Magellan Hearing Transcript

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UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ------------------------------------x In re Case No.: 03-40515 MAGELLAN HEALTH SERVICE, INC., et al,

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Debtors. ------------------------------------x

10 April 1, 2004 11 United States Custom House One Bowling Green New York, New York 10004

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Hearing on debtors' objection to claim of Healthguard of Lancaster, Inc. (Claim No. 2818) and debtors' counterclaim; debtors' motion for order holding Robert M. Davidson and Vanessa E. Komar in contempt for failure to comply with orders of this Court and the discharge injunction.

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THE HONORABLE PRUDENCE CARTER BEATTY United States Bankruptcy Judge

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A P P E A R A N C E S: WEIL, GOTSHAL & MANGES, LLP Attorneys for Debtors 1501 K Street, N.W. Washington, D.C. 20005

5 BY:

CHRISTINE P. HSU, ESQ.

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AKIN GUMP STRAUSS HAUER & FELDMAN, LLP Attorneys for Creditors' Committee 590 Madison Avenue New York, New York 10022

9 BY:

ANGELA FERRANTE, ESQ.

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REED SMITH LLP Attorneys for Healthguard of Lancaster 599 Lexington Avenue New York, New York 10022

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BY:

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JOSEPH O'NEIL, JR., ESQ.

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ROBERT DAVIDSON, M.D. Appearing Pro Se P.O. Box 1785 Kilgore, Texas 75663

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JUDGE BEATTY:

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Now, we have got

one of my favorite cases, Magellan. It is April 1st, so I can say a Page 2

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55758 thing like that and they don't have to be

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true.

Who wants to start with what?

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MS. HSU:

We have two matters

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before you today, Your Honor.

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sure which you would rather we start

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I am not

with?

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JUDGE BEATTY:

I have no

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interest in telling you, so you will have

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to make your own judgment.

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MS. HSU:

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with the Healthguard matter.

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my name is Christine Hsu.

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Weil, Gotshal & Manges, representing

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Magellan.

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Why don't we start Your Honor,

I am with

About two months ago we were

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here on Magellan's objection and

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counterclaim to Healthguard's proof of

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claim, and at the last hearing Your Honor

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asked that we go back and take a look at

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the claims that are at issue.

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In Magellan's objection and

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counterclaim that we were to have heard

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last time, Magellan had attached an audit

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that went over the claims that were at

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issue, and in Magellan's view the audit

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showed that the claims were, in fact, not

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reimbursable by Magellan as Healthguard Page 3

55758 In the last two months, I

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had claimed.

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have been in contact with counsel for

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Healthguard, and we have not made

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significant progress in going over the

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claims.

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JUDGE BEATTY:

Why not?

I told

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each of you to designate somebody who

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knows how to review claims and pick a

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batch of 35 to 50 claims -- that is not a

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lot -- and go through them and see how

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many of those were right or wrong.

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MS. HSU:

In response to Your

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Honor's directive, Magellan went to and I

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spoke to Healthguard's counsel and asked

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for them to provide for us those claims

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for which they knew they had evidence of

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prior authorization.

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request, Healthguard's counsel indicated

In response to that

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that they had no interest in doing that

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and, in fact, thought that we should

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instead give them --

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JUDGE BEATTY:

I told

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Healthguard how I intended this to be

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handled.

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handle it in the way in which I stated.

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That was a Court directive which they

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They had no choice but to

were required to comply with. Page 4

It was in

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55758 lieu of their having to go through each

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and every one of their claims and

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reconsider whether they were, in fact,

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correct and what basis they were

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asserting for them.

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So whoever is here for

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Healthguard, you missed the point.

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back and do what I told you.

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MR. O'NEIL:

Go

Your Honor, Joseph

O'Neil from Reed Smith for Healthguard.

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We have gone through all of our

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claims and basically have come up with a

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list of 1100 --

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JUDGE BEATTY:

I told you to

pick 35 claims and they basically could

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be in order, and have two people, one

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from your side and one from their side,

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who are familiar with this process, and

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go through them and see what the problems

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were.

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MR. O'NEIL:

Your Honor, I

think it goes a little bit beyond that.

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JUDGE BEATTY:

If it went

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beyond that, then why didn't you tell me

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last time?

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MR. O'NEIL:

Your Honor, there

is an issue here concerning claims for Page 5

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55758 prior authorization versus claims that

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are in and out of the network.

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JUDGE BEATTY:

I understand

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that, and the question was for you to put

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out a fairly small number of claims and

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have the parties start to see how to

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identify the various claims.

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consider it appropriate for you to refuse

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to do what I asked you to do.

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not liked what I asked you to do, you

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should have spoken up at the last

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hearing.

I do not

If you had

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MR. O'NEIL:

Your Honor, we are

prepared to give all the claims.

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JUDGE BEATTY:

No. I didn't ask

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you to give them to them.

I asked you to

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provide a person to review with their

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person the way the claims read and to

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pick a reasonable number.

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suggested 35.

I think I

I didn't suggest that you

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necessarily pick out particular ones, but

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if that is what you would like to do, you

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can.

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thing be done, because there are too many

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claims right now for anybody to get a

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handle on what the problems are.

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appreciate your refusing to do what I

But I directed that a particular

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I don't

55758 Did you sit

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directly asked you to do.

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down and have one of your knowledgeable

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claims people sit down with one of their

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people?

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MR. O'NEIL:

I don't know what

the counsel in Pennsylvania did.

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JUDGE BEATTY:

That is what I

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asked you to have done.

