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N O T F O R P U B L I C A T I O N
FILED APRIL 11, 1996
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
RELIGIOUS TECHNOLOGY CENTER;
CHURCH OF SCIENTOLOGY OF
CALIFORNIA;
CHURCH OF SCIENTOLOGY
INTERNATIONAL,
Plaintiffs-counter-defendants-Appellees
v.
ROBIN SCOTT, et al.,
Defendants.
And
CHURCH OF THE NEW CIVILIZATION; DAVID MAYO,
Detendants-counter-claimants-Appellants,
CHURCH OF SPIRITUAL TECHNOLOGY,
Counter-defendant-Appellee.
No. 94-55781
DC No. CV-85-0711-AWT(Bx)
-1-
RELIGIOUS TECHNOLOGY CENTER;
CHURCH OF SCIENTOLOGY OF
CALIFORNIA; CHURCH OF SCIENTOLOGY
INTERNATIONAL,
Plaintiffs- counter-defendants-Appellants,=20
v.
LARRY WOLLERSHEIM, et al.,
Defendants,
CHURCH OF SPIRITUAL TECHNOLOGY,
Counter - defendant,
and
CHURCH OF THE NEW CIVILIZATION=20
DAVID MAYO,
Defendant-counter-claimants -Appellees
No. 94-55920
DC No. CV-85-7197 -AWT (Bx)
MEMORANDUM*
)
)
)
Appeal from the United States District Court
for the Central District of California
A. Wallace Tashima, District Judge, Presiding
Argued and Submitted November 14, 1995
Pasadena, California
Before: HALL and NOONAN, Circuit Judges. SHUBB*, District Judge.
Religious Technology Center (RTC), a California corporation, appeals from
judgment and imposition of attorneys fees entered against it in two cases it
brought against David Mayo (Mayo) and other related defendants. Mayo
cross-appeals judgment entered against him on his counterclaims. We affirm
the judgment and
-------------------------------------------------------------
* This disposition is not appropriate for publication and may not=20
be cited to or by the courts of this circuit except as provided by=20
9th Cir. R 36-3.
* The Honorable William B. Shubb, United States District Judge for=20
the Eastern District of California, sitting by designation.
-2-
award of attorneys fees against RTC. We affirm the dismissal of Mayo's
emotional distress counterclaim, but reverse and remand the judgment against
Mayo on his remaining counterclaims.
PROCEEDINGS
In January 1985 RTC sued Mayo and other persons connected with the Church of
the New Civilization, a splinter group of the official Church of
Scientology, contending that they were making unauthorized use of stolen
documents relating to the religion of Scientology. RTC stated that it was
"the protector" of the religion of Scientology, its philosophy and its
technology "including the Advanced Technology" consisting of "confidential
and proprietary information regarding counseling and training," and was the
owner of various trademarks registered with the U.S. Patent and Trademark
Office protecting the Advanced Technology. The coplaintiffs with RTC were
the Church of Scientology International, Inc. and the Church of Scientology
of California, Inc., both nonprofit California corporations which RTC stated
were authorized by it to use the Advanced Technology in accordance with
certain terms and conditions in conjunction with the marks it owns.
Thirty-one marks were identified in RTC's complaint, in addition to which
there were a number of other marks for which registration was pending or
marks owned by RTC but as yet unregistered. RTC sought an injunction
against the use of this material by the defendants. In November 1985 RTC
filed a second suit, ultimately consolidated with the first.=20
-3-
Mayo counter-sued for false designation of origin of the documents and for
unfair competition in violation of the Lanham Act, for libel, and for
intentional infliction of emotional distress. After 1,825 docket entries and
nine years of pretrial litigation involving three discovery magistrates, a
special master, the recusal of two district court judges, the denial of five
petitions for writ of mandamus, three appeals (Religious Technology Center
v. Wollersheim, 796 F.2d 1076 (9th Cir. 1986), cert. denied, 479 U.S. 1103,
107 9. Ct. 1336, 94 L.Ed.2d 187 (1987); Religious Technology Center et al.
v. Scott, 869 F.2d 1306 (9th Cir. 1989); Religious Technology Center v.
