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Hearing Date: July 9, 2012 at 10:00 a.m. Objection Date: July 2, 2012 at 4:00 p.m. PATTERSON BUCHANAN FOBES LEITCH & KALZER, INC., P.S. 2112 Third Avenue, Suite 500 Seattle, Washington 98121 (206) 462-6700 Michael A. Patterson, Esq. NYSBA Reg. No. 3615283 Attorneys for the Corporation of the Catholic Archbishop of Seattle Party-In-Interest UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK _____________________________________________ In re: THE CHRISTIAN BROTHERS INSTITUTE, et al., : : : : : : : : Chapter 11 Case No. 11-22820 (RRD) (Jointly Administered)

Debtor(s)

REPLY IN SUPPORT OF ARCHDIOCESES MOTION FOR RELIF FROM STAY The Corporation of the Catholic Archbishop of Seattle (the Archdiocese), partyin-interest and defendant in the state court litigation, by and through its counsel, Patterson Buchanan Fobes Leitch & Kalzer, Inc., P.S., submits this reply in support of its Motion for Relief From Stay (ECF Docket No. 284) (the Motion) and in response to the Official Committee of Unsecured Creditors Objection (ECF Docket No. 363) and Plaintiffs Joinder in Committees Objection (ECF Docket No. 365) (these Objections include identical arguments and will collectively be referred to as the Objection) to the Motion.

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I. 1.

PRELIMINARY STATEMENT

The Archdiocese moves this court to lift the automatic stay under 362

of the Bankruptcy Code for the sole purpose of allowing it to proceed with removal of the King County Superior Court actions (State Cases) 1 and to transfer these cases to the Southern District of New York Bankruptcy Court along with other similarly situated cases 2 (Transferred Cases). 2. The Christian Brothers Institute (CBI) and the Christian Brothers of

Ireland, Inc. (CBOI) (collectively, the Debtors) filed a limited consent to the Archdioceses Motion (ECF Docket No. 357), having no objection to the reasons and purpose of the Motion. The Debtors wrote the following in their limited consent, [i]n essence, the Lift Stay Motion only seeks modification of the automatic stay to enable the timely removal of two lawsuits related to the Debtors Chapter 11 cases, and the Debtors have no objection to this limited relief. Debtors Limited Consent, 6. 3. The State Cases have been stayed for approximately a year. By

stipulated order, the parties in the state court actions agreed to briefly extend the stay again to July 20, 2012, in order to allow this Court to rule on the instant Motion. II. 4. ARGUMENT

The parties appear to be in agreement (Objection at 3-4) that the

Transferred Cases may likely need to be remanded to state court sometime after the August 1, 2012 bar date for claims of sexual abuse. However, the main point of contention between the Archdiocese and the parties filing the Objection is the scope of
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The State Court Cases are T.P., A.S., J.H., L.B., D.P. See Motion at p. 2-5. The Transferred Cases have been removed pursuant to Rule 9027(a)(1) of the Federal Rules of Bankruptcy Procedure and CR 101(e) of the Local Rules of the U.S. District Court for the Western District of Washington and transferred to the Bankruptcy Court pursuant to 28 U.S.C. 1404 and 1412: L.W. v. Christian Brothers and Archdiocese SDNY Adv. Pro. 11-08317, R.P. v. Christian Brothers and Archdiocese SDNY Adv. Pro. 11-08319, G.W. v. Christian Brothers and Archdiocese SDNY Adv. Pro. 1108320, K.A. v. Christian Brothers and Archdiocese SDNY Adv. Pro. 11-08321, W.D. v. Christian Brothers and Archdiocese SDNY Adv. Pro. 12-08238, F.C. v. Christian Brothers and Archdiocese SDNY Adv. Pro. 12-08239.

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the automatic stay under 362 of the Bankruptcy Code; specifically, which Christian Brothers entities are subject to the automatic stay. 5. The scope of the automatic stay, and the parties bound by that stay, is at

the sound discretion of this court. In Re Sonnax Indus., Inc., 907 F.2d 1280, 1286 (2d Cir. 1990). Until this issue concerning the relationship between the various Christian Brothers entities is decided, it is in the best interests of the parties to these bankruptcy proceedings to have the State Cases with the Transferred Cases: in one court, before one judge. 6. The main legal argument advanced by the Objection is that even if this

Court orders that the stay be lifted, removal of the State Cases cannot be accomplished because the automatic stay is inapplicable to non-debtor codefendants. Opposition at 2, 6-10. However, there is an issue as to whether the codefendants or their assets (such as insurance policies) in the State Cases are so closely related to the Debtors as to be wholly or partially part of the bankruptcy estate. The parties opposing this Motion cannot definitively state that the codefendants and their assets in the State Cases are wholly independent of the bankruptcy estate because this Court has not yet decided that issue. 7. The relationship between the Debtors and codefendants, including the

