WEBVTT

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Let's begin with our 130 matters, please. 23

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and me holding co. at all. Appearances in the

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courtroom. Good afternoon, Your Honor. Tom Riskin,

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Nathan Wallace, Carmen McDonald as co -counsel

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for the debtors. Good afternoon, Your Honor.

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Christopher Hopkins, Paul Weiss -Rifkin, Morgan

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Garrison as co -counsel to the debtors. I'm here

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with my colleague, Max Siegel, and Jeffrey Rector.

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Very good. from Stinson LLP as proposed co -counsel

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to the committee. Good afternoon, Your Honor.

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Jason Adams, Kelly Dryen Warren, proposed counsel

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to the Official Committee of Unsecured Creditors.

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With me in the courtroom today is Megan McLaughlin,

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and on the Webex today is Eric Wilson. We also

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have Andrew Scruton and Matthew Diaz from FTI

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Consulting, proposed counsel. For the official

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committee of unsecured creditors also on the

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web apps to the extent your honor has any questions

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with respect to We're good. Thank you Good afternoon

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your honor Josh watts for jambi and with chitsky

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abc 2 .0 llc and with chitsky revocable trust

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and the and chitsky foundation definitely joe

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schlotzauer on behalf of the u .s. trustee good

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afternoon definitely schlotzauer good afternoon

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your honor michael cassel walktail leptin rosen

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and katz for generon pharmaceutical zinc as the

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successful bidder i'm here with I'm sorry the

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last I'm here with Ben Strube of Lathrop GPM.

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Got it Castle. You said sorry my pins as they

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tend to do are all out of ink at the same time

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Yes, I got it. Thank you Castle. Thank you. Thank

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you. Mr. Castle Good afternoon, you are Joshua

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Jones the United States of America. Good afternoon

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Any other princes in the courtroom are the princes

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on the WebEx? Good afternoon, Your Honor. It's

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Robert Hirsch. I am, I sometimes roll my camera

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at the moment. I have to fix it in a second,

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but yeah, thanks for joining me. My name is Kevin

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Barnes. I'm a Class A shareholder. Welcome back,

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Mr. Barnes. Good afternoon, Your Honor. Charles

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Pasito, Class A shareholder. Welcome back, Mr.

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Pasito. Good afternoon, Your Honor. This is Abigail

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Ryan with the National Association of Attorneys

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General, representing the nine client states

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to which Oklahoma and South Dakota are joining.

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So we're a little larger now. So those are your

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new clients, Oklahoma, South Dakota? Yes, Your

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Honor, I'm going to update and add South Dakota

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this afternoon. Okay, very good. Thank you. Good

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afternoon. Good afternoon, Your Honor. I'm Sage

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Nemeth -Orohi. I'm counsel to the Cross Action

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Plaintiffs in Canada. It's a privilege to be

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here. Thank you. Thank you, sir. Anyone else?

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Good afternoon, Your Honor. This is Andy Goldman

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from Wilmer Hale in New York. We are a proposed

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council to Neil Richards, the Consumer Privacy

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Ombudsman. Very good. Good afternoon, Your Honor.

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This is Dahlila Jordan with the State of Minnesota,

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representing the people of Minnesota. Ms. Jordan.

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All right, Mr. Riskey. I'm risky for the debtors

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as your honors aware typically when we when we

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have these hearings I asked mr. Hopkins Give

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an update as the case stands and some of the

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coming attractions If it's okay with the court

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As the court knows we've agreed to push a number

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of matters tomorrow, and I think as part of those

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accommodations We we're agreeing to not really

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raise any of those issues today Is that satisfactory

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that seems like a good idea? We could get sidetracked

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if we all decide we need to argue today about

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what? So I think they're probably a good plan.

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Thank you honor So as your under those we filed

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a proposed agenda I noticed from the court stock

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at your honor already took off the the motion

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of reject as your honor knows If we can take

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that matter up we filed the stipulation miss

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Jones and mr. Gregor on it contemplates setting

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a rejection date contemplation of their administrative

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expense claim and payment the offsetting of the

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security deposit And some additional language

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in there, just clarifying the removal issues

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with respect to the waste. But the long and short

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is that issue has been resolved. The parties

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have negotiated in good faith. We believe the

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settlement is in the best interest of the estate.

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So we've submitted that to your honor. So I just

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wanted to touch on that. And the committee in

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the dip lander reviewed that as well, the order,

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I mean, the general terms of the settlement.

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To be honest, given the time constraints yesterday,

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no. That's why we went ahead and filed it, just

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so the parties could see it. But I'm happy to

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talk with them after the hearing today and talk

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to them about any comments before. Sure. If you

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give Mr. Espino a report about where that stands

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with key parties, and then we'll take a closer

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look. And if there are any disputes, we'll get

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them resolved, of course. Perfect. Thank you,

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Your Honor. With that, would the court be OK

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if we took up some of the retention matters and

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then saved the? This day matters till the end.

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I think that would make sense. Sure. Perfect

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your honor. Well up next is the debtors application

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to retain Deloitte As your honors aware there

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was a separate OCP application for Deloitte with

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respect to some of their services, but the services

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contemplated by this are more in tune with actual

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retention and 330 review We haven't received

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any formal objections. The US trustee did have

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some Informal questions as right after we filed

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it we walked through those with them, so I do

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not believe there any Informal or formal objections

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the applications we'd ask that Okay a question

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for you mr. Risky on the indemnification provisions

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seem a little broader than normal in the proposed

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order at least the last one I looked at didn't

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have the usual three paragraphs that Sort of

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bring that back to earth is that is that one

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of the comments you received from the US trustee?

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It actually was not your honor, but I'm happy

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to Now that you've highlighted that issue go

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back and see if that needs to be reined in no

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no party has said that that's Sure, I think the

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way we handle the mollusk order paragraph 12

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is standard and and ought to be acceptable to

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everyone so First let me Find out if anybody

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else wishes to be heard on the Deloitte retention

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Apparently not all right, so I'll grant the application

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But subject to the the usual language as in the

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molus order for example, and if that's an issue

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Let's reset it and we'll sort it out, but I suspect

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it won't be perfect and if you'd submit an order,

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please Thank you. I believe that the next retention

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and applications are those of the committee site

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and see the podium You're good good afternoon

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your honor megan mclaughlin kelly dry and warren

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counsel to the committee on may 5th stinson kelly

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dry and fti all filed their retention applications

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at docket numbers 383 384 and 385 respectively

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on the same date we filed a notice of hearing

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advising all parties of the may 27th objection

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deadline end of today's hearing the applications

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were served on the master service list The certificate

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of service was filed at docket number 397. The

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committee professionals did not receive any formal

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or informal objections to their applications.

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I understand that the orders have been submitted

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to your chambers already. We're happy to resubmit

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if needed, but we request entry of those orders.

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Okay, let's take one at a time just in case someone

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wants to be heard. The Stinson application, anybody

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wish to be heard on the Stinson application?

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that appears to be in order. So I'll grant that

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application, and no need to resubmit if there's

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an issue with the order that we have. We will

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be in touch. How about the Kelly Dry application?

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Anyone wish to be heard on the Kelly Dry application?

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All right, Ms. McLaughlin, the only question

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I had there is the associate who owns a couple

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of shares of stock. If that were a partner, I

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would say maybe the partner should donate it

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to charity. Since it's an associate, how about

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we implement a formal wall as you would with

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a lawyer who comes over from another firm or

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government service or something like that. I

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think that will take care. It's obviously a de

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minimis issue. And as you mentioned, the associate's

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not going to be working on the matter. Correct,

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sure. So with that change, I'll grant the application.

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OK. And I'll ask you to resubmit orders. So you

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can describe. Your formal walling procedure using

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the correct terminology and and we'll look for

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that All right, how about the FTI application

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385 anyone wish to be heard All right, I read

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that one as well the indemnification protocols

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there do seem to be standard to me so I don't

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think we need further tweaking there and I'll

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grant the FTI application and we'll Run with

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the order that you've submitted Thank you, Your

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Honor. Thank you. Up next, we have Wilmer Hale.

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Yes, good afternoon, Your Honor. Andy Goldman

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again from Wilmer Hale, and I'm joined in the

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virtual courtroom by my partner Kirk Nara in

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Washington, D .C. Your Honor, we filed our application

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to serve as counsel to Neil Richards, the Consumer

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Privacy Ombudsman back on. May 13th, cognizant

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of the stipulation in order which appointed Mr.

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Richards, we styled this as a 327 application

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and obviously went through the standards that

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one would go through with respect to disclosure,

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parties in interest, complex check and the like.

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We received no objection from anyone formally

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or informally on the application. My declaration

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is attached to the application explaining the

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procedures that the firm went through in terms

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of clearing conflicts and confirming to this

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court that we are disinterested and hold no interest

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adverse. We did file a short supplement just

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to disclose that Ryan Dury, who is going to work

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with Mr. Richards and assist him in Mr. Richards'

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tasks, at one point, because he worked for Amazon,

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held some Amazon shares and was also a consumer

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himself. That declaration, that supplemental

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declaration was filed on May 30th. Again, Your

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Honor, we've received no objections. I'm happy

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to walk the court through the application if

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Your Honor has any questions or concerns. But

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again, no objections were filed. Nobody has reached

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out to us asking us any questions with respect

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to our application. All right. Thank you. Mr.

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Goldman the certificate of service shows that

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the application was served on May 29 So aren't

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we a little a little tight on timing here? Yeah,

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well Your honor Tom risky for the debtors, I

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think there was some Confusion by the parties

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with respect to this we we agreed to file it

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on behalf of them to move this press forward

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But I think there was some miscommunication with

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on serving that immediately. I don't know if

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there's a workaround to have it go on negative

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notice for a little bit longer to satisfy any

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notice concerns the court may have. But I think

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that's why it was served last week formally.

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That's the reason for the delay. Negative notice

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is a creative solution. I don't have in front

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of me the actual language of what went out. If

00:13:18.580 --> 00:13:20.919
it would tell someone to object by a certain

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time, I could probably get my head around negative

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notice. if not it if not it may file send it

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that you want to send a supplemental notice yes

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okay well it looked the CPO should have counsel

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and why don't why don't you do that why don't

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you send a negative notice giving 14 days from

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whenever that is for anyone to object to the

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Wilmer hail application and failing receipt or

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filing of an objection I do want to also talk

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at the same time about Mr. Durie. I don't understand

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from the application who Mr. Durie is or whether

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he has any connection with Wilmer Hale. I'm not

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saying Mr. Durie shouldn't work for the CPO,

00:14:06.559 --> 00:14:10.659
but I didn't get the sense that he's a lawyer

00:14:10.659 --> 00:14:13.120
with Wilmer Hale, and so I wasn't sure. Oh, no,

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no, no, Your Honor. Yeah, first of all, I apologize.

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With respect to the notice question, Your Honor,

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this is the first... that I am hearing of any

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of this with respect to any delay or close service.

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We had thought that this was served on May 13th

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when it was filed with the court. For any confusion,

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I apologize. I'm as surprised by hearing this

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as anyone. Beyond that though, Your Honor, with

00:14:37.360 --> 00:14:41.759
respect to that question, no, Mr. Berry is not...

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He is not a Wilmer Hale lawyer. He is somebody

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who Mr. Richards knows well. He is the director

00:14:47.200 --> 00:14:50.059
of AI initiatives at Washington University St.

00:14:50.139 --> 00:14:53.879
Louis School of Law. And I believe, although

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Mr. Richards is on, if the court wants to ask

00:14:58.399 --> 00:15:01.059
him directly, but I believe that in Mr. Richards'

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preparation of his reports to the court and the

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work that he is going to do, he is going to utilize

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Mr. Dury's services as necessary. And it is for

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that reason that I wanted to make sure that there

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was supplemental disclosure, both of Mr. Dury,

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which we did disclose, and then of Mr. Dury's

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very, if you will, tenuous parties and interest

00:15:26.340 --> 00:15:30.500
contacts with respect to Amazon and a former

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health lawyer and small shareholder, et cetera.

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I don't know if that answers the court's question

00:15:37.379 --> 00:15:42.399
in full or not. That's helpful. Mr. Dury probably

00:15:42.399 --> 00:15:47.379
needs his own application. I assume he's a lawyer,

00:15:47.379 --> 00:15:51.279
he's a professional person. And I think he ought

00:15:51.279 --> 00:15:55.200
to, or the CPO ought to apply on his behalf to

00:15:55.200 --> 00:15:58.259
retain him as a professional person. So primarily,

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Mr. Goldman, because your declaration about Mr.

00:16:01.879 --> 00:16:04.980
Dury is probably missing a little foundation

00:16:04.980 --> 00:16:09.360
because he doesn't even work for you. And so

00:16:09.360 --> 00:16:12.889
why don't we Subject to the negative notice issue,

00:16:13.169 --> 00:16:15.210
I'll grant the Wilmer -Hale application, but

00:16:15.210 --> 00:16:17.809
let's carve Mr. Durie out into his own application.

00:16:18.370 --> 00:16:20.389
I'm not anticipating there will be any problem

00:16:20.389 --> 00:16:23.350
with that, but I'll take up any objections as

00:16:23.350 --> 00:16:26.690
they are, and we'll deal with that. And it won't

00:16:26.690 --> 00:16:30.110
impair the timing of his attention or his ability

00:16:30.110 --> 00:16:33.330
to charge for his time, beginning from the outset

00:16:33.330 --> 00:16:41.649
of his engagement. second supplemental application

00:16:41.649 --> 00:16:45.190
if your honor would like. We obviously ran our

00:16:45.190 --> 00:16:47.389
exhaustive conflicts check off the parties in

00:16:47.389 --> 00:16:49.929
interest which we were provided at the time the

00:16:49.929 --> 00:16:53.029
parties in interest list was circulated. Mr.

00:16:53.169 --> 00:16:55.230
Richards obviously wasn't on the list because

00:16:55.230 --> 00:17:01.350
he wasn't there at the inception. And so we did

00:17:01.350 --> 00:17:05.029
not disclose and we just learned embarrassingly

00:17:05.029 --> 00:17:06.650
for me, since I've been a partner at the firm

00:17:06.650 --> 00:17:10.329
for now 24 and a half years, that from 2002 to

00:17:10.329 --> 00:17:14.549
2003, Mr. Richards was affiliated with the firm,

00:17:14.730 --> 00:17:17.549
I believe, and associate in one of our offices.

