23andMe - Audio of June 3 2025 Bankruptcy Court Hearing, case 2025-40976 before the US Bankruptcy Court for the Eastern District of Missouri, #bankruptcy, #privacy, #data, #genetics #sale #truecrime #23andMe

Let's begin with our 130 matters, please.

23 and me, Holding Co, et al.

Conferences in the courtroom.

Good afternoon, your honor. Tom Riskin, Nathan Wallace, Carmi McDonald as co counsel for the debtors.

Good afternoon, your honor. Christopher Hopkins, Paul Weisbrooke and Morgan Garrison

as co counsel to the debtors. I'm here with my colleagues, Max Siegel and Jeffrey Rucker. Are you good?

Miranda Swift from Stinson LMP as proposed co counsel to the committee.

Good afternoon,

your honor. Jason Adams, Kelly Dryan 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 Unsecured Creditors, also on the WebEx to the extent your honor has any questions with respect to retention applications.

Very good. Thank you.

Good afternoon, your Honor. Josh Watts for JMB. Good afternoon, your honor. David Unsef, law firm of Brian K. Blayton Pacer, on behalf of TTA M Research Institute, Amwichitsky ABC two point o LLC, Amwichitsky Revocable Trust, and the Amwichitsky Foundation.

Good afternoon.

Joe Schlotcauer on behalf of the US Trustee. Good afternoon.

Good afternoon, Mr. Schlotcauer. Good afternoon, your honor. Michael Castle, Wachtell, Lipton resident Katz for Regeneron Pharmaceuticals Inc. As the successful bidder.

I'm here with Ben Strube of Lathrop GPM. I'm sorry. The last part? I'm here with Ben Strube of Lathrop GPM.

Got

it. The Castle you said sorry. My pens as they tend to do are all out of ink at the same time.

Yes, Michael Castle.

I got it. Thank you.

Castle. Thank you. Thank you, Mr. Castle. Good afternoon.

Yara Joshua Jones, United States of America. Good afternoon. Any other appearances in the courtroom? Alright. Princes on the Webex.

Good afternoon, Melissa. Amber Jones for Carol, LLC. And with me on the Webex today is Matt Greger.

Good afternoon. Good afternoon, your honor. It's Robert Hirsch. Born in Roseville. Right?

I

am my son is on my camera at

the moment. I have to fix it in a second, but, yeah, I'm doing it for J and B Capital with this one.

Very good.

Good afternoon, Your Honor. My name is Kevin Barnes. I'm a Class A shareholder.

Welcome back, Mr. Barnes.

Good afternoon, your Honor. Charles Pacino, Class A shareholder.

Welcome back, Mr. Pacino.

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.

Good afternoon, your honor. I'm I'm Sage Namathalani. I'm counsel to the class 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 Hall in New York. We are proposed counsel to Neil Richards, the consumer privacy ombudsman.

Very good.

Good afternoon, your honor.

This is Dalila Jordan with the state of Minnesota representing the people of Minnesota.

And miss Jordan. All right. Mr. Riske?

I think, Your Honor, it sounds risky for the debtors. As Your Honor is aware, typically when we have these hearings, I ask Mr. Hopkins to give an update as to where the case stands and some of the coming attractions. If it's okay with the court, as the court knows, we've agreed to push a number of matters 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 That

seems like a good idea. We could get sidetracked if we all decide we need to argue today about what we're going to argue about tomorrow. So I think that's probably a good plan.

Thank you, Your Honor. So as your undernose we filed a proposed agenda. I noticed from the court stock that 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.

Greg are on 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 waste. But the long and short is that issue has been resolved. The parties have negotiated in good faith. We believe the settlement is in best interest of the estate. So we've submitted that

to your Honor. So I just wanted

to touch on that since it was. Okay.

And the committee and the DIPL enter review that as well, The the order I mean, the the general terms of the settlement?

I I to be honest, given given the the time constraints yesterday, no. That that's why we went ahead and filed it just so the parties could see it. But I'm I'm happy, to talk to them after the hearing today and and talk to them about any comments before. Sure.

If you give Mr. Espinal report about where that stands with 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 till the end?

I think that would make sense. Sure.

Perfect, Your Honor. Well, up next is the debtors' application to retain Deloitte. As Your Honor is aware, there was a separate OCP application for Deloitte with respect to some of their services, but the services contemplated by this are more in tune with actual retention and three thirty 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 applications. We'd ask that it be granted as submitted draft.

Okay. A question for you, Mr. Riske. The indemnification provision seemed a little broader than normal in the proposed or 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 illustruste?

