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Resolving mass tort cases under the Companies' Creditors Arrangement Act in Canada : learning from the United States experience



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This thesis describes, compares and assesses the ways in which mass tort claims are addressed through United States and Canadian insolvency legislative structures. The thesis begins by examining how courts in the United States use the Bankruptcy Code to reorganize companies facing extreme financial strain because of mass tort claims. The areas examined include: the consolidation of claims; the automatic stay; the requirement of insolvency; the various tort claims that are involved in the mass tort case; the plan; and the confirmation of the plan. The thesis then examines how Canadian courts can, and have, used the CCAA to reorganize or restructure companies dealing with mass tort claims. The Canadian Red Cross reorganization is used to demonstrate the complexity involved in resolving mass tort cases under Canadian insolvency legislation, specifically focusing on the steps that a company must follow to receive protection and how the plan can deal with tort claims. The issue of insolvency is examined as Canadian courts require a company to be insolvent in order to receive CCAA protection. This thesis argues that a broader definition of insolvency should be adopted. The thesis also addresses the following: how a stay of proceedings is obtained; the appointment of a monitor to oversee the reorganization; the classes; the plan; the sanction (court approval) of the plan; and the types of tort claims that are involved in mass tort insolvency reorganizations. What makes mass tort insolvency cases so unique and difficult are the tort claimants and how they fit into the reorganization process. The types of claimants that arise are examined in detail and include: claimants with judgments; claimants who have filed actions but have not obtained judgments; claimants whose injuries have manifest themselves but have not yet filed actions; contingent claimants, identified “claimants” who have been exposed to the defective or dangerous product but have not manifested injuries; and future claimants who have been exposed to the defective or dangerous product but who have not been identified at the relevant time. The courts in both countries have included all claims that have manifested injuries before an application for reorganization and both countries have found ways to include contingent and future claims (unmanifested injuries) by using trusts. Mass tort case law in both Canada and the United States is examined to show how trusts are established by the courts to allow tort claims, including future unidentified claims, to be included in the plan. The outcome of these cases is examined and assessed. United States case law is used to show how Canada can make mass tort insolvency cases more successful in the future by avoiding the administrative costs of frivolous claims and setting up “best offer/no negotiation schemes” as well as codifying a number of aspects that arise in mass tort cases such as the definition of mass torts, future claims representatives and channeling injunctions to also decrease time and money on arguing to allow these into the CCAA. The purpose of the CCAA is to provide a company with a fresh start while also providing the creditors of the company with the best possible return; mass tort insolvency cases achieve this goal.



Mass Tort, Companies' Creditors Arrangement Act, Red Cross, Bankruptcy, Insolvency, Bankruptcy Code



Master of Laws (LL.M.)






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