IN THE UNITED STATES BANKRUPTCY COURT

FOR THE DISTRICT OF MONTANA

______________________________________________________________________
In Re:

Case No. 14-60074

Roman Catholic Bishop of Helena,

Montana,
Debtor.
______________________________________________________________________

THE HON. TERRY L. MYERS, presiding

TRANSCRIPT OF PROCEEDINGS
Coeur d'Alene, Idaho
March 4, 2015

Electronic Recording Operator:

Melanie Battle

Transcript Services:
Jonny B. Nordhagen
Nordhagen Court Reporting
1734 Harrison Avenue
Butte, Montana
(406) 494-2083
nordhagencourtreporting.com
Proceedings recorded by electronic recording;
transcript produced by reporting service.

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APPEARANCES OF COUNSEL

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FOR ROMAN CATHOLIC BISHOP OF HELENA, MONTANA:

J. FORD ELSAESSER

KATIE ELSAESSER

Attorneys at Law

ELSAESSER, JARZABEK, ANDERSON,

ELLIOTT & MacDONALD, CHTD

P.O. Box 1049

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Sandpoint, ID

83864

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MICHAEL A. PATTERSON

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Attorney at Law

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PATTERSON, BUCHANAN, FOBES & LEITCH, INC., PS

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2112 Third Avenue, Suite 500

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Seattle, WA 98121

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BRUCE ANDERSON

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Attorney at Law

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ELSAESSER, JARZABEK, ANDERSON,

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ELLIOTT & MacDONALD, CHTD

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320 East Neider Avenue, Suite 102

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Coeur d'Alene, ID

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83815

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APPEARANCES OF COUNSEL (continued)

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FOR INSURANCE COVERAGE GROUP:

JAMES R. MURRAY

Attorney at Law

DICKSTEIN SHAPIRO, LLP

1825 Eye Street Northwest

Washington, DC

20006

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FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS:

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JAMES I. STANG

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ILAN D. SCHARF

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Attorney at Law

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PACHULSKI, STANG, ZIEHL & JONES, LLP

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10100 Santa Monica Blvd., 13th Floor

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Los Angeles, CA

90067

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FOR TORT CLAIMANTS:

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MILTON DATSOPOULOS

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MOLLY K. HOWARD

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Attorneys at Law

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DATSOPOULOS, MacDONALD & LIND, PC

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201 West Main Street, Suite 201

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Missoula MT

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59802

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APPEARANCES OF COUNSEL (continued)

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FOR TORT CLAIMANTS:

JOSEPH A. BLUMEL, III

Attorney at Law

BLUMEL LAW FIRM

4407 North Division Street, Suite 900

Spokane, WA

99207

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CRAIG VERNON

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DOUGLAS PIERCE

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Attorneys at Law

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JAMES, VERNON & WEEKS, PA

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1625 Lincoln Way

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Coeur D'Alene, ID

83814

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FOR URSULINE WESTERN PROVINCE:

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SUSAN G. BOSWELL

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Attorney at Law

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QUARLES & BRADY, LLP

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One South Church Avenue, No. 1700

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Tucson, AZ

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85701

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APPEARANCES OF COUNSEL (continued)

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FOR MONTANA CLERGY SEXUAL ABUSE SURVIVORS FOR JUSTICE:

BRIAN J. SMITH

Attorney at Law

GARLINGTON LOHN ROBINSON

350 Ryman Street

Missoula, MT 59802

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FOR THE CATHOLIC MUTUAL RELIEF SOCIETY OF AMERICA:

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BRADLEY J. LUCK

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Attorney at Law

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GARLINGTON LOHN ROBINSON

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350 Ryman Street

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Missoula, MT 59802

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FOR TRAVELERS CASUALTY & SURETY COMPANY:

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MICHAEL P. POMPEO

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Attorney at Law

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DRINKER BIDDLE & REATH, LLP

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1177 Avenue of the Americas

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New York, NY

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10036-2714

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APPEARANCES OF COUNSEL (continued)

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FOR TRAVELERS CASUALTY & SURETY COMPANY:

ROBERT M. VINCI

Attorney at Law

DRINKER, BIDDLE & REATH, LLP

500 Campus Drive

Florham Park, NJ

07932-1047

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FOR GREAT AMERICAN INSURANCE COMPANY:

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RUSSELL W. ROTEN

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Attorney at Law

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DUANE MORRIS, LLP

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865 South Figueroa Street, Suite 3100

15

Los Angeles, CA 90017-5450

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FOR THE U.S. TRUSTEE'S OFFICE:

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GARY DYER

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U.S. TRUSTEE

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405 East 8th Avenue, Suite 1100

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I N D E X

WITNESS:

GEORGE LEO THOMAS:

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Direct Examination by Mr. Elsaesser

PAGE:

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ROMAN CATHOLIC BISHOP OF HELENA BANKRUPTCY

COEUR D'ALENE, IDAHO

- - -

BE IT REMEMBERED THAT this matter came on for

hearing on March 4, 2014, in the United States Bankruptcy

Court, District of Montana, The Hon. Terry L. Myers,

presiding:

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9

The following proceedings were had:

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11

THE COURT:

12

UNIDENTIFIED SPEAKER:

Good morning.

13

UNIDENTIFIED SPEAKER:

Good morning.

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THE COURT:

15

Good morning.

Have a seat, please.

We'll take up our hearings this

morning in the Helena Diocese case.

16

Thank you for accommodating the scheduling of

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this matter in Coeur d'Alene, and welcome to my regular

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courtroom in this district.

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to flex so that we could get this matter heard promptly and

20

appropriately.