It actually 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 they're they're need to die on with respect to indemnification. I think that might have been a a pullover from another another one before that got refined.

Sure. I I think the way we handled the MOLIS order, paragraph 12, is standard and and ought to be acceptable to everyone. So first, let me find out if anybody else wishes to be heard on the Deloitte retention. Apparently not. All right.

So I'll grant the application, but subject to the usual language as in the MOLIS 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 submit an order, please.

Thank you. I believe the next retention and applications are those of the committee, so I'd see the podium here.

Very good.

Good afternoon, your honor. Megan McLaughlin, Kelly Dry, and Warren, counsel to the committee. On May 5, Stinson, Kelly Dry and FTI all filed their retention applications at docket numbers 383, 3 80 4 3 80 5, respectively. On the same date, we filed a notice of hearing advising all parties of the May 27 objection deadline end of today's hearing. The applications were served on the master service list, and the certificate of service was filed at docket number 397.

The committee professionals did not receive any formal or informal objections to their applications. I understand that the orders have been submitted to your chambers already. We're happy to resubmit if needed, but we 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? Okay. Apparently not.

I've reviewed 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? Alright. Miss McLaughlin, the only question I had there is the associate who owns a couple of shares of stock. If that were a partner, I would say maybe the partner should donate it 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 care of it's obviously a de minimis issue.

And as you mentioned, the the associate is not gonna be working on the matter.

Correct.

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

Okay.

And, I'll ask you to resubmit orders so you can describe your formal walling procedure using the correct terminology, and, and we'll look for that.

Thank you, your honor.

Alright. How about the FTI application 385? Anyone wish to be heard? Very good. Alright, 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 FDI application, and we'll run with the order that you've submitted.

Thank you, Your Honor.

Thank you. Up next, we have WilmerHale.

Yes. Good afternoon, your honor. Andy Goldman again from Wilmerge Hall. I'm joined in the virtual courtroom by my partner, Kurt Nora, in Washington, D. State.

Your honor, we filed our application to serve as counsel to Neil Richards, the consumer privacy ombudsman, back on May 13, cognizant of the stipulation in order which appointed Mr. Richards, we styled this as a 03/27 application and obviously went through the standards that one would go through with respect to disclosure, parties and interests, 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 to this court that we are disinterested and hold no interest at first. We did file a short supplement just to disclose that Ryan Durie who is going to work with Mr.

Richards and assist him in Mr. Richards' tasks at one point because he worked for Amazon, held some Amazon shares and is also a consumer himself. That declaration that supplemental declaration was filed on May 30. 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 just

want to ask

you, I know that I Yes, well

Your Honor, it's not 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 press forward, but I think there was some miscommunication with Kroll 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 that's why it was it was served last week formally. The reason for the delay.

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 send a you want to send a supplemental notice? Yes.

Okay. Well, look, the CPO should have counsel. And why don't you do that? Why don't you send negative notice giving fourteen days from whenever that is for anyone to object to the WilmerHale application and failing receipt or filing of an objection? You can submit an order on that.

I do wanna also talk at the same time about mister Durie. I I don't understand from the application who mister Durie is or whether he has any connection with WilmerHale. I'm not saying mister Durie shouldn't work for the CPO, but I didn't get the sense that he's a lawyer with WilmerHale. 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 call service. We had thought that this was served on May 13 when it was filed with the court. For any confusion, I apologize. I'm as surprised by hearing this as anyone.

Beyond that though, Your Honor, with respect to that question, no, Mr. Bury is not, is not a WilmerHale lawyer. He is somebody who mister Richards knows well. He is the director of AI initiatives at Washington University, Saint Louis School of Law. And I I believe, although mister Richards is on, if the court wants to ask him directly, but I believe that in mister Richards' preparation of his reports to the court and the work that he is gonna do, he is going to utilize mister Dury's services as necessary.

And it is for that reason that I wanted to make sure that there was supplemental disclosure both of mister Dury, which we did disclose, and then of mister Dury's very, if you will, tenuous parties and interest contacts with respect to Amazon, and a former in health lawyer and small shareholder, etcetera. I don't know if that answers the court's question in full or not.

That's helpful. I think, mister Durie probably needs his own application. I assume he's a he's a lawyer, he's a professional person, and I think he ought to or the CPO ought to apply on his behalf to retain him as a professional person. So primarily, Mr. Goldman, because your declaration about Mr.

