ontario law.38

The Bankruptcy Court's interpretation of the MRDA was firmly grounded in the plain language of the MRDA. See Allocation Op. at 74. Based upon the text of the MRDA, the

Bankruptcy Court correctly concluded that NNSA and each other Licensed Participant held important license rights, and that no buyer would have bought Nortel's intellectual property unless such licenses were terminated.39 See Allocation Op. at 85. The Bankruptcy Court rejected the Monitor's commercially implausible interpretation that would allocate to NNL substantially all value from Nortel intellectual property.40

The Monitor's comity argument is similarly unavailing. The Bankruptcy Court duly considered and rejected the Canadian Court's interpretation of the MRDA. See Allocation

Op. at 63 ("The Court and the Canadian Court do not agree on the meaning of the MRDA[.]").

That decision should not be reversed absent an abuse of discretion. See Remington Rand Corp.-

Delaware v. Bus. Sys. Inc., 830 F.2d 1260, 1266 (3d Cir. 1987). The Monitor cites to Remington

Rand to support its argument that this Court should grant comity to the Canadian Court's

37 See also Sattva Capital Corp. v. Creston Moly Corp., [2014] S.C.R 633, at ¶ 47 (Can.) ("[T]he court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.'") (citation omitted).

38 The Bankruptcy Court properly considered evidence of custom and practice. Allocation Op. at 66, 74; see also Sattva Capital Corp, supra.

39 As set forth elsewhere in this brief, NNSA contends that the Bankruptcy Court's error was in failing to value the exclusive licenses.

40 See Downey v. Ecore Int'l Inc., [2012] ONCA 480, at ¶ 38 (Can.) (A contract should always be interpreted "so as to accord with sound commercial principles and good business sense, and avoid commercial absurdity.").

interpretation of the MRDA, see Mon. Br. at 47, but that decision supports denial of comity instead. The Third Circuit reversed the imposition of a constructive trust on a Dutch corporation's assets because it interfered with the Dutch bankruptcy trustee's duties under Dutch law. Remington Rand, 830 F.2d at 1270-72. The court further found that imposition of a constructive trust would have favored one creditor over other unsecured creditors, a result which

"offend[ed] notions of fairness." Id. at 1271 (American and Dutch law favor equal distributions among "creditors of similar standing"). The Bankruptcy Court's refusal to afford comity to the

Canadian Court's interpretation of the MRDA prevents such an unfair result.

C. The CCC's Cross-Appeal Should Be Denied.

The CCC's cross-appeal argues for "pure" pro rata allocation. See CCC Br. at 30-

31. As the Bankruptcy Court recognized, and the CCC fails to address in its cross-appeal, "pure" pro rata allocation is global substantive consolidation, an extreme remedy that cannot be justified on the facts established at trial. Allocation Op. at 102, 104.41 The CCC's cross-appeal should therefore be denied.

41 Indeed, the CCC's pure pro rata approach embodies more technical attributes of substantive consolidation than MPR, because under "pure" pro rata all creditors receive the same common dividend. See Britven Report, TR00045 Sc. 1.

CONCLUSION

WHEREFORE, the Conflicts Administrator respectfully requests that the Court

(i) reverse the Allocation Rulings and remand for further proceedings, and (ii) grant to NNSA such further relief as is just and proper.

Dated: Wilmington, Delaware February 12, 2016 /s/ Robert A. Weber Robert A. Weber (I.D. No. 4013) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 920 North King Street Wilmington, Delaware 19899-0636 Telephone: (302) 651-3000

- and –

George A. Zimmerman (admitted pro hac vice) Susan L. Saltzstein (admitted pro hac vice) SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP Four Times Square New York, New York 10036-6522 Telephone: (212) 735-3000

Attorneys for Appellant Stephen Taylor, Conflicts Administrator for Nortel Networks S.A. (In Administration)

CERTIFICATE OF COMPLIANCE

Pursuant to Fed. R. Bankr. P. 8015(a)(7)(C), I hereby certify that this brief contains 25 or fewer pages, exclusive of the portions exempted under Fed. R. Bankr. P. 8015(a)(7)(B)(iii), and therefore complies with the length requirements established by this Court's November 2, 2015 order.