Congregation of Christian Brothers, North American Province in the state court actions remains unresolved. Motion at p. 8 and Exhibits D and E to Patterson Declaration. In fact, the judge in the State Court actions has stayed the pending cases for over a year in order to allow this court to determine the legal relationship between the entities. In the meantime, various parties, including the Archdiocese, have successfully removed and transferred other state court actions with the same Christian Brothers entities in the State Cases to this Court. This is precisely why the Archdiocese is seeking to lift the

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stay here: to allow the State Cases to be removed and transferred like the previous cases. 8. The Objection justifies its change of position concerning transferring all

related cases to this Court by arguing that a remand of these cases will soon follow, therefore, lifting the stay to transfer the State Cases is a waste of judicial resources. Unfortunately, this position ignores the fact that while we wait to have the Transferred Cases remanded (once the relationship between the Christian Brothers entities is determined), other courts might move forward with cases on their docket, further complicating the bankruptcy process in this Court. This possibility is most recently demonstrated by a July 3, 2012 ruling in the U.S. Bankruptcy Court for the Western District of Washington, setting a hearing to determine whether cases related to this bankruptcy should be remanded and tried in state court. See Exhibit A. The Western District of Washington Bankruptcy Court could remand cases concerning alleged sexual abuse by Christian Brothers individuals to state court to proceed concurrently with the Debtors bankruptcy process. This could have severe ramifications in this Court should it be discovered later that insurance policies or other assets at issue in the bankruptcy estate are also at issue in concurrent state court litigation. 9. The Objection further argues that a better tool to determine the

relationship between the Christian Brothers entities is the pending Complaint for Substantive Consolidation. Objection at 5; Adv. Pro No. 12-08236 (RDD). However, this Complaint is being challenged in two separate motions to dismiss, and while this issue is being litigated, the judge in the State Cases could decide to deny further stay requests and continue discovery without a definitive ruling from this Court on the relationship between the Christian Brothers entities 10. In addition, Plaintiffs in the State Cases will likely be filing claims in this

Court shortly before the August 1, 2012 bar date. Lifting the stay now will accomplish
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the most efficient use of judicial resources, as the Archdiocese can begin the process of removing and transferring plaintiffs that will likely be in this Court after the August bar date. III. 11. CONCLUSION

The State Cases should be given the opportunity to be removed and

transferred to this court until such time as the relationship between the various Christian Brothers entities has been determined and the Court rules on whether remands are appropriate. The Objections approach ignores the fact that the relationship between the various Christian Brothers entities needs to be definitively resolved before allowing the State Cases to proceed in separate courts. By lifting the stay to allow the Archdiocese the opportunity to remove and transfer the State Cases - like the previously Transferred cases - this Court would facilitate the efficient use of judicial resources in the best interests of the parties to the bankruptcy DATED this 6th day of July, 2012.

PATTERSON BUCHANAN FOBES LEITCH & KALZER, INC., P.S. ____s/ Michael A. Patterson_____________ Michael A. Patterson, NYSBA Reg. No. 3615283 2112 Third Avenue, Suite 500 Seattle, Washington 98121 Telephone: (206) 462-6700 Facsimile: (206) 462-6701 Email: map@pattersonbuchanan.com Attorneys for the Corporation of the Catholic Archbishop of Seattle Party-In-Interest

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Exhibit A

EXHIBIT A

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Exhibit A

Below is the Order of the Court.

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_________________________ Karen A. Overstreet U.S. Bankruptcy Judge


(Dated as of Entered on Docket date above)

_________________________________________________________________

Karen A. Overstreet Bankruptcy Judge United States Courthouse 700 Stewart Street, Suite 6301 Seattle, WA 98101 206-370-5330 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE

In re THE CHRISTIAN BROTHERS INSTITUTE, et al., Debtor(s). B.L. and B.S., Plaintiffs, vs. CORPORATION OF THE CATHOLIC ARCHBISHOP OF SEATTLE, a sole corporation; CONGREGATION OF CHRISTIAN BROTHERS; CONGREGATION OF CHRISTIAN BROTHERS-NORTH AMERICAN PROVINCE a/k/a WESTERN PROVINCE a/k/a EASTERN PROVINCE a/k/a AMERICAN PROVINCE; CHRISTIAN BROTHERS

Chapter 11 Case No. 11-22820 (RDD) Southern District of New York (Jointly Administered)

No. 12-2-08139-5 SEA Adv. No. 12-01396-KAO ORDER SETTING A HEARING ON MOTION TO TRANSFER ADVERSARY CASE TO ANOTHER DISTRICT

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Exhibit A

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INSTITUTE OF CALIFORNIA; CHRISTIAN BROTHERS INSITUTE OF MICHIGAN, Defendants.

