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Hearing Date: July 9, 2012 at 10:00 a.m.

PACHULSKI STANG ZIEHL & JONES LLP James I. Stang, Esq. 10100 Santa Monica Blvd., 13th Floor Los Angeles, CA 90067-4100 Telephone: 310/277-6910 Facsimile: 310/201-0760 - and PACHULSKI STANG ZIEHL & JONES LLP Ilan D. Scharf, Esq. 780 Third Avenue, 36th Floor New York, NY 10017-2024 Telephone: 212/561-7700 Facsimile: 212/561-7777 Attorneys for Official Committee of Unsecured Creditors of The Christian Brothers Institute and The Christian Brothers of Ireland, Inc. UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Chapter 11 In re: Case No. 11-22820 (RDD) THE CHRISTIAN BROTHERS INSTITUTE, et al., (Jointly Administered) Debtors. OBJECTION OF THE OFFICIAL COMMITTEE OF UNSECURED CREDITORS TO MOTION FOR RELIEF FROM THE AUTOMATIC STAY The Official Committee of Unsecured Creditors (the Committee) appointed in the above-captioned cases (the Cases) of The Christian Brothers Institute (CBI) and The Christian Brothers of Ireland, Inc. (CBOI and, together with CBI, the Debtors), hereby submits this Objection (the Objection) of the Official Committee of Unsecured Creditors to Motion for Relief From the Automatic Stay (the Motion) filed by Corporation of the Catholic -1DOCS_LA:255408.3 14012-002

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Archbishop of Seattle (the Archdiocese). In support of its Objection, the Committee respectfully states as follows:

Objection 1. The Debtors and the Archdiocese have together removed six actions from

Washington State court to the Bankruptcy Court. These six actions state personal injury claims against the Debtors and/or the Archdiocese and other defendants. The Archdiocese now seeks relief from the automatic stay in order to remove additional civil actions pending against it and the Debtors in Washington State. The Motion seeks relief from the stay for two purposes: (1) to make the removal of the Civil Actions1 timely and (2) to allow all of the sexual abuse litigation pending in Washington State against the Debtors and the Archdiocese to proceed before this Court. The Committee will be seeking the remand of the already removed sexual abuse litigation to the Washington Superior Court.2 In light of the significant overlap of factors in favor of remand of the removed and the Civil Actions, the removal of the Civil Actions is premature until the Court rules on a remand motion for the already removed sexual abuse litigation. 2. The Archdiocese seeks relief from the stay to remove the Civil Actions.

The Archdioceses issue is not so much whether the stay restrains the removal of the Civil Actions but rather, whether the removal is timely. Removal of a stayed claim or cause of action is timely until 30 days after entry of an order granting relief from the automatic stay if the action
1

Capitalized terms used but not defined herein shall have the meanings and definitions ascribed to them in the Motion.
2

The Committee has not yet sought remand of the removed actions because the deadline for parties asserting claims based on sexual abuse has not passed. Rather than litigate issues piecemeal and increase the complexity and cost of these Cases, the Committee was waiting until after the bar date to assert sexual abuse claims had passed before addressing issues related to remand since such issues are intertwined with claims that have not yet been filed.

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was stayed pursuant to section 362 of the Bankruptcy Code. Bankruptcy Rule 9027(a)(2)(B). The Civil Actions involve a number of non-debtor defendants, including the Archdiocese. The Civil Actions were not stayed against the non-debtor defendants pursuant to section 362 of the Bankruptcy Code since the automatic stay does not apply to non-debtor co-defendants. See Teachers Ins. & Annuity Ass'n of America v. Butler, 803 F.2d 61, 65 (2nd Cir. 1986); In re Bidermann Industries U.S.A., Inc., 200 B.R. 779, 782 (Bankr. S.D.N.Y. 1996). If the Archdiocese is trying to remove a claim or cause of action against a non-debtor third party, then the removal deadline is 90 days after entry of an order for relief. Fed.R.Civ.P. 9027(a)(2)(A). That deadline passed almost a year ago and the Motion cannot resuscitate the otherwise expired period to remove the Civil Actions. 3. The Seattle Archdiocese also seeks relief from stay to allow all of the

removed sexual abuse litigation to proceed before this Court and, to the extent applicable, before the District Court. The Committee does not support the removed sexual abuse litigation proceeding in this venue and, at the appropriate time, will file a motion to remand all of the removed actions to the Washington Superior Court. The deadline for parties to assert claims against the Debtors based on sexual abuse (the Sexual Abuse Bar Date) will occur on August 1, 2012. The Committee will address issues regarding the proper venue for liquidation of the sexual abuse claims after the Sexual Abuse Bar Date has passed. 4. As a preview to a remand motion, the Committee preliminarily notes that

the removed Civil Actions and Transferred Actions involve more than eighteen individual abuse claims across six separate cases. In a number of those cases, the Washington trial courts have -3DOCS_LA:255408.3 14012-002

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already managed extensive discovery and pre-trial motions, so they are familiar with the legal issues and facts in those cases, while in others the discovery process has yet to begin. Moreover, the sexual abuse at issue in the removed Washington litigation took place in Washington, the majority of witnesses to the removed litigation are in Washington, the majority of the plaintiffs reside in Washington, the Archdiocese resides in Washington, the debtors do business in Washington, the Debtors always have been represented by Washington counsel in the removed litigation, the Archdiocese and the claimants are all represented by Washington counsel, the Washington courts have already been extensively involved in at least a number of the claims and are familiar with the same, and Washington law is the applicable law. In the interests of judicial economy and consistency in rulings, this Court should refrain from entering substantive orders in the removed actions until there is a determination that it in fact will keep the removed actions. 5. Since the commencement of these Cases, the Archdiocese has advocated

that the Court sort out the myriad of defendants named in the prepetition Washington State court actions and determine the relationships between the Debtors, the various Christian Brothers provinces (past and present) and the Congregation. Its goal is understandable given that the Congregation may be a named co-insured with the Archdiocese under certain insurance policies that appear applicable to Washington-based claims and that the Archdiocese may be exposed to joint and several liability under Washington law as a co-defendant in the Civil Actions and Transferred Actions. However, those relationships are best sorted out, if not around the negotiating table, then in the Archdioceses pending adversary proceeding for substantive consolidation. If the Archdiocese has not named all of the different defendants that are named -4DOCS_LA:255408.3 14012-002

