Former Nortel Execs Free of 9-Year-Old Securities Class Action

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By Jennifer Bennett

A pair of former Nortel Networks Corp. executives are free of a class action begun in 2009 after a federal judge held that their alleged misstatements aren’t enough to support a securities law claim.

Nortel’s investors didn’t show Mike Zafirovski and Pavi Binning misled them about Nortel’s finances, and even if they had, they didn’t show the executives consciously or recklessly misbehaved, according to a U.S. District Court for the Southern District of New York opinion. The court dismissed the case April 11. Zafirovski was formerly the CEO of Canadian telecommunications equipment firm Nortel, while Binning was its chief financial officer.

The investors said Zafirovski’s statements about Nortel’s quarterly results were misleading because he didn’t discuss some Nortel customers’ reductions in capital investments, according to the opinion. However, Zafirovski’s statements, while optimistic, didn’t require him to discuss specific customers, the court held. Nortel had already said its fortunes were dependent on customers’ capital investments and the public already knew some investments had been cut back, the court said.

The investors also said statements about Nortel’s goodwill in its quarterly financial reports — which Binning signed — were false, the opinion said. However, goodwill estimates are opinions, not objective facts, and the investors didn’t sufficiently allege Binning didn’t believe the statements, the court held.

Even if the investors had shown Zafirovski and Binning misled them, they didn’t show the executives did so consciously or recklessly, the court held. The investors didn’t make any plausible allegations that Zafirovski or Binning intentionally deceived them, according to the opinion.

Senior District Judge Denise Cote, who presided over the case, has heard 127 securities cases since 2007, according to Bloomberg Law Litigation Analytics. Of those, 13 have been appealed, with the U.S. Court of Appeals for the Second Circuit affirming Cote 76.9 percent of the time.

Attorneys with Robbins Geller Rudman & Dowd LLP’s Melville, N.Y., office represented the class. Attorneys with Morrison Foerster LLP’s New York office represented Zafirovski and Binning. The parties’ attorneys didn’t immediately respond to a request for comment on the decision.

The case is Lucescu v. Zafirovski , S.D.N.Y., No. 09-cv-4691 (DLC), 4/11/18 .

To contact the reporter on this story: Jennifer Bennett in Washington at

To contact the editor responsible for this story: Seth Stern at

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