American court hearing recordings and interviews - 23andMe - Audio of June 3 2025 Bankruptcy Court Hearing, case 2025-40976 before the US Bankruptcy Court

Episode Date: June 9, 2025

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Let's begin with our 130 matters, please. 23 and me, holding co, at all? Here, this is in the courtroom. Good afternoon, Your Honor. Tom Risky and Nathan Wallace, Harmony McDonald. Good afternoon, Your Honor, Christopher Hockman, Paul Weiss Griffin, Warren, Garrison, co-counsel to the debtors.

I'm here with my colleague, Max Siegel, and Jeffrey Rector. Very good. Mr. Good afternoon. I hope he has proposed co-counsel to the committee. Good afternoon, Your Honor. Jason Adams, Kelly, Drian Warren, proposed counsel to the official committee of unsecured creditors. With me in the courtroom today is

Megan McLaughlin, and on the WebEx today is Eric Wilson. We also have Andrew Scruton and Matthew Diaz from FTI Consulting, proposed counsel for the official committee of insecure creditors, also on the WebEx. Did you state, Your Honor? Has any questions with respect to the protection of the question. Very good, thank you. Good afternoon, Your Honor. Good afternoon, Your Honor. David Unsov, Lawful, O'Brien Cave, late in pageant. on behalf of TTA and Research Institute,

and Wichitsky, ABC, 2.0 LLC, LLC, and Wichitsky, Ravocetal Trust, and the Am Wichick-K Foundation. Good afternoon. Joe Schlazauer on behalf of the U.S. Trustee. Good afternoon. Good afternoon, Your Honor. Michael Castle, Wachtell, Lefton, Rosen, and Katz,

for a general pharmaceutical Zanecas, as the successful bidder. I'm here with Mr.N. I'm sorry, the last word. I'm here with Ben Struby of Lathrop GPM. Got it. Castle, you said, sorry, my pens, as they tend to do, are all out of ink at the same time. Yes, Michael.

I got it. Thank you. Castle, thank you. Thank you, Mr. Castle. Good afternoon, I, Joshua Jones, the United States of America. Good afternoon. Any other princes in the courtroom? All right, your parents is on the WebEx.

Good afternoon, Robert. Good morning. Chamber Jones for Kara Ops-R-L-E. And with me on the WebEx today is Mike Kricker. Good afternoon. Good afternoon, Your Honor. Robert Hirsch. Northern Rose, but I am, I sometimes don't want my camera at the moment.

I hope to fix it in a second, but yeah, I'm doing for J&B. Castle with different. Very good. All right. My name is Kevin Barnes on the Class A shareholder. Welcome back, Mr. Barnes. Good afternoon, Your Honor. Charles Baceto, Class A shareholder.

Mr. Pesito. Good afternoon, Your Honor. This is Abigail Ryan with the National Association of Attorneys General, representing the bank client states to which, Oklahoma and South Dakota are joining, so we're a little larger now. So those are your new clients, Oklahoma, South Dakota? Yes, Your Honor. I'm going to update and add South Dakota this afternoon.

Okay, very good. Thank you. Good afternoon. Thank you. Thank you. Good afternoon, Your Honor. I'm staged in with Hulahi. I'm counsel through the cross-action plaintiffs in Canada.

It's a privilege to be here. Thank you. Thank you, sir. Anyone else? Good afternoon, Your Honor. This is Andy Goldman from Wilmer Hale in New York. We are proposed counsel to Neil Richards, the Consumer Privacy on Butchman. Very good. Good afternoon, Your Honor. This is Ballyla Jordan with the state of Minnesota representing the people of Minnesota. All right, Ms. Risky?

Mr. Your Honor, I'm risky for the debtors. As Your Honor is aware, typically when we have these hearings, I ask Mr. Hopper, let's give an update as to the case stands in some of the case. the coming attractions. If it's okay with the court, as the court knows, we've agreed to push a number of matters to tomorrow, and I think as part of those accommodations, we're agreeing to not really raise any of those issues today. Is that satisfactory to the court?

That seems like a good idea. We could get sidetracked if we all decided we need to argue today about what we can argue about tomorrow. So I think that's probably a good plan. Thank you, Your Honor. So as Your Honor knows, we filed a proposed agenda. I noticed from the Court's docket, Your Honor, already took off the motion to reject as your honor knows if we can take that matter up we filed

the stipulation Ms. Jones and Mr. Gregeron it contemplates setting a rejection date contemplation of their administrative expense claim and payment the offsetting of the security deposit and some additional language in there just clarifying the removal issues with respect to the But the long and short is that issue has been resolved. The parties have negotiated in good faith. We believe the settlement is in the best interest of the estate. So we've submitted that to your honor. So I just wanted to touch on that.

Have the committee and the Diplander reviewed that as well? The order, I mean, the general terms of the settlement. To be honest, given the time constraints yesterday, no, that's why we went ahead and filed it just so the parties could see it. But I'm happy to talk to them after the hearing. today and before. Sure, if you give Mr. Spinal report about where that stands with the key parties, and then we'll take a closer look and if there are any disputes, we'll get them resolved, of course. Perfect. Thank you, Your Honor. With that, would the court be okay if we took up some of the retention

matters and then save the stay matters until the end? I think that would make sense. Sure. Perfect, Your Honor. Well, up next is the debtor's application to retain Deloitte. As your honors aware, there was a separate OCP application for Deloitte that's expected some of their services, but the services contemplated by this are more in tune with actual retention and 330 review. We haven't received any formal objections. The U.S. trustee did have some informal questions right after we filed it. We walked through those with them, so I do not believe there are any informal or formal objections to the application. that sort of be granted.

Okay, a question for you, Mr. Risky. The indemnification provisions seemed a little broader than normal. In the proposed order, at least the last one I looked at, didn't have the usual three paragraphs that sort of bring that back to Earth. Is that one of the comments you received from the Oestriste? Actually, it was not, Your Honor, but I'm happy to, now that you've highlighted that issue, go back and see if that needs to be reined in. No party has said that that's a point there need to die on.

through deminification. I think that might have been a pullover from another one before that got refined. Sure. I think the way we handled the MOLUS order, paragraph 12, is standard and ought to be acceptable to everyone. So first let me find out if anybody else wishes to be heard on the delight retention? Apparently not. All right. So I'll grant the application but subject to the usual language as in the MOLUS order, for example. And if that's an issue, let's reset it and we'll sort it out, but I suspect it won't be. Perfect. And if you'd submit an order, please. Thank you.

I believe the next retention and applications are those of the committee, so I'd see the podium, you know. Very good. Good afternoon, Your Honor. Megan McLaughlin, Kelly Dry and Warren, counsel to the committee. On May 5th, Stinson, Kelly Dry, and FTI all filed their retention applications at document numbers 383, 384 and 385, respectively. On the same date, we filed a notice of hearing advising all parties, the May 27th objection deadline, end of today's hearing.

The applications were served on the master service list, a certificate of service was filed at docket number of 37. The committee professionals did not receive any formal or informal objections or applications. I understand that the orders have been submitted to your chambers already. We're happy to resubmit if needed, but we're. request entry of those orders. Okay, let's take them one at a time just in case someone wants to be heard. The Stinson application, anybody wish to be heard in the Stinson application, that it appears to be an order.

So I'll grant that application, and no need to resubmit if there's an issue with the order that we have. We will be in touch. How about the Kelly Dry application? Anyone wish to be heard on the Kelly Dry application? All right, Ms. McLaughlin, the only question I had there is the associate who owns a couple shares of stock. If that were a partner, I would say maybe the partnership donated to charity. Since it's an associate, how about we implement a formal wall as you would with a lawyer who comes over from another firm or government service or something like that, I think that will take

it. It's obviously the minimum issue. And as you mentioned, the associate's not going to be working on the matter. So with that change, I'll grant the application. And I'll ask you to resubmit order so you can describe your formal walling procedure using the correct terminology. And we'll look for that. All right. How about the FTI application, 385? Anyone wish to be heard? All right, I reviewed that one as well.

