Subject: Ninth Cir. Dec., 11Apr96, 2/2 From: mayo@lightlink.com (David Mayo) Date: 1996/04/17 Message-Id: <4l265n$c8n@light.lightlink.com> Sender: electra@light.lightlink.com Organization: Art Matrix - Lightlink Electra Gateway v2.4 Newsgroups: alt.religion.scientology [ctd from part 1/2] 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=20Wollersheim]. 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 [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." ****************************************************************************= ***