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55758

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4 UNITED STATES BANKRUPTCY COURT


SOUTHERN DISTRICT OF NEW YORK
5 ------------------------------------x
In re
6 Case No.:
03-40515
7 MAGELLAN HEALTH SERVICE,
INC., et al,
8
Debtors.
9 ------------------------------------x

10
April 1, 2004
11
United States Custom House
12 One Bowling Green
New York, New York 10004
13

14
Hearing on debtors' objection to claim of
15 Healthguard of Lancaster, Inc. (Claim No.
2818) and debtors' counterclaim; debtors'
16 motion for order holding Robert M.
Davidson and Vanessa E. Komar in contempt
17 for failure to comply with orders of this
Court and the discharge injunction.
18
19

20
B E F O R E:
21
THE HONORABLE PRUDENCE CARTER BEATTY
22 United States Bankruptcy Judge

23
24
25

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2 A P P E A R A N C E S:
3 WEIL, GOTSHAL & MANGES, LLP
Attorneys for Debtors
4 1501 K Street, N.W.
Washington, D.C. 20005
5
BY: CHRISTINE P. HSU, ESQ.
6

7 AKIN GUMP STRAUSS HAUER & FELDMAN, LLP


Attorneys for Creditors' Committee
8 590 Madison Avenue
New York, New York 10022
9
BY: ANGELA FERRANTE, ESQ.
10
11 REED SMITH LLP
Attorneys for Healthguard of
12 Lancaster
599 Lexington Avenue
13 New York, New York 10022
14 BY: JOSEPH O'NEIL, JR., ESQ.

15
ROBERT DAVIDSON, M.D.
16 Appearing Pro Se
P.O. Box 1785
17 Kilgore, Texas 75663
18

19

20

21
22

23

24
25

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2 JUDGE BEATTY: Now, we have got


3 one of my favorite cases, Magellan.

4 It is April 1st, so I can say a

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5 thing like that and they don't have to be
6 true. Who wants to start with what?
7 MS. HSU: We have two matters

8 before you today, Your Honor. I am not


9 sure which you would rather we start

10 with?
11 JUDGE BEATTY: I have no
12 interest in telling you, so you will have

13 to make your own judgment.


14 MS. HSU: Why don't we start

15 with the Healthguard matter. Your Honor,

16 my name is Christine Hsu. I am with


17 Weil, Gotshal & Manges, representing

18 Magellan.

19 About two months ago we were

20 here on Magellan's objection and


21 counterclaim to Healthguard's proof of

22 claim, and at the last hearing Your Honor

23 asked that we go back and take a look at

24 the claims that are at issue.


25 In Magellan's objection and

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2 counterclaim that we were to have heard
3 last time, Magellan had attached an audit
4 that went over the claims that were at

5 issue, and in Magellan's view the audit


6 showed that the claims were, in fact, not

7 reimbursable by Magellan as Healthguard

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8 had claimed. In the last two months, I
9 have been in contact with counsel for
10 Healthguard, and we have not made

11 significant progress in going over the


12 claims.

13 JUDGE BEATTY: Why not? I told


14 each of you to designate somebody who
15 knows how to review claims and pick a

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


17 lot -- and go through them and see how

18 many of those were right or wrong.

19 MS. HSU: In response to Your


20 Honor's directive, Magellan went to and I

21 spoke to Healthguard's counsel and asked

22 for them to provide for us those claims

23 for which they knew they had evidence of


24 prior authorization. In response to that

25 request, Healthguard's counsel indicated

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2 that they had no interest in doing that

3 and, in fact, thought that we should

4 instead give them --


5 JUDGE BEATTY: I told
6 Healthguard how I intended this to be
7 handled. They had no choice but to

8 handle it in the way in which I stated.


9 That was a Court directive which they

10 were required to comply with. It was in

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11 lieu of their having to go through each
12 and every one of their claims and
13 reconsider whether they were, in fact,

14 correct and what basis they were


15 asserting for them.