The indemnification protocols there do seem to be standard to me, so I don't think we need any further tweaking there. And I'll grant the FTI application and we'll run with the order that you've submitted. Thank you, Your Honor. Thank you. Up next to we have Wilmer Hale. Yes, good afternoon, Your Honor, Andy Goldman again from Wilmer Hill, and I'm joined in the virtual courtroom by my partner, Kirk Nara, in Washington, D.C. Your Honor, we filed our application to serve as counsel to Neil Richards, the Consumer Privacy Ombudsman back on May 13th, cognizant of the stipulation in order which appointed Mr. Richards, we styled this as a 327 application,

and obviously went through the standards, the one would go through, with respect to disclosure, parties in interest, conflicts check, and the like. We received no objection from anyone formally or informally on the application. My declaration is attached to the application, explaining the procedures that the firm went through in terms of clearing conflicts and confirming for this court that we are disinterested and hold no interest adverse. We've all done it. Stock our fridge with leafy greens and good intentions, only to have our future self-sacrifice quality nutrition for the convenience of takeout.

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That's 30% off for a limited time at KAC, H-A-V-A-com Code News. I did file a short supplement just to disclose that Ryan Dury, who is going to work with Mr. Richards and assist him in Mr. Richards' tasks at one point because he worked for Amazon, helps and Amazon shares, and is also a consumer himself. That declaration, that supplemental declaration was filed on May 30th. Again, Your Honor, we've received no objections. I'm happy to walk the court through the application if your honor has any questions or concerns.

But again, no objections were filed. Nobody has reached out to us asking us any questions with respect to our application. All right. Thank you, Mr. Goldman. The certificate of service shows that the application was served on May 29. So aren't we a little tight on timing here? I know. Yeah, we'll...

Your Honor, Tom Risky for the debtors. I think there was some confusion by the parties with respect to this. We agreed to file it on behalf of them to move this process forward, but I think there was some miscommunication with parole on serving that immediately. I don't know if there's a workaround to have it go on negative notice for a little bit longer to satisfy any notice concerns the court may have, but I think that's why it was served last week formally. negative notice is a creative solution.

I can't, I don't have in front of me the actual language of what went out. If it would tell someone to object by a certain time, I could probably get my head around negative notice. If not, it, if not, it may. You want to send a supplemental notice? Yes. Okay, well, look, the CPO should have counsel. And why don't, why don't you do that? Why don't you send negative notice giving 14 days from whenever that is for anyone to object to the Wilmore Hale application and failing receipt or filing of an objection?

You can submit an order on that. I do want to also talk at the same time about Mr. Dury. I don't understand from the application who Mr. Dury is or whether he has any connection with Wilma Hale. I'm not saying Mr. Dury shouldn't work for the CPO, but I didn't get the sent. that he's a lawyer with Wilmer Hale and so I wasn't sure. Oh no, no, no, Your Honor, yeah, first of all, I apologize. This is, with respect to the notice question, Your Honor, this is the first that I am hearing of any of this with respect to any delay or close service.

We had thought that this was served on May 13th, one of this file with the court for any confusion. I apologize. I'm as surprised by hearing this as anyone. Beyond that, Your Honor, with respect to that question, no. Mr. Derry is not a Wilmer Hale lawyer. He is somebody who Mr. Richards knows well. He is the director of AI initiatives

at Washington University, St. Louis School of Law. And I believe, although Mr. Richards is on, if the court wants to ask him directly, but I believe that in Mr. Richards' preparation of his reports to the court and the work that he is going to do, he is going to utilize Mr. Dury's services as necessary. And it is for that reason that I wanted to make sure that there was supplemental disclosure, both of Mr. Dury, which we did disclose, and then of Mr. Dory's very, if he will,

tenuous parties and interest contacts with respect to Amazon, and a former health lawyer and small shareholder, etc. I don't know if that answers the court's question in full or not. That's helpful. I think Mr. Dury probably needs his own application. I assume he's a lawyer, he's a professional person, and I think he ought to apply, or the CPO ought to apply on his behalf for retaining him as a professional person.

So primarily Mr. Goldman, because your declaration about Mr. Dury is probably missing a little foundation. because he doesn't even work for you. And so why don't we, subject to the negative notice issue, I'll grant the Wilmer Hale application, but let's carve Mr. Dury out into his own application. I'm not anticipating there will be any problem with that, but I'll take up any objections as they are,

and we'll deal with that, and it won't impair the timing of his attention or his ability to charge for his time, beginning from the outset of his engagement. That's fine, Your Honor. One last housekeeping matter, Your Honor, and I'm happy to file a second supplemental application, if Your Honor, would like. We obviously ran our exhaustive conflicts check off the parties and interest, which we were provided at the time the parties and interest lists were circulated. Mr. Richards obviously wasn't on the list because he wasn't there at the inception. And so we did not disclose, and we just learned, in that.

surprisingly for me since I've been a partner at the firm for now 24 and a half years, that from 2002 to 2003, Mr. Richards was affiliated with the firm, I believe, an associate in one of our offices. Obviously, the world in my world don't really intersect in any way until now. But I did want to disclose that to the court, obviously, that he left the firm 22 years ago. But I did want to disclose that to the firm. If Your Honor wishes I'm happy to file a second supplemental declaration unless the record can stand as such with respect to this declaration and my comments on the record. That is. Life at a large law firm. So without leaking into tomorrow's subject matter, there is a supplemental declaration from Paul Weiss about the bidders.

I don't believe we've seen supplemental declaration from the other professionals who are interacting with the bidders about any connections with the bidders. And that, so Wilmer Hale may be due to file something of that nature anyway, Mr. Goldman. And if so, go ahead and put the one-liner in there about Professor Richard's affiliation with the firm in the past, and that'll take care of that. But I will take this up again tomorrow as necessary, but I do think the other professionals who've been involved in the sale process ought to get supplemental declarations on file and seal them as appropriate based on the order for last week. Okay, so we'll look for, we'll look for an order following a negative notice period on one more Hale and we'll look for a separate application for Mr.

I believe that brings us to the stay motion and Mr. Siegel will be presenting it for the debtor. Very good. Mr. Siegel, shall we start with the motion to expedite? Happy to, Your Honor. We've sought to expedite this motion because there is an impending hearing in the Canadian class actions that are the subject of our substantive stay motion, that hearing is scheduled to occur on June 16th. And despite the debtor's best efforts in Canada, respondents have thus far refused to agree to an adjournment of that hearing,

and thus in order to avoid all of the prejudice and harm to the debtors that would come from further proceedings in the Canadian case, we request that the court expedite this matter. All right. So anyone wish we heard on the motion to expedite? Your Honor, I'm Sajum, as a lawyer, on behalf of the Canadian plaintiff. I just with note for the record that I do not necessarily agree with my friend's characterization of the events, but we have no objection to the motion to expedite.

Thank you. Okay. Thank you. Anyone else? All right. I'll grant the motion to expedite. Let's proceed to the merits. Mr. Siegel.

Thank you, Your Honor. Present motion seeks an order confirming that the automatic stay applies to two Canadian cumulative class actions, including as to certain non-debtor defendants. These class actions arise from the October 23 cybersecurity incident that this court has heard much about in the course of these Chapter 11 cases. In the alternative, the motion asks that the court extends the automatic stay, and it also seeks an injunction against continuation of the Canadian Cuditive class actions during these Chapter 11 cases.