Wollersheim, 971 F.2d 364 (9th Cir. 1992), and three denials of certiorari
by the Supreme Court, the third district judge, A. Wallace Tashima, entered
Final Judgment. We set out and respond to the issues now raised on these
appeals.
I. Recusal of Judge Ideman
RTC first appeals District Judge Letts' denial of its October 1991 motion to
recuse Judge Ideman, the district judge assigned to this case after Judge
Pfaelzer had recused herself. In denying RTC's petition for writ of
mandamus this court in an unpublished order expressly determined that Judge
Letts, denial was "not clearly erroneous." This order is the law of the
case, to which subsequent panels should defer unless new evidence or law has
bean presented or unless the first panel's ruling was clearly erroneous.
See Merritt=20
-4-
v. Mackey, 932 F.2d 1317, 1320 (9th Cir. 199l).=20
We find that none of Merritt's exceptions apply in this case. 1/
II. Rule 37 Dismissal
RTC mounts two attacks on Judge Ideman's dismissal of its claims as a
discovery sanction under Rule 37; it argues: (1) that Judge Ideman simply
rubber stamped the special master's recommendation to dismiss without
conducting an independent review; and (2) that the dismissal order itself
was improper under Rule 37. We will discuss these arguments in turn.
A. Rubber Stamping
When the case was referred to District Judge Ideman, it was still in a
pretrial stage after four years of litigation. Taking note of the complexity
of the litigation (which involved the Copyright Act, the Federal Trademark
and Patent Infringement Act), the number of parties to the litigation, the
large number of motions and motions for reconsideration already
characteristic of the litigation, and the need to reduce to manageable
proportions what was estimated to be three months' trial time, Judge Ideman
referred the consolidated cases to a retired state judge to act as special
master to supervise discovery and law and motions practice.
1/Even if Judge Letts mistakenly applied a subjective standard under =A7=
544,
so that the law of the case doctrine only applies to the first panel's
conclusion that Judge Ideman was not subjectively biased, we independently
conclude that Judge Ideman's recusal was also not mandated under =A7=
544(a)'s
objective test.
-5-
On this appeal, RTC objects to the way the district court treated the
special master's recommendations. 2/ In other contexts, we have recognized
that while a special master should not be given authority to conduct a full
trial, he may be given broad authority to supervise and conduct pretrial
matters, including discovery activity, the production and the range of
exhibits and stipulations of fact, the power to hear motions for summary
judgment or dismissal and to make recommendations thereto. Burlington
Northern R,R. Co. v Department of Revenue, 934 F.2d 1064, 1073 (9th Cir.
1991) (quoting In re Armco. Inc., 770 F.2d 103, 105 (8th Cir. 1985)). At the
same time we have observed that a district court's rubber-stamping of a
special master's order is unacceptable -- even on pretrial matters: "[T]he
district court's rubber stamp of the master's order is an inexcusable
abdication of judicial responsibility and a violation of article III of the
Constitution." Burlington, 934 F.2d at 1072.=20
RTC contends that the district court rubber-stamped the dismissal of RTC's
claims as a discovery sanction for noncompliance with court orders. To the
contrary, the district court took the position that the special master had
no power to order dismissal of the case. In the course of responding to
RTC's second petition for mandamus Judge Ideman, on June 21, 1993, filed a
declaration with the court ruling in relevant part as follows:=20
3. The past 8 years have consisted mainly of a prolonged, and ultimately
unsuccessful, attempt to persuade or compel the plaintiff to comply with
lawful discovery. These efforts have been fiercely resisted by
---------------------------------------------------------
2/RTC does not in this appeal challenge Judge Ideman's initial reference of
this litigation's pretrial matters to the special master. RTC's two previous
attempts to do so failed and we are given no reason to=20
abandon our prior decisions.