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it, you didn't do what I asked you to do.

If you didn't do

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Proceedings MR. O'NEIL:

Maybe I

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misunderstood what was required at the

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last hearing.

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JUDGE BEATTY:

No.

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couldn't have misunderstood.

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speak the English language.

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MR. O'NEIL:

You Not if you

Your Honor, I

think that the issue that we are stuck on

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is the authorization issue.

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Honor was concerned at the last hearing

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about claims being in and out of network.

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JUDGE BEATTY:

I think Your

I have asked you

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to proceed in a certain way.

I don't

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expect you to just hand over a bunch of

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claims to your adversary and expect them

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to try to figure out what they say and

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how they do it.

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are knowledgeable to meet with the

I expect your people who

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55758 debtors' people and go over a reasonable

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group of claims that represent a

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reasonable range of issues, so that the

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parties can begin to understand why you

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think you have prior authorization and

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how it is reflected where they say you

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don't.

I don't fancy having a trial at

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which I require you to present each and

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every claim and we have a ruling on each

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and every claim.

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MR. O'NEIL:

Yes, Your Honor.

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I don't think we need to get to that

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point.

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and we compiled a list of providers, and

We compiled a list of services,

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the dates when services were rendered,

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and the costs of the service.

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JUDGE BEATTY:

I am saying to

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you that you did not do what I asked you

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to do, and whatever else you did, you may

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discuss with the debtors, but you still

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have to do what I asked you to do.

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not acceptable to me.

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MR. O'NEIL:

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It is

Your Honor, we

will do that.

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JUDGE BEATTY:

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Now, shall we set another date

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Thank you.

for this? Page 8

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55758 The debtors are

MS. HSU:

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concerned about the passage of time on

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this matter.

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JUDGE BEATTY:

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When should we

set another date?

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MS. HSU:

I think four weeks

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would be enough time, Your Honor.

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JUDGE BEATTY:

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MS. HSU:

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That is fine with the

debtors, Your Honor.

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Thank you.

JUDGE BEATTY:

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MS. HSU:

May 5th at 2:30.

What is next?

The next matter is

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Magellan's motion to hold Dr. Davidson in

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contempt of Court order.

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JUDGE BEATTY:

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MS. HSU:

Okay.

Your Honor, what we

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have before you today is a creditor who

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is in violation now of, not only the

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provisions of the Bankruptcy Code, but

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two court orders that this Court has

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signed.

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Back in December of last year

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Dr. Davidson voluntarily signed and

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actually requested a stipulation to

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dismiss and withdraw the claims that were

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underlying his proof of claim against the

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debtors.

In spite of that stipulation, Page 9

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and in spite of the confirmation order,

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and also in spite of the provisions of

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the Bankruptcy Code, Dr. Davidson

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persists in pursuing an appeal of the

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underlying complaint in the Ninth

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Circuit, not only against other tenants,

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but also against the debtors.

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We have put before the Court

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documents indicating the stipulation and

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the communications with the claimant

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indicating his desire to withdraw the

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claims underlying his proof of claim, and

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there really is no justification for his

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continuing against the debtors.

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given him every opportunity to withdraw

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his claims before the Ninth Circuit and

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have informed him of the provisions of

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the relevant rules of bankruptcy law and

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the other two orders that govern this

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proceeding, but he has not responded.

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Because of the creditor's actions we are

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now in the position of having to provide

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briefing before the Ninth Circuit on his

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appeal and the dismissal of his claims.

We have

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This is causing a great deal of

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additional expense to the debtors, which

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we had reasonably believed would have

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been put to bed last December

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JUDGE BEATTY:

As I understand

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Dr. Davidson's problem, he thinks he

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really shouldn't have ever entered into a

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settlement with you under which he

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withdrew his claims.

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MS. HSU:

I understand that,

Your Honor.

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JUDGE BEATTY:

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MS. HSU:

But he did.

He did.

I can also

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hand to you his signature on a page.

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don't think that he denies that he signed

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a stipulation.

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says that he was coerced by apparently a

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standard letter that was written by

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in-house counsel at Magellan notifying

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him of the bankruptcy and informing him

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that --

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I

He now, after the fact,

JUDGE BEATTY:

He couldn't

proceed with this action? MS. HSU:

Exactly.

Now,

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Dr. Davidson insists that this is the

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basis for his feeling coerced to sign the Page 11

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stipulation.

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JUDGE BEATTY:

People with

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higher education are not supposed to be

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coerced as easily as people with lower

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education.

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assume he has at least a college

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He calls himself a doctor.

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education and something beyond that.

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MS. HSU:

Also, Your Honor,

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because of the magnitude of the claims

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that Dr. Davidson has brought against the

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debtors, had this claim not been disposed

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of when it was, Magellan actually would

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not have been able to emerge from

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bankruptcy.

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relied on the stipulation that he

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voluntarily signed and asked for back in

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December in order to emerge from

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bankruptcy in January.

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JUDGE BEATTY:

Let me hear from

the other side.

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The debtors reasonably

DR. DAVIDSON:

Your Honor,

Robert Davidson, M.D. appearing pro se.

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I am a claimant and my wife is a

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claimant, Vanessa E. Komar.

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JUDGE BEATTY:

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claimants.

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claims eliminated.

No.

You are not

You agreed to have your Page 12

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DR. DAVIDSON:

Yes, Your Honor.

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I have moved this Court under Rule 60(b)

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to give strong consideration to

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revoking --

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JUDGE BEATTY:

There is no

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basis for revoking a consent to withdraw

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your claims.