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23

I appreciate your willingness

Mr. Elsaesser or Mr. Anderson, would you like to

proceed?
MR. ELSAESSER:

Thank you, Your Honor.

If the

24

Court pleases, we'd like to begin by asking the Court to

25

take up the Great American settlement motion.

And

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Mr. Murray, our insurance counsel, and counsel for Great

American are both here today, and I would like to defer to

Mr. Murray.

We have received -- the record will reflect there

were no objections filed to the Great American motion, and

we would like to begin with that if that's okay with the

Court.

THE COURT:

MR. MURRAY:

That would be acceptable.

Good morning, Your Honor.

Jim

10

Murray from the D.C. office of Dickstein Shapiro on behalf

11

of the debtor.

12

Your Honor, we were before you on January 14th on

13

five insurance agreements, that Your Honor approved those

14

settlements.

15

Those had a total number of $10,901,500.

We're before Your Honor this morning on the

16

motion to approve the settlement agreement, the buyback of

17

policies, and the release of claims and covenant not to sue

18

between the debtor and Great American Insurance company.

19

This settlement, Your Honor, is for $3.5 million,

20

bringing the total insurance contribution to $14,401,500.

21

The payment by Great American will be in two parts, 1.75

22

each, in consideration both for the buyback of the

23

insurance policies and also in consideration for the

24

potential channeling injunction.

25

of the agreements are essentially the same as the prior

That said, all parameters

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2

five agreements.
Let me just take one minute to talk a little bit

about the reasonableness of the settlement.

at issue for Great American -- well, first of all, even the

years of the policies are in dispute, so the diocese would

allege that the policies at issue go from August 1 of 1956

to April 30th of 1963.

position that the only policies potentially at issue are

between '58 and '62.

10

The policies

Great American will take the

Unlike the other agreements that Your Honor

11

approved, this agreement is not so much affected by the

12

Trial Court's rulings on the trigger motion or on buybacks;

13

however, the issues are significant and would have been

14

hotly contested.

15

First and foremost is the policy proof.

Even

16

with respect to the year where we have a policy number and

17

limits, we do not have the insurance policy.

18

proffered secondary evidence, we would have proffered

19

expert testimony, but at the end of the day, that would

20

have been a long and protracted battle to prove, probably

21

on a clear and convincing evidence standard; although I

22

wouldn't concede that this morning, but that's certainly

23

what counsel for Great American would argue.

24

risky proposition.

25

We would have

And that's a

Even if we were to prove the existence of those

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policies under a civil standard, Your Honor, this was

awhile ago.

the limits at issue are either 5 million -- I mean $5,000

per person or $100,000 per occurrence, and there would be a

dig difference depending on which of those limits apply.

This was 60 years ago, these policies.

And

This issue has not been litigated much throughout

the country.

It is hotly, hotly contested.

Great American

will very aggressively take the position that it would be

$5,000 per person.

We would have a good argument on that,

10

we would have a good dispute on that, but at the end of the

11

day, it would have been a very risky proposition for the

12

diocese.

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limits are very, very small in those periods.

14

And if it is $5,000 per person, the available

And add to that, of course, Your Honor, that

15

these policies, by virtue of the Court's ruling in the

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Montana court, are only implicated for allegations of abuse

17

or for abuse that occurred during those years.

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Add to that there are additional defenses that

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are generic, whether the injury was expected or intended,

20

whether the proof on that would be sufficient, what

21

policies were triggered, what constitutes bodily injury

22

under the policies.

23

So all things considered, I believe, in my

24

experience, this is a very reasonable settlement.

Indeed,

25

I believe that without protracted, and extended, and

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expensive, and uncertain litigation for many years, Great

American would not have paid a penny more than they did

pursuant to this settlement.

So if all of those issues are true, why are they

paying this amount, Your Honor?

experience over the last 30 years, the more finality one

can give an insurance company, the more they're willing to

pay.

again, they will pay more money.

10

As I said last time, in my

If they never have to hear the words "Helena Diocese"

In this case, one of the virtues of the

11

bankruptcy context, if we can give a broad release, we can

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give a policy buyback, and then we can hold out hope for a

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channeling injunction.

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With those terms and preconditions, Your Honor, I

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believe that 3.5 million is an extremely fair settlement

16

and for the good of all.

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might have got more, we might have got a lot less.

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I can answer any questions, Your Honor.

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THE COURT:

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Others that wish to be heard with regard to the

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We could have fought this; we

Thank you, Mr. Murray.

settlement of Great American?

MS. SUGAYAN:

Good morning, Your Honor.

Cathy

Sugayan on behalf of Great America.

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THE COURT:

Good morning.

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MS. SUGAYAN:

I'm here.

I can answer any

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questions with respect to the reasonableness of the

settlement.

explaining the parties' positions in his brief and just now

in his argument to the Court, so I'm just here to answer

any questions if you have them.

about the bankruptcy part, Mr. Roten is here as well.

I believe Mr. Murray did a nice job of

THE COURT:

If you have questions

I have no questions that I think need

to be answered at this point.

observations about the briefing and the argument.

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MS. SUGAYAN:

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THE COURT:

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I concur with your

Thank you, then.

Thank you.

Any others that wish to

be heard on Great American's settlement?

MR. ELSAESSER:

Your Honor, the order and

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findings of fact and conclusion were attached to the

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original motion in this matter and we've confirmed with

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Mr. Roten and Ms. Sugayan that there are no changes, so we

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would propose, if the Court is inclined to grant the

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motion, that we would submit the findings and the order

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this afternoon electronically.

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THE COURT:

That would be fine, Mr. Elsaesser.