Durie 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 WilmerHale 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, Nora. 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 list we were provided at the time the parties and interest list was circulated. Mr. Richards obviously wasn't on the list because he wasn't there at the inception of the and so we did not disclose and I we've just learned embarrassingly from me since I've been a partner at the firm for now twenty four point five years that from 2002 to 02/2003, Mr. Richards was affiliated with the firm, I believe, and 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 twenty two years ago. But I didn't 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 declarations from the other professionals who are interacting with the bidders about any connections with the bidders. And that so WilmerHale 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 Richards' affiliation with the firm in the past, and that will 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 from last week. Understood. Okay. So we'll look for an order following a negative notice period on one more hail, and we'll look for a separate application for Mr.

Durie.

Thank you, Your Honor.

I believe that brings us to the stay motion and Mr. Siegel will be presenting it for the debtors.

Very good. Mr. Siegel, shall we start with the motion to expedite?

Happy to, Your Honor. We've 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 16. 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.

Alright. So, anyway, wish to be heard of the motion to expedite?

In

your honor, on stage, I'm with Zaladi on behalf of the Canadian plaintiffs. I I just with 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, mister Siegel.

Thank you, Your Honor.

Present motion seeks an order confirming that the automatic stay applies to two Canadian punitive class actions, including as to certain non debtor defendants. These class actions arise from the October 2023 cybersecurity incidents 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 punitive 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 four thirty four. Miss 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

court actions and anonymization order in those cases and a proposed amended complaint, we would offer those into evidence as well.

Alright. Any objection?

No objection, your honor.

Thank you. Thank you. They're admitted.

Next, we'd move to admit exhibits a, b, and c to the seagull declaration filed at docket number 435. Those documents consist of certificates of incorporation for the debtor's twenty three and me Folding Co and twenty three and me Inc. They're public records that have been filed with the Delaware Secretary of State. We would request that the court admit those as well.

You said a, b, and c, but not d?

D, is a red line 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. Alright. Any objection to the receipt of, exhibits a, b, and c to seagull declaration four thirty five? No objection, your honor.

Okay. Thank you. This will be admitted as well. Thank you.

On the substance, your honor, this motion concerns two Canadian class actions arising out of this cybersecurity incident of October 2023, 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 allege were deficient data privacy and security practices at 23. 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 twenty three and Me as well as KPMG, who was then the debtor's auditor.

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 principals and or coconspirators. That's in exhibit c to the buttery declaration, paragraph six, nine, and 47. The second complaint does not bring a single claim against the nondeter defendants that is not also alleged against the debtors and nondetors in any way in the nondeter 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 the act causes of action in the complaint, if helpful.

I 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 nondebtor 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 and discussed for resolving claims arising 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 nondetors 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 defendants, not just for any judgment, but also for their legal fees.

So, So, mister Siegel, the the response, mentions that insurance is defending the litigation. And I I didn't see a rebuttal to that in your in your reply. So is the estate coming out of pocket for defense costs right now, or is an insurance company handling that?

At at the moment, the, state 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 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 yet?

My understanding is the latter.

Okay. 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 US case in their briefing. By contrast, other similarly situated plaintiffs who have asserted claims against the debtors and nondetors in analogous circumstances nondetors. Your honor is familiar, for example, with the pixel litigation that is pending

against I know I know that it exists, but that's and I I don't even know why it's called Pixel. So I

It it

If you wanna go into that, you're gonna have to you 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 nondebtor. 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 nondebtor defendant, and plaintiffs in that case came to an agreement and a stipulation with the debtors that applied the automatic stay to the nondebtors. 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 parties and the court have sort sought to establish in these cases. The court should grant the motion for three fundamental reasons. First, as noted, the claims against the nondebtor 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 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 nondeter 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 nondetors 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 arguments 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 nondebtors 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 andMe defendants did not introduce, implement, and or maintain proper data retention practices, end quote, the 23 andMe defendants did not introduce, implement, and or maintain proper data protection measures and or practices. That's at paragraph eight of exhibit c to the pottery declaration. 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 nondetors are liable for it. At the end of the day, the claims against the nondetors are the same claims as those against the debtors, are based on the same conduct as that as of the debtors, and ultimately seek the same source of recovery, which was 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 mister Clark'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, in personum 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 stayed.

So I see your point about that aspect of the motion being more or less in rem. If I but if I need to extend the automatic stay to reach the plaintiffs, aren't we in the world of in personam at that point? Don't I need personal jurisdiction over these two plaintiffs and or their counsel to extend the automatic stay to reach them?

First, our counsel has appeared, Prohav Vitje, in this court at this stage. And and determining the scope of the stay, would be would be a matter within this court's core, jurisdiction As to whether, any further relief would require in personum jurisdiction, I think it's helpful to take a look at exactly what, respondents have done here.

I I do think yeah. Let let's talk about minimum context. Give me give me an overview of that if you would, please.

Sure. As an initial matter, respondents purportedly chose to do business with a US company by reportedly entering contracts with using the products of twenty three andMe, which is a US based entity. And, thus, they availed themselves to the privilege of doing business in The United States. In connection with that, they received, saliva collection kits from a US company, collected saliva, sent it back to The United States for it to be processed by a US company at a laboratory in The United States and ultimately return to them, in Canada. On top of that, the, respondents have initiated a lawsuit in which they routine repeatedly allege that the debtors are US based entities, and, thus, they've 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 provide case law to this court out of the eighth circuit that says that filing a lawsuit against The US 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. That's an, I'm not familiar with that specific case law. I don't know if you have it handy or if, if you wanna if you have access to it, wanna 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. That's 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.

That'd be helpful. Thank you. Appreciate that. Okay.

But even short of that, we'd submit that doing business, in The United States as respondents did via their use of the 23 andMe kits is sufficient minimum contacts for purposes of this motion.

And so you're and so it seems to me you're talking about a very specific kind of specific jurisdiction or 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 handle a breach of contract claim against them or something much further afield from the core of the bankruptcy cases. Is that the nature of your personal jurisdiction theory?

I think

with respect to, our in rem theories, that's certainly

that's

certainly the case. With respect to in personam jurisdiction, I think there are sufficient minimum contacts to exercise specific personal jurisdiction regarding respondents' dealings with twenty three andMe, which they state form the basis of the claims in this action. There simply is no there, are no Canadian class actions without, without the exact business transactions I just described, I don't I don't think the court needs to go farther than that in determining the extent of jurisdiction.

Okay. That's helpful.

Yeah.

Okay. Well, we'll we'll give you a chance, mister Dimituelati, after, after I run 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?

We'd we'd submit that it would be appropriate, at least through the, continuation of these chapter 11 cases that they can they can proceed, uninterrupted by what's going on in Canada. And we 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 a plan?

Consult, momentarily with my colleagues. So, your honor, to clarify, we seek to stay through the effective date of the plan.

Effective date. Okay. Fair.

And just to, note one one further point on jurisdiction. We are 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. Good. That's helpful. Alright. So if the stay extends or is extended through the effective date of a plan, what is gonna happen in litigation in Canada that's irreparable injury if I if I don't do that?

First, there is a hearing, as I noted, scheduled for June 16. And But and I'm sorry to

interrupt, but the the plaintiff's declaration says that hearing is only on a 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 two, the seagull 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 andMe 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, 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 16 hearing occurs.

Now past the June 16 hearing, assuming that the motion is granted, we expect there to be 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 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 miss Buttery's declaration. And that sort of fact gathering, much like any discovery that might subsequently occur in this, in these actions, would squarely implicate the debtors.

So the 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 mister Karp'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 temp 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.

K. The plaintiffs refer to miss Wojcicki 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,

always for the debtors, your honor. Miss Wojcicki is currently still a member of the board of directors of 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 debt.

Okay. I thought that's what I remember. Thank you for clarifying that. Alright. Then how about, KPMG?

I haven't seen anything about indemnification of KPMG, 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 officers and directors do. And there's some discussion of that in the complaint. But the more 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 occurred 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 that are fundamentally ancillary to what respondents describe 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 cocrincipal and or coconspirator.

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 I'm not aware of their being covered by the insurance policy that covers the debtors. Happy to look into that, to make sense

Okay. To

make sense the court would like.

Okay.

Alright. Hey, what's gonna 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 7,065. But, HR one, 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 we don't believe that, security would be appropriate in, these circumstances given given, the financial distress that the debtors find themselves in and, the fact that even as to the nondettors, as I've spent a lot of time on, those claims are fundamentally claims against the debtors. With respect to the big beautiful bill, I'm candidly not, not certain of its application to this proceeding.

It's it's not the sort of proceeding that Congress has in mind, I'm pretty sure, but it it the language is vague.

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 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 have for you, mister Steve. Thank you very much.

Let's hear from the plaintiffs or the I've been calling the plaintiffs, the respondents in this motion. Mr. Nematollah, am I saying that correctly?

Yes, Your Honor. Absolutely correct me.

Very good. Please proceed.

Thank you, Your Honor. So just wanted to touch base 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 our clients. 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 counsel Canadian counsel to the debtors and we had stated to them that we will comply with the scope of this day. There was absolutely no reason to file an adversary complaint and especially on with no notice to us. And just to be clear, the adversary complaint includes incorrect statements regarding the fact and the connection with The 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 to that the state should be extended to any of the non debtors, we, of course, comply. As my friend indicated the Canadian court has now recognized these proceedings in Canada that happened on our consent. So if your order grants a further order with respect to the 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 also to say also, I don't think there is any real reason to have a discussion around an injunction.