A Canadian court has already granted recognition of these Chapter 11 cases and thus is prepared to give effect to any order that this court issues with respect to a stay of the class actions. First, I'd like to deal with some housekeeping evidentiary matters. As an initial matter, we'd like to admit the declaration of Mary Buttery in support of the motion at docket number 434.

Ms. Buttery is counsel to the debtors and the individual defendants in the Canadian class actions, and her declaration describes the proceedings thus far in those cases. She's available on Zoom, should the court have any questions for her, but we understand the respondents do not intend any cross-examination. Okay. Any objection to receipt of the buttery declaration in evidence? No objection, Your Honor. Thank you.

Okay, I'll receive it. 434 is in evidence. And just for clarification, Your Honor, we'd also move to admit the exhibits to that declaration, which are all public records of Canadian court proceedings, including the complaints in the two putative class actions and anonymization order in those cases and a proposed amended complaints. We would offer those into evidence as well. All right. Any objection?

No objection, Your Honor. Thank you. Okay, thank you. They're admitted. Next, we'd move to admit exhibits A, B, and C, to the Siegel Declaration filed at docket number 435. Those documents consist of certificates of incorporation for the debtor's 23-and-Me-Me-Folding Co and 23-Me, Inc., and their public records. that have been filed with the Delaware Secretary of States. We would request that the court admit those as well.

You said A, B, and C, but not D? D is a redline comparison of exhibits A and D to the buttery declaration, so we think it's better considered as an illustrative aid rather than an actual item to be admitted into evidence. Okay, fair point. All right, any objection to the receipt of exhibits A, B, and C to the Segal Declaration 435? No objection, Your Honor. Okay, it will be admitted as well, thank you.

On the substance, Your Honor, this motion can start... We've all done it. Stock our fridge with good intentions, only to sacrifice nutrition for convenience. Keep your body and mind nourished with whole-body meal shakes from Kachava. It's got 25 grams of protein, 6 grams of fiber, greens, and so much more. But it actually tastes delicious. Try one of Kachava's indulgent flavors today. Shop now through December 2nd to get 30% off your first purchase.

of two or more bags. Go to Kachava.com and use code news. That's KACHAVA.com, code news. It earns two Canadian class actions arising out of this cybersecurity incident of October 2003, which has been the subject of many proceedings in this court. Respondents filed the first class action in October 2023, bringing contractual statutory and tort claims solely against the debtors. The claims focus on what respondents alleged were deficient data privacy and security practices at 23 and me. Then nearly one year later in September 2024, respondents sought to add additional defendants to the complaint against the debtors. Namely, these are certain officers, directors, and employees of 23 and me, as well as KPMG, who was then the debtor's order.

Instead of obtaining leave to amend, though, respondents filed a duplicate class action. They again sued the debtors on largely identical claims to the first class action and based their claims entirely on the same conduct as before. The only difference is that they now tacked on these additional defendants, calling them at least three times throughout the complaint, co-principles and or co-conspirators. That's in Exhibit C to the buttery declaration, paragraph 6, 9, and 47. This second complaint does not bring a single claim against the non-debtor defendants

that is not also alleged against the debtors, and doesn't differentiate between the debtors and non-debtors in any way in the non-debtor claims. There are some claims in the complaints that are just claims against the debtors, but there are no claims that are just against the non-debtor defendants. I'm glad to walk your honor through the causes of action in the complaint, if helpful. I've reviewed it. Thank you. I appreciate that. The face of the complaints, thus in no way, reveals any sort of claim against the non-debtor defendants.

That's not also a claim against the debtors. And the proposed amended complaints, which is Exhibit D to the Buttery Declaration, is even worse in this regard. It pleads five causes of action, and each one of those is against, quote, each of the defendants. Unlike the plaintiffs in the many other class actions arising from the cybersecurity incident,

respondents here have to date refused to pursue their claims in these Chapter 11 cases or to utilize the procedures that have been extensively negotiated. negotiated and discussed for resolving claims rising out of the cybersecurity incident. And while it appears that respondents agree that the automatic stay applies to their claims against the debtors, they're continuing what amounts to proxy litigation against the debtors by bringing claims against the debtors, former directors, officers, and employees as well as KPMG.

And that's because the claims asserted against the non-debtors are the same as the claims asserted against the debtors are based entirely on the debtors alleged wrongdoing in the cybersecurity incident and would result in recovery from the debtors because of indemnification obligations that the debtors undisputedly have. In fact, the cases are already taxing estate resources because the debtors are required to indemnify the individual defense. not just for any judgments, but also for their legal fees. So Mr. Siegel, the response mentions that insurance is defending the litigation. And I didn't see a rebuttal to that in your reply. So is the estate coming out of pocket for defense costs right now, or is an insurance company handling that? At the moment, the estate is out of pocket for those. there is insurance that is applicable with a retention that may be waived in the case of bankruptcy,

but ultimately the estate, at the end of the day, stands liable based on its indemnification obligations. So is there a denial of coverage or dispute about coverage or it's just you haven't reached the retention level? My understanding is the latter. Okay, thank you. Now, respondents have not been able to identify a single case where litigation has been allowed to proceed under the circumstances I just described. In fact, they don't cite a single U.S. case in their briefing. By contrast, other similarly situated plaintiffs who have asserted claims against the debtors and non-debtors in analogous circumstances have reasonably consented to stay their cases, including against the non-debtors. have reasonably consented to stay their cases, including against the non-tetters.

Your Honor's familiar, for example, with the pixel litigation that is pending against... Well, I know that it exists, but that's... I don't even know why it's called pixel, so I... If you want to go into that, you're going to have to spoon-feed me a little bit about the pixel litigation. It's a class action that's not based on the cybersecurity incident. It's based on certain tracking pixels. as they're termed on a website operated by Lemonade, but as relevant today, one of the defendants in that case is a non-debtor,

and shortly after a suggestion of bankruptcy was filed, the district court in the Northern District of California asked whether the stay applied to the non-debtor defendant, and plaintiffs in that case came to an agreement and a stipulation with the debtors that applied the automatic stay to the non-debtors. And that's available on the docket at ECF number 216. But respondents, the Canadian plaintiffs, have refused to agree to any sort of stay or stipulation with respect to the non-debtor defendants here,

which plainly is an effort to evade this court's jurisdiction and the orderly resolution of data breach claims that the court's. parties in the court have sought to establish in these cases. The court should grant the motion for three fundamental reasons. First, as noted, the claims against the non-debtor additional defendants in the Canadian proceedings are identical to the claims against the debtors and arise from the debtor's alleged misconduct in the cybersecurity incident. In essence, the complaint says the debtors did something wrong and certain

and additional defendants are liable because of it. This means that resolution of those claims based on the debtor's alleged wrongdoing without the debtor's participation would be highly prejudicial to the debtors. Second, the individual non-debtor defendants have an undisputed right to indemnification for claims against them,

which means that at the end of the day, the debtors are the ones on the hook for any judgment in the Canadian class actions as well as for legal fees. And courts routinely apply the automatic stay to non-debtors in such circumstances. Third, the continuation of the Canadian class actions, even as to the additional defendants, would disturb these Chapter 11 cases where the debtors are presently resolving

their other liabilities stemming from the data breach incident. By contrast, applying the stay threatens no prejudice to respondents who would face at most a slight delay while these Chapter 11 cases are resolved. The only argument that respondents have presented to the contrary seems to be that there is some hidden distinct liability theory as to the non-debtor defendants, but that's simply contrary to the face of the complaint.

