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IN THE SUPERIOR COURT OF APPEAL OF THE STATE OF CALIFORNIA

IN AND FOR THE COUNTY OF MARIN

HONORABLE GARY W. THOMAS, PRESIDING         DEPARTMENT 1

CHURCH OF SCIENTOLOGY INTERNATIONAL,

    Plaintiff,

vs. No. 157680

GERALD ARMSTRONG, ET AL.,

    Defendants.

___________________________/

REPORTER'S TRANSCRIPT OF PROCEEDINGS

January 27, 1995

APPEARANCES:

For the Plaintiff:

Andrew Wilson
Laurie Bartilson
Attorneys at Law

 

For the Defendant: Ford Greene
Attorneys at Law

 

 

REPORTED BY: JANICE M. KNETZGER, CSR#4434

 
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January 27, 1995

P R O C E E D I N G S

--o0o---

THE COURT: The Church of Scientology versus

Gerald Armstrong, et al.

MR. GREENE: Ford Greene for defendants.

MR. WILSON: Andrew Wilson and Laurie Bartilson.

THE COURT: I don't encourage these daily

occurrences in this case.

What do you say about this matter,

Mr. Green?

MR. GREENE: The comments that I have are

somewhat extended.

THE COURT: Go ahead.

MR. GREENE: They are as follows:

First of all, with respect to your

tentative ruling as to the enforceability of the

liquidated damages provisions, your tentative ruling did

not take into consideration the reasonability of the

liquidated damages provisions at the time that Armstrong

entered into the Settlement Agreement.

Specifically, what the Court -- at least in

the tentative ruling did not consider -- was the issue

with respect to Armstrong's lack of consent. There were

two areas where that lack of consent was manifested.

THE COURT: I read the transcript. He was asked

 
 

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specifically a great number of questions regarding

settlement. He agreed to it, knew the conditions. He was

bound by it. He was asked whether there was something he

wanted clarified. He did not want it clarified.

MR. GREENE: That's correct.

And that was in reliance on the

representations of his attorney Michael Flynn who had

specifically told Armstrong that the provision requiring a

$50,000 liquidated damages hit any time he mentioned the

Church of Scientology was, quote, "not worth the paper on

which it was written", close quote.

THE COURT: He might have some claim against

Mr. Flynn. That's a different matter.

MR. GREENE: Well, this goes to Armstrong's

ability to consent.

The issue of consent is heightened because

what he was waiving were First Amendment rights,

Constitutional rights.

In order for his consent to be effective,

it had be known, it had be intelligent. It had to be

voluntary. If he was specifically misinformed as to

material provisions of the agreement, that test of

Constitutional voluntrainess was not adequately met.

In addition, not only was there the problem

with respect to the representations made by Flynn to

Armstrong on the enforceability or lack of enforceability

 

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of the provisions, but there is also the question of

Flynn's own conflict of interest.

That conflict of interest took two forms.

One form it took was the fact that he was involved in

settling his own litigation against Armstrong or against

Scientology -- as well as representing some 15 people who

also were involved in litigation against Scientology, all

in the same agreement.

So under those kinds of circumstances,

there had to be a lot greater protections then there were

because of the dual conflicts intrinsic to the manner of

Flynn's representation.

In addition to that, Flynn did not advise

Armstrong that he had engaged in separate side

negotiations with Scientology counsel in furtherance of

the Scientology's objective of overturning Judge

Breckenridge's decision by engineering a lack of

opposition to the appeal by Armstrong.

Flynn talks to Scientology lawyers and

enters into a stipulation that if there is going to be

any kind of retrial, if the non-opposed appeal is

successful, the damages to Armstrong will not exceed one

dollar over the jurisdictional minimum for superior court.

And in addition to that, that Scientology

will indemnify Flynn who, in turn, will indemnify

Armstrong. Armstrong was never advised of this.

 
 

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If Armstrong had been advised of this,

Armstrong would have been on notice that there would have

been more activity involved than his lawyer simply telling

him in response to his questions regarding the

enforceability of $50,000 liquidated damages hits; that

they were not enforceable and weren't worth the paper on

which they were written.

Those issues are not addressed by the Court

in its tentative ruling.

My assertion that in order for Armstrong's

waivers to be valid, it was a Constitutional standard, not

just an ordinary waiver, but the kind of waiver that's

required by the Court in a criminal case.