00:17:18.230 --> 00:17:21.490
Obviously, his world and my world don't really

00:17:21.490 --> 00:17:25.269
intersect in any way until now. But I did want

00:17:25.269 --> 00:17:27.490
to disclose that to the court, obviously, that

00:17:27.490 --> 00:17:31.380
he left the firm 22 years ago. uh... but i didn't

00:17:31.380 --> 00:17:33.579
want to go back to the front of your wish is

00:17:33.579 --> 00:17:36.680
i'm happy to finally second supplemental declaration

00:17:36.680 --> 00:17:39.779
of the record can stand as such with respect

00:17:39.779 --> 00:17:42.579
to the separation and my uh... my comment on

00:17:42.579 --> 00:17:47.240
the record life in a large law firm uh... so

00:17:47.240 --> 00:17:50.079
without uh... leaking into tomorrow's subject

00:17:50.079 --> 00:17:54.079
matter there is a separate declaration from paul

00:17:54.079 --> 00:17:57.710
weiss about I don't believe we've seen supplemental

00:17:57.710 --> 00:17:59.410
declarations from the other professionals who

00:17:59.410 --> 00:18:01.930
are interacting with the bidders about any connections

00:18:01.930 --> 00:18:05.809
with the bidders. So Wilmer Hale may be due to

00:18:05.809 --> 00:18:08.730
file something of that nature anyway, Mr. Goldman,

00:18:08.809 --> 00:18:12.609
and if so, go ahead and put the one -liner in

00:18:12.609 --> 00:18:15.049
there about Professor Richards' affiliation with

00:18:15.049 --> 00:18:16.710
the firm in the past, and that'll take care of

00:18:16.710 --> 00:18:21.130
that. But we'll take this up again tomorrow as

00:18:21.130 --> 00:18:23.150
necessary, but I do think the other professionals

00:18:23.150 --> 00:18:25.440
who've been involved in the sale process ought

00:18:25.440 --> 00:18:27.480
to get supplemental declarations on file and

00:18:27.480 --> 00:18:29.819
seal them as appropriate based on the order from

00:18:29.819 --> 00:18:35.799
last week. Okay, so we'll look for an order following

00:18:35.799 --> 00:18:38.099
a negative notice period on one more hail and

00:18:38.099 --> 00:18:40.079
we'll look for a separate application for Mr.

00:18:40.240 --> 00:18:45.180
Dirt. Thank you, Your Honor. Thank you, Your

00:18:45.180 --> 00:18:48.859
Honor. I believe that brings us to the stay motion

00:18:48.859 --> 00:18:50.920
and Mr. Siegel will be presenting it for the

00:18:50.920 --> 00:19:04.619
debtors. Very good. Mr. Siegel shall we start

00:19:04.619 --> 00:19:09.079
with the motion to expedite? Happy to your honor

00:19:09.079 --> 00:19:14.480
We've we've sought to expedite this motion because

00:19:14.480 --> 00:19:19.299
there is an impending hearing in the Canadian

00:19:19.299 --> 00:19:22.200
class actions that are the subject of our substantive

00:19:22.200 --> 00:19:25.960
stay motion that hearing is scheduled to occur

00:19:25.960 --> 00:19:31.359
on June 16th and despite the debtors best efforts

00:19:31.359 --> 00:19:35.450
in Canada um respondents have thus far refused

00:19:35.450 --> 00:19:38.849
to agree to an adjournment of that hearing and

00:19:38.849 --> 00:19:41.869
thus in order to avoid all of the prejudice and

00:19:41.869 --> 00:19:44.470
harm to the debtors that would come from further

00:19:44.470 --> 00:19:47.930
proceedings in the canadian case we request that

00:19:47.930 --> 00:19:51.269
the court expedite this matter all right so anyone

00:19:51.269 --> 00:19:56.150
wish to be heard on the motion to expedite your

00:19:56.150 --> 00:19:58.289
honor on stage and it's a lady on behalf of the

00:19:58.289 --> 00:20:01.940
canadian plaintiff i i just With with notes for

00:20:01.940 --> 00:20:04.359
the record that I do not necessarily agree with

00:20:04.359 --> 00:20:07.279
my friend's characterization of the events, but

00:20:07.279 --> 00:20:09.599
we have no objection to the motion to expedite.

00:20:09.759 --> 00:20:12.319
Thank you. Okay. Thank you. Anyone else? All

00:20:12.319 --> 00:20:13.839
right, I'll grant the motion to expedite. Let's

00:20:13.839 --> 00:20:17.099
proceed to the merits. Thank you, your honor.

00:20:17.740 --> 00:20:20.660
Present motion seeks an order confirming that

00:20:20.660 --> 00:20:24.319
the automatic stay applies to two Canadian cumulative

00:20:24.319 --> 00:20:27.920
class actions, including as to certain non debtor

00:20:27.920 --> 00:20:31.230
defendants. These class actions arise from the

00:20:31.230 --> 00:20:35.990
October 2023 cybersecurity incident that this

00:20:35.990 --> 00:20:39.250
court has heard much about in the course of these

00:20:39.250 --> 00:20:42.809
Chapter 11 cases. In the alternative, the motion

00:20:42.809 --> 00:20:45.569
asks that the court extends the automatic stay,

00:20:45.910 --> 00:20:49.130
and it also seeks an injunction against continuation

00:20:49.130 --> 00:20:52.430
of the Canadian putative class actions during

00:20:52.430 --> 00:20:57.279
these Chapter 11 cases. A Canadian court has

00:20:57.279 --> 00:21:00.119
already granted recognition of these Chapter

00:21:00.119 --> 00:21:03.660
11 cases and thus is prepared to give effect

00:21:03.660 --> 00:21:06.859
to any order that this court issues with respect

00:21:06.859 --> 00:21:10.720
to a stay of the class actions. First, I'd like

00:21:10.720 --> 00:21:13.920
to deal with some housekeeping evidentiary matters.

00:21:14.859 --> 00:21:17.660
As an initial matter, we'd like to admit the

00:21:17.660 --> 00:21:20.559
declaration of Mary Buttery in support of the

00:21:20.559 --> 00:21:25.779
motion at docket number 434. Ms. Buttery is counsel

00:21:25.779 --> 00:21:29.579
to the debtors and the individual defendants

00:21:29.579 --> 00:21:32.859
in the Canadian class actions. And her declaration

00:21:32.859 --> 00:21:35.980
describes the proceedings thus far in those cases.

00:21:36.759 --> 00:21:39.460
She's available on Zoom should the court have

00:21:39.460 --> 00:21:42.200
any questions for her. But we understand the

00:21:42.200 --> 00:21:44.700
respondents do not intend any cross -examination.

00:21:45.299 --> 00:21:47.420
OK. Any objection to receipt of the Buttery declaration

00:21:47.420 --> 00:21:51.869
and evidence? No objection your honor. Thank

00:21:51.869 --> 00:21:54.769
you. Okay. I'll receive it 434 is in evidence

00:21:54.769 --> 00:21:58.089
And just for clarification your honor We'd also

00:21:58.089 --> 00:22:00.930
move to admit the exhibits to that declaration

00:22:00.930 --> 00:22:04.130
which are all public records of Canadian court

00:22:04.130 --> 00:22:08.609
proceedings including complaints in the two putative

00:22:08.609 --> 00:22:12.710
class actions and Anonymization order in those

00:22:12.710 --> 00:22:17.390
cases and a proposed amended complaints We would

00:22:17.390 --> 00:22:19.500
offer those into evidence as well All right.

00:22:19.559 --> 00:22:24.259
Any objection? No objection, Your Honor. Thank

00:22:24.259 --> 00:22:28.599
you. Thank you. Third minute. Next, we'd move

00:22:28.599 --> 00:22:33.319
to admit exhibit A, B, and C to the Segal Declaration

00:22:33.319 --> 00:22:38.900
filed at docket number 435. Those documents consist

00:22:38.900 --> 00:22:43.019
of certificates of incorporation for the debtors

00:22:43.019 --> 00:22:47.789
23andMe Folding Co. and 23andMe Inc. There are

00:22:47.789 --> 00:22:49.809
public records that have been filed with the

00:22:49.809 --> 00:22:52.369
Delaware Secretary of State's we would request

00:22:52.369 --> 00:22:56.369
that the court admit those as well You said a

00:22:56.369 --> 00:23:01.089
B and C but not D D is a red line comparison

00:23:01.089 --> 00:23:04.950
of Exhibits a and D to the buttery declaration.

00:23:04.950 --> 00:23:08.390
So we think it's better considered as an Illustrative

00:23:08.390 --> 00:23:11.150
aid rather than an actual item to be admitted

00:23:11.150 --> 00:23:14.160
into evidence. Okay Fair point. All right. Any

00:23:14.160 --> 00:23:16.279
objection to the receipt of exhibits A, B, and

00:23:16.279 --> 00:23:20.240
C to the Segal Declaration 435? No objection,

00:23:20.380 --> 00:23:22.039
Your Honor. Okay. That will be admitted as well.

00:23:22.140 --> 00:23:28.000
Thank you. On the substance, Your Honor, this

00:23:28.000 --> 00:23:31.759
motion concerns two Canadian class actions arising

00:23:31.759 --> 00:23:34.839
out of this cybersecurity incident of October

00:23:34.839 --> 00:23:39.720
2023, which has been the subject of many proceedings

00:23:39.720 --> 00:23:43.150
in this court. Respondents filed the first class

00:23:43.150 --> 00:23:47.829
action in October 2023, bringing contractual,

00:23:48.130 --> 00:23:51.269
statutory, and tort claims solely against the

00:23:51.269 --> 00:23:54.569
debtors. The claims focus on what respondents

00:23:54.569 --> 00:23:57.630
allege were deficient data privacy and security

00:23:57.630 --> 00:24:02.750
practices at 23andMe. Then nearly one year later

00:24:02.750 --> 00:24:06.890
in September 2024, respondents sought to add

00:24:06.890 --> 00:24:09.609
additional defendants to the complaint against

00:24:09.609 --> 00:24:13.410
the debtors. Namely, these are certain officers,

00:24:13.549 --> 00:24:17.950
directors, and employees of 23andMe, as well

00:24:17.950 --> 00:24:22.269
as KPMG, who was then the debtor's auditor. Instead

00:24:22.269 --> 00:24:25.289
of obtaining leave to amend, though, respondents

00:24:25.289 --> 00:24:29.049
filed a duplicate class action. They again sued

00:24:29.049 --> 00:24:32.150
the debtors on largely identical claims to the

00:24:32.150 --> 00:24:35.769
first class action and based their claims entirely

00:24:35.769 --> 00:24:39.450
on the same conduct as before. The only difference

00:24:39.640 --> 00:24:43.400
is that they now tacked on these additional defendants,

00:24:43.559 --> 00:24:45.839
calling them at least three times throughout

00:24:45.839 --> 00:24:50.140
the complaint co -principals and or co -conspirators.

00:24:50.759 --> 00:24:53.839
That's in Exhibit C to the Buttery Declaration,

00:24:54.220 --> 00:24:59.039
paragraphs 6, 9, and 47. This second complaint

00:24:59.039 --> 00:25:02.740
does not bring a single claim against the non

00:25:02.740 --> 00:25:06.019
-debtor defendants that is not also alleged against

00:25:06.019 --> 00:25:09.200
the debtors. and doesn't differentiate between

00:25:09.200 --> 00:25:12.460
the debtors and non -debtors in any way in the

00:25:12.460 --> 00:25:15.180
non -debtor claims. There are some claims in

00:25:15.180 --> 00:25:17.400
the complaints that are just claims against the

00:25:17.400 --> 00:25:20.240
debtors, but there are no claims that are just

00:25:20.240 --> 00:25:23.180
against the non -debtor defendants. I'm glad

00:25:23.180 --> 00:25:26.619
to walk, Your Honor, through the causes of action

00:25:26.619 --> 00:25:30.140
in the complaint, if helpful. I've reviewed it.

00:25:30.279 --> 00:25:33.980
Thank you. I appreciate that. The face of the

00:25:33.980 --> 00:25:36.940
complaints, thus, in no way reveals any sort

00:25:36.940 --> 00:25:39.180
of claim against the non -debtor defendants.

00:25:39.200 --> 00:25:41.940
That's not also a claim against the debtors.

00:25:42.440 --> 00:25:44.720
And the proposed amended complaints, which is

00:25:44.720 --> 00:25:47.740
exhibit D to the buttery declaration, is even

00:25:47.740 --> 00:25:51.019
worse in this regard. It pleads five causes of

00:25:51.019 --> 00:25:54.579
action, and each one of those is against, quote,

00:25:54.920 --> 00:25:59.700
each of the defendants. the plaintiffs in the

00:25:59.700 --> 00:26:03.259
many other class actions arising from the cybersecurity

00:26:03.259 --> 00:26:08.500
incident, respondents here have to date refused

00:26:08.500 --> 00:26:12.259
to pursue their claims in these Chapter 11 cases

00:26:12.259 --> 00:26:16.299
or to utilize the procedures that have been extensively

00:26:16.299 --> 00:26:19.259
negotiated and discussed for resolving claims

00:26:19.259 --> 00:26:24.579
arising out of the cybersecurity incident. And

00:26:24.579 --> 00:26:28.279
while it appears that Respondents agree that

00:26:28.279 --> 00:26:30.960
the automatic stay applies to their claims against

00:26:30.960 --> 00:26:33.299
the debtors. They're continuing what amounts

00:26:33.299 --> 00:26:37.019
to proxy litigation against the debtors by bringing

00:26:37.019 --> 00:26:40.519
claims against the debtors, former directors,

00:26:40.819 --> 00:26:45.319
officers, and employees, as well as KPMG. And

00:26:45.319 --> 00:26:48.519
that's because the claims asserted against the

00:26:48.519 --> 00:26:51.119
non -debtors are the same as the claims asserted

00:26:51.119 --> 00:26:54.329
against the debtors. are based entirely on the

00:26:54.329 --> 00:26:56.910
debtor's alleged wrongdoing in the cybersecurity

00:26:56.910 --> 00:27:00.430
incident, and would result in recovery from the

00:27:00.430 --> 00:27:03.450
debtors because of indemnification obligations

00:27:03.450 --> 00:27:07.549
that the debtors undisputedly have. In fact,

00:27:07.950 --> 00:27:10.809
the cases are already taxing estate resources

00:27:10.809 --> 00:27:13.609
because the debtors are required to indemnify

00:27:13.609 --> 00:27:16.829
the individual defendants, not just for any judgment,

00:27:16.910 --> 00:27:20.009
but also for their legal fees. So Mr. Siegel,

00:27:20.529 --> 00:27:24.849
the response Mentions that insurance is defending

00:27:24.849 --> 00:27:28.230
the litigation And I didn't see a rebuttal to

00:27:28.230 --> 00:27:32.109
that in your in your reply So is the estate coming

00:27:32.109 --> 00:27:34.170
out of pocket for defense costs right now or

00:27:34.170 --> 00:27:40.390
is an insurance company? At the moment the State

00:27:40.390 --> 00:27:43.750
is out of pocket for those there is insurance

00:27:43.750 --> 00:27:48.630
That is applicable with a retention that may

00:27:48.630 --> 00:27:53.109
be waived in the case of bankruptcy But ultimately,

00:27:55.029 --> 00:27:59.049
the estate, at the end of the day, stands liable

00:27:59.049 --> 00:28:02.069
based on its indemnification obligations. So

00:28:02.069 --> 00:28:04.849
is there a denial of coverage or dispute about

00:28:04.849 --> 00:28:06.410
coverage, or is it just you haven't reached the

00:28:06.410 --> 00:28:09.190
retention level yet? My understanding is the

00:28:09.190 --> 00:28:16.519
latter. OK, thank you. Now, respondents. have

00:28:16.519 --> 00:28:19.779
not been able to identify a single case where

00:28:19.779 --> 00:28:22.500
litigation has been allowed to proceed under

00:28:22.500 --> 00:28:25.539
the circumstances I just described. In fact,

00:28:25.539 --> 00:28:29.180
they don't cite a single US case in their briefing.

