Transcript of the Helena Bankruptcy

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

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

Sandpoint, ID 83864

MICHAEL A. PATTERSON

Attorney at Law

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

2112 Third Avenue, Suite 500

Seattle, WA 98121

BRUCE ANDERSON

Attorney at Law

ELSAESSER, JARZABEK, ANDERSON,

ELLIOTT & MacDONALD, CHTD

320 East Neider Avenue, Suite 102

Coeur d'Alene, ID 83815

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APPEARANCES OF COUNSEL (continued)

FOR INSURANCE COVERAGE GROUP:

JAMES R. MURRAY

Attorney at Law

DICKSTEIN SHAPIRO, LLP

1825 Eye Street Northwest

Washington, DC 20006

FOR THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS:

JAMES I. STANG

ILAN D. SCHARF

Attorney at Law

PACHULSKI, STANG, ZIEHL & JONES, LLP

10100 Santa Monica Blvd., 13th Floor

Los Angeles, CA 90067

FOR TORT CLAIMANTS:

MILTON DATSOPOULOS

MOLLY K. HOWARD

Attorneys at Law

DATSOPOULOS, MacDONALD & LIND, PC

201 West Main Street, Suite 201

Missoula MT 59802

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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

CRAIG VERNON

DOUGLAS PIERCE

Attorneys at Law

JAMES, VERNON & WEEKS, PA

1625 Lincoln Way

Coeur D'Alene, ID 83814

FOR URSULINE WESTERN PROVINCE:

SUSAN G. BOSWELL

Attorney at Law

QUARLES & BRADY, LLP

One South Church Avenue, No. 1700

Tucson, AZ 85701

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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

FOR THE CATHOLIC MUTUAL RELIEF SOCIETY OF AMERICA:

BRADLEY J. LUCK

Attorney at Law

GARLINGTON LOHN ROBINSON

350 Ryman Street

Missoula, MT 59802

FOR TRAVELERS CASUALTY & SURETY COMPANY:

MICHAEL P. POMPEO

Attorney at Law

DRINKER BIDDLE & REATH, LLP

1177 Avenue of the Americas

New York, NY 10036-2714

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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

FOR GREAT AMERICAN INSURANCE COMPANY:

RUSSELL W. ROTEN

Attorney at Law

DUANE MORRIS, LLP

865 South Figueroa Street, Suite 3100

Los Angeles, CA 90017-5450

FOR THE U.S. TRUSTEE'S OFFICE:

GARY DYER

U.S. TRUSTEE

405 East 8th Avenue, Suite 1100

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I N D E X

WITNESS: PAGE:

GEORGE LEO THOMAS:

Direct Examination by Mr. Elsaesser . . . . 15

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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:

The following proceedings were had:

THE COURT: Good morning. Have a seat, please.

UNIDENTIFIED SPEAKER: Good morning.

UNIDENTIFIED SPEAKER: Good morning.

THE COURT: We'll take up our hearings this

morning in the Helena Diocese case.

Thank you for accommodating the scheduling of

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

courtroom in this district. I appreciate your willingness

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

appropriately.

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

proceed?

MR. ELSAESSER: Thank you, Your Honor. If the

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

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: That would be acceptable.

MR. MURRAY: Good morning, Your Honor. Jim

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

of the debtor.

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

five insurance agreements, that Your Honor approved those

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

We're before Your Honor this morning on the

motion to approve the settlement agreement, the buyback of

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

between the debtor and Great American Insurance company.

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

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

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

each, in consideration both for the buyback of the

insurance policies and also in consideration for the

potential channeling injunction. That said, all parameters

of the agreements are essentially the same as the prior

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five agreements.

Let me just take one minute to talk a little bit

about the reasonableness of the settlement. The policies

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. Great American will take the

position that the only policies potentially at issue are

between '58 and '62.

Unlike the other agreements that Your Honor

approved, this agreement is not so much affected by the

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

however, the issues are significant and would have been

hotly contested.

