Gerry Armstrong--Transcript of Proceedings 12-01-1995

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IN THE SUPERIOR COURT OF APPEAL OF THE STATE OF CALIFORNIA

IN AND FOR THE COUNTY OF MARIN

BEFORE THE HONORABLE GARY W. THOMAS

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CHURCH OF SCIENTOLOGY
INTERNATIONAL,

PLAINTIFF,

VS.

GERALD ARMSTRONG, ET AL.,

DEFENDANTS

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NO. 157680

REPORTER'S TRANSCRIPT OF THE PROCEEDINGS

FRIDAY, DECEMBER 1, 1995

APPEARANCES:

FOR THE PLAINTIFF:

ANDREW H. WILSON
WILSON, RYAN & CAMPILONGO 115 SANSOME STREET
FOURTH FLOOR
SAN FRANCISCO, CA 94104

LAURIE J. BARTILSON
MOXON & BARTILSON
6255 SUNSET BOULEVARD
SUITE 2000
HOLLYWOOD, CA 90028

FOR THE DEFENDANTS:

FORD GREENE
711 SIR FRANCIS DRAKE
BOULEVARD
SAN ANSELMO, CA 94960

REPORTED BY:
ELAINE PASSARIS, C.S.R.
CERTIFICATE NO. 2948

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FRIDAY, DECEMBER 1, 1995

MORNING SESSION

P R O C E E D I N G S

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THE COURT: WE HAVE THE CHURCH OF SCIENTOLOGY

VERSUS ARMSTRONG.

MR. GREENE: GOOD MORNING, YOUR HONOR.

MR. WILSON: GOOD MORNING. ANDREW WILSON AND

LAURIE BARTILSON.

MR. GREENE: FORD GREENE ON BEHALF OF DEFENDANT

GERALD ARMSTRONG.

THE COURT: I DID RECEIVE, MR. GREENE, YOUR

LETTER. I GUESS YOU SENT A COPY TO THE OTHER SIDE --

MR. GREENE: YES, SIR.

THE COURT: -- SAYING SOMETHING IN ESSENCE THAT

YOUR CLIENT THOUGHT I MIGHT BE PREJUDICED AGAINST HIM

BECAUSE HE'S A RELIGIOUS PERSON.

MR. GREENE: YES, SIR.

THE COURT: WELL, NOTHING COULD BE FURTHER FROM

THE TRUTH.

MR. GREENE: THANK YOU.

THE COURT: NOW, OH, YES. WHO ASKED FOR THE

HEARING?

MS. BARTILSON: WELL, I ASKED FOR A HEARING ON

OUR MOTION FOR SUMMARY ADJUDICATION OF THE DECLARATORY

RELIEF ACTION. I DON'T KNOW IF MR. GREENE ASKED FOR A

HEARING AS WELL.

MR. GREENE: NO, I DID NOT FORMALLY REQUEST ANY

HEARING. THERE ARE A COUPLE OF MATTERS, IF THE COURT WOULD

INDULGE ME, I'D LIKE TO RAISE. IF NOT, I CAN DO IT THROUGH

A MOTION FOR CLARIFICATION AND THAT WOULD BE WITH RESPECT TO

THE SCOPE OF THE COURT'S INJUNCTION.

THE COURT: WELL, YOU GO AHEAD.

MS. BARTILSON: ALL RIGHT. THE MOTION THAT WE

BROUGHT, YOUR HONOR, WAS INTENDED, AND I THINK THAT IT'S

PROBABLY VERY CLEAR TO YOUR HONOR, TO BASICALLY CLOSE OUT

THE CASE AS MUCH AS WE POSSIBLY CAN AT THIS STAGE WHILE

MR. ARMSTRONG IS IN BANRUPTCY. THAT'S WHY WE ASKED FOR

SUMMARY ADJUDICATION OF THE LAST REMAINING COUNT IN

MR. ARMSTRONG'S LAST REMAINING CROSS-COMPLAINT, BUT WE ALSO

ASK FOR DISMISSAL OF CERTAIN BREACH OF CONTRACT CLAIMS THAT

WE HAD BROUGHT FINAL JUDGMENT TO BE ENTERED ON OUR CLIENT'S

BEHALF AND A DETERMINATION IF WE WERE THE PREVAILING PARTY.