00:28:30.140 --> 00:28:33.640
By contrast, other similarly situated plaintiffs

00:28:33.640 --> 00:28:36.339
who have asserted claims against the debtors

00:28:36.339 --> 00:28:39.799
and non -debtors in analogous circumstances have

00:28:39.799 --> 00:28:43.180
reasonably consented to stay their cases, including

00:28:43.180 --> 00:28:45.930
against the non -debtors. Your Honor's familiar,

00:28:45.950 --> 00:28:49.230
for example, with the pixel litigation that is

00:28:49.230 --> 00:28:51.650
pending against... Well, I know that it exists,

00:28:51.730 --> 00:28:54.470
but that's... I don't even know why it's called

00:28:54.470 --> 00:28:57.289
pixel, so... If you want to go into that, you're

00:28:57.289 --> 00:28:59.210
going to have to spoon feed me a little bit about

00:28:59.210 --> 00:29:02.150
the pixel litigation. It's a class action that's

00:29:02.150 --> 00:29:04.690
not based on the cybersecurity incident. It's

00:29:04.690 --> 00:29:08.690
based on certain tracking pixels, as they're

00:29:08.690 --> 00:29:13.650
termed, on a website operated by Lemonade, but...

00:29:13.680 --> 00:29:17.779
As relevant today, one of the defendants in that

00:29:17.779 --> 00:29:22.640
case is a non -debtor. And shortly after a suggestion

00:29:22.640 --> 00:29:26.240
of bankruptcy was filed, the district court in

00:29:26.240 --> 00:29:30.000
the Northern District of California asked whether

00:29:30.000 --> 00:29:33.279
the stay applied to the non -debtor defendant.

00:29:34.220 --> 00:29:36.920
And plaintiffs in that case came to an agreement

00:29:36.920 --> 00:29:39.940
and a stipulation with the debtors that applied

00:29:39.940 --> 00:29:42.920
the automatic stay. to the non -debtors, and

00:29:42.920 --> 00:29:46.119
that's available on the docket at ECF number

00:29:46.119 --> 00:29:51.720
216. But respondents, the Canadian plaintiffs,

00:29:51.819 --> 00:29:55.220
have refused to agree to any sort of stay or

00:29:55.220 --> 00:29:58.200
stipulation with respect to the non -debtor defendants

00:29:58.200 --> 00:30:01.940
here, which plainly is an effort to evade this

00:30:01.940 --> 00:30:05.559
court's jurisdiction. and the orderly resolution

00:30:05.559 --> 00:30:08.779
of data breach claims that the parties and the

00:30:08.779 --> 00:30:12.180
court have sought to establish in these cases.

00:30:13.380 --> 00:30:16.799
The court should grant the motion for three fundamental

00:30:16.799 --> 00:30:20.380
reasons. First, as noted, the claims against

00:30:20.380 --> 00:30:23.000
the non -debtor additional defendants in the

00:30:23.000 --> 00:30:25.960
Canadian proceedings are identical to the claims

00:30:25.960 --> 00:30:29.099
against the debtors and arise from the debtors

00:30:29.099 --> 00:30:32.279
alleged misconduct in the cybersecurity incident.

00:30:32.430 --> 00:30:35.490
In essence, the complaint says the debtors did

00:30:35.490 --> 00:30:39.150
something wrong and certain additional defendants

00:30:39.150 --> 00:30:42.809
are liable because of it. This means that resolution

00:30:42.809 --> 00:30:45.690
of those claims based on the debtor's alleged

00:30:45.690 --> 00:30:48.509
wrongdoing without the debtor's participation

00:30:48.509 --> 00:30:52.509
would be highly prejudicial to the debtors. Second,

00:30:53.130 --> 00:30:56.089
the individual non -debtor defendants have an

00:30:56.089 --> 00:30:59.089
undisputed right to indemnification for claims

00:30:59.089 --> 00:31:02.059
against them, which means that At the end of

00:31:02.059 --> 00:31:04.559
the day, the debtors are the ones on the hook

00:31:04.559 --> 00:31:07.740
for any judgment in the Canadian class actions,

00:31:08.259 --> 00:31:11.500
as well as for legal fees. And courts routinely

00:31:11.500 --> 00:31:14.660
apply the automatic stay to non -debtors in such

00:31:14.660 --> 00:31:19.079
circumstances. Third, the continuation of the

00:31:19.079 --> 00:31:22.339
Canadian class actions, even as to the additional

00:31:22.339 --> 00:31:25.980
defendants, would disturb these Chapter 11 cases,

00:31:26.359 --> 00:31:29.119
where the debtors are presently resolving their

00:31:29.119 --> 00:31:32.019
other liabilities stemming from the data breach

00:31:32.019 --> 00:31:36.700
incident. By contrast, applying the stay threatens

00:31:36.700 --> 00:31:39.740
no prejudice to respondents who would face at

00:31:39.740 --> 00:31:43.019
most a slight delay while these Chapter 11 cases

00:31:43.019 --> 00:31:47.460
are resolved. The only argument that respondents

00:31:47.460 --> 00:31:50.220
have presented to the contrary seems to be that

00:31:50.220 --> 00:31:53.799
there is some hidden distinct liability theory

00:31:53.799 --> 00:31:57.339
as to the non -debtor defendants, but that's

00:31:57.339 --> 00:32:00.000
simply contrary to the face of the complaint.

00:32:00.279 --> 00:32:02.559
As I've mentioned to your honor, every cause

00:32:02.559 --> 00:32:05.759
of action against the non -debtors is also a

00:32:05.759 --> 00:32:08.960
cause of action against the debtors. The complaint

00:32:08.960 --> 00:32:11.920
states that it, quote, arises out of two main

00:32:11.920 --> 00:32:16.220
allegations, which are that, quote, the 23 and

00:32:16.220 --> 00:32:19.480
me defendants did not introduce, implement, and

00:32:19.480 --> 00:32:22.779
or maintain proper data retention practices.

00:32:23.309 --> 00:32:27.470
End quote, the 23 and me defendants did not introduce,

00:32:27.769 --> 00:32:31.049
implement, and or maintain proper data protection

00:32:31.049 --> 00:32:34.210
measures and or practices. That's at paragraph

00:32:34.210 --> 00:32:38.049
8 of exhibit C to the buttery declaration. So

00:32:38.049 --> 00:32:40.549
simply, the suggestion that there is some sort

00:32:40.549 --> 00:32:44.670
of distinct liability theory is contrary to the

00:32:44.670 --> 00:32:46.809
face of the complaint, which says the debtors

00:32:46.809 --> 00:32:50.130
did something wrong and the non -debtors are

00:32:50.130 --> 00:32:54.259
liable for it. At the end of the day the claims

00:32:54.259 --> 00:32:57.039
against the non debtors are the same claims as

00:32:57.039 --> 00:32:59.799
those against the debtors are based on the same

00:32:59.799 --> 00:33:04.180
conduct as that as of the debtors and Ultimately

00:33:04.180 --> 00:33:07.299
seek the same source of recovery Which is the

00:33:07.299 --> 00:33:10.299
debtors and for those reasons unless the court

00:33:10.299 --> 00:33:13.319
has any questions We would ask that the court

00:33:13.319 --> 00:33:15.740
grant the motion. Okay. Thank you. I do have

00:33:15.740 --> 00:33:19.740
a few questions for you personal jurisdiction

00:33:19.740 --> 00:33:24.190
the Canadian plaintiffs, at least in their declaration,

00:33:24.609 --> 00:33:26.329
have made what I'm interpreting as a special

00:33:26.329 --> 00:33:29.349
appearance. They're not acknowledging that this

00:33:29.349 --> 00:33:31.589
court has personal jurisdiction over them. Tell

00:33:31.589 --> 00:33:34.170
me your thoughts on that. There are a couple

00:33:34.170 --> 00:33:37.450
of answers to that, Your Honor. First, as you

00:33:37.450 --> 00:33:41.799
mentioned, this is kind of a throwaway. statement

00:33:41.799 --> 00:33:46.079
in Mr. Clark's declaration, and there's no argument

00:33:46.079 --> 00:33:48.380
in the motion whatsoever that there's a lack

00:33:48.380 --> 00:33:51.380
of personal jurisdiction. Typically, a party

00:33:51.380 --> 00:33:54.259
entering a special appearance would be required

00:33:54.259 --> 00:33:58.099
to contest personal jurisdiction in their first

00:33:58.099 --> 00:34:01.460
filing, which did not happen in these motions,

00:34:01.779 --> 00:34:05.240
nor in the stipulation that respondents previously

00:34:05.240 --> 00:34:08.320
agreed to, signed, and filed before this court.

00:34:08.780 --> 00:34:11.659
We also attempted to resolve any jurisdictional

00:34:11.659 --> 00:34:15.340
issues by agreement to proceed by motion and

00:34:15.340 --> 00:34:19.260
therefore via an in rem proceeding in this court

00:34:19.260 --> 00:34:22.579
as to the scope of the automatic stay rather

00:34:22.579 --> 00:34:27.099
than any sort of impersonal adversary proceeding

00:34:27.099 --> 00:34:31.920
against the respondents. And I'm happy to speak

00:34:31.920 --> 00:34:35.679
to the minimum contacts that respondents have

00:34:35.679 --> 00:34:38.650
with the United States if. that would be helpful.

00:34:38.989 --> 00:34:42.550
But as noted, the Canadian court has recognized

00:34:42.550 --> 00:34:45.869
these proceedings and stands ready to give effect

00:34:45.869 --> 00:34:49.630
to this court's determination as to the automatic

00:34:49.630 --> 00:34:52.389
stay. In other words, this court could make a

00:34:52.389 --> 00:34:55.809
finding about the scope of the stay, and a Canadian

00:34:55.809 --> 00:34:58.590
court can then tell the trial court in Canada

00:34:58.590 --> 00:35:01.429
the proceedings have been stayed. So I see your

00:35:01.429 --> 00:35:04.710
point about that aspect of the motion being more

00:35:04.710 --> 00:35:09.269
or less in realm. But if I need to extend the

00:35:09.269 --> 00:35:12.070
automatic stay to reach the plaintiffs, aren't

00:35:12.070 --> 00:35:14.630
we in the world of impersonum at that point?

00:35:14.710 --> 00:35:17.389
Don't I need personal jurisdiction over these

00:35:17.389 --> 00:35:20.309
two plaintiffs and or their counsel to extend

00:35:20.309 --> 00:35:24.369
the automatic stay to reach them? First, our

00:35:24.369 --> 00:35:28.570
counsel has appeared, Prohap Viche, in this court

00:35:28.570 --> 00:35:35.889
at this stage. And in determining the scope of

00:35:35.889 --> 00:35:43.269
the stay, would be a matter within this court's

00:35:43.269 --> 00:35:49.630
core jurisdiction. As to whether any further

00:35:49.630 --> 00:35:53.269
relief would require impersonal jurisdiction,

00:35:54.050 --> 00:35:57.570
I think it's helpful to take a look at exactly

00:35:57.570 --> 00:36:00.949
what respondents have done here. I do think,

00:36:00.949 --> 00:36:02.469
yeah, let's talk about minimum context. Give

00:36:02.469 --> 00:36:04.070
me an overview of that, if you would, please.

00:36:04.269 --> 00:36:09.090
Sure. As an initial matter, respondents purportedly

00:36:09.090 --> 00:36:14.610
chose to do business with a US company by purportedly

00:36:14.610 --> 00:36:18.010
entering contracts with using the products of

00:36:18.010 --> 00:36:21.469
23andMe, which is a US -based entity. And thus,

00:36:22.110 --> 00:36:24.190
they availed themselves of the privilege of doing

00:36:24.190 --> 00:36:28.050
business in the United States. In connection

00:36:28.050 --> 00:36:32.969
with that, they received saliva collection kits

00:36:32.969 --> 00:36:36.449
from a US company. collected saliva, sent it

00:36:36.449 --> 00:36:39.550
back to the United States for it to be processed

00:36:39.550 --> 00:36:43.610
by a US company at a laboratory in the United

00:36:43.610 --> 00:36:48.809
States and ultimately a return to them in Canada.

00:36:49.989 --> 00:36:55.489
On top of that, the respondents have initiated

00:36:55.489 --> 00:37:00.590
a lawsuit in which they repeatedly allege that

00:37:00.590 --> 00:37:04.800
the debtors are US -based entities. And thus,

00:37:05.199 --> 00:37:08.099
they've also recently filed a proposed amended

00:37:08.099 --> 00:37:13.619
complaint in that lawsuit. And by doing so, during

00:37:13.619 --> 00:37:20.139
this bankruptcy case, I'm happy to provide case

00:37:20.139 --> 00:37:23.340
law to this court out of the Eighth Circuit that

00:37:23.340 --> 00:37:26.659
says that filing a lawsuit against a US -based

00:37:26.659 --> 00:37:31.079
debtor during the existence of a stay constitutes

00:37:31.079 --> 00:37:35.380
minimum contact. brings the respondents within

00:37:35.380 --> 00:37:38.159
this court's personal jurisdiction. I haven't

00:37:38.159 --> 00:37:41.980
seen that. I'm not familiar with that specific

00:37:41.980 --> 00:37:44.860
case law. I don't know if you have it handy or

00:37:44.860 --> 00:37:48.579
if you have access to it, want to supply it in

00:37:48.579 --> 00:37:50.079
rebuttal or something like that. I'd be curious

00:37:50.079 --> 00:37:53.139
to hear about that because in poking around,

00:37:53.280 --> 00:37:55.059
I've not found anything quite that specific.

00:37:55.840 --> 00:37:58.639
Yes, I believe that is cited in the adversary

00:37:58.639 --> 00:38:01.440
complaints that we initially filed, but I'm happy

00:38:01.440 --> 00:38:04.809
to finds that and present it on rebuttal. Would

00:38:04.809 --> 00:38:06.369
that be helpful? Thank you. I appreciate that.

00:38:06.389 --> 00:38:09.550
OK. But even short of that, we'd submit that

00:38:09.550 --> 00:38:14.030
doing business in the United States as respondents

00:38:14.030 --> 00:38:17.750
did via their use of the 23andMe kits is sufficient

00:38:17.750 --> 00:38:20.889
minimum contacts for purposes of this motion.

00:38:21.829 --> 00:38:23.429
And so it seems to me you're talking about a

00:38:23.429 --> 00:38:26.010
very specific kind of specific jurisdiction or

00:38:26.010 --> 00:38:28.969
very specific aspect of specific jurisdiction.

00:38:29.420 --> 00:38:32.219
I have personal jurisdiction over these plaintiffs

00:38:32.219 --> 00:38:34.480
as to the scope of this lawsuit, and we don't

00:38:34.480 --> 00:38:36.940
need to think about whether I would have personal

00:38:36.940 --> 00:38:40.679
jurisdiction to handle a breach of contract claim

00:38:40.679 --> 00:38:43.539
against them or something much further afield

00:38:43.539 --> 00:38:45.800
from the core of the bankruptcy case. Is that

00:38:45.800 --> 00:38:48.019
the nature of your personal jurisdiction theory?

00:38:49.159 --> 00:38:53.880
I think with respect to our NRAAM theories, that's

00:38:53.880 --> 00:38:58.139
certainly the case. With respect to in personam,

00:38:58.300 --> 00:39:02.619
jurisdiction. I think there are sufficient minimum

00:39:02.619 --> 00:39:07.519
contacts to exercise specific personal jurisdiction

00:39:07.519 --> 00:39:11.940
regarding respondents' dealings with 23andMe,

00:39:12.019 --> 00:39:15.239
which they state formed the basis of the claims

00:39:15.239 --> 00:39:19.239
in this action. There simply is no, there are

00:39:19.239 --> 00:39:25.559
no Canadian class actions without the exact business

00:39:25.559 --> 00:39:28.619
transactions I just described. I don't think

00:39:28.619 --> 00:39:31.480
the court needs to go farther than that in determining

00:39:31.480 --> 00:39:34.679
the extent of jurisdiction. OK, that's helpful.