As I've mentioned to your honor, every cause of action against the non-debtors is also a cause of action against the debtors. The complaint states that it, quote, arises out of two main allegations, which are that, quote, the 23 and me defendants did not introduce, implement,

and or maintain proper data retention practices, and, quote, the 23 and me defendants did not introduce, implement, and or maintain proper data protection measures and or practices. That's at paragraph 8 of Exhibit C to the buttery deck. So simply, the suggestion that there is some sort of distinct liability theory is contrary to the face of the complaint,

which says the debtors did something wrong and the non-debtors are liable for it. At the end of the day, the claims against the non-debtors are the same claims as those against the debtors, are based on the same conduct as that of the debtors, and ultimately seek the same source of recovery, which is the debtors. And for those reasons, unless the court has any questions, we would ask that the court grant the motion. Okay, thank you.

I do have a few questions for you. Personal jurisdiction, the Canadian plaintiffs, at least in their declaration, have made what I'm interpreting as a special appearance. They're not acknowledging that this court has personal jurisdiction over them. Tell me your thoughts on that. There are a couple of answers to that, Your Honor.

First, as you mentioned, this is kind of a throwaway statement in Mr. Karf's declaration, and there's no argument in the motion whatsoever that there's a lack of personal jurisdiction. Typically, a party entering a special appearance would be required to contest personal jurisdiction in their first filing, which did not happen in these motions, nor in the stipulation that respondents previously agreed to signed and filed before this court. We also attempted to resolve any jurisdictional issues by agreement to proceed by motion, and therefore via an in-REM proceeding in this court as to the scope of the automatic stay, rather than any sort of impersonum adversary proceeding against the respondents.

And I'm happy to speak to the minimum contacts that respondents have with the United States if that would be helpful. But as noted, the Canadian court has recognized these proceedings and stands ready to give effect to this court's determination as to the automatic stay. In other words, this court could make a finding about the scope of the stay, and a Canadian court can then tell the trial court in Canada the proceedings have been stated. So I see your point about that aspect of motion being more or less in realm. But if I need to extend the automatic stay to reach the plaintiffs, aren't we in the world of inference? We've all done it. Stock our fridge with good intentions, only to sacrifice nutrition for convenience. Keep your body and mind nourished with whole body meal shakes from Kachava.

It's got 25 grams of protein, 6 grams of fiber, greens, and so much more. But it actually tastes delicious. Try one of Kachava's indulgent flavors today. Shop now through December 2nd to get 30% off your first purchase of two or more bags. Go to Kachava.com and use code news. That's KACHAVA.com code news. Personum at that point, don't I need personal jurisdiction over these two plaintiffs and or their counsel to extend the automatic state to reach them?

First, our counsel has appeared prohap V-H-A in this court at this. stage and determining the scope of the stay would be a matter within this court's or jurisdiction as to whether any further relief would require in personum jurisdiction I think it's helpful to take a look at exactly what response have done here. I do think, yeah, let's talk about minimum context. Give me an overview of that, if you would, please. Sure.

As an initial matter, respondents purportedly chose to do business with a U.S. company by purportedly entering contracts with using the products of 23 and me, which is a U.S.-based entity, and thus they availed themselves of the privilege of doing business in the United States. In connection with that, they received saliva collection kits from a U.S. company, collected saliva, sent it back to the United States, for it to be processed by a U.S. company at a laboratory in the United States, and ultimately a return to them in Canada. On top of that, the respondents have initiated a lawsuit in which they repeatedly allege that the debtors are U.S.-based entities, and thus they've also recently filed a proposed amended complaint in that lawsuit. And by doing so during this bankruptcy case, I'm happy to provide case law to this court out of the 8th Circuit that says that filing a lawsuit against a U.S. based debtor during the existence of a stay, constitutes minimum contact, and brings the respondents within this court's personal jurisdiction. I haven't seen.

I'm not familiar with that specific case law. I don't know if you have it handy or if you want to, if you have access to it, I want to supply it in rebuttal or something like that. I'd be curious to hear about that because in poking around, I've not found anything quite that specific. Yes, I believe that is cited in the adversary complaints that we initially filed, but I'm happy to find that and present it on rebuttal.

But that would be helpful. Thank you. I appreciate that. Okay. But even short of that. We'd submit that doing business in the United States, as respondents did by their use of the 23-and-me-kits, the sufficient minimum contacts for purposes of this motion. And so it seems to me you're talking about a very specific kind of specific jurisdiction,

or very specific aspect of specific jurisdiction. I have personal jurisdiction over these plaintiffs as to the scope of this lawsuit, and we don't need to think about whether I would have personal jurisdiction to to handle a breach of contract claim against them or something much further afield from the core of the bankruptcy case. Is that the nature of your personal jurisdiction theory? I think with respect to our in-RAM theory

is that certainly. That's certainly the case. With respect to in-personum jurisdiction, I think there are sufficient minimum contacts to exercise specific personal jurisdiction regarding respondents dealings with 23 and me, which they state form the basis of the claims in this action. There simply is no, there are no Canadian class actions

without the exact business transactions I just described. I don't think the court needs to go farther than that in determining the extent of jurisdiction. Okay, that's helpful. Okay, well, we'll give you a chance, Mr. Nematelotti, after everyone through some questions. Thank you. Irreparable injury. So what, so if I grant an interpretation of the state or a preliminary injunction that stays this litigation,

how long does that preliminary injunction or that stay last? And we'd submit that it would be appropriate, at least through the continuation of these Chapter 11 cases, so that they can proceed uninterrupted by what's going on in Canada. And we think it would be appropriate during that time to attempt to work with respondents as we already have to help them engage in the exact claim resolution process that other class actions against the debtors are undergoing at this time. So we're talking about the stay or an injunction extending the stay through confirmation of the plan? Consult momentarily with my colleagues. So, Your Honor, to clarify, we seek the stay through the effective date of the plan.

Effective date. Okay, sure. And just to note one further point on jurisdiction, we are asking this court to issue an order with respect to the scope of the stay. But that order, as I noted, will ultimately be recognized by a Canadian court and enforced by a Canadian court, which unquestionably has personal jurisdiction over respondents. Okay. Okay, okay, that's helpful.

All right, so if the stay extends or is extended through the effective date of a plan, what is going to happen in litigation in Canada that's irreparable injury if I don't do that? First, there is a hearing, as I noted, scheduled for June 16. And I'm sorry to interrupt, but the plaintiff's deck. says that hearing is only on the motion to consolidate the two cases. Is that right? Part of that motion includes the amendment of the complaint. The amendments you can see at exhibit D to the Siegel Declaration.

And among those is to enlarge the class so that it is no longer just individuals in Canada whose data was breached and now expands to all 23 and me customers in Canada. That sort of vast expansion of the potential liability of the debtors or the debtors by proxy through the non-debtors is a substantial irreparable threat to the estate. The debtors can't see the scope of their liability expanding as they're trying to complete a reorganization. There are also changes to the claims that are sought in the proposed consolidation and there are the fees that the debtors would need to indemnify the individual defendants

for as the June 16th hearing occurs. Now past the June 16th hearing, assuming that the motion is granted, we expect there to the proceedings regarding motions that, according to respondent's own words, will determine the universe of claims against the debtors. In other words, there's the potential for liability against the debtors to accrue via those proceedings, not give the debtors the breathing spells,

which they are entitled. And subsequently, there will be, motions for class certification, which do involve factual affidavits as set forth in Ms. Buttery's declaration, and that sort of fact-gathering, much like any discovery that might subsequently occur in these actions, would squarely implicate the debtors. So the plaintiffs lay out a pretty extensive timeline in their declaration, starting in paragraph 37. And you haven't really addressed that with the reply. But is that timeline roughly accurate?

I don't have all the details on my screen here. But class certification, we're talking about 2027 or 2028, if I remember correctly. I don't want to stand here and speculate as to what will happen in terms of timeline. As you see the timeline set forth in Mr. Carp's declaration makes a vast number of assumptions about whether there will be appeals from different orders, the timeline for those appeals. What I think that the timeline does speak to unquestionably, though, is that if respondents are correct,

then there is effectively no prejudice to them from issuing a stay through these fast-moving Chapter 11 cases to resolve to give the debtors a breathing spell from what respondents say will take many years beyond the Chapter 11 cases. Okay. The plaintiffs refer to Ms. Wigiske as a former director. I thought in earlier proceedings there was a discussion that she was still on the board but not on the special committee. I'm sure there's a straightforward answer to that.