For example, when a criminal defendant is

pleading guilty is changing his or her plea, that waiver

of the right to counsel and against self-incrimination has

got to be intelligent knowing and voluntary is based on

the ITT versus Duely case 214 C.A. 3d 307 at 319 where

Duely states that when there is a waiver of First

Amendment rights -- which unquestionably is what is at

issue here -- that waiver has got to be intelligent

knowing and voluntary.

The other issue going to the

unreasonableness of the circumstances at the time the

parties entered into the agreement with respect to --

THE COURT: All this is in your papers. Is

 

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there something else?

MR. GREENE: That's not. The Constitutional

waiver part is not in my papers. Indeed, the aspects

having to do with Flynn.

THE COURT: You're alleging something new which

are not in your papers which are not appropriate for

argument here.

MR. GREENE: Well, since the Court did not

address those factual issues and concluded that Armstrong

had not raised any question of fact as to whether or not

he effectively consented to a waiver of his Constitutional

rights, those specific things I believe needed to be

addressed because the Court did not address those.

And also, in the context which I will get

to later with respect to the interview with American

Lawyer where the Court indicated that Armstrong -- his

testimony was not credible because he asserted that he had

already -- that he did not speak about any matters other

than what were covered in the Breckenridge decision to the

American Lawyer reporter and then later admitted in

deposition that he didn't even recall discussing the

decision with the American Lawyer reporter.

He did not assert that in his papers.

In light of the fact that they focused on

Armstrong -- on the mistaken allegation in opposition to

the motion for Summary Judgment that Armstrong says that

 

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when he talked to Bill Horn, it wasn't anything other than

Breckenridge when he didn't assert that in his papers.

Given the gravity of the situation and in

an abundance of caution, it's incumbent upon me to call

the Court's attention to matters that I believe are

central and that the Court did not address in its

tentative ruling.

THE COURT: Any response that you wish to make?

MR. WILSON: Very briefly.

MR. GREENE: Your Honor, just --

THE COURT: Just a moment.

MR. GREENE: I want to make sure the Court's not

cutting me off.

MR. WILSON: I understand Mr. Greene may not be

finished.

MR. GREENE: Right.

THE COURT: He is right now.

MR. WILSON: Good.

THE COURT: Any response?

MR. WILSON: Briefly.

I think all of the stuff is in the papers.

As you indicated, you read the transcript. His consent was

freely given.

He's raised these issues before the Court

in Los Angeles. The Judge didn't buy it. The Court of

Appeal didn't buy it.

 

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Your tentative ruling I think was very

comprehensive on it. I think there is no reason to change

the tentative.

I think what Mr. Greene is arguing -- I

think he's been watching the O.J. trial and he's arguing

that Mr. Armstrong had mental arthritis and couldn't

consent to the settlement.

The only thing I want to -- I'd like you to

take another look at the cause of action you didn't

grant Summary Judgment on. I don't want to be greedy, but I'm

going to be.

If you look at the separate statement --

it's fact number nine. The paragraph that's at issue

provides -- I'm going to paraphrase it.

That plaintiff understands that the

non-disclosure provisions apply to any documents defined

in Exhibit A and they apply that he wouldn't disclose the

substance of his complaint on file in the action referred

to then.

It goes on including documents, tapes,

films, et cetera, and that the declaration that we're

hanging our hat on here which appears as part of Exhibit A

to the evidence says that he is authenticating true and

correct copies of reporter's transcript in that action.

He is authenticating documents that relate

to the substance of his complaint.

 

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For that reason, I believe the Summary

Judgment is appropriate on that cause of action as well.

Finally, with respect to the sanctions that

you granted -- as I said I'm going to be greedy -- I think

they need to be higher. I think Mr. Armstrong just hasn't

got the message.

I think that Ms. Bartilson had to come up

here and appear. We had to spend attorney's fees on this.

I request that the sanctions be in the

amount of $3,000.

I'll respond to whatever Mr. Greene has to

say.

THE COURT: Any response to the request for

sanctions of $3,000?

MR. GREENE: Yes, your Honor.

I think that under the circumstances that

that would be excessive. I'm not going to repeat the

arguments that were made on the exparte application that

were before you yesterday.

