Two law firms representing some Hudson’s Bay employees and retirees are opposing the retailer’s motion to appoint another law firm as counsel for its thousands of workers who could face layoffs in the near future.
As the liquidation sale of Canada’s oldest company enters its fifth week, Hudson’s Bay will apply to the court on Thursday to appoint Ursel Phillips Fellows Hopkinson LLP as legal counsel for its current and former non-union employees, citing its experience in representing employee groups in other large retailers such as Sears Canada and Nordstrom, according to court documents.
The retailer said in factum to court that it selected Ursel Phillips from among five law firms that submitted written proposals to represent the employees based on factors such as the firm’s prior experience and the proposed budget and cost structure.
However, Koskie Minsky LLP, which has been retained by about 400 non-union employees and retirees, has filed a cross-motion to dismiss the retailer’s motion. The law firm was the only one to appear in court last month to defend the workers at five previous hearings and argued it had been acting as “de facto” counsel for Hudson’s Bay employees and retirees.
Prior to Hudson’s Bay’s motion, Koskie Minsky was preparing to file its own motion with the court to be appointed as counsel for non-union employees and retirees.
“Our clients oppose HBC’s motion,” wrote Andrew Hatnay, a partner at Koskie Minsky, in a letter to the court. “They do not trust the company to select another firm and have HBC’s selection imposed on them against their wishes.”
Hatnay added that HBC’s motion has “injected confusion” among the employees and retirees in an already tense environment.
Gowling WLG LLP, the law firm that served as counsel to six former Hudson’s Bay executives participating in the Supplemental Executive Retirement Plan, supports Koskie Minsky’s motion. The retirement plan was wound up at the end of March, and Gowling WLG, in a letter to the court Tuesday, asked to be appointed as counsel for all former employees with rights in this retirement plan.
When the retailer filed for creditor protection under the Companies’ Creditors Arrangement Act on March 7, Hudson’s Bay, Saks Fifth Avenue and Saks OFF 5TH employed 9,364 workers in Canada, with 8,717 of those employees being non-unionized. Since then, the company has laid off 272 corporate employees and expects further cuts. The retailer has confirmed to the Star there will be no severance pay for all its employees.
“It is somewhat unusual that the company in their restructuring is making the motion to appoint a third-party counsel,” said insolvency lawyer Tim Dunn, who is not involved in the case. Dunn added that the fact that Koskie Minsky represents some employees gives it institutional and procedural knowledge that a new counsel wouldn’t have access to.
However, Dunn said he doesn’t find the appointment of a third-party counsel concerning as long as the employees have a voice in the restructuring process and are provided with legal guidance.
“Who represents them really doesn’t make a difference, as long as they are represented and have all of the information that they need to consider,” Dunn said.
According to a cross-motion court document, Koski Minsky will apply to the court on Thursday to allow Hon. Douglas Cunningham, the former associate chief justice of the Superior Court of Justice, to act as an independent third party to decide which law firm is appointed as staff counsel. If this is not approved, it would apply to the court to serve as counsel for all Hudson’s Bay non-union employees and retirees.
A court document filed by Koski Minsky says the law firm has communicated with hundreds of HBC employees about the CCAA proceeding, organized employee and retiree committees, and set up an email, telephone hotline and an information webpage on its firm’s website for those affected.
The law firm has also opposed a previous restructuring support agreement in court backed up by Hudson’s Bay and its senior creditors that “would have operated to prevent HBC from funding any representative counsel.” Later, the court rejected the agreement.
Hudson’s Bay has informed employees that it would eliminate commission-based pay for some employees starting April 20, a move that some employee lawyers say is concerning and could be treated by workers as a termination.