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sort that is of limited education and

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doesn't know what they are doing.

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assuming that you withdrew your claims,

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because you wished to proceed with the

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rest of your actions and didn't believe

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that you would get enough from Magellan

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to make it worthwhile litigating against

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Magellan.

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You are not a pro se of the

DR. DAVIDSON:

I am

That is actually

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not correct, Your Honor.

The threat of a

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contempt citation and further attorneys'

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fees and costs --

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JUDGE BEATTY:

Didn't you

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bother to find out what the automatic

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stay said?

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DR. DAVIDSON:

In my view the

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automatic stay was obtained through fraud

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upon this Court.

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JUDGE BEATTY:

The automatic

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stay could not possibly have been Page 13

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obtained through fraud upon this Court.

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It is provided for in a statute enacted

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by the Congress of the United States.

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DR. DAVIDSON:

If that is true,

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Your Honor, why did the debtors choose to

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lie in wait until June to notify the U.S.

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District Court that the stay was in

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place?

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JUDGE BEATTY:

Because the

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debtors had a lot to do, and maybe you

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weren't doing anything at that point in

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the litigation.

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the Bankruptcy Code.

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from the day the case was filed, and that

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is that.

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fraud.

But that stay comes from It was in there

It can't possibly be a somehow It wasn't obtained pursuant to an

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order.

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it was.

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proceed with your action.

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sign a legal paper, you get legal

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counsel.

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by yourself?

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Once they filed the case, there You were stuck.

You could not Before you

Are you prosecuting this action

DR. DAVIDSON:

Yes.

For

reasons that are in substantial measure

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due to the ongoing conspiracy of at least

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three of the debtors in the Magellan

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chapter 11 proceeding. Page 14

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JUDGE BEATTY:

What kind of a

conspiracy did they have?

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DR. DAVIDSON:

A conspiracy to

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conceal fraud, intrinsic fraud, from this

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Court, which they have succeeded in

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doing.

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JUDGE BEATTY:

What kind of

DR. DAVIDSON:

Fraud in Vivra,

fraud?

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Inc.'s recruitment of my employment

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contract with an Arizona corporation.

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JUDGE BEATTY: know something?

Do you want to

There is nothing you can

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do about the fraud, except file a proof

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of claim; and you stipulated to that

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claim being expunged.

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There is no such thing as a

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non-dischargeable claim against a

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corporation.

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it was based, in your view, on fraud.

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Too bad.

So sad.

It makes no difference that

DR. DAVIDSON:

Even extrinsic

JUDGE BEATTY:

Neither

fraud --

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extrinsic nor intrinsic fraud nor any

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other type of fraud is the basis for

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finding a claim nondischargeable against

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a corporation.

All claims against Page 15

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corporations can be discharged.

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DR. DAVIDSON:

But there is a

vehicle in law to revoke a discharge.

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JUDGE BEATTY:

That vehicle in

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law is not really relevant to

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corporations.

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distinction in the law between

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individuals and corporations.

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that you have only knowledge of

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individual bankruptcies.

There is a major

I think

It is true that

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an individual cannot discharge certain

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fraud claims.

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corporation cannot.

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for objecting to a claim in a corporate

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case.

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asking that it survive confirmation on

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the basis of fraud.

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issue, and it is related to the fact that

It is not true that a There is no basis

That is, there is no basis for

This is a policy

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in an individual 7 there is only the

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debtor to be concerned about.

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chapter 11 case there are other creditors

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to be concerned about and the amounts

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they will receive.

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were thousands of creditors, is my

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recollection.

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fraud doesn't win the day.

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In a

In Magellan there

I am sorry but the fact is

DR. DAVIDSON:

Even intentional Page 16

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fraud targeted at obtaining the discharge

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order?

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JUDGE BEATTY:

It is not a

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discharge order.

It is an order of

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confirmation, and I don't know what you

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mean by "targeted in obtaining it."

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certainly don't think that you rose to

I

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any great level in the Magellan case.

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There were many, many, many issues in

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Magellan that were resolved.

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just one of them.

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DR. DAVIDSON:

You were

I have alleged

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injury and damages to me and my spouse in

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excess of $15 million.

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JUDGE BEATTY:

You stipulated

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to the withdrawal of your claims.

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are gone.

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They

DR. DAVIDSON:

Under duress and

JUDGE BEATTY:

There was no

coercion?

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duress.

There was no coercion.

The

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person that acts as their own lawyer is a

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fool for a lawyer.

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that I don't think that you bothered to

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find out what your rights were or you

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realized that you had no possibility of

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having this claim survive. Really there Page 17

I am saying to you

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is no basis for vacating that

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stipulation.

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debtors in confirming the case.

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not talking about a claim of $125,000

It was relied upon by the You were

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where somebody in your office might have

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made a mistake.

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large claim.

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confirmation of the case potentially.

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The parties have relied on the fact that

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no distribution needs to be made on your

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claim.

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stipulation, and now there is reliance on

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You are talking about a

It would have affected

That is that.

You made a

it.

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DR. DAVIDSON:

For the record,

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may I ask this Court to certify this

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final judgment on this particular

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question as appealable?

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JUDGE BEATTY:

I can't certify

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it as appealable, no.

It either is or it

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isn't.

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view as a motion for reconsideration,

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which is reconsideration of your wife's

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claims based on your stipulation in which

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you stipulated to have those claims

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disallowed.

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order or it is not.

