Reporter's Transcript of Proceedings

CSI v. Gerald Armstrong, Robert Minton, Lisa McPherson Trust

IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA

IN AND FOR THE COUNTY OF MARIN

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HON. LYNN DURYEE, JUDGE

DEPARTMENT NO. 7

CHURCH OF SCIENTOLOGY INTERNATIONAL

PLAINTIFF

VS.

GERALD ARMSTRONG, ET AL

DEFENDANTS

)

) NO. CV021632

)

REPORTER'S TRANSCRIPT OF PROCEEDINGS

FRIDAY, APRIL 9, 2004

REPORTED BY: DEBORAH S. BARTUNEK, CSR 4822

A-P-P-E-A-R-A-N-C-E-S

FOR THE PLAINTIFFS: ANDREW WILSON, ESQ.

FOR THE DEFENDANT: FORD GREENE, ESQ.
711 SIR FRANCIS DRAKE BLVD. SAN ANSELMO, CA 94960

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FRIDAY, APRIL 9, 2004 AM SESSION

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P-R-O-C-E-E-D-I-N-G-S

THE COURT: CHURCH OF SCIENTOLOGY INTERNATIONAL VERSUS GERALD ARMSTRONG.

MR. WILSON: ANDREW WILSON FOR THE CHURCH OF SCIENTOLOGY.

CASE IS READY.

MR. GREENE: GOOD MORNING, YOUR HONOR.

FORD GREENE APPEARING ON BEHALF OF AND WITH GERALD ARMSTRONG.

THE COURT: GOOD MORNING.

ARE YOU READY FOR TRIAL?

MR. GREENE: WE'RE READY TO PROCEED.

THE COURT: OKAY.

SO THERE WERE SOME IN LIMINE MOTIONS THAT WERE DELIVERED TO ME. I'LL TAKE A LOOK AT THEM, THEN I'LL RULE ON THEM IN A MOMENT.

IS THERE ANYTHING ELSE THAT EITHER SIDE WANTS FROM ME?

MR. GREENE: YES, YOUR HONOR. THERE'S ALSO A MATTER OF TWO OUTSTANDING CIVIL BENCH WARRANTS FOR MR. ARMSTRONG AND WE NEED TO ADDRESS THOSE. THOSE ARE NOT IN THE CASE WITH A FILE NUMBER THAT'S BEFORE THIS COURT.

IT'S THE PREVIOUS CASE THAT'S REFERRED TO. AND WE'RE CONCERNED THAT AT ANY POINT MR. ARMSTRONG COULD BE TAKEN INTO CUSTODY. AND SO WE'D LIKE TO ADDRESS THAT BEFORE YOU, IF WE CAN.

THE COURT: ALL RIGHT.

MR. WILSON: YOUR HONOR, WE WOULD LIKE TO ADDRESS THAT, AS WELL. THE BENCH WARRANTS, AS YOU MAY KNOW --

THE COURT: I DON'T KNOW.

MR. WILSON: -- ONLY LAST A YEAR IN THIS COURT. I FOUND THAT OUT A COUPLE DAYS AGO WHEN I WAS TRYING TO FIND OUT WHETHER THE BENCH WARRANTS WERE IN FACT OUTSTANDING. SO THEY'RE NOT OUTSTANDING.

THE COURT: WHO ISSUED THE BENCH WARRANTS?

MR. WILSON: BENCH WARRANTS WERE ISSUED BY JUDGES THOMAS AND SMITH.

THE COURT: OKAY. WHICH SMITH?

MR. WILSON: VERN.

THE COURT: OKAY.

MR. WILSON: THEY WERE ISSUED AS A RESULT OF JUDGES THOMAS AND SMITH FINDING MR. ARMSTRONG IN CONTEMPT. JUDGE THOMAS FOUND MR. ARMSTRONG IN CONTEMPT TWICE AND HE IMPOSED SENTENCE WHICH I BELIEVE TOTALLED APPROXIMATELY 40 DAYS. I COULD BE WRONG. I CAN TELL YOU EXACTLY WHAT THEY WERE.

JUDGE SMITH, ON THE LAST CONTEMPT, WHICH HAPPENS TO BE -- WHICH HAPPENS TO ARISE OUT OF THE 131 BREACHES THAT WE'RE SEEKING TO RECOVER ON HERE, IN WHICH JUDGE SMITH -- THOSE WERE IN FACT BREACHES AND VIOLATIONS OF THE INJUNCTION -- HELD MR. ARMSTRONG IN CONTEMPT FOR THOSE VIOLATIONS, BUT HELD OFF ON IMPOSING SENTENCE, BECAUSE MR. ARMSTRONG HAD FLED THE

JURISDICTION. AND THE ORDER THAT HE ISSUED SAID THAT HE WOULD IMPOSE SENTENCE ON THOSE CONTEMPTS WHEN MR. ARMSTRONG WAS BROUGHT BACK TO COURT.

NOW WE THINK MR. ARMSTRONG, BEING HERE, SHOULD ALLOW HIM TO PRESENT WHATEVER CASE HE'S GOING TO PRESENT, BUT HE SHOULD NOT BE ALLOWED TO LEAVE THE JURISDICTION UNTIL HE HAS SERVED THE TIME THAT HE HAS BEEN SENTENCED TO AND UNTIL HE HAS BEEN SENTENCED FOR THE THIRD CONTEMPT THAT JUDGE SMITH WITHHELD SENTENCING ON.

THE COURT: SO WHEN WERE THESE ORDERS ISSUED?

MR. WILSON: THE ORDERS WERE ISSUED IN -- I ACTUALLY HAVE THE FIRST AND SECOND ORDERS OF CONTEMPT. THE FIRST ONE WAS ISSUED ON JULY 5TH OF 1997, AND THE SECOND ONE WAS FEBRUARY 20 OF 1998. THE THIRD ONE WAS, I BELIEVE, JULY 12 OR 13TH OF 2001. THIRD ONE IS ONE THAT WAS ISSUED BY JUDGE SMITH.

THE COURT: OKAY. SO IF THE BENCH WARRANTS WERE ONLY VALID FOR A YEAR, DO WE HAVE A PROBLEM?

MR. WILSON: WELL, WE HAVE A PROBLEM. THE PROBLEM IS THAT WE DON'T BELIEVE THAT MR. ARMSTRONG SHOULD BE ALLOWED -- WE BELIEVE HE SHOULD BE ALLOWED TO PRESENT HIS CASE. I DON'T WANT HIM TAKEN TO JAIL SO HE CAN'T PRESENT HIS CASE, BUT HE NEEDS TO SERVE THE TIME THAT HE WAS SENTENCED TO. AND HE SHOULD BE SENTENCED FOR THE THIRD CONTEMPT.

THE COURT: SO HE'S NOT BEEN SENTENCED ON THE THIRD?

MR. WILSON: HE'S NOT BEEN SENTENCED ON THE THIRD CONTEMPT.

THE COURT: ALL RIGHT.

MR. WILSON: NOW, HOWEVER THE COURT WISHES TO ACHIEVE THAT RESULT IS FINE WITH US.

THE COURT: WELL, SO WHAT OCCURS TO ME IS TO STAY THE WARRANTS, TO SET THEM FOR A HEARING AT THE END OF THIS CASE.

MR. GREENE: THAT WOULD BE GREAT.

THE COURT: SO THERE'S NOT A CONCERN ABOUT HIS BEING TAKEN INTO CUSTODY, BUT WE HAVE A HEARING DATE ON THE VALIDITY OF THEM AND THE SENTENCING ON THE THIRD CONTEMPT.

MR. WILSON: THAT'S FINE. I DON'T BELIEVE THERE'S AN ISSUE ABOUT VALIDITY, BUT HE --

THE COURT: OR WHATEVER ISSUES.

MR. WILSON: WHATEVER HE WANTS TO RAISE.

WHAT ASSURANCE DO WE HAVE THAT ONCE THE CASE -- WE FINISH THE CASE, WHICH WE THINK ISN'T GOING TO TAKE VERY LONG, BUT WE COULD BE WRONG, THAT HE DOESN'T JUST LEAVE LIKE HE DID LAST TIME?

MR. GREENE: FIRST, WE OBJECT TO THESE CHARACTERIZATIONS OF HOW MR. ARMSTRONG FLED THE JURISDICTION AND HOW HE LEFT LAST TIME.

I HAVE SPOKEN WITH MR. ARMSTRONG. I HAVE KNOWN HIM FOR 13 YEARS. HE HAS GIVEN ME HIS WORD THAT HE WILL FACE WHATEVER MUSIC IT IS THAT HE HAS TO FACE, SERVE WHATEVER TIME OR PENALTY, IF THAT'S THE CASE, HE

WILL DO THAT. AND I FEEL SUFFICIENTLY CONFIDENT IN MR. ARMSTRONG'S WORD TO ME TO BE ABLE TO GIVE MY WORD TO THE COURT THAT HE'S NOT GOING TO GO ANYWHERE AT THE CONCLUSION OF THIS CASE, OR BEFORE ANY HEARING ON THE WARRANTS THAT THE COURT SETS.

THE COURT: OKAY. HAVE A SEAT EVERYONE.

I THINK I'LL THINK ABOUT THAT.

HOW MANY WITNESSES DO WE HAVE FOR PLAINTIFF?

MR. WILSON: WE DON'T BELIEVE WE'LL NEED ANY WITNESSES UNLESS WE HAVE TO AUTHENTICATE THE POSTINGS THAT ARE EVIDENCE OF THE 131 BREACHES.

THE COURT: OKAY. SO YOU HAVE SOME DOCUMENTS?

MR. WILSON: WE HAVE EXHIBITS TO PROFFER AND OUR TRIAL BRIEF DEALS WITH THE EVIDENTIARY ISSUES.

I THINK THAT THE COURT CAN TAKE JUDICIAL NOTICE AND SHOULD TAKE JUDICIAL NOTICE OF ALL OF THE PLEADINGS IN THE PRIOR CASE. I THINK THAT'S EXHIBITS 1 THROUGH 12 OR 13. THE BALANCE OF THE EXHIBITS ARE THE 131 POSTINGS. THE COURT SHOULD ADMIT THOSE ON TWO GROUNDS. NUMBER ONE --

THE COURT: I'LL GET INTO THAT IN A MOMENT.

SO I'M JUST TRYING TO PICTURE HOW MUCH TIME IS GOING TO BE INVOLVED IN THIS.

MR. WILSON: PROBABLY DEPENDS ON THE MOTION IN LIMINE.

THE COURT: OKAY.

MR. WILSON: AND IF I MAY SAY ONE THING, WE DID

RECEIVE FROM MR. GREENE, AT 4:45 YESTERDAY, OPPOSITION

TO THE MOTION IN LIMINE. AND WE HAVE A REPLY, WHICH I'VE GIVEN MR. GREENE, AND I WOULD LIKE TO GIVE TO THE COURT.

THE COURT: ALL RIGHT.

HOW MANY WITNESSES FOR THE DEFENSE?

MR. GREENE: ONE, MAYBE TWO.

THE COURT: OKAY. THERE WAS -- MR. ARMSTRONG DID REQUEST A JURY TRIAL, HOWEVER DID NOT FOLLOW THROUGH ON THE PROCEDURES FOR SECURING A JURY TRIAL. THERE WAS NO ADDITIONAL FEE WAIVERS.

SO MY THOUGHT IS TO PROCEED AS A COURT TRIAL.

MR. GREENE: THAT'S AGREEABLE, YOUR HONOR.

THE COURT: ALL RIGHT. SO I'LL TAKE A LOOK AT THE PAPERS AND THEN WE'LL PROCEED. IF YOU WOULD SHOW MR. GREENE THE DOCUMENTS THAT YOU INTEND TO MARK THEN HE CAN LOOK AT THOSE BEFORE WE HAVE THEM MARKED. AND IF YOU HAVE ANY DOCUMENTS THAT YOU INTEND TO PRODUCE PERHAPS YOU CAN SHOW COUNSEL THOSE.

MR. GREENE: LET ME ADD ONE THING, YOUR HONOR.

WHAT I WOULD LIKE TO DO, IF IT WOULD BE ALL RIGHT WITH THE COURT -- MR. ARMSTRONG HIRED ME YESTERDAY. IF WE COULD PROCEED WITH THE PLAINTIFF'S CASE TODAY, GIVE US THE WEEKEND TO LINE OUR DUCKS UP TO BE READY MONDAY THAT WOULD --

THE COURT: THAT'S YOUR REQUEST.

ALL RIGHT. THANKS.

(WHEREUPON, A RECESS WAS TAKEN AT 9:20 AM)

THE COURT: ALL RIGHT. PLAINTIFF'S IN LIMINE MOTION SEEKS TO PRECLUDE DEFENDANT FROM INTRODUCING ANY EVIDENCES -- ANY EVIDENCE OF THE DEFENSES RAISED IN THIS ACTION ON THE GROUNDS OF COLLATERAL ESTOPPEL, RES JUDICATA, THAT ALL OF THESE DEFENSES WERE RAISED IN THE EARLIER ACTION THAT JUDGE THOMAS DECIDED IN 1995.

AND DEFENDANT CLAIMS THAT BECAUSE OF THE CONSTITUTIONAL ISSUES INVOLVED, FIRST AMENDMENT AND RELIGIOUS FREEDOM, THAT WE SHOULD BE ABLE TO HAVE A FULL REHEARING ON ALL OF THESE ISSUES.

SO I'LL HEAR ARGUMENT ON IT.

I GUESS MY QUESTION FOR THE DEFENSE IS HOW MR. ARMSTRONG'S ACCEPTANCE OF THE $800,000 IN THE SETTLEMENT OF HIS CLAIMS AND THE CONTRACT ISSUES THAT EXIST -- IN OTHER WORDS, THIS IS NOT JUST A CASE ABOUT FREE SPEECH. IN SOME WAYS HE SIGNED ON FOR THIS WHEN HE ACCEPTED THE SETTLEMENT WITH THE CHURCH.

SO I'LL HEAR FROM YOU, MR. WILSON, THEN I'LL HEAR YOUR OPPOSITION.

MR. WILSON: THANK YOU, YOUR HONOR.

AS YOUR HONOR KNOWS, IT'S NOT A CASE ABOUT PURE FREE SPEECH. AS JUDGE THOMAS FOUND, AND I THINK IN ONE OF THE SUMMARY JUDGMENT ORDERS HE SPECIFICALLY MADE A FINDING, THAT FREE SPEECH CAN BE CONTRACTED AWAY. MR. ARMSTRONG CONTRACTED AWAY HIS RIGHT TO SPEAK ABOUT THE CHURCH. THAT'S WHAT JUDGE THOMAS RULED IN GRANTING SUMMARY JUDGMENT.

SO THAT DEFENSE, FOR SURE, WAS LITIGATED IN

THE PRIOR ACTION. THE ONLY DEFENSE THAT WASN'T LITIGATED IN THE PRIOR ACTION WAS THE NEW DEFENSE OF FREEDOM FROM SLAVERY.

AS WE POINT OUT IN OUR PAPERS, THAT EVEN ASSUMING IT COULD BE A DEFENSE, EVEN GIVING THEM THAT, IT COULD HAVE BEEN RAISED IN THE PRIOR ACTION. THAT'S WHAT THE CASES SAY, THAT ANY ISSUE THAT WAS EITHER DECIDED OR NECESSARILY DECIDED OR COULD HAVE BEEN RAISED, IS PRECLUDED.

NOW, ALL OF THE AFFIRMATIVE DEFENSES WERE NECESSARILY DECIDED AGAINST MR. ARMSTRONG BY VIRTUE OF THE GRANT OF SUMMARY JUDGMENT WHICH BECAME THE FINAL JUDGMENT FROM WHICH MR. ARMSTRONG APPEALED AND HIS APPEAL WAS DISMISSED.

THE COURT: YOUR POSITION IN THIS CASE IS THE EXACT SAME, THERE'S NOTHING NEW ABOUT THIS CASE?

MR. WILSON: THERE IS NOTHING NEW. IT'S THE SAME CONTRACT. IN FACT THE 131 BREACHES THAT WE'RE TRYING TO RECOVER FOR --

THE COURT: HAVE ALREADY BEEN DECIDED?

MR. WILSON: THAT'S RIGHT. THEY'VE ALREADY BEEN DECIDED TO BE VIOLATIONS. I WANT TO GET A LITTLE BIT TECHNICAL SO I DON'T GET ACCUSED OF GLOSSING SOMETHING OVER. THE INJUNCTION PARROTED THE LANGUAGE OF THE CONTRACT.

THE COURT: SO THE SETTLEMENT AGREEMENT CONTAINED THE RIGHT FOR THE CHURCH TO OBTAIN INJUNCTIVE RELIEF?

MR. WILSON: YES, IT DID. AND THE SETTLEMENT AGREEMENT, THE LANGUAGE OF THE SETTLEMENT AGREEMENT, WHICH PROHIBITED MR. ARMSTRONG FROM MAKING THE STATEMENTS THAT HE MADE, WAS TRACKED IN THE INJUNCTION.

JUDGE SMITH FOUND THAT THOSE WERE VIOLATIONS OF THE INJUNCTION AND HENCE THE AGREEMENT.

THERE'S NOTHING FURTHER TO BE LITIGATED.

THE COURT: WAS THE ISSUE OF THE CONSTITUTIONALITY OF THE INJUNCTIVE RELIEF REGARDING SPEECH LITIGATED?

MR. WILSON: YES, IT WAS. THE SUMMARY JUDGMENT ORDER -- IF I MAY?

THE COURT: I HAVE IT.

MR. WILSON: I THINK IT'S EITHER SEVEN OR

EIGHT.

THE COURT: IT'S EIGHT. WELL, SEVEN IS THE ORDER ON THE PERMANENT INJUNCTION AND EIGHT IS THE JUDGMENT WHICH WAS BASED ON SUMMARY JUDGMENT.

MR. WILSON: AND ALL OF THOSE CONSTITUTIONAL ISSUES WERE ISSUED. AND I BELIEVE THAT IN THE --

THERE'S ANOTHER ONE THAT I'D LIKE TO DIRECT YOUR ATTENTION TO, SIX. IF YOU LOOK AT EXHIBIT 6, WHICH IS --

THE COURT: THE ORDER ON SUMMARY JUDGMENT.

MR. WILSON: RIGHT.

IF YOU LOOK AT PAGE TWO THROUGH THREE AND FOUR, YOU SEE THAT JUDGE THOMAS DISCUSSES IN DETAIL THE VALIDITY OF THE DAMAGES PROVISION. HE DISCUSSES MR.

ARMSTRONG'S DURESS ARGUMENTS. HE DISCUSSES HIS FRAUD ARGUMENTS. AND THEN HE DISCUSSES, ON PAGE FOUR, THE FIRST AMENDMENT ARGUMENT SAYING FIRST AMENDMENT RIGHTS MAY BE WAIVED BY CONTRACT, WHICH WAS WHAT WAS ARGUED.

THE ONLY THING THAT WAS NOT ARGUED, THAT APPARENTLY MR. ARMSTRONG IS ARGUING TODAY, IS THE FREEDOM FROM SLAVERY ARGUMENT.

EVEN IF HE HAD NOT RAISED ANY OF THOSE ISSUES -- I MEAN LET'S JUST SAY HE HADN'T RAISED THE FIRST AMENDMENT, HADN'T RAISED FRAUD, HADN'T RAISED DURESS IN ARGUING AGAINST SUMMARY JUDGMENT, HE RAISED THEM IN HIS ANSWER AND NECESSARILY THEY WERE DECIDED AGAINST HIM WHEN THE JUDGMENT WAS FINAL.

THE COURT: OKAY.

MR. WILSON: IF I MAY SAY ONE MORE WORD ABOUT THE CASES MR. GREENE RELIES ON.

THE COURT: YES.

MR. WILSON: THE MYERS VERSUS GREENFIELD (PHONETIC) CASE, WAS A CASE IN WHICH -- IT WAS A COLLECTION CASE IN WHICH THERE WERE TWO JUDGMENTS IN LOS ANGELES COUNTY, THEN A THIRD JUDGMENT WAS PROCURED IN SAN FRANCISCO WHICH WAS INCONSISTENT WITH THE FIRST TWO JUDGMENTS. AND ON THAT BASIS THE COURT HELD THAT RES JUDICATA SLASH COLLATERAL ESTOPPEL DID NOT APPLY, APPARENTLY ON THE BASIS OF UNFAIRNESS OR IMPOSSIBILITY.

HAS NO APPLICATION HERE.

THE OTHER TWO CASES ARE EVEN LESS APPLICABLE. THE FIRST ONE, WHICH WAS THE STATE OF

CALIFORNIA -- CITY OF SACRAMENTO VERSUS STATE OF CALIFORNIA CASE, DEALS WITH THE SO-CALLED PUBLIC INTEREST EXEMPTION. IN THAT CASE THERE WAS AN ISSUE REGARDING TAXATION AND REIMBURSEMENT DECIDED AGAINST THE STATE OF CALIFORNIA. AND THEN ON A SUBSEQUENT CASE THE ISSUE WAS WHETHER THAT PRECLUDED ALL OF THE CITIZENS FROM THE STATE OF CALIFORNIA AND THE MUNICIPALITIES FROM LITIGATING THE ISSUE OVER. THE COURT SAID, NO, IT DIDN'T BECAUSE IT'S A PUBLIC INTEREST. JUST BECAUSE THE STATE IS PRECLUDED DOESN'T MEAN THE CITIZENS ARE PRECLUDED. THE COURT ALSO SAID THAT THE INDIVIDUAL CLAIMS THAT WERE LITIGATED ARE PRECLUDED.

SO IF YOU APPLY THAT CASE TO THIS SITUATION WHAT YOU WOULD SAY IS, WELL, MR. ARMSTRONG'S INDIVIDUAL CLAIMS WERE LITIGATED. THAT CASE REALLY WAS AN ISSUE OF PRIVITY, WHETHER THE STATE WAS IN PRIVITY WITH THE CITIZENS SO THE DOCTRINE COULD APPLY.

THE KOPP CASE, WHICH IS THE THIRD CASE THAT THEY CITE, IF YOU READ IT IT'S PRETTY CLEAR THAT WHAT THE COURT IS CONCERNED WITH IS THAT A FEDERAL COURT DECIDED AN ISSUE OF STATE LAW THAT HAD TO DO WITH FAIR POLITICAL PRACTICES. THE COURT HAD A LONG DISCUSSION ABOUT HOW THE FEDERAL COURTS -- IN MANY STATES YOU CAN CERTIFY ISSUES TO THEM, BUT WE DON'T HAVE IT HERE IN CALIFORNIA.

AND IT'S PRETTY CLEAR THAT THE REASON WHY THAT CASE HELD THAT COLLATERAL ESTOPPEL DIDN'T APPLY WAS BECAUSE THE COURT WANTED THE CALIFORNIA COURTS RATHER

THAN THE FEDERAL COURT TO DECIDE THAT ISSUE.

SO NONE OF THESE THREE CASES HAS ANYTHING TO DO WITH THIS CASE.

THE COURT: SO HERE'S MY QUESTION. THE CONTRACT BETWEEN THE PARTIES WAS BASED ON CONSIDERATION OF THE CHURCH PAYING $800,000 TO MR. ARMSTRONG. SO NOW WE HAVE SUBSEQUENT ACTIONS WHERE MR. ARMSTRONG CONTINUES TO HAVE MONETARY LIQUIDATED DAMAGES IMPOSED AGAINST HIM FOR HIS VIOLATION OF THE SETTLEMENT AGREEMENT.

MR. WILSON: RIGHT.

THE COURT: OKAY. SO WHAT HAPPENS WHEN WE REACH THE POINT THAT HE HAS AN OBLIGATION TO PAY THE CHURCH MORE THAN WHAT HE RECEIVED? WHAT ABOUT THAT?

HOW DOES THAT AFFECT THE RIGHTS BETWEEN THE PARTIES?

MR. WILSON: DOESN'T AFFECT IT AT ALL.

THE COURT: BECAUSE?

MR. WILSON: BECAUSE THE LIQUIDATED DAMAGES -- HE BARGAINED FOR -- HE BARGAINED FOR THE LIQUIDATED PROVISION THAT PROVIDED FOR $50,000 FOR EACH BREACH. THAT WAS IN THE NATURE OF INCENTIVE FOR HIM NOT TO BREACH.

THE COURT: SO YOUR POSITION IS ONCE HE MADE THAT DEAL HE FOREVER GAVE UP HIS RIGHTS TO SPEECH AGAINST THE CHURCH?

MR. WILSON: HE DID. HE TOOK $800,000 FOR IT.

I MEAN, OTHERWISE IT WOULD BE, OKAY, WELL, I TOOK $800,000 SO I GUESS, YOU KNOW, I SHOULDN'T -- WHAT, THAT'S 40 BREACHES, SO AFTER 40 BREACHES I CAN'T BE

PUNISHED? THERE'S NO LAW, I MEAN THERE'S NOTHING THAT WOULD SUPPORT THAT.

THE COURT: OKAY. ANYTHING ELSE?

MR. WILSON: NO.

THE COURT: ALL RIGHT.

MR. GREENE.

MR. GREENE: OKAY.

FIRST, YOUR HONOR, IT'S ABSOLUTELY TRUE THAT THERE WAS LITIGATION THROUGH SUMMARY JUDGMENT. OBVIOUSLY THE NUMBER OF PROBLEMS THAT WE HAVE, AND WHAT OUR POSITION IS, IS THAT WITH RESPECT TO SUMMARY JUDGMENT THAT THERE WASN'T AN ACTUAL LITIGATION OF THE ISSUE BECAUSE JUDGE THOMAS WOULDN'T REALLY LOOK AT THE ISSUES.

FOR EXAMPLE, THE ITT VERSUS DOOLEY CASE, WHICH IS THE CASE THAT SAYS YOU CAN CONTRACT AWAY YOUR FIRST AMENDMENT RIGHTS, SAYS THAT IN ORDER TO DO SO THERE HAS TO BE SOMETHING AKIN TO A CONSTITUTIONAL WAIVER. THAT THE CONTRACTING AWAY HAS GOT TO BE KNOWING, IT'S GOT TO BE VOLUNTARY, IT'S GOT TO BE INTENTIONAL.

ALTHOUGH WE RAISED IT, HE REFUSED TO ADDRESS THAT AND MADE A LEGAL NOT A FACTUAL DETERMINATION WITH RESPECT TO THAT ISSUE.

THE COURT: DOESN'T THE SETTLEMENT AGREEMENT SAY THERE WAS A KNOWING, VOLUNTARY ENTERING INTO THE SETTLEMENT AGREEMENT?

MR. GREENE: THE SETTLEMENT AGREEMENT SAYS

THAT. AND THAT BRINGS US QUICKLY TO WHAT JUDGE THOMAS DID, WHICH WAS TO LOOK AT THE FOUR CORNERS OF THE AGREEMENT AND SAY, THAT'S IT, THIS IS ENOUGH, I'M NOT GOING TO HEAR ANY EVIDENCE ABOUT WHAT THE CIRCUMSTANCES WERE. I'M NOT GOING TO HEAR ANY EVIDENCE ABOUT WHAT THE INTENTION OF THE PARTIES WERE. I DON'T NEED TO GO ANY FURTHER THAN THAT.

THAT'S WHERE OUR POSITION BEFORE YOU IS.

MR. ARMSTRONG NEVER HAD AN OPPORTUNITY TO HAVE HIS DAY IN COURT. HE NEVER HAD AN OPPORTUNITY TO LITIGATE WHAT THE AGREEMENT REALLY MEANT.

NOW, IN ORDER FOR MR. ARMSTRONG TO BE ABLE TO DO THAT THE AGREEMENT ITSELF HAS GOT TO CONTAIN SOME SORT OF INTRINSIC AMBIGUITY. IF YOU DON'T HAVE AN INTRINSIC AMBIGUITY IN THE AGREEMENT, YOU DON'T GET TO GO OUTSIDE THE AGREEMENT. YOU -- YOU DON'T GET TO RELY ON EXTRINSIC EVIDENCE AS A MEANS OF MAKING A DECISION OF WHAT THE INTENTION OF THE PARTIES WERE.

AND IN THIS PARTICULAR AGREEMENT, FOR EXAMPLE IN PARAGRAPH 7(I), WHAT WE TRIED -- WHAT I TRIED TO DO, BECAUSE I REPRESENTED MR. ARMSTRONG THEN, WAS TO SAY THAT THE AGREEMENT -- THE THEORY OF OUR DEFENSE WAS THAT THE AGREEMENT WAS MUTUAL. BOTH SIDES HAD TO SHUT UP ABOUT EACH OTHER. AND THAT SCIENTOLOGY STARTED TO DISPARAGE MR. ARMSTRONG IN THE PRESS, IN OTHER COURT CASES AND OTHER CONTEXTS, AND THAT HE RESPONDED TO THAT, AND THAT, IN THE PROVISIONS AND THE UNDERSTANDING OF THE PARTIES, WAS THAT IT WAS GOING -- THAT THE AGREEMENT WAS

MUTUAL AND GAG ORDERS IN AFFECT WERE MUTUAL. ONCE SCIENTOLOGY STARTED TO DISPARAGE ARMSTRONG PUBLICALLY, AT THAT POINT THEY COULDN'T ENFORCE THAT PROVISION AGAINST HIM WHEN HE STARTED TO RESPOND. WE NEVER GOT TO GO THERE BECAUSE JUDGE THOMAS REFUSED TO GO BEYOND THE FOUR CORNERS OF THE DOCUMENT.

AND SO IT'S OUR POSITION NOW, IN FRONT OF YOU, WITH RESPECT TO THE STRICTURES OF RES JUDICATA AND COLLATERAL ESTOPPEL, THAT MR. ARMSTRONG NEVER GOT AN ACTUAL OPPORTUNITY TO LITIGATE HIS DEFENSE BECAUSE JUDGE THOMAS, BY MAKING A LEGAL NOT FACTUAL DECISION, MADE THE DECISION YOU DON'T GET TO GO THERE.

THE COURT: SO THE DEFENSE WOULD BE WHAT, THEN, I GOT TO SAY THOSE THINGS BECAUSE THEY SAID THINGS ABOUT ME?

MR. GREENE: CORRECT. THE DEFENSE WOULD BE THAT, WITH RESPECT TO THE GAG PROVISIONS, THAT AS SOON AS SCIENTOLOGY STARTED TO PUBLICALLY DISPARAGE MR. ARMSTRONG AS A CRIMINAL, PUBLICALLY DISPARAGE MR. ARMSTRONG AS AN AGENT PROVOCATEUR, DISTRIBUTE VIDEOTAPES THEY CLAIM SHOWED MR. ARMSTRONG'S INTENT TO TRY TO ESTABLISH SOME SORT OF A -- GENERATE A COUP WITHIN SCIENTOLOGY TO TAKE IT OVER, AND OTHER THINGS THAT WE THINK ARE RIDICULOUS, BUT NONETHELESS DISPARAGING, AT THAT POINT HE WAS NOT REQUIRED TO PROSTITUTE HIMSELF IN FRONT OF SCIENTOLOGY AND SAY YOU CAN RUN ROUGHSHOD OVER MY REPUTATION AND PERSON AND SAY ANYTHING THAT YOU WANT ABOUT ME. AND HE DID NOT BARGAIN FOR THAT POSITION. HE

WOULD NEVER BARGAIN FOR THAT POSITION.

THE COURT: OKAY. BUT THIS DEFENSE WAS RAISED IN THE PRIOR CASE BETWEEN THE PARTIES, BUT BECAUSE OF JUDGE THOMAS'S GRANT OF SUMMARY JUDGMENT IT WASN'T -- THERE WAS NO HEARING ON IT.

MR. GREENE: THAT'S RIGHT. THAT'S RIGHT.

AND HIS GRANT OF SUMMARY JUDGMENT WAS A LEGAL DECISION, NOT FACTUAL DECISION. AND SINCE IT WAS NOT A FACTUAL DECISION THEN IT DOES NOT FALL WITHIN THE STRICTURES OF RES JUDICATA AND COLLATERAL ESTOPPEL.

THE COURT: SO WHAT'S YOUR AUTHORITY FOR THE POSITION THAT IF THE CHURCH BEGAN TO DISPARAGE MR. ARMSTRONG HE WAS FREE TO DISREGARD HIS OBLIGATION UNDER THE CONTRACT?

MR. GREENE: I CERTAINLY HAVE IT. IF YOU CAN GIVE ME A COUPLE OF MINUTES. I WASN'T QUITE --

THE COURT: ALL RIGHT.

MR. GREENE: DO YOU WANT ME TO DO THAT NOW?

THE COURT: BUT I'M INTERESTED IN KNOWING WHAT THAT IS. WHAT'S YOUR RESPONSE TO THE QUESTION THAT I ASKED MR. WILSON ABOUT THE $800,000 AND WHETHER OR NOT, WHEN MR. ARMSTRONG'S PENALTIES HAVE REACHED WHAT HE RECEIVED, DOES THAT AFFECT HIS OBLIGATIONS UNDER THE CONTRACT THAT HE HAS WITH THE CHURCH?

MR. GREENE: TO BE CANDID WITH YOU I HAVEN'T THOUGHT ABOUT IT. I MEAN, I COULD GIVE YOU MY QUICK AND OBVIOUS RESPONSE WHICH WOULD BE END OF OBLIGATION, BUT IT REALLY WOULDN'T BE SINCERE BECAUSE I REALLY HAVEN'T

THOUGHT IT --

THE COURT: I NOTICE IT WASN'T RAISED, BUT IT'S SOMETHING THAT OCCURRED TO ME. IT'S DANGEROUS WHEN JUDGES START THINKING OF ISSUES THEMSELVES.

MR. GREENE: WE'RE GLAD TO HAVE A THINKING JUDGE.

THE COURT: ALL RIGHT.

ANYTHING ELSE YOU WANTED TO SAY?

MR. GREENE: YES, YOUR HONOR.

I WOULD JUST ADD THAT GIVEN THE NATURE OF WHAT'S TRANSPIRING, GIVEN THE NATURE OF WHAT MR. ARMSTRONG'S COMMENTS AND ALLEGED BREACHES HAVE BEEN AND ARE, AND THE PLACE THAT KIND OF DISCUSSION HAS IN THE MARKETPLACE OF IDEAS AND THE ANALYSIS OF DIFFERENT -- THE PLACE OF DIFFERENT ORGANIZATIONS IN OUR DEMOCRACY, THAT THAT DOES HAVE A PUBLIC INTEREST COMPONENT AND HAS A STRONG COMPONENT AND THAT BASED ON THAT ALSO PROVIDES THE REASON FOR THERE TO BE A FULL AND FAIR AIRING OF THE ISSUES WHICH HAS NOT EVER TAKEN PLACE.

FINALLY, AND MAYBE THIS WOULD RESPOND A LITTLE BIT TO YOUR QUESTION ABOUT WHAT HAPPENS WHEN HE ACCUMULATES ENOUGH LIQUIDATED DAMAGES HITS TO EQUAL THE CONSIDERATION THAT HE GOT, IF THAT -- IF THERE WAS NO WASHOUT THE INJUSTICE TO ARMSTRONG WOULD BE FOREVER. SCIENTOLOGY COULD SAY WHATEVER THEY WANT ABOUT HIM. HE WOULD BE EFFECTIVELY GAGGED AND TIED. AND IF HE REFUSED TO BE GAGGED AND TIED, AND IF HE MADE THE CHOICES TO SPEAK OUT AND TELL THE TRUTH AS HE KNEW IT, THE RANGE OF

PUNISHMENT FOR DOING THAT WOULD BE LIMITLESS. THAT'S JUST SIMPLY UNFAIR AND UNJUST.

AND BASED ON THE INJUSTICE EXCEPTION TO THE RULE OF RES JUDICATA WE WOULD SUBMIT THAT THIS PROCEEDING IS WORTHY OF A FULL HEARING.

MR. WILSON: MAY I?

THE COURT: I MEAN, I GUESS MY CONCERN IS ALL OF THOSE THINGS THAT YOU SAY ABOUT FREE EXCHANGE OF IDEAS AND FIRST AMENDMENT ARE MORE TRUE THAN WHEN THERE'S AN ACCEPTANCE OF MONEY AND THE AGREEMENT TO NOT DO THAT. IN SOME WAYS MR. ARMSTRONG'S MAIN PROBLEM IS SIGNING THE SETTLEMENT AGREEMENT. AND HE -- THAT WAS HIS DEAL.

SO WHY SHOULD THE COURT IGNORE THE CONTRACT THAT HE SIGNED ON FOR?

MR. GREENE: WELL, THE DEAL, ALSO, YOUR HONOR, WAS NOT -- IT WAS -- IT WAS A STRANGE DEAL.

THE WAY THE DEAL WORKED WAS THAT MICHAEL FLYNN, WHO IS MR. ARMSTRONG'S FORMER LAWYER, HAD A STABLE OF CLIENTS THAT WERE SUING SCIENTOLOGY. SCIENTOLOGY GAVE A LUMP SUM OF MONEY TO FLYNN TO GET RID OF ALL OF THE CASES. SHORTLY AFTER, A JURY IN LOS ANGELES FOUND, AFTER A 90-DAY TRIAL, AWARDED $30 MILLION TO LAUREN WOLLERSHEIM. SCIENTOLOGY HAD A BIG INTEREST IN GETTING RID OF ALL THE CASES AGAINST THEM. FLYNN GOT THIS LUMP SUM OF MONEY. ARMSTRONG WAS ONE OF -- PROBABLY THE LEAD CLIENT IN FLYNN'S STABLE, SO THERE WAS ANOTHER AGREEMENT THAT PAST BETWEEN ARMSTRONG AND FLYNN

AND ALL OF THE REST OF FLYNN'S CLIENTS. THERE IS NOTHING IN THAT AGREEMENT ABOUT CONSIDERATION FOR KEEPING YOUR MOUTH SHUT.

AND WHAT -- FOR ARMSTRONG, WHAT MADE THAT PALATABLE, ASIDE FROM ANY ISSUES OF DURESS THAT HE WAS UNDER, WAS THAT IT WAS GOING TO BE MUTUAL. THAT THERE WAS MUTUAL SILENCE, MUTUAL LEAVING ONE ANOTHER ALONE. AND HE ABIDED BY THAT UNTIL SCIENTOLOGY STARTED TO ATTACK HIM PUBLICALLY, THEN HE RESPONDED.

SO THAT'S WHAT MAKES THE DIFFERENCE.

IF HE GOT $800,000 TO KEEP HIS MOUTH SHUT, AND SCIENTOLOGY KEPT THEIR MOUTH SHUT ABOUT HIM, THEN YOUR QUESTION, IN MY MIND, WOULD HAVE GREATER VALIDITY. BUT THE CORE ISSUE IS THIS ISSUE OF WHAT WAS THE POSITION OF THE PARTIES. I MEAN ARMSTRONG, AT THE TIME THAT HE ENTERED THIS AGREEMENT, HAD ALREADY BEEN SUED BY SCIENTOLOGY, GONE THROUGH A 30-DAY COURT TRIAL BEFORE PAUL G. BRECKENRIDGE, IN LOS ANGELES, WHERE SCIENTOLOGY TRIED TO SHUT ARMSTRONG UP THERE AND BRECKENRIDGE SPECIFICALLY FOUND, IN HIS MEMORANDUM OF INTENDED DECISION, THAT ARMSTRONG AND OR HIS LAWYER COULD SAY ANYTHING THAT THEY WANTED TO ABOUT SCIENTOLOGY. THAT THERE WASN'T ANY SORT OF A GAG ORDER.

AND SO WHEN HE HAD FOUGHT THAT HARD AND THAT LONG TO BE ABLE TO SPEAK, IT JUST SIMPLY STRAINS CREDULITY THAT HE WOULD SAY, SURE, I'LL ENTER AN AGREEMENT WHERE YOU CAN SAY WHATEVER YOU WANT ABOUT ME, AND I CAN'T -- I CAN'T SAY ANYTHING BACK.

SO THAT'S -- THE CONTEXT OF WHAT THE AGREEMENT WAS IS IMPORTANT. IF THE INTERPRETATION OF THE INTENT OF THE PARTIES IS LIMITED STRICTLY TO THE FOUR CORNERS OF THE DOCUMENT, THEN, YES, THERE'S NOT MUCH I CAN SAY TO YOUR QUESTION.

THE COURT: YES, MR. WILSON.

MR. WILSON: BRIEFLY.

WHAT THIS ALL AMOUNTS TO IS THAT MR. GREENE SAYS JUDGE THOMAS WAS WRONG. I MEAN THAT'S BASICALLY WHAT HE'S SAYING. THIS IS NOT AN APPEAL.

THE COURT: WELL, HE'S ALSO SAYING A SUMMARY JUDGMENT IS NOT A HEARING ON MERITS.

MR. WILSON: IT IS ON MERITS. A SUMMARY JUDGMENT IS A HEARING ON THE MERITS AND JUDGE THOMAS MADE A FINDING WITH RESPECT TO THIS CONFIDENTIALITY ISSUE, THIS MUTUALITY ISSUE. IN EXHIBIT 6 THE COURT FINDS THAT THE PORTIONS OF THE AGREEMENT CITED BY THE DEFENDANT DO NOT ESTABLISH A FACTUAL CONFIDENTIALITY REQUIREMENT. PARAGRAPH SEVEN PROHIBITS PARTIES FROM DISCLOSING INFORMATION IN LITIGATION BETWEEN THE PARTIES. THEN HE GOES ON ABOUT PARAGRAPH 18(D), ONLY PROHIBITS DISCLOSURE OF THE TERMS OF THE SETTLEMENT.

DEFENDANT HAS NOT SHOWN THAT PLAINTIFF DID EITHER OF THOSE THINGS.

IF MR. GREENE'S ARGUMENT IS TRUE, WHAT THAT MEANS IS THAT A SUMMARY JUDGMENT COULD NEVER HAVE PRECLUSIVE AFFECT. THAT'S WHAT HE'S SAYING. WHERE IS THE LAW? WHERE IS THE LAW THAT SAYS THAT? THERE IS NO

LAW THAT SAYS THAT. AND IT WOULDN'T MAKE SENSE BECAUSE LET'S LOOK AT IT THIS WAY, LET'S SAY I SUE SOMEBODY AND I WIN ON SUMMARY JUDGMENT. AND IT'S KIND OF LIKE HERE, I HAVE A CONTRACT. I SUE ON THAT CONTRACT. I WIN ON SUMMARY JUDGMENT. I SUE ON THE CONTRACT AGAIN. AND I SAY NOW IT'S RES JUDICATA AND I HAVE ANOTHER JUDGE AND ARGUMENT.

WELL, IT'S NOT RES JUDICATA BECAUSE YOU GOT A SUMMARY JUDGMENT, YOU DIDN'T HAVE A TRIAL, SO NOW I GET A TRIAL. THAT'S TOTALLY BACKWARDS. TO TRY TO RELY ON RES JUDICATA AS A RESULT OF SUMMARY JUDGMENT MEANS, IN MR. GREENE'S WORLD, THAT YOU GET A TRIAL IN THE SECOND TRIAL WHERE YOU DIDN'T GET ONE IN THE FIRST TRIAL.

I MEAN, NOT ONLY IS THERE NO LAW, IT DOESN'T MAKE ANY SENSE. AND IMAGINE THE RESULTS OF THAT. JUST IMAGINE WHAT THAT WOULD MEAN IF YOU CARRIED IT FORWARD. YOU DON'T HAVE PRECLUSIVE AFFECT ON SUMMARY JUDGMENT. THERE -- THE CASES ON RES JUDICATA DON'T SAY THAT A TRIAL ON THE MERITS MEANS EVIDENCE. THAT A DECISION -- DOESN'T SAY TRIAL ON MERITS. IT SAYS DECISION ON MERITS. THIS DECISION WAS ON THE MERITS OF THAT ISSUE.

AND TO PUT A FURTHER POINT ON IT, THE AGREEMENT ITSELF SAYS THAT IT'S AN INTEGRATED AGREEMENT. THE AGREEMENT SAYS THAT ARMSTRONG CAN'T SAY ANYTHING ABOUT THE CHURCH AND IT DOESN'T SAY THAT THE CHURCH CAN'T SAY ANYTHING ABOUT ARMSTRONG. AND THIS NOTION THAT SOMEHOW THIS LEAVES THE CHURCH FREE TO DEFAME MR.

ARMSTRONG IS NOT TRUE BECAUSE THE AGREEMENT DOESN'T SAY THAT MR. ARMSTRONG WAIVES HIS RIGHT TO SUE THE CHURCH FOR DEFAMATION. IF THAT'S WHAT HE THINKS HAPPENED, THAT'S HIS REMEDY.

THE CHURCH ISN'T FREE TO SAY WHATEVER IT WANTS ABOUT MR. ARMSTRONG. IT'S ONLY FREE TO SAY WHAT IT WANTS TO SAY CONSTRAINED BY THE LAW. THE CHURCH IS CONSTRAINED BY THE LAW NOT TO DEFAME MR. ARMSTRONG. MR. ARMSTRONG SAYS I CAN MAKE A CONTRACT BUT I'M NOT CONSTRAINED BY THE LAW. I CAN MAKE A CONTRACT, BREACH IT ZILLIONS OF TIMES, TELL YOU I'M BREACHING IT ZILLIONS OF TIMES, THUMB MY NOSE AT THE COURT, AND IT'S OKAY BECAUSE THERE'S SOME WEIGHTY PUBLIC INTEREST HERE. JUST NOT TRUE.

THIS IS A CONTRACT ACTION. HE MADE HIS BARGAIN. IT WAS -- IT WAS A FREE, VOLUNTARY BARGAIN. THAT'S BEEN FOUND BY JUDGE THOMAS. THIS IS NOT AN APPEAL. THIS IS A SECOND CASE.

THE COURT: SUBMITTED?

MR. WILSON: SUBMITTED.

MR. GREENE: ALMOST.

THE COURT: YES.

MR. GREENE: ONE MORE COMMENT.

THE COURT: YES.

MR. GREENE: I NEGLECTED TO SAY THAT AN IMPORTANT -- VERY IMPORTANT PART OF THIS IS THAT WHAT WE HAVE IS SCIENTOLOGY ATTEMPTING TO EMPLOY A COMPLETELY ONE-SIDED CONTRACT TO BE ABLE TO POUND ON ARMSTRONG IN

COURT IN THE FURTHERANCE OF THEIR FAIR GAME POLICY THAT SAYS THAT ENEMIES OF SCIENTOLOGY CAN BE SUED, LIED TO, TRICKED, OR OTHERWISE DESTROYED BY SCIENTOLOGY WITHOUT ANY ADVERSE CONSEQUENCES.

OUR POSITION IS THAT THE IMPRIMATUR OF THE COURT ON CONDUCT LIKE THAT HAS THE EFFECT OF VIOLATING THE FIRST AMENDMENT CLAUSE THAT PROHIBITS THE ESTABLISHMENT OF A RELIGION, THAT PROHIBITS A CONJOINED OF RELIGIOUS DOCTRINE AND PRACTICES WITH THE POWER OF THE COURT.

IT'S DRESSED UP AS A CONTRACT ACTION, BUT WHEN YOU LOOK AT WHAT IS GOING ON, WHEN YOU LOOK AT 131 INTERNET POSTINGS AND YOU LOOK AT A $50,000 PENALTY FOR EACH OF THOSE, IT'S NOT ABOUT BREACH OF CONTRACT, IT'S ABOUT MAKING SURE THAT MR. ARMSTRONG IS QUIET AND DOESN'T SAY ANYTHING CRITICAL ABOUT SCIENTOLOGY. FORTY BREACHES WOULD BE WELL IN EXCESS OF $800,000.

THE COURT: ALL RIGHT. THE MOTION WILL STAND SUBMITTED.

LET'S -- DO YOU WISH TO GIVE AN OPENING STATEMENT?

MR. WILSON: I DON'T MEAN -- WELL, I CAN GIVE A SHORT ONE.

WHEN MIGHT WE HAVE A RULING ON THAT? I MEAN IT'S SORT --

THE COURT: WHEN I MAKE UP MY MIND. I DON'T KNOW.

MR. WILSON: OKAY.

THE COURT: BUT MY --

MR. WILSON: GO AHEAD.

THE COURT: -- THOUGHT IS WE'LL PROCEED IN TRIAL. AND IF THE MOTION IS DENIED YOU'LL BE ALLOWED A REBUTTAL CASE.

MR. WILSON: OKAY. I WOULD REQUEST THAT IF THE MOTION IS DENIED THAT I'D LIKE TO KNOW WHO MR. GREENE'S WITNESSES ARE BECAUSE AS YOU KNOW THERE WAS NO ISSUE CONFERENCE STATEMENT FILED. WE HAVE NO IDEA WHAT -- WHAT THEIR CASE IS. AND WE MIGHT WANT SOME TIME TO PREPARE FOR IT, I DON'T KNOW.

THE COURT: WELL, ALL RIGHT.

WHO ARE YOUR WITNESSES?

MR. GREENE: RIGHT NOW MY ONLY WITNESS IS MR. ARMSTRONG. I MIGHT ALSO HAVE HIS FORMER COUNSEL, MICHAEL FLYNN.

THE COURT: ALL RIGHT.

MR. WILSON: IF HE WANTS TO BRING MICHAEL FLYNN, I REALLY THINK I NEED A CHANCE TO DEPOSE HIM.

FIRST I'VE EVER HEARD OF THAT. AND ANYWAY, I WILL BRIEFLY MAKE AN OPENING STATEMENT.

THE COURT: ALL RIGHT.

MR. WILSON: I THINK I PROBABLY SAID EVERYTHING THAT I NEEDED TO SAY IN THE OPENING STATEMENT.

THIS CASE STARTED IN 1986 WHEN MR. ARMSTRONG SIGNED THE AGREEMENT. AGREEMENT WAS ENTERED INTO VOLUNTARILY, FREELY. SAYS IT WAS ENTERED INTO VOLUNTARILY, FREELY. MR. ARMSTRONG TOOK $800,000 AND

WHEN IT WAS SPENT HE STARTED BREACHING THE AGREEMENT CLAIMING THAT, AS MR. GREENE SAID, HE HAD A RIGHT TO DO IT. CLAIMING THAT THE AGREEMENT WAS MUTUAL. CLAIMING THAT THERE WAS DURESS. CLAIMING THAT THERE WAS FRAUD. CLAIMING THAT THERE WAS FREEDOM OF RELIGION, CLAIMING ALL THESE DEFENSES. ALL OF THESE DEFENSES WERE LITIGATED, DECIDED AGAINST MR. ARMSTRONG. 131 BREACHES, WE'RE TRYING TO RECOVER FOR TODAY, WERE FOUND TO BE BREACHES OF THE AGREEMENT, BY JUDGE THOMAS, WHO ALSO FOUND THAT THE DEFENSES WERE INVALID.

THE ANSWER THAT MR. ARMSTRONG FILED IN THIS CASE ADMITS THE 131 BREACHES. I HAVEN'T HEARD ANYTHING TODAY, YESTERDAY, THE DAY BEFORE, OR BEFORE THAT, TO INDICATE THAT THESE BREACHES DID NOT OCCUR.

THE COURT: WHAT RELIEF DOES THE CHURCH SEEK IN THIS ACTION THAT IT DID NOT OBTAIN FROM JUDGE THOMAS?

MR. WILSON: THE ONLY RELIEF THAT WE SEEK IS DAMAGES FOR THESE BREACHES THAT WE DID NOT RECEIVE FROM JUDGE THOMAS. THAT'S THE RELIEF.

THE COURT: ALL RIGHT. WHY WAS THAT NOT REQUESTED BEFORE?

MR. WILSON: I BELIEVE THAT THE REASON THAT IT WASN'T WAS BECAUSE WHEN THE BREACHES OCCURRED THE CASE HAD BEEN -- WAS OVER.

THE COURT: SO THESE WERE SUBSEQUENT TO HIS --

MR. WILSON: I BELIEVE THEY WERE POST-JUDGMENT BREACHES.

THE COURT: OKAY.

MR. WILSON: I'M VIRTUALLY CERTAIN THAT THEY WERE.

IN ANY EVENT, IT WOULD HAVE REQUIRED AMENDING THE COMPLAINT AND EITHER -- OR AMENDING THE COMPLAINT AND FILING A NEW ACTION. I SUPPOSE THE CHURCH HAD SOME HOPE THAT MR. ARMSTRONG WOULD STOP.

I CAN TELL YOU THAT IF MR. ARMSTRONG TODAY WOULD LIKE TO PAY THE MONEY BACK WE'LL RESCIND THE AGREEMENT. I MEAN THIS IS NOT ABOUT THE CHURCH OF SCIENTOLOGY TRYING TO BE PUNITIVE. THIS IS ABOUT THE CHURCH OF SCIENTOLOGY TRYING NOT TO BE A VICTIM.

YOUR HONOR, THERE'S SOMEBODY IN THE AUDIENCE WHO THINKS IT'S FUNNY TO LAUGH AT SOMETHING THAT I SAY AND --

THE COURT: I'LL MAKE SURE OUR BAILIFF IS ON THAT.

MR. WILSON: I DON'T KNOW WHAT THAT'S ABOUT, BUT I WOULD ASK THAT RESPECT BE GIVEN TO EVERYONE. I WOULDN'T WANT ANYONE TO LAUGH AT WHAT MR. GREENE DOES AND I DON'T --

THE COURT: I DO ASK EVERYONE HERE BE RESPECTFUL AND MAINTAIN DIGNITY OF THE COURTROOM.

THANK YOU.

MR. WILSON: THIS IS ABOUT THE CHURCH OF SCIENTOLOGY NOT BEING MR. ARMSTRONG'S VICTIM. THIS IS ABOUT AN INSTITUTION.

THE COURT: SO HERE'S MY QUESTION THAT I JUST WANT TO BE CLEAR ON BECAUSE WE ARE TALKING ABOUT QUITE A

FEW FACTS. WE'RE TALKING ABOUT 131 BREACHES BEING THE SAME THAT WERE ALREADY -- WHEN WE TALK ABOUT THEM BEING THE SAME, WHAT DOES THAT MEAN? I WANT TO MAKE SURE THAT IF THERE'S A COLLATERAL ESTOPPEL AFFECT, RES JUDICATA AFFECT, THAT IT'S BOTH SIDES.

OKAY.

MR. WILSON: IT MEANS THAT THE POSTINGS, 131 POSTINGS --

THE COURT: HAVE BEEN ADMITTED BY MR. ARMSTRONG?

MR. WILSON: RIGHT. WERE THE SAME POSTINGS THAT MR. ARMSTRONG WAS FOUND TO BE IN CONTEMPT OF COURT FOR VIOLATING THE INJUNCTION FOR. THAT'S WHAT IT MEANS.

THE COURT: OKAY. CONTEMPT, THAT WAS BY WHOM, WAS THAT JUDGE SMITH THEN?

MR. WILSON: THAT WAS JUDGE SMITH.

THE COURT: SO YOU'RE SAYING 131 POSTINGS, THERE WAS ALREADY THIS HEARING -- THIS IS YET A DIFFERENT PROCEEDING?

MR. WILSON: THE 131 WERE THE SUBJECT OF AN EX PARTE APPLICATION.

THE COURT: OKAY. SO TODAY FORMS THE BASIS OF THE CONTEMPT PROCEEDING, THAT'S THE ONE THAT THERE HAS NOT BEEN A SENTENCE ON?

MR. WILSON: THAT'S THE ONE THAT HAS NOT BEEN SENTENCED ON.

THE COURT: ALL RIGHT. SO YOU'RE SAYING THERE

HAS BEEN A JUDICIAL DETERMINATION THAT THESE 131 POSTINGS VIOLATED THE SETTLEMENT AGREEMENT BETWEEN THE PARTIES. AND WHAT'S SOUGHT IN THIS ACTION ARE JUST THE MONETARY DAMAGES THAT WOULD ACCOMPANY THAT UNDER THE LIQUIDATED DAMAGES PROVISION OF THE CONTRACT.

MR. WILSON: RIGHT.

THE COURT: OKAY.

MR. WILSON: RIGHT. THAT'S CORRECT.

THE COURT: AND WHAT IS THE CASE NUMBER FOR THE JUDGE SMITH CASE THAT THE CONTEMPT FINDING WAS MADE?

MR. WILSON: 15229, I THINK. 15229. I'M SORRY, THREE TWO'S. 152229.

THE COURT: OKAY. ALL RIGHT.

SO THAT WAS EX PARTE?

MR. WILSON: AND MR. ARMSTRONG FILED OPPOSITION. MR. ARMSTRONG'S OPPOSITION TO THAT IS EXHIBIT --

THE COURT: I'M GOING TO HAVE THE FILE BROUGHT DOWN.

MR. WILSON: -- EXHIBIT 10. IT'S OUR EXHIBIT 10 IN YOUR BOOK. THAT'S MR. ARMSTRONG'S OPPOSITION.

SO IF YOU TAKE A LOOK AT THAT OPPOSITION, AGAIN MR. ARMSTRONG MAKES THE ARGUMENTS HE MADE BEFORE JUDGE THOMAS. SO YOU HAVE BASICALLY TWO JUDGES HAVE DECIDED THIS CASE THE SAME WAY AGAINST MR. ARMSTRONG. AND ONE OF THOSE WAS ON THE VERY BREACHES THAT WE'RE TALKING ABOUT HERE.

THE COURT: ALL RIGHT. AND WAS THERE -- WAS

THERE A -- THERE WAS A HEARING ON THAT?

MR. WILSON: THERE WAS A HEARING.

THE COURT: THAT WAS JUNE 17TH 2001?

MR. WILSON: RIGHT.

THE COURT: ALL RIGHT. THAT WAS ONE THAT MR. ARMSTRONG DIDN'T APPEAR FOR?

MR. WILSON: HE DID NOT APPEAR.

THE COURT: OKAY. I UNDERSTAND.

MR. WILSON: I CAN'T REMEMBER WHETHER HE DID OR NOT. I THINK HE DID APPEAR. I THINK HE APPEARED ON THE PHONE.

THE COURT: I'M LOOKING AT THE ORDER OF CONTEMPT, YOUR EXHIBIT 11. IT SAYS ARMSTRONG MADE NO APPEARANCE.

MR. GREENE: HE DID NOT APPEAR BY PHONE.

THE COURT: HE FILED OPPOSITION AND SWORN DECLARATION.

MR. WILSON: OKAY. HE DID FILE LENGTHY OPPOSITION. THAT'S CORRECT.

THE COURT: OKAY.

MR. WILSON: SO OUR POSITION IS --

THE COURT: YOU'RE ASKING FOR MONETARY DAMAGES FOR 131 POSTINGS AND YOU'RE ALSO SAYING THAT IF MR. ARMSTRONG WANTS TO GIVE THE CHURCH THE MONEY BACK THE CHURCH WILL RESCIND THE AGREEMENT?

MR. WILSON: THAT'S RIGHT.

THE COURT: ALL RIGHT.

MR. WILSON: WE MADE THAT OFFER TO MR.

ARMSTRONG BEFORE.

I WOULD ALSO LIKE TO POINT OUT, JUST SO THE COURT KNOWS, THAT WHEN I SAID THAT MR. ARMSTRONG WAS FREE TO ENFORCE HIS RIGHTS NOT TO BE DEFAMED, HE ACTUALLY DID AT ONE POINT FILE A CASE IN NEVADA ALLEGING DEFAMATION AND THAT CASE WAS DECIDED AGAINST HIM, AS WELL.

SO AT THIS POINT I THINK THE COURT IS AWARE, WELL AWARE OF ENOUGH OF THE BACKGROUND, THE FACTS OF THE CASE, I CAN MOVE TO INTRODUCE THE EVIDENCE --

THE COURT: WELL, LET'S HEAR OPENING STATEMENT FROM MR. GREENE.

MR. WILSON: -- UNLESS MR. GREENE WANTS TO MAKE AN OPENING STATEMENT.

THE COURT: ALL RIGHT.

MR. GREENE.

MR. GREENE: WELL, LET ME GET SOME CLARIFICATION FROM YOU FIRST, YOUR HONOR.

MY OPENING STATEMENT, IN LARGE PART, DEPENDS ON WHETHER OR NOT WE'RE ALLOWED TO ASSERT ANY DEFENSE, AND/OR WHETHER WE'RE GOING TO BE PRECLUDED OR COLLATERALLY ESTOPPED FROM DOING SO.

SO I'M NOT QUITE SURE HOW --

THE COURT: IT'S POSSIBLE THAT BOTH OF THOSE COULD BE TRUE. IT'S POSSIBLE THAT YOU'RE ALLOWED TO PUT ON EVIDENCE, BUT THERE IS RES JUDICATA AFFECT TO THE EVIDENCE BASED ON THE PREVIOUS COURT RULINGS.

MR. GREENE: ALL RIGHT. WELL, I'M JUST GOING

TO --

THE COURT: I MEAN, WHAT, WE HAVE AN IN LIMINE MOTION THAT SEEKS TO PREVENT YOU FROM INTRODUCING EVIDENCE ON THE GROUNDS THAT IT'S ALREADY BEEN RULED ON.

ONE POSSIBILITY IS THAT WE GO FORWARD, THAT I HEAR YOUR EVIDENCE, BUT THAT DOES NOT MEAN THAT THE COURT WOULD NOT FIND THAT THIS MATTER HAS BEEN ADJUDICATED ALREADY.

MR. GREENE: I UNDERSTAND. ALL RIGHT.

GERALD ARMSTRONG WAS A HIGHLY DEDICATED SCIENTOLOGIST. THERE WAS A TIME WHEN, IN LOS ANGELES, OR IN SOUTHERN CALIFORNIA, THERE WAS A MASSIVE SHREDDING OPERATION BECAUSE SCIENTOLOGY FEARED AN FBI RAID.

GERALD ARMSTRONG WAS ONE OF THE PEOPLE WHO PARTICIPATED IN THE GATHERING UP OF ALL DOCUMENTS THAT SHOWED ANY CONTROL EXERTED OVER SCIENTOLOGY BY ITS FOUNDER L. RON HUBBARD.

IN THE PROCESS OF DOING THAT MR. ARMSTRONG CAME ACROSS A NUMBER OF BOXES THAT CONTAINED PAPERS HAVING TO DO WITH MR. HUBBARD'S HISTORY, HIS PAST ACCOMPLISHMENTS, HIS PAST EDUCATION, HIS SERVICE IN THE MILITARY. AND ARMSTRONG, BEING A DEDICATED SCIENTOLOGIST, AND REVERING MR. HUBBARD AS A LEADER OF SCIENTOLOGY, SAW THAT THESE BOXES HAD TREMENDOUS -- OF DOCUMENTS HAD TREMENDOUS VALUE AND THAT THE CONTENTS OF THE BOXES DID NOT RELATE IN ANY DIRECT WAY TO CONTROL EXERTED BY HUBBARD OVER SCIENTOLOGY.

MR. WILSON: EXCUSE ME, YOUR HONOR.

MR. GREENE: WOULDN'T BE PROPER FOR THOSE

THINGS TO BE SHREDDED.

MR. WILSON: I'M GOING TO OBJECT TO THIS ON THE BASIS THAT THE AGREEMENT SAYS THE PARTIES HERETO AGREE THAT IN THE EVENT OF ANY FUTURE LITIGATION BETWEEN PLAINTIFF AND ANY OF THE ORGANIZATIONS, INDIVIDUALS, OR ENTITIES LISTED IN PARAGRAPH ONE, THAT ANY PAST ACTION OR ACTIVITY EITHER ALLEGED IN THIS LAWSUIT OR ACTIVITY SIMILAR IN FACT TO THE EVIDENCE THAT WAS DEVELOPED DURING THE COURSE OF THIS LAWSUIT WILL NOT BE USED BY EITHER PARTY AGAINST THE OTHER IN ANY FUTURE LITIGATION.

IN OTHER WORDS, THE SLATE IS WIPED CLEAN CONCERNING PAST ACTIONS BY ANY PARTY.

THE COURT: WELL, I'M GOING TO ALLOW HIM TO MAKE AN OPENING STATEMENT.

MR. GREENE: THANK YOU, YOUR HONOR.

SO MR. ARMSTRONG RECOGNIZED THE HISTORICAL VALUE OF MR. HUBBARD'S PAPERS, PETITIONED MR. HUBBARD FOR PERMISSION NOT TO SHRED THEM BUT INSTEAD TO SAVE THEM AND ARCHIVE THEM. THAT PERMISSION WAS GRANTED.

MR. ARMSTRONG THEN BECAME THE PERSONAL ARCHIVIST FOR L. RON HUBBARD, STARTED TO ARCHIVE WHAT ULTIMATELY TURNED OUT TO BE APPROXIMATELY 120 BOXES FULL OF DOCUMENTS WHICH ADDRESSED HUBBARD'S PAST HISTORY, ACCOMPLISHMENTS, EDUCATION.

IN THE PROCESS OF INDEXING THESE DOCUMENTS MR. ARMSTRONG CAME TO SEE THAT THE REPRESENTATIONS THAT SCIENTOLOGY MADE TO THE PUBLIC AT LARGE ABOUT THE HISTORY, ACCOMPLISHMENTS, AND PAST OF MR. HUBBARD,

WEREN'T TRUE. THAT MR. HUBBARD WAS PRESENTED IN A MANNER THAT WAS HIGHLY GRANDIOSE, AND THAT THE HISTORICAL DOCUMENTS DID NOT SUPPORT OR CONFIRM.

MR. ARMSTRONG THEN RAISED THE ISSUE WITHIN THE SCIENTOLOGY HIERARCHY THAT GIVEN THE FACT THAT HOW SCIENTOLOGY HELD MR. HUBBARD OUT WAS NOT TRUE, IT WAS PUTTING BOTH MR. HUBBARD AND SCIENTOLOGY AT RISK FOR SOME INVESTIGATIVE REPORTER TO START TO DIG AROUND AND COME TO THE CONCLUSION AND PUBLISH THE RUMORS THAT SCIENTOLOGY WAS A FRAUD, THAT HUBBARD WAS A FRAUD. MR. ARMSTRONG ARDENTLY LOBBIED FOR ACCURACY IN PRESENTATION. THE WAY THAT MR. ARMSTRONG'S EFFORTS WERE RESPONDED TO WERE HEAVY-HANDED. THERE'S SOMETHING SCIENTOLOGY CALLED SECURITY CHECKING, WHICH IS A FORM OF INTERROGATION TO SEE WHETHER OR NOT SOMEONE HARBORS INTENT THAT'S EVIL OR CONTRARY TO WHAT THE GOALS OF SCIENTOLOGY ARE.

WHEN ARMSTRONG FOUND OUT THAT HE WAS SLATED FOR SECURITY CHECKING AS A RESPONSE TO HIS EFFORT TO HAVE SCIENTOLOGY BE HONEST ABOUT WHO MR. HUBBARD WAS, HE KNEW THAT HE WAS IN TROUBLE.

IN THE PROCESS OF GOING THROUGH AND REVIEWING THE DOCUMENTS THAT HE HAD DONE FOR AN EXTENSIVE PERIOD OF TIME, AND COMPARING THAT REVIEW WITH THE REPRESENTATIONS THAT SCIENTOLOGY MADE ABOUT HUBBARD, JERRY ARMSTRONG, IN EFFECT, DEPROGRAMMED HIMSELF FROM THE INFLUENCE OF SCIENTOLOGY AND FROM ITS IDEOLOGY THAT HE FOR YEARS AND YEARS HAD BEEN INDOCTRINATED WITH.

STARTED TO BE MORE FREETHINKING.

SO WHAT HE DID WAS TO SEE THAT HE WAS IN TROUBLE. AND HE MADE THE DECISION THAT IF HE STAYED WITHIN SCIENTOLOGY HARM WAS GOING TO COME TO HIM. AND HE KNEW, BECAUSE OF INTIMATE FAMILIARITY WITH SCIENTOLOGY'S FAIR GAME POLICY, THAT IF HE LEFT SCIENTOLOGY HE WAS GOING TO BECOME FAIR GAME. THAT AT THAT POINT THE MASSIVE INSTITUTIONAL CLOUT OF SCIENTOLOGY WAS GOING TO BE BROUGHT TO BEAR PERSONALLY ON HIM IN ORDER TO DESTROY HIM LEGALLY, OR BY ANY OTHER MEANS, BECAUSE IN SCIENTOLOGY THERE IS A STRICT DICHOTOMY BETWEEN THOSE WHO ARE SCIENTOLOGISTS AND THOSE WHO ARE IN THE OUTSIDE WORLD, WHERE THOSE WHO ARE THE OUTSIDE WORLD REALLY ARE INFERIOR PEOPLE, ESPECIALLY THOSE IN THE OUTSIDE WORLD WHO TAKE ACTION THAT'S CONTRARY TO THE GOALS OF SCIENTOLOGY AND CONTRARY TO WHAT SCIENTOLOGY WANTS TO HAVE HAPPEN. AT THAT POINT SUCH A PERSON CAN BE DECLARED FAIR GAME OR RATHER BE DECLARED SUPPRESSIVE THEN BECOME SUBJECT TO THE FAIR GAME POLICY.

ARMSTRONG KNEW THAT IF HE LEFT THAT HE WAS GOING TO BE DECLARED A SUPPRESSIVE PERSON AND THE FAIR GAME POLICY WAS GOING TO COME DOWN ON HIS HEAD. AT THE TIME ARMSTRONG WAS ALSO WORKING WITH A BIOGRAPHER, NAMED MARK GARRISON, WRITING A BIOGRAPHY OF HUBBARD. AND SO WHEN ARMSTRONG LEFT HE KNEW THAT HE HAD TO PROTECT HIMSELF. AND THE WAY, ULTIMATELY, HE PROTECTED HIMSELF WAS BY GETTING A COPY OF A LOT OF THE

HISTORICAL DOCUMENTS FROM GARRISON WHICH THEN ARMSTRONG GAVE TO HIS ATTORNEY MICHAEL FLYNN.

AT THAT POINT SCIENTOLOGY GOT WIND OF IT AND SUED ARMSTRONG, SUED ARMSTRONG FOR BREACH OF FIDUCIARY DUTY, SUED ARMSTRONG FOR CONVERSION OF DOCUMENTS. THAT'S THE CASE THAT WAS TRIED BEFORE JUDGE BRECKENRIDGE. THAT CASE TOOK ABOUT 30 DAYS. AND THE RESULT WAS AN EXTENSIVE JUDICIAL OPINION THAT FOUND ARMSTRONG'S TESTIMONY AND THE TESTIMONY OF HIS WITNESSES TO BE HIGHLY CREDIBLE AND CONSISTENT, FOUND THAT SCIENTOLOGY, BEFORE BRECKENRIDGE, WAS AS IT HAD BEEN BEFORE A JUDGE IN FRANCE WHO HAD CHARACTERIZED THEM AS -- AS ABUSING THE CONFIDENCES OF PARISHIONERS, OF POSSESSING, THROUGH THIS, WHERE I DESCRIBED EARLIER, THIS PROCESS OF SECURITY CHECKING, TO VARIANT SOMETHING CALLED AUDITING WHICH IS THE USE OF A CRUDE LIE DETECTOR, AN ELECTRO-PSYCHOMETER THAT SCIENTOLOGY CALLED AN E-METER. SO THE PERSON WHO IS BEING AUDITED HOLDS ON TO TWO ELECTRODES AND THE AUDITOR ASKS A SERIES OF QUESTIONS THAT ARE WRITTEN OUT AND THEN RECORDS ALL OF THE PERSON'S RESPONSES. AND INCREASINGLY THE AUDITING PROCESS PENETRATES THE MOST INTIMATE DETAILS OF AN INDIVIDUAL'S PSYCHOLOGY. SO EVERYTHING THAT YOU'VE EVER DONE, OR THAT YOU FEEL THE SLIGHTEST BIT GUILTY ABOUT, OR SLIGHTEST BIT ASHAMED ABOUT, IS STORED IN WHAT ARE CALL PRE-CLEAR FOLDERS.

SO BRECKENRIDGE TALKED ABOUT HOW, BEFORE HIM, THE EVIDENCE WHICH HAD BEEN PRESENTED BY ARMSTRONG

AND HIS WITNESSES, PUT ALL OF THEM AT RISK BECAUSE THEY KNEW THAT ALL OF THESE MOST INTIMATE DISCLOSURES OF ALL THE DIRT IN THEIR LIFE, BASICALLY, COULD BE USED AND WOULD BE USED AGAINST THEM. HE FOUND THAT -- THAT HUBBARD WAS A PATHOLOGICAL LIAR, CLEARLY SCHIZOPHRENIC, WHILE POSSESSING TREMENDOUS CHARISMA, AND PROBABLY SOME GENIUS, THAT THERE WAS ALSO A SIDE THAT WAS VERY DARK, THAT WAS VERY CONTROLLING, AND THAT THE SCIENTOLOGY INSTITUTION REFLECTED THAT. AND THAT THE CONTROLLING, DOMINATING NATURE OF SCIENTOLOGY WAS EXPRESSED THROUGH FAIR GAME.

AND BRECKENRIDGE, IN SOME OF THE MOST EXPLICIT LANGUAGE THAT I EVER READ FROM A JUDGE, CONDEMNED FAIR GAME AND CONDEMNED SCIENTOLOGY FOR USING IT. FOUND IN FAVOR OF ARMSTRONG.

THE COURT: THIS IS WHEN?

MR. GREENE: THIS WAS IN JULY OF 1984. JUNE 1984.

NOW, WHEN ARMSTRONG RESPONDED TO SCIENTOLOGY'S ACTION AGAINST HIM, HE FILED A CROSS-COMPLAINT BECAUSE -- I MEAN, INCLUDED IN BRECKENRIDGE'S OPINION WAS A LOT OF MATERIAL ABOUT HOW SCIENTOLOGY'S PRIVATE INVESTIGATORS HAD TRIED TO RUN ARMSTRONG DOWN IN A CAR, THAT THERE WAS A LOT OF CLEARLY CRIMINAL ACTIVITY THAT WAS DIRECTED AT ARMSTRONG AS PART OF THE FAIR GAME POLICY. THAT FAIR GAME POLICY WASN'T JUST A BUNCH OF NASTY WORDS THAT WERE WRITTEN DOWN.

THESE WORDS WERE TAKEN VERY, VERY SERIOUSLY, PUT INTO

ACTION.

SO BECAUSE OF ALL OF THIS ARMSTRONG HAD A CROSS-COMPLAINT FOR FRAUD AND INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS WHICH WAS SEVERED. IT WAS NOT TRIED AT THE SAME TIME THAT SCIENTOLOGY'S CASE AGAINST ARMSTRONG WAS TRIED BEFORE BRECKENRIDGE, IT WAS WAITING IN THE WINGS AND PENDING.

NOW IT'S WITH RESPECT TO THAT CASE, ARMSTRONG'S CROSS-COMPLAINT AGAINST SCIENTOLOGY, THAT'S WHAT GOT SETTLED. THAT'S WHAT THE $800,000 WAS FOR. $800,000 WAS NOT FOR ARMSTRONG TO BE -- TO BE GAGGED AND PUT IN SOME -- SOME SORT OF CONSTITUTIONAL PILLORY. IT WAS TO GET RID OF THAT CROSS-COMPLAINT.

AT THE TIME OF THE SETTLEMENT, WHICH WAS DECEMBER OF 1986, THERE WERE, I THINK, IN THE L.A. AREA, IT WAS SOMETHING BETWEEN EIGHT AND TWELVE PARTIES THAT FLYNN REPRESENTED THAT WERE PART OF THIS GLOBAL SETTLEMENT AGREEMENT. THERE WERE ALSO OTHER SETTLEMENT AGREEMENTS OF FLYNN CLIENTS AGAINST SCIENTOLOGY IN VARIOUS PARTS OF THE COUNTRY. ONE IN BOSTON, THE GARETY ONES; AND IN FLORIDA, WHICH WERE THE MCLEAN ONES, INCLUDING DAVID CAZARES, FORMER MAYOR OF CLEARWATER, ALSO PENDING CLAIMS AGAINST SCIENTOLOGY BECAUSE THE FAIR GAME POLICY.

ALL OF THOSE WERE SETTLED. ALL OF THOSE HAD GAG AGREEMENTS. THOSE SETTLEMENTS TOOK PLACE ALL IN 1986. AND IT WAS IN JULY OF 1986, THAT, AS I ADVERTED TO EARLIER, A L.A. COUNTY JURY AWARDED LAUREN

WOLLERSHEIM $5 MILLION IN COMPENSATORY DAMAGES AND $25 MILLION IN PUNITIVE DAMAGES. NOW THAT AWARD, SUBSEQUENTLY ON APPEAL, WAS SLASHED DRASTICALLY TO TWO AND A HALF MILLION, BUT AT THE TIME IT STOOD.

AND WITH A JURY IN L.A., MIDDLE OF THE SUMMER OF 1986, STINGING SCIENTOLOGY THAT HARD, THEY HAD A LOT OF EXPOSURE. THEY HAD A LOT OF REASON TO PUT THESE CASES TO BED AND TO SHUT PEOPLE UP BECAUSE REALLY WHAT THE PERNICIOUSNESS WAS OF THE GAG AGREEMENTS WAS THAT IT COMPLETELY ERADICATED PEOPLE WHO HAD BEEN -- THERE WERE EX-SCIENTOLOGISTS THEN, WHO HAD BEEN MEMBERS OF SCIENTOLOGY FOR A LONG TIME, THEY WERE HIGHLY PLACED AND KNEW HOW THE ORGANIZATION OPERATED ON A FIRST-HAND BASIS. SO AS A STABLE OF WITNESSES THEY WERE ABSOLUTELY DEADLY.

NOW FLYNN WAS -- DID NOT REPRESENT ALL OF THESE PEOPLE AND HAD NOT BECOME UNDER THE AIM OF THE FAIR GAME POLICY HIMSELF. I MEAN, IF YOU LITIGATE AGAINST SCIENTOLOGY, CONTEMPT MOTIONS, STATE BAR COMPLAINTS, LAWSUITS, THAT'S ALL HEAT IN THE KITCHEN. WITH FLYNN IT WAS EVEN MORE. I MEAN I WON'T GO INTO ALL OF THAT, BUT THERE'S A POINT WHERE THERE WAS WATER IN THE GAS TANK OF HIS AIRPLANE, HIS WIFE LEFT HIM, AND HE WANTED OUT. AND HE MADE IT CLEAR THAT HE WAS GOING TO GET OUT AND THAT IF EVERYBODY DIDN'T GO ALONG HE WASN'T GOING TO BE THERE. MIKE FLYNN WAS A CHAMPION OF ALL OF THESE PEOPLE.

SO THERE WAS A LOT OF REASON FOR SCIENTOLOGY

TO SETTLE AND FAIR GAME PROVIDED A BIG LEVER TO ASSIST IN THE ACCOMPLISHMENT OF SUCH SETTLEMENT. AND ARMSTRONG WAS RIGHT IN THE MIDDLE OF IT. SO I THINK IT'S DECEMBER 6, OR 11TH, 1986, IS THE SETTLEMENT DATE. AND ARMSTRONG SIGNED, THERE'S A VIDEOTAPE, PROBABLY COME TO IT, I'LL SHOW THE VIDEOTAPE. ARMSTRONG ABIDED BY THE AGREEMENT.

NOW THE -- BUT TO MAKE IT CLEAR, AGAIN THE $800,000, SCIENTOLOGY DIDN'T KNOW WHAT THAT AMOUNT WAS, THEY DIDN'T PAY 800 GRAND TO JERRY ARMSTRONG, THEY PAID SOME UNTOLD MILLIONS TO FLYNN. IT WAS HIS JOB TO PUT ALL HIS CLIENTS TO BED AND TO GET THEM TO AGREE.

SO THE ACTUAL SETTLEMENT WAS A LITTLE BIT DIFFERENT IN THAT REGARD.

JUST TO GO BACK FOR A SECOND TO THE BRECKENRIDGE LITIGATION. THERE WAS SOME TAPES IN THE LITIGATION THAT NOW HAVE BECOME SUBJECT OF SOME OF THE LEADING PRECEDENTS INVOLVING THE CRIME FRAUD EXCEPTION TO THE ATTORNEY-CLIENT PRIVILEGE. UNITED STATES VERSUS ZOLLER.

THE COURT: I FEEL THAT WE'RE GETTING --

MR. GREENE: TOO FAR AFIELD?

THE COURT: -- PRETTY FAR OFF TOPIC FOR WHAT WE'RE HERE FOR TODAY.

MR. GREENE: LET ME GO TO THE FACT THAT IN THE DISCUSSIONS WITH RESPECT TO THE LIQUIDATED DAMAGES PROVISION THERE WAS NO TALK, THERE WAS NO BARGAIN, THERE WAS NO DISCUSSION. IT WAS PRESENTED TO ARMSTRONG AND THAT WAS THAT, THAT WAS IT.

THE COURT: DIDN'T HE HAVE TO SIGN IT?

MR. GREENE: NO, HE DIDN'T HAVE TO SIGN IT EXCEPT THAT IF HE DIDN'T SIGN IT, IT WAS GOING TO PRECLUDE EVERYBODY ELSE WHO WAS CLAMORING TO SIGN AND TO BE RELEASED. AND THERE WAS PRESSURE FROM HIS LAWYER BECAUSE IF HE DIDN'T SIGN IT HIS LAWYER WAS GOING TO LEAVE. AND THERE WAS THE THREAT OF FAIR GAME.

SO NO, HE DIDN'T HAVE TO SIGN IT, BUT THERE WAS -- HIS SIGNING WAS NOT FREE OF COERCION. AND ALSO HIS SIGNING CERTAINLY DID NOT INCLUDE ANY KIND OF ADVICE THAT, MR. ARMSTRONG, AFTER YOU SIGN THIS AGREEMENT WE'RE GOING TO START MAKING PUBLIC REPRESENTATIONS ABOUT HOW YOU'RE A CRIMINAL, AND HOW YOU'RE AN AGENT PROVOCATEUR, AND OVERALL BAD GUY. AND YOU KNOW WHAT, BECAUSE YOU SIGNED THIS AGREEMENT YOU HAVE TO KEEP YOUR MOUTH SHUT.

THE COURT: ALL RIGHT. I GOT THAT. YOU TOLD ME ABOUT THAT.

MR. GREENE: ALL RIGHT. NOW, AT THE TIME THAT MR. ARMSTRONG DID SIGN THAT, I MEAN HE'S NOT STUPID, AND HE SAW THAT THERE -- THAT THE AGREEMENT APPEARED TO BE ONE-SIDED. AND HE ASKED MR. FLYNN, "WHAT'S THE STORY WITH THIS?" MR. FLYNN, "YOU CAN'T CONTRACT AWAY YOUR FIRST AMENDMENT RIGHTS. IT'S NOT WORTH THE PAPER IT'S WRITTEN ON."

SO ARMSTRONG -- THE AGREEMENT IS SIGNED, LITIGATION PUT TO BED, ARMSTRONG GOES ON WITH HIS LIFE. THEN THE REPRESENTATIONS START COMING TO HIM ABOUT WHAT SCIENTOLOGY IS SAYING TO THE L.A. TIMES, WHAT

SCIENTOLOGY IS SAYING IN LITIGATION IN ENGLAND TRYING TO SUPPRESS THE PUBLICATION OF A BOOK CRITICAL OF SCIENTOLOGY, WHAT -- THERE'S A MOVIE OR A VIDEO DISTRIBUTED THAT WAS EDITED THAT WAS SUPPOSED TO SUPPORT THE CLAIM THAT ARMSTRONG WANTED TO TAKE OVER SCIENTOLOGY AND WAS TRYING TO FORM A COMPANY WITHIN.

AT THAT POINT, AT FIRST HE'S QUIET THEN THEY KEEP GOING. HE STARTS TO RESPOND. THEN THERE'S -- THEN HE GETS SERVED WITH A SUBPOENA IN LITIGATION INVOLVING BENT CORYDON WHO WROTE A BOOK CALLED L. RON HUBBARD, MESSIAH OR MADMAN? AND IT WAS, WITH RESPECT TO THAT, ARMSTRONG IS SERVED WITH A SUBPOENA.

THEN HE GETS SOME PHONE CALLS FROM LAWRENCE HELLER, WHO WAS ONE OF THE PEOPLE PRESENT AT THE ACTUAL SIGNING OF OUR AGREEMENT HERE. AND HELLER TELLS ARMSTRONG THAT IF HE IN ANY WAY RESPONDS TO THE SUBPOENA -- BECAUSE YOU'LL SEE IN THE AGREEMENT PART OF HIS OBLIGATION WAS TO AVOID SERVICE OF PROCESS. THE SPIRIT OF THE AGREEMENT REALLY REVEALED THROUGH SOME OF THE TERMINOLOGY, THROUGH THE ONE-SIDEDNESS ON ONE HAND, AND SOME OF THE ACTUAL LANGUAGE --

THE COURT: LET ME ASK YOU THIS QUESTION, HAVE

YOU SEEN JUDGE SMITH'S ORDER OF CONTEMPT FROM JULY 13 OF 2001?

MR. GREENE: NO.

THE COURT: OKAY. SO WHAT STRIKES ME, IN LISTENING TO YOUR OPENING STATEMENT, IS A LOT OF THE EVIDENCE THAT YOU'RE DESCRIBING IS NOT -- DOES NOT

REALLY RELATE TO THIS ACTION, BUT COULD BE -- IT MIGHT BE EVIDENCE IN CONNECTION WITH JUDGE SMITH'S ORDER, BECAUSE I'M JUST LOOKING AT JUDGE SMITH'S ORDER OF CONTEMPT WHERE HE FINDS THAT -- HE SAYS: IT IS HEREBY ADJUDGED, ORDERED, DECREED THAT DEFENDANT GERALD ARMSTRONG IS GUILTY OF CONTEMPT OF COURT FOR HIS INTENTIONAL AND WILLFUL FAILURES TO OBEY THE ORDERS DESCRIBED ABOVE. THE ORDER IS VALID AND ENFORCEABLE.

ARMSTRONG HAD NOTICE AND KNOWLEDGE OF THE ORDER. HAD THE ABILITY TO COMPLY WITH THE ORDER AND REPEATEDLY AND ADMITTEDLY WILLFULLