The Court of Appeal for Ontario has rejected a bid to overturn a lower court decision, which dismissed a proposed class action against the trustees of the benefits plan provided by failed tech giant Nortel Networks Corp.

In Holley v. Northern Trust Company, Canada, the appeal court ruled against Jennifer Holley, a disabled former Nortel employee, in her appeal of a decision earlier this year, which rejected a proposed class action against Northern Trust Co. and Royal Trust Co., the trustees of Nortel’s long-term disability plan.

In the initial decision, Judge Paul Perell of the Ontario Superior Court of Justice ruled that “it is plain and obvious” that her claim “does not plead a tenable cause of action”, a court-approved settlement as part of Nortel’s bankruptcy proceeding released the companies from certain claims, and Holley’s claims were made after the two-year deadline expired. The lower court dismissed her action against the trust companies.

On appeal, Holley argued, among other things, that the Perell erred in finding that her claims were statute-barred. However, the appeal court sided with the lower court and dismissed the appeal, saying, “… the limitation period began to run at the latest in March of 2010, and the appellant was well beyond the two-year limitation when she filed her notice of action on August 27, 2012.”

In its decision, the appeal court found that a report issued by Nortel’s bankruptcy monitor in February 2010 “provided the appellant with all of the material facts she required to pursue her proposed cause of action against the respondents for their alleged mishandling of trust funds.” It noted that report disclosed that Nortel’s Health and Welfare Trust (HWT), “was seriously underfunded and that some of the trust assets consisted of an amount owed to the trust by Nortel.”

Additionally, the appeal court says that, in March 2010, a motion was brought in the Nortel bankruptcy proceeding to approve a settlement and release of claims against the trustees and others related to the management of the HWT. The appeal court decision notes that Holley filed materials and appeared on the motion to oppose the granting of a release to Nortel, the trust companies, and others, from potential claims related to the trust, including claims related to its administration and underfunding. These filings show that she understood the possible grounds for a claim in March 2010, the appeal court says.

“In the materials filed by the appellant in that proceeding, it is apparent that she understood that she had a potential cause of action against the respondents for their administration of the HWT,” the appeal court said. “It is apparent, therefore, that as of March 2010, the appellant considered litigation to be an appropriate means to seek a remedy for the loss suffered as a result of the underfunding of the HWT and the respondents having allowed Nortel to fund the claims of pay-as-incurred beneficiaries out of HWT funds.”

The decision said that Holley argued that new information came to light in a report that was released in August 2010; namely, that the significant increase in underfunding was a result of Nortel deciding to take a contribution holiday. However, the court found that report “did not provide the basis for a new or different claim.”

“The claim alleged by the appellant in the March 2010 proceedings was a claim for breach of trust against the trustees for allowing Nortel to underfund or withdraw assets from the HWT. The appellant’s understanding of the precise mechanism and amount of underfunding may have changed as a result of the [August 2010] report, but the nature of the claim remained the same” the appeal court said in its decision. As a result, it dismissed the appeal.