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appeals in bankruptcy is very complex, Page 18

You are making a motion that I

It is either an appealable The subject of

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and I am not prepared to offer an opinion

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to you as to whether a motion for

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reconsideration is appealable.

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certainly think that your motion for

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revocation of the discharge is ill

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founded because the confirmation of a

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large corporate case is not something

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that one should undo lightly.

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stipulated to the discharge of your

I

Since you

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claims, I don't see where there is any

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basis for revocation of the order of

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confirmation.

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that could be revoked -- the order of

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confirmation.

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discharge, if I might say that, is part

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of the order confirmation.

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That is the only thing

Because the debtors'

DR. DAVIDSON:

Does this Court

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not give importance to concerns I have

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that are procedural relative to selective

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docketing?

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JUDGE BEATTY:

What do you mean

by "selective docketing"? DR. DAVIDSON:

Your Honor,

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debtors' counsel provided a copy of an

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e-mail to my attention, and I have here

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e-mailed back to debtors' counsel

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exhibits in support of my objection to

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their motion to dismiss, bankruptcy memo

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of points, memorandum of points, and

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objection to the dismissal.

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filed with this Court, and it never

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appeared.

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JUDGE BEATTY:

This was all

Sir, the Court

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has an electronic case filing system.

In

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order for your papers to be filed, you

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must comply with the rules and

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regulations governing the electronic case

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filing system.

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must take training before you are allowed

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to docket onto that system.

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not have that training, then you must

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send a hard copy of those papers, along

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with a diskette, with a request that they

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be docketed.

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matter, because the fact of the matter is

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that you consented to have your claims

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expunged.

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told me about whether it was right or

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wrong.

Among other things, you

If you do

But it really doesn't

It doesn't matter what you

You solved the problem.

I didn't

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55758 have to rule on your motion.

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DR. DAVIDSON:

The affidavits

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filed by Michael P. McQuillen influenced,

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in my view, the holdings of the U.S.

6

District Court in Arizona.

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affidavit, a sworn affidavit, has a

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number of --

9

JUDGE BEATTY:

I don't care

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what happened in that case.

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totally independent.

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DR. DAVIDSON:

That

That case is

But the

13

affidavit to your Court, that is totally

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not relevant to this proceeding?

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JUDGE BEATTY:

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you:

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your claims.

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it.

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I am saying to

you stipulated to a disallowance of That stipulation, that is

DR. DAVIDSON:

But prior to

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that stipulation, which I maintain was

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under duress and coercion, the Federal

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Judge in the Arizona District Court

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dismissed my case under Younger

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abstention, and I believe that that

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decision was impacted by the sworn

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Proceedings affidavit by Mr. McQuillen. JUDGE BEATTY:

Younger

abstention is not impacted by anything Page 21

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55758 other than jurisdictional issues.

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did that affidavit say that so impacted

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the Judge?

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DR. DAVIDSON:

The Arizona

courts for the record stripped me of my attorney of record.

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What

JUDGE BEATTY:

Why did they

strip you of your attorney of record?

13

DR. DAVIDSON:

He withdrew four

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months before the scheduled trial date

15

under the auspices under color of a

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Arizona statute which was in my view

17

unconstitutional.

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JUDGE BEATTY:

What did that

statute say?

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DR. DAVIDSON:

It basically

21

allows counsel to decide amongst

22

themselves when either counsel can

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withdraw from the proceeding from my

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representation.

25

legal counsel and we entered into --

I had retained this

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JUDGE BEATTY:

That is

3

something that you needed to take up

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there.

5

withdraw only if you make a motion on

6

notice to the party that you represent.

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Normally in this court you can

DR. DAVIDSON:

But there was no Page 22

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55758 process given to them stripping my

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attorney from me.

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That is the point.

JUDGE BEATTY:

That is

11

something for that court to take up.

12

could challenge the constitutionality or

13

whatever.

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DR. DAVIDSON:

Relevant to

15

today's hearing, I have got

16

Mr. McQuillen's affidavit and I quote

17

from paragraph 10:

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annual report identifies --

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Although the 2000

JUDGE BEATTY:

We can't

20

possibly follow you at that rate of

21

speed.

22

You

DR. DAVIDSON:

I will try it

23

again.

This is on page 3 paragraph 10 of

24

Mr. McQuillen's affidavit of Michael

25

McQuillen.

26

1

Proceedings

2

JUDGE BEATTY:

3 4

I think you just

changed pages. DR. DAVIDSON:

I am just

5

letting the transcriptionist know where I

6

am quoting.

7 8 9 10

JUDGE BEATTY:

You told us that

you were quoting from another place. DR. DAVIDSON: paragraph 10, I quote:

Page 3, "Although the Page 23

11

55758 2000 annual report identifies Vivra, Inc.

12

as a shareholder holding more than 20

13

percent of the shares ..."

14 15

JUDGE BEATTY:

Slow down.

"... identifies Vivra, Inc. ..."

16

DR. DAVIDSON.

"... as a

17

shareholder holding more than 20% of the

18

shares of ..." -- and this is in caps.

19

This is an acronym for a long-winded

20

corporate name.

21

Vivra, Inc. does not in fact possess any

22

stock certificates evidencing such

23

ownership and has no record of owning any

24

such interest at that time or any time."

25

It is -- "... VAACAA,

But here this is -- I will

27

1

Proceedings

2

finish this paragraph, because that is

3

what I find to be really the basis of

4

their fraud or their intentional fraud

5

upon this Court, rather it goes on.