16 So whoever is here for


17 Healthguard, you missed the point. Go
18 back and do what I told you.

19 MR. O'NEIL: Your Honor, Joseph


20 O'Neil from Reed Smith for Healthguard.

21 We have gone through all of our

22 claims and basically have come up with a


23 list of 1100 --

24 JUDGE BEATTY: I told you to

25 pick 35 claims and they basically could

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2 be in order, and have two people, one

3 from your side and one from their side,


4 who are familiar with this process, and
5 go through them and see what the problems

6 were.

7 MR. O'NEIL: Your Honor, I


8 think it goes a little bit beyond that.
9 JUDGE BEATTY: If it went
10 beyond that, then why didn't you tell me

11 last time?
12 MR. O'NEIL: Your Honor, there

13 is an issue here concerning claims for

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14 prior authorization versus claims that
15 are in and out of the network.
16 JUDGE BEATTY: I understand

17 that, and the question was for you to put


18 out a fairly small number of claims and

19 have the parties start to see how to


20 identify the various claims. I do not
21 consider it appropriate for you to refuse

22 to do what I asked you to do. If you had


23 not liked what I asked you to do, you

24 should have spoken up at the last

25 hearing.

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2 MR. O'NEIL: Your Honor, we are

3 prepared to give all the claims.


4 JUDGE BEATTY: No. I didn't ask

5 you to give them to them. I asked you to

6 provide a person to review with their


7 person the way the claims read and to
8 pick a reasonable number. I think I

9 suggested 35. I didn't suggest that you

10 necessarily pick out particular ones, but


11 if that is what you would like to do, you
12 can. But I directed that a particular
13 thing be done, because there are too many

14 claims right now for anybody to get a


15 handle on what the problems are. I don't

16 appreciate your refusing to do what I

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17 directly asked you to do. Did you sit
18 down and have one of your knowledgeable
19 claims people sit down with one of their

20 people?
21 MR. O'NEIL: I don't know what

22 the counsel in Pennsylvania did.


23 JUDGE BEATTY: That is what I
24 asked you to have done. If you didn't do

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

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2 MR. O'NEIL: Maybe I

3 misunderstood what was required at the

4 last hearing.

5 JUDGE BEATTY: No. You

6 couldn't have misunderstood. Not if you


7 speak the English language.

8 MR. O'NEIL: Your Honor, I

9 think that the issue that we are stuck on


10 is the authorization issue. I think Your
11 Honor was concerned at the last hearing

12 about claims being in and out of network.

13 JUDGE BEATTY: I have asked you


14 to proceed in a certain way. I don't
15 expect you to just hand over a bunch of
16 claims to your adversary and expect them

17 to try to figure out what they say and


18 how they do it. I expect your people who

19 are knowledgeable to meet with the

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20 debtors' people and go over a reasonable
21 group of claims that represent a
22 reasonable range of issues, so that the

23 parties can begin to understand why you


24 think you have prior authorization and

25 how it is reflected where they say you

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2 don't. I don't fancy having a trial at

3 which I require you to present each and

4 every claim and we have a ruling on each


5 and every claim.

6 MR. O'NEIL: Yes, Your Honor.

7 I don't think we need to get to that

8 point. We compiled a list of services,

9 and we compiled a list of providers, and


10 the dates when services were rendered,

11 and the costs of the service.

12 JUDGE BEATTY: I am saying to


13 you that you did not do what I asked you
14 to do, and whatever else you did, you may

15 discuss with the debtors, but you still

16 have to do what I asked you to do. It is


17 not acceptable to me.
18 MR. O'NEIL: Your Honor, we
19 will do that.

20 JUDGE BEATTY: Thank you.


21 Now, shall we set another date

22 for this?

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23 MS. HSU: The debtors are
24 concerned about the passage of time on
25 this matter.

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2 JUDGE BEATTY: When should we

3 set another date?


4 MS. HSU: I think four weeks
5 would be enough time, Your Honor.

6 JUDGE BEATTY: May 5th at 2:30.

7 MS. HSU: That is fine with the


8 debtors, Your Honor. Thank you.

9 JUDGE BEATTY: What is next?

10 MS. HSU: The next matter is

11 Magellan's motion to hold Dr. Davidson in

12 contempt of Court order.