First and foremost is the policy proof. Even

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

limits, we do not have the insurance policy. We would have

proffered secondary evidence, we would have proffered

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

have been a long and protracted battle to prove, probably

on a clear and convincing evidence standard; although I

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

what counsel for Great American would argue. And that's a

risky proposition.

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. This was 60 years ago, these policies. And

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 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,

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

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

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

limits are very, very small in those periods.

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

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

Montana court, are only implicated for allegations of abuse

or for abuse that occurred during those years.

Add to that there are additional defenses that

are generic, whether the injury was expected or intended,

whether the proof on that would be sufficient, what

policies were triggered, what constitutes bodily injury

under the policies.

So all things considered, I believe, in my

experience, this is a very reasonable settlement. Indeed,

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? As I said last time, in my

experience over the last 30 years, the more finality one

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

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

again, they will pay more money.

In this case, one of the virtues of the

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

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

channeling injunction.

With those terms and preconditions, Your Honor, I

believe that 3.5 million is an extremely fair settlement

and for the good of all. We could have fought this; we

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

I can answer any questions, Your Honor.

THE COURT: Thank you, Mr. Murray.

Others that wish to be heard with regard to the

settlement of Great American?

MS. SUGAYAN: Good morning, Your Honor. Cathy

Sugayan on behalf of Great America.

THE COURT: Good morning.

MS. SUGAYAN: I'm here. I can answer any

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questions with respect to the reasonableness of the

settlement. I believe Mr. Murray did a nice job of

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. If you have questions

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

THE COURT: I have no questions that I think need

to be answered at this point. I concur with your

observations about the briefing and the argument.

MS. SUGAYAN: Thank you, then.

THE COURT: Thank you. Any others that wish to

be heard on Great American's settlement?

MR. ELSAESSER: Your Honor, the order and

findings of fact and conclusion were attached to the

original motion in this matter and we've confirmed with

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

would propose, if the Court is inclined to grant the

motion, that we would submit the findings and the order

this afternoon electronically.

THE COURT: That would be fine, Mr. Elsaesser. I

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

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

it as requested. You can lodge those findings,

conclusions, and order for me today.

MR. ELSAESSER: 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

would conclude with some of the paperwork issues with

regard to the nonmaterial modifications of the plan that

were proposed and sort of the technical aspects on the

paperwork, if that process is okay with the Court.

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

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

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

claims representative, who also is here in court today.

And we have both of them available to testify should the

Court or any of the counsel present wish to hear any

further beyond the report and the declarations that are

already on file.

THE COURT: I've read the Carney declaration and

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

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

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.

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

Court, Mr. Elsaesser. Go ahead and call Bishop Thomas, if

you would.

MR. ELSAESSER: Okay. I'd call Bishop Thomas to

be sworn and testify.

THE COURT: Bishop, if you'll come up here to my

left, the clerk will give you the oath.

GEORGE LEO THOMAS, WITNESS, SWORN

THE CLERK: Please state your name and spell your

last name for the record.

THE WITNESS: I am Bishop George Leo Thomas, the

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

THE COURT: Mr. Elsaesser.

DIRECT EXAMINATION

BY MR. ELSAESSER:

Q. Okay. Good morning, Bishop Thomas. Bishop, what is,

what is your current occupation?

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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. And you'll recall that we prepared, after

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

Chapter 11 process and the mediation process that occurred

before?

A. That is correct.

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

is a separate class involving the claim of Shaela Evenson,

a teacher in Butte who has filed a lawsuit first against

Butte community schools and now has stay relief to file

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

the plan.

A. That is correct.

Q. And did you later come to learn that they, the

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

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

the plan?

A. Yes, Mr. Elsaesser.

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. And do you believe it would be fair and

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

ballot on a tardy basis?


Q. Okay. Bishop, your declaration covers a lot of ground,

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

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

parties, and other interested parties who are here today.


THE WITNESS: Your Honor, if I may just offer

three very brief comments to the Court.

THE COURT: Certainly.

THE WITNESS: I think really most importantly

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

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

expressing in this public forum our profound sorrow for

what victim survivors have experienced over the past many

decades.