/s/ Robert A. Weber______Robert A. Weber

26 1268234-NYCSR03A - MSW APPENDIX A

For the attention of the President and Judges of the Versailles Commercial Court

Hearing of January 21, 2016

FINDINGS ON INCOMPETENCE AND MERITS No. 5 FOR: Messrs Alan Robert Bloom, Alan Michael Hudson, Stephen John Harris and Christopher John Wilkinson Hill, domiciled at Ernst & Young LLP, 1 More London Place, London SE1 2AF, United Kingdom, in their capacity as Joint Administrators under English law of the main administration proceedings commenced against Nortel Networks SA, a French limited company registered at the Versailles Trade and Companies Register under no. B 389 516 741, having its registered office at Centre d’Affaires Parc Lumière, 46 avenue des Frères Lumières, 78190 Trappes, France DEFENDANTS IN THE FORCED INTERVENTION Represented by: Maitre Bruno Basuyaux Maitre Clément Dupoirier Court Advocates Cabinet Herbert Smith Freehills Paris LLP 66 avenue Marceau, 75008 Paris, France Tel: 01 53 57 70 70 – Fax: 01 53 57 70 80 Toque: J 025 AGAINST: Maitre Cosme Rogeau, domiciled at his chambers at 26 rue Hoche, 78000 Versailles, in his capacity as Authorised Liquidator in the secondary administration proceedings commenced against Nortel Networks SA, a French limited company registered at the Versailles Trade and Companies Register under no. B 389 516 741, having its registered office at Centre d’Affaires Parc Lumière, 46 avenue des Frères Lumières, 78190 Trappes, France PLAINTIFF IN THE FORCED INTERVENTION DEFENDANT IN THE MAIN CASE Represented by: Maitre Antoine Tchekhoff Maitre Edouard Fabré Court Advocates SCP Foucaud Tchekhoff Pochet & Associés 1 bis, avenue Foch, 75116 Paris, France Tel: 01 45 00 86 20 – Fax: 01 45 00 86 83 Toque: P 010

[stamp:] Herbert Smith Freehills Paris LLP Advocates at the Paris Bar 66 avenue Marceau, 75008 Paris, France Tel: 01 53 57 70 70 – Fax: 01 53 57 70 80 Palais: J 025 07/12129771_2 3.5.2 Assets that do not pose a problem 239. There are three categories of assets that do not pose a problem as far as determining their location is concerned. 240. Tangible assets: NNSA owned tangible assets for its GSM/GSM-R, Enterprise and CVAS businesses. Lists were drawn up at the time of the overall sales involving these businesses. All of these tangible assets were located in France when the Secondary Proceedings commenced. Once calculated, the proceeds of their sale must therefore revert to the Secondary Proceedings in application of the first indent of Article 2(g). 241. Intellectual and industrial property rights registered in the name of NNSA: Although the Main Plaintiffs and Maitre Rogeau do not mention it, it is certain that NNSA owned intellectual and industrial property rights registered in its name. An inventory will have to be drawn up. 242. According to the rules of Article 2(g) and article 12 of Regulation 1346/2000, we must distinguish between three specific cases with regard to these rights: Specific case no. 1: When the Secondary Proceedings commenced, the assets were registered with the INPI (Institut National de la Propriété Industrielle) but were not EU patents or brands (or similar rights). In this case they must be included in the assets of the Secondary Proceedings (second indent of Article 2(g). Specific case no. 2: When the Secondary Proceedings commenced, the assets were registered with the INPI as EU patents or brands (or similar rights). In this case, they must be included in the assets of the Main Proceedings (Article 12 of Regulation 1346/2000). Specific case no. 3: When the Secondary Proceedings commenced, the assets were not registered with the INPI. In this case they were not located in France (it does not matter where they were in fact located – see point 54 of the EUCJ’s Nortel ruling) and did not therefore form part of the assets of the Secondary Proceedings. They must be included with the assets of the Main Proceedings. 243. Client receivables: NNSA held receivables on its clients. In application of the third indent of article 2(g), all receivables on clients that had their principal interests located abroad were covered by the Main Proceedings. Once again, this is a straightforward application of article 2(g) and should not pose any problem. An inventory will have to be drawn up.

3.5.5 Summary of the laws of the Main proceeding activity by activity

263. The aim of the following paragraphs is to give a summary, activity by activity, of the localization rules presented above by making reference to three rules laid down by Article 2(g) (fixed assets, laws registered in the records, debts).

264. As the Tribunal will note, to successfully undertake a localization exercise presupposes that several inventories have been conducted.