00:39:39.019 --> 00:39:41.900
OK, well, we'll give you a chance, Mr. Numitalati,

00:39:42.219 --> 00:39:45.099
after I run through some questions. Thank you.

00:39:46.760 --> 00:39:53.900
Irreparable injury. So if I grant an interpretation

00:39:53.900 --> 00:39:56.780
of the state or a preliminary injunction that

00:39:57.070 --> 00:40:02.670
Stays this litigation How long does that preliminary

00:40:02.670 --> 00:40:07.730
injunction or that stay last? We'd we'd submit

00:40:07.730 --> 00:40:11.050
that it would be appropriate at least through

00:40:11.050 --> 00:40:15.510
the Continuation of these chapter 11 cases that

00:40:15.510 --> 00:40:20.969
they can they can proceed uninterrupted by what's

00:40:20.969 --> 00:40:24.929
going on in Canada and We we think it would be

00:40:24.929 --> 00:40:28.320
appropriate during that time to attempt to work

00:40:28.320 --> 00:40:33.599
with respondents, as we already have, to help

00:40:33.599 --> 00:40:37.360
them engage in the exact claim resolution process

00:40:37.360 --> 00:40:40.880
that other class actions against the debtors

00:40:40.880 --> 00:40:43.699
are undergoing at this time. So we're talking

00:40:43.699 --> 00:40:46.360
about the stay or an injunction extending the

00:40:46.360 --> 00:40:50.400
stay through confirmation of the plan? Let me

00:40:50.400 --> 00:40:53.739
consult momentarily with my colleagues. Sure,

00:40:53.739 --> 00:41:22.079
of course. So your honor to clarify We seek the

00:41:22.079 --> 00:41:25.679
stay through the effective date of the plan And

00:41:25.679 --> 00:41:30.360
just to note one one further point on jurisdiction

00:41:30.360 --> 00:41:36.579
We are we are asking this court to issue an order

00:41:36.579 --> 00:41:40.860
with respect to the scope of the stay But that

00:41:40.860 --> 00:41:44.190
order as I noted well ultimately be recognized

00:41:44.190 --> 00:41:47.170
by a Canadian court and enforced by a Canadian

00:41:47.170 --> 00:41:50.969
court, which unquestionably has personal jurisdiction

00:41:50.969 --> 00:41:56.030
over respondents. Okay, that's helpful. All right,

00:41:56.070 --> 00:42:01.590
so if the stay extends or is extended through

00:42:01.590 --> 00:42:05.409
the effective date of a plan, what is going to

00:42:05.409 --> 00:42:09.949
happen in the litigation in Canada that's irreparable

00:42:09.949 --> 00:42:15.780
injury if I don't do that? First there is a hearing

00:42:15.780 --> 00:42:20.480
as I noted scheduled for June 16 and I'm sorry

00:42:20.480 --> 00:42:23.860
to interrupt but the the Plaintiffs declaration

00:42:23.860 --> 00:42:26.159
says that hearing is only on the motion to consolidate

00:42:26.159 --> 00:42:29.480
the two cases. Is that right? Part of that motion

00:42:29.480 --> 00:42:33.500
includes the amendment of the complaints the

00:42:33.500 --> 00:42:36.960
amendments you can see at exhibit D to the Segal

00:42:36.960 --> 00:42:40.260
Declaration and among those is to enlarge the

00:42:40.260 --> 00:42:44.320
class so that it is no longer just individuals

00:42:44.320 --> 00:42:49.260
in Canada whose data was breached and now expands

00:42:49.260 --> 00:42:53.360
to all 23andMe customers in Canada, that sort

00:42:53.360 --> 00:42:57.400
of vast expansion of the potential liability

00:42:57.400 --> 00:43:04.039
of the debtors or the debtors by proxy through

00:43:04.039 --> 00:43:08.099
the non -debtors is a substantial irreparable

00:43:08.099 --> 00:43:13.199
threat to the estate. The debtors can't see scope

00:43:13.199 --> 00:43:16.000
of their liability expanding as they're trying

00:43:16.000 --> 00:43:20.380
to complete a reorganization. There are also

00:43:20.380 --> 00:43:25.460
changes to the claims that are sought in the

00:43:25.460 --> 00:43:29.019
proposed consolidation and there are the fees

00:43:29.019 --> 00:43:34.179
that the debtors would need to indemnify the

00:43:34.179 --> 00:43:39.099
individual defendants for as the June 16th hearing

00:43:39.099 --> 00:43:44.489
occurs. Now past the June 16th hearing assuming

00:43:44.489 --> 00:43:49.090
that the motion is granted we expect there to

00:43:49.090 --> 00:43:53.670
be proceedings regarding motions that according

00:43:53.670 --> 00:43:58.690
to respondents own words will Determine the universe

00:43:58.690 --> 00:44:01.829
of claims against the debtors in other words.

00:44:01.829 --> 00:44:06.429
There's the potential for liability against the

00:44:06.429 --> 00:44:12.360
debtors to to accrue via those proceedings and

00:44:12.360 --> 00:44:14.519
not give the debtors the breathing spell to wish

00:44:14.519 --> 00:44:18.579
they are entitled. And subsequently, there will

00:44:18.579 --> 00:44:22.280
be motions for class certification, which do

00:44:22.280 --> 00:44:26.400
involve factual affidavits as set forth in Ms.

00:44:26.559 --> 00:44:31.340
Buttery's declaration and that sort of fact gathering,

00:44:31.579 --> 00:44:34.099
much like any discovery that might subsequently

00:44:34.099 --> 00:44:38.119
occur in this In these actions would squarely

00:44:38.119 --> 00:44:41.500
implicate the debtors. So the the plaintiffs

00:44:41.500 --> 00:44:45.000
lay out a pretty extensive timeline in their

00:44:45.000 --> 00:44:50.400
declaration Starting in paragraph 37 And you

00:44:50.400 --> 00:44:53.280
haven't really addressed that with with the reply

00:44:53.280 --> 00:44:56.940
but Is that timeline roughly accurate? I don't

00:44:56.940 --> 00:44:59.659
have all the details on my screen here, but class

00:44:59.659 --> 00:45:02.539
certification We're talking about 2027 or 2028

00:45:02.539 --> 00:45:06.699
if I remember correctly I don't want to stand

00:45:06.699 --> 00:45:10.079
here and speculate as to what will happen in

00:45:10.079 --> 00:45:14.179
terms of timeline. As you see, the timeline set

00:45:14.179 --> 00:45:18.599
forth in Mr. Karp's declaration makes a vast

00:45:18.599 --> 00:45:20.579
number of assumptions about whether there will

00:45:20.579 --> 00:45:24.280
be appeals from different orders, the timeline

00:45:24.280 --> 00:45:27.699
for those appeals. What I think that the timeline

00:45:27.699 --> 00:45:32.699
does speak to unquestionably though is that if

00:45:32.699 --> 00:45:35.730
respondents are correct, then there is effectively

00:45:35.730 --> 00:45:40.190
no prejudice to them from issuing a stay through

00:45:40.190 --> 00:45:44.670
these fast -moving Chapter 11 cases to resolve

00:45:44.670 --> 00:45:49.710
to give the debtors a breathing spell from what

00:45:49.710 --> 00:45:53.710
respondents say will take many years beyond the

00:45:53.710 --> 00:45:59.190
Chapter 11 cases. The plaintiffs refer to Ms.

00:45:59.349 --> 00:46:02.159
Wojcicki as a Former director I thought in earlier

00:46:02.159 --> 00:46:03.820
proceedings. There was a discussion that she

00:46:03.820 --> 00:46:05.500
was still on the board, but not on the special

00:46:05.500 --> 00:46:07.679
committee I'm sure there's a straightforward

00:46:07.679 --> 00:46:09.920
answer to that. Do you do you have it handy?

00:46:13.880 --> 00:46:15.559
For the record Christopher Hopkins are always

00:46:15.559 --> 00:46:17.460
for the debtors your honor. Um, miss widgets

00:46:17.460 --> 00:46:21.019
key is Currently still a member of the board

00:46:21.019 --> 00:46:24.260
of directors of of the debtors. She is not a

00:46:24.260 --> 00:46:27.079
member of the special committee That's been delegated

00:46:27.179 --> 00:46:29.320
Effectively the full authority of the board with

00:46:29.320 --> 00:46:31.519
respect to all restructuring related. I thought

00:46:31.519 --> 00:46:32.760
that's what I remember. Thank you for clarifying

00:46:32.760 --> 00:46:38.280
that All right, then how about KPMG I haven't

00:46:38.280 --> 00:46:42.559
seen anything about indemnification of KPMG and

00:46:42.559 --> 00:46:47.940
I do see in the complaint Some daylight between

00:46:47.940 --> 00:46:51.400
the claims against KPMG and the claims against

00:46:51.400 --> 00:46:54.619
everybody else Related to the fact that they're

00:46:54.619 --> 00:46:56.500
the auditor and auditors do different things

00:46:56.500 --> 00:46:59.710
then Officers and directors do and there's some

00:46:59.710 --> 00:47:01.969
discussion of that complaint, but the more more

00:47:01.969 --> 00:47:05.909
important issue is indemnification of KPMG Are

00:47:05.909 --> 00:47:07.690
they indemnified and where is that in the record?

00:47:08.530 --> 00:47:13.110
They're not indemnified Your honor, but nonetheless

00:47:13.110 --> 00:47:18.190
the proceedings against KPMG are all about what

00:47:18.190 --> 00:47:22.940
occurred in the cybersecurity incidents and what

00:47:22.940 --> 00:47:26.599
little there is in the complaints that is specific

00:47:26.599 --> 00:47:31.400
to KPMG are, for example, statements that KPMG

00:47:31.400 --> 00:47:34.820
puts in advertising materials on its website.

00:47:35.119 --> 00:47:38.699
They're fundamentally ancillary to what respondents

00:47:38.699 --> 00:47:41.920
describe as the main allegations in the complaints,

00:47:42.079 --> 00:47:46.059
which are deficiencies in the debtor's cybersecurity

00:47:46.519 --> 00:47:50.860
practices and data retention practices and KPMG

00:47:50.860 --> 00:47:53.920
like the others is alleged to be a co -principal

00:47:53.920 --> 00:47:56.760
and or co -conspirator. Okay and are they covered

00:47:56.760 --> 00:48:00.059
by the same insurance that covers the debtors

00:48:00.059 --> 00:48:02.239
or they have their own insurance or no insurance

00:48:02.239 --> 00:48:08.400
at all? I'm not aware of they're being covered

00:48:08.400 --> 00:48:12.280
by the insurance policy that covers the debtors.

00:48:13.119 --> 00:48:18.409
Happy to look into that. to the extent the court

00:48:18.409 --> 00:48:24.550
would like. All right. I have what's going to

00:48:24.550 --> 00:48:26.170
sound like an oddball question, but I'll explain.

00:48:26.550 --> 00:48:29.889
Are the debtors offering any security in support

00:48:29.889 --> 00:48:31.730
of a preliminary injunction to the extent this

00:48:31.730 --> 00:48:33.289
heads in the direction of preliminary injunction?

00:48:33.389 --> 00:48:36.269
And the reason I ask that is I think the bankruptcy

00:48:36.269 --> 00:48:39.050
lawyers know that the court can waive security

00:48:39.050 --> 00:48:44.269
for a debtor under Rule 7065. But HR 1, the One

00:48:44.269 --> 00:48:47.059
Big Beautiful Bill Act. moving through Congress

00:48:47.059 --> 00:48:49.480
contains language that could be read to make

00:48:49.480 --> 00:48:52.000
a preliminary injunction unenforceable unless

00:48:52.000 --> 00:48:54.840
security has been provided. And it appears to

00:48:54.840 --> 00:48:57.539
apply to injunctions that are in existence before

00:48:57.539 --> 00:49:00.860
the bill is enacted into law. So that's a very

00:49:00.860 --> 00:49:02.940
long explanation for why I asked what I think

00:49:02.940 --> 00:49:09.059
is an odd question. Understood, Your Honor. We

00:49:09.059 --> 00:49:13.280
don't believe that security would be appropriate

00:49:13.280 --> 00:49:18.389
in these circumstances given given the financial

00:49:18.389 --> 00:49:21.550
distress that the debtors find themselves in

00:49:21.550 --> 00:49:27.869
and The fact that even as to the non debtors

00:49:27.869 --> 00:49:32.130
as I've spent a lot of time on Those claims are

00:49:32.130 --> 00:49:36.250
fundamentally claims against the debtors with

00:49:36.250 --> 00:49:42.840
respect to the big beautiful bill, I'm candidly

00:49:42.840 --> 00:49:47.719
not not certain of its application to this proceeding

00:49:47.719 --> 00:49:51.340
It's it's not the sort of proceeding that Congress

00:49:51.340 --> 00:49:56.260
has in mind. I'm pretty sure but It the language

00:49:56.260 --> 00:50:06.500
is Big Understood that to something we're glad

00:50:06.500 --> 00:50:10.239
to look into if it would be helpful to the court,

00:50:10.420 --> 00:50:16.789
but Short of that answer is that a security wouldn't

00:50:16.789 --> 00:50:20.289
be appropriate given the distress that the debtors

00:50:20.289 --> 00:50:22.849
find themselves in and that the non -debtor claims

00:50:22.849 --> 00:50:26.309
are really debtor claims. OK. Thank you. That's

00:50:26.309 --> 00:50:28.750
helpful. That's all the questions I had for you,

00:50:28.769 --> 00:50:32.969
Mr. C. Thank you very much. Let's hear from the

00:50:32.969 --> 00:50:36.170
plaintiffs. I've been calling the plaintiffs,

00:50:37.070 --> 00:50:40.769
the respondents in this motion. Mr. Neema Tolali,

00:50:40.809 --> 00:50:44.030
am I saying that correctly? Yes, Your Honor,

00:50:44.269 --> 00:50:47.530
absolutely correctly. Very good. Please proceed.

00:50:48.889 --> 00:50:50.869
Thank you, Your Honor. So just wanted to touch

00:50:50.869 --> 00:50:54.010
base quickly on the issues around jurisdiction

00:50:54.010 --> 00:50:58.010
and I guess relatedly the injunction and security

00:50:58.010 --> 00:51:03.610
for cost. I apologize if our claim or our declaration

00:51:03.610 --> 00:51:06.610
was maybe a little bit not as clear as it could

00:51:06.610 --> 00:51:09.559
have been. The language that we included was

00:51:09.559 --> 00:51:12.380
in response to the adversary complaint. Obviously,

00:51:12.900 --> 00:51:17.440
23 and me had filed against the clients. We were

00:51:17.440 --> 00:51:19.559
shocked to receive that with no notice to us,

00:51:19.699 --> 00:51:22.340
especially so given the very first day of the

00:51:22.340 --> 00:51:24.900
commencement of these proceedings. We were in

00:51:24.900 --> 00:51:28.400
direct contact with the Canadian Council to the

00:51:28.400 --> 00:51:31.039
debtors, and we had stated to them that we would

00:51:31.039 --> 00:51:34.079
comply with the scope of this day. There was

00:51:34.079 --> 00:51:37.440
absolutely no reason to file an adversary complaint

00:51:37.440 --> 00:51:43.559
and especially, you know, with no notice to us.