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

tremendous amount of courage on behalf of victims to come

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. And it's so important that they know that their

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

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

Second, Your Honor, when we started this process

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

paths that, that lay before us. I, at the outset of the

process, really rejected the idea of prolonged acrimonious

litigation. I believe that the strong suit of the church

should be healing and conciliation and not long-term

litigation. So I really hope that the pastoral care

approach that we have taken will be effective.

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

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

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

pivotal in creating what I would describe as a "consensus

model." This has been a cooperative venture from the

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

the possibility of a healing and mediated process that

comes both to a conclusion today and affects the healing

process for the future.

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. I think that it requires

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

and screening for our seminarians; and if complaints do

come forward from this day forward, the assurance in this

public forum that we'll cooperate fully with law

enforcement.

I see this is a time for some new beginnings,

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

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

THE COURT: Thank you, Bishop.

MR. ELSAESSER: 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?

MR. DATSOPOULOS: May it please the Court and

counsel, my name is Milt Datsopoulos. I'm with the law

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

firms representing the Whalen group plaintiffs.

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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. And we support this settlement with a great

deal of commitment and enthusiasm. Thank you.

THE COURT: Thank you, Counsel.

Very well, you may step down. Thank you.

THE WITNESS: Thank you, Your Honor.

MR. ELSAESSER: Your Honor, I also, I

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

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

Ursuline and will also want to make some remarks to the

Court.

Before I turn matters over to Mr. Patterson,

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

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

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

timely.

It was very clear to us when we spoke with

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

basic understanding to stipulate to stay relief for several

months, it took a little while to get the paperwork

together. And, of course, this court granted this, the

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

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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.

THE COURT: Thank you. Are there any oppositions

to the motion?

(No audible response.)

THE COURT: I hear none. You've given me two

alternatives to look at, both fair and equitable treatment

of Evenson as well as the late-filed ballot.

The issue of the ballot under the rules include

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

basis of excusable neglect. The Ninth Circuit, I think,

has very clearly addressed that in the Pioneer Investment

standards in dealing with such a motion, including the

ZiLOG case in 2006. This court has previously embraced

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

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

proceeding, and whether the party acted in good faith.

I understand the submission concerning the

relationship between stay relief and the casting of an

expressed ballot, and I accept that. The delay wasn't

long. I perceive no prejudice.

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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.

So your request is granted. You can give me an

appropriate form of order separately, if you wish;

otherwise, my comments will constitute my ruling.

MR. ELSAESSER: Thank you, Your Honor. At this

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

THE COURT: Thank you.

MR. PATTERSON: Good morning, Your Honor. Mike

Patterson on behalf the Diocese of Helena.

This process began back in September of 2011,

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

on formal notice of complaints initially of 33 plaintiffs,

and then it grew to eventually 362 claims and lawsuits. At

that particular point in time, it became abundantly clear,

through my experience in dealing with thousands of these

cases around the United States, that the process that had

been used previously of scorched-earth litigation was not

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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. It was through that leadership that we entered a

pre-mediation protocol with both plaintiffs groups, and

that protocol called for us to cooperate in a manner that

would ensure a maximum recovery with the available assets

through insurance to the victims.

It was a long process that actually started in

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

three years ago; encompassed four individual mediations;

and finally a culmination and a settlement in December of

2013.

But it was through that process that we engaged

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

from almost every victim under oath. We received their

background information; we did evaluations; had many

meetings with the insurance carriers; and through a

deliberative process, reached an agreement, through

transparency, that it was the best the diocese could do

under the circumstances without financially ruining its,

its ability to carry out its mission.

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And it was through that cooperative process --

and I have to applaud both plaintiffs groups for entering

into that process. There was a lot of skepticism, Your

Honor, when I approached them in February of 2012 saying

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

litigation. And it was through that cooperation and that

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

that we believe Bishop Thomas when he tells us that he

cares and he wants to bring the best benefit to these

victims. Obviously, money cannot take care of the harm

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

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

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

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

carry on its mission.