265. It is appropriate to draw the Tribunal’s attention to the fact that the distribution of assets sold by NNSA between the Principal Applicant and the Secondary Applicant, when it is supposed that this distribution had already been undertaken, only represents a first step towards the settlement of the first legal dispute. Indeed, once NNSA’s part in the Lockbox has been determined definitively, it will still be necessary to perform an equalization between the corresponding sum and the assets sold. In other words, to date it is impossible to determine, for each and every asset, its equivalent sale value and thus this period of equalization can only be undertaken once NNSA’s part in Lockbox will have been finalized.

(A) GSM/GSM-R activity

266. As a reminder, the sale of the GSM/GSM-R activity to NNSA was undertaken to the benefit of Kapsch. The latter paid around 33 million euros for the total of the GSM/GSM-R European activities of the Nortel Group. NNSA’s part thus corresponds to only a fraction of this amount.

Fixed Assets

267. NNSA held fixed assets in France and attached to the GSM/GSM-R activity at the time of the opening verdict of the Secondary Proceeding. These assets were sold to the Kapsch France company in the context of a sale under the form of a business acquisition. At that time, a list was drawn up. The Joint Administrators do not have a copy of said list. To date, Attorney at law Rogeau has abstained from contributing to the debate.

268. The counter value of these fixed assets under sequestration in Lockbox must be returned to the Secondary Proceeding in application of Article 2(g), first bullet point.

Assets Registered in the Public Records

269. Assets registered at INPI in NNSA’s name. To the Joint Administrator’s knowledge, no intellectual property assets (outside of patents and community trade marks (and similar rights)) attached to GSM/GSM-R’s activity were registered in NNSA’s name at INPI at the time of the opening of the Secondary Proceeding.

270. Assets registered at INPI in NNL’s name. (as legal owner). If, in any case, the Secondary Proceeding cannot receive the proceeds corresponding to the sale of Intellectual Property Rights of the Group initially (i) registered in NNL’s name (as legal owner) in records outside of France and/or (ii) corresponding to the patents or community trade marks (or similar rights) (see above), it should be noted that the Tribunal should postpone any decision about the allocation of the proceeds of the sale of the Intellectual Property Rights of the Group until the question of the nature and the extent of the rights of NNSA has been definitively decided by the North American jurisdiction.

271. Licensing Right(s). As long as the share of Lockbox returning to NNSA results in, in all or part, the value of the Licensing Rights to be considered independently to the ownership of NNSA of the underlying assets or any other basis of allocation that benefits NNSA, the counter value of the Licensing Rights will depend on the Primary Principle if Article 2(g), second bullet point is to be applied by the Tribunal to localize the Licensing Rights.

Debt Entitlements

272. Debt entitlements tied to the services provided by NNSA under the GSM/GSM-R activity. Only the claims by the debtors whose principal business is situated in France at the time of the opening of the Secondary Proceeding falls therein. The others fall within the scope of the Primary Proceeding. It is the responsibility of M. Rogeau to draw up a list of the entirety of the NNSA debtors in the name of its GSM/GSM-R activity at the day of the opening judgments of the Main Proceedings and to identify the debtor(s).

273. Licensing Right(s). As long as the share of Lockbox returning to NNSA results in, in all or part, the value of the Licensing Rights to be considered independently to the ownership of NNSA of the underlying assets or any other basis of allocation that benefits NNSA, the counter value of the Licensing Rights will depend on the Primary Principle if Article 2(g), third bullet point is to be applied by the Tribunal to localize the Licensing Rights.

(B) Enterprise activity

Fixed Assets

274. NNSA had fixed assets in France that were attached to the Enterprise activity at the time of the opening judgment of the Secondary Proceeding. These assets were sold to the Avaya company in France. At this time, a list was drawn up (Piece no23). Their sale value was estimated at €220,192.94. This estimation was approved by the Tribunal (Piece no13).

275. The final counter value (to be determined when the share of NNSA will have itself been finalized) of these fixed assets under sequestration in Lockbox must be returned to the Secondary Proceeding in application of Article 2(g), first bullet point.

Assets Registered in the Public Records

276. Assets registered at INPI in NNSA’s name. To the Joint Administrator’s knowledge, no intellectual property asset (outside of patents and community trade marks (and similar rights)) are attached to Enterprise’s activity registered in NNSA’s name at INPI at the time of the opening of the Secondary Proceeding.