13 JUDGE BEATTY: Okay.

14 MS. HSU: Your Honor, what we

15 have before you today is a creditor who


16 is in violation now of, not only the
17 provisions of the Bankruptcy Code, but

18 two court orders that this Court has

19 signed.
20 Back in December of last year
21 Dr. Davidson voluntarily signed and
22 actually requested a stipulation to

23 dismiss and withdraw the claims that were


24 underlying his proof of claim against the

25 debtors. In spite of that stipulation,

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2 and in spite of the confirmation order,


3 and also in spite of the provisions of
4 the Bankruptcy Code, Dr. Davidson

5 persists in pursuing an appeal of the

6 underlying complaint in the Ninth


7 Circuit, not only against other tenants,
8 but also against the debtors.

9 We have put before the Court

10 documents indicating the stipulation and


11 the communications with the claimant

12 indicating his desire to withdraw the

13 claims underlying his proof of claim, and

14 there really is no justification for his

15 continuing against the debtors. We have


16 given him every opportunity to withdraw

17 his claims before the Ninth Circuit and

18 have informed him of the provisions of


19 the relevant rules of bankruptcy law and
20 the other two orders that govern this

21 proceeding, but he has not responded.

22 Because of the creditor's actions we are


23 now in the position of having to provide
24 briefing before the Ninth Circuit on his
25 appeal and the dismissal of his claims.

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2 This is causing a great deal of


3 additional expense to the debtors, which
4 we had reasonably believed would have

5 been put to bed last December


6 JUDGE BEATTY: As I understand
7 Dr. Davidson's problem, he thinks he

8 really shouldn't have ever entered into a

9 settlement with you under which he


10 withdrew his claims.
11 MS. HSU: I understand that,

12 Your Honor.

13 JUDGE BEATTY: But he did.


14 MS. HSU: He did. I can also

15 hand to you his signature on a page. I

16 don't think that he denies that he signed

17 a stipulation. He now, after the fact,

18 says that he was coerced by apparently a


19 standard letter that was written by

20 in-house counsel at Magellan notifying

21 him of the bankruptcy and informing him


22 that --
23 JUDGE BEATTY: He couldn't

24 proceed with this action?

25 MS. HSU: Exactly. Now,

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2 Dr. Davidson insists that this is the
3 basis for his feeling coerced to sign the
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4 stipulation.

5 JUDGE BEATTY: People with


6 higher education are not supposed to be
7 coerced as easily as people with lower

8 education. He calls himself a doctor. I


9 assume he has at least a college
10 education and something beyond that.

11 MS. HSU: Also, Your Honor,

12 because of the magnitude of the claims


13 that Dr. Davidson has brought against the
14 debtors, had this claim not been disposed

15 of when it was, Magellan actually would

16 not have been able to emerge from


17 bankruptcy. The debtors reasonably

18 relied on the stipulation that he

19 voluntarily signed and asked for back in

20 December in order to emerge from

21 bankruptcy in January.
22 JUDGE BEATTY: Let me hear from

23 the other side.

24 DR. DAVIDSON: Your Honor,


25 Robert Davidson, M.D. appearing pro se.

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2 I am a claimant and my wife is a


3 claimant, Vanessa E. Komar.

4 JUDGE BEATTY: No. You are not


5 claimants. You agreed to have your
6 claims eliminated.
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7 DR. DAVIDSON: Yes, Your Honor.

8 I have moved this Court under Rule 60(b)


9 to give strong consideration to
10 revoking --

11 JUDGE BEATTY: There is no


12 basis for revoking a consent to withdraw
13 your claims. You are not a pro se of the

14 sort that is of limited education and

15 doesn't know what they are doing. I am


16 assuming that you withdrew your claims,
17 because you wished to proceed with the

18 rest of your actions and didn't believe

19 that you would get enough from Magellan


20 to make it worthwhile litigating against

21 Magellan.

22 DR. DAVIDSON: That is actually

23 not correct, Your Honor. The threat of a

24 contempt citation and further attorneys'


25 fees and costs --

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2 JUDGE BEATTY: Didn't you


3 bother to find out what the automatic
4 stay said?

5 DR. DAVIDSON: In my view the


6 automatic stay was obtained through fraud

7 upon this Court.


8 JUDGE BEATTY: The automatic
9 stay could not possibly have been
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10 obtained through fraud upon this Court.