6

guess this will put this last sentence in

7

context.

8

whole paragraph 10.

9

signatures appear on the annual report

10

were not employees, representatives or

11

agents of Vivra, Inc.

12

directors of VAACAA identified on that

13

annual report were not employees or

I

That is why I am reading the "The persons whose

The officers and

Page 24

14

55758 directors of Vivra, Inc. and had no

15

relationship with Vivra, Inc. at any time

16

after February 29, 2000."

17

JUDGE BEATTY:

18

that have to do with this Younger

19

abstention?

20 21

DR. DAVIDSON:

JUDGE BEATTY:

Could you just

tell me what the Judge did?

24 25

I believe it was

inappropriate use of the doctrine of --

22 23

But what does

DR. DAVIDSON:

Dismissed with

prejudice my complaint, the first amended

28

1

Proceedings

2

complaint in the U.S. District Court in

3

Arizona that named, amongst others,

4

Vivra, Inc., Magellan Specialty Health,

5

Inc., and Allied Specialty Care Services,

6

Inc.

7

JUDGE BEATTY:

So before you

8

withdrew your claim that Court had

9

already ruled against you?

10 11

DR. DAVIDSON:

It had dismissed

JUDGE BEATTY:

That is what I

my case.

12 13 14

am saying. DR. DAVIDSON:

That was a

15

dismissal with prejudice, Your Honor --

16

my claim in that Court was the basis for Page 25

55758 17

my filing the claim.

18

JUDGE BEATTY:

So when it was

19

dismissed with prejudice, you didn't have

20

a claim there.

21 22

DR. DAVIDSON:

I didn't have a

JUDGE BEATTY:

So you

claim.

23 24

stipulated to dismiss it.

25

DR. DAVIDSON:

But there --

29

1

Proceedings

2

JUDGE BEATTY:

Because you

3

didn't have a claim, because it had been

4

ruled against in this other court.

5

DR. DAVIDSON:

But the final

6

verdict is not in, Your Honor.

7

before the Ninth Circuit Court of Appeals

8

right now.

9

JUDGE BEATTY:

It is

That is too bad.

10

You agreed to dismissal of your claims

11

after they had been dismissed by the

12

federal court, and that is that.

13

it.

14

over in this court.

15

against any of the debtors before the

16

Ninth Circuit.

17

claim.

18

Even if you had had an allowed claim, you

19

would be barred by the discharge

It is done.

It is finished.

You did It is

You cannot proceed

You have no stipulated

You stipulated you had no claim.

Page 26

20

55758 contained in the order of confirmation

21

from pursuing any claim against the

22

debtors.

23

DR. DAVIDSON:

Does that apply

24

to the Second Circuit U.S. District

25

Court?

30

1

Proceedings

2

JUDGE BEATTY:

Absolutely.

It

3

applies to any court.

You may not pursue

4

a claim in any court.

All claims against

5

the Magellan debtors have been -- I would

6

say that they are discharged by the order

7

of confirmation, and the order contains a

8

stay precluding lawsuits.

9 10

DR. DAVIDSON:

But Bankruptcy

Rule 9024.

11

JUDGE BEATTY:

9024 says what?

12

DR. DAVIDSON:

And Federal Rule

13

of Civil Procedure Rule 60(b).

14

JUDGE BEATTY:

9024, yes?

15

DR. DAVIDSON:

Basically, if

16 17

any holder -JUDGE BEATTY:

You have made a

18

request that I reconsider your claim, and

19

I have denied that request.

20

also a provision that says that a

21

complaint to revoke or discharge a

22

chapter 7 may be filed.

There is

Not relevant. Page 27

23

55758 If the claims revoke an order confirming

24

the plan they may be filed only within

25

the time allowed by certain sections.

31

1

Proceedings

2

Now, there is no possibility

3

that I would revoke the discharge in this

4

case, because the discharge in this case

5

on the basis of somehow your having a

6

claim that you stipulated was to be

7

disallowed in this case, and you so

8

stipulated after the lower court

9

dismissed your case with prejudice.

That

10

is not the type of grounds for which

11

someone will revoke an order of

12

confirmation.

13

confirmation if, and only if, the order

14

was procured by fraud.

15

allegations that you have made are ones

16

which would be within the scope of that,

17

because it is the order of confirmation

18

itself that has to be procured by fraud.

19

The disallowance of your claim, you

20

signed up.

21

words, these books, what do they cost?

22

$50 or $75.

23

them perfectly well.

24

you is your claim, having been disallowed

25

on yours and your wife's signature, could

You revoke orders of

None of the

If you did not understand the

You can read the words in But I am saying to

Page 28

55758

32

1

Proceedings

2

not have been a basis for procuring

3

confirmation by fraud.

4

I have been on the bench for

5

over 20 years, and I confirm a lot, a lot

6

of cases.

7

which there is an allegation that there

8

was fraud in the conversion of the case

9

because of failure to disclose property.

I have had only one case in

10

You just don't revoke confirmation on the

11

grounds of fraud in a large case.

12

not something that happens, because the

13

fraud would have to be somehow -- I can

14

hardly think of an example.

15

the debtor advised the creditors that it

16

had an assigned line with the bank of

17

$100 million and provided a false

18

document to the committee that said that

19

that is what they had and the case was

20

confirmed on that basis, because that was

21

the amount of money that was required,

22

that would presumably be a case where

23

confirmation was obtained by fraud.