We have been complied and we said we will continue to comply with the state of the proceedings that it may be in place. And on that note, I think the issue regarding securities or cost would also be moot.

Okay. Thank you. That's helpful. How about the merits?

Amazing. Your Honor, we have a declaration of LV card that I would like to introduce into evidence. That is Docket No. Five eighty four. That obviously is out narrative 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 what Ms. Badri said, 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 we've got to bear in mind that that's not going to happen until 2029. So my Mr. Karp'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.

Karp's declaration with respect to the relevant events and occurrences in Canada. So we respectfully ask or move to admit Mr. Karp's affidavit, including the exhibits A through F into the evidence before the court.

All right. Is there any objection to receive the Karp declaration and exhibits?

No objection, Your Honor.

Okay. It will be received. Thank you.

Your honor, my friend said in the release submissions and again on his feet that we do not cite to a single US 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 sites in their motion. And specifically, I wanted to take you to this case from the appellate court in the circuit, which is called Ricci Capital Management. It's a 2011 judgment of the court and it's cited in my friend's motion at paragraph 39. So I I wanted to take you to some excerpts of that judgment. I'm I'm not sure if you have a copy of it or if you if it would be it it would be possible for you to have a copy of it or I can just read out to you

the portion

of it. I don't

The portion of it.

I've looked at it within the last hour, if that's helpful.

I think you're already if you allow me, I would want to check some of the language from the appellate court because I think it's germane to what my friend was even saying. So this decision has room and 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 I want to be complete and faithful to the decision, but I'm going to skip over some of the words and rely on my the one that I want to emphasize, especially given that you are on also read it just recently.

But if you want me to go and read the balance of the extra, just maybe let me know. But the portion under Section B that I wanted to highlight would be as follows. Whatever the precise scope of this category of action, it is significantly broader and more and more focused than the group of actions affecting this asset of the receivership. The federal court, supervisor and equity receivership has inherent equitable authority to issue a variety of ancillary relief to protect the receivership and true enough the scope of that relief is not limited to parties before the court. We accept that 100%.

Permissible ancillary relief includes issuance of orders imposing blanket state of litigation in order to give the receiver a chance to do the important job of marshaling and untangling company's assets without being forced into court by every investor or claimant. But the coupon the cost power to stave off suit by third parties, turn on these suits, ability to deplete the rest of the receivership state. The court's equitable powers do not reach cases that pose no threat to the assets of the receivership. In this respect, the critical powers of the receivership core are similar to powers of the bankruptcy core to impose an automatic stay. The goal in both securities fraud receivership and liquidation bankruptcy is identical to firm distribution of the liquidated assets.

The bankruptcy court can stay actions against any party, even a non debtor, whenever the objective of the action is to obtain possession or exercise control over the debtor's property unless the case involves unusual circumstances. However, the bankruptcy court cannot halt litigation by non debtors. Even this is very important to my for my commitment, your honor. Even if they are in a similar legal or factual nexus with the debtor. And next paragraph says, the unusual circumstances in which the bankruptcy court can state cases against non debtors are rare.

So I I would pause here. So our pitch is simply in 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 debtors must preserve a stake. My friend 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 and we are looking into bringing 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 has been granted.

Now we are we think there is a way for us to in accordance with your orders over to bring that claim within the Chapter 11 proceeding and we have we are putting a lot of efforts to do that. But suffice it to say that debtors have already secured what they wish to secure, a state proceeding against the debtors, a preservation of this estate of the debtors and channeling all the claims against the debtors within this chapter 11 proceeding. That that has all been achieved. And now there is no in in in the world of the appellate court, there is no, unusual circumstance, which are we already know are rare to warrant that the claims against the non debtor or KPMG be stayed at this time. And, my friend, keeps saying that the claim against, the debtors and and sorry.

The the former directors and officers at KPMG are basically right out of the same conduct of 22 ME. That is just simply false. We plead domestic misrepresentations and that is the evidence before the court. And then my friend is actually now even acknowledging in their reply. They acknowledge, well, yes, there is 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 I we have a full reply and that directs the court to the to the provisions of the claim that, we rely specifically on the specific misrepresentations we allege these non debtors have made. So we in our written submission, we identified for the court two issues. And under issue number two, basically the question is whether 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.