00:51:44.679 --> 00:51:47.400
And just to be clear, the adversary complaint

00:51:47.400 --> 00:51:51.239
includes incorrect statements regarding the fact

00:51:51.239 --> 00:51:54.440
and the connection with the United States and

00:51:54.440 --> 00:51:57.239
whatnot. So that language in the declaration

00:51:57.239 --> 00:52:01.119
really speaks to the context of coming from that.

00:52:02.680 --> 00:52:06.559
our adversary proceeding situation into this

00:52:06.559 --> 00:52:09.380
more proper forum to address the scope of the

00:52:09.380 --> 00:52:13.719
state. But besides that, there is really no dispute

00:52:13.719 --> 00:52:18.659
that Your Honor has the authority to extend or

00:52:18.659 --> 00:52:20.940
determine the scope of the state. And if you

00:52:20.940 --> 00:52:23.739
determine that the state should be extended to

00:52:23.739 --> 00:52:27.130
any up -and -on debtors, We, of course, comply.

00:52:27.469 --> 00:52:30.769
As my friend indicated, the Canadian court has

00:52:30.769 --> 00:52:33.730
now recognized these proceedings in Canada that

00:52:33.730 --> 00:52:38.210
happened on our consent. So, if you're already

00:52:38.210 --> 00:52:41.809
granted further order with respect to the state,

00:52:42.969 --> 00:52:45.269
and that order will have to be recognized in

00:52:45.269 --> 00:52:47.630
Canada as well. So, we will consent to that very

00:52:47.630 --> 00:52:50.320
obviously as well. That is also to say also I

00:52:50.320 --> 00:52:54.199
don't think there is any reason to have a discussion

00:52:54.199 --> 00:52:56.300
around an injunction. We have been complying

00:52:56.300 --> 00:52:58.840
and we say we will continue to comply with the

00:52:58.840 --> 00:53:01.800
state of the proceedings as it may be in place.

00:53:02.239 --> 00:53:05.239
And on that note, I think the issue regarding

00:53:05.239 --> 00:53:10.420
a security for cost would also be moved. Okay.

00:53:10.639 --> 00:53:12.619
Thank you. That's helpful. How about the merits?

00:53:14.970 --> 00:53:19.050
Your Honor, we have a declaration of LE card

00:53:19.050 --> 00:53:21.590
that I would like to introduce into evidence.

00:53:22.010 --> 00:53:28.389
That is docket number 584. That obviously is

00:53:28.389 --> 00:53:30.829
out of narrative regarding the events and proceedings

00:53:30.829 --> 00:53:34.869
in Canada. The difference is that I did not object

00:53:34.869 --> 00:53:37.969
to the declaration of Ms. Buttery being admitted

00:53:37.969 --> 00:53:40.750
to evidence. But with respect, I do believe that

00:53:40.750 --> 00:53:44.300
it's incomplete in some respects. A very clear

00:53:44.300 --> 00:53:46.679
example would be when Ms. Buttery said, well,

00:53:46.780 --> 00:53:48.920
if the action proceeds, we're going to get its

00:53:48.920 --> 00:53:51.420
certification, and then there's going to be discovery.

00:53:51.840 --> 00:53:53.539
Well, that is correct, but we've got to bear

00:53:53.539 --> 00:53:55.539
in mind that that's not going to happen until

00:53:55.539 --> 00:54:02.699
2029. So Mr. Carr's declaration provides further

00:54:02.699 --> 00:54:05.980
detail from our perspective regarding the procedure

00:54:05.980 --> 00:54:10.900
in Canada, so we do not exceed to the... to the

00:54:10.900 --> 00:54:14.539
declaration of Ms. Buttery and we rely on Mr.

00:54:14.800 --> 00:54:17.360
Karp's declaration with respect to the relevant

00:54:17.360 --> 00:54:20.780
events and occurrences in Canada. So with respect

00:54:20.780 --> 00:54:26.900
we ask or move to admit Mr. Karp's affidavit

00:54:26.900 --> 00:54:30.119
including the exhibits A through F into the evidence

00:54:30.119 --> 00:54:32.360
before the court. All right. Is there any objection

00:54:32.360 --> 00:54:34.179
to receive the Karp declaration and exhibits?

00:54:34.880 --> 00:54:37.519
No objection, Your Honor. Okay. It'll be received.

00:54:37.539 --> 00:54:45.179
Thank you. Your Honor, my friend said in the

00:54:45.179 --> 00:54:47.260
witness submissions and again on his feet that

00:54:47.260 --> 00:54:51.519
we do not cite the single U .S. authority in

00:54:51.519 --> 00:54:58.039
our response. And that is not fair. The law is

00:54:58.039 --> 00:55:01.400
undisputed. We do not have any debate on the

00:55:01.400 --> 00:55:04.179
law. Frankly, in Canada, I can tell you that

00:55:04.179 --> 00:55:08.260
the concepts are largely the same. And we do

00:55:08.260 --> 00:55:11.079
rely on the same authorities that my friends

00:55:11.079 --> 00:55:16.519
cite in their motion. And specifically, I wanted

00:55:16.519 --> 00:55:20.980
to take you to this case from the applet court

00:55:20.980 --> 00:55:24.300
in the circuit, which is called Richey Capital

00:55:24.300 --> 00:55:29.139
Management. It's a 2011 judgment of the court

00:55:29.139 --> 00:55:36.320
and it's cited in my friend's motion at paragraph

00:55:39.339 --> 00:55:42.480
So I wanted to take you to some excerpt of that

00:55:42.480 --> 00:55:44.860
judgment, and I'm not sure if you have a copy

00:55:44.860 --> 00:55:47.940
of it, or if it would be possible for you to

00:55:47.940 --> 00:55:50.079
have a copy of it, or I can just read out to

00:55:50.079 --> 00:55:52.940
you. I don't have a copy, but I've looked at

00:55:52.940 --> 00:55:57.280
it within the last hour, if that's helpful. I

00:55:57.280 --> 00:56:00.039
think you already allowed me. I would want to

00:56:00.039 --> 00:56:03.030
take you to some of the... from the Appellate

00:56:03.030 --> 00:56:05.309
Court because I think it's germane to what my

00:56:05.309 --> 00:56:10.230
friend was even saying. So this decision has,

00:56:10.230 --> 00:56:13.690
you know, room and numerals 1 and 2 and under

00:56:13.690 --> 00:56:17.409
2 it has section A and section B and section

00:56:17.409 --> 00:56:21.829
B is the one that I'm relying on. And I'm going

00:56:21.829 --> 00:56:25.760
to read... I want to be complete and faithful

00:56:25.760 --> 00:56:28.000
to the decision, but I'm going to skip over some

00:56:28.000 --> 00:56:31.820
of the words and rely on the ones that I want

00:56:31.820 --> 00:56:34.340
to emphasize, especially given that Your Honor

00:56:34.340 --> 00:56:37.260
also read it just recently. But if you want me

00:56:37.260 --> 00:56:41.000
to go and read the balance of the excerpt, just

00:56:41.000 --> 00:56:44.719
maybe let me know. But the portions under Section

00:56:44.719 --> 00:56:50.280
B that I wanted to highlight would be as follows.

00:56:50.619 --> 00:56:53.480
Whatever the precise scope of this category of

00:56:53.480 --> 00:56:56.260
action, it is significantly broader and more

00:56:56.260 --> 00:56:58.360
amorphous than the group of actions affecting

00:56:58.360 --> 00:57:01.719
the status of the receivership. The federal court

00:57:01.719 --> 00:57:04.940
supervising an equity receivership has inherent

00:57:04.940 --> 00:57:09.219
equitable authority to issue a variety of answerative

00:57:09.219 --> 00:57:11.900
relief to protect the receivership and truly

00:57:11.900 --> 00:57:14.900
enough, the scope of that relief is not limited

00:57:14.900 --> 00:57:18.719
to parties before the court. We accept that 100%.

00:57:19.019 --> 00:57:21.780
permissible answer release includes issuance

00:57:21.780 --> 00:57:25.139
of orders imposing blanket state of litigation

00:57:25.139 --> 00:57:29.059
in order to give the receiver a chance to do

00:57:29.059 --> 00:57:32.179
the important job of marshaling and untangling

00:57:32.179 --> 00:57:35.300
company's assets without being forced into court

00:57:35.300 --> 00:57:39.480
by every investor or claimant. But the court's

00:57:39.480 --> 00:57:43.920
power to save up suits by third parties turn

00:57:43.920 --> 00:57:47.739
on the suit's ability to deplete the rest of

00:57:47.739 --> 00:57:50.960
the receivership state, the court's equitable

00:57:50.960 --> 00:57:55.099
powers do not reach cases that pose no threat

00:57:55.099 --> 00:58:03.420
to the assets of the receivership. In this respect,

00:58:03.780 --> 00:58:05.860
equitable powers of the receivership court are

00:58:05.860 --> 00:58:08.500
similar to powers of the bankruptcy court. To

00:58:08.500 --> 00:58:12.500
impose an automatic state, the pool in both securities

00:58:12.500 --> 00:58:14.860
fraud receivership and liquidation bankruptcy

00:58:14.860 --> 00:58:17.119
is identical to the third distribution of the

00:58:17.119 --> 00:58:20.929
liquidated assets. The bankruptcy court can stay

00:58:20.929 --> 00:58:24.389
action against any party, even a non -debtor,

00:58:24.650 --> 00:58:27.670
whenever the objective of the action is to obtain

00:58:27.670 --> 00:58:30.690
position or exercise control over the debtor's

00:58:30.690 --> 00:58:34.989
property, unless the case involves unusual circumstances.

00:58:35.630 --> 00:58:38.769
However, the bankruptcy court cannot halt litigation

00:58:38.769 --> 00:58:42.429
by non -debtors. Even, this is very important

00:58:42.429 --> 00:58:47.110
for my purpose, Your Honor, even if they are

00:58:47.110 --> 00:58:51.429
in a similar legal or factual nexus with debtors.

00:58:52.409 --> 00:58:55.429
And next paragraph says, the unusual circumstances

00:58:55.429 --> 00:58:58.769
in which the bank of support can state cases

00:58:58.769 --> 00:59:04.769
against non -debtors are rare. So I would pause

00:59:04.769 --> 00:59:09.070
here. So our pitch is simply in your honor that

00:59:09.070 --> 00:59:11.969
we already said from day one to our friends that

00:59:11.969 --> 00:59:13.949
we're going to comply with the sale proceedings.

00:59:14.170 --> 00:59:18.409
with respect to the nurse. We agree that a nurse

00:59:18.409 --> 00:59:21.690
must preserve a state. My friend said that we

00:59:21.690 --> 00:59:23.650
have refused to bring the claim within the chapter

00:59:23.650 --> 00:59:27.230
11 proceeding. That is not fair and not accurate.

00:59:27.429 --> 00:59:29.469
We have been in significant discussion. We are

00:59:29.469 --> 00:59:32.929
looking into bringing into creating a channel

00:59:32.929 --> 00:59:36.730
to bring the claim in this court. And just so

00:59:36.730 --> 00:59:40.590
you know, your honor has already granted what

00:59:40.590 --> 00:59:43.469
I refer to as a claim process order or claims

00:59:43.469 --> 00:59:47.489
bar order within this proceeding. The debtors

00:59:47.489 --> 00:59:51.210
did not give us notice of that motion. We had

00:59:51.210 --> 00:59:55.150
asked to be included on the service list. We

00:59:55.150 --> 00:59:57.309
were not provided with notice. And lo and behold,

00:59:57.429 --> 00:59:59.349
one day they say, well, the order has been granted.

00:59:59.889 --> 01:00:04.690
Now we are, we think there is a way for us to,

01:00:05.210 --> 01:00:07.920
in accordance with your orders order, to bring

01:00:07.920 --> 01:00:10.800
that claim within the Chapter 11 proceeding,

01:00:10.900 --> 01:00:13.940
and we are putting a lot of efforts to do that.

01:00:14.739 --> 01:00:18.179
But suffice it to say that debtors have already

01:00:18.179 --> 01:00:21.739
secured what they wish to secure, a state of

01:00:21.739 --> 01:00:24.139
proceeding against the debtors, the preservation

01:00:24.139 --> 01:00:28.300
of the estate of the debtors, and channeling

01:00:28.300 --> 01:00:31.559
all the claims against the debtors within this

01:00:31.559 --> 01:00:35.460
Chapter 11 proceeding. That has all been achieved.

01:00:35.800 --> 01:00:39.599
And now There is no, in the words of the Appellate

01:00:39.599 --> 01:00:44.380
Court, there is no unusual circumstance which

01:00:44.380 --> 01:00:48.139
we already know are rare to warrant that the

01:00:48.139 --> 01:00:51.599
claims against a non -debtor or KPMG be stayed

01:00:51.599 --> 01:00:57.320
at this time. And my friend keeps saying that

01:00:58.220 --> 01:01:03.079
the claim against the debtors and former directors

01:01:03.079 --> 01:01:06.980
and officers and KPMG are basically right out

01:01:06.980 --> 01:01:11.139
of the same conduct of 23M8. That is just simply

01:01:11.139 --> 01:01:15.599
false. We plead specific misrepresentations and

01:01:15.599 --> 01:01:19.360
that is the evidence before the court. And then

01:01:19.360 --> 01:01:21.420
my friend is actually now even acknowledging

01:01:21.420 --> 01:01:24.320
in their reply, they acknowledge well, yeah,

01:01:24.519 --> 01:01:27.199
there is a specific misrepresentation has been

01:01:27.199 --> 01:01:29.960
pleaded against these entities. However, my friend

01:01:29.960 --> 01:01:33.699
said that misrepresentation do not form the basis

01:01:33.699 --> 01:01:36.219
for any cause of action, which is also false

01:01:36.219 --> 01:01:39.619
because we have assumed reply and that directs

01:01:39.619 --> 01:01:44.000
the court to the provisions of the claim. that

01:01:44.000 --> 01:01:46.980
we're not going to rely specifically on the specific

01:01:46.980 --> 01:01:50.099
misrepresentation we allege these non -daters

01:01:50.099 --> 01:01:57.780
have made. So we, in our written submission,

01:01:58.000 --> 01:02:02.599
we identify for the court two issues. And under

01:02:02.599 --> 01:02:06.480
issue number two, basically the question is whether,

01:02:06.760 --> 01:02:09.840
you know, this case is one of those unusual circumstances

01:02:09.840 --> 01:02:13.510
that it would be warranted to extend the stay

01:02:13.510 --> 01:02:17.530
of proceedings to non -debtors? And the answer

01:02:17.530 --> 01:02:22.469
is absolutely no. If we look at the facts, the

01:02:22.469 --> 01:02:25.070
claims are distinguishable. They're, you know,

01:02:25.389 --> 01:02:27.949
in the words of the appellate court, they do

01:02:27.949 --> 01:02:30.769
arise from the same legal and factual nexus.

01:02:31.050 --> 01:02:36.469
But that is insufficient to grant a stay with

01:02:36.469 --> 01:02:39.610
respect to non -debtors. The claims against them

01:02:39.610 --> 01:02:43.090
is different. They are not going to be liable

01:02:43.090 --> 01:02:46.510
for the conduct of 23andMe. They are going to

01:02:46.510 --> 01:02:50.250
be liable for their own conduct. If they are

01:02:50.250 --> 01:02:54.150
to be found liable, sometimes down the road.