Do you have it handy? For the record, Christopher Hopkins is always for the debtors, Your Honor. Ms. Wajitsky is currently still a member of the Board of Directors of the debtors. She is not a member of the Special Committee that's been delegated effectively the full authority of the board with respect to all restructuring related. I thought that's what I remember. Thank you for clarifying that. All right. Then how about KPMG?

I haven't seen anything about indemnification of KPMG, and I do see in the complaint some, daylight between the claims against KPMG and the claims against everybody else related to the fact that they're the auditor and auditors do different things than off the school. You've finally broken loose from work, three friends, one tea time, and then the text. Honey, there's water in the basement. Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance. We always answer the call because real protection means showing us.

up even when things are in the rough. Cincinnati Insurance. Let us make your bad day better. Find an agent at CINFIN.com. Some discussion of that complaint. But the more important issue is indemnification of KPMG. Are they indemnified? And where is that in the record?

They're not indemnified, Your Honor. But nonetheless, the proceedings against KPMG are all about what occurs. in the cybersecurity incident and what little there is in the complaints that is specific to KPMG are for example statements that KPMG puts in advertising materials on its website they're fundamentally ancillary to what respondents described as the main allegations in the complaints which are deficiencies in the debtors cybersecurity practices and data retention practices and KPMG, like the others, is alleged to be a co-principal and or co-conspirator.

Okay. And are they covered by the same insurance that covers the debtors? Or they have their own insurance, or no insurance at all? I'm not aware of there being covered by the insurance policy that covers the debtors. I'm happy to look into that, to the extent the extent the court would like. Okay. All right, I have what's going to sound like an oddball question, but I'll explain. Are the debtors offering any security in support of a preliminary injunction to the extent

this heads in the direction of preliminary injunction? And the reason I ask that is, I think the bankruptcy lawyers know that the court can waive security for a debtor under Rule 7065, but HR1, the one big beautiful bill act moving through Congress, contains language that could be read to make a preliminary injunction unenforceable unless security has been provided. And it appears to apply to injunctions that are in existence before the bill is enacted into law. So that's a very long explanation for why I asked what I think is an odd question.

Understood, Your Honor. We don't believe that security would be appropriate in these circumstances, given the financial distress that the debtors find themselves in, And the fact that even as to the non-debtors, as I've spent a lot of time on those claims or fundamentally claims against the debtors, with respect to the big beautiful bill, I'm candidly not certain of its application

to this proceeding. It's not the sort of proceeding that Congress has in mind, I'm pretty sure, but the language is. Understood, and that too is something. We're glad to look into if it would be helpful to the court, but short of that answer, is that a security wouldn't be appropriate, given the distress that the debtors find themselves in,

and that the non-debtor claims are really debtor claims. Okay. Thank you. That's helpful. That's all the questions I had for you, Mr. Siegel. Thank you very much. Let's hear from the plaintiffs. I've been calling the plaintiffs

the respondents in this motion. Mr. Nima Toulali, am I saying that correctly? Yes, Your Honor. Absolutely correct me. Very good. Please proceed. Thank you, Your Honor. So just wanted to touch me quickly on the issues around jurisdiction

and I guess relatedly the injunction and security for cost. I apologize if our claim or our declaration was maybe a little bit not as clear as it could have been. The language that we included was in response to the adversary complaint, obviously, 23 and me have filed against a client. We were shocked to receive that with no notice to us, especially so. Given the very first day of the commencement of these proceedings, we were in direct contact with the, with council, Canadian council to the debtors, and we had stated to them that it would comply

with the scope of their stay. There was absolutely no reason to file an adversary complaint and especially, you know, with no notice to us. And just to be clear, the adversary complaint includes incorrect statements regarding the fact and the connection, United States and whatnot. So that language in the declaration really speaks

to the context of coming from that adversary complaint, or adversary proceeding situation into this more proper forum to address the scope of the state. But besides that, there is really no dispute that your honor has the authority to extend or determine the scope of the state. And if you determine that the state should be extended, to any up and non-debtors.

We, of course, complied. As my friend indicated, the Canadian court has now recognized these proceedings in Canada that happened on our consent. So if your honorary grants a further order with respect to this state,

and that order will have to be recognized in Canada as well, so we will consent to that very obviously as well. That is all to say also, I don't think there is any really reason to to have a discussion around an injunction. We have been complied, and we say we will continue to comply

with the stay of the proceedings that it may be in place. And on that note, I think the issue regarding security for cost would also be moved. Okay, thank you. That's helpful. How about the merits? Amazing. Your Honor, we have a declaration of L.E. Carr that I would like to introduce into evidence. That is docket number 5,8, 4.

that obviously is outlawed regarding the events and proceedings in Canada. The difference is that we, I did not object to the declaration of Ms. Buttery being admitted to evidence, but with respect I do believe that it's incomplete in some respects. A very clear example would be where Ms. Buttery says, well, if the action proceeds, we're going to get its certification and then there's going to be discovery. Well, that is correct, but because I'm very in mind that that's not going to have to have. happened until 2020-29. So Mr. Kopp's declaration provides further detail from our perspective regarding the procedure

in Canada. So we do not exceed to the declaration of Ms. Buttery and we rely on Mr. Kopp's declaration with respect to the relevant events and occurrences in Canada. So we respectfully ask or move to admit Mr. car's affidavit including the exhibits A through S into the evidence before the court. All right. Is there any objection to receive the cart declaration and exhibits? No objection, Your Honor.

Okay. It'll be received. Thank you. Your Honor, my friend said in the witness submissions, and again on his feet, that we do not cite to a single U.S. authority in our response. And that is not fair. The law is undisputed. We do not have any debate on the law.

Frankly, in Canada, I can tell you that the concepts are largely the same. And we do rely on the same authorities that my friend cites in their motion. And specifically, I wanted to take you, to this case from the Appletes Court in the Circuit, which is called Ritchie Capital Management. It's a 2011 judgment of the court, and it's cited in my friend's motion at paragraph 39. So I wanted to take it to some excerpt of that judgment. I'm not sure if you have a copy of it, or if it would be possible for you to have a copy of it, or I can just read out to you.

I don't have a copy, but I've looked at it within the last hour, if that's helpful. I think you are to allow me I would want to take you to some of the language from the appellate court because I think it's germane to what my friend would even say. So this decision has you know Roman numerals one and two and under two it has a section A and section B and section B is the one that I'm relying on and I'm going to read I want to be and faithful to the decision, but I'm going to skip over some of the words and rely on my, the ones that I want to emphasize, especially given that Your Honor, also read it just recently, but if you want me to go and read their balance of their excerpt just maybe let me know.

But the portions under Section B that I wanted to highlight would be as follows. Whatever the precise scope of this category of action, it is significant, broader and more and more force than the group of their actions affecting the assets of the receiver per-ruborship. The federal court, supervisor and equity receivership has inherent equitable authority to issue a variety of answer relief to protect the receivership and truly enough the scope of that relief is not made that two parties before the court. We accept that 100%.