277. Assets registered at INPI in NNL’s name. (as legal owner). If, in any case, the Secondary Proceeding cannot receive the proceeds corresponding to the sale of Intellectual Property Rights of the Group initially (i) registered in NNL’s name (as legal owner) in records outside of France and/or (ii) corresponding to the patents or community trade marks (or similar rights), it should be noted that the Tribunal should postpone any decision about the allocation of the proceeds of the sale of the Intellectual Property Rights of the Group until the question of the nature and the extent of the rights of NNSA has been definitively decided by the North American jurisdiction.

278. Licensing Right(s). As long as the share of Lockbox returning to NNSA results in, in all or part, the value of the Licensing Rights to be considered independently to the ownership of NNSA of the underlying assets or any other basis of allocation that benefits NNSA, the counter value of the Licensing Rights will depend on the Primary Principle if Article 2(g), second bullet point that is to be applied by the Tribunal to localize the Licensing Rights. Debt Entitlements

279. Debt entitlements tied to the services provided by NNSA under the Enterprise activity. As was highlighted by the Legal Administrator, within NNSA, the Enterprise activity was “principally focused on support services for other entities in the Group” Nortel (Piece No12).

280. At the day of the opening judgment of the Secondary Proceeding, none of Nortel’s entities carried out their principal activities in France. Thus, at the opening of the Secondary Proceeding, none of NNSA’s debtors could have detained shares in any of the Group’s other entities by the fact that its Enterprise activity was only located in France in the sense of Article 2(g), second bullet point. Everything thus comes under the jurisdiction of the Main Proceeding. By consequence, the Secondary Proceeding cannot legitimately hold pretention to treat the amounts sequestered in the Lockbox.

281. As a general rule, it is the responsibility of M. Rogeau to draw up a list of the entirety of NNSA’s debtors in the name of it’s Enterprise activity at the day of the opening judgments of the Secondary Proceedings and to identify the debtor(s).

282. Licensing Right(s). As long as the share of Lockbox returning to NNSA results in, in all or part, the value of the Licensing Rights to be considered independently to the ownership of NNSA of the underlying assets or any other basis of allocation that benefits NNSA, the counter value of the Licensing Rights will depend on the Primary Principle if Article 2(g), third bullet point is to be applied by the Tribunal to localize the Licensing Rights.

(A) CVAS Activity

Fixed Assets

283. NNSA held fixed assets in France and attached to the CVAS activity at the time of the opening verdict of the Secondary Proceeding. These assets were sold to the Genband France company. At that time, a list was drawn up (Piece No24). The value of the sale was evaluated at €8,303. This estimation was approved by the Tribunal (Piece No15).

284. The counter value (to be determined when the share of NNSA will have itself been finalized) of these fixed assets under sequestration in Lockbox must be returned to the Secondary Proceeding in application of Article 2(g), first bullet point.

Assets registered in public records

285. Assets registered with the INPI on behalf of NNSA. To the knowledge of the Joint Administrators, no intellectual property assets (excluding Community patents and trademarks (and similar rights)) relating to the activity of CVAS were registered on behalf of NNSA with INPI at the time of the opening of the Secondary Procedure.

286. Assets registered with INPI on behalf of NNL (as the legal owner). If in any case the Secondary procedure cannot accept the proceeds from the sales corresponding to the sale of the Intellectual Property of the Group initially (i) registered on behalf of NNL (as legal owner) with the records located outside France and / or (ii) corresponding to Community patents or trademarks (or similar rights), than the Court should stay the proceedings on any allocation of the proceeds from the sales of the Intellectual Property of the Group until this issue of the nature and extent of the rights of NNSA has been finally determined by the north American jurisdictions.

287. License Right(s). As far as the share of the Lockbox owed by NNSA results in whole or part, from the value of the License Rights considered regardless of the ownership of NNSA over the underlying assets or any other basis of allocation benefiting NNSA, the corresponding value of the License Rights falls under the Main Procedure if Article 2 (g) second indent had to be applied by the Court to locate the License Rights.

Debt securities

288. Debt Securities related to the services provided by NNSA as CVAS activity. Only the claims on debtors whose center of main interests was in France at the time of the opening of the Secondary procedure fall within the Secondary Procedure. The others fall under the perimeter of the Main Procedure. It is Mr. Rogeau who has to prepare the list of all claims of NNSA as CVAS activity on the day of the opening of the Secondary procedure and to identify their the debtor(s).