01:02:56.429 --> 01:02:59.070
That's point number one. The claims are not identical.

01:02:59.829 --> 01:03:03.130
Secondly, there is no rational connection between

01:03:03.130 --> 01:03:05.849
the state of proceedings and the restructuring

01:03:05.849 --> 01:03:10.989
efforts of 23andMe. KPMG is an entirely independent

01:03:10.989 --> 01:03:13.210
party, third party. They're doing their own thing.

01:03:13.409 --> 01:03:16.690
They already have separate representation. They're

01:03:16.690 --> 01:03:19.429
not even involved in any role or capacity here.

01:03:21.409 --> 01:03:24.849
The forward directors of the company resigned

01:03:24.849 --> 01:03:29.409
en masse in September of last year in an unprecedented

01:03:29.409 --> 01:03:33.230
situation. We went back in memory. We cannot

01:03:33.230 --> 01:03:37.099
recall any situation where all the non... All

01:03:37.099 --> 01:03:38.940
the independent directors of the company, seven

01:03:38.940 --> 01:03:43.260
of them, resigned en masse just one time. They

01:03:43.260 --> 01:03:44.980
said, we don't want to have anything to do with

01:03:44.980 --> 01:03:48.360
this company anymore. That was their wish, to

01:03:48.360 --> 01:03:51.119
not have anything to do with this company or

01:03:51.119 --> 01:03:57.440
the restructuring events anymore. So there is

01:03:57.440 --> 01:04:02.719
no rational connection. Thirdly, we say there

01:04:02.719 --> 01:04:06.199
is absolutely no adverse impact on the state.

01:04:07.829 --> 01:04:12.829
Absolutely zero. The defense is being funded

01:04:12.829 --> 01:04:18.989
by insurance. KPMG has their own resources. They're

01:04:18.989 --> 01:04:21.670
not on the insurance policies that we have seen.

01:04:22.190 --> 01:04:23.909
There are two sets of insurance policies that

01:04:23.909 --> 01:04:26.809
we have to understand. I have never seen any

01:04:26.809 --> 01:04:29.250
situation where either we'd be on the same set

01:04:29.250 --> 01:04:32.050
of policies as the directors and officers or

01:04:32.050 --> 01:04:34.630
the company. They're not on the same policy.

01:04:34.989 --> 01:04:37.059
They have their own resources. They don't even

01:04:37.059 --> 01:04:41.000
have indemnification rights, whatever. As for

01:04:41.000 --> 01:04:44.320
DNOs, my friend says, okay, they have an indemnification

01:04:44.320 --> 01:04:47.559
right against the debtors. Correct. But the estate

01:04:47.559 --> 01:04:51.960
of the DNO claim is not going to dispose or resolve

01:04:51.960 --> 01:04:55.880
that indemnification right. Presumably, they

01:04:55.880 --> 01:04:59.519
already have or they will have to file the indemnification

01:04:59.519 --> 01:05:03.610
right within the Chapter 11 Procedure. to state

01:05:03.610 --> 01:05:05.210
the claim against the directors and officers

01:05:05.210 --> 01:05:08.309
is not going to resolve that claim. What would

01:05:08.309 --> 01:05:11.250
resolve the claim would be to allow that their

01:05:11.250 --> 01:05:15.230
objections on pleadings or jurisdictional objections

01:05:15.230 --> 01:05:20.309
be heard. Maybe they're right. Maybe the Canadian

01:05:20.309 --> 01:05:22.309
court would agree with them to strike the claim

01:05:22.309 --> 01:05:24.750
on pleadings against them or find that the court

01:05:24.750 --> 01:05:27.070
doesn't have jurisdiction over them. That would

01:05:27.070 --> 01:05:29.809
be the end of any indemnification right they

01:05:29.809 --> 01:05:32.650
have asserted. It will be asserted against 23

01:05:32.650 --> 01:05:38.710
and me, to stay the claim against them is not

01:05:38.710 --> 01:05:41.269
going to address or resolve that claim. So that

01:05:41.269 --> 01:05:43.250
is for that reason that, you know, we say the

01:05:43.250 --> 01:05:45.110
universe of the claim. My friend says that that

01:05:45.110 --> 01:05:48.849
should or argues that should somehow work against

01:05:48.849 --> 01:05:50.989
us. No. To the contrary, I just explained to

01:05:50.989 --> 01:05:53.750
Your Honor that the damn indemnification claim

01:05:53.750 --> 01:05:56.070
already exists because the directors and officers

01:05:56.070 --> 01:05:58.869
have already been sued. So how are we going to

01:05:58.869 --> 01:06:02.199
deal with it? Either it has to be addressed in

01:06:02.199 --> 01:06:04.920
the chapter 11 proceedings or if the directors

01:06:04.920 --> 01:06:06.920
and officers are correct that the claim should

01:06:06.920 --> 01:06:09.840
be struck against them or the claim against them

01:06:09.840 --> 01:06:13.880
should be struck, that would be the end of the

01:06:13.880 --> 01:06:22.619
debate. That's the big chunk of the claim off

01:06:22.619 --> 01:06:24.579
the shoulder of the state. And I would pause

01:06:24.579 --> 01:06:27.900
here to say this at least as far as my experience

01:06:27.900 --> 01:06:32.119
goes. This is a peculiar insolvency proceeding

01:06:32.119 --> 01:06:34.639
because as far as I know, there are no secure

01:06:34.639 --> 01:06:38.260
lenders. This is really an insolvency proceeding

01:06:38.260 --> 01:06:40.880
in pit and substance and in large part to deal

01:06:40.880 --> 01:06:45.380
with these cyberclaims. So anything that we can

01:06:45.380 --> 01:06:48.119
do to address this claim, and there is no cost

01:06:48.119 --> 01:06:51.199
for their state, it's the pleading motion. You

01:06:51.199 --> 01:06:55.519
know, it's going to be funded by insurance. Anything

01:06:55.519 --> 01:06:58.019
that we can do to one way or another resolve

01:06:58.019 --> 01:07:00.940
that any of the claims of the creators that arise

01:07:00.940 --> 01:07:05.480
from the cyberclaim, I would submit to you, Your

01:07:05.480 --> 01:07:07.860
Honor, that should be welcomed by the court because

01:07:07.860 --> 01:07:11.300
it's going to be streamlining the process and

01:07:11.300 --> 01:07:13.639
it's going to determine what claims are going

01:07:13.639 --> 01:07:15.820
to stay and what claims are not going to stay.

01:07:23.239 --> 01:07:26.300
as against a state, or what claims are going

01:07:26.300 --> 01:07:27.980
to be struck, and that's going to be the end

01:07:27.980 --> 01:07:31.840
of the debate. And lastly, we say, my friend

01:07:31.840 --> 01:07:34.260
said there is no prejudice. It says, you know,

01:07:34.480 --> 01:07:38.340
a slight delay. I don't know, my friend is really

01:07:38.340 --> 01:07:40.519
not committing to any timeline for Chapter 11,

01:07:40.760 --> 01:07:42.760
and you know, you ask him, you know, for how

01:07:42.760 --> 01:07:47.340
long this injunction should remain in effect.

01:07:47.679 --> 01:07:50.360
My friend is really not committing to a timeline.

01:07:50.590 --> 01:07:54.949
If it is a matter of, you know, these fast -evolving

01:07:54.949 --> 01:07:58.969
and unwrapping proceedings in a matter of, like,

01:07:59.010 --> 01:08:01.610
fall, we're going to be done, before the Canadian

01:08:01.610 --> 01:08:04.969
court is going to even hear these preliminary

01:08:04.969 --> 01:08:07.349
objections on the pleading and jurisprudence,

01:08:07.650 --> 01:08:12.309
the Chapter 11 is going to be done. Or substantial

01:08:12.309 --> 01:08:17.170
legal. But on the other hand, we have the interest

01:08:17.170 --> 01:08:21.109
of Again, the debtors will not tell us. Well,

01:08:21.130 --> 01:08:27.510
about 700 ,000 Canadians in this privacy class

01:08:27.510 --> 01:08:30.270
action, and I have gathered before you that in

01:08:30.270 --> 01:08:33.149
Canada, these are serious rights. And Canadian

01:08:33.149 --> 01:08:35.689
courts have very strong interest in them. They

01:08:35.689 --> 01:08:38.090
treat these rights as, quote, the constitutional

01:08:38.090 --> 01:08:40.569
rights of Canadians and have very strong interest

01:08:40.569 --> 01:08:43.130
in dedicating them. And we obviously, you know,

01:08:43.210 --> 01:08:46.710
really just, you know, I spend this council idea

01:08:46.710 --> 01:08:51.229
all the time. I'm not saying it in a discouraging

01:08:51.229 --> 01:08:53.729
way, but defendants would like delays. They want

01:08:53.729 --> 01:08:57.729
to take the time. I deal with these delays very,

01:08:57.729 --> 01:09:02.710
very often and there is a saying that says justice

01:09:02.710 --> 01:09:06.210
denied, justice delayed, justice denied. Since

01:09:06.210 --> 01:09:08.949
we're in the same situation, you know, we have

01:09:08.949 --> 01:09:11.449
the claim of the significant population in Canada.

01:09:11.569 --> 01:09:13.529
We have no connection with the debtor. We have

01:09:13.529 --> 01:09:19.369
no cost for the debtor. at least for at these

01:09:19.369 --> 01:09:23.369
preliminary stages. And my friend is not clueless

01:09:23.369 --> 01:09:27.710
to any timeline, wants to basically get an order

01:09:27.710 --> 01:09:30.529
that they, you know, stage the claim, finally

01:09:30.529 --> 01:09:35.050
die until we know when, who knows when. But on

01:09:35.050 --> 01:09:37.130
the other hand, we have a significant population

01:09:37.130 --> 01:09:39.369
of Canada whose quasi -constitutional rights

01:09:39.369 --> 01:09:42.750
are at stake. So in summary, it's subject to

01:09:42.750 --> 01:09:46.029
any questions, Your Honor. The Appendix Course

01:09:46.029 --> 01:09:49.439
says, We do not sustain the claim against non

01:09:49.439 --> 01:09:52.260
-detectors even if they arise out of the same

01:09:52.260 --> 01:09:55.699
legal or factual nexus. We've got to have rare

01:09:55.699 --> 01:09:59.880
exceptional circumstances and an imminent harm

01:09:59.880 --> 01:10:03.659
to the state resulting from the proceeding. And

01:10:03.659 --> 01:10:05.939
in my respect of submission, Your Honor, this

01:10:05.939 --> 01:10:09.600
is not a case of an exceptional circumstance.

01:10:10.060 --> 01:10:12.680
The debtors have already gotten everything that

01:10:12.680 --> 01:10:15.420
they would have wanted to accomplish. We have

01:10:15.420 --> 01:10:18.800
been cooperating since very, very first day with

01:10:18.800 --> 01:10:21.399
them, and we have complied with the state. And

01:10:21.399 --> 01:10:23.500
the preliminary issues that are now before the

01:10:23.500 --> 01:10:27.819
Canadian court does not adversely at all, at

01:10:27.819 --> 01:10:30.880
all, not in the slightest, affect the state in

01:10:30.880 --> 01:10:35.399
any way. But if there is any likelihood, as the

01:10:35.399 --> 01:10:37.920
DNOs are saying, that the country is strong on

01:10:37.920 --> 01:10:40.220
the free gain or for a lack want of jurisdiction,

01:10:40.779 --> 01:10:43.140
I would submit to Your Honor that let's determine

01:10:43.140 --> 01:10:46.489
that. forever later because backing back benefits

01:10:46.489 --> 01:10:49.649
the state and that in fact we get back that they'll

01:10:49.649 --> 01:10:53.170
get it up the chapter of the proceedings subjective

01:10:53.170 --> 01:10:55.210
questions about what those would be my commission

01:10:55.210 --> 01:10:58.090
thank you so uh... do you agree with mister seagull

01:10:58.090 --> 01:11:04.020
on the scope of the june sixteenth hearing No,

01:11:04.020 --> 01:11:08.420
Your Honor. The evidence, Mr. Siegel is not qualified

01:11:08.420 --> 01:11:11.420
to provide any opinions on Canadian law. The

01:11:11.420 --> 01:11:13.359
evidence that is before the court is the evidence

01:11:13.359 --> 01:11:22.159
of Ms. Bonnery. And Ms. Bonnery has a brief description

01:11:22.159 --> 01:11:28.079
as to what this motion is seeking to accomplish.

01:11:29.779 --> 01:11:34.060
They do say that we are seeking to add that is

01:11:34.060 --> 01:11:37.220
not entirely accurate because we are not adding

01:11:37.220 --> 01:11:40.979
any defendant who is not already named. The defendants

01:11:40.979 --> 01:11:43.239
are already there. We are just bringing the two

01:11:43.239 --> 01:11:45.600
claims in the same umbrella. And just so you

01:11:45.600 --> 01:11:48.720
know, just because my friend did mention something

01:11:48.720 --> 01:11:51.859
and he's already had made some comments about

01:11:51.859 --> 01:11:54.579
the manner of the filing of the second claim.

01:11:54.859 --> 01:11:57.899
We do note in our declaration that Ms. Bartory

01:11:57.899 --> 01:11:59.939
raised the same objection with Justice Douglas.

01:12:00.239 --> 01:12:02.340
Justice Douglas was not very impressed, really.

01:12:02.380 --> 01:12:05.939
She said, you know, those characterizations were

01:12:05.939 --> 01:12:08.140
not correct. But if Ms. Bartory wanted to bring

01:12:08.140 --> 01:12:12.460
a motion, she could do that, which is yet to

01:12:12.460 --> 01:12:15.300
be brought. But in any case, this is how the

01:12:15.300 --> 01:12:19.920
events unfolded. The discussion around the claims

01:12:19.920 --> 01:12:22.279
with respect to deferment defendants had been

01:12:22.279 --> 01:12:25.899
ongoing for some time. And again, we're dealing

01:12:25.899 --> 01:12:31.979
with a delay issue that we wanted to add the

01:12:31.979 --> 01:12:35.119
directors without, of course, any prejudice that

01:12:35.119 --> 01:12:37.460
the defense may have to bring, you know, motions

01:12:37.460 --> 01:12:40.420
to strike the claim or state the claim. You know,

01:12:40.420 --> 01:12:44.199
it would be entirely without prejudice. The defense

01:12:44.199 --> 01:12:47.220
were dragging their feet, not committing to any

01:12:47.220 --> 01:12:51.210
timeline. They were looking for dates. We were

01:12:51.210 --> 01:12:53.569
around September. They were looking for dates

01:12:53.569 --> 01:12:57.270
in December for that kind of simple motion to

01:12:57.270 --> 01:13:00.649
add some parties without prejudice. And what

01:13:00.649 --> 01:13:03.350
happened as we were having these conversations,

01:13:03.850 --> 01:13:06.750
the directors resigned en masse. So from our

01:13:06.750 --> 01:13:11.909
perspective, to protect the interests of our

01:13:11.909 --> 01:13:16.100
Canadian class, We had to take the steps to file

01:13:16.100 --> 01:13:18.619
the claim because we know in the situation of

01:13:18.619 --> 01:13:22.399
insolvency, those claims could entirely perish.

01:13:22.560 --> 01:13:24.920
So we would be... Hold on a second. Hold on a

01:13:24.920 --> 01:13:28.020
second. I'm asking a much more granular question.