Appellate court, they do arise from the same legal and factual nexus. But that is insufficient to grant a stay with respect to non donors. The claims against them is different. They are not going to be liable for the conduct of twenty three and me. They are going to be liable for their own conduct if they are to be found liable sometime 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 twenty three and me. KPMG 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 capacity here. The forward directors of the company relied en masse in September of last year in an unprecedented situation. We certainly went back in memory. We cannot recall any situation where all the non 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 the restructuring events anymore. So there is no rational connection. Thirdly, we say there is absolutely no adverse impact on the state. Absolutely zero.

The the defense is being funded by insurance. KPMG 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 of or or or the company.

They're not on the same policy. They don't they have their own resources. They don't even have indemnification rights, whatever. As for DNOs, my friend says, okay. They have an indemnification right against the debtors.

Correct. But the state of the DNO claim is not going to dispose or resolve that indemnification right. That presumably, we already have or they will have to file the and then indemnification 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 objection on pleadings or jurisdictional objections be heard.

Maybe they're right. Maybe maybe, maybe the Canadian court would agree with them to strike the claim on pleading against them or find that the court doesn't have to restriction over them. That would be the end of the any indemnification right then. They have asserted. They will be asserted against 23 andMe.

To stay the claim against them, it is not going to address or resolve that claim. So that is for that reason that, you know, we stay the universe of the claim. My friend said that that should or argue that should somehow work against us. No. To the contrary, I just explained to your honor that the the indemnification 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 officers are correct that the claim should be struck against them or the claim against them should be a struck, that would be the end of the debate. That's the norm. We've been given a chunk, a big chunk of the claim off the shoulder of the state. And I would pause here to say this at least as far as my experience goes, this is a peculiar insolvency proceeding because as far as I know there are no secured lenders.

This is really an insolvency proceeding in pit 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 there for the state, it's the pleading motion. 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 creditors that are that arise from the cyber claim, I would submit to you, Your Honor, that should be welcomed by the court because it's going to be streamlining the process and it's going to determine what claim is going to stay and what claims are not going to stay. I mean, 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 said, my friend said there is no prejudice. He said, you know, a slight delay. If if my I I don't know. My friend is really not committing to any timeline for chapter 11. And 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 this fast evolving and unwrapping proceedings in a matter of by fall were 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 substantially done. But on the other hand, we have the interest of again, the debtors would not tell us. Well, about 700,000 Canadians in this privacy clause of action privacy class action and I have it before you that in Canada, these are serious rights and Canadian courts have very strong interest in them. They treat these rights as quasi constitutional rights of Canadians and have very strong interest in educating them.

And we often think, really, this as a point of this counsel, I deal all the time with at least I'm not saying it in a discouraging way, but defendants would might delayed. They won't take the time to deal with these delays very, very often. And and there's a there's a saying that says justice denied is justice justice delayed is justice denied. Since we're in the same situation, you know, we have We have the claim of this significant population in Canada. We have no connection with the debtors, has no cost for the debtor, at least for at this preliminary stages.

And my friend is not coming to any time now, wants to basically get an order that states the claim, sign it until we know when, who knows when. But on the other hand, we have a significant population of Canada whose quasi constitutional rights are at stake. So in summary, it is subject to any questions, Your Honor. The average court says we do not mistake the claim against nonvenors even if we arise out of the same legal or factual nexus. We gotta 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 got everything that they would have wanted to accomplish. We have been cooperating since very, very first day with them, and we have complied with the state. And the preliminary issues that are now before the Canadian court does not adversely at all, not in the slightest affect the state in any way. But if there is any likelihood, as the DNOs will say, that the country will be strong under Fabian or for lack of jurisdiction, we 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 objectives of the Chapter 11 proceedings.

So Object to any questions, those would be my submissions.

Thank you. So, do you agree with Mr. Siegel on the scope of the June 16 hearing?

No, your Honor. The evidence that Mr. Segal is not qualified to provide any opinions on Canadian law. The evidence that is before the court is the evidence of Ms. Bottere, and Ms.

Bottere has a brief

a

brief description as to what this this motion is seeking to accomplish. They they do say that we are seeking to add defendants. That is not entirely accurate because we are not adding any defendant who is not already named. The defendants are already there. We are just bringing the two claims in the same umbrella.

And just so you know, just so because my friend did mention something and Ms. Barre had made some comments about the manner of the filing of the second claim. We do note in our declaration that Ms. Barteri made the same objection with Justice Douglas. Justice Douglas was not very impressed really.

She said, no, those characterization were not correct. But if Ms. Barteri wanted to bring emotion, 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 defendant had been ongoing for some time.