Permissible answer release includes issuance of orders imposing blanket state of litigation in order to give the receiver a chance to do the important job of marshalling and untangling companies' assets without being forced into court by every investor or claimant. But the court's power to save off suits, but third parties turn on the ability to deplete the rest of the receivership state. The court equitable powers do not reach cases that pose no threat. to the assets of the receivership. In this respect, equitable powers of the receivership court are similar to powers of the bankruptcy court

to impose an automatic stay. The pull in both securities fraud receivership and liquidation bankruptcy is identical the third distribution of the liquidated assets. The bankruptcy court can stay action against any party as an non-debtor whenever the objective of the action is to obtain position or exercise control.

over the debtor's property unless a case involves unusual circumstances, however. The bankruptcy court cannot halt litigation by non-debtors. You've finally broken loose from work. Three friends, one tea time, and then the text. Honey, there's water in the basement. Not exactly how you pictured your Saturday. That's when you call us, Cincinnati Insurance. We always answer the call,

because real protection means showing up, even when things are in the rough. Cincinnati Insurance, let us make your bad day better. Find an agent at cINFIN.com. It's important to my, for my purpose, Your Honor. Even if they are in a similar legal or factual nexus with debtor, and next paragraph says the unusual circumstances in which the bank of support can state cases, against non-debtors are rare. So I would pause here.

So our pitch is simply your honor that we already said from day one to our friends that we're going to comply with the sale proceedings with respect to debtors. We agree that netters must preserve estate. My friends said that we have refused to bring the claim within the Chapter 11 proceeding. That is not fair and not accurate. We have been in significant discussion. We are looking into creating a channel to bring the claim in this court. And just so, you know, your honor has already granted what I refer to as a claims process order or claims bar order within this proceeding.

The debtors did not give us notice of that motion. We had asked to be included on the service list. We were not provided with notice. And lo and behold, one day they say, well, the order had been granted. Now we are, we think there is a way for us to, to, to, uh, in accordance with your honor's order to bring that claim within, uh, within the chapter 11 proceeding. And we have, we have putting a lot of efforts to do that. But suffice it to say that debtors have already secured what they wish to secure as

they're proceeding against the debtors, that preservation of this, uh, a state of the debtors and channeling all the claims. against the debtors within this chapter 11 proceeding. That has all been achieved. And now there is no, in the world of the applicant court, there is no unusual circumstance, which are, we already know, are rare to warrant that the claims against a non-debtor or KPMG

be stayed at this time. And my friend keeps saying that the claims against the debtors and former directors and officers and KTMG are basically right out of the same conduct of 23M. That is just simply false. We plead specific misrepresentations and that is the evidence before the court. And my friend is actually now even acknowledging in their reply, they acknowledge, well, yeah, there's a specific misrepresentation have been pleaded against these entities. However, my friend said that misrepresentations do not form the basis for any cause of action, which is also false because we have a full reply and that directs the court to the provisions of the claim

that we will not rely specifically on the specific misrepresentations we allege who non-debtors have made. So we, in our written submission, we identify for the court to the court, two issues and under issue number two, basically the question is whether, you know, this case is one of those unusual circumstances that it would be warranted to extend the stay of proceedings to non-debtors and the answer is absolutely no. If we look at the facts, the claims are distinguishable. They're, you know, they, in the words of the applicant court, they do arise from the same

legal and factual nexus. But that is insufficient to grant a state with respect to non-debtors. The claims against them is different. They are not going to be liable for the conduct of 23 and me. They are going to be liable for their own conduct. If they are to be found liable, sometimes down the road. That's point number one. The claims are not identical.

Secondly, there is no rational connection between the stay of proceedings and the restructuring efforts of 23 and need. KPNG is an entirely independent party, third party. They're doing their own thing. They already have separate representation. They're not even involved in any role or capacity here. The forward directors of the company resigned en masse in September of last year in an uncrowing. We went back in memory. We cannot recall any situation where all the independent directors

of the company, seven of them, resigned en masse. Just one time they said, we don't want to have anything to do with this company anymore. That was their wish to not have anything to do with this company or their restructuring events anymore. So there is no rational connection. Thirdly, we say there is absolutely no more. absolutely no adverse impact on the state.

Absolutely zero. The defense is being funded by insurance. KP and G has their own resources. They're not on the insurance policies that we have seen. There are two sets of insurance policies that we have to understand. I have never seen any situation where the either would be on the same set of policies

as the directors and officers or the company. They're not on the same policy. They have their own resources. They don't even have indemnification rights, whatever. As for D&Os, my friend says, okay, they have an indemnification right against the debtors. Correct. But the stay of the D&O claim is not going to dispose or resolve that indemnification right. Presumably, they already have, or they will have to file the endemnification right within the Chapter 11 proceeding.

to state the claim against the directors and officers is not going to resolve that claim. What would resolve the claim would be to allow that their objections on pleadings or jurisdictional objections be heard. Maybe they're right. Maybe the Canadian courts would agree with them to strike the claim on pleading against them or find that the court doesn't have jurisdiction over them. That would be the end of any domestication right. They have assertive.

They will be a servant against 23 and me. To stay the claim against them is not going to address a result in claim. So that is for that reason that, you know, we say the universe of the claim, my friends said that that should or argues that should somehow work against us. No, to the contrary, I just explained to your honor that the den identification claim already exists because the directors and officers have already been sued. So how are we going to deal with it? Either it has to be addressed in the Chapter 11 proceedings or if the directors and office is correct that the claim should be struck against them or the claim against them should be a shrug.

That would be at the end of the debate. That's, you know, giving a chunk, a big chunk of the claim of the shoulder of the state. And I would pause here to say, you know, this at least as far as my experience goes, this This is a peculiar insolvency proceeding because as far as I know, there are no secure lenders. This is really an insolvency proceeding in Pith and substance and in large part to deal with these cyber claims. So anything that we can do to address this claim, and there is no cost for the state, it's

the pleading motion, you know, it's going to be funded by insurance, anything that we can do to one way or another resolve that any of the claims. of the creators that arise from the site or claim, I would submit to you, Your Honor, that should be welcomed by the court, because it's going to be a streamlining the process and it's going to determine what claim is going to are going to stay and what claims are not going to stay.

I mean, sorry, I'm going to remain, what claims are going to remain as against the state or what claims are going to be struck and that's going to be the end of the debate. And lastly, we say, my friend, there's no prejudice. It says, you know, a flight delay. I don't know, my friend is really not committing to any timeline for chapter 11. And, you know, you ask him, you know, for how long this injunction should remain in effect.

My friend is really not committed to a timeline. If it is a matter of, you know, this fast evolving and unwrapping proceedings in a matter of, by fault, we're going to be done before the Canadian court is going to even hear these preliminary objections on the pleading and jurisprudence the chapter 11 is going to be done or substantial legal but on the other hand we have that the interest of again the debtors would not tell us about 700,000 Canadians in this privacy cause of action a privacy class action and I have it before you that in Canada that these are serious rights.

And Canadian courts have very strong interest in them. They treat these rights as core of the constitutional rights of Canadians and have very strong interest in educating them. And we often think, you know, really this, you know, as plenty of this council, I deal all the time. I'm not saying in a discouraging way, but dependents would like delay. They want to take the time.

I deal with these delays very, very often. and there is a saying that says justice denied, the justice delayed, the justice denied. So we're in the same situation. You know, we have the claim of this significant population in Canada. We have no connection with the debtors. It has no cost for the debtor at least at these preliminary stages. And my friend is not coming to any time,

and I want to basically get an order that they're, you know, state the claim, signy die until we know when, who knows when. But on the other hand, we have a significant population of Canada whose costly constitutional rights are at the stake. So in summary, it's subject to any questions, Your Honor. The advert, of course, says, we do not to state the claim against non-leaders, even if they arise out of the same legal or factual nexus. You've got to have rare exceptional circumstances, and an imminent harm to the state resulting from the proceeding.

