Subject: Ninth Cir. Dec(wrapped)2/2 From: mayo@lightlink.com (David Mayo) Date: 1996/04/17 Message-Id: <4l2aeo$gjf@light.lightlink.com> Sender: electra@light.lightlink.com Organization: Art Matrix - Lightlink Electra Gateway v2.4 Newsgroups: alt.religion.scientology 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. 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 -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. a) Libel 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 -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 -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 -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. c) Unfair Competition and False Designation of Origin 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 ------------------------------------------------------------------------ 5/RTC also argues that Mayo's unfair competition counterclaim rests solely on Cal. Bus. & Prof. Code 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). -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. 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. Filed APR 11 l996 [end part 2/2] Rev. David Mayo (finger for key) PGP ID: 1024/4D5EE559 1996/01/04 David Mayo PGP Fingerprint: 0D 69 92 87 79 2F 38 72 FE 03 CE 51 31 D5 6D E9 "So many have fallen, yet so far left to go." *******************************************************************************