WHAT'S HAPPENED, IF YOUR TENTATIVE ORDER GOES

THROUGH, IS THAT ALL OF THE THINGS TO CLOSE OUT THE CASE

WILL OCCUR EXCEPT WE WILL STILL HAVE THIS DECLARATORY RELIEF

ACTION PENDING BEFORE THE COURT.

SO PARTLY I'M ASKING FOR A LITTLE BIT OF

CLARIFICATION ON THAT, BUT ALSO I WOULD LIKE TO ADDRESS THE

MERITS OF THE SUMMARY ADJUDICATION MOTION, BECAUSE I BELIEVE

THAT SUMMARY ADJUDICATION AT THIS TIME IS WARRANTED, AND I'D

LIKE VERY MUCH TO REQUEST THAT YOUR HONOR TAKE ANOTHER LOOK

AT THAT PARTICULAR POINT.

THE MOTION IS DENIED IN YOUR TENTATIVE,

BECAUSE --

THE COURT: I'M NOW LOOKING -- AND THIS IS JUST

SOME OF THE FILES IN THIS CASE (INDICATING). GO AHEAD.

MS. BARTILSON: I KNOW, YOUR HONOR. I KNOW.

THE RATIONALE BEHIND THE RULING IS THAT THERE ARE

TWO PARAGRAPHS THAT MR. ARMSTRONG SEEKS DECLARATORY RELIEF

IN THE AGREEMENT, WHICH YOUR HONOR SAYS YOU HAVEN'T ALREADY

DECIDED BY DECIDING THE MAIN CASE. BUT BOTH OF THOSE

PARAGRAPHS, IF YOULOOK AT THEM, I BELIEVE ARE STATEMENTS OF

GENERAL PURPOSE AND POLICY. THEY'RE NOT PARTICULAR

STATEMENTS REQUIRING ACTION. ONE OF THEM AMOUNTS TO A

STATEMENT THAT MATTERS THAT HAVE ALREADY BEEN LITIGATED,

THAT WERE BEING LITIGATED AT THE TIME OF THE SETTLEMENT,

WILL NOT BE RELITIGATED IN THE FUTURE.

I THINK THAT'S A PROVISION THAT'S --

THE COURT: I THINK ON THE RECONSIDERATION,

BASICALLY NEW OR DIFFERENT FACTS, CIRCUMSTANCES, CHANGES OF

THE LAW, NOT TO COME IN AND RAISE THE SAME ARGUMENTS.

MS. BARTILSON: YOUR HONOR, I'M NOT ADDRESSING

MR. GREENE'S RECONSIDERATION MOTION. I'M ADDRESSING THE

OTHER MOTION THAT'S BEFORE YOU TODAY -- OKAY -- BECAUSE THIS

IS MY INITIAL MOTION, MY ONLY MOTION FOR SUMMARY

ADJUDICATION OF MR. ARMSTRONG'S DECLARATORY RELIEF ACTION.

IT'S THE SECOND ONE ON THE LIST.

THE COURT: GO AHEAD.

MS. BARTILSON: OKAY. BASICALLY YOUR TENTATIVE

SAYS THAT THERE ARE TWO PARAGRAPHS IN THE AGREEMENT THAT YOU

HAVEN'T ALREADY RULED ON, WHETHER OR NOT THEY VIOLATE PUBLIC

POLICY, AND THAT'S THE REASON MR. ARMSTRONG'S

CROSS-COMPLAINT MUST STAY ALIVE. I BELIEVE THAT YOUR HONOR

HAS ALREADY RULED ON THOSE, BECAUSE THEY ARE STATEMENTS OF

POLICY RATHER THAN PARTICULAR CLAIMS THAT ARE SUBSUMED

WITHIN THE RULINGS YOUR HONOR HAS ALREADY ISSUED ON OTHER

SUMMARY ADJUDICATION MOTIONS.

