Lawrence Wollersheim v. Church of Scientology of California

May 4, 2001


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Order on Submitted Motions

This action came on regularly before the Court, the Honorable Robert
L. Hess, Judge, presiding, on April 13, 2001, for hearing on selected
preliminary issues raised by respondents in connection with plaintiff's
Motion to Amend the Judgment. Plaintiff was represented by Daniel A.
Leipold, Esq., of Leipold, Donohue & Shipe, LLP, Ford Greene, Esq., of
Hub Law Offices, and Craig J. Stein, Esq., of Gelfand & Stein, LLP;
respondent Church of Scientology International ("CSI") was represented
by William T. Drescher, Esq, and by Gerald L. Chaleff, Esq., of
Orrick, Herrington & Sutcliffe, LLP; and respondent Religious
Technology Center ("RTC") was represented by Samuel D. Rosen, Esq., of
Paul, Hastings, Janofsky & Walker, LLP. Having considered the moving
and opposition papers, and the arguments of counsel, and being fully
advised, the Court rules as follows.

Background

This proceeding arises from plaintiff's attempt to amend his 1986
judgment against the Church of Scientology of California ("CSC") to
add CSI and RTC as judgment debtors. The convoluted history of this
action (and various related actions) will only be mentioned as is
particularly pertinent to the discussion below. The Court requested
oral argument addressed to five specific points, which it conceived to
raise threshold issues. These are:

1. Whether plaintiff's renewed motion to amend the judgment is
foreclosed by what plaintiff knew prior to trial (in 1986) about
respondent's alleged unity of interest with CSC?

2. Whether plaintiff's renewed motion to amend the judgment is
precluded by his alleged untimely delay in moving to amend and/or
collect on his judgment?

3. Whether the doctrine of judicial estoppel precludes respondents
from asserting their untimely delay arguments?

4. Whether plaintiff's alter ego analysis is precluded as a
constitutionally prohibited intrusion into the doctrine, internal
administration and governance of Scientology's ecclesiastical
hierarchy?

5. Whether plaintiff's motion is precluded because the law forbids
imposition of alter ego liability horizontally on sister churches
based on alleged joint control by a common superior ecclesiastical
body or person?

Issue #1

Respondents primarily rest their argument on this issue upon Jines
v. Abarbanel, 77 Cal. App. 3d 702 (1978). As is pertinent to this
proceeding, Jines holds that where a medical doctor and his
professional medical corporation have been openly conducting
themselves as employee and employer, and plaintiffs counsel were aware
of that fact at all pertinent times but sued only the medica1 doctor,
there was no legal basis for a post-judgment order adding the
corporation as a judgment debtor. In addition, there was no suggestion
of any abuse of the corporate privilege in that case.

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id. At 714-17. The Jines argument fails for three separate reasons.

The first reason why respondent's argument fails is that the
factual basis for the ruling in Jines is missing here. The various
Scientology entities have not continuously and unequivocally held
themselves out as having the common identity, or anything even
remotely resembling the employee/employer relationship, which was the
factual underpinning in Jines. Rather, the Scientology entities have
vigorously and vehemently denied that the requisite relationship
actually exists, and have insisted that the various entities are
completely separate. Absent both the fact of and knowledge of the
necessary relationship between the Scientology entities, Jines simply
does not apply. Neither Jines nor the other cases cited by respondents
preclude plaintiff from asserting after the trial later-discovered
facts in support of a post-trial motion to amend the judgment.

The second reason why respondents' argument fails is that it rests in
large part on the notion-stressed at oral argument-that timely inquiry
by plaintiff (before July I986) would have revealed all the facts
necessary to make this motion. The Court is not persuaded that if it
focuses only on the period before July 1986, plaintiff's discovery
would have revealed what he now claims is the true nature of the
relationships between the various scientology persons and entities.
Various courts have already found that individuals and entities under
what might broadly be described as the Scientology umbrella engaged in
a pattern and practice of deception, including creation of fake
documents and the giving of deliberately false and misleading
information, about the control, finances, and organization of various
entities under that umbrella. In large measure, that falsification and
deception may have been undertaken in connection with

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the individuals' and entities' resistance to inquiry by tax
authorities, as documented in such cases as Church of Scientology of
California v. Commissioner of Internal Revenue, 83 T.C. 381 (1984), United
States v. Zolin, 905 F 2d 1334 (9th Cir. 1990), and Church of Spiritual
Technology v. United States, 26 Ct. Cl. 713 (1992).