This matter came before the Court on June 12, 2012, on the Motion to Transfer Related Cases From the U.S. Bankruptcy Court for the Western District of Washington to the U.S. Bankruptcy Court for the Southern District of New York (White Plains Division) (the Motion to Transfer) filed by the Corporation of the Catholic Archbishop of Seattle (Archdiocese). The

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Motion to Transfer appears to have been properly served and no opposition has been filed. The Archdiocese appears to have complied with this Courts local rules in uploading its proposed order granting the Motion to Transfer. There is no evidence, however, to convince the Court that it has subject matter jurisdiction over the underlying state court action between the plaintiffs and defendants identified above under 11 U.S.C. 1334(c) , that venue is proper under 28 U.S.C.

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1409, or that removal of the underlying state court action to this Court was proper under 28 U.S.C. 1452. The Archdiocese removed the underlying state court case, filed in King County Washington on March 8, 2012 (the State Court Action), on the ground that it is related to the

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bankruptcy proceedings of The Christian Brothers Institute (CBI) and The Christian Brothers of Ireland, Inc. (collectively, the Debtors), which are pending in the Bankruptcy Court for the Southern District of New York (the New York Bankruptcy Proceeding). The Debtors, however, are not defendants in the State Court Action and there is no evidence that the Archdiocese, the plaintiff in the State Court Action, or any of the other defendants in the State

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Court Action has filed a proof of claim against the Debtors in the New York Bankruptcy Proceeding. The New York Bankruptcy Proceeding was commenced on April 28, 2011, prior to

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the filing of the State Court Action, so the Debtors would have been protected by the stay as of the time the State Court Action was filed. The Court can only surmise that the reason why the plaintiff in the State Court Action did not name the Debtors as defendants and why the Archdiocese has not named the Debtors as additional defendants herein is because the New York Bankruptcy Proceeding preceded the State Court Action. There is no evidence before the Court

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to establish that the Archdiocese sought relief from stay to join the Debtors in the State Court Action. The Archdiocese contends that the judge in the New York Bankruptcy Proceeding is looking at which entity is really just a pseudonym for the debtor, or legally might be responsible for the debtor and that the judge recognizes that [this issue] needs to be dealt with in a

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definitive way. Motion to Transfer at p. 7. The excerpts of proceedings from New York, however, which are attached to the Motion to Transfer as Exhibit A, do not reference any specific matter now pending in the New York Bankruptcy Proceeding to address issues of relation between various possible defendants in the State Court Action and the Debtors. In fact,

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in cases pending before Judge Dore in the Western District of Washington, the Debtors opposed similar motions to transfer cases filed by the Archdiocese, contending that the Debtors are separate entities from the defendants named in this and the other actions. See W.D. v. Corporation of the Catholic Archbishop of Seattle, et al., Adv. No. 12-01112-TWD (W.D. Wash.).1 No party opposes the Motion to Transfer. However, issues of subject matter jurisdiction cannot be waived. Accordingly, the Court may not grant the Motion to Transfer until it is convinced that it has the requisite subject matter jurisdiction.

The mere fact that Judge Dore determined that cases pending before him should be transferred to the Southern District of New York does not require this Court to similarly transfer this case.

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NOW, THEREFORE, it is HEREBY ORDERED as follows: 1. A hearing on the Motion to Transfer will be held at 9:30 a.m. on July 20, 2012, in

courtroom 7206, 700 Stewart Street, Seattle, WA. 2. The Archdiocese must appear at the hearing on July 20, 2012, and show cause why the

State Court Action should not be remanded to the state court pursuant to 28 U.S.C. 1447(c).
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3.

The Archdiocese shall serve a copy of this Order on the Debtors and on all parties served

with the Notice of Removal filed in this case not later than July 6, 2012, and file proof of such service with the Court. ///END OF ORDER///

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Exhibit A

Below is the Order of the Court.

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_________________________ Karen A. Overstreet U.S. Bankruptcy Judge


(Dated as of Entered on Docket date above)

_________________________________________________________________
Karen A. Overstreet Bankruptcy Judge United States Courthouse 700 Stewart Street, Suite 6301 Seattle, WA 98101 206-370-5330 IN THE UNITED STATES BANKRUPTCY COURT FOR THE WESTERN DISTRICT OF WASHINGTON AT SEATTLE

In re THE CHRISTIAN BROTHERS INSTITUTE, et al., Debtor(s). R.A., D.S. AND J.D., Plaintiffs, vs.