-6-
plaintiffs. They have utilized every device that we on the District Court
have ever heard of to avoid such compliance, and some that are new to us.
4. This noncompliance has consisted of evasions, misrepresentations, broken
promises and lies, but ultimately with refusal. As part of this scheme to
not comply, the plaintiffs have undertaken a massive campaign of filing
every conceivable motion (and some inconceivable) to disguise the true issue
in these pretrial proceedings. Apparently viewing litigation as war,
plaintiffs by this tactic have had the effect of massively increasing the
costs to the other parties, and, for a while, to the Court. The appointment
of the Special Master 4 years ago has considerably relieved the burden to
this Court. The scope of plaintiff's efforts have to be seen. to be
believed. (See Exhibit "A", photo of clerk with filings, and Exhibit "B",
copy of clerk's docket with 81 pages and 1,737 filings.)
5. Yet it is all puffery -- motions without merit or substance.
Notwithstanding this, I have carefully monitored the Special Master's
handling of these motions. I saw no need to try to improve on the Special
Master's writings if I agreed with the reasons and the results. However,
with respect to the major ruling that I have made during these proceedings,
the dismissal of the plaintiff's claims, the following occurred:
6. The Special Master, after years of efforts to compel compliance with
discovery, purported to order a dismissal of plaintiff's claims. Although
the action was probably long overdue, the Special Master did not have the
authority to make such a dispositive order. In reviewing his order, as I did
with all of his actions, I saw what he had done and did not approve it. I
treated the Special Master's 'order" as a recommendation and gave notice to
the parties that they could have a hearing and invited briefs. Only after
considering fully the briefs of the parties did I give approval to the
dismissal. It is true that I adopted the language chosen by the Special
Master, but that was because I fully agreed with his reasoning and saw no
need to write further. Judge Ideman's pointed and pungent review of the
record is the reverse of a rubber stamp. It is the judge's own heartfelt
appraisal of the plaintiffs' actions as meriting dismissal. RTC's claim of
violation of the Constitution by unconstitutional delegation fails.
-7-
B. Propriety of Dismissal
Dismissals under Fed.R.Civ.P. 37 are reviewed for abuse of discretion.
Anheuser-Busch, Inc. v. Natural Beverage Distributors, 69 F. 3D 337, 348
(9th Cir. 1995). An appellate court should reverse "only if [it has] a
definite and firm conviction that [the sanction] was clearly outside the
acceptable range of sanctions." Malone v. United States Postal Service, 833
F.2d 128, 130 (9th Cir. 19&7), cert. denied sub nom. Malone v. Frank, 438
U.S. 819 (1988'. Rule 37(b)(2)(C) gives the district court discretion to
dismiss a party's claims as a sanction for noncooperation in discovery
matters. Fed. R. Civ. P. 37 (b) (2) (C). Dismissal is warranted only if the
party facing sanctions acted in bad faith. Anheuser-Busch, 69 F.3d at 348.
The district court must also weigh several other factors before imposing the
"harsh sanction of dismissal": (1) the public's interest in expeditious
resolution of litigation; :2) the court's need to manage its dockets; (3)
the risk of prejudice to the party seeking sanctions; (4) the public policy
favoring disposition of cases on their merits; and (5) the availability of
less drastic sanctions. Id. (citation omitted). If the district court makes
explicit findings as to these factors, as it did in this case, we need not
review the record independently to determine if there was an abuse of
discretion. Cf. Adriana Int'l Corp. v. Thoeren, 913 F.2d 1406, 1412 (9th
Cir. 1990). Notwithstanding our ability to rely on the district court's
findings, RTC argues that the dismissal was improper because (l) the
district court wrongly denied RTC an
-8-
evidentiary hearing; and (2) the district court's dismissal was unwarranted
because RTC acted in good faith.