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find that the motion is well-taken both under 9019 of the

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rules as well as 363 of the code and 6004, and I'll approve

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it as requested.

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conclusions, and order for me today.

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MR. ELSAESSER:

You can lodge those findings,

Thank you, Your Honor.

Your

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Honor, with regard to confirmation of the plan, our

proposed order of things would be that I would put on some

very brief testimony of Bishop Thomas.

I would -- Mr. Patterson, our co-counsel, would

like to make some remarks to the Court, turn it over at

that point to the committee and the U.S. trustee and then

plaintiffs' counsel, if any of them wish to address the

Court, as well as insurance counsel who are here today.

And then at the conclusion of that, Mr. Anderson

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would conclude with some of the paperwork issues with

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regard to the nonmaterial modifications of the plan that

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were proposed and sort of the technical aspects on the

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paperwork, if that process is okay with the Court.

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We do -- I also wanted to advise we do have our

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CFO, Jim Carney, from the diocese, whose declaration has

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been submitted; as well as Retired Judge Hogan, the future

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claims representative, who also is here in court today.

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And we have both of them available to testify should the

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Court or any of the counsel present wish to hear any

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further beyond the report and the declarations that are

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already on file.

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THE COURT:

I've read the Carney declaration and

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Judge Hogan's report, and I don't have questions that I

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need to pose, so I'm willing to accept on the basis -- I

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would be interested whether you're aware of any parties who

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wish to examine either of those individuals or Bishop

Thomas.

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MR. ELSAESSER:

Not that I'm aware of, Your

Honor.

THE COURT:

All right, very well.

Unless I hear

otherwise, then I'll accept the submissions through the

declarations and the report of the future claims

representative.

Your approach is perfectly acceptable to the

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Court, Mr. Elsaesser.

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you would.

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MR. ELSAESSER:

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be sworn and testify.

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THE COURT:

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I'd call Bishop Thomas to

Bishop, if you'll come up here to my

GEORGE LEO THOMAS, WITNESS, SWORN

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THE CLERK:

Please state your name and spell your

last name for the record.

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Okay.

left, the clerk will give you the oath.

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Go ahead and call Bishop Thomas, if

THE WITNESS:
bishop of Helena.

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And it's T-H-O-M-A-S.

THE COURT:

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I am Bishop George Leo Thomas, the

Mr. Elsaesser.

DIRECT EXAMINATION

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BY MR. ELSAESSER:

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Q.

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what is your current occupation?

Okay.

Good morning, Bishop Thomas.

Bishop, what is,

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A.

I am the Roman Catholic bishop of Helena.

Q.

And how long have you served in that role?

A.

I've been in Helena for 10 and a half years.

Q.

Okay.

discussions with you, your declaration in support of

confirmation of the plan for the Diocese of Helena?

A.

I do.

Q.

And that also contained details about your background

and experience as well as your supervision of the

And you'll recall that we prepared, after

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Chapter 11 process and the mediation process that occurred

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before?

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A.

That is correct.

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Q.

And in your declaration, you noted that Class 10, which

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is a separate class involving the claim of Shaela Evenson,

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a teacher in Butte who has filed a lawsuit first against

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Butte community schools and now has stay relief to file

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against the diocese, did not vote for, vote for or against

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the plan.

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A.

That is correct.

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Q.

And did you later come to learn that they, the

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plaintiffs, filed a -- the plaintiff's attorney,

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Ms. Evenson's attorney, filed a tardy ballot in favor of

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the plan?

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A.

Yes, Mr. Elsaesser.

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Q.

And do you believe that the treatment of the, of

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Ms. Evenson, particularly the fact that her claim is being

handled in total by the Catholic Mutual insurance company,

is fair and equitable treatment of her claim?

A.

Yes, I do.

Q.

Okay.

reasonable, if the Court were to so agree, to accept her

ballot on a tardy basis?

A.

Yes, Mr. Elsaesser.

Q.

Okay.

And do you believe it would be fair and

Bishop, your declaration covers a lot of ground,

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but I would like to ask if there is anything else you would

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like to address to the Court, the counsel present, or the

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parties, and other interested parties who are here today.

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A.

Yes, Mr. Elsaesser.

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THE WITNESS:

Your Honor, if I may just offer

three very brief comments to the Court.

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THE COURT:

Certainly.

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THE WITNESS:

I think really most importantly

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this morning, on behalf of the Diocese of Helena, its

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priests, and its people, I want to be on record as

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expressing in this public forum our profound sorrow for

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what victim survivors have experienced over the past many

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decades.

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I want to say as well that it's taken a

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tremendous amount of courage on behalf of victims to come

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forward, and I want to applaud courage and perseverance,

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expressing our sorrow for a betrayal that has taken place

in the lives of so many people at the hands of clergy or

lay leaders, and to be on record as saying that the victim

survivors in our Diocese of Helena are believed and deeply

respected.

testimony has been received and it is part of a very broad

effort for us to effect a healing process in the diocese.

And it's so important that they know that their

Second, Your Honor, when we started this process

three and a half years ago, there were a couple of possible

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paths that, that lay before us.

I, at the outset of the

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process, really rejected the idea of prolonged acrimonious

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litigation.

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should be healing and conciliation and not long-term

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litigation.

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approach that we have taken will be effective.

I believe that the strong suit of the church

So I really hope that the pastoral care

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And I think it's also important to say in this

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public forum I'm deeply grateful for the work of Mr. Milt

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Datsopoulos and Molly Howard in the -- they've been very

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pivotal in creating what I would describe as a "consensus

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model."

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beginning, and for me it has led to this day where there's

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the possibility of a healing and mediated process that

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comes both to a conclusion today and affects the healing

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process for the future.

