Proof of Claim Disallowed Because of a Lack of Evidentiary Support
By: Madeline Mallo
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
A Delaware bankruptcy court has held that a former officer of a debtor could not recover on his claim for his “Special Pension Arrangement” absent evidence of having worked for the debtor. In In re Nortel, a former President and CEO filed a claim in the amount of $2,278,679 against both a Canadian and United States debtor. The officer entered into a retention agreement, which provided for a “Special Pension Arrangement,” with Nortel Networks Corporation (“NNC”) and Nortel Networks Limited (“NNL”), two Canadian debtors. The officer also entered into a termination agreement with the Canadian debtors and Nortel Networks, Inc. (“NNI”), a United States debtor. The Canadian debtors objected to the officer’s claim, but then represented that they would withdraw their objection if the bankruptcy court disallowed the claim against the United States debtor. The court concluded that upon the Canadian debtors’ withdrawal of their objection to the claim, the court would sustain the objection to the claim against the U.S. debtor.
Under 11 U.S.C. § 502 a proof of claim is deemed allowed, unless a party in interest objects. In general, a proof of claim “shall constitute prima facie evidence of the validity and amount of the claim.” The proof of claim must include facts that sufficiently support the debtor’s legal liability to the creditor. If the debtor objects, the burden shifts to the debtor to provide negating evidence. Then, if the debtor is successful, the burden shifts back to the claimant to prove the validity of the claim.
The In re Nortel decision turned on a lack of evidence. The claimant did not provide the court with an explanation as to why the termination agreement included NNI. The court speculated it was because NNI is the principal U.S. operating subsidiary of the Canadian debtors and the claimant is a U.S. citizen, but this speculation had no evidentiary support. The evidence, including the terms of the retention agreement, reflected that the officer was an employee of NNC and NNL, not of NNI. Further, the debtors also provided a letter which explicitly stated how the claimant was going to receive his pension benefits from Canada. The court determined NNC and NNL employed the claimant, that the claimant worked as President and CEO of NNC and NNL, and that the pension payments came from Canada. The officer, however, did not have a relationship with NNI. Accordingly, the court concluded only the Canadian debtors had obligations to the claimant.
In general, a creditor may only hold a claim against a debtor with which it has a relationship. Consequently, a creditor will not be allowed to hold a claim against two affiliated debtors when there is evidence the claimant only worked for one of the debtors and not the other.
 In re Nortel, No. 09-10138(KG), 2017 WL2656520, at *1 (Bankr. D.Del. 2017).
 See Id. at 2.
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 11 U.S.C. § 502.
 Fed. R. Bankr. P. § 3001(f).
 In re Allegheny, 954 F.2d 167, 173 (3d Cir. 1992).
 See Id. at 173.
 See Id.
 In re Nortel, 2017 WL2656520, at *3
 See Id.
 See Id.
 See Id.
 See Id at 4.