As to the evidentiary hearing claim, RTC asserts that it did not have
certain documents required by discovery so that its compliance was
impossible; it contends that it needed an evidentiary hearing to show the
nonexistence of the documents. This Circuit has, in dicta, noted that an
evidentiary hearing on the matter for which a party is sanctioned might be
required before dismissal if the party had sought "to show that it was
impossible for them to comply with the discovery orders..." United States
v. Westinghouse Elec. Corp., 648 F.2d 642, 652 {9th Cir. 1981); see also
Wyle v. R.J. Reynolds Industries. Inc., 709 F.2d 585, 592 (9th Cir. 1983)
("When necessary, the district court may hold an evidentiary hearing on a
motion for sanctions. Indeed, that method best determines the appropriate
sanctions while protecting a party's due process rights."). No court,
however, has said that evidentiary hearings are absolutely required prior to
a Rule 37 dismissal; thus, the decision whether to hold an evidentiary
hearing is well within the court's discretion.
The district court in this case did not abuse its discretion because RTC was
given full opportunity to demonstrate the nonexistence of the documents.
When RTC was notified of the special master's declared intent to impose a
Rule 37 dismissal sanction, it moved for an evidentiary hearing. In its
supporting papers, RTC argued that a hearing was necessary because of the
alleged lack of credibility of Mayo/CNC's witnesses -- it never=20
-9-
argued that the documents it refused to produce never existed. Moreover,
RTC's allegations of non-credibility mischaracterized the record. RTC first
misrepresented Judge Pfaelzer's finding regarding Mayo's credibility "with
respect to his claim that he had authored the NOTs materials and that he had
produced the AA5 [sic] materials from memory." While Judge Pfaelzer doubted
Mayo's ability to reproduce the materials from memory, she cast no doubt on
his authorship claim. In fact, Judge Pfaelzer only found Mayo not credible
on the specific narrow "issue of how he and the Advanced Ability Center came
to have in their possession the documents in question in this law suit."
RTC also misrepresented credibility findings by a U.S. magistrate as to
Mayo's wife Julia and another woman, Jan Nash. That non-credibility finding
was specifically limited to how one of the women conducted record keeping
regarding certain documents and to the other woman's claim that she saw
certain notes. Finally, RTC takes the magistrate's statement that "the
Court now feels [counsel's testimony on a limited point] lacks a little
credibility and needs to be tested" and transforms it into a ruling that
attorney Fagelbaum was found "not to be credible." RTC's
mischaracterization of the court's credibility findings casts RTC's
credibility in doubt. Anheuser-Busch, 69 F.3d at 348 (noting that "the
district court's credibility determinations are entitled to special
deference" when reviewing dismissal sanctions). Because the special master
and Judge Ideman were able to review RTC's claims as to credibility and
other matters in light of the entire record before them and in
-10
light of the famliarity each had with the parties and their litigation
tactics, we do not find that they abused their discretion in denying a
hearing on either the credibility or document-existence issues. Nor did the
district court err in rejecting RTC's alternative claim that it acted in
good faith and was therefore not deserving of sanctions. RTC claims that it
believed that the discovery order it disobeyed was stayed pending a ruling
on a related summary judgment motion that would have mooted the discovery
order. This claim is not supported by the facts of this case. On July 25,
l990, the district court issued an order requiring discovery of certain
documents related to RTC's antitrust claim. On August 8, 1990, RTC filed a
motion for review of the district court's July 25 order. RTC then moved for
summary judgment on its antitrust claim. On October 31, 1990, the district
court continued its consideration of the August 8 review order pending the
master's resolution of RTC's summary judgment motion; the continuance lasted
until January 7, 1991. On April 26, 1991, the master reordered discovery
(and did not mention the district court's October 31 order). On August 12,
1991, the district court ordered RTC to comply with the discovery order. On
April 17, 1992, the master dismissed RTC's claims for violation of the
August 12, 1991 and other discovery orders. RTC claims that it believed it
did not have to comply with the July 25, 1990 discovery order because of the
district court's October 31, 1990 continuance. Even if that were true, the
continuance ended on January 7, 1991 -- and RTC was reminded of
-11-
its obligation to follow the order on April 26. Thus, RTC's confusion
should have been dispelled. RTC further argues that the master's April 17,
1992 dismissal order was tainted because it rested on the August 12, 1591
order; the August 12 order, RTC contends, was wrong because it ignored the
earlier October 31 order. As we find the August 12, 1991 order proper, the
April 17, 1992 dismissal is affirmed.