24

it has to be something that was related

25

to the plan and somehow funding it before

It is

I suppose if

But

33 Page 29

55758 1

Proceedings

2

you get or the failure to disclose some

3

significant assets so that they weren't

4

part of the plan.

5

about what you are arguing that does

6

anything.

7

There is just nothing

DR. DAVIDSON:

The final plan

8

didn't go into effect until January of

9

2004, is my understanding, where the

10

order of confirmation was August 8th, I

11

believe -- or October 8th.

12

JUDGE BEATTY:

I am sorry.

But once the

13

order of confirmation was signed, it

14

controlled, and the things that took

15

place thereafter were provided for in the

16

plan and were discussed in the disclosure

17

statement.

18

finalize the financing and other

19

arrangements post-confirmation.

It is not uncommon to

20

I had a case just this last

21

December, where I had confirmed it in

22

early November.

23

December 18th, the debtors put on a road

24

show that raised $1 billion.

25

it on December 20th, which was a month

Between December 8th and

They closed

34

1

Proceedings

2

after confirmation, because the case had

3

to be fully confirmed.

That is, all Page 30

55758 4

action had to be fully taken by December

5

31st. This is quite common for people to

6

line up financing either preliminarily

7

before confirmation or after

8

confirmation, because the lenders want to

9

know what is really going to happen.

10

DR. DAVIDSON:

But I don't see

11

how Mr. McQuillen's affidavit doesn't go

12

directly to an assault in your court on

13

my and my wife's --

14

JUDGE BEATTY:

15

to have them disappear.

16

sad.

17 18

You stipulated So sorry.

So

They are gone. DR. DAVIDSON:

But it is due to

this document --

19

JUDGE BEATTY:

You could have

20

come in here and told me anything.

You

21

didn't have to stipulate to this.

22

could have come in here and argued about

23

it.

24

stipulation.

25

to me, "They are trying to get me to do

You

Nobody told you to sign that You never came in and said

35

1 2 3

Proceedings this and I don't want to." DR. DAVIDSON:

By the time that

4

the stipulation was signed by me, the

5

fraud upon this Court and the assault

6

upon my action and my claims in two Page 31

55758 7

different federal courts, yours and the

8

district --

9

JUDGE BEATTY:

Where was the

10

assault on your claim in my court that

11

somehow -- was it something that I did

12

that somehow precluded?

13

DR. DAVIDSON:

14

Not that you

did, Your Honor.

15

JUDGE BEATTY:

But I am saying

16

to you, this was an 03 case.

17

filed in 1983.

18

document that dates from 1982, and you

19

still haven't told me what he used the

20

Younger doctrine for.

21

It was

You are talking about a

DR. DAVIDSON:

The Judge

22

abstained, claiming that my filings in

23

Arizona interfered with an ongoing state

24

litigation between another physician and

25

myself.

The other physician being a

36

1

Proceedings

2

codefendant, along with Magellan, Vivra,

3

Inc., and Allied in the U.S. District

4

Court action.

5

Now, because of this --

JUDGE BEATTY:

Can I ask you a

7

DR. DAVIDSON:

Yes, Your Honor.

8

JUDGE BEATTY:

Are you not able

6

9

question?

to work now? Page 32

55758 10 11

DR. DAVIDSON: addressed --

12 13

No one has

JUDGE BEATTY:

I am asking you

a question.

14

DR. DAVIDSON:

I can work now.

15

JUDGE BEATTY:

Well, go out and

16

get a job and make some money and stop

17

being bothered with this.

18

claims against Magellan.

19

gone -- period, end of story.

20

getting yourself obsessed, totally

21

obsessed, with something which you will

22

be lucky if you get $50,000 out of it.

23

You have no They are You are

Now, you may have been wronged.

24

I don't know.

But I suggest that you go

25

and practice medicine, instead of trying

37

1

Proceedings

2

to practice law, which you don't have the

3

training to do.

4

get had."

5

Sometimes things don't work out the way

6

you had hoped.

That is the way life is.

7 8

Just say, "Sometimes you

DR. DAVIDSON:

This is a court

of equity.

9

JUDGE BEATTY:

I know it is a

10

court of equity, but I confirmed the

11

plan.

12

expungement of your claim. Courts of Page 33

Too bad.

You stipulated to the

55758 13

equity don't rehear things just because

14

you changed your mind

15

DR. DAVIDSON:

Your court, Your

16

Honor, shares original and concurrent

17

jurisdiction with the U.S. District Court

18

for the Second Circuit.

19

JUDGE BEATTY:

20

correct.

It was not correct.

21 22

That is not

DR. DAVIDSON:

It hears matters

pertaining to chapter 11.

23

JUDGE BEATTY:

It was not

24

correct.

You have ignored the sections

25

which state that I may not hold and do

38

1

Proceedings

2

not have jurisdiction over personal

3

injury claims.

4

jurisdiction over certain types of

5

non-core claims.

6

no way concurrent with the United States

7

District Court's jurisdiction.

8

an article 3 Judge.

9

Judge.

I do not have

My jurisdiction is in

I am not

I am an article 1

That means that I cannot do

10

certain things that article 3 judges can

11

do.

12

jurisdiction is not, in fact,

13

overlapping.

14

overlap, but there are some things that

15

only the district court can do in Page 34

I do not have lifetime tenure.

The

There are some areas that

55758 16

bankruptcy.

17

The thing that you have to

18

recognize is that just as in medicine,

19

you make progress along towards treating

20

your patient and you can't redo what you

21

did earlier.

22

mistake.

23

really didn't have gangrene.