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This has been a cooperative venture from the

Lastly, I think that complacency is really the

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enemy of the church, and it's very possible that once this

process is completed, that it's -- it can be seen as a

chapter in history and we move forward, and I think that

would be a huge mistake.

continued vigilance on the part of the diocese to ensure

that we continue to cooperate very fully with what we call

the "VIRTUS training," so it's the training and screening

of all the clergy and lay leaders and volunteers in the

diocese, criminal background checks, psychological testing

I think that it requires

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and screening for our seminarians; and if complaints do

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come forward from this day forward, the assurance in this

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public forum that we'll cooperate fully with law

13

enforcement.

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I see this is a time for some new beginnings,

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some very difficult learnings for all of us, but in the

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final analysis I think that we have taken the right path.

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THE COURT:

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MR. ELSAESSER:

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Thank you, Bishop.

Okay.

Your Honor, I don't have

any additional questions of Bishop Thomas.

THE COURT:

Thank you.

Did any of the counsel

appearing wish to ask any questions of the bishop?

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MR. DATSOPOULOS:

May it please the Court and

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counsel, my name is Milt Datsopoulos.

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firm of Datsopoulos, MacDonald & Lind, one of the four

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firms representing the Whalen group plaintiffs.

I'm with the law

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And this has been a difficult and at times

acrimonious battle.

I do believe that this proposed

settlement is clearly in the best of our clients,

especially in view of the age and the state of health of

these clients.

deal of commitment and enthusiasm.

And we support this settlement with a great

Thank you.

THE COURT:

Very well, you may step down.

THE WITNESS:

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Thank you, Counsel.

Thank you.

Thank you, Your Honor.

MR. ELSAESSER:

Your Honor, I also, I

11

neglected -- I apologize, I neglected to mention that Susan

12

Boswell is here, of course, for the Western Providence of

13

Ursuline and will also want to make some remarks to the

14

Court.

15

Before I turn matters over to Mr. Patterson,

16

though, I would like to orally move to allow the ballot of

17

Shaela Evenson, which is Class -- which is the sole member

18

of Class 10, to be admitted under Rule 9006 as if it were

19

timely.

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It was very clear to us when we spoke with

21

plaintiffs' counsel that because they had -- we had had a

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basic understanding to stipulate to stay relief for several

23

months, it took a little while to get the paperwork

24

together.

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motion for stay lift, and I think they had a good-faith

And, of course, this court granted this, the

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belief that that's all they really had to do, they didn't

really need to vote any more because they're now back in

state court in Butte.

And so I think there would be no prejudice to

allowing it, and I think it was a good-faith effort and

there was no improper reason why the ballot was late.

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THE COURT:

Thank you.

Are there any oppositions

to the motion?

(No audible response.)

10

THE COURT:

I hear none.

You've given me two

11

alternatives to look at, both fair and equitable treatment

12

of Evenson as well as the late-filed ballot.

13

The issue of the ballot under the rules include

14

Rule 9006, which allows a post-deadline request on the

15

basis of excusable neglect.

16

has very clearly addressed that in the Pioneer Investment

17

standards in dealing with such a motion, including the

18

ZiLOG case in 2006.

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those factors, including a lack of prejudice, the length of

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the delay, and whether it has any impact on the core

21

proceeding, and whether the party acted in good faith.

22

The Ninth Circuit, I think,

This court has previously embraced

I understand the submission concerning the

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relationship between stay relief and the casting of an

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expressed ballot, and I accept that.

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long.

I perceive no prejudice.

The delay wasn't

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I'll grant the motion, allow it.

That's

consistent with rulings that I have found of colleagues

that I respect, including the Court in the In Re: Paul case

in 1989 out of the Southern District of California and

others who have followed that precedent.

In the alternative, I would find that the fair

and equitable treatment is also appropriately relied upon

in the alternative under 1129 given the treatment under the

stay relief.

10

So your request is granted.

You can give me an

11

appropriate form of order separately, if you wish;

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otherwise, my comments will constitute my ruling.

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14

MR. ELSAESSER:

THE COURT:

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MR. PATTERSON:

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At this

time, then, I would turn matters over to Mr. Patterson.

15

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Thank you, Your Honor.

Thank you.
Good morning, Your Honor.

Mike

Patterson on behalf the Diocese of Helena.

This process began back in September of 2011,

19

almost three and a half years ago, when the diocese was put

20

on formal notice of complaints initially of 33 plaintiffs,

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and then it grew to eventually 362 claims and lawsuits.

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that particular point in time, it became abundantly clear,

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through my experience in dealing with thousands of these

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cases around the United States, that the process that had

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been used previously of scorched-earth litigation was not

At

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the process that was either beneficial to the victims or to

the Diocese of Helena.

It became clear in the leadership of Bishop

Thomas that he, too, wanted to enter into a process that

brought healing to the victims while at the same time

understanding his stewardship responsibilities to the

diocese.

pre-mediation protocol with both plaintiffs groups, and

that protocol called for us to cooperate in a manner that

10

would ensure a maximum recovery with the available assets

11

through insurance to the victims.

It was through that leadership that we entered a

12

It was a long process that actually started in

13

February of 2012, almost three years ago or a little over

14

three years ago; encompassed four individual mediations;

15

and finally a culmination and a settlement in December of

16

2013.

17

But it was through that process that we engaged

18

in pre-discovery wherein we, indeed, did take statements

19

from almost every victim under oath.

20

background information; we did evaluations; had many

21

meetings with the insurance carriers; and through a

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deliberative process, reached an agreement, through

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transparency, that it was the best the diocese could do

24

under the circumstances without financially ruining its,

25

its ability to carry out its mission.