11 It is provided for in a statute enacted


12 by the Congress of the United States.
13 DR. DAVIDSON: If that is true,

14 Your Honor, why did the debtors choose to


15 lie in wait until June to notify the U.S.
16 District Court that the stay was in

17 place?

18 JUDGE BEATTY: Because the


19 debtors had a lot to do, and maybe you
20 weren't doing anything at that point in

21 the litigation. But that stay comes from

22 the Bankruptcy Code. It was in there


23 from the day the case was filed, and that

24 is that. It can't possibly be a somehow

25 fraud. It wasn't obtained pursuant to an

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2 order. Once they filed the case, there

3 it was. You were stuck. You could not


4 proceed with your action. Before you

5 sign a legal paper, you get legal


6 counsel. Are you prosecuting this action
7 by yourself?

8 DR. DAVIDSON: Yes. For


9 reasons that are in substantial measure

10 due to the ongoing conspiracy of at least


11 three of the debtors in the Magellan
12 chapter 11 proceeding.
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13 JUDGE BEATTY: What kind of a

14 conspiracy did they have?


15 DR. DAVIDSON: A conspiracy to
16 conceal fraud, intrinsic fraud, from this

17 Court, which they have succeeded in


18 doing.
19 JUDGE BEATTY: What kind of

20 fraud?

21 DR. DAVIDSON: Fraud in Vivra,


22 Inc.'s recruitment of my employment
23 contract with an Arizona corporation.

24 JUDGE BEATTY: Do you want to

25 know something? There is nothing you can

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2 do about the fraud, except file a proof

3 of claim; and you stipulated to that


4 claim being expunged. Too bad. So sad.

5 There is no such thing as a

6 non-dischargeable claim against a


7 corporation. It makes no difference that

8 it was based, in your view, on fraud.


9 DR. DAVIDSON: Even extrinsic
10 fraud --

11 JUDGE BEATTY: Neither


12 extrinsic nor intrinsic fraud nor any

13 other type of fraud is the basis for


14 finding a claim nondischargeable against
15 a corporation. All claims against
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16 corporations can be discharged.

17 DR. DAVIDSON: But there is a


18 vehicle in law to revoke a discharge.
19 JUDGE BEATTY: That vehicle in

20 law is not really relevant to


21 corporations. There is a major
22 distinction in the law between

23 individuals and corporations. I think

24 that you have only knowledge of


25 individual bankruptcies. It is true that

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2 an individual cannot discharge certain


3 fraud claims. It is not true that a

4 corporation cannot. There is no basis

5 for objecting to a claim in a corporate

6 case. That is, there is no basis for


7 asking that it survive confirmation on

8 the basis of fraud. This is a policy

9 issue, and it is related to the fact that


10 in an individual 7 there is only the

11 debtor to be concerned about. In a


12 chapter 11 case there are other creditors
13 to be concerned about and the amounts

14 they will receive. In Magellan there


15 were thousands of creditors, is my

16 recollection. I am sorry but the fact is


17 fraud doesn't win the day.
18 DR. DAVIDSON: Even intentional
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19 fraud targeted at obtaining the discharge

20 order?
21 JUDGE BEATTY: It is not a
22 discharge order. It is an order of

23 confirmation, and I don't know what you


24 mean by "targeted in obtaining it." I
25 certainly don't think that you rose to

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2 any great level in the Magellan case.

3 There were many, many, many issues in

4 Magellan that were resolved. You were

5 just one of them.


6 DR. DAVIDSON: I have alleged

7 injury and damages to me and my spouse in

8 excess of $15 million.

9 JUDGE BEATTY: You stipulated


10 to the withdrawal of your claims. They

11 are gone.

12 DR. DAVIDSON: Under duress and


13 coercion?

14 JUDGE BEATTY: There was no


15 duress. There was no coercion. The
16 person that acts as their own lawyer is a

17 fool for a lawyer. I am saying to you


18 that I don't think that you bothered to

19 find out what your rights were or you


20 realized that you had no possibility of
21 having this claim survive. Really there
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22 is no basis for vacating that

23 stipulation. It was relied upon by the


24 debtors in confirming the case. You were
25 not talking about a claim of $125,000

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2 where somebody in your office might have

3 made a mistake. You are talking about a

4 large claim. It would have affected


5 confirmation of the case potentially.