And again, we're dealing with a delay issue that we wanted to add the further directors without, of course, any prejudice that the sense may have to bring in all motions for to strike the claim or state the claim. It would be entirely without prejudice. The sensible was we're dragging their feet, not committing to 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 add some parties without prejudice. And what happened as we were having these conversations, the directors resigned en masse. So from our perspective, to protect the interest of our Canadian class, we had to take the steps to file the claim because we know in a situation of an insolvency, those claims could entirely perish. So we would be Hold on a second.

Hold on

a second, miss Nemo Tawada. I'm asking a much more granular question. What motions are being heard on June 16?

It's a consolidation motion. So there are two existing applications to bring them together, exactly, a joiner, if you wish, and join there.

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 Canadians?

That is an excellent question, Your Honor. We are seeking to broaden the class. I say a couple of things. That is a proposed class. That is not a certified class.

It has no they have no nothing with respect to twenty three and me. And especially so that 23andMe is already subject to a claim process order of this court. So there is not going to be any claims against 23andMe at all, boy, in in Canada. So and on the other hand, right now, twenty three and we have sent notification to all the customers, like I think someone mentioned at some point 18,000,000 customers, that any customer can submit a claim within Chapter 11 proceedings. So '23, and we have already invited any customer who might have a claim to submit a claim.

The the expansion of the definition of the proposed class, which is without prejudice to a motion to strike, a motion for to stay for wrongful jurisdiction. And eventually, a certification motion has absolutely no bearing at this point in time.

Okay. That's

It's a proposed definition on paper that can happen as a matter of, you know, the law in Canada, you know, some someone can just propose a new definition at the time of the hearing of certification application. It really has no bearing other than the court 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. Nemeth Valli. I think you were saying that litigation in Canada would benefit the debtors and their estates and the other parties in interest because your litigation would clarify issues, maybe in the debtors' favor, maybe in favor of the Canadian claimants. By determining whether certain parties are liable, whether their liabilities 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 KPMG doesn't have any indemnification rights, so we're not talking about KPMG right now. We're talking only about DNOs.

So what I'm saying is that the claim against E and Os is already there. If they is not going to make it suddenly go away. If they if the client if the Canadian proceeding proceeds and if the DNO 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 now the state knows that there is this valid indemnity or on face, you know, a claim that will not be a straw indemnification claim that would not be straw for the for the benefit of the DNO. So when time comes to figure out how any proceeds should be distributed and how should all of their claims be discharged, etcetera, that is also going to benefit the state.

However, I would go one step further to just say how what the non issue is indemnification right is 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 this detail, at the end of the day, if there's judgment in favor of the DNOs like five years down the road in Canada, it's twenty three and me that has to provide for indemnification. So all the installments in matters that I have are dealt with and when there was a plan that was successful, it will discharge all the claims. This is only an academy debate that never come into reality, never bears any air of reality. It's just for people to say we have an investigation 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 the Chapter 11 proceedings, if at all. Not only that it does not harm the state in any conceivable way, not in the slightest. If anything, it would help the debtors and these proceedings before Your Honor.

Okay. Mr. Nematollah, 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 year litigation timeline?

Well, firstly, that's a very good question. Firstly, there is no commitment that there's going to be like if my friend had 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 P and G and O and KPMG have indicated they would be bringing 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 issue with any of that. Then 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 condensed many of the value scenarios to come to a consensual arrangement and none of them has worked. And I would just say for my friend 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 timeline that we are looking, realistically, these applications are going to be 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 a stay for six months only, that would be perfectly fine with us. But an indeterminate stay, especially in the other considerations where we say there is no unity of the claims, there is no identity of interest, there is no adverse impact and also on and so forth. Well, if any state especially and in determining the state is totally unwarranted. And again, I direct your honor to the language in the rich case that I took you to. We must treat a state to non debtors as a rare event to be granted only in exceptional circumstances, none of which exist here.

And we do feel very strongly about these claims in Canada. So you have it in the record before me, the Privacy Commission of Canada has conducted 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 value as a democratic society. We have a very strong interest in adjudicating them to set the standard that that was all Canadian.

This is like a this analogy would not be the best analogy, but just to get a sense of where my head is. It's like like any criminal proceeding. We want the accused to have this referred trial with no delay. We're not the exact same situation, but the rights at the issue are quasi constitutional rights of Canadians. If again, there was any circumstance, we've done many of these cases.

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 stay. We know how this should be done. But in this particular case, there's absolutely no reason whatsoever that we justify the state. And again, I'm repeating myself, but I direct you to the language from the appellate court that there is no exceptional circumstance in this case to warrant a stake with respect to DNOs or KPMG.

All right. Thank you. Appreciate it. The committee or any other party interest like to weigh in before we go to rebuttal?