We received their

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And it was through that cooperative process --

and I have to applaud both plaintiffs groups for entering

into that process.

Honor, when I approached them in February of 2012 saying

there's a better way to deal with these issues than

litigation.

transparency -- and I have to hand it to Bishop Thomas

because he was willing to meet with the plaintiffs groups.

And the response from the plaintiffs groups was

There was a lot of skepticism, Your

And it was through that cooperation and that

10

that we believe Bishop Thomas when he tells us that he

11

cares and he wants to bring the best benefit to these

12

victims.

13

that was caused to them, but certainly reaching out to them

14

in a way that we could, given the assets that were

15

available, was the best course of action while at the same

16

time ensuring, once again, that the diocese was able to

17

carry on its mission.

18

Obviously, money cannot take care of the harm

And part of this settlement obviously involves

19

some nonmonetary terms, and certainly the bishop has

20

addressed those.

21

issues do not happen in the future and that we can

22

eradicate and eliminate any sort of individual that has a

23

tendency to engage in this horrific conduct.

24

through that process that we've been able to move forward,

25

and certainly given the opportunity to get these cases

We fully intend to make sure that these

And it's

25
1

resolved and behind the diocese while at the same time

recognizing our future and our future obligations to

individuals such as these 362 victims.

And I believe that this process is a model that

should be followed throughout the United States in that it

brings healing and it brings an end to a process that has

been horrific.

for a lot of people.

It's been one that has been very hurtful

Certainly, George Thomas inherited this

10

situation, he didn't create it, but once again I applaud

11

him for accepting the responsibility of reaching out to

12

these victims while at the same time recognizing his duties

13

to the diocese and the parishioners of the Diocese of

14

Helena in carrying on their mission.

15

So it's with that background, Your Honor, that I

16

believe that this is the best result that could have been

17

achieved.

18

not without its debate and without its argument, but it's

19

one that resolved this case in a financially responsible

20

manner.

21

It was certainly arm's length.

It certainly was

And I can only look around the United States and

22

take a look at other bankruptcy situations involving this

23

church and tell you that the aftermath of those cases, the

24

cost of litigating those cases has not been beneficial to

25

either the victims or to the diocese that are involved in

26
1
2

those.
So I wholly support, on behalf of the Diocese of

Helena, the process that was followed.

plaintiffs' counsel, and certainly Jim Stang, and Ilan, and

the committee, and the work that they've done in resolving

a case that could have been very, very contentious and very

harmful both to the victims and the Diocese of Helena.

Thank you, Your Honor.

THE COURT:

I applaud the

Thank you, Mr. Patterson.

10

Mr. Elsaesser?

11

(No audible response.)

12

THE COURT:

Mr. Stang?

13

MR. STANG:

Yes, Your Honor.

Your Honor, James

14

Stang and Ilan Scharf for Pachulski, Stang, Ziehl &

15

Jones appearing for the committee.

16

Your Honor, since 2004, my firm has represented

17

the creditors committee in 11 what I call "church cases,"

18

12 if you count one where two church corporations filed

19

bankruptcy for a religious order in New York.

20

And this case turned out the way it did in part

21

because of the lessons learned in this scorched-earth

22

litigation that Mr. Patterson made reference to.

23

like he might have been talking about me when he said

24

"scorched earth" because it's no secret that the

25

archdiocese in Milwaukee, where we represent the creditors

I felt

27
1

committee, is going into its fourth year with very large

administrative expenses and no resolution in sight.

But in the course of litigation since 2004 - and

most of the cases have had much more litigation than this

one has had - we discovered letters written by

Archbishop -- an archbishop who is now a cardinal, in our

opinion, admitting that a very -- a multi,

multimillion-dollar transfer was made with the intent to

hinder, delay, and defraud creditors.

10

We have found a letter from an attorney for a

11

religious order admitting that a piece of property worth in

12

excess of $8 million was transferred with the intent to

13

hinder, delay, and defraud survivors.

14

We have seen a diocese that was intent on

15

continuing payments to priests that it claimed were

16

credibly -- that it admitted were credibly accused of child

17

abuse.

18

And we have seen insurance companies who have

19

litigated with the committee and with the debtor solely for

20

what we think was delay, which was to their profit.

21

And so this committee is glad that this case is

22

concluded, for the most part, more quickly than most of the

23

others, but there was a road leading here, and that road

24

was populated with a lot of litigation, administrative

25

expenses, and frankly, committee members and survivors who

28
1

were willing to hold people accountable even though it was

in a legal process that most of them had never experienced.

All of the cases are different, but there is one

thing that's common, and that is the courage of the

survivors.

on the creditors committee.

speak with me and Mr. Scharf on at least a weekly basis.

think over the course of this case, there may have been two

or three weeks when we didn't have committee meetings.

And a special nod to those survivors who serve

They had the opportunity to
I

And

10

they have hung in there and have supported us and really

11

represented their constituency very well.

12

The crime of child sexual abuse, whether or not

13

it's barred by the statute of limitations for prosecution,

14

is a generational crime.

15

were abused and their spouses, it affects their children,

16

it affects their grandchildren, it affects the communities

17

they live in, and is generational for those other community

18

members as well.

19

It affects the men and women who

This settlement has been accepted not only by the

20

requisite margin requirements of the code of those people

21

voting, but almost every person who was abused voted.

22

we are, I think, in excess of 99 percent acceptance in

23

Class 4; and the settlement with the province also well

24

exceeded the 85 percent margin of all province claimants,

25

not just province claimants who voted.