6 The parties have relied on the fact that

7 no distribution needs to be made on your

8 claim. That is that. You made a


9 stipulation, and now there is reliance on

10 it.

11 DR. DAVIDSON: For the record,

12 may I ask this Court to certify this


13 final judgment on this particular

14 question as appealable?

15 JUDGE BEATTY: I can't certify


16 it as appealable, no. It either is or it

17 isn't. You are making a motion that I


18 view as a motion for reconsideration,
19 which is reconsideration of your wife's

20 claims based on your stipulation in which


21 you stipulated to have those claims

22 disallowed. It is either an appealable


23 order or it is not. The subject of
24 appeals in bankruptcy is very complex,
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25 and I am not prepared to offer an opinion

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2 to you as to whether a motion for
3 reconsideration is appealable. I

4 certainly think that your motion for


5 revocation of the discharge is ill

6 founded because the confirmation of a

7 large corporate case is not something


8 that one should undo lightly. Since you

9 stipulated to the discharge of your

10 claims, I don't see where there is any

11 basis for revocation of the order of


12 confirmation. That is the only thing

13 that could be revoked -- the order of

14 confirmation. Because the debtors'

15 discharge, if I might say that, is part


16 of the order confirmation.

17 DR. DAVIDSON: Does this Court

18 not give importance to concerns I have


19 that are procedural relative to selective

20 docketing?
21 JUDGE BEATTY: What do you mean
22 by "selective docketing"?

23 DR. DAVIDSON: Your Honor,


24 debtors' counsel provided a copy of an

25 e-mail to my attention, and I have here

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2 e-mailed back to debtors' counsel


3 exhibits in support of my objection to

4 their motion to dismiss, bankruptcy memo


5 of points, memorandum of points, and
6 objection to the dismissal. This was all

7 filed with this Court, and it never


8 appeared.

9 JUDGE BEATTY: Sir, the Court

10 has an electronic case filing system. In


11 order for your papers to be filed, you

12 must comply with the rules and

13 regulations governing the electronic case

14 filing system. Among other things, you


15 must take training before you are allowed

16 to docket onto that system. If you do

17 not have that training, then you must

18 send a hard copy of those papers, along


19 with a diskette, with a request that they

20 be docketed. But it really doesn't

21 matter, because the fact of the matter is


22 that you consented to have your claims

23 expunged. It doesn't matter what you


24 told me about whether it was right or
25 wrong. You solved the problem. I didn't

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2 have to rule on your motion.
3 DR. DAVIDSON: The affidavits
4 filed by Michael P. McQuillen influenced,

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


6 District Court in Arizona. That

7 affidavit, a sworn affidavit, has a


8 number of --
9 JUDGE BEATTY: I don't care

10 what happened in that case. That case is


11 totally independent.

12 DR. DAVIDSON: But the

13 affidavit to your Court, that is totally


14 not relevant to this proceeding?

15 JUDGE BEATTY: I am saying to

16 you: you stipulated to a disallowance of

17 your claims. That stipulation, that is


18 it.

19 DR. DAVIDSON: But prior to

20 that stipulation, which I maintain was

21 under duress and coercion, the Federal


22 Judge in the Arizona District Court

23 dismissed my case under Younger

24 abstention, and I believe that that


25 decision was impacted by the sworn

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2 affidavit by Mr. McQuillen.


3 JUDGE BEATTY: Younger

4 abstention is not impacted by anything

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5 other than jurisdictional issues. What
6 did that affidavit say that so impacted
7 the Judge?

8 DR. DAVIDSON: The Arizona


9 courts for the record stripped me of my

10 attorney of record.
11 JUDGE BEATTY: Why did they
12 strip you of your attorney of record?

13 DR. DAVIDSON: He withdrew four


14 months before the scheduled trial date

15 under the auspices under color of a

16 Arizona statute which was in my view


17 unconstitutional.

18 JUDGE BEATTY: What did that

19 statute say?

