They're all "Shook" up!

Scientology

From: bob@minton.org (Bob Minton)
Subject: They're all "Shook" up!
Date: Tue, 13 Oct 1998 17:14:48 GMT
Message-ID: <36248a54.1608561@news.tiac.net>

Now, ask yourself, "Why would anybody want to vacate this decision?"

SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF LOS ANGELES LAWRENCE DOMINICK WOLLERSHEIM vs.

CHURCH[SIC] OF SCIENTOLOGY, ET AL., CASE NO.

C332027 ORDER The motion of plaintiff Lawrence Wollersheim to amend the judgment of 7.22.86 against Church[sic] of Scientology of California ("CSC"), to include real party defendants and judgment debtors Church[sic] of Scientology International ("CSI") and Religious Technology Center ("RTC"), is granted.

The parties do not dispute the general principles of law which guide the court in deciding this motion. The court in which a judgment is entered has both the inherent power and the duty to carry the judgment into effect. (Code Civ. Proc.; C. 187.) This may include amending the judgment to add another debtor. (Jack Farenbaugh & Son v. Belmont Construction, Inc. (1987) 194 Cal.App.3d 1023, 1029.)

The court must determine whether there is substantial evidence of the following:

1.CSI and RTC are the alter egos of CSC; and
2.CSI and RTC controlled the litigation.
(Triplett v. Farmers Ins. Exchange (1994) 24 Cal.App.4th 1415, 1420, 1421; NEC Electronics, Inc. v. Hurt (1989) 208 Cal.App.3d 772, 778.)

The court must also decide if plaintiff is barred by the doctrine of laches from seeking amendment in 1997 to a 1986 judgment.

The court is entitled to hear evidence which was not presented in the underlying trial, on proper notice to the adverse party, to make the judgment speak the truth. (Jack Farenbaugh & Son v. Belmont Construction, Inc., supra, 104 Cal.App.3d at p.

1029.) All parties have submitted evidence in the form of declarations and exhibits and the court has reviewed and considered only admissible evidence; all objections to the evidence are overruled. Plaintiff's request for judicial notice is granted.

The parties agree that Scientology reorganized its corporate structure from 1981 through 1985 during the pretrial phase of the instant lawsuit. CSI became the new "mother Church[sic]," replacing CSC. RTC was formed in 1982 With the approval of L. Ron Hubbard, Scientology's founder, and is the owner and protector of Scientology service marks and products. CSC became an inactive corporation with no income, assets, employees or business. Plaintiff claims the reorganization occurred partly to prevent him from collecting on his judgment against CSC, which he would win one year later in 1986. Based on the evidence outlined below, the court agrees and concludes that the Scientology leaders acted in bad faith which would result in an injustice to plaintiff if CSI and RTC's corporate separateness were maintained and they were not added as judgment debtors.

Alter ego "Where there is such a unity of interest and ownership that the separateness of the corporation has ceased and the facts are such that an adherence to the fiction of separate existence of the corporation would under the particular circumstances sanction a fraud or promote an injustice, separate identity will be disregarded.

[Citation.]" (Ukegawa Brothers v. Agriculture Labor Relations Bd.

(1989] 212 Cal.App.3d 1314, 1323.)

"To prevail on a claim of 'alter ego,' the [judgment creditor] must show (1) there is such a unity of interest that the separate personalities of the corporations no longer exist; and (2) inequitable results will follow if the corporate separateness is respected.

[Citation.] Certainly, the facts of each case vary." (Tomaselli v.

Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1285.)

A finding of actual fraud is not required; only bad faith which would result in fraud or injustice if accomplished (Associated Vendors, Inc. v. Oakland Heat Co. (1962) 210 Cal.App.2d 825, 838) Unity of interest Among the facts which will be considered [in deciding if there is a 'unity of interest'] are:

1. Financial issues (e.g. was the corporation adequately capitalized?);

2. Corporate formality questions (e.g. was stock issued, are minutes kept and officers and directors elected, are corporate records segregated?);

3. Ownership issues {e.g. what is the stock ownership picture?); and 4. Commingling issues (e.g. are corporate assets commingled, does the parent company merely use the corporate shell of the subsidiary to obtain goods and services for the parent company?); etc. [Associated Vendors, Inc. v. Oakland Meat Co., supra, 210 Cal.App.2d at p.p. 838-840.]"' (Tomaselli v. Transamerica Ins. Co., supra, 25 Cal.App.4th at p 1285, fn. 13.)

Applying these rules to the instant case, there is sufficient evidence that CSI and RTC had a unity of interest with defendant CSC:

1. Financial issues a. Claiming responsibility for the debt of the other (Associated Vendors, Inc., supra, at p. 838) CSI has claimed (to the IRS) as its own debt the $30 million judgment [later reduced) plaintiff won against CSC.

CSI paid CSC's lawyers' fees in this case. (Exh. A, p.