289. License Right(s). As far as the share of the Lockbox owed by NNSA results in whole or part, from the value of the License Rights considered regardless of the ownership of NNSA over the underlying assets or any other basis of allocation benefiting NNSA, the corresponding value of the License Rights falls under the Main Procedure if Article 2 (g) second indent had to be applied by the Court to locate the License Rights.

(D) The activities MEN, MSS, CDMA, Next Generation Packet Core Network Components and Virtual Service Switches

Tangible assets

290. NNSA does not have any tangible assets in France for these activities. The Secondary Procedure may not therefore assign a share of the Lockbox on the basis of Article 2 (g), first indent.

Assets registered in public records

291. Assets registered with the INPI on behalf of NNSA. To the knowledge of the Joint Administrators, no intellectual property assets (excluding Community patents and trademarks (and similar rights)) relating to the activities MEN, MSS, CDMA, Next Generation Packet Core Network Components and Virtual Service Switches were registered on behalf of NNSA with INPI at the time of the opening of the Secondary Procedure..

292. Assets registered with INPI on behalf of NNL (as the legal owner). If in any case the Secondary procedure cannot accept the proceeds from the sales corresponding to the sale of the Intellectual Property of the Group initially (i) registered on behalf of NNL (as legal owner) with the records located outside France and / or (ii) corresponding to Community patents or trademarks (or similar rights), than the Court should stay the proceedings on any allocation of the proceeds from the sales of the Intellectual Property of the Group until this issue of the nature and extent of the rights of NNSA has been finally determined by the north American jurisdictions.

293. License Right(s). As far as the share of the Lockbox owed by NNSA results in whole or part, from the value of the License Rights considered regardless of the ownership of NNSA over the underlying assets or any other basis of allocation benefiting NNSA, the corresponding value of the License Rights falls under the Main Procedure if Article 2 (g) second indent had to be applied by the Court to locate the License Rights

Debt Securities

294. Debt Securities related to the services provided by NNSA as MEN, MSS, CDMA, Next Generation Packet Core Network Components and Virtual Service Switches activity. Only the claims on debtors whose center of main interests was in France at the time of the opening of the Secondary procedure fall within the Secondary Procedure. The others fall under the perimeter of the Main Procedure. It is Mr. Rogeau who has to prepare the list of all claims of NNSA as MEN, MSS, CDMA, Next Generation Packet Core Network Components and Virtual Service Switches activity on the day of the opening of the Secondary procedure and to identify their the debtor(s).

295. License Right(s). As far as the share of the Lockbox owed by NNSA results in whole or part, from the value of the License Rights considered regardless of the ownership of NNSA over the underlying assets or any other basis of allocation benefiting NNSA, the corresponding value of the License Rights falls under the Main Procedure if Article 2 (g) second indent had to be applied by the Court to locate the License Rights.

(E) The Portfolio of Residual Rights

296. Assets registered with the INPI on behalf of NNSA. An inventory of such assets should be made, to subsequently divide them according to the rules mentioned above (paragraph 242).

297. Assets registered with INPI on behalf of NNL (as the legal owner). If in any case the Secondary procedure cannot accept the proceeds from the sales corresponding to the sale of the Intellectual Property of the Group initially (i) registered on behalf of NNL (as legal owner) with the records located outside France and / or (ii) corresponding to Community patents or trademarks (or similar rights), than the Court should stay the proceedings on any allocation of the proceeds from the sales of the Intellectual Property of the Group until this issue of the nature and extent of the rights of NNSA has been finally determined by the north American jurisdictions.

298. License Right(s). As far as the share of the Lockbox owed by NNSA results in whole or part, from the value of the License Rights considered regardless of the ownership of NNSA over the underlying assets or any other basis of allocation benefiting NNSA, the corresponding value of the License Rights falls under the Main Procedure if Article 2 (g) second indent had to be applied by the Court to locate the License Rights.

* *

07/12129771-2 64 At the request of the Main Plaintiffs for the Joint Administrators of “NNSA” to be obliged “to pay to it” 300,000 Euros under Article 700 of the Civil Procedure Code

299. The Main Plaintiffs request, since their conclusions from November 12, 2015 for the Joint Administrators of “NNSA” to be obliged “to pay to it” the exorbitant amount of 300,000 Euros under Article 700 of the Civil Procedure Code.

300. As far as the submitting parties understand, it seems that the Main Plaintiffs request the sentencing of the Joint Administrators under the Secondary procedure. As it has been already been amply shown, the Main Plaintiffs have neither the quality nor the interest to act on behalf of the Secondary Procedure. For this reason alone, their request shall be dismissed.

301. Excessively and in any event, it is being recalled that the Joint Administrators are parties to the present proceedings only in their official capacity. Therefore the submitting party of the Main procedure is being requested. In any case, nothing justifies the imposition of such a sentence; neither the circumstances of the case, nor the equity. This request will appear in court for what it is: totally incongruous and in reality shocking. The Tribunal shall also note that Mr. Rogeau, the only representative of the Procedure Secondary, does not ask anything on the basis of Article 700 of the Civil Procedure Code.

* *

07/12129771-2 64 APPENDIX B

Case 07-11738-CSS Doc 212 Filed 12/26/07 Page 1 of 86

UNITED STATES BANKRUPTCY COURT DISTRICT OF DELAWARE

IN RE: . Case No. 07-11738(CSS) . Chapter 11 . Jointly Administered POPE & TALBOT, INC., . et al., . 824 Market Street . Wilmington, Delaware 19801 Debtors. . . December 14, 2007 ...... 2:08 p.m.

TRANSCRIPT OF JOINT TELEPHONIC HEARING BEFORE HONORABLE CHRISTOPHER S. SONTCHI UNITED STATES BANKRUPTCY COURT JUDGE AND DONALD BRENNER, CHIEF JUSTICE BRITISH COLUMBIA SUPREME COURT

APPEARANCES:

For the Debtors: Pachulski, Stang, Ziehl & Jones, LLP By: LAURA DAVIS JONES, ESQ. JAMES E. O'NEILL, ESQ. 919 North Market Street 17th Floor P.O. Box 8705 Wilmington, DE 19899

For the Debtors: Shearman & Sterling, LLP By: FREDRIC SOSNICK, ESQ. SUSAN A. FENNESSEY, ESQ. 599 Lexington Avenue New York, NY 10022

Audio Operator: Leslie Murin

Proceedings recorded by electronic sound recording, transcript produced by transcription service.

______

J&J COURT TRANSCRIBERS, INC. 268 Evergreen Avenue Hamilton, New Jersey 08619 E-mail: [email protected]

(609) 586-2311 Fax No. (609) 587-3599 Case 07-11738-CSS Doc 212 Filed 12/26/07 Page 63 of 86

1 rights they have. It's not intended to affect the rights of

2 the Courts, but gives the Court -- makes clear that the Courts

3 can consult and how they can consult. So I don't think -- I

4 frankly don't understand the issue, and I'm not sure I even

5 follow what the Office of the United States Trustee was saying

6 because all it's saying is there are two automatic stays. If

7 there is an issue -- and to clarify which Court to go to first,

8 if there's an issue with regard to the application of those

9 stays, which it will be brought in the first instance or it

10 will be brought in the Court where the assets or operations are

11 located, we assume that if there's an issue where there could

12 be an issue raised with respect to which automatic stay should

13 apply, that would be the type of proceeding that the two Courts

14 would confer on or decide to hold a joint hearing on. So, I

15 think, Your Honor and Your Lord, it -- all the provisions that

16 have been objected to work and I think do not require actually

17 any additional changes.

18 JUDGE SONTCHI: Before you turn it over to your

19 colleague, I'm having trouble with the imprecise form of

20 communication, understanding the problem articulated by the

21 unions in connection with Paragraph 10, I take it (i), and

22 maybe you're not the person to ask to explain it.

23 MR. SOSNICK: I may not be, Your Honor, because I

24 actually do not completely understand --

25 JUDGE SONTCHI: All right.

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1 MR. SOSNICK: -- what the issue is --

2 JUDGE SONTCHI: Well, I'll allow -- I'm, frankly,

3 happy to defer to Chief Justice Brenner on that issue since

4 it's -- seems to be more addressed to him and to the -- as I

5 understood it, the normal procedures and practices of the

6 Canadian court system, as -- and being sensitive to that, and

7 he was actually present to hear the argument, and so I -- I'm a

8 bit at sea at that one, but I'll -- I'm happy to hear sort of

9 more about it as we proceed.

10 JUDGE BRENNER: Judge Sontchi, it's Chief Justice

11 Brenner. As I understand it, and counsel can correct me if I

12 have this incorrectly, the concern I think is with the rather

13 broad nature of 10(1) that would appear to authorize --

14 authorize you and I to communicate with respect to any matter

15 relating to the insolvency proceeding, and the concern would be

16 I suppose that we would have a discussion of matters of

17 substance and proceed to make decisions without hearing from

18 parties or hearing from counsel.

19 Mr. Dunphy was referring I think to either earlier

20 proceedings in which I was involved or earlier events in which

21 we were both present in which I expressed the view that

22 communication, direct communications, I think are appropriate

23 for matters of procedure, administration, scheduling, that type

24 of thing, but if there were to be matters of substance with

25 decision making, it certainly is my general view that those be

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1 done on notice to the parties so that they're informed as to

2 what is going on and have a chance to make submissions. As I

3 understood the objection from the unions is that the -- as

4 written, it's a little too broad, and I think Mr. Dunphy was

5 trying to narrow it down or to say that the debtors would have

6 no objection to that being narrowed down, so -- do I have that

7 correct?

8 MR. DUNPHY: Correct, yes.

9 JUDGE SONTCHI: Well, based on your explanation of

10 it, I can say that I concur with your approach on that, which

11 is that matters of substance are certainly the types of matters

12 that need to be decided on notice and a hearing, and everyone

13 needs an opportunity to be heard. It's certainly not my intent

14 to conspire with the Canadian Court to do anything other than

15 hopefully have the procedures run in an appropriate manner.

16 JUDGE BRENNER: Thank you. Mr. Dunphy?

17 MR. DUNPHY: Thank you, My Lord and Your Honor. It's

18 Sean Dunphy for the petitioners in reply. I will address the

19 last point first I think. I don't think there is any

20 disagreement with anyone on this, so I think it really is just

21 a question of wordsmithing. It might make sense to add in

22 (indiscernible) any matters, add in any procedural matters, to

23 make it clear that it's procedural. I would submit that it

24 goes without saying that natural justice governs all aspects of

25 the court's operations, and I don't think either Judge needs to

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1 taken out -- I think we can do that, but I don't think we need

2 a joint hearing to do that. I have, just so we'd have it, made

3 that one change on the clean copy, adding the word "procedural"

4 just so you'd have something you can attach in your files when

5 we take the order out of the protocol, adding the word

6 "procedural" in 10(i). Otherwise it has the amendments handed

7 up this morning, being the amendments to Paragraph 15 in

8 particular. But I think we can terminate -- from our end, we

9 can terminate the joint hearing here.

10 JUDGE BRENNER: All right. Judge Sontchi, are you

11 happy to terminate the joint hearing?

12 JUDGE SONTCHI: I think that makes sense, and what I

13 understood that conversation to be is that the changes will be

14 made to the protocol order in Canada and then you'll submit it

15 under certification of counsel to me here in Delaware and I'll

16 sign the same thing or --

17 MR. SOSNICK: I actually think, Your Honor, the

18 comments that were just made were referring to the order that

19 -- orders that Your Honor signed last week --

20 JUDGE SONTCHI: Oh.

21 MR. SOSNICK: -- on the pulp sale and the other

22 assets, which had been approved the day before in Canada. We

23 made changes here in the United States that were in the order.

24 I think Mr. Dunphy was suggesting was suggesting to the

25 Canadian Court that on their docket one of the things that has

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1 to get done is that order conformed to your order.

2 JUDGE SONTCHI: All right.

3 MR. DUNPHY: That's correct.

4 MR. SOSNICK: In terms of the order itself, we're

5 happy to submit on -- I think the only change at this point is

6 the change to Paragraph 10(i), the -- which is one word. We

7 can either do it through a certification of counsel submission

8 or, if the Courts wanted to, insert it, however Your Honor and

9 Your Lord pleases.

10 JUDGE SONTCHI: Well, whatever is easiest, as long as

11 -- the only concern I had was to make sure the orders are

12 identical, so --

13 MR. SOSNICK: We can do it by certification of

14 counsel then. I think that's the easiest way.

15 JUDGE SONTCHI: Very well.

16 JUDGE BRENNER: Judge Sontchi, I -- Mr. Dunphy just

17 passed up an order for me to sign, and he simply added the word

18 "procedural" to 10(i) in handwriting, so I --

19 JUDGE SONTCHI: Please do.

20 JUDGE BRENNER: I can sign it and (indiscernible) and

21 if there's nothing else, thank you very much for your time.

22 JUDGE SONTCHI: Thank you. Can we --

23 UNIDENTIFIED SPEAKER: (indiscernible) phone call

24 here --

25 THE CANADIAN COURT CLERK: (Indiscernible)

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1 JUDGE SONTCHI: There we go. I apologize for having

2 to do that by telephone. It turns out that the issue with the

3 video conference was here in our courthouse, and it arose this

4 morning when we tried to test the system, and we didn't have an

5 opportunity or time to fix it, so I hope that any future

6 hearings will have video. You may approach. This moots Item

7 9, correct?

8 (Pause)

9 THE COURT: Ms. Jones?

10 MS. JONES: Thank you, Your Honor. Your Honor, for

11 the record, Laura Davis Jones of Pachulski, Stang, Ziehl &

12 Jones on behalf of the debtors. Your Honor, we had a

13 housekeeping matter that Mr. Harrington and I want to bring to

14 the Court, and that is in connection with the orders that the

15 Court has already signed with respect to the retentions, there

16 was an issue that Mr. Harrington had raised, and that had to do

17 with the evergreen retainer. And we did resolve that issue

18 with the trustee office, and what I told Mr. Harrington we

19 would put on the record is that resolution, and that is the

20 firms that asked for the evergreen retainers, what we would do,

21 Your Honor, is we would hold our retainers until the first

22 quarterly fee application and then we will apply those

23 retainers to any fees and expenses that Court approves as a

24 result of the first quarterly applications.

25 JUDGE SONTCHI: I just -- one other -- on fees, now

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1 that you are mentioning fees, I will have to see how it plays.

2 I don't think we're going to need a fee examiner, given the

3 speed of this case, but I reserve the right to ask for one if I

4 get, you know, lots and lots of large fee applications, but we

5 could raise that at a -- is there one -- or a process like that

6 in the Canadian Court, do you know?

7 MR. SOSNICK: There is not. They don't have fee apps

8 the same way --

9 JUDGE SONTCHI: Oh, they don't have fee applications?

10 MR. SOSNICK: No.

11 JUDGE SONTCHI: Now, that's a change in the law that

12 I would heartily support.

13 MR. SOSNICK: Your Honor, one other I guess

14 housekeeping matter, which became readily apparent as we were

15 conforming the order to send up to Canada. We sent the notice

16 of the auction on Wednesday pursuant to the order that Your

17 Honor entered. It contained -- we moved -- I don't know if

18 Your Honor recalls, but we moved all the dates back by two

19 weeks, and we moved the date in the notice that was sent out,

20 but it wasn't in -- didn't make it into the order that Your

21 Honor signed, so there's actually an inconsistency. It was the

22 date that we were required to give notice of qualified bids of

23 the parties. The bid deadline was moved to February 1st. The

24 way the order read, it still required -- it required us to give

25 notice of qualified bids, the bids we received by January 20th,

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1 which obviously couldn't have occurred. It was intended to be

2 February 3rd, which is actually what went out in the notices

3 that went out. I don't know if Your Honor needs or wants us to

4 submit an amended order or if it's sufficient that we point it

5 out to the Court, but I just wanted to make that clear.

6 JUDGE SONTCHI: Better submit -- better do an amended

7 order. That way --

8 MR. SOSNICK: We'll do that, Your Honor.

9 JUDGE SONTCHI: -- there's no inconsistencies.

10 MR. SOSNICK: I apologize.

11 JUDGE SONTCHI: Anything else?

12 MR. SOSNICK: I think that's it, Your Honor.

13 JUDGE SONTCHI: All right, thank you. Hearing is

14 adjourned.

15 * * * * *

16 C E R T I F I C A T I O N

17 I, DENISE M. O’DONNELL, court approved transcriber,

18 certify that the foregoing is a correct transcript from the

19 official electronic sound recording of the proceedings in the

20 above-entitled matter, to the best of my ability.

22 /s/ Denise M. O’Donnell

23 DENISE M. O’DONNELL

24 J&J COURT TRANSCRIBERS, INC. Date: December 26, 2007

J&J COURT TRANSCRIBERS, INC.