Nevertheless, because these false statements and deceptions were made
concerning reorganizations and relationships which were actually or
purportedly occurring within the same time frame as those on which
respondents now rely, the Court is not persuaded that prior to 1986,
prompt, full and truthful disclosure would have been made in this case.
Rather, the Court is persuaded that, at that time, whether as a
continuation of the "fair game" policy previously practiced against
plaintiff (Wollersheim v. Church of Scientology of California, 212 Cal.
App. 3d 872,879-86,893 (1989)), or as a necessary adjunct to strategies
being employed in connection with other matters, the details of the true
relationships of persons and individuals under the Scientology
umbrella would not have been disclosed to plaintiff. This conclusion
is not meant to disparage either respondents' present hierarchy or
their counsel; rather, it reflects prior judicial findings that, at an
earlier time which is relevant to events in this case, various
Individuals and entities associated with Scientology engaged in a
calculated program of deception as to these subjects for their own
purposes.

The third reason respondents' argument fails is that the Court is
persuaded that the core evidence on which plaintiff relies in support
of its renewed motion simply was not available prior to the conclusion
of trial. Setting aside the issue of the credibility of the
declarants, the declarations of Vicki Aznaran, Jesse Prince and Joseph
Yanny, for example, which tend to support plaintiff's argument that
persons or

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entities outside CSC controlled CSC's posture in this litigation were
not available until various times the 1990s. In addition, commencing
with the judgment debtor examination of CSC President Neil Levin on
May 31, 1995, other testimony and documentary evidence began to become
available. The general information about organizational structure
which was available to plaintiff prior to trial may have raised
certain suspicions, but it is these later declarations and documents,
among other evidence, which plaintiff relies upon to give substance to
the present motion.

Issue #2

The second issue is whether plaintiff's motion to amend the judgment is
precluded because of his alleged excessive delay in moving to amend or
to collect on his judgment. Both parties have addressed this issue in
detail. Respondents rely primarily on Alexander v. Abbey of the Chimes
104 Cal. App. 3d 39 (1980), for the proposition that an unjustified
seven-year delay precludes an amendment of the judgment here, where
the delay is asserted to be 11 years.

At the threshold, the Court is inclined to agree with respondents on
two preliminary points. First, the Court is not persuaded that
respondents must demonstrate "prejudice" in opposing the due diligence
showing; that is, the test is not the same as laches. While Abbey of
the Chimes emphasizes the equitable nature of the determination
whether to permit the amendment, that decision did not address any
aspect of "prejudice" to the non-moving party except insofar as the
control of the litigation/due process issues implicate prejudice.
Indeed, the Abbey of the Chimes decision clearly implies that there
was no prejudice in that case, although the

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unexplained delay made it an abuse of discretion to grant the
amendment. Nothing in Ukegawa Brothers v. Agricultural Labor Relations
Board, 212 Cal. App. 3d 1314 (1989)is to the contrary.

Second, the Court rejects what appears to be plaintiff's argument
that respondents are somehow collaterally estopped from raising the
due diligence issue by the outcome of Church of Scientology of
California v. Wollersheim, 42 Cal, App. 4th 628 (1996), and/or by the
unpublished portion of the decision in Wollersheim v, Church of
Scientology International, No. B118114, 2d. Dist., Div. 2, filed Feb.
4, 1999. The due diligence issue presented here is not identical to that in
Church of Scientology v. Wollersheim, nor was it actually or necessarily
decided in that prior action, and the Court of Appeal in last appeal in
this case expressly declined to address this issue.

As a further threshold issue, the question with respect to due
diligence under Abbey of the Chimes is the timeliness of the filing of
a motion to amend the judgment, not to attempts to collect on the
judgment. To the extent respondents argument vacillates between the
two concepts, only diligence in filing the motion to amend is
pertinent.

This case involves an attempt to amend the judgment under C.C.P.
187. It does not fall within C.R.C. 48(a), which applies in
circumstances such as when a party to an action dies and a personal
representative takes over the litigation. See 9 B. Witkin, California
Procedure, Appeals 175, at 232 (4th ed. 1997).

Under C.C.P. 916(a), a perfected appeal generally divests the trial
court of further jurisdiction as to all questions affecting the
validity of the judgment or order being appealed. Thus, the trial
court has no power during. an appeal to correct or

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amend that judgment or order. E.g., Laidlaw Waste Systems, Inc. v.
Bay Cities Services, Inc. 43 Cal. App. 4th 630,641(1996); Elsea v.
Saberi, 4 Cal. App. 4th 625, 629 (1992). However, the trial court
retains jurisdiction to determine ancillary or collateral matters that
do not affect the judgment. People v. Hedge, 72 Cal. App. 4th 1466,
1477 (1999).

The rationale for this rule is simple.

"The purpose of the rule depriving the trial court of jurisdiction
during the pending appeal is to protect the appellate court's
jurisdiction by preserving the status quo until the appeal is decided.
The rule prevents the trial court from rendering an appeal futile by
altering the appealed judgment or order by conducting other
proceedings that may affect it. [Citation omitted.] Accordingly,
whether the matter is 'embraced' in or 'affected' by a judgment within
the meaning of section 916 depends on whether post-judgment trial
court proceedings on the particular matter would have any impact on
the 'effectiveness' of the appeal. If so, the proceedings are stayed;
If not, the proceedings are permitted."

In re Marriage of Vamer, 68 Cal. App. 4th 932,936 (1996), quoting
Elsea v. Saberi, supra. 4 Cal. App, 4th at 629.

This case well illustrates the application of the rule to preclude the
exercise of trial court jurisdiction to amend the judgment while the
appeal was pending. To give but one example, an important issue in the
original appeal was the propriety of the compensatory and punitive
damages awards. Wollersheim v. Church of Scientology of California,
supra. 212 Cal. App. 3d at 905-07. The identity of the parties who
would be subject to any award (as well as its amount) was manifestly
"embraced" in or "affected" by the judgment. The Court therefore
concludes that from the filing of the notice of appeal on or about
September 29,1986, until the conclusion of the direct appeals with the
issuance of the remittitur following final dismissal of the grant of
the

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writ of review by the California Supreme Court on or about March 7,
1994, the trial court had no jurisdiction to amend the judgment.

In addition, post-trial proceedings with respect to the question of
interest were held in the second half of 1994, during which CSC
claimed that no final judgment existed. The trial court's adverse
determination of those issues was followed by a further notice of
appeal by CSC on or about December 21,1994. That further appeal again
divested the trial court of jurisdiction. The California Supreme Court
's remittitur following denial of CSC's petition for review issued on
or about February 15, 1996, once again restored the trial court's
jurisdiction. The motion to amend the judgment to add RTC and CSI were
filed on or about May 7, 1997.

In addition, there is another set of factors which the Court believes
is pertinent to the due diligence issue: the pendency of other
litigation involving the parties. On or about November 4,1985, prior
to trial in this case, present respondents RTC and CSI filed two suits
(later consolidated) in federal court alleging violations of the
Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C.
1962, the Copyright Act, 17 U.S.C. 501(b), and state tort law.
Religious Technology Center and Church of Scientology International v.
Wollersheim, U.S.D.C., C.D. Cal. No. CV-85-7191. RTC and CSI sued,
among others, plaintiff Wollersheim, as well as his then-attorneys and
some of Wollersheim's expert witnesses in this action, to prevent the
dissemination and use in this action of certain allegedly stolen
religious materials which were alleged to be "trade secrets." That
case resulted in published decisions in Religious Technology Center v.
Wollersheim, 796 F.2d 1076 (9th Cir. 1986), cert. denied, 479 U.S.
1103 (1987) (reversing a preliminary injunction in favor of RTC and

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CSI), Religious Technology Center v. Scott, 869 F.2d 1306 (9th Cir.
1989) (reversing summary denial of renewed application for preliminary
injunction an different grounds), and Religious Technology Center v.
Wollersheim, 971 F.2d 364 (9th Cir. 1992) (affirming dismissal of the
claims against the attorneys and experts).

The next suit was Church of Scientology of California v. Superior
Court, U.S.D.C. C.D. Cal. No. CV 86-1362, which arose after Judge
Swearinger ordered CSC to produce its entire 'auditing" and 'pre-clear
' files on plaintiff for this case. CSC sued Judges Margolis and
Swearinger, as well as the entire Los Angeles Superior Court bench.
That action was dismissed by the federal district court in 1987.

While the various proceedings on its direct appeals from the
judgment were still pending, CSC launched a collateral attack on the
judgment by filing Church of Scientology of California v. Wollersheim
on February l6, 1993. It attempted to have the original judgment against
CSC set aside on the grounds of judicial bias. Wollersheim filed a
special motion to strike the complaint based on C.C.P. 425.16, the
anti-SLAPP suit statute, which was granted, and substantial attorneys
fees were awarded. That decision was affirmed on appeal in a published
decision at 42 Cal. App. 4th, 628 (1996), and review was denied by the
California Supreme Court on May 22,l996 (1996 Cal. Lexis 2783 (May 22,
1996)).

On August 21, 1995, after the trial court had dismissed Church of
Scientology v. Wollersheim, but before the Court of Appeals had issued
its decision, yet another action was filed called Religious Technology
Center and Bridge Publications Inc. v. F.A.C.T.N.E.T. and Wollersheim,
et al., U.S.D.C.D. Colo. No. 95 K2143. This suit apparently related to the
alleged wrongful appropriation or dissemination of various

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Scientology documents. Pursuant to a civil writ of seizure, hundreds
of thousands of documents were seized relating to various of
Wollersheim's attorneys, the trial judges in both Wollersheim v.
Church of Scientology of California and --and various other persons,
arguably in violation of C.C.P. 425.16. The case as to Wollersheim
was apparently settled.

The Court finds this history to be significant because it demonstrates
that, from well prior to trial, Scientology entities-including not
only CSC, but also RTC and CSI-almost continuously were maintaining
one or more separate suits against Wollersheim. This separate
litigation has been characterized not only by the use of deep pockets
to pursue virtually every possible appeal, but also-until the Colorado
case-by its almost unbroken lack of success on the merits. See Church
of Scientology v. Wollersheim, 42 Cal. App. 4th at 649-50. Under these
circumstances, the Court concludes that the necessary diversion of
Wollersheim's attention, resources and effort caused by these countersuits
constitute valid and persuasive reasons for such delay as has actually
occurred. The Court therefore concludes that respondents (as moving
parties) have not carried their burden of persuasion that this motion to
amend should be precluded under either Abbey of the Chimes or any other
decision cited by respondents.

Issue #3

Plaintiff has argued that the doctrine of judicial estoppel should
preclude respondents from raising issue # 2. Plaintiff's theory is
that as recently as October l994, CSC's counsel, William Drescher,
argued in submissions in opposition to

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plaintiff's motion for appointment of a receiver that there was no
judgment in effect to enforce. Having taken this position in 1994,
plaintiff argues, respondents cannot now be heard to claim undue
delay in seeking to amend a judgment they claimed did not exist.

The Court understands the argument, but need not reach it in view of
the fact that respondent's position on Issue # 2 has been rejected on
the merits. The Court therefore need not address two underlying
questions: whether the position taken was an issue of fact, or of law,
or of mixed fact law; and what significance there may be to the fact
the Mr. Drescher asserted one position on behalf of CSC in 1994, and
the contrary position on behalf of CSI in 1997 and subsequently.

Issue #4

Respondents contend that plaintiff's alter ego analysis will
necessarily involve a constitutionally prohibited intrusion by the
Court into the doctrine, internal administration and governance of
Scientology's ecclesiastical hierarchy. The two principal decisions on
which respondents rely are Serbian Eastern Orthodox Diocese v.
Milivojevich, 426 U.S. 696 (1976), and National Labor Relations Board
v. Catholic Bishop of Chicago, 440 U.S. 490 (1979).

At the threshold, this argument may seem premature. It is not yet
clear what precise evidence may be proffered in connection with the
hearing, and precisely what subjects will be addressed. Certainly,
respondents have made it known that they believe oral testimony will
be required to reach the merits, notwithstanding the voluminous
exhibits and declarations which have already been tendered.
Nevertheless,

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the Court believes it can now address what it construes as the
functional equivalent to a facial challenge to holding any hearing on
the merits, as opposed to a challenge to the admissibility of
particular pieces of evidence toward the merits.

National Labor Relations Board v. Catholic Bishop of Chicago, supra.
is of little help on these issues. The question in that case was
whether the N.L.R.B. had jurisdiction over private, non-profit
religious schools. The Supreme Court noted the potentially serious
issues raised by the N.L.R.B.'s differentiation between 'completely
religious" and "merely religiously affiliated" (440 U.S. at 495-99)
and the need for an examination into the good faith adherence of religious
beliefs by administrators in the resolution of unfair labor practice
charges (Id at 501-03). The Court concluded that, in the absence of a
clearly expressed Congressional intent that religious schools should be
covered by the National Labor Relations Act, it would construe the Act to
deny jurisdiction rather than be required to confront the constitutional
questions raised by the alternative construction. Id. at 504-07.

Serbian Eastern Orthodox Diocese v. Milivojevich involved a dispute
over control of the American-Canadian Diocese of the Serbian Orthodox
Church. The Holy Assembly of Bishops and the Holy Synod of the Serbian
Orthodox Church (the mother church) suspended and ultimately removed
Milivojevich as Bishop of the American-Canadian Diocese. The mother
church also reorganized the former American-Canadian Diocese into
three dioceses. Milivojevich refused to recognize these acts by the
authorities of the mother church, and challenged them in Illinois
state court, including seeking a ruling that he was the true Diocesan
Bishop. The Illinois Supreme Court ruled that both Milivojevich's
removal and the reorganization were invalid under its

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interpretation of governing church law. 426 U.S. at 697-708.

The Supreme Court reversed. The court quoted Watson v. Jones, 13
Wall. 679 (1872), a diversity case decided before the First Amendment had
been rendered applicable to the States through the Fourteenth Amendment,
for the guiding principles applicable to hierarchical churches.

"[T]he rule of action which should govern the civil courts. is, that,
whenever the question of discipline, or of faith, or ecclesiastical
rule, custom, or law have been decided by the highest of these church
Judicatories to which the matter had been carried, the legal tribunals
must accept such decision as final, and as binding on them, In their
application to the case before them."

426 U.S. at 710, quoting Watson v. Jones, 13 Wall. at 727.

This principle means that the court may not decide issues of
theological controversy, review determinations of church members'
moral standing , and similar issues. However, it is well recognized
that the courts may make decisions relating to church property, where
neutral principles of law, developed for use in all property disputes,
are applied, as opposed to having the issue turn on resolution of
controversies over religious doctrine and practice. Presbyterian Church
in the United States v. Mary Elizabeth Blue Hull Memorial Presbyterian
Church, 393 U.S. 440,449 (1969) (reversing a Georgia state court
decision where the jury had been instructed to determine whether there
had been a "departure from doctrine" by the mother church), The
Supreme Court expressly reaffirmed the "neutral principles of law"
approach in Jones v. Wolf 443 US. 595,602-06 (1979). Moreover, Hull
Memorial Presbyterian Church (393 US, at 447, 450-51) mentions a
"fraud, collusion, of arbitrariness" exception, although Serbian
Eastern Orthodox Diocese (426 U.S. at 412-13) points out that its
content has never

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been defined.

Respondent's argument that there is a blanket prohibition on any
examination of the structure or operation of any Scientology entity
was squarely rejected by the Tax Court In Church of Scientology of
California v. Commissioner of Internal Revenue, supra, 83 T.C. at
464-69. The Tax Court used Scientology policy documents, not to
resolve doctrinal issues, but to determine (among other things) its
corporate structure and management practices. The Tax Court
articulated the following principles which may apply to this case:

1. "The establishment clause does not prevent the government from
making a threshold inquiry into whether or not a given practice is
religious in nature and therefore entitled to First Amendment
protection." Id. at 462.

2. "The establishment clause does not cloak a church in utter secrecy,
nor does it immunize a church from all governmental authority. The
thrust of the entanglement component of the establishment clause is to
keep Government out of the business of umpiring matters involving
religious practice and belief." Id.

3. "[C]ivil authorities are not barred from settling disputes
implicating the secular side of church affairs as long as they rely
upon neutral principles of Law." Id.

4. The state may "examine Church [of Scientology] documents, including
the constitution of a church, provided the documents are scrutinized
in purely secular terms and the facts determined are not attendant on
the resolution of doctrinal issues,' Id. at 463.

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These principles suggest that the inquiry sought by plaintiff is not
barred by the First Amendment. Two examples of possible factual issues
will suffice. First, a central character In plaintiff's alter ego
theory is David Miscavige. During oral argument, Mr. Drescher advised
the Court that at the time of trial in 1986, Mr. Miscavige was
associated with a for-profit non-church entity called Author Services,
Inc., and he allegedly had no relationship whatsoever with RTC or CSI.
Clearly, to the extent Mr. Miscavige had no ecclesiastical position
prior to or at the time of trial, scrutiny of his role (if any) in
controlling this litigation does not in any sense implicate the First
Amendment. Moreover, as Mr. Drescher further stated at oral argument, when
Mr. Miscavige was Chairman of the Board of Directors of RTC beginning in or
about 1987, he wore two separate hats. He was the senior corporate
administrative officer of RTC, and he was simultaneously serving as the
senior ecclesiastical official of the Scientology religion. Which, if
either, of these two hats Mr. Miscavige wore at any particular time and
with respect to any particular conduct is undoubtedly the appropriate
subject for judicial inquiry.

The second example is also suggested by Mr. Drescher's remarks at oral
argument. He alluded to Mr. Miscavige's membership in something called
the Sea Organization, also known as "Sea Org." This Mr. Drescher
characterized as a "religious order," and analogized it to the
Jesuits. However, in the pre-RTC period, according to Mr. Drescher,
Mr. Miscavige's membership in Sea Org did not put in him a position of
religious authority, and he was not interpreting doctrine.

An alternative view of Sea Org is presented in Church of Spiritual
Technology v. United States, supra.

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"After carefully examining the record and attempting to understand the
nominal corporate structure of Scientology, it is apparent to the
court that it is something of a deceptis visus. Real, control is
exercised less formally, but more tangibly, through an unincorporated
association, the Sea Organization, more commonly referred to as the
Sea Org. This group, in the nature of a fraternity or clan, began with
Scientologists who pledged themselves eternally to Scientology...

"The Sea Org appellation survives in Scientology as a distinction
afforded to those Scientologists who have dedicated themselves to
serving Scientology for the next billion years. It is described by CST
[Church of Spiritual Technology] as a way to distinguish those
Scientologists worthy of great deference and respect. Sea Org members
are initiates into the highest levels of Scientology, and bear
concomitant responsibilities.

"CST staff and officers are required to be members of the Sea Org.
which gives CST the distinction of being a Sea Org Church. CSI, RTC
The Flag Services 0rg (which employs over 900 Sea Org members), the
Saint Hill Church, in short all high ranking organizations are Sea Org
Churches. Being a "Sea Org church" means that the church's function is
important enough to Scientology to warrant the attention of a
significant number of Sea Org members.

"Sea Org rank nominally carries with it no ecclesiastical authority in
the sense that Sea Org members still take orders from the
ecclesiastical leaders of whatever Scientology organization they join.
Upon closer analysis, however, this appears to be a distinction
without a difference because in a Sea Org church the ecclesiastical
authority necessarily resides In a Sea Org member.

"Furthermore, the Sea Org appears to have considerable financial
importance. . . . Sea Org members also exercise considerable control
over Scientology money through SOR Management Services, Ltd."

26 Ct. CL at 718-19. SOR Management Services, Ltd., was further
described as a United Kingdom for-profit corporation which acts as an
agent in managing money for, among other organizations, CSI and CSC.
Id. at 724 n.23.

Plaintiff's motion argues that Sea Org members, including Mr.
Miscavige, while having no formal corporate positions in the pertinent
organizations, and while not exercising ecclesiastical functions by
virtue of a specific hierarchical position, have in fact controlled
and directed the activities of CSC, CSI and/or RTC as it relates to
the

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litigation involving plaintiff. Plaintiff apparently further argues
that the conduct of the litigation involving him is a secular
function, rather than a religious function. Plaintiff urges that,
under all the circumstances, adherence to the fiction of separateness
would sanction a fraud or injustice,

These arguments, if proven, suggests that the corporate formalities
have been disregarded and that there was at pertinent times an
effective unity of control and direction, which might support the
imposition of alter ago liability. This particular issue is
susceptible to examination and analysis using neutral legal
principles, without impermissibly involving the court in issues of
religious practice or belief, faith, doctrine, or ecclesiastical
administration. The First Amendment offers no bar to a properly
structured evaluation of this question.

Issue #5

Respondents' final issue is predicated on principles articulated Roman
Catholic Archbishop of San Francisco v. Superior Court, 15 Cal. App.
3d 405 (1971). In that case, plaintiff had arranged to buy a Saint
Bernard dog in Switzerland from the Canons Regular of St. Augustine, a
Roman Catholic order. When a dispute arose, he sued not only all those
involved in Switzerland, but also "The Roman Catholic Church d.b.a.,
The Roman Catholic Bishop of San Francisco, a corporation sole, the
Bishop of Rome, [and] The Holy See." He alleged essentially that all
the subordinate entities were alter egos of the Roman Catholic Church,
the Bishop of Rome and the Holy See. Id. at 408-09. The Court of
Appeals reviewed the trial court's denial of the Archbishop's motion
for summary judgment. The Court of Appeal held that, regardless
whether the Canons

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Regular of St. Augustine might be an alter ego of the Pope, that there
was no evidence
that the Archbishop was the alter ego of the Canons Regular. Id. at
409-12.

The Court of Appeal pointed out:

The "alter ego" theory makes a "parent" liable for the actions of a
"subsidiary" which it controls, but it does not mean that where a
"parent" controls several subsidiaries each subsidiary then becomes
liable for the actions of all other subsidiaries. There is no
respondent superior between subagents.

Id. at 412.

In order to fall within Roman Catholic Archbishop of San Francisco,
the fundamental claim implicit in respondents' argument must be that
they are really subordinate sister churches with CSC under common,
superior ecclesiastical control. As a factual premise, that remains
unproven.

There are divergent views of the respective roles of the different
Scientology entities. One of these is that Implicit in respondents'
argument. Another is reflected in Church of Spiritual Technology v.
United States, supra.

"Before 1981, the Church of Scientology of California ("CSC") acted as
the mother church for all of Scientology. It was organized as a
non-profit corporation in California, and was responsible for running
all aspects of Scientology with the exception of some specialized
financial arrangements. it had ultimate ecclesiastical authority,
provided all levels of Scientology services, and was the center of
management for all other Scientology organizations . . .

". . . [I]n 1981, Scientology underwent a reorganization. The goal of
the new structure was for Scientology to "simplify its corporate
structure." CSC was broken up and replaced by several new higher level
entities. Church of Scientology International ("CSI"), Religious
Technology Center ("RTC"), Church of Scientology San Francisco, and
Church of Scientology Los Angeles were all products of the
reorganization. . . . CSI became the new mother church of Scientology.
It sits at the top of a complex corporate hierarchy. RTC Is the entity
charged with maintaining doctrinal purity in the church. CSI along with
RTC form the top-level ecclesiastical

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management of Scientology, although there are numerous other churches
and other entities that have a role in management, finance or
spiritual affairs."

26 Ct. Cl. at 716-17. The term "simplify" is in quotes because the
Court of Claims listed separate organizations as constituting the
church of Scientology after the
reorganization. Id. at 717 n.9.

The Court of Claims description is significant because it does not
depict CSC, on the one hand, and CSI and RTC, on the other hand, as
subordinate sister churches, but rather as successive entities at the
top of the pyramid. If this is in fact the case, respondent's entire
argument premised upon Roman Catholic Archbishop of San Francisco
lacks any factual foundation. That, however, is a decision which must
be made on the basis of all the evidence, and not on the basis of a
theoretical construct.

As Church of Scientology of California v. Commissioner of Internal
Revenue, supra, teaches, it is permissible for the Courts to look at
Scientology's corporate structure and management practices, including
through the use of internal documents. The issues can be examined on
purely secular terms, and not to resolve any doctrinal issues. No
preclusion principle acts as a matter of law to bar a properly
structured factual inquiry.

Conclusion

The Court wishes to emphasize that it has not yet decided the
factual issues which will be necessary to address the motion on the
merits. What it has decided is that respondents' preliminary
objections to even conducting a merits inquiry

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are not persuasive. The Court is cognizant of the volume of
declarations, exhibits, evidentiary objections, and transcripts which
already have been submitted. The Court will address the procedures by
which the evidence is to be evaluated in a separate Order.

The Clerk will give notice.

Dated: May 4,2001

Robert L. Hess
Judge of the Superior Court

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