And part of this settlement obviously involves

some nonmonetary terms, and certainly the bishop has

addressed those. We fully intend to make sure that these

issues do not happen in the future and that we can

eradicate and eliminate any sort of individual that has a

tendency to engage in this horrific conduct. And it's

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

and certainly given the opportunity to get these cases

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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. It's been one that has been very hurtful

for a lot of people.

Certainly, George Thomas inherited this

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

him for accepting the responsibility of reaching out to

these victims while at the same time recognizing his duties

to the diocese and the parishioners of the Diocese of

Helena in carrying on their mission.

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

believe that this is the best result that could have been

achieved. It was certainly arm's length. It certainly was

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

one that resolved this case in a financially responsible

manner.

And I can only look around the United States and

take a look at other bankruptcy situations involving this

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

cost of litigating those cases has not been beneficial to

either the victims or to the diocese that are involved in

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those.

So I wholly support, on behalf of the Diocese of

Helena, the process that was followed. I applaud the

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: Thank you, Mr. Patterson.

Mr. Elsaesser?


THE COURT: Mr. Stang?

MR. STANG: Yes, Your Honor. Your Honor, James

Stang and Ilan Scharf for Pachulski, Stang, Ziehl &

Jones appearing for the committee.

Your Honor, since 2004, my firm has represented

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

12 if you count one where two church corporations filed

bankruptcy for a religious order in New York.

And this case turned out the way it did in part

because of the lessons learned in this scorched-earth

litigation that Mr. Patterson made reference to. I felt

like he might have been talking about me when he said

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

archdiocese in Milwaukee, where we represent the creditors

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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.

We have found a letter from an attorney for a

religious order admitting that a piece of property worth in

excess of $8 million was transferred with the intent to

hinder, delay, and defraud survivors.

We have seen a diocese that was intent on

continuing payments to priests that it claimed were

credibly -- that it admitted were credibly accused of child

abuse.

And we have seen insurance companies who have

litigated with the committee and with the debtor solely for

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

And so this committee is glad that this case is

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

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

was populated with a lot of litigation, administrative

expenses, and frankly, committee members and survivors who

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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. And a special nod to those survivors who serve

on the creditors committee. They had the opportunity to

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

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

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

they have hung in there and have supported us and really

represented their constituency very well.

The crime of child sexual abuse, whether or not

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

is a generational crime. It affects the men and women who

were abused and their spouses, it affects their children,

it affects their grandchildren, it affects the communities

they live in, and is generational for those other community

members as well.

This settlement has been accepted not only by the

requisite margin requirements of the code of those people

voting, but almost every person who was abused voted. And

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

Class 4; and the settlement with the province also well

exceeded the 85 percent margin of all province claimants,

not just province claimants who voted. And so again, that

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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. These folks -- the media talks about and sometimes

church officials who are a little more antagonistic than

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

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

contingency, the crimes that have been hidden in the dark

for decades would have stayed in the dark. And it was

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

finally revealed them.

The compensation is what it is. The nonmonetary

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

most important aspect of this. They were reached with some

negotiation. The committee found them satisfactory and

hopes that it will protect those generations that I

referred to.

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

the cases that my office has handled. Mr. Scharf has been,

I'm sorry, on a couple of them. But at the end of the

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

work on these cases. The bankruptcy lawyers in the

courtroom know that these are really unusual. They raise

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some fascinating legal issues. How many bankruptcy lawyers

get to deal with the First Amendment, freedom of religion

and separation of church and state? Very few.

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

can tell you that Judge Kelley in Milwaukee wishes she was

spared from some of it. But it is a privilege because of

men and women that we meet. They are extraordinary. I

salute them and appreciate the opportunity to have

represented them. Thank you, Your Honor.

THE COURT: Thank you, Mr. Stang.

Ms. Boswell.

MS. BOSWELL: Thank you, Your Honor. For the

record, Susan Boswell, Quarles & Brady, representing the

Ursuline Western Province.

And, Your Honor, Sister Margaret Johnson, who is

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

and I think there are others who are listening.