24

There is no way to put it back.

25

there is nothing to put back here.

It is done.

You made a

You cut off their leg and it It is gone. Well, The

39

1

Proceedings

2

case has been confirmed.

3

confirmed after you and your wife

4

stipulated to disallow your claim.

5

stipulated to disallow your claim after

6

the district court dismissed your claim

7

with prejudice.

8 9 10 11

DR. DAVIDSON:

It was

That was a

domino effect, and I was the last domino. My claim entered into the -JUDGE BEATTY:

But I am saying

12

to you, that is the way life is.

13

made a decision

14

You

DR. DAVIDSON:

You

But still it

15

troubles my sensibility, and probably the

16

public should be concerned that a

17

bankruptcy debtor can obtain their

18

discharge confirmation along the basis of Page 35

55758 19 20

this document -JUDGE BEATTY:

That is a

21

corporate debtor.

But they didn't obtain

22

it on the basis of that.

23

judgment that somehow you should accept

24

that affidavit as true.

25

to accept it as true.

You made a

You didn't have You could have

40

1

Proceedings

2

taken the deposition of the man.

You

3

could have tried to take the depositions

4

of other people.

5

I am saying to you, no matter

6

how many papers you filed here, I never

7

got to rule on them, because you

8

stipulated to disallow your claim.

9

DR. DAVIDSON:

Your Honor, this

10

is a fact that needs to be looked at

11

carefully, because there are e-mails to

12

their legal counsel Christine Hsu, when I

13

have provided copies to them ahead of the

14

hearing on December 2nd --

15 16 17 18 19 20 21

JUDGE BEATTY:

But what I am

trying to say to you is -DR. DAVIDSON:

This relates to

selective docketing. JUDGE BEATTY:

Are you talking

about selective docketing here? DR. DAVIDSON:

I would like to Page 36

55758 22

know why --

23

JUDGE BEATTY:

Why?

Because

24

you didn't have the authority to docket,

25

because you didn't ever have the training

41

1

Proceedings

2

and you didn't provide the papers in hard

3

copy, along with a CD, in the right form

4

to the clerk's office and ask them to

5

docket the papers.

6 7

DR. DAVIDSON:

JUDGE BEATTY:

No.

A hard

DR. DAVIDSON:

I did provide

disk.

10 11

Do you

mean a floppy disk?

8 9

A CD?

some on a 700-microbyte optical disk.

12

JUDGE BEATTY:

I am saying to

13

you, I do not control what the clerk's

14

office does.

15

clerk of the court.

16 17

I don't do it.

There is a

DR. DAVIDSON:

It is under your

JUDGE BEATTY:

I am sorry to

auspices.

18 19

say the clerk of the court is in charge

20

of what the clerk's office does.

21

not in charge of the clerk of the court.

22

I am serious.

23

is.

24

I am

That is just the way it

DR. DAVIDSON:

When you say I Page 37

55758 25

never made an effort to let you know of

42

1 2

Proceedings my concerns relative to their fraud --

3 4

JUDGE BEATTY:

That is not what

I said to you.

5

DR. DAVIDSON:

I did.

6

JUDGE BEATTY:

That is what I

7

said to you.

I said to you that because

8

you settled your claim, I never had to

9

rule on the matter and, therefore, in

10

essence your papers were irrelevant.

11

made a decision to have your claims

12

disallowed.

13

what I had read, because I can't give you

14

legal advice.

15

You

It wouldn't have mattered

DR. DAVIDSON:

So this matter

16

then, if it went to a -- is this a final

17

--

18

JUDGE BEATTY:

Keep going.

19

don't know what you were going to say

20

before that.

21 22

DR. DAVIDSON:

I

If the U.S.

District for the Second Circuit --

23

JUDGE BEATTY:

Look, stop,

24

stop.

There is a Bankruptcy Court of the

25

Southern District of New York.

Page 38

It is an

55758 43

1

Proceedings

2

article 1 court.

3

States District Court for the Southern

4

District of New York.

5

court.

6

Above the district court, is the Second

7

Circuit Court of Appeals, which sits for

8

the three states of New York,

9

Connecticut, and Vermont.

10

There is the United

It is an article 3

It is above the bankruptcy court.

DR. DAVIDSON:

So there is a

11

U.S. District Court for the Southern

12

District of New York?

13

JUDGE BEATTY:

Correct; which

14

is Manhattan and The Bronx.

15

are trying to suggest is that somehow it

16

matters that your papers weren't filed.

17

It didn't matter that your papers weren't

18

filed, because they never needed to be

19

considered by me because you stipulated

20

to the disallowance of your claim.

21

you think that they still should be

22

filed, you are welcome to try to deal

23

with the clerk's office on that subject.

24 25

DR. DAVIDSON:

But what you

If

Here is the

reorganized debtors' motion for this

44

1

Proceedings Page 39

55758 2

hearing today.

3 4

JUDGE BEATTY: really care.

5 6

Sir, I do not

DR. DAVIDSON:

Their motion was

docketed and mine wasn't.

7

JUDGE BEATTY:

Then you didn't

8

give the papers to the right person with

9

the right diskette to cause it to happen.

10 11

I gave them to

JUDGE BEATTY:

Well, I don't

you.

12 13

DR. DAVIDSON:

know where they are and I don't docket.

14

DR. DAVIDSON:

Your clerk's

15

office told me to send it to you.

16

JUDGE BEATTY:

I don't think

17

that that is what the clerk's office said

18

to you, unless what the clerk's office

19

thought you were asking them was about

20

the order itself, rather than the

21

document.