20 DR. DAVIDSON: It basically


21 allows counsel to decide amongst

22 themselves when either counsel can

23 withdraw from the proceeding from my

24 representation. I had retained this


25 legal counsel and we entered into --

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2 JUDGE BEATTY: That is
3 something that you needed to take up
4 there. Normally in this court you can

5 withdraw only if you make a motion on


6 notice to the party that you represent.

7 DR. DAVIDSON: But there was no

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8 process given to them stripping my
9 attorney from me. That is the point.
10 JUDGE BEATTY: That is

11 something for that court to take up. You


12 could challenge the constitutionality or

13 whatever.
14 DR. DAVIDSON: Relevant to
15 today's hearing, I have got

16 Mr. McQuillen's affidavit and I quote


17 from paragraph 10: Although the 2000

18 annual report identifies --

19 JUDGE BEATTY: We can't


20 possibly follow you at that rate of

21 speed.

22 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.

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2 JUDGE BEATTY: I think you just

3 changed pages.

4 DR. DAVIDSON: I am just


5 letting the transcriptionist know where I
6 am quoting.
7 JUDGE BEATTY: You told us that

8 you were quoting from another place.


9 DR. DAVIDSON: Page 3,

10 paragraph 10, I quote: "Although the

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11 2000 annual report identifies Vivra, Inc.
12 as a shareholder holding more than 20
13 percent of the shares ..."

14 JUDGE BEATTY: Slow down.


15 "... 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. It is -- "... VAACAA,

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 But here this is -- I will

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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. I

6 guess this will put this last sentence in

7 context. That is why I am reading the


8 whole paragraph 10. "The persons whose
9 signatures appear on the annual report
10 were not employees, representatives or

11 agents of Vivra, Inc. The officers and


12 directors of VAACAA identified on that

13 annual report were not employees or

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14 directors of Vivra, Inc. and had no
15 relationship with Vivra, Inc. at any time
16 after February 29, 2000."

17 JUDGE BEATTY: But what does


18 that have to do with this Younger

19 abstention?
20 DR. DAVIDSON: I believe it was
21 inappropriate use of the doctrine of --

22 JUDGE BEATTY: Could you just


23 tell me what the Judge did?

24 DR. DAVIDSON: Dismissed with

25 prejudice my complaint, the first amended

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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 DR. DAVIDSON: It had dismissed


11 my case.
12 JUDGE BEATTY: That is what I
13 am saying.

14 DR. DAVIDSON: That was a


15 dismissal with prejudice, Your Honor --

16 my claim in that Court was the basis for

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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 DR. DAVIDSON: I didn't have a

22 claim.
23 JUDGE BEATTY: So you
24 stipulated to dismiss it.

25 DR. DAVIDSON: But there --

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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. It is


7 before the Ninth Circuit Court of Appeals

8 right now.

9 JUDGE BEATTY: 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. You did

13 it. It is done. It is finished. It is


14 over in this court. You cannot proceed
15 against any of the debtors before the
16 Ninth Circuit. You have no stipulated

17 claim. You stipulated you had no claim.


18 Even if you had had an allowed claim, you

19 would be barred by the discharge

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20 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

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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 DR. DAVIDSON: But Bankruptcy


10 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 any holder --
17 JUDGE BEATTY: You have made a
18 request that I reconsider your claim, and
19 I have denied that request. There is

20 also a provision that says that a


21 complaint to revoke or discharge a

22 chapter 7 may be filed. Not relevant.

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23 If the claims revoke an order confirming
24 the plan they may be filed only within
25 the time allowed by certain sections.

31

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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. You revoke orders of


13 confirmation if, and only if, the order

14 was procured by fraud. None of the

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. If you did not understand the
21 words, these books, what do they cost?
22 $50 or $75. You can read the words in

23 them perfectly well. But I am saying to


24 you is your claim, having been disallowed

25 on yours and your wife's signature, could

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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. I have had only one case in


7 which there is an allegation that there
8 was fraud in the conversion of the case

9 because of failure to disclose property.

10 You just don't revoke confirmation on the


11 grounds of fraud in a large case. It is

12 not something that happens, because the

13 fraud would have to be somehow -- I can

14 hardly think of an example. I suppose if

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. But
24 it has to be something that was related
25 to the plan and somehow funding it before

33

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1 Proceedings

2 you get or the failure to disclose some


3 significant assets so that they weren't
4 part of the plan. There is just nothing

5 about what you are arguing that does


6 anything.
7 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. I am sorry.