Chapter 11 Case No. 11-22820 (RDD) Southern District of New York (Jointly Administered)

No. 12-2-08141-7 SEA Adv. No. 12-01397-KAO ORDER SETTING A HEARING ON MOTION TO TRANSFER ADVERSARY CASE TO ANOTHER DISTRICT

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CORPORATION OF THE CATHOLIC ARCHBISHOP OF SEATTLE, a sole corporation; CONGREGATION OF CHRISTIAN BROTHERS; CONGREGATION OF CHRISTIAN BROTHERS-NORTH AMERICAN PROVINCE a/k/a WESTERN PROVINCE a/k/a EASTERN PROVINCE a/k/a AMERICAN PROVINCE, Defendants.

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Exhibit A

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This matter came before the Court on June 12, 2012, on the Motion to Transfer Related Cases From the U.S. Bankruptcy Court for the Western District of Washington to the U.S.

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Bankruptcy Court for the Southern District of New York (White Plains Division) (the Motion to Transfer) filed by the Corporation of the Catholic Archbishop of Seattle (Archdiocese). The Motion to Transfer appears to have been properly served and no opposition has been filed. The Archdiocese appears to have complied with this Courts local rules in uploading its proposed order granting the Motion to Transfer. There is no evidence, however, to convince the Court that

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it has subject matter jurisdiction over the underlying state court action between the plaintiffs and defendants identified above under 11 U.S.C. 1334(c) , that venue is proper under 28 U.S.C. 1409, or that removal of the underlying state court action to this Court was proper under 28 U.S.C. 1452. The Archdiocese removed the underlying state court case, filed in King County

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Washington on March 8, 2012 (the State Court Action), on the ground that it is related to the bankruptcy proceedings of The Christian Brothers Institute (CBI) and The Christian Brothers of Ireland, Inc. (collectively, the Debtors), which are pending in the Bankruptcy Court for the Southern District of New York (the New York Bankruptcy Proceeding). The Debtors,

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however, are not defendants in the State Court Action and there is no evidence that the Archdiocese, the plaintiff in the State Court Action, or any of the other defendants in the State Court Action has filed a proof of claim against the Debtors in the New York Bankruptcy Proceeding. The New York Bankruptcy Proceeding was commenced on April 28, 2011, prior to the filing of the State Court Action, so the Debtors would have been protected by the stay as of

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the time the State Court Action was filed. The Court can only surmise that the reason why the plaintiff in the State Court Action did not name the Debtors as defendants and why the

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Archdiocese has not named the Debtors as additional defendants herein is because the New York Bankruptcy Proceeding preceded the State Court Action. There is no evidence before the Court to establish that the Archdiocese sought relief from stay to join the Debtors in the State Court Action. The Archdiocese contends that the judge in the New York Bankruptcy Proceeding is

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looking at which entity is really just a pseudonym for the debtor, or legally might be responsible for the debtor and that the judge recognizes that [this issue] needs to be dealt with in a definitive way. Motion to Transfer at p. 7. The excerpts of proceedings from New York, however, which are attached to the Motion to Transfer as Exhibit A, do not reference any specific matter now pending in the New York Bankruptcy Proceeding to address issues of

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relation between various possible defendants in the State Court Action and the Debtors. In fact, in cases pending before Judge Dore in the Western District of Washington, the Debtors opposed similar motions to transfer cases filed by the Archdiocese, contending that the Debtors are separate entities from the defendants named in this and the other actions. See W.D. v.

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Corporation of the Catholic Archbishop of Seattle, et al., Adv. No. 12-01112-TWD (W.D. Wash.).1 No party opposes the Motion to Transfer. However, issues of subject matter jurisdiction cannot be waived. Accordingly, the Court may not grant the Motion to Transfer until it is convinced that it has the requisite subject matter jurisdiction.

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NOW, THEREFORE, it is HEREBY ORDERED as follows: 1. A hearing on the Motion to Transfer will be held at 9:30 a.m. on July 20, 2012, in

courtroom 7206, 700 Stewart Street, Seattle, WA.

The mere fact that Judge Dore determined that cases pending before him should be transferred to the Southern District of New York does not require this Court to similarly transfer this case.

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2.

The Archdiocese must appear at the hearing on July 20, 2012, and show cause why the

State Court Action should not be remanded to the state court pursuant to 28 U.S.C. 1447(c). 3. The Archdiocese shall serve a copy of this Order on the Debtors and on all parties served

with the Notice of Removal filed in this case not later than July 6, 2012, and file proof of such service with the Court.

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///END OF ORDER///

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