01:13:28.520 --> 01:13:33.039
What motions are being heard on June 16th? It's

01:13:33.039 --> 01:13:35.779
a consolidation motion. So there are two existing

01:13:35.779 --> 01:13:38.180
applications to bring them together. Exactly.

01:13:38.300 --> 01:13:42.609
Adjoin them if you wish. Adjoin them. Okay, and

01:13:42.609 --> 01:13:46.909
are you seeking to broaden the class, as Mr.

01:13:47.029 --> 01:13:49.850
Siegel mentioned, from those who are known to

01:13:49.850 --> 01:13:52.350
be impacted by the data breach to all Canadians?

01:13:53.289 --> 01:13:57.649
That is an excellent question, Your Honor. We

01:13:57.649 --> 01:14:00.329
are seeking to broaden the class. I say a couple

01:14:00.329 --> 01:14:01.909
of things. That is a proposed class. That is

01:14:01.909 --> 01:14:05.510
not a certified class. We have no bearing, no

01:14:05.510 --> 01:14:08.029
nothing with respect to 23andMe. And especially

01:14:08.029 --> 01:14:11.680
so that 23andMe is already subject to a claim

01:14:11.680 --> 01:14:14.300
process order of the score. So there's not going

01:14:14.300 --> 01:14:19.159
to be any claims against 23andMe at all in Canada.

01:14:20.100 --> 01:14:23.399
And on the other hand, right now 23andMe has

01:14:23.399 --> 01:14:26.119
sent notification to all the customers, I think

01:14:26.119 --> 01:14:28.420
someone mentioned at some point 18 million customers,

01:14:28.880 --> 01:14:31.720
that any customer can submit a claim within Chapter

01:14:31.720 --> 01:14:35.399
11 proceeding. 23, and we have already invited

01:14:35.399 --> 01:14:37.899
any customer who might have a claim to submit

01:14:37.899 --> 01:14:42.819
a claim. The expansion of the definition of a

01:14:42.819 --> 01:14:46.880
proposed class, which is without prejudice, to

01:14:46.880 --> 01:14:50.680
a motion to strike, a motion to stay for wanted

01:14:50.680 --> 01:14:53.279
jurisdiction. And eventually, a certification

01:14:53.279 --> 01:14:56.479
motion has absolutely no bearing at this point

01:14:56.479 --> 01:15:01.949
in time. It's a proposed definition on paper

01:15:01.949 --> 01:15:05.689
that can happen as a matter of, you know, the

01:15:05.689 --> 01:15:09.029
law in Canada, you know, someone can just propose

01:15:09.029 --> 01:15:11.390
a new definition at the time of the hearing of

01:15:11.390 --> 01:15:13.890
certification application. It really has no bearing

01:15:13.890 --> 01:15:16.130
other than the court will consider whether or

01:15:16.130 --> 01:15:18.989
not at certification time, certification, whether

01:15:18.989 --> 01:15:21.430
or not that's going to be correct or should be

01:15:21.430 --> 01:15:24.289
certified. It's a proposed, it's a matter of

01:15:24.289 --> 01:15:33.640
merely definition. Okay. Let me see if I can

01:15:33.640 --> 01:15:36.779
summarize part of your argument accurately, Mr.

01:15:36.899 --> 01:15:40.619
Nemitwari. I think you were saying that litigation

01:15:40.619 --> 01:15:44.600
in Canada would benefit the debtors and their

01:15:44.600 --> 01:15:47.199
states and the other parties in interest because

01:15:47.199 --> 01:15:50.760
your litigation would clarify issues, maybe in

01:15:50.760 --> 01:15:54.180
the debtor's favor, maybe in favor of the Canadian

01:15:54.180 --> 01:15:58.859
claimants. By determining whether certain parties

01:15:58.859 --> 01:16:01.020
are liable whether the liabilities co -extensive

01:16:01.020 --> 01:16:04.359
with other parties Whether there's a valid claim

01:16:04.359 --> 01:16:07.979
under Canadian law at all I suppose is that is

01:16:07.979 --> 01:16:10.239
that the point you're making that you're that

01:16:10.239 --> 01:16:12.979
you're helping the debtors? Crystalize what's

01:16:12.979 --> 01:16:16.680
going on in this case So your honor just to be

01:16:16.680 --> 01:16:19.119
clear we have like five different Arguments,

01:16:19.119 --> 01:16:22.079
and this is one of them and and almost but not

01:16:22.079 --> 01:16:26.899
entirely Why what what I'm saying is that? the

01:16:26.899 --> 01:16:32.939
outcome of the Canadian case would only benefit

01:16:32.939 --> 01:16:35.979
the debtors and the Chapter 11 proceedings. Because

01:16:35.979 --> 01:16:41.300
what? Because the claim, and that corresponds

01:16:41.300 --> 01:16:44.720
with the indemnification claim that the DNOs

01:16:44.720 --> 01:16:48.159
have. And KPMG doesn't have any indemnification

01:16:48.159 --> 01:16:50.000
rights, so we're not talking about KPMG right

01:16:50.000 --> 01:16:53.960
now. We're talking only about DNOs. So what I'm

01:16:53.960 --> 01:16:57.220
saying is that The claim against DNOs is already

01:16:57.220 --> 01:17:01.520
there. The state is not going to make it suddenly

01:17:01.520 --> 01:17:06.220
go away. If the Canadian proceeding proceeds

01:17:06.220 --> 01:17:09.880
and if the DNO succeeds on striking the claim

01:17:09.880 --> 01:17:12.500
on pleadings or for want of jurisdiction, that

01:17:12.500 --> 01:17:17.739
can only benefit the state. Even if the Canadian

01:17:17.739 --> 01:17:20.640
court agrees with us, that still benefits the

01:17:20.640 --> 01:17:23.220
state, bearing in mind that now the state knows

01:17:23.470 --> 01:17:25.770
that there is this valid indemnification claim

01:17:25.770 --> 01:17:32.250
that would not be strong, indemnification claim

01:17:32.250 --> 01:17:35.050
that would not be strong for the benefit of the

01:17:35.050 --> 01:17:39.630
DNOs. So when time comes to figure out how any

01:17:39.630 --> 01:17:43.329
proceeds should be distributed and how should

01:17:43.329 --> 01:17:47.210
all of their claims be discharged, et cetera,

01:17:47.569 --> 01:17:50.609
that is also going to benefit their state. However,

01:17:50.810 --> 01:17:53.210
I would go one step farther to just say, you

01:17:53.210 --> 01:17:56.409
know, what's the non -issue of this indemnification,

01:17:56.649 --> 01:17:59.310
right? Because we all know that at the end of

01:17:59.310 --> 01:18:01.750
the day, all these claims are going to be bundled

01:18:01.750 --> 01:18:04.130
together and they're going to be largely discharged.

01:18:04.510 --> 01:18:08.010
So my friend Anani Stutel, you know, at the end

01:18:08.010 --> 01:18:10.270
of the day, if there's judgment in favor of the

01:18:10.270 --> 01:18:12.609
DNOs like five years down the road in Canada,

01:18:12.970 --> 01:18:16.270
it's directly on me that has to provide for indemnification.

01:18:16.930 --> 01:18:19.289
So... So all the insolvency matters that I have

01:18:19.289 --> 01:18:21.170
dealt with, and when there was a plan that was

01:18:21.170 --> 01:18:22.930
successful, it all discharged all the claims.

01:18:23.329 --> 01:18:25.989
This is only an academic debate that never comes

01:18:25.989 --> 01:18:30.550
into reality, never bears any air of reality.

01:18:30.810 --> 01:18:33.350
It's just, you know, for people to say we have

01:18:33.350 --> 01:18:36.510
an individual right, but that is realistically

01:18:36.510 --> 01:18:38.970
against an insolvent company, it will never be

01:18:38.970 --> 01:18:42.449
realized. So it's all I'm saying that if at all,

01:18:42.670 --> 01:18:46.930
if anything, this Canadian proceeding would only

01:18:46.930 --> 01:18:49.890
benefit the state and the Chapter 11 proceedings,

01:18:50.170 --> 01:18:52.770
if at all. Not only that it does not harm the

01:18:52.770 --> 01:18:56.529
state in any conceivable way, not in the slightest.

01:18:56.949 --> 01:19:00.750
If anything, it would help the debtors and these

01:19:00.750 --> 01:19:06.250
proceedings before your honor. Okay. Mr. Nematoli,

01:19:06.350 --> 01:19:10.289
what's the prejudice to your clients if there's

01:19:10.289 --> 01:19:13.310
a stay of their litigation against all the defendants

01:19:13.310 --> 01:19:16.510
through the effective date of a plan, and let's

01:19:16.510 --> 01:19:20.310
say it's six months from now. What's the prejudice

01:19:20.310 --> 01:19:22.310
to your client if you're looking at a five or

01:19:22.310 --> 01:19:26.449
six year litigation timeline? Well, firstly,

01:19:26.670 --> 01:19:28.529
that's a very good question. Firstly, there is

01:19:28.529 --> 01:19:31.630
no commitment that there's going to be, like,

01:19:31.789 --> 01:19:34.510
if my friend that said that the estate is going

01:19:34.510 --> 01:19:37.689
to be imposed only for six months, then I have

01:19:37.689 --> 01:19:40.489
no issue with it, bearing in mind that realistically

01:19:40.489 --> 01:19:45.220
those those applications that BMT and OVNK BMG

01:19:45.220 --> 01:19:47.539
have indicated they would be bringing cannot

01:19:47.539 --> 01:19:51.140
be brought until probably December. The timelines

01:19:51.140 --> 01:19:55.260
are just like that. So if this proceeding, if

01:19:55.260 --> 01:19:58.279
my friend was going to commit to a conclusion

01:19:58.279 --> 01:20:01.859
or stay only for six months, I would have no

01:20:01.859 --> 01:20:04.720
issue with any of that. You reminded me, Your

01:20:04.720 --> 01:20:07.079
Honor, that I think my friend suggested that

01:20:07.079 --> 01:20:09.659
we have not been amenable to any sort of resolution.

01:20:09.979 --> 01:20:12.579
And if my friend said that, that is absolutely

01:20:12.579 --> 01:20:18.579
not correct. We have many various scenarios to

01:20:18.579 --> 01:20:21.840
come to a consensual arrangement and none of

01:20:21.840 --> 01:20:25.539
them has worked. And I would just say for my

01:20:25.539 --> 01:20:29.140
friend to suggest that we have basically been

01:20:29.140 --> 01:20:33.579
very difficult and not amenable to any resolution,

01:20:34.220 --> 01:20:37.189
that would not be accurate offer. In any case,

01:20:37.310 --> 01:20:39.770
what I'm saying is that the timeline that we

01:20:39.770 --> 01:20:42.630
are looking, you know, realistically, these applications

01:20:42.630 --> 01:20:44.550
are going to have to be brought in December.

01:20:45.590 --> 01:20:47.869
So, if there's going to be a stay only for six

01:20:47.869 --> 01:20:50.689
months, again, I'm not aware of any reason for

01:20:50.689 --> 01:20:53.029
that. But if Your Honor would be inclined to

01:20:53.029 --> 01:20:55.770
impose a stay for six months only, you know,

01:20:55.770 --> 01:20:58.970
that would be perfectly fine with us. But an

01:20:58.970 --> 01:21:04.369
indeterminate stay, especially in the other considerations

01:21:04.369 --> 01:21:08.350
where We say there is no unity of the claims.

01:21:08.829 --> 01:21:11.409
You know, there is no identity of interest. There

01:21:11.409 --> 01:21:15.649
is no adverse impact. And so on and so forth.

01:21:16.750 --> 01:21:19.829
Any state, especially an indeterminate state,

01:21:20.069 --> 01:21:22.710
is totally unwarranted. And again, I direct Your

01:21:22.710 --> 01:21:26.590
Honor to the language in the Ritchie case that

01:21:26.590 --> 01:21:30.989
I took you to. We must treat a state to non -detention

01:21:30.989 --> 01:21:35.119
as a rare event. to be granted only in exceptional

01:21:35.119 --> 01:21:38.380
circumstances. None of which exists here. And

01:21:38.380 --> 01:21:41.699
we do feel very strongly about these claims in

01:21:41.699 --> 01:21:45.039
Canada. You have it in the record before you,

01:21:45.180 --> 01:21:47.420
the Privacy Commission of Canada is conducting

01:21:47.420 --> 01:21:51.760
an investigation. And the Supreme Court of Canada

01:21:51.760 --> 01:21:55.220
has said that these claims are quasi -constitutional.

01:21:55.319 --> 01:21:57.460
They're important to us because they define our

01:21:57.460 --> 01:22:00.550
values as democratic. society, we have a very

01:22:00.550 --> 01:22:02.850
strong interest in adjudicating them to set the

01:22:02.850 --> 01:22:08.449
standard that applies to all Canadians. This

01:22:08.449 --> 01:22:11.710
would not be the best analogy, but just to get

01:22:11.710 --> 01:22:14.430
the sense of what my head is, you know? It's

01:22:14.430 --> 01:22:16.850
not like in a criminal proceeding, you know,

01:22:16.850 --> 01:22:20.810
we want the accused to have the trial with no

01:22:20.810 --> 01:22:24.050
delay. We're not in the exact same situation,

01:22:24.109 --> 01:22:26.850
but the rights at the issue are quasi -constitutional

01:22:26.850 --> 01:22:30.189
rights of Canadians. If, again, there was any

01:22:30.189 --> 01:22:34.590
circumstance, you know, we've done many of these

01:22:34.590 --> 01:22:36.270
cases, you know, we could see. If there isn't

01:22:36.270 --> 01:22:39.189
any adverse impact on the state, if there was

01:22:39.189 --> 01:22:42.630
anything really of substance, we would not be

01:22:42.630 --> 01:22:45.989
here. We would be agreeing to stay. We know how

01:22:45.989 --> 01:22:48.930
this, you know, this should be done. But in this

01:22:48.930 --> 01:22:51.770
particular case, there's absolutely no reason

01:22:51.770 --> 01:22:55.390
whatsoever that would justify a stay. and again

01:22:55.390 --> 01:22:57.289
i'm repeating myself but i do have to go to the

01:22:57.289 --> 01:23:00.670
language here from the apple of court there is

01:23:00.670 --> 01:23:05.109
no exceptional that in this case towards as they

01:23:05.109 --> 01:23:09.109
would expect to be an old or keep engine i think

01:23:09.109 --> 01:23:12.630
it the committee or any other parties just like

01:23:12.630 --> 01:23:20.359
to weigh in before we uh... Thank you your honor

01:23:20.359 --> 01:23:22.880
again for the record Jason Adams Kelly dry and

01:23:22.880 --> 01:23:25.659
Warren I think now officially counseled to the

01:23:25.659 --> 01:23:32.760
yes going to be brief because I always try to

01:23:32.760 --> 01:23:34.960
go with the mantra of not saying too much to

01:23:34.960 --> 01:23:37.840
put myself in danger here because I think that

01:23:37.840 --> 01:23:39.960
the briefing in the arguments they were exceptional

01:23:39.960 --> 01:23:44.199
and I think the debtors have laid out the case

01:23:44.199 --> 01:23:46.300
for for why it's actually the state is appropriate

01:23:46.300 --> 01:23:49.359
here and we do support it your honor I don't

01:23:49.359 --> 01:23:50.960
want to go through all the legal issues again

01:23:50.960 --> 01:23:53.239
if they've been discussed exhaustingly here.