And

And so again, that

29
1

is a testament to the committee members that they were able

to craft something that met with wide acceptance from their

constituency.

I also want to acknowledge the effort of what I

call "state court counsel," and Mr. Datsopoulos is one of

them.

church officials who are a little more antagonistic than

the bishop here talk about the "greedy trial lawyers."

it weren't for those lawyers, all of whom always work on a

These folks -- the media talks about and sometimes

If

10

contingency, the crimes that have been hidden in the dark

11

for decades would have stayed in the dark.

12

through their efforts and, of course, their clients, that

13

finally revealed them.

14

The compensation is what it is.

And it was

The nonmonetary

15

covenants that the bishop referred to are, in a sense, the

16

most important aspect of this.

17

negotiation.

18

hopes that it will protect those generations that I

19

referred to.

20

They were reached with some

The committee found them satisfactory and

Finally, from my perspective, I've worked on all

21

the cases that my office has handled.

Mr. Scharf has been,

22

I'm sorry, on a couple of them.

23

day -- and this is -- I mean this, it is a privilege to

24

work on these cases.

25

courtroom know that these are really unusual.

But at the end of the

The bankruptcy lawyers in the

They raise

30
1

some fascinating legal issues.

get to deal with the First Amendment, freedom of religion

and separation of church and state?

How many bankruptcy lawyers

Very few.

You've been spared some of that, Your Honor.

can tell you that Judge Kelley in Milwaukee wishes she was

spared from some of it.

men and women that we meet.

salute them and appreciate the opportunity to have

represented them.

But it is a privilege because of

They are extraordinary.

Thank you, Your Honor.

10

THE COURT:

Thank you, Mr. Stang.

11

Ms. Boswell.

12

MS. BOSWELL:

Thank you, Your Honor.

For the

13

record, Susan Boswell, Quarles & Brady, representing the

14

Ursuline Western Province.

15

And, Your Honor, Sister Margaret Johnson, who is

16

a sister and a member of the order, is in the courtroom,

17

and I think there are others who are listening.

18

We are very pleased to be before Your Honor and

19

are very pleased that we have been able, in this

20

litigation, to come to a conclusion that not only brings

21

all of the litigation to a conclusion, that allowed for the

22

insurance settlements to go forward without coming before

23

Your Honor and to have to determine whether or not the

24

Ursuline Western Province was an additional insured and

25

what could be done there, as well as some of the other

31
1

issues that Mr. Stang has referred to.

happy to be part of the solution and to bring, as I say,

this chapter to an end both for the survivors and for all

of those who have been affected.

And we are also

Your Honor, as you know, there is an alternative

settlement here.

We are asking that the Court approve the

settlement that would provide for the channeling

injunction.

Judge Hogan has so appropriately pointed out and while I

Judge Hogan has submitted his report.

And as

10

argued it to your court -- to Your Honor in our lift stay

11

motion, I was not successful in that, but as many of these

12

claims are, they are joint and several liability alleged as

13

between the Ursuline Western Province and the diocese.

14

So to that extent and when you look at the Dow

15

factors that the Ninth Circuit looked at in the Plant

16

Insulation case, which is really the most recent

17

pronouncement, if you will, of the Ninth Circuit when it

18

has looked at things like channeling injunctions or 524(g)

19

releases, certainly, Your Honor, we believe that we satisfy

20

most, if not all, of those Dow factors.

21

In addition, Your Honor - and I was counting the

22

cases - I don't know whether it's because the Ninth Circuit

23

is the largest or whether it's because we all like to work

24

together so well, but there have actually been seven of the

25

cases that have been filed for diocese and religious orders

32
1

in the United States that have been in the Ninth Circuit.

Of those, six resulted in confirmed plans; and of those, in

every one of those cases, channeling injunctions similar to

what we are asking the Court to approve in this case have

been approved.

By virtue of this, Your Honor, in addition to the

$3,950,000 that will be distributed to the Class 4

claimants who have, who have asserted claims against both

the diocese and the Ursulines or solely against the

10

Ursulines, there's an additional $500,000.

11

Based upon Judge Hogan's report, Your Honor, that

12

will also be a substantial contribution towards the

13

administrative expenses that have been incurred in bringing

14

this settlement to fruition and before the Court.

15

this not approved, those administrative expenses would not

16

go away but would have to be otherwise borne by the

17

diocese.

18

a substantial contribution to the survivors who will

19

benefit from this settlement but also to the estate.

20

Were

So to that extent, Your Honor, not only is there

Therefore, Your Honor, we believe that we have

21

satisfied all of the factors necessary for the Court to

22

consider.

23

overwhelming acceptance of the plan by those who voted.

24

And it is, given the number of claimants, remarkable and a

25

tribute to state court counsel that they were diligent in

And as Mr. Stang has indicated, there has been

33
1

getting their clients to vote for the plan.

Therefore, Your Honor, we support the plan and we

request that the Court approve the plan that does contain

the channeling injunction.

5
6

I'm happy to answer any questions the Court may

have.

THE COURT:

That's fine.

MS. BOSWELL:

MR. SMITH:

Thank you, Ms. Boswell.

Thank you, Your Honor.

May it please the Court, Bryan Smith

10

of Tamaki Law Offices on behalf of 95 Doe claimants, 80 of

11

whom have claims against the Ursulines, 2 of whom serve on

12

the creditors committee represented by Mr. Stang.

13

I'm here, Your Honor, today in support of

14

confirmation of the plan.

15

for two separate settlements with -- one of which is with

16

the diocese, the other with the Ursuline Western Province.

17

These settlements were reached after years of good-faith

18

negotiations, full transparency regarding the finances of

19

the defendants.

