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BACKGROUND OF EATON'S INSOLVENCY PROCEEDINGS
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Around August 1999 Eaton's became insolvent and could not pay its liabilities
in full. It terminated its employees and began to wind down the company. It
ultimately filed for protection from creditors under the Companies Creditors
Agreement Act (the CCAA). On November 19, 1999, the creditors of
Eaton's voted in favour of the Plan of Compromise of Eaton's under the On
November 23, 1999, Mr. Justice Farley of the Ontario Superior Court of Justice
(Commercial List) approved the Plan of Compromise. The Plan included a claims
process pursuant to which creditors could file claims for amounts owing to
Eaton's in respect of which they would be paid dividends based on the remaining
assets available.
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Our firm prepared claims for amount owing to the employees and retirees as a
result of their termination of employment. We sent a letter to all Eaton's
employees and retirees setting out Eaton's estimate of the amounts owing to
each employee for unpaid vacation pay, severance and termination pay, health
benefits, long-term disability benefits, and other amounts owing. The total
amount of the employees' claims was approximately $110 million. We had
previously sent out letters to all employees with preliminary claim
calculations, however, those amounts were for CCAA voting purposes only for the
proposed plan of Compromise and were not final employee claim numbers.
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Sears purchased a number of Eaton's stores and offered jobs to many Eaton's
employees without any break in employment. Those employees who were offered a
job with Sears that were similar or better than the job they had with Eaton's
continued to work without interruption and are therefore not eligible for a
claim for termination and severance pay. Also, those employees were not
entitled to a termination pay claim in any event as they had been given working
notice and continued to work past the November 30, 1999 termination date.
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The Liquidator disputed a large number of claims we submitted on behalf of
employees. Given the sheer volume of employee's claims, it has taken a
significant amount of time to sort though all the disputes with Richter and
settle the employees' claims. All major employee claim issues have now been
settled and the amount of accepted employees' claims as of December 2, 2004 is
$120,022,320.93. At the current dividend rate of 50 cents on the dollar of
claims and means the employees and retirees have been paid approximately
$60,000,000 to date. That does not include the upcoming 2 cent dividend.
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