III. Attorneys Fees
RTC also challenges the district court's order awarding Mayo almost $2.9
million in attorneys fee on two grounds: (1) that the order was a mere
rubber stamp of the special master's ruling; and (2) that the district court
abused its discretion in awarding fees at all.
A. Rubber Stamping
The facts are as follows: On January 20, 1993, the special master awarded
attorneys fees, first under the Lanham Act finding the case exceptional
because the plaintiffs "have abused the federal court system by using it,
inter alia, to destroy their opponents, rather than to resolve an actual
dispute over trademark law or any other legal matter." The master also
awarded fees pursuant to the Copyright Act, 17 U.S.C. =A7 505, finding that
the plaintiffs' complaints had been brought "in bad faith" to harass the
individual defendants and destroy the church through massive over-litigation
and other highly questionable litigation tactics." The master also awarded
fees pursuant to the court's inherent
-12-
authority to award fees when the losing party has acted in bad faith.
Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 258
(1975). Finally, the master declined to base the attorneys fees award on
California contract law because "California contract law might collide with
the first amendment in this particular context."
The master made a succinct statement as to the fees requested, noting that
"many attorneys worked many, many hours on this case"; that the hours were
reasonable "given the plethora of constitutional issues, discovery
stand-offs, appeals, and, most importantly, plaintiffs' practice of
endlessly litigating issues"; and that the hourly rates were reasonable for
federal civil practice within the Central District of California. The
master recommended an award of $2.9 million.
The plaintiffs appealed to the district court, which denied their appeal on
February 24, 1993. The district court stated that it had reviewed the
extensive record and found among other things evidence of the plaintiffs'
destruction and concealment of documents, refusal to comply with many court
orders, needless delay and multiplication of the proceedings by the
plaintiffs, and their filing of frivolous motions and of offensive and
unreasonable motions. As a result of these findings the court concluded
that the plaintiffs should be assessed fees under the Lanham Act and the
Copyright Act. The court ignored the master's recommendation as to
California contract law and awarded the defendants fees "as the prevailing
parties pursuant to contract." The court also concluded that RTC should
be assessed attorneys=20
-13-
fees for their bad faith litigation conduct. Comparing the district court's
rulings of law with the recommendations of the special master, we note that
the district court disagreed with the special master on one issue and agreed
with the special master on three issues.
The district court also stated that it had reviewed the declarations and
exhibits supporting the amount and reasonableness of the attorneys fees;
that it considered "the novelty and complexity of the issues" involving the
RICO, Lanham and copyright issues and pendent state questions, including
breach of contract and trade secrets, the multiple requests for injunctive
relief, the several appeals to the circuit court and the volume of the
issues producing a court file "well in excess of 100 volumes." The court
found that defense counsel had acted reasonably in response to a case in
which they were confronted by claims for $2 million plus punitive damages
and a request for permanent injunctive relief against their clients; counsel
had secured for their clients a dismissal of all the plaintiffs' claims in
their entirety. Only after this review did the district court substantially
adopt the recommendation of the special master as the amount of fees to be
awarded. The district court's action cannot fairly be characterized as
rubber-stamping. 3/
B. Propriety of Fee Award
To uphold a fee award, we must find a concise but clear explanation of the
fee award, which will allow us to determine
------------------------------------------------------------------
3/We find RTC's other claims of rubber stamping equally meritless.
-14
whether or not the court below abused its discretion in awarding fees.
Cunningham v. City of Los Angeles, 879 F.2d 481, 485 (9th Cir. 1988);
D'Emanuele v. Montgomery Ward & Co., Inc., 904 F.2d 1379, 1386 (9th Cir.