60.) 1 CSI is responsible for CSC's debt in another lawsuit between these parties, CSC v. Wollersheim (1996) 42 Cal.App.4th 628. (Exh. II, p. 14.} CSC's counsel Chodos has acknowledged his other client, CSI, is responsible for CSC's debts and has said it renders moot any alter ego issue. (Exh. II, pp. 8-11.)

RTC and CSC claimed the judgment in this case as their own debt as an element of their damages in another ____________________________
1 All references to exhibits are to plaintiff's exhibits filed on 5.9.97 in support of this motion.

____________________________
lawsuit between the parties, RTC and CSI v. Wollersheim (9th Cir.

1992) 971 F.2d 364. (Exh. U, p. 4.) Further, CSI and RTC filed a notice of appeal, not only on their own behalf, but also on CSC's behalf, even though CSC was not a party. (Exh. Z.)

CSI settled a lawsuit between CSC and another ex- Scientologist, Gerald Armstrong, in late 1986, even though CSI was not a party.

b. Failure to adequately capitalize new corporation or maintain capital in old corporation.

Monthly management fees from local California Scientology branches, which had been sent to CSC, became payable to CSI. (Exh. B, p. 151414.)

2. Ownership issues a. Diversion of assets from a corporation to another to the detriment of creditors, or manipulation of assets and liabilities between entities so as to concentrate the assets in one and the liabilities in the other.

CSC's net worth in 1981 (a year after plaintiff filed this action) was $340 million. (Exh. I.] By May 1985 (a year before plaintiff won judgment against CSC), all of CSC's assets had been divested and transferred to CSI and RTC. (Exh. J, pp. 14309- 14310; Young decl., paras. 20,21.)

b. Identical equitable ownership in the two entities or the identification of the equitable owners, directors, or officers w/ domination and control of the various entities or management of the corporations' affairs.

Authority over CSC and its affairs was handed over to CSI and RTC, especially David Miscavige, who controls both corporations and all of Scientology after the death of L. Ron Hubbard. "Sea Org" is the unincorporated association which, is the power center -- Miscavige is its highest ranking member. (Exh. B, p. 153819.) Miscavige is also chairman of RTC and ASI (Author Services, Inc.).

Scientology's corporate officers and trustees are intermingled at will.

3. Commingling issues a. Use of corporation as a shell for the other CSI provided the funds to open an account at Republic Bank in New York in CSC's name. (Exh. A, p. 47.)

b. Same employees or attorneys (at p. 839) RTC's lawyer, Kendrick L. Moxon, was also CSC's lawyer in the instant case in post-trial matters and in Wollersheim IV. (Exhs. N, U, V, HH) Inequitable result It is sufficient that it appear that recognition of the acts as those of the corporation only will produce inequitable results.

(Associated Vendors, Inc. v. Oakland Meat Co., supra, at p. 837.)

In light of the closeness of corporations involved, and the ongoing litigation between these corporations and plaintiff, the court concludes it would be inequitable to recognize the acts of CSI and RTC regarding plaintiff's lawsuit against CSC to be separate from those of CSC.

Control of litigation "Control of the litigation sufficient to overcome due process objections may consist of a combination of factors., usually including the financing of the litigation, the hiring of attorneys, and control over the course of the litigation. [Citation.] Clearly, some active defense of the underlying claim is contemplated. [Citation]"

(NEC Electronics Inc. v. Hurt, supra, 208 Cal.App.3d at p. 781.)

Applying these rules to the instant case, there is sufficient evidence that CSC and RTC controlled this litigation.

Financing the lawsuit CSI paid CSC's defense costs. (Exh. A, P. 60.)

CSI then funded CSC's 1993 SLAPP suit against plaintiff. (Exh. A, pp. 59-60.)

There is no written agreement for CSC to repay CSI for the defense costs. (Exh. A, p. 60.)

CSI's counsel on 4.11.97 stated in a hearing in Department 14 of this court that CSI financed Wollersheim IV.

Hiring attorneys Earle Cooley was hired to simultaneously represent CSC in the instant case and RTC and CSI in Wollersheim II.

Participation in the defense RTC's present chairman and highest officer in the power hub "Sea Org," David Miscavige, supervised and controlled the defense, along with a few other persons in the corporation ASI.

(Young decl., para. 25; exh. S; pp. 364-366.} Miscavige attended a portion of the trial. (Exh. K.)

Other factors Miscavige ordered Vicki Aznaran to destroy certain files the court had ordered CSC to produce to plaintiff. (Exh. S, p.

333.)

Laches Plaintiff's delay in bringing this motion is excused; further, CSI and RTC have not demonstrated prejudice by the delay.

RTC and CSI did not exist when plaintiff filed his complaint in 1980, so they could not have been joined as defendants. While he could have amended the complaint, his failure to do so is not fatal.

As this court has concluded CSI and RTC are the alter egos of CSC, their interests were adequately represented and protected at trial. Finally, the parties have been in litigation ever since the judgment was rendered, both in federal court and on appeal in state court. Indeed, the notice of final judgment in the instant case did not issue until 1994. (Exh. V.)

Dated: 10-29-97
John P. Shook [Signature]
JUDGE OF THE SUPERIOR COURT