20

The plan provides, as you know,

And the claimants have waited decades for the

21

church to take responsibility for the abuse that they

22

suffered.

23

with these settlements, the church has taken responsibility

24

and some measure of accountability has been achieved.

25

And I believe, on behalf of my clients, that

So we're asking the Court to confirm the plan.

34
1

THE COURT:

Thank you.

UNIDENTIFIED SPEAKER:

Your Honor, I don't know

if either Mr. Dyer or insurance counsel, any of the

insurance counsel or other counsel wanted to address the

Court.

I don't see any hands raised.

Before turning matters over to Mr. Anderson, Your

Honor, I wanted to give just a brief update.

First of all,

I want to really express my appreciation to, particularly

to Mr. Stang and Mr. Scharf for the cooperative efforts

10

we've engaged in from the very beginning of this case right

11

through today in working together to facilitate matters.

12

And because of that - and I'll leave it to

13

Mr. Stang if I'm wrong on this - but we're already well

14

along the way with the adjudication of the claims by

15

Retired Judge Bettinelli.

16

that is a requirement of virtually every one of these types

17

of settlements, we have literally, I think, well over 100

18

Medicare letters already processed and we have adjudication

19

of a very substantial percentage.

20

And with the Medicare processing

And so just to give the Court sort of an updated

21

status report, if we obtain confirmation today, we believe

22

that the trusts will be fully funded by the diocese, the

23

six insurers, MIGA, and the Ursulines by -- or on or before

24

March 30, since the effective date, if we confirm today,

25

would fall on a Saturday, the 28th.

35
1

And we believe that -- I understand, at least

indicative from Mr. Stang, that that will enable at least

the vast majority of the claimants to receive distributions

by mid April, so there won't be any extensive delays.

Because while we've been pending confirmation, a lot of the

work has sort of gotten under way as far as adjudication

and taking care of the Medicare paperwork, and so forth.

And I really appreciate the efforts of Mr. Stang and

Mr. Scharf as well as Rust Omni and -- Rust Omni in this

10

process.

11

With that, Your Honor, if no one else has any

12

comments, I'd like to turn it over to Mr. Anderson, who's

13

taken the laboring oar in most of the drafting with

14

Mr. Stang and Mr. Scharf's work as well to some

15

last-minute, I guess, knits and gnats that we need to

16

address the Court on.

17

concluded.

And other than that, I think we are

18

THE COURT:

Mr. Anderson.

19

MR. ANDERSON:

Your Honor, on February 26th, we

20

filed what was called a "notice of intended amendments to

21

first amended joint plan."

22

collaborative effort with the province, the committee, and

23

the insurance counsel.

24

things that were seen after that first plan was filed.

25

This is definitely a

Basically, it was to clean up

This notice of intended amendments was served on

36
1

all, and I've received no response back from, from anyone

regarding the propriety of those.

is to merge those amendments into a second amended joint

plan and have that plan that is confirmed.

and would like to substitute that later on today if the

Court would confirm the plan.

7
8
9
10

THE COURT:

What we would like to do

I have done so

Well, it will be filed as a second

amended plan, and that will be the plan that is confirmed.

MR. ANDERSON:
THE COURT:

Correct.

Yes.

That was my understanding of

11

the suggestion, and I have no opposition to that approach.

12

I think having a single finally confirmed document rather

13

than referring back to a series of amendments is in

14

everyone's interest, and I agree with your approach.

15

MR. ANDERSON:

Very good.

And with the

16

memorandum on the confirmation of the plan, we filed

17

proposed findings of facts and conclusions of law as well

18

as an order.

19

versions, and we have made changes to the findings of facts

20

and conclusions of law.

21

Those turned out not to be the final

More importantly, we've made some changes with

22

respect to retiree benefits to be consistent with the plan

23

and the files.

24
25

And on the order, we've made some very minor

changes to Paragraph 19(c) to reflect some requested

37
1

changes of Ms. Boswell.

and has no objection.

The committee's looked at those

So with that, I would ask that the plan be

confirmed and that I be allowed to submit the proposed

order and findings of facts and conclusions of law later on

today.

THE COURT:

UNIDENTIFIED SPEAKER:

All right.
Your Honor, Paragraph 19

dealt with the situation where people who were abused have

10

died, and we were getting ballots in signed by personal

11

representatives.

12

THE COURT:

Yes.

13

UNIDENTIFIED SPEAKER:

I had anticipated the

14

possibility of, of people who might have been incapacitated

15

due to senility or other mental defect, that we have people

16

signing through general powers of attorney.

17

included in the order the possibility that those people

18

could sign ballots and releases as well.

19

And I had

After consultation with the province, decided

20

that that probably didn't work for them.

And it's now

21

limited to the -- so that piece came out of what you were

22

looking at, and now it's limited to personal

23

representatives whose appointment papers were filed with

24

the Court to sign the releases; now we don't need the

25

ballots anymore, but to sign the releases.

That was the

38
1

change of 19(c).

THE COURT:

Thank you.

UNIDENTIFIED SPEAKER:

And, Your Honor, just to

clarify, the way it is worded, it does allow for a

conservator or guardian.

but it does refer to other orders of appointment by a state

court.

conservator or guardian and the person's still alive as

opposed to deceased where there's a personal

10

It doesn't specifically state it,

So to the extent that somebody -- that there is a

representative, the order does allow for that.

11

THE COURT:

Thank you for the clarification.

12

UNIDENTIFIED SPEAKER:

Finally, Your Honor, in

13

the confirmation memorandum, we alerted the Court that we

14

were going to submit a more updated version of an escrow

15

agreement.