1990). This explanation must: (1) set out the reasonable hourly rate and
reasonable number Of hours spent on the matter, and explain those numbers
(this is the "lodestar" amount, and is presumed reasonable; see D'Emanuele,
904 F.2d at 1383,; (2) discuss any relevant Kerr factors used to adjust the
"lodestar" amount, although all the factors need not be addressed (these
factors come from Kerr v. Screen Actors Extras Guild. Inc., 526 F.2d 67, 70
(9th Cir. 1975)); and (3) it detailed records submitted by the winning
attorney are rejected, explain the reasons for the rejection. D'Emanuele,
904 F.2d at 1386.4/
The record shows that the explanation of the fee award satisfies all of
these requirements. At the special master's level, the lodestar amount was
properly calculated and specifically explained in light of the Kerr factors.
In making the lodestar calculation, the special master explicitly reached
the following conclusions: that the number of hours submitted by the
defendants (totaling at least 22,155.71 attorneys' hours) was reasonable
taking into consideration the number of attorneys. working on the case, the
number of issues involved, the appeals, the discovery standoffs, and RTC's
practice of repeatedly litigating issues, including up to ten petitions to
stay the attorneys fee ruling; and that the hourly rate was reasonable as
--------------------------------------------------------
4/Because the district court in this case was not rejecting detailed and
accurate time sheet records submitted by winning counsel, we need not
address this last factor.
-15
well, given the rates normally charged by attorneys practicing in the
Central District of California ($90 to $185 per hour for associates, $150 to
$300 per hour for partners, $50 per hour for paralegals and law clerks).
The materials submitted to support Mayo/CNC's fee request included detailed
declarations of counsel. These declarations referenced hundreds of pages of
contemporaneously prepared and filed time records reflecting work actually
and necessarily performed and billed, as well as affidavits and other
evidence. The records submitted by RTC contested the validity of Mayo/CNC's
submissions and referenced numerous attached exhibits purporting to document
discrepancies in Mayo/CNC's billing records. The district judge readdressed
these concerns and also took into account other Kerr factors, such as the
fact that the litigation , involved a large amount of money including
potential punitive and injunctive relief, and the fact that Mayo/CNC's
attorneys were successful in all the matters for which they were seeking fee
reimbursement. We therefore conclude that the district court did not abuse
its discretion in awarding fees.
IV. Mayo's Counterclaims.=20
a) Libel=20
Mayo's libel counterclaim is based on statements in a publication titled
"Squirrels" allegedly circulated by RTC in Scientology and CNC circles. The
publication identifies Mayo and other CNC officials has having offered
"false testimony to the IRS" and having attempted to "shift attention from .
. . their=20
-16-
crimes." Mayo contends that the statement is false and that the publication
was intended to reach Scientologists and non-Scientologists. RTC does admit
this statement is "an accusation of criminal acts" but that it was intended
only for Scientologists. Based on these contradictory assertions alone,
material facts are in dispute and summary judgment was improper.
Summary judgment was also improper because Mayo can establish a prima facie
case of libel. Mayo has made a showing of damages from the alleged libel,
having testified that at least two people terminated economic relationships
with Mayo and CNC based on the statements in "Squirrels," although he did
not identify a specific amount of damages related to those terminations.
Moreover, even if Mayo had shown no damages, RTC's publication of a written
statement attributing criminal activity to Mayo is libel per se for which no
special damages need be proved. Barnes-Hind. Inc. v. Superior Court, 181
Cal.App.3d 377, 382, 226 Cal Rptr. 354, 356 (Cal. Ct. App. 1986).
b) Emotional Distress
The district court dismissed Mayo's August 1985 emotional distress claim as
untimely under California's one-year statute of limitations. Mayo maintains
his cause of action was timely because (l) it was a compulsory counterclaim
under Fed. R. Civ. P. 13(a) that related back to RTC's January 1985
complaint; and (2) it was the product of a civil conspiracy whose last act
occurred within the Year before Mayo filed his emotional distress claim.
