That's the part about the story

which bothers the most. Was CIH involved in the counter suit? Or was it just the doctor and his lawyer? If CIH, what happened to turning the other cheek?

If I were the Bishops. I'd issue a statement clearly defining the difference between state law under which a case had to be answered, and a statement of what the Catholic church believed in contrary to those state laws. I'd apologize for the situation that developed from it and set up a college fund for the daughter.