Thank you, your honor. Again, for the record, Jason Adams, Kelly, and Ryan Warren, I think now, officially counsel to the

Yes. Correct.

Unsecured Credit. Correct.

Thank you

for that, your honor. I'm gonna be brief because, I I always try to go with the mantra of not saying too much to, 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 exception of this day is appropriate here, and we do support it, your Honor. I don't want to go through all the legal issues again. They've been discussed 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 of claims and a centralized process for claims here.

That's the purpose, one of the core purposes of 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 the bar date. Reconciliation of claims, I believe they'll be dealt with down the road during this chapter 11 bankruptcy or potentially after the bankruptcy process, by another party or entity. To have peripheral litigation going on where we're not dealing with the centralized claims 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.

It was the opening comment from from Debtors Council today. This is not isolated to a Canadian litigation. We have multiple litigations. 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 gonna come to this court. We're gonna resolve our claims here.

We're gonna file first 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, it doesn't necessarily jive with a an efficient way of reconciling claims. And it is gonna force the debtors to take action in Canada. The debtors cannot sit idly by where claims against so called non debtors, and they 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 data breach.

That that's the core of the questions that are gonna be addressed in the Canadian proceedings. Whether you just say, well, we're just talking about the representations of the d's and o's or what KPMG did, it gets back to the core of what the debtors do. And 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 we'll deal with tomorrow, some of those we'll deal with them in coming 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 costs 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 wanna see those depleting. So from the creditors' perspective, there's significant harm here, whereas a stay, not dismissal of the Canadian proceedings, not 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 16 hearing that would be coming up, Your Honor, I would reiterate, and I suspect counsel will address this as well.

If there's a potential for expansion of the class happening at the June 16 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 and KPMG. It means we're

Well, it but somewhere in between, isn't it? 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. It 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 knell, 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. I would want to be involved in that. So again, we're getting 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 16 hearing, and I guess the question is, and your honor may be addressing this eventually, is where are we stopping?

Are we stopping at the June 16 hearing? Are we starting at stopping at a July matter? You know, what what's the next thing? And and I don't think that's been really discussed today. But, again, I think for judicial economy's sakes, for the estate's benefit, to minimize the harms here, the state for now, which is, again, applicable to all of the other litigations that have to do with the data breach, makes the most sense.

It's appropriate. It certainly satisfies the legal standard here. And so, Your Honor, we are in support of expansion of the stay in this proceeding.

All right.

Thank you. Anyone else wish to be heard before we go to the debtors for rebuttal? All right. Mr. Siegel?

Thank you, your honor.

As an initial matter, to something that my friends on the other side mentioned several times, if respondents are willing to agree to a consensual six month stay of the punitive class actions as to all defendants, we are amenable to that. And

Yeah. So if we were all here, this would be an opportunity for me to say y'all 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, mister Niematali Niematali 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 always welcome the conversations around these topics, and I would not forfeit that opportunity now. It's my friend is inclined to call

me. Me.

Should we be willing to take a short time?

Should we take a short time? Have that call? Okay. Why don't we do that, and I'll let you all figure out how to not be on a hot mic. But, it is is that clock right?

Yeah. It's 03:01. Should we take a twenty minute recess? What you you tell me.

That's

Twenty minutes? Alright. If you all are still talking, let mister Spidele know, and I will not emerge in the middle of your discussion, ideally. Well, let's take a recess till twenty after three. Thank you.

Your Honor, we are back on the record. Thank you.

Please be seated, everyone. Alright. Where do things stand, mister Siegel, mister Whiskey? Who's who's got the mic?

Yes, your honor. We, conferred with, mister Neema Tahahi 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 say of the Canadian proceedings until the earlier of September excuse me, 12/03/2025, 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.

The parties shall cooperate on adjourning existing hearing dates in the Canadian proceedings for a date on or after December 3. And at a, case management conference that we were advised is scheduled, to be held on June 6, the Canadian plaintiffs will advise the court that they intend to seek an adjournment of the hearing on the consolidation motion until the week of December 15 or the courts the Canadian court's convenience. We, are glad to memorialize this in a written stipulation and submit that to the court.

Sounds great. Mr. Nivatala, is that consistent with your understanding?

Thank you very much, Oliver. It's absolutely a privilege, and thank you to our friends. This is an agreement we have agreement on the terms that my friends

have 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 a mutually beneficial resolution. So very good.

Anything further for today then?

Nothing from debits, your honor. Thank you.

Committee? No? Okay. Very good. Alright.

We have matters scheduled for 01:30 tomorrow, and so we'll see you all then. Court will be adjourned. Thank you, your honor. Thanks, everyone.