And in my respect to submission, Your Honor, this is not a case of an exceptional circumstance. The debtors have already gotten everything that they would have wanted to accomplish. We have been cooperated since very, very first stay with them, and we have complied with the state. And the preliminary issues that are now before the Canadian court does not adversity at all. at all, not in the slightest, affect the state in any way. But if there is any likelihood, as the DNO says, that the country would be strong on the free day or for one of jurisdiction, I would submit to your honor

that let's determine that sooner or later, because that, in fact, benefits the state, and that, in fact, would advance the objective of the Chapter 11 proceedings. Suggest to any questions, those would be my submission. Thank you. So, do you agree with that? Mr. Siegel on the scope of the June 16th hearing?

No, Your Honor. The evidence, Mr. Siegel is not qualified to provide any opinions on Canadian law. The evidence that is before the court is the evidence of Ms. Botterly, and Ms. Botterly has a brief description as to what this motion is seeking to accomplish. They do say that you are seeking to add defendants. That is not entirely accurate because you are not adding any defendant who is not already named. The defendants are already either. We are just bringing the two claims in the same umbrella.

And just so you know, just because my friend did mention something, and Ms. Baudetri had made some comments about the manner of the finding of the second claim. We do note in our declaration that Ms. Bauderry made the same objection, Justice Douglas was not very impressed really. She said, no, that, you know, those correctizations were not correct. But if Ms. Bodder wanted to bring a motion, she could do that, which is yet to be brought. But in any case, this is how the events unfolded.

The discussion around the claims with respect to the further defendants have been ongoing for some time. And again, we were dealing with a delay issue that we wanted to add the directors without of course any prejudice that defense may have to bring, you know, motions to strike the claim or state the claim, you know, it would be entirely without prejudice. Defense were dragging their feet,

not coming into any timeline. They were looking for dates, we were around September, they were looking for dates in December for that kind of just simple motion to at some parties without prejudice. And what happened as we were having these conversations, the directors resigned on that.

So from our perspective, to get to protect the interests of our Canadian class, we had to take the steps to file the claim because we know in the situation of an insolvency, you know, those claims could entirely perish. So we would be... Hold on a second. Hold on a second, name of time. I'm asking a much more granular question.

What motions are being heard on June 16th? It's a consolidation motion. So there are two existing applications to bring them together, exactly. It joined her, if you wish. It joined her. Okay, and are you seeking to broaden the class, as Mr. Siegel mentioned,

from those who are known to be impacted by the data breach to all Canadian? That is an excellent, that is an excellent, question, Your Honor. We are seeking to broaden the class. I say a couple things. That's a proposed class. That's not a certified class. It has no, they already know nothing with the 23M. And especially so that 23 and me is already subject to a claim process order of this score. So there's not going to be any claims against 23 and

at all way in Canada. So, and on the other hand, right now 23 and we have sent notification to all the customers, I think someone mentioned at some point 18 million customers, that any customer can submit a claim within Chapter 11 proceeding. So 23, and we have already invited any customer who might have a claim to submit a claim. The expansion of a definition of a proposed class, which is without prejudice to a motion to strike, a motion to stay for voluntary jurisdiction, and eventually a certification motion has absolutely no bearing at this point in time. Okay.

It's a proposed definition on paper that can happen as a matter of, you know, the law in Canada, you know, someone can just propose a new definition at the time of the hearing of certification application. It really has no bearing other than the course will consider whether or not at certification time of certification, whether or not that's going to be correct or should be certified. It's a proposed, it's a matter of merely definition. Okay. Let me see if I can summarize part of your argument accurately, Mr. Niemichwai.

I think you were saying that litigation in Canada would benefit the debtors and their states and the other parties in interest because your litigation would clarify issues, maybe in the debtor's favor, maybe in favor of the Canadian claimants. by determining whether certain parties are liable, whether the liability is coextensive with other parties, whether there's a valid claim under Canadian law at all, I suppose. Is that the point you're making that you're helping the debtors crystallize what's going on in this case?

So, Your Honor, just to be clear, we have like five different arguments, and this is one of them, and almost, but not entirely. What I'm saying is that the outcome of the Canadian case would only benefit the debtors and the Chapter 11 proceeding. Because what? Because the claim, and that corresponds with the indemnification claim that the DNOs have. And KP&G doesn't have any indemnification rights, so we're not talking about KPNG right now. We're talking only about D&Os.

So what I'm saying is that the claim against D&O is already there. A state is not going to make it suddenly go away. If the Canadian proceeding proceeds and if the D&O succeeds on striking the claim on pleadings or for want of jurisdiction, that can only benefit the state. Even if, even if the Canadian court agrees with us, that still benefits the state bearing in mind that then out of the state. that there is this valid in them or you know on face you know a claim that would not be a strong in deminification claim that would not be struck for the

benefit of the DNOs so when time comes to figure out how any proceeds should be should be distributed and how should all of their claims be be discharged etc that is also going to benefit their state however I I would go one step farther to just say, you know, what a non-issue is indemnification ready. Because we all know that at the end of the day, all these claims are going to be bundled together and they're going to be largely discharged. So my friend, on the only St.ubtos, you know, at the end of the day, if there's judgment in favor of the DNO's like five years down the road in Canada,

is 203ME that has to provide for indemnification. So all the insolvency matters that I have dealt with in when there was a plan. that was successful, all the charges all the claims. This is only an academic debate that never come into reality, never bears any, any air of reality. It's just, you know, for people to say we have an identification right, but that is realistically against a dissolving company. It will never be realized.

So it's all I'm saying that if at all, if anything, this Canadian proceeding would only benefit the state and these Chapter 11 proceedings, if at all. Not only that it does not harm the state in any conceivable way, nothing the slightest, if anything, it would help the debtors and these proceedings before your honor. Okay. Mr. Nematelai, what's the prejudice to your clients if there's a stay of their litigation against all the defendants through the effective date of a plan, and let's say it's six months from now?

What's the prejudice to your client if you're looking at a five or six? six-year litigation time. Well, first thing, that's a very good question. Firstly, there is no commitment that this day, you know, there's going to be, like, if my friend, if my friend that said that the state is going to be imposed only for six months, then I would have no issue with it. Bearing in mind that realistically those applications that B&D and O, and KPMG have indicated they would be bringing it cannot be brought until probably

December. The timelines are just like that. So if this proceeding, if my friend was going to commit to a conclusion or stay only for six months, I would have no high issue with any of that. You reminded me, Your Honor, that I think my friend suggested that we have not been amenable to any sort of resolution, and if my friend said that that is absolutely not correct, we have confessed many values scenarios to come to a consensual arrangement, and none of them has worked.

And I would just say for my friends to suggest that we have basically been very difficult and not amenable to any resolution, that would not be accurate offer. In any case, what I'm saying is that the time length that we are located, you know, realistically, these applications are going to have to be brought in December. So if there's going to be a stay only for six months, again, I'm not aware of any reason for that. But if your honor would be inclined to impose the state for six months only, you know, that would be perfectly fine with us.

But an indeterminate stay, especially during the other considerations where we say there is no unity of the claims, you know, there is no identity of interest, there is no adverse impact, and so on and so forth, well, any state, especially an indeterminate of state, is totally onward. And again, I direct you your honor to the language in the Ritchie case that I took you to. We must treat state to non-debtors as a rare event to be granted only in exceptional circumstances. None of which exists here. And we do have, we do feel very strongly about these claims in Canada. So you have it in the record before me, the Privacy Commission of Canada is conducting an investigation. and the Supreme Court of Canada has said that these claims are quasi-constitutional. They're important to us because they define our values of the democratic society.