16

it signed around today and we'll have that filed with the

17

Court.

We do have that completed.

18

THE COURT:

19

UNIDENTIFIED SPEAKER:

20
21

We're going to get

All right.
That's all I have, Your

Honor.
THE COURT:

To the extent that you or any of the

22

other counsel or parties need to have resources here, we'll

23

make our best arrangements to give you jury room space or

24

other conference space so that you can continue your work,

25

if necessary, so take advantage of that as you prepare the

39
1

final documents for my later review.

UNIDENTIFIED SPEAKER:

THE COURT:

All right.

Thank you.
Anyone else need to be

heard on the issue of confirmation?

(No audible response.)

THE COURT:

I appreciate the clarifications that

you've given me, Mr. Anderson, regarding the findings of

fact and conclusions of law.

benefit issue in my review of what had been previously

10
11

I, too, found the retiree

drafted and submitted.

I also compliment you on directly addressing in

12

your proposal the capacity issue regarding the balloting

13

and the releases because in reviewing the Omni reports, I

14

also noted the capacity in which several of the ballots

15

were filed.

16

well as the other submissions.

And I have reviewed that report in detail as

17

Let me start by saying that in reviewing the

18

entirety of the briefing that was submitted by the plan

19

proponents, the committee and the diocese, that I concur

20

with the arguments and observations concerning the

21

compliance with 1129(a) of the code and the requirements

22

for confirmation.

23

with oral recitation today.

24

conclusions and order will stand as the Court's ruling on

25

those, and I'll again review them as they're submitted to

And I'm not going to belabor the record

The written findings and

40
1
2

me in final form.
In doing so and in confirming the plan, I will

also approve the channeling injunction.

that issue through all of the various courts that have

addressed it and the authorities in the Ninth Circuit as

well as the supplemental injunction.

I have evaluated

I also know that the briefing asked me to

consider carefully the question of the exculpation clauses.

I have addressed that previously in other Chapter 11 cases.

10

I've also evaluated the nature of the

11

authorities, both cited and those that were not cited, and

12

I will approve those as they are presently drafted.

13

As I've indicated, I'm accepting the Evenson

14

ballot as a late-filed or tardily filed ballot under 9006

15

of the bankruptcy rules, and that concludes the need, I

16

think, for any further addressing of the issues of the

17

alternative.

18

For a non-accepting impaired class.

The plan will be confirmed.

In doing so, let me

19

take the opportunity to comment as you have, I think, in

20

your various submissions.

21

Mr. Stang was absolutely correct in noting that

22

this case is unlike many of the cases throughout the

23

country on church Chapter 11 bankruptcies.

24

been very few hearings in this case, and he was correct in

25

that observation as well, whether they were contested or

And there have

41
1

otherwise.

Still, I've monitored the case very closely.

I've had the opportunity to read some excellent work,

thousands and thousands of pages of pleadings and papers in

the case.

I was appointed to this, to sit on this case, to review

similar volumes of materials from cases that colleagues of

mine throughout the country have been assigned to and sat

on.

I've also had the opportunity from the time that

So I think that there's -- between that and a lot of

10

years in this business, I think I have a foundation for

11

some observations.

12

I would concur that it's rare that a Chapter 11

13

case, particularly a large and significant one, confirms

14

without the need for the Court in the confirmation process

15

to resolve several final, additional, complicated,

16

technical, legal, highly contested confirmation issues or

17

other issues.

18

results from what you have all described here today, which

19

was an enlightened as well as diligent, talented effort to

20

reach an optimum solution for all concerned.

21

This is an unusual case.

I think that that

I don't doubt for a moment that there were some

22

extraordinarily hard issues and hard negotiations, and I

23

think that's been alluded to, but ultimately those efforts

24

were bridged in a way that brought a mutually beneficial

25

result to the parties.

And I think that's a singular

42
1

achievement.

it; I don't know that any have approached it as rapidly or

as well as it has occurred in this case.

I think there are cases that have approached

I think the diocese and Bishop Thomas should be

commended as well as their professionals for an approach

that not only addressed the financial aspects and the legal

aspects but, as plaintiffs' counsel has acknowledged, the

nonmonetary relief.

I think the joinder in this process of the

10

province and its professionals and the solution reached is

11

an excellent approach, addition, and reflects some hard and

12

very thoughtful work.

13

Several insurance companies as well as the

14

professionals for the debtor dealing with the insurance

15

issues have all managed to not only address their own

16

concerns but an approach which maximizes the funds that

17

will be available through the buyback, and that was well

18

considered and presented.

19

I think the work of the, certainly the committee

20

and the debtor's counsel and all of the professionals were

21

absolutely essential in reaching this, and also the

22

survivors and the plaintiffs' counsel for their approach to

23

reaching a resolution that brings not only financial relief

24

but some closure and some other less tangible but certainly

25

critical and important relief.

43
1

I think more could be said, but probably it would

be repetitious of some of the things that you all have

noted.

commending you for your efforts, I apologize.

unintentional.

you've achieved.

If I've overlooked anybody in my recognition and my

It was

I wanted to recognize all of you for what

Mr. Anderson, I'll be available.

If you can

prepare the appropriate orders, I'll make myself to execute

all of them as may be necessary.

10

The plan is confirmed.

11

We're adjourned.

12
13
14
15
16
17
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19
20
21
22
23
24
25

* * * * *

44
1

C E R T I F I C A T E

2
3

I certify that the foregoing is a correct transcript

from the electronic recording of the proceedings in the

above-entitled matter, all done to the best of my skill and

ability.

7
8

__________________________________

___________

Jonny B. Nordhagen

03/15/15

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