While it is true that a compulsory counterclaim relates back to the filing
of the original complaint, Employers Ins. v. Wausau=20
-17-
v. United States, 764 F.2d 1572, 1576 (Fed. Cir. 1985), we do not find
Mayo's emotional distress claim compulsory. FRCP 13(a) defines a compulsory
counterclaim as one "aris[ing] out of the same transaction or occurrence
that is the subject matter of the opposing party's claim." Fed. R. Civ. P.
13(a). Courts making this determination ask whether the "essential facts"
of the claims are "logically connected"; this often involves asking whether
the resolution of the first claim would moot the counterclaim. Pochiro v.
Prudential Ins, Co. of America, 827 F 2d 1246, 1249-51 (9th Cir. 1987).
In our case, RTC originally asserted claims for trade secret appropriation,
unfair competition, false designation, as well as for RICO and trademark
violations. Mayo and CNC asserted counterclaims for unfair competition,
false designation, libel, and emotional distress. On the one hand, all of
the litigation stems from the same factual scenario -- the theft and
subsequent use of RTC's scriptures. Even so, Mayo's emotional distress
claim involves other facts as well (e.g. harassment). Moreover, while RTC's
victory on its unfair competition and false designation claims might moot
Mayo's mirror claims, resolving RTC's claims would not resolve Mayo's
emotional distress claim -- which does not deal with who owned the
scriptures. Despite the broad definition of "same transaction," Pochiro,
827 F.2d at 1252, we cannot conclude that Mayo's emotional distress claim
was compulsory.
Mayo alternatively argues that his emotional distress injuries were
inflicted as part of a civil conspiracy by RTC so that the limitations
period was tolled until the last overt act=20
-18-
was completed, "[W]hen a civil conspiracy is properly alleged and proved,
the statute of limitations does not begin to run on any part of the
plaintiff's claims until the 'last overt act' pursuant to the conspiracy has
been completed." Wyatt v. Union Morg. Co., 24 Cal.3d 773, 786, 157 Cal.
Rptr. 392, 400 (Cal. 1979). Although Judge Pfaelzer concluded that Mayo had
properly alleged a conspiracy, she also concluded that he had not properly
proved one; Mayo has offered no further proof of the conspiracy. We must
therefore affirm the district court's dismissal of Mayo's emotional distress
counterclaim.=20
c) Unfair Competition and False Designation of Origin=20
RTC argued that Mayo's unfair competition and false designation of origin
claims were not justiciable under the First Amendment because they would
require the court to entangle itself in underlying questions of religious
doctrine.5/ See Jones v. Wolf, 443 U.S. 595 (1979); Serbian Eastern orthodox
Diocese v. Millvojevich, 426 U.S. 696, 725 (1976); Presbyterian Church v,
Mary Elizabeth Blue Hull Memorial Presbyterian Church, 393 U.S. 440, 449
(l969). The district court agreed, finding that it was Scientology doctrine
that L. Ron Hubbard was the "source" of all "Advanced Technology" and that
adjudication of the Technology's authorship would undermine this religious
doctrine. We do not=20
------------------------------------------------------------------------
5/RTC also argues that Mayo's unfair competition counterclaim rests solely
on Cal. Bus. & Prof. Code =A7=A7 17200 et sec. which precludes an action for
damages. Because RTC raises this issue for the first time on appeal, we
decline to consider it. E.W. French & Sons. Inc. v. General Portland. Inc.,
885 F.2d 1392, 1402 (9th Cir. 1989).=20
-19-
reach the issue of justiciability, however, because we find RTC estopped
from raising the non-justiciability defense. The doctrine of judicial
estoppel is invoked to "prevent a party from changing its position over the
course of judicial proceedings when such positional changes have an adverse
impact on the judicial process." United States v. Nix, 21 F.3d 347 (9th Cir.