22

downstairs and ask them to docket your

23

motion.

24

It has been provided to me twice.

25

But I am saying to you:

You are welcome to go

I have a copy of your motion.

the

45

1

Proceedings

2

problem with your motion is that you

3

stipulated to the withdrawal of your

4

claim at a time when it was not Page 40

5

55758 unreasonable to stipulate to the

6

withdrawal of your claim.

7

been kicked out of court.

8 9

DR. DAVIDSON:

That is still

before the Ninth Circuit.

10 11

You had just

JUDGE BEATTY:

I didn't say it

DR. DAVIDSON:

I have alleged

wasn't.

12 13

Constitutional and federal injury by the

14

conspirators, and that includes the

15

debtors.

16

JUDGE BEATTY:

You may not sue

17

the debtors.

You may not include them in

18

your appeal.

You are precluded by the

19

order of confirmation and the stay, which

20

is in the order of confirmation.

21

not want to have to hold you in contempt.

22

That is not my desire.

23

get you to stop doing what you are doing

24

and to understand that you can't do it.

25

I do

My desire is to

I don't see any basis for

46

1

Proceedings

2

setting aside your stipulation.

It was

3

voluntary.

4

you had lost your claims.

5

stipulations are entered into all of the

6

time.

7

a case, I would never finish.

It was made at a time when These kinds of

If I had to try all the claims in

Page 41

8 9

DR. DAVIDSON:

55758 There are two

more paragraphs that are fraudulent

10

representations to your Court in this

11

affidavit.

12

memorandum of points and authorities by

13

the debtors' legal counsel that has

14

additional -- this is all cited, so I

15

wouldn't quote the specifics, unless you

16

wish me to.

17

Now, there is another

But paragraph 12 and paragraph

18

13 of Mr. McQuillen's sworn affidavit

19

before this Court have intentional

20

misrepresentations.

21

JUDGE BEATTY:

Sir, it makes no

22

difference.

We are talking about

23

something that relates to your claim.

24

They are presumably something.

25

representations are something that this

These

47

1

Proceedings

2

person believed to be true in connection

3

with your claim.

4

relate to confirmation of the case as a

5

whole.

6

reconsider at this point, and at this

7

point you, in fact, do not have a claim

8

because you have not prevailed before the

9

Ninth Circuit.

10

It did not and does not

Your claim is too large for me to

You stipulated to

disallow your claim after it had already Page 42

11

55758 been disallowed with prejudice by the

12

federal court.

13

be said.

14

find in papers that you think is wrong.

15

None of that makes any difference.

There is nothing else to

It does not matter what you

16

The only thing that is relevant

17

is that you entered into the stipulation.

18

You could have sought counsel.

19

debtor was not your counsel.

20

well educated.

21

reviewed the Bankruptcy Code, since you

22

can cite to me various sections of the

23

Bankruptcy Code.

24

order of confirmation from suing the

25

debtors in any court or in any fashion or

The You are

I believe that you have

You are barred by the

48

1

Proceedings

2

taking any action against them, which

3

means with respect to the Ninth Circuit

4

you need to withdraw whatever contentions

5

you have made against the debtors.

6

DR. DAVIDSON:

7

do, reluctantly.

8

that before this Court.

9

JUDGE BEATTY:

Which I agree to

10 11

But I would agree to do

I, in that case,

will not hold you in contempt. I am a one bite at the apple

12

person, Mr. Davidson.

13

one free shot with me.

That means you get This was your Page 43

free shot.

15

free.

55758 The next time, it is not

14

16

MS. HSU:

Your Honor, the Ninth

17

Circuit briefing by the debtors is due

18

April 9th.

19

JUDGE BEATTY:

Do you think you

20

could possibly settle an order prior to

21

April 9th, it currently being April 1st,

22

and I don't think it is a good idea to

23

sign orders on April 1st.

24 25

MS. HSU:

We can hand up an

order to you.

49

1

Proceedings

2

JUDGE BEATTY:

I just told you

3

that I don't think it is a good idea to

4

sign orders on April 1st.

5

MS. HSU:

We will wait until

6

April 2nd, if that is all right with Your

7

Honor.

8 9 10 11

JUDGE BEATTY:

Yes.

Would you

please get Mr. Davidson to agree to the form of your order. MS. HSU:

The debtors continue

12

to have some concern that there is not

13

going to be an end to this, despite --

14

JUDGE BEATTY:

Did you hear

15

what I just said to Mr. Davidson?

16

believe he heard what I said, and I Page 44

I

17

55758 believe he understood what I said.

18

got his free bite at the apple today.

19

The second one doesn't come free.

20 21 22

MS. HSU:

He

Thank you, Your

Honor. (Time noted:

4:29 p.m.)

23 24 25

50

1 2 3 4

C E R T I F I C A T E STATE OF NEW YORK

) : SS: COUNTY OF NEW YORK )

5 6

I, DEBORAH HUNTSMAN, a Shorthand

7

Reporter and Notary Public within and for

8

the State of New York, do hereby certify:

9

That the within is a true and

10

accurate transcript of the proceedings

11

taken on the 1st day of April, 2004.

12

I further certify that I am not

13

related by blood or marriage to any of

14

the parties and that I am not interested

15

in the outcome of this matter.

16

IN WITNESS WHEREOF, I have

17

hereunto set my hand this 8th day of

18

April, 2004.

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20

55758 DEBORAH HUNTSMAN

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