I will, however, incorporate all of those

arguments now.

I think that there certainly is no question

but that with respect to late filed papers, Mr. Armstrong

has gotten the message that papers cannot be filed late

willi nilly without any application to the Court.

Under the circumstances, I think $700 is

 

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plenty in order to have Mr. Armstrong understand.

THE COURT: With regard to this case, it's

obvious from the very terms, the agreement was to buy

silence.

Your client got some half a million dollars

more or less for it and he got advice from not one but two

attorneys. He stated on the record that the agreement was

made of his own free will and you have argued that

Mr. Armstrong did not have the benefit of active counsel.

When you look at the statements of

Mr. Armstrong, there is no showing of duress whatsoever it

looks like and I find that Mr. Armstrong carefully weighed

the options, the benefits of the settlement as opposed to

the detriment and giving up of certain rights he has. One

of them is the requirement of silence.

There is no showing of any duress. It

shows that Mr. Armstrong by his own declarations carefully

weighed his options. He did not do something against his

will. He did not succumb to the other persons.

With regard to the matter, there is no

reason to change my tentative ruling.

With regard to the complaint made by the

plaintiff here involving the 11th cause of action -- I'm

relying upon the papers on this motion for Summary

Adjudication of the issues -- the papers do not

sufficiently address Paragraph D --

 

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MR. GREENE: 7-D.

THE COURT: -- so I did not grant it.

With regard to the fourth and sixth cause

of action, I granted that as set forth in my tentative

ruling which becomes the final ruling and denied it as to

the 11th cause of action.

With regard to the motion to strike, I have

granted the motion to strike. As I've indicated, the

papers were filed some six days late.

There was no attempt made by you Mr. Greene

or anyone connected with you to obtain permission of the

Court to file late papers which, from the checking in my

file, I previously granted to you or considered the filed

late papers that were just perhaps one or two days late --

MR. GREENE: Yes.

THE COURT: -- and granted it upon some minor

sanction.

With regard to the amount of $700, I think

it is reasonable when one considers the time consumed and

the fact that when we're talking about six days late, you

knew that it was more than we're talking about, an our or

two hours or one day possibly late.

Finding that to be in bad faith, therefore,

the sanctions are granted as prayed but the amount of

$3,000 is not the amount.

The amount of $700 should be payable within

 

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20 days.

MR. GREENE: All right.

I apologize to the Court for allowing those

papers to be filed late and do recognize and appreciate

the Court's comments with respect to leeway that's been

provided in the past.

One thing I want to point out that

Armstrong's defense privilege was not addressed at all in

the Court's tentative ruling.

THE COURT: It was definitely with regard to the

matter and I decided and weighed whether there was any

duress and whether he had sufficient counsel advice with

regard to the matter and .I found that he had.

He, obviously, was your client and from a

reading of his own declarations an intelligent person and

at the time he advised the Court that he had given this

agreement, it was made under his own free will.

A person coming from the background of

Mr. Armstrong, that means something.

I thank you. You prepare the order.

MR. WILSON: A housekeeping matter.

Will the declarations that were stricken --

Can they be returned so that they are not in the court

file --

THE COURT: Yes, they can be.

MR. WILSON: -- or put in the circular file?

 

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THE COURT: Take the originals out. Those

documents that I struck.

MR. WILSON: When you consolidated these two

cases, you may recall you had previously ordered that

Mr. Benz be the discovery referee for the case. That was

here before they were consolidated.

There is currently pending a motion before

Mr. Benz relating to discovery on the consolidated case.

Mr. Greene said because there was no formal

order appointing Mr. Benz in the latter case that he's not

going to be appearing before

Mr. Benz on a motion as to which he filed opposition.

THE COURT: Yes. He so appointed with regard to

the consolidated case.

MR. WILSON: Thank you.

MR. GREENE: With respect to that, Your Honor,

for the record, on behalf of Mr. Armstrong I object to

that appointment --

THE COURT: The record may so reflect.

MR. GREENE: -- and object to further payment of

his fees.

THE COURT: Yes.

MR. WILSON: Thank you, Your Honor. Sorry we

have taken so much of your time this week.

---o0o---

(Whereupon, the matter calendared for this date

 

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concluded.)

 

Janice M. Knetzger CSR #4434

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