ONE OF THE PARAGRAPHS IS A STATEMENT THAT MATTERS

THAT WERE LITIGATED UP AND TO THE TIME OF THE SETTLEMENT

WON'T BE RELITIGATED IN FUTURE ACTIONS. I THINK THAT'S A

PARAGRAPH THAT ISN'T CONTRARY TO PUBLIC POLICY AND IS INDEED

IN JUST ABOUT EVERY SETTLEMENT AGREEMENT. PEOPLE ARE

DECIDING TO END LITIGATION AND END THEIR DISAGREEMENTS ON

THAT.

THE SECOND PARAGRAPH IS BASICALLY AN EXPRESSION

OF THE COVENANT, WHICH IS NOW IMPLIED BY STATUTE OF GOOD

FAITH AND FAIR DEALING IN EVERY CONTRACT, THAT THE PARTIES

WON'T DO THINGS THAT ARE CONTRARY TO THE AGREEMENT AFTER THE

AGREEMENT HAS BEEN SIGNED. THEY WON'T AFFIRMATIVELY TAKE

ACTIONS IN VIOLATION OF THE AGREEMENT.

BOTH OF THOSE PARAGRAPHS MR. ARMSTRONG WANTS TO

HAVE DECLARATORY -- DECLARE AGAINST PUBLIC POLICY. THAT'S

THE ESSENCE OF THIS DECLARATORY RELIEF ACTION.

THE COURT: 7(I) AND -- 7(I) AND 18(E).

MS. BARTILSON: THAT'S CORRECT, AND I BELIEVE IF

YOU TAKE ANOTHER LOOK AT THOSE, YOU'LL SEE THAT THEY'RE

REALLY, IN ADDITION TO WHETHER OR NOT THEY'RE SUBSUMED UNDER

YOUR EARLIER RULINGS ENFORCING THE AGREEMENT, ENFORCING

SPECIFIC PROVISIONS OF THE AGREEMENT, THERE'S NO PARTICULAR

CONTROVERSY BETWEEN THESE PARTIES AS TO THOSE PARTICULAR

PARAGRAPHS. MR. ARMSTRONG'S NEVER BEEN SUED ON THEM. NO

ONE'S TRIED TO ENFORCE THEM AGAINST HIM.

IF THERE'S NO CONTROVERSY, HE'S NOT ENTITLED TO A

DECLARATION THAT THEY'RE IN VIOLATION OF PUBLIC POLICY, AND

I HAVE A COUPLE OF CASES THAT I'D LIKE TO CITE TO YOU ON

THAT. THE FIRST ONE IS CALLED --

THE COURT: JUST A MOMENT. HAVE THEY BEEN

PREVIOUSLY CITED?

MS. BARTILSON: NO, THEY HAVE NOT.

THE COURT: WELL, THEN IT'S ANOTHER MATTER.

MS. BARTILSON: OKAY. THEN I WON'T GIVE THEM TO

YOU. BUT I DO THINK IT'S REALLY IMPORTANT TO LOOK AT THESE

PARAGRAPHS, BECAUSE IF YOU DON'T, YOUR HONOR, WE'RE LEFT IN

THE POSTURE WHERE THE FRAUDULENT CONVEYANCE ACTION HAS BEEN

SEVERED, THAT'S YOUR ORDER, FOR A LATER DETERMINATION AFTER

THE BANKRUPTCY'S COMPLETED OR BY THE BANRUPTCY TRUSTEE AS

THE BANRUPTCY TRUSTEE DETERMINES.

THE PLAINTIFF'S REMAINING CLAIMS AGAINST

MR. ARMSTRONG ARE DISMISSED. PLAINTIFF IS DECLARED THE

PREVAILING PARTY. PLAINTIFF IS AWARDED ATTORNEY'S FEES AND

COSTS AND THE FINAL JUDGMENT IS ENTERED.

HOWEVER, WE STILL HAVE A CROSS-COMPLAINT ALIVE

SEEKING DECLARATORY RELIEF ON BEHALF OF MR. ARMSTRONG THAT

THESE TWO PROVISIONS OF THE AGREEMENT, NEITHER OF WHICH HAVE

BEEN IN CONTROVERSY BETWEEN THE PARTIES BEFORE, ARE IN

VIOLATION OF PUBLIC POLICY.

THAT'S THE EFFECT OF YOUR TENTATIVE RULING, YOUR

HONOR, AND THAT'S WHY I WANTED A CHANCE TO BRING TO IT YOUR

ATTENTION TODAY AND ASK FOR YOU TO TAKE ANOTHER LOOK IF YOU

COULD.

THE COURT: AND WHAT DO YOU SAY?

MR. GREENE: WITH RESPECT TO YOUR TENTATIVE, YOUR

HONOR, WHAT IT IS BASED ON IS THAT PLAINTIFF HAS NOT MET

THEIR BURDEN, WHICH IN FACT IS TRUE. IN ORDER FOR PLAINTIFF

TO OBTAIN SUMMARY JUDGMENT, THEY'VE GOT TO MAKE AN ADEQUATE

SHOWING. THEY'VE NOT MADE AN ADEQUATE SHOWING.

7(I) IS NOT AS COUNSEL RELATES. 7(I) HAS TO DO

WITH WHETHER OR NOT MATERIAL THAT SCIENTOLOGY AND ARMSTRONG

BOTH OBTAINED UP TO THE POINT OF THE DECEMBER 6, '86,

SETTLEMENT COULD BE USED IN ENSUING LITIGATION BY EITHER

PARTY, BY EITHER PARTY, AND THIS LITIGATION HAS BEEN

SATURATED WITH THAT KIND OF MATERIAL.

BUT THAT DOESN'T -- THAT GETS REALLY MORE INTO

SUBSTANTIVE CONCERNS WHERE WHAT THE COURT'S TENTATIVE WAS

YOU DIDN'T CARRY YOUR BURDEN, AND I UNDERSTAND THAT WHAT

SCIENTOLOGY SEEKS TO DO IS TO BE ABLE TO DISPOSE OF THE

LITIGATION, BUT THEY -- BECAUSE THEY HAVE PREVAILED ON OTHER

CAUSES OF ACTION AND ON THEIR COMPLAINT, DOESN'T MEAN THAT

EVERYTHING IS GONE PARTICULARLY WITH RESPECT TO MATTERS THAT

THEY HAVE NOT ADEQUATELY ADDRESSED IN A MOTION FOR SUMMARY

ADJUDICATION.

SO YOUR TENTATIVE RULING IS CORRECT. THEY DIDN'T

CARRY THEIR BURDEN, AND ARMSTRONG'S CROSS-COMPLAINT STAYS

ALIVE.

THE COURT: WELL, REGARDING 7(I) AND 18(E),

THESE HAVE BEEN, YOU KNOW, ADDRESSED, AND THE PLAINTIFF

HASN'T MET ITS BURDEN AND SO HAS NOT SHOWN THAT IT IS

ENTITLED TO A JUDGMENT ON ARMSTRONG'S FIRST CAUSE OF ACTION.

NOW, WITH REGARD TO THE REQUEST FOR SEVERANCE,

DISMISSAL OF THE UNADJUDICATED BREACH OF CONTRACT CLAIMS AND

DETERMINATION THAT THE PLAINTIFF IS THE PREVAILING PARTY

ENTITLED TO ATTORNEY'S FEES AND COSTS AND TO ENTER THEIR

JUDGMENT, I THINK THAT'S A GOOD REQUEST. EVEN ASSUMING THAT

ARMSTRONG IS SUCCESSFUL IN PURSUING HIS CLAIMS REGARDING

7(I) AND 18(E), THE PLAINTIFF WOULD CLEARLY BE THE

PREVAILING PARTY ON ITS COMPLAINT.

SO THERE'S NO REASON TO CHANGE MY TENTATIVE

RULING WITH REGARD TO THAT. SO THANK YOU.

MR. GREENE: YOUR HONOR --

MS. BARTILSON: THANK YOU, YOUR HONOR.

MR. GREENE: -- IF I MAY FOR A MOMENT, SINCE

WE'RE ALL HERE, THERE ARE FOUR POINTS OF CLARIFICATION WITH

RESPECT TO YOUR PERMANENT INJUNCTION THAT I WOULD LIKE TO

ASK YOU ABOUT. I CAN DO IT EITHER NOW OR I CAN DO IT

THROUGH A MOTION FOR CLARIFICATION. WHATEVER THE COURT'S

PLEASURE IS.

THE COURT: WELL, I THINK YOU SHOULD COMMUNICATE

WITH THE PLAINTIFF AS TO WHAT YOUR DIFFICULTY IS AND SEE IF

YOU CAN AGREE UPON A PROPER WORDING OR MODIFICATION OR NOT,

OR FILE THE MOTION AND I'LL DECIDE IT ONE WAY OR ANOTHER.

MR. GREENE: ALL RIGHT.

THE COURT: THAT WAY BOTH SIDES WILL GET A

HEARING.

MS. BARTILSON: YOUR HONOR, COULD WE SET A STATUS

CONFERENCE IN THAT CASE SINCE WE STILL HAVE ONE CAUSE OF

ACTION?

THE COURT: OH, YES.

MS. BARTILSON: PERHAPS A TRIAL DATE.

THE COURT: YES, I THINK A NICE STATUS CONFERENCE

WOULD BE GOOD, AND WE'LL KEEP TRACK OF THIS SO WE DON'T LOSE

-- I THINK MARCH THE 11TH, 1996, WILL BE A GOOD TIME AT

9:00 A.M. SO WAIT A MOMENT. YOU'LL GET THAT ORDER

REGARDING THE STATUS CONFERENCE, AND YOU HAVE TO PREPARE THE

ORDER WITH REGARD TO THE MOTION HEARD TODAY.

MS. BARTILSON: I WILL, YOUR HONOR.

JUST ONE MORE HOUSEKEEPING MATTER. MR. GREENE

FILED SOME MORE PAPERS UNDER SEAL. WE ASK THAT THEY BE

STRICKEN AT THIS TIME. HE FILED THEM IN CONJUNCTION WITH

THIS MOTION FOR RECONSIDERATION. I DID ASK FOR IT IN THE

MOVING PAPERS, AND THEY WERE THE SAME THINGS THAT WERE FILED

BEFORE.

THE COURT: YOU MEAN THAT THEY BE RETURNED?

MS. BARTILSON: YES, RETURNED.

MR. GREENE: YOUR HONOR, WITH RESPECT TO THAT, WE

WOULD OBJECT. MR. ARMSTRONG IS GOING TO APPEAL YOUR

INJUNCTION OR A PART OF THE RECORD. WE SOUGHT TO ADDRESS

SCIENTOLOGY'S HYPERSENSITIVITY TO THEM BY FILING THEM UNDER

SEAL AND THEY SHOULD REMAIN -- THEY SHOULD REMAIN FOR THE

COURT OF APPEAL TO ADDRESS.

THE COURT: THEY SHOULD REMAIN UNDER SEAL AND NOT

TO BE OPENED EXCEPT UNDER COURT ORDER.

THANK YOU.

MR. WILSON: THANK YOU, YOUR HONOR.

MS. BARTILSON: THANK YOU, YOUR HONOR.

(WHEREUPON, PROCEEDINGS WERE CONCLUDED)

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