On February 1, 2013, the Supreme Court of Canada rendered its much-anticipated decision in Sun Indalex Finance, LLC v. United Steelworkers et al. (Indalex). This bulletin focuses on pension plan administration issues arising from the Indalex case.
Facts
On Thursday, December 1, 2011, a three-judge panel of the Supreme Court of Canada granted leave to appeal from the decision of the Court of Appeal for Ontario in Re Indalex.
The Supreme Court has announced it will hear the appeal in the high profile Indalex Ltd., Re. The appeal is of great interest to the commercial litigation, insolvency and pension bar. Its outcome will be closely watched and may have dramatic impact on Canadian corporate reorganizations.
Background
The Ontario Court of Appeal released its decision in Indalex Limited (Re), 2011 ONCA 265 on April 7, 2011. The decision comes as a surprise to many pension and insolvency professionals, lenders and pension plan sponsors. The court, essentially, directed that monies held in reserve by the monitor appointed under the federal Companies Creditors Arrangement Act should be used to pay off pension fund deficits in preference to secured creditors.
Background
On April 7, 2011, the Ontario Court of Appeal released its judgment in theRe Indalex Limited case (Indalex).1 The decision addresses the interplay between the deemed trust provision in the Ontario Pension and Benefits Act (PBA)2 and the federal Companies’ Creditors Arrangement Act (CCAA),3 as well as the fiduciary duties of pension plan administrators in CCAA proceedings. Indalex is important for pension plan sponsors and administrators for a number of reasons:
On April 7, 2011, the Ontario Court of Appeal released its long-awaited decision in Re Indalex Limited 1. In a unanimous decision, the Court of Appeal overturned the decision of the Ontario Superior Court of Justice dated February 18, 2010, and allowed the appeals of the United Steelworkers and a certain group of retired executives. The Court of Appeal ordered FTI Consulting Canada ULC (the Monitor) to pay from the reserve fund (the Reserve Fund) held by the Monitor from the sale of Indalex Limited, Indalex Holdings (B.C.) Ltd., 6326765 Canada Inc. and Novar Inc.
On April 7, 2011, in the context of a liquidating CCAA that achieved a going concern sale of the debtor’s business, the Ontario Court of Appeal held that:
The recent bankruptcy case of Hostess has centered on Hostess’s attempts to reject collective bargaining agreements with its unions. Hostess has emphasized that realigning labor costs is essential to its ability to successfully reorganize. Section 1113 of the Bankruptcy Code sets forth detailed requirements that a debtor must meet to modify or reject CBAs. Bankruptcy courts’ ultimate decision to authorize rejection of a CBA frequently turns on a detailed examination of the evidence presented in support of the rejection motion.
The recent bankruptcy case of Hostess has centered on Hostess’s attempts to reject collective bargaining agreements with its unions. Hostess has emphasized that realigning labor costs is essential to its ability to successfully reorganize. Section 1113 of the Bankruptcy Code sets forth detailed requirements that a debtor must meet to modify or reject CBAs. Bankruptcy courts’ ultimate decision to authorize rejection of a CBA frequently turns on a detailed examination of the evidence presented in support of the rejection motion.
The Supreme Court of Canada’s decision inSun Indalex Finance, LLC v United Steelworkers, 2013 SCC 6, has a number of implications for employers, pension plan administrators, as well as both secured and unsecured creditors.