If we have a very strong interest in adjudicating them to set the standard that that was all Canadians, this is like a, this analogy would not be the best analogy, but just to get the sense of what my head is, you know. It's not like in the criminal proceeding, you know, you want to accuse to have this. with no delay. We're not the exact same situation, but the rights at the issue are for the constitutional rights of Canadians. If, again, there was any circumstance,

you know, we've done many of these cases, you know, we could see if there isn't any adverse impact on the state, if there was anything really of substance, we would not be here, we would be agreeing to a state. We know how this should be done. done. But in this particular case, there's absolutely no reason whatsoever that to justify a stay. And again, I'm repeating myself, but I direct me to the language from the Applet's Court that there is no exceptional circumstance in this case towards a state which is expected

D&O or KPNG. All right. Thank you. Appreciate it. The committee or any other party interests like to weigh in before we go to rebuttal. Thank you, Your Honor. Again, for the record, Jason Adams, Kelly, Dry and Warren, I think now officially, counsel to the Yes, correct. Unsecure creditors. Correct. Thank you for that, Your Honor. I'm going to be brief because I always try to go with the mantra of not saying too much

to put myself in danger here because I think that the briefing and the arguments today were exceptional and I think the debtors have laid out the case for why it should stay is appropriate here and we do support it, Your Honor. I don't want to go through all the legal issues again. been discussed exhausting, interestingly here. I'll talk about maybe one or two things, which is harm. Your Honor, you've asked questions about harm today. What's the harm to the estate? What's the harm to the plaintiffs here?

I think the harm to the estate is very clear, and I think it was explained, but I'll highlight maybe a few points. Your Honor, number one, the desire for centralized reconciliation claims and a centralized process for claims here. That's the purpose, one of the core purposes of the bankruptcy case that we're running here, ultimately, hopefully once we get through a sale process, which we'll talk about tomorrow, a plan. And that'll be addressed in terms of how we ultimately bring claims in.

You've already dealt with that with a bar date. Reconciliation of claims, I believe that would be dealt with down the road during this Chapter 11 bankruptcy or potentially after the bankruptcy process by another party for instance. To have peripheral litigation going on, but we're not dealing with the centralized plane process here creates not only confusion,

it creates cost and expense, and it causes distraction. There are a lot of litigations, as Your Honor knows, is the opening comment from debtors' counsel today. This is not isolated to a Canadian litigation. We have multiple litigation, we have arbitrations going on, we have state court litigations going on, all with respect to the same incident here. All of those parties in the U.S. have said,

yes, we're going to come to this court, we're going to resolve our claims here. We're going to file proofs of claims, whether they're consolidated claims, whether they're going to be class claims. We obviously have briefing on that from one set of claimants already. So to say all of those claimants need to stay, come to this court and file claims, but another litigation can proceed,

doesn't necessarily jive with an efficient way of reconciling claims. And it is going to force the debtors to take action in Canada. The debtors cannot sit idly by where claims against so-called non-debtors, may are non-debtors, Your Honor, but it is the underlying issues of whether or not there was some error mistake problem by the debtors in terms of the debt breach. That's the core of the questions that are going to be addressed in the Canadian proceedings. Whether you just say, well, we're just talking about the representations of the Ds and O's

or what KPMG did, it gets back to the core of what the debtors do. It's going to force the debtors to participate in that process. And that means cost, that means expense, that means their time. And we have a lot going on in this bankruptcy case right now, as Your Honor knows. Some of those issues will deal with tomorrow. Some of those will deal with them in the couple of weeks. So any distraction from the debtors in terms of achieving the goals of this bankruptcy, which is maximizing value and coming up with an exit strategy, that's a harm to the estate.

We heard about indemnification rights. We've talked about insurance rights here. obviously if the debtors are forced and required to indemnify, then any cost that are being incurred up there right now is a cost to the estate. And that's not something that we should be dealing with today and deal with those issues in the future. And if there's insurance covering this, then that's depleting a potential resource and asset for all stakeholders

in this Chapter 11 bankruptcy. We don't want to see those to please. So from the creditors' perspective, there's significant harm here, whereas a stay, not dismissal of the Canadian proceedings, eliminating it a stay of those proceedings and extending that to the non-debtors is minimal harm to the plaintiffs in this case. So those are my points on the harm, Your Honor.

With respect to the June 16th hearing that would be coming up, Your Honor, I would reiterate, I suspect, counsel will address this as well. If there's a potential for expansion of the class happening at the June 16th hearing, then that's a significant impact on the debtors. It can't be that we're only expanding the class with respect to the non-debtors in KPMG. It means where... Well, it's somewhere in between, isn't it? It would expand the class, but the class is a long way from being certified. So it's...

Expand the putative class. I don't know what you call that exactly. There is an impact, but it's not the death knell. I don't disagree with Your Honor that it may not be the death now, but it certainly is now expanding the pool of claimants that are involved in that litigation. Again, I think that's something that the debtors would be extremely interested in, as it impacts them at a preliminary stage, we'd want to be involved in that.

So, again, we're dragging the debtors again back into the litigation in Canada, which would be problematic. And we've had some conversations around this June 16th hearing, and I guess the question is, Your Honor may be addressing this eventually is, where are we stopping? Are we stopping at the June 16th hearing? We're starting stopping at July matter. What's the next thing?

And I don't think that's been really discussed today. But again, I think for judicial economy's sake, for the estate's benefit to minimize the harms here, a stay for now, which is, again, applicable to all of the other litigation that have to do with the data breach. It makes the most sense. It's appropriate. It certainly satisfies the legal standard here.

And so, Your Honor, we are in support of the expansion of the state in this proceeding. All right. Thank you. Anyone else wish to be heard before we go to the debtor's rebuttal? Mr. Siegel. Thank you, Your Honor. As an initial matter, to something that my friend on the other side mentioned several times,

if respondents are willing to agree to a consensual six-month stay of the putative class actions as to all defendants, we are amenable to that. Yeah, so if we were all here, this would be an opportunity for me to say you should go out in the hall and talk about that. Would you like to have an opportunity to, through the miracle of telecommunications, talk about that with Mr. Nimetai, Neumatali, without anyone being on a live mic? Is that helpful? Is that a question for me, Your Honor?

Well, it's a general question. You're welcome to weigh in. Well, we've always welcomed conversations around these topics, and I would not forfeit that opportunity now, if my friend is inclined to call. I am. Should we take a short recess? I have that call.

Okay. Why don't we do that? figure out how to not be on a hot mic but um uh it is that clock right yeah it's 3.1 should we take a 20 minute recess what you tell me that's 20 minutes all are still talking let mr spital know and i will not emerge in the middle of your discussion ideally well let's take let's take a recess till uh 20 after 3 thank you thank you please be seated everyone where do things stand mr seagel mr riskey who's who's got the mic Yes, Your Honor. We conferred with Mr. Nima Taha'uahi during the recess and we're pleased to report that we here to have an agreement.

Under that agreement, the parties will mutually agree on a stay of the Canadian proceedings until the earlier of September, excuse me, December 3rd, 2025 and the effective date of a plan the debtors reserve their rights to seek an extension of the stay and Canadian respondents reserve their rights to oppose such an extension neither party will use the fact of this stipulation to argue that the stay should or should not be extended and the parties shall cooperate on adjourning existing hearing dates in the Canadian proceedings for a date on a date on or after December 3rd and at a case management conference that we are advised is scheduled to be held on June 6th the Canadian plaintiffs will advise that they intend to seek an adjournment of the hearing on the consolidation motion until the week of December 15th for the court's the Canadian court's convenience.

We are glad to memorialize this in a written stipulation and submit that to the court. Sounds great. Mr. Neiman Fahy, is that consistent with your understanding? Thank you very much, Your Honor. It's absolutely a privilege and thank you to our friends. This is an agreement. We have an agreement on the terms that my friend is advised the court. Thank you.

Very good. All right. Well, thank you. I appreciate the parties getting their heads together on that, and it sounds like the mutually beneficial resolution. So very good. Anything further for today, then? Committee, no.

Very good. All right. We have matters scheduled for 1.30 tomorrow, and so we'll see you all then. Court will be adjourned. Thanks, everyone.