We are very pleased to be before Your Honor and

are very pleased that we have been able, in this

litigation, to come to a conclusion that not only brings

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

insurance settlements to go forward without coming before

Your Honor and to have to determine whether or not the

Ursuline Western Province was an additional insured and

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

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issues that Mr. Stang has referred to. And we are also

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.

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 submitted his report. And as

Judge Hogan has so appropriately pointed out and while I

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

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

claims are, they are joint and several liability alleged as

between the Ursuline Western Province and the diocese.

So to that extent and when you look at the Dow

factors that the Ninth Circuit looked at in the Plant

Insulation case, which is really the most recent

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

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

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

most, if not all, of those Dow factors.

In addition, Your Honor - and I was counting the

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

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

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

cases that have been filed for diocese and religious orders

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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

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

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

will also be a substantial contribution towards the

administrative expenses that have been incurred in bringing

this settlement to fruition and before the Court. Were

this not approved, those administrative expenses would not

go away but would have to be otherwise borne by the

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

a substantial contribution to the survivors who will

benefit from this settlement but also to the estate.

Therefore, Your Honor, we believe that we have

satisfied all of the factors necessary for the Court to

consider. And as Mr. Stang has indicated, there has been

overwhelming acceptance of the plan by those who voted.

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

tribute to state court counsel that they were diligent in

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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.

I'm happy to answer any questions the Court may

have.

THE COURT: That's fine. Thank you, Ms. Boswell.

MS. BOSWELL: Thank you, Your Honor.

MR. SMITH: May it please the Court, Bryan Smith

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

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

the creditors committee represented by Mr. Stang.

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

confirmation of the plan. The plan provides, as you know,

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

the diocese, the other with the Ursuline Western Province.

These settlements were reached after years of good-faith

negotiations, full transparency regarding the finances of

the defendants.

And the claimants have waited decades for the

church to take responsibility for the abuse that they

suffered. And I believe, on behalf of my clients, that

with these settlements, the church has taken responsibility

and some measure of accountability has been achieved.

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

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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

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

through today in working together to facilitate matters.

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

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

along the way with the adjudication of the claims by

Retired Judge Bettinelli. And with the Medicare processing

that is a requirement of virtually every one of these types

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

Medicare letters already processed and we have adjudication

of a very substantial percentage.

And so just to give the Court sort of an updated

status report, if we obtain confirmation today, we believe

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

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

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

would fall on a Saturday, the 28th.

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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

process.

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

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

taken the laboring oar in most of the drafting with

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

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

address the Court on. And other than that, I think we are

concluded.

THE COURT: Mr. Anderson.

MR. ANDERSON: Your Honor, on February 26th, we

filed what was called a "notice of intended amendments to

first amended joint plan." This is definitely a

collaborative effort with the province, the committee, and

the insurance counsel. Basically, it was to clean up

things that were seen after that first plan was filed.

This notice of intended amendments was served on

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

regarding the propriety of those. What we would like to do

is to merge those amendments into a second amended joint

plan and have that plan that is confirmed. I have done so

and would like to substitute that later on today if the

Court would confirm the plan.

THE COURT: Well, it will be filed as a second

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

MR. ANDERSON: Correct.

THE COURT: Yes. That was my understanding of

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

I think having a single finally confirmed document rather

than referring back to a series of amendments is in

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

MR. ANDERSON: Very good. And with the

memorandum on the confirmation of the plan, we filed

proposed findings of facts and conclusions of law as well

as an order. Those turned out not to be the final

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

and conclusions of law.

More importantly, we've made some changes with

respect to retiree benefits to be consistent with the plan

and the files.

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

changes to Paragraph 19(c) to reflect some requested

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changes of Ms. Boswell. The committee's looked at those

and has no objection.

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: All right.

UNIDENTIFIED SPEAKER: Your Honor, Paragraph 19

dealt with the situation where people who were abused have

died, and we were getting ballots in signed by personal

representatives.

THE COURT: Yes.

UNIDENTIFIED SPEAKER: I had anticipated the

possibility of, of people who might have been incapacitated

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

signing through general powers of attorney. And I had

included in the order the possibility that those people

could sign ballots and releases as well.

