Summary of the Proceedings
On August 1, 2001, Dylex obtained court protection from its creditors under the Companies Creditors’ Arrangement Act (CCAA). Soon thereafter, Dylex terminated over 3,400 employees en masse without paying termination pay and severance pay and other amounts owing to the employees.
On August 20, 2001, we attended in Court and Mr. Justice Spence of the Ontario Superior Court of Justice appointed terminated employee Samuel Martin as the Employees’ Representative and our firm as Employees’ Representative counsel to represent the terminated employees of Dylex (which included the BiWay and Fairweather divisions) in its insolvency proceedings. There were approximately 6000 employees, former employees, retirees, beneficiaries and others who were affected by the insolvency of Dylex and who were subject to our mandate. Our mandate as the Employees’ Representative Counsel included the preparation of claims on behalf of all employees and former employees of Dylex for amounts owing to them by Dylex and filing and advancing those claims for payment in the insolvency proceedings of Dylex.
On September 28, 2001, Dylex was placed into formal bankruptcy by the Ontario Superior Court of Justice and Richter (formerly the Interim Receiver of Dylex) was appointed the Trustee in Bankruptcy of Dylex.
On October 24, 2001, we filed an Omnibus Employee Proof of Claim with the Trustee on behalf of all terminated employees totaling over $18 million for amounts owing to the employees from Dylex for unpaid wages, vacation pay, termination pay, severance pay, unpaid expenses, and other amounts.
The claims process was administered by the Trustee in Bankruptcy, RSM Richter Inc. The employees’ claim that we prepared was one of the highest of all creditors’ claims in the Dylex bankruptcy proceedings.
After negotiations and adjustments, the total amount of the employees’ claim that we prepared was settled at approximately $19,145,571.47. The Trustee released a series of dividend payments to all creditors at the final dividend rate of 70.38 cents on the dollar of claims. The Trustee released approximately $13,586,338.32 in dividend payments to the employees and retirees who we represented.
Employees on Long Term Disability (“LTD”)
We filed a claim on behalf of LTD employees for unpaid termination pay and severance pay. The Trustee initially disallowed this claim and took the position that employees on LTD at the time of the bankruptcy had their employment contracts with Dylex “frustrated”, meaning that the employment contracts came to an end without any requirement that Dylex provide termination pay or severance pay.
A settlement was reached. The Trustee agreed to accept 50% of the termination pay and severance pay claim amounts. Dividend cheques have been released by the Trustee to all LTD employees at the dividend rate referred to above.
Dylex Pension Plans
On November 8, 2001, the Financial Services Commission of Ontario appointed an administrator to wind-up of the Dylex pension plans. The administrator is the former actuary for the pension plans (Aon Consulting Inc.). If you have questions about the Dylex pension plans, please contact Karen Mitchell at Aon at 416-542-5585 or by email at firstname.lastname@example.org. The pension benefits for members of the Dylex pension plan are secure as they did not form part of the estate of Dylex and were protected from creditors’ claims against Dylex.
Class Action against Great American Group
On January 23, 2002, we filed a class action lawsuit on behalf of all the Managers and Assistant Managers of Biway stores against Great American Group (“GAG”) for payment of the bonuses promised by GAG. The representative plaintiff was Thomas Englefield, the former Manager of a Biway store. Prior to Dylex becoming bankrupt, Managers and Assistant Managers of BiWay stores signed contracts with GAG during the BiWay liquidation sales that promised bonuses if certain sales targets were achieved. The targets were achieved but GAG did not pay the bonuses. The class action was settled with GAG agreeing to pay the bonus amounts and paying a contribution to the Managers’ and Assistant Managers’ legal costs.
On September 25, 2002, we attended in court before Mr. Justice Cullity who certified the action as a class proceeding under the Class Proceedings Act, 1992 and also approved the settlement. The bonus settlement cheques were administered by the Trustee and have been paid to all Managers and Assistant Managers in the class.
This class action is now concluded.
Class Action against Hardof Wolf
On March 6, 2002, we filed a class action lawsuit on behalf of all the terminated employees of Dylex against the sole remaining director of Dylex at the time of its bankruptcy, Hardof Wolf. The representative plaintiff of the employees was again Thomas Englefield, the former manager of a Bi-Way store. The claim sought the payment of all amounts owing to the employees who were terminated by Dylex when Dylex became bankrupt in August 2001. The defendant, Hardof Wolf, did not respond to the lawsuit.
Mr. Justice Cullity certified the action as a class proceeding and granted judgment in favour of the employees in the amount of $286,089.68 representing amounts owing to the employees for wages, vacation pay, and expense reimbursements for the period of time that Hardof Wolf was a director of Dylex. His Honour declined to give judgment for termination pay and severance pay owing, which was the bulk of the employees’ claim. Class members have been notified individually about the status of this proceeding.