12 JUDGE BEATTY: 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. It is not uncommon to

18 finalize the financing and other


19 arrangements post-confirmation.

20 I had a case just this last

21 December, where I had confirmed it in


22 early November. Between December 8th and
23 December 18th, the debtors put on a road

24 show that raised $1 billion. They closed

25 it on December 20th, which was a month

34

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2 after confirmation, because the case had
3 to be fully confirmed. That is, all
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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: You stipulated

15 to have them disappear. So sorry. So

16 sad. They are gone.


17 DR. DAVIDSON: But it is due to

18 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. You


22 could have come in here and argued about

23 it. Nobody told you to sign that

24 stipulation. You never came in and said


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

35

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2 this and I don't want to."


3 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
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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: Not that you

14 did, Your Honor.

15 JUDGE BEATTY: But I am saying


16 to you, this was an 03 case. It was
17 filed in 1983. You are talking about a

18 document that dates from 1982, and you

19 still haven't told me what he used the


20 Younger doctrine for.

21 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. Now, because of this --

5 JUDGE BEATTY: Can I ask you a


6 question?

7 DR. DAVIDSON: Yes, Your Honor.


8 JUDGE BEATTY: Are you not able
9 to work now?
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10 DR. DAVIDSON: No one has

11 addressed --
12 JUDGE BEATTY: I am asking you
13 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. You have no

18 claims against Magellan. They are


19 gone -- period, end of story. You are
20 getting yourself obsessed, totally

21 obsessed, with something which you will

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


23 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

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2 to practice law, which you don't have the

3 training to do. Just say, "Sometimes you


4 get had." That is the way life is.

5 Sometimes things don't work out the way


6 you had hoped.
7 DR. DAVIDSON: This is a court

8 of equity.
9 JUDGE BEATTY: I know it is a

10 court of equity, but I confirmed the


11 plan. Too bad. You stipulated to the
12 expungement of your claim. Courts of
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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: That is not

20 correct. It was not correct.

21 DR. DAVIDSON: It hears matters


22 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

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2 not have jurisdiction over personal

3 injury claims. I do not have


4 jurisdiction over certain types of

5 non-core claims. My jurisdiction is in

6 no way concurrent with the United States


7 District Court's jurisdiction. I am not

8 an article 3 Judge. I am an article 1


9 Judge. That means that I cannot do
10 certain things that article 3 judges can

11 do. I do not have lifetime tenure. The


12 jurisdiction is not, in fact,

13 overlapping. There are some areas that


14 overlap, but there are some things that
15 only the district court can do in
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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. It is done. You made a
22 mistake. You cut off their leg and it

23 really didn't have gangrene. It is gone.

24 There is no way to put it back. Well,


25 there is nothing to put back here. The

39

1 Proceedings

2 case has been confirmed. It was


3 confirmed after you and your wife

4 stipulated to disallow your claim. You

5 stipulated to disallow your claim after

6 the district court dismissed your claim


7 with prejudice.

8 DR. DAVIDSON: That was a

9 domino effect, and I was the last domino.


10 My claim entered into the --

11 JUDGE BEATTY: But I am saying


12 to you, that is the way life is. You
13 made a decision

14 DR. DAVIDSON: 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
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19 this document --

20 JUDGE BEATTY: That is a


21 corporate debtor. But they didn't obtain
22 it on the basis of that. You made a

23 judgment that somehow you should accept


24 that affidavit as true. You didn't have
25 to accept it as true. 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 JUDGE BEATTY: But what I am
16 trying to say to you is --

17 DR. DAVIDSON: This relates to


18 selective docketing.

19 JUDGE BEATTY: Are you talking


20 about selective docketing here?
21 DR. DAVIDSON: I would like to
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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 DR. DAVIDSON: A CD? Do you

7 mean a floppy disk?

8 JUDGE BEATTY: No. A hard


9 disk.

10 DR. DAVIDSON: I did provide

11 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. I don't do it. There is a

15 clerk of the court.