1994) (quoting Russell v. Rolfs, 893 F.2d 1033 (9th Cir. 1990), cert.
denied, 501 S. Ct. 1260 (1991)). The Ninth Circuit has not yet decided on
the conditions under which estoppel applies:
Under the majority view, judicial estoppel does not apply unless the
assertion inconsistent with the claim made in the subsequent litigation "was
adopted in some manner by the court in the prior litigation." Under the
minority view, judicial estoppel can apply even when a party was
unsuccessful in asserting its position in the prior judicial proceeding, "if
the court determines that the alleged offending party engaged in 'fast and
loose' behavior which undermined the integrity Of the court." United States
v. Garcia, 37 F 3d 1359, 1367 (9th Cir. 1994), cert. denied, 115 S. Ct. 1699
(1995) (quoting Britton v Co-op Banking Group, 4 F.3d 742, 744 (9th Cir.
1993) (quoting In re Corey, 892 F.3d 829, 836 (9th Cir. 1989), cert. denied
sub nom. Kulalani Ltd. v. Corey, 498 U.S. 815 (1990))).
We need not resolve this issue because RTC is estopped under either
standard. The pertinent preceding proceedings to examine under the majority
rule are stated in RTC v. Scott, supra:
The district court granted the Church a TRO and later extended it to a
preliminary injunction, prohibiting the New Church from "using,
distributing, exhibiting or in any way publicly revealing" the scriptures.
RTC v. Wollersheim, 869 F.2d at 1079. The preliminary injunction was based
on the district court's finding that the scriptures were trade secrets and
-20
entitled to protection under both RICO and California law. On appeal, we
vacated the preliminary injunction. We held that the scriptures did not
qualify as trade secrets under California law because of the failure of the
Church to claim that the scriptures had any commercial value. We rejected
the Church's argument that the scriptures qualified as trade secrets because
of their spiritual value. Id. at 1090-91. The Church returned to the
district court and filed a second Ex Parte Application for Temporary
Restraining Order and Order to Show Cause, again asking the court to
restrain the New Church from using the scriptural materials. This time, the
Church argued that the scriptures qualified as trade secrets because they
had economic value. Specifically, the Church contended that if the New
Church was not enjoined from using the scriptures, "[p]laintiffs will be
forever at a loss to protect the confidential nature and resultant economic
value of these materials. Defendant will obtain an economic advantage that
they would not otherwise possess which will be used to divert parishioners,
the value and goodwill of which cannot be monetarily measured for
plaintiffs." Excerpt of Record ("E.R."), Vol. 1:347 at 29. (Emphasis
added.) After a hearing, the district court denied the application "solely
based upon the Ninth Circuit's . . . decision [in Wollersheim]. 869 F.2d at
1308. On appeal to this court we held that the district court had
interpreted the first opinion too narrowly and remanded the case to the
district court to consider whether the Church had an economic interest in
its scriptures. Id. at 1310.
Consequently, RTC obtained a judicial ruling in its favor by asserting that
the status of the scriptures was an economic matter justiciable in the
courts. Because the ruling on remand adopted RTC's prior position that it
had a justiciable, economic interest in the Advanced Technology, RTC is
estopped under the majority view. =20
Moreover, there is little doubt that RTC is playing "fast and loose" with
the judicial system as required in the minority view
-21-
of estoppel. To first assert that its unfair competition and false
designation of origin claims are justiciable and at the same time assert
that Mayo's identical claims are not is at best questionable; in light of
RTC's documented history of vexatious behavior, RTC's actions are
indefensible. We therefore reverse and remand these two counterclaims to the
district court.
Accordingly, the judgment of dismissal of RTC's case and the award of
attorneys fees are AFFIRMED, the judgment against Mayo on his emotional
distress counterclaim is AFFIRMED, and the judgment against Mayo on the
remaining counterclaims is REVERSED and the case REMANDED.
-22
Religious Technology Center v. Church of the New Civilization
94-55781 and 94-55920.
NOONAN, Circuit Judge, concurring separately.
JUDGE: NOONAN concurs in the result.=20
Filed APR 11 l996