01:23:53.680 --> 01:23:56.239
I'll talk about maybe one or two things, which

01:23:56.239 --> 01:23:58.880
is harm. Your Honor, you've asked questions about

01:23:58.880 --> 01:24:01.359
harm today. What's the harm to the estate? What's

01:24:01.359 --> 01:24:03.760
the harm to the plaintiffs here? I think the

01:24:03.760 --> 01:24:06.119
harm to the estate is very clear, and I think

01:24:06.119 --> 01:24:08.340
it was explained, but I'll highlight maybe a

01:24:08.340 --> 01:24:12.140
few points. Your Honor, number one, the desire

01:24:12.140 --> 01:24:15.140
for centralized reconciliation claims and a centralized

01:24:15.140 --> 01:24:17.800
process for claims here. That's the purpose,

01:24:17.899 --> 01:24:20.300
one of the core purposes of the bankruptcy case

01:24:20.300 --> 01:24:22.399
that we're running here. Ultimately, hopefully,

01:24:22.640 --> 01:24:25.119
once we get through a sale process, which we'll

01:24:25.119 --> 01:24:29.359
talk about tomorrow, a plan. And that'll be addressed

01:24:29.359 --> 01:24:32.520
in terms of how we ultimately bring claims in.

01:24:32.579 --> 01:24:34.079
We've already dealt with that with the bar date.

01:24:34.880 --> 01:24:36.479
Reconciliation of claims, that'll either be dealt

01:24:36.479 --> 01:24:38.779
with down the road during this Chapter 11 bankruptcy

01:24:38.779 --> 01:24:42.560
or potentially after the bankruptcy process by

01:24:42.560 --> 01:24:47.359
another party or entity. Peripheral litigation

01:24:47.359 --> 01:24:49.340
going on where we're not dealing with centralized

01:24:49.340 --> 01:24:52.939
claims process here creates not only confusion

01:24:52.939 --> 01:24:57.180
It creates costs and expense and it causes distraction

01:24:57.180 --> 01:24:59.939
There are a lot of litigations as your honor

01:24:59.939 --> 01:25:02.640
knows. It was the opening comment from from debtors

01:25:02.640 --> 01:25:05.960
council today This is not isolated to a Canadian

01:25:05.960 --> 01:25:07.960
litigation. We have multiple litigations. We

01:25:07.960 --> 01:25:09.699
have arbitrations going on We have state court

01:25:09.699 --> 01:25:11.600
litigations going on all with respect to the

01:25:11.600 --> 01:25:14.739
same incident here all of those parties in the

01:25:14.739 --> 01:25:17.430
US have said, yes, we're going to come to this

01:25:17.430 --> 01:25:19.390
court. We're going to resolve our claims here.

01:25:19.409 --> 01:25:20.770
We're going to file personal claims, whether

01:25:20.770 --> 01:25:22.569
they're consolidated claims, whether they're

01:25:22.569 --> 01:25:25.409
going to be class claims. We obviously have briefing

01:25:25.409 --> 01:25:28.810
on that from one set of claimants already. So

01:25:28.810 --> 01:25:32.210
to say all of those claimants need to stay, come

01:25:32.210 --> 01:25:34.470
to this court and file claims, but another litigation

01:25:34.470 --> 01:25:39.829
can proceed, doesn't necessarily jive with an

01:25:39.829 --> 01:25:42.069
efficient way of reconciling claims. And it is

01:25:42.069 --> 01:25:44.789
going to force the debtors to take action in

01:25:44.789 --> 01:25:48.500
Canada. The debtors cannot sit idly by where

01:25:48.500 --> 01:25:51.460
claims against so -called non -debtors, and they

01:25:51.460 --> 01:25:54.560
are non -debtors, Your Honor, but it is the underlying

01:25:54.560 --> 01:25:58.000
issues of whether or not there was some error,

01:25:58.260 --> 01:26:01.300
mistake, problem by the debtors in terms of the

01:26:01.300 --> 01:26:04.000
debt breach. That's the core of the questions

01:26:04.000 --> 01:26:05.319
that are going to be addressed in the Canadian

01:26:05.319 --> 01:26:06.659
proceedings. Whether you just say, well, we're

01:26:06.659 --> 01:26:09.399
just talking about the representations of the

01:26:09.399 --> 01:26:13.539
D's and O's or what KPMG did, it gets back to

01:26:13.539 --> 01:26:15.050
the core of what is the debtor. And it's going

01:26:15.050 --> 01:26:17.050
to force the debtors to participate in that process.

01:26:17.069 --> 01:26:18.869
And that means cost. That means expense. That

01:26:18.869 --> 01:26:22.350
means their time. And we have a lot going on

01:26:22.350 --> 01:26:24.770
in this bankruptcy case right now, as Your Honor

01:26:24.770 --> 01:26:26.970
knows. Some of those issues we'll deal with tomorrow.

01:26:27.109 --> 01:26:28.649
Some of those we'll deal with them in the coming

01:26:28.649 --> 01:26:31.329
weeks. So any distraction from the debtors in

01:26:31.329 --> 01:26:33.050
terms of achieving the goals of this bankruptcy,

01:26:33.130 --> 01:26:35.970
which is maximizing value and coming up with

01:26:35.970 --> 01:26:38.949
an exit strategy, that's a harm to the estate.

01:26:40.130 --> 01:26:42.210
We heard about indemnification rights. We've

01:26:42.210 --> 01:26:44.710
talked about insurance rights here. Obviously,

01:26:44.770 --> 01:26:47.289
if the debtors are forced and required to indemnify,

01:26:47.670 --> 01:26:49.069
then any costs that are being incurred up there

01:26:49.069 --> 01:26:52.109
right now is a cost to the estate. And that's

01:26:52.109 --> 01:26:53.489
not something that we should be dealing with

01:26:53.489 --> 01:26:55.649
today. We can deal with those issues in the future.

01:26:56.430 --> 01:26:58.109
And if there's insurance covering this, then

01:26:58.109 --> 01:27:00.229
that's depleting a potential resource and asset

01:27:00.229 --> 01:27:02.989
for all stakeholders in this Chapter 11 bankruptcy.

01:27:03.130 --> 01:27:04.649
We don't want to see those depleted. So from

01:27:04.649 --> 01:27:07.189
the creditor's perspective, there's significant

01:27:07.189 --> 01:27:12.319
harm here, whereas a stay, not dismissal, of

01:27:12.319 --> 01:27:14.699
the Canadian proceedings, not eliminating it,

01:27:14.720 --> 01:27:16.960
a stay of those proceedings and extending that

01:27:16.960 --> 01:27:20.500
to the non -debtors is minimal harm to the plaintiffs

01:27:20.500 --> 01:27:25.380
in this case. So those are my points on the harm,

01:27:25.439 --> 01:27:33.300
Your Honor. With respect to the June 16th hearing

01:27:33.300 --> 01:27:35.239
that would be coming up, Your Honor, I would

01:27:35.239 --> 01:27:37.500
reiterate, and I suspect counsel will address

01:27:37.500 --> 01:27:40.159
this as well, if there's a potential for expansion

01:27:40.159 --> 01:27:42.720
of the class, happening at the June 16th hearing,

01:27:42.939 --> 01:27:45.640
then that's a significant impact on the debtors.

01:27:45.939 --> 01:27:48.600
It can't be that we're only expanding the class

01:27:48.600 --> 01:27:51.079
with respect to the non -debtors and KPMG. It

01:27:51.079 --> 01:27:52.920
means we're. Well, it's somewhere in between,

01:27:53.000 --> 01:27:54.979
isn't it? It would expand the class, but the

01:27:54.979 --> 01:27:57.340
class is a long way from being certified. So

01:27:57.340 --> 01:27:59.439
it's expand the putative class. I don't know

01:27:59.439 --> 01:28:03.180
what you call that exactly. There is an impact,

01:28:03.180 --> 01:28:06.750
but it's not the death knell. I don't disagree

01:28:06.750 --> 01:28:08.270
with Your Honor that it may not be the death

01:28:08.270 --> 01:28:10.909
now, but it certainly is now expanding the pool

01:28:10.909 --> 01:28:13.229
of claimants that are involved in that litigation.

01:28:13.430 --> 01:28:14.989
Again, I think that's something that the debtors

01:28:14.989 --> 01:28:17.750
would be extremely interested in as it impacts

01:28:17.750 --> 01:28:20.369
them at a preliminary stage. I would want to

01:28:20.369 --> 01:28:22.229
be involved in that. So again, we're dragging

01:28:22.229 --> 01:28:25.069
the debtors again back into the litigation in

01:28:25.069 --> 01:28:28.630
Canada, which would be problematic. And we've

01:28:28.630 --> 01:28:31.409
had some conversations around this June 16 hearing.

01:28:31.409 --> 01:28:34.079
And I guess the question is or maybe addressing

01:28:34.079 --> 01:28:36.060
this eventually is, where are we stopping? Are

01:28:36.060 --> 01:28:38.260
we stopping at the June 16 hearing? Are we stopping

01:28:38.260 --> 01:28:42.399
at a July matter? What's the next thing? And

01:28:42.399 --> 01:28:43.920
I don't think that's been really discussed today.

01:28:44.300 --> 01:28:46.699
But again, I think for judicial economy's sake,

01:28:46.779 --> 01:28:49.359
for the state's benefit, to minimize the harms

01:28:49.359 --> 01:28:52.960
here, a stay for now, which is, again, applicable

01:28:52.960 --> 01:28:55.340
to all of the other litigations that have to

01:28:55.340 --> 01:28:57.479
do with the data breach, makes the most sense.

01:28:57.560 --> 01:28:59.579
It's appropriate. It certainly satisfies the

01:28:59.579 --> 01:29:02.399
legal standard here. So your honor we are in

01:29:02.399 --> 01:29:04.340
support of expansion of the state in this proceed.

01:29:04.760 --> 01:29:07.560
All right. Thank you Anyone else wish to be heard

01:29:07.560 --> 01:29:12.079
before we go to the debtors for rebuttal? All

01:29:12.079 --> 01:29:35.159
right, mr. Siegel Thank you your honor as an

01:29:35.159 --> 01:29:38.699
initial matter to something that my friends on

01:29:38.699 --> 01:29:41.420
the other side mentioned several times if respondents

01:29:41.420 --> 01:29:45.260
are willing to agree to a consensual six -month

01:29:45.260 --> 01:29:50.199
stay of the Puted of class actions as to all

01:29:50.199 --> 01:29:54.300
defendants we are amenable to that Yeah, so if

01:29:54.300 --> 01:29:56.079
we were all here. This would be an opportunity

01:29:56.079 --> 01:29:57.300
for me to say you'll should go out in the hall

01:29:57.300 --> 01:30:00.359
and talk about that Would you like to have an

01:30:00.359 --> 01:30:04.109
opportunity to through the? miracle of telecommunications.

01:30:04.149 --> 01:30:10.590
Talk about that with Mr. Nimotali without anyone

01:30:10.590 --> 01:30:21.029
being on a live mic. Is that helpful? Is that

01:30:21.029 --> 01:30:23.170
a question for me, Your Honor? Well, it's a general

01:30:23.170 --> 01:30:28.390
question. You're welcome to weigh in. Well, we've

01:30:28.390 --> 01:30:31.439
always welcomed Conversations around these topics

01:30:31.439 --> 01:30:34.520
and I would not uh forfeit that opportunity now

01:30:34.520 --> 01:30:41.579
if my friend is inclined to call me Should we

01:30:41.579 --> 01:30:43.960
willing to take a short time should we take a

01:30:43.960 --> 01:30:46.840
short call Okay, why don't why don't we do that

01:30:46.840 --> 01:30:50.060
and i'll let you all figure out how to not be

01:30:50.060 --> 01:30:54.140
on a hot mic, but um uh, it is is that clock

01:30:54.140 --> 01:30:57.800
right? Yeah, it is 301. Should we take a 20 minute?

01:30:57.939 --> 01:31:01.159
Recess what you tell me That's 20 minutes. All

01:31:01.159 --> 01:31:02.779
right, if you all are still talking let mr. Spital

01:31:02.779 --> 01:31:05.180
know and I will not emerge in the middle of your

01:31:05.180 --> 01:31:08.600
discussion ideally Well, let's take let's take

01:31:08.600 --> 01:31:20.979
a recess till 20 after 3 Thank you, please be

01:31:20.979 --> 01:31:27.359
seated everyone All right, where do things stand

01:31:27.359 --> 01:31:30.319
mr. Siegel mr. risky who's Who's got the mic?

01:31:32.279 --> 01:31:37.739
Yes, your honor. We conferred with Mr. Nematahahi

01:31:37.739 --> 01:31:41.180
during the recess, and we're pleased to report

01:31:41.180 --> 01:31:47.680
that we appear to have an agreement. Under that

01:31:47.680 --> 01:31:59.579
agreement, the parties will mutually agree on

01:31:59.579 --> 01:32:03.159
a stay of the Canadian proceedings until the

01:32:03.159 --> 01:32:08.500
earlier of September excuse me December 3rd 2025

01:32:08.500 --> 01:32:12.100
and the effective date of a plan the debtors

01:32:12.100 --> 01:32:14.779
reserve their rights to seek an extension of

01:32:14.779 --> 01:32:18.659
the stay and Canadian respondents reserve their

01:32:18.659 --> 01:32:22.390
rights to oppose such an extension Neither party

01:32:22.390 --> 01:32:25.869
will use the fact of this stipulation to argue

01:32:25.869 --> 01:32:29.050
that the stay should or should not be extended

01:32:29.050 --> 01:32:33.550
The parties shall cooperate on adjourning existing

01:32:33.550 --> 01:32:36.609
hearing dates in the Canadian proceedings for

01:32:36.609 --> 01:32:42.510
a date on or after December 3rd and at a case

01:32:42.510 --> 01:32:46.609
management Conference that we were advised is

01:32:46.609 --> 01:32:54.500
scheduled To be held on June 6 the Canadian plaintiffs

01:32:54.500 --> 01:32:58.640
will advise the court that they intend to seek

01:32:58.640 --> 01:33:02.260
an adjournment of the hearing on the consolidation

01:33:02.260 --> 01:33:06.479
motion until the week of December 15th or the

01:33:06.479 --> 01:33:11.119
courts the Canadian courts convenience we Are

01:33:11.119 --> 01:33:14.520
glad to memorialize this in a written stipulation

01:33:14.520 --> 01:33:18.239
and submit that to the court Sounds great. This

01:33:18.239 --> 01:33:20.659
new flies that consistent with your understanding

01:33:20.659 --> 01:33:24.119
Thank you very much your honor. I feel the privilege

01:33:24.119 --> 01:33:26.260
of thank you to our friends that this is an agreement

01:33:26.260 --> 01:33:28.659
We have agreement on the terms and that my friend

01:33:28.659 --> 01:33:32.180
is by the court. Thank you. Very good All right.

01:33:32.180 --> 01:33:34.199
Well, thank you. I appreciate the party's getting

01:33:34.199 --> 01:33:36.100
their heads together on that and it sounds like

01:33:36.100 --> 01:33:40.720
a mutually beneficial resolution So very good

01:33:40.720 --> 01:33:47.979
anything further for today then Very good. All

01:33:47.979 --> 01:33:50.659
right. We have matters scheduled for 1 30 tomorrow

01:33:50.659 --> 01:33:53.439
and so we'll see you all then court will be adjourned

01:33:53.439 --> 01:33:54.720
Thanks, everyone