16 DR. DAVIDSON: It is under your

17 auspices.
18 JUDGE BEATTY: I am sorry to
19 say the clerk of the court is in charge

20 of what the clerk's office does. I am


21 not in charge of the clerk of the court.

22 I am serious. That is just the way it


23 is.
24 DR. DAVIDSON: When you say I
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25 never made an effort to let you know of

42

1 Proceedings
2 my concerns relative to their fraud --
3 JUDGE BEATTY: That is not what

4 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. You

11 made a decision to have your claims


12 disallowed. It wouldn't have mattered

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

14 legal advice.

15 DR. DAVIDSON: So this matter


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

17 --

18 JUDGE BEATTY: Keep going. I


19 don't know what you were going to say

20 before that.
21 DR. DAVIDSON: If the U.S.
22 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. It is an

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43

1 Proceedings

2 article 1 court. There is the United


3 States District Court for the Southern

4 District of New York. It is an article 3


5 court. It is above the bankruptcy 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 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. But what you


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. If

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 DR. DAVIDSON: Here is the
25 reorganized debtors' motion for this

44

1 Proceedings

Page 39
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2 hearing today.
3 JUDGE BEATTY: Sir, I do not
4 really care.

5 DR. DAVIDSON: Their motion was


6 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 DR. DAVIDSON: I gave them to


11 you.

12 JUDGE BEATTY: Well, I don't

13 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. You are welcome to go


22 downstairs and ask them to docket your

23 motion. I have a copy of your motion.

24 It has been provided to me twice.


25 But I am saying to you: 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

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5 unreasonable to stipulate to the
6 withdrawal of your claim. You had just
7 been kicked out of court.

8 DR. DAVIDSON: That is still


9 before the Ninth Circuit.

10 JUDGE BEATTY: I didn't say it


11 wasn't.
12 DR. DAVIDSON: I have alleged

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. I do


21 not want to have to hold you in contempt.

22 That is not my desire. My desire is to

23 get you to stop doing what you are doing

24 and to understand that you can't do it.


25 I don't see any basis for

46

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2 setting aside your stipulation. It was
3 voluntary. It was made at a time when
4 you had lost your claims. These kinds of

5 stipulations are entered into all of the


6 time. If I had to try all the claims in

7 a case, I would never finish.

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8 DR. DAVIDSON: There are two
9 more paragraphs that are fraudulent
10 representations to your Court in this

11 affidavit. Now, there is another


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 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. These

25 representations are something that this

47

1 Proceedings
2 person believed to be true in connection

3 with your claim. It did not and does not

4 relate to confirmation of the case as a


5 whole. Your claim is too large for me to
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. You stipulated to

10 disallow your claim after it had already

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11 been disallowed with prejudice by the
12 federal court. There is nothing else to
13 be said. It does not matter what you

14 find in papers that you think is wrong.


15 None of that makes any difference.

16 The only thing that is relevant


17 is that you entered into the stipulation.
18 You could have sought counsel. The

19 debtor was not your counsel. You are


20 well educated. I believe that you have

21 reviewed the Bankruptcy Code, since you

22 can cite to me various sections of the


23 Bankruptcy Code. You are barred by the

24 order of confirmation from suing the

25 debtors in any court or in any fashion or

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: Which I agree to

7 do, reluctantly. But I would agree to do


8 that before this Court.
9 JUDGE BEATTY: I, in that case,
10 will not hold you in contempt.

11 I am a one bite at the apple


12 person, Mr. Davidson. That means you get

13 one free shot with me. This was your

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14 free shot. The next time, it is not
15 free.
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 MS. HSU: We can hand up an

25 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 JUDGE BEATTY: Yes. Would you

9 please get Mr. Davidson to agree to the

10 form of your order.


11 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? I

16 believe he heard what I said, and I

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17 believe he understood what I said. He
18 got his free bite at the apple today.
19 The second one doesn't come free.

20 MS. HSU: Thank you, Your


21 Honor.

22 (Time noted: 4:29 p.m.)


23
24

25

50

1
2 C E R T I F I C A T E

3 STATE OF NEW YORK )


: SS:
4 COUNTY OF NEW YORK )

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.

19

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20 DEBORAH HUNTSMAN
21
22

23
24

25

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