After consultation with the province, decided

that that probably didn't work for them. And it's now

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

looking at, and now it's limited to personal

representatives whose appointment papers were filed with

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

ballots anymore, but to sign the releases. That was the

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change of 19(c).


UNIDENTIFIED SPEAKER: And, Your Honor, just to

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

conservator or guardian. It doesn't specifically state it,

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

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

conservator or guardian and the person's still alive as

opposed to deceased where there's a personal

representative, the order does allow for that.

THE COURT: Thank you for the clarification.

UNIDENTIFIED SPEAKER: Finally, Your Honor, in

the confirmation memorandum, we alerted the Court that we

were going to submit a more updated version of an escrow

agreement. We do have that completed. We're going to get

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

Court.

THE COURT: All right.

UNIDENTIFIED SPEAKER: That's all I have, Your

Honor.

THE COURT: To the extent that you or any of the

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

make our best arrangements to give you jury room space or

other conference space so that you can continue your work,

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

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final documents for my later review.

UNIDENTIFIED SPEAKER: Thank you.

THE COURT: All right. Anyone else need to be

heard on the issue of confirmation?


THE COURT: I appreciate the clarifications that

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

fact and conclusions of law. I, too, found the retiree

benefit issue in my review of what had been previously

drafted and submitted.

I also compliment you on directly addressing in

your proposal the capacity issue regarding the balloting

and the releases because in reviewing the Omni reports, I

also noted the capacity in which several of the ballots

were filed. And I have reviewed that report in detail as

well as the other submissions.

Let me start by saying that in reviewing the

entirety of the briefing that was submitted by the plan

proponents, the committee and the diocese, that I concur

with the arguments and observations concerning the

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

for confirmation. And I'm not going to belabor the record

with oral recitation today. The written findings and

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

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

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me in final form.

In doing so and in confirming the plan, I will

also approve the channeling injunction. I have evaluated

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 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.

I've also evaluated the nature of the

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

I will approve those as they are presently drafted.

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

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

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

think, for any further addressing of the issues of the

alternative. For a non-accepting impaired class.

The plan will be confirmed. In doing so, let me

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

your various submissions.

Mr. Stang was absolutely correct in noting that

this case is unlike many of the cases throughout the

country on church Chapter 11 bankruptcies. And there have

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

that observation as well, whether they were contested or

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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've also had the opportunity from the time that

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

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

some observations.

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

case, particularly a large and significant one, confirms

without the need for the Court in the confirmation process

to resolve several final, additional, complicated,

technical, legal, highly contested confirmation issues or

other issues. This is an unusual case. I think that that

results from what you have all described here today, which

was an enlightened as well as diligent, talented effort to

reach an optimum solution for all concerned.

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

extraordinarily hard issues and hard negotiations, and I

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

were bridged in a way that brought a mutually beneficial

result to the parties. And I think that's a singular

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achievement. I think there are cases that have approached

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

as well as it has occurred in this case.

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

province and its professionals and the solution reached is

an excellent approach, addition, and reflects some hard and

very thoughtful work.

Several insurance companies as well as the

professionals for the debtor dealing with the insurance

issues have all managed to not only address their own

concerns but an approach which maximizes the funds that

will be available through the buyback, and that was well

considered and presented.

I think the work of the, certainly the committee

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

absolutely essential in reaching this, and also the

survivors and the plaintiffs' counsel for their approach to

reaching a resolution that brings not only financial relief

but some closure and some other less tangible but certainly

critical and important relief.

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I think more could be said, but probably it would

be repetitious of some of the things that you all have

noted. If I've overlooked anybody in my recognition and my

commending you for your efforts, I apologize. It was

unintentional. I wanted to recognize all of you for what

you've achieved.

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.

The plan is confirmed.

We're adjourned.

* * * * *

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C E R T I F I C A T E

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.

__________________________________ ___________

Jonny B. Nordhagen 03/15/15

Transcript of the Helena Bankruptcy

Documents

Transcript of Transcript of the Helena Bankruptcy