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in the Civil Actions and Transferred Actions, it can seek leave to amend the substantive consolidation complaint. In the Committees opinion, opening up the Pandoras Box of the removed abuse litigation (including the jurisdictional risks associated with personal injury claims in the Bankruptcy Court) is not the way to sort out these relationships. Applicable Law 6. Section 362(d)(1) of the Bankruptcy Code empowers the bankruptcy court

to grant relief from the stay "for cause", such as by terminating or annulling the automatic stay. The Bankruptcy Code does not define the meaning of the phrase for cause. E.g., Schneiderman v. Bogdanovich (In re Bogdanovich), 292 F.3d 104, 110 (2d Cir.2002). In determining whether

there is cause to grant relief from the automatic stay, courts in the Second Ccircuit typically examine the factors outlined in Sonnax Indus., Inc. v. Tri Component Products Corp. (In re Sonnax Indus., Inc.), 907 F.2d 1280, 1286 (2d Cir.1990); In re Enron Corp., 306 B.R. 465, 476 (Bankr. S.D.N. Y. 2004). These factors are: (1) whether relief would result in a partial or complete resolution of the issues; (2) lack of any connection with or interference with the bankruptcy case; (3) whether the other proceeding involves the debtor as a fiduciary; (4) whether a specialized tribunal with the necessary expertise has been established to hear the cause of action; (5) whether the debtor's insurer has assumed full responsibility for defending it; (6) whether the action primarily involves third parties;

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(7) whether litigation in another forum would prejudice the interests of other creditors; (8) whether the judgment claim arising from the other action is subject to equitable subordination; (9) whether movant's success in the other proceeding would result in a judicial lien avoidable by the debtor; (10) the interests of judicial economy and the expeditious and economical resolution of litigation; (11) whether the parties are ready for trial in the other proceeding; and (12) impact of the stay on the parties and the balance of harms. Id. (citing In re Curtis, 40 B.R. 795, 799-800 (Bankr.D.Utah 1984).

7.

Here, the Sonnax factors do not apply. The Archdiocese argues that cause

exists to grant it relief from the automatic stay in order to seek removal of the Civil Actions so that they may proceed before this Court because (a) removal would be timely under Bankruptcy Rule 9027, (b) the Archdiocese will file a cross claim against non-debtor defendants in the Civil Actions, and (c) issues relating to the relationship between the NAP and the Debtors should be addressed before this Court. 8. The Archdioceses arguments fail because it missed its deadline to seek

remand under Bankruptcy Rule 9027. The Archdiocese argues that removal would be timely under Bankruptcy Rule 9027, which allows the filing of a notice of removal within the longest of (A) 90 days after the order for relief in the case under the Code, (B) 30 days after entry of an order terminating a stay, if the claim or cause of action in a civil action has been stayed under 362 of the Code, or (C) 30 days after a trustee qualifies in a chapter 11 reorganization case but not later than 180 days after the order for relief.

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Fed. R. Bankr. P. 9027. 9. These Cases were filed on April 28, 2011. Thus, pursuant to Bankruptcy

Rule 9027(A), a notice of removal should have been filed by July 27, 2011. That deadline has long passed. 10. Bankruptcy Rule 9027(B) is also not available to the Archdiocese.

Bankruptcy Rule 9027(B) provides that a notice of removal may be filed within 30 days after entry of an order terminating the automatic stay. The automatic stay applies to causes of action against the Debtors. The automatic stay does not apply to claims or causes of action against nondebtor co-defendants. See Teachers Ins. & Annuity Ass'n of America v. Butler, 803 F.2d 61, 65 (2nd Cir. 1986); In re Bidermann Industries U.S.A., Inc., 200 B.R. 779, 782 (Bankr. S.D.N.Y. 1996). Thus, the automatic stay does not apply to claims against the Archdiocese and the Archdiocese cannot seek to remove claims against it on the basis that claims against the Debtors were stayed. 11. Moreover, the Committee intends to seek remand of the Transferred

Actions. The issues regarding remand between the Civil Actions that the Archdiocese seeks to remove and the already Transferred Actions are substantially similar. As such, to the extent the Court is not willing to deny the Motion at this time, the Court should set a briefing schedule for remanding the actions to the Washington Superior Court in order to avoid the confusion and added burden of addressing the issue for two additional actions. WHEREFORE, the Committee requests that the Court deny the Motion and grant such other and further relief as is just and proper.

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Dated: New York, New York July 2, 2012

PACHULSKI STANG ZIEHL & JONES LLP

/s/ Ilan D. Scharf Ilan D. Scharf, Esq. 780 Third Avenue, 36th Floor New York, NY 10017-2024 Telephone: (212) 561-7700 Facsimile: (212) 561-7777 -andJames I. Stang, Esq. (admitted pro hac vice) 10100 Santa Monica Blvd., 13th Floor Los Angeles, California 90067-4100 Telephone: (310) 277-6910 Facsimile: (310) 201-0760 Counsel for the Official Committee of Unsecured Creditors of The Christian Brothers Institute and The Christian Brothers of Ireland, Inc.

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