A Suggestion: Shut-Off-The-Spigot Plus Mandatory-Mediation (the Nortel Networks Bankruptcy, Part Four)

By: Donald L Swanson

First of all, I know this suggestion will never happen.

But it should.

This suggestion, if implemented long ago, would have dramatically increased odds of a mediated settlement in the Nortel bankruptcy.  Such a settlement would have stopped the excessively-expensive and excessively-long-running legal battles in the Nortel Networks bankruptcy (Case No. 09-10138 in Delaware).

The suggestion is this:

–Shut off the spigot for payment of fees from the bankruptcy estate for non-debtor professionals; and

–Require another round of mediation.

This suggestion means, (i) disallowing all fee applications for committees and other non-debtor professionals, and (ii) continue disallowing such fees until a resolution of all pending disputes is reached.

For such period of time, each creditor and other constituency would be obliged to pay its own professional fees, instead of getting paid from the $7.3 billion pot of gold.

This approach would bring a more-realistic assessment of risks and benefits and costs to the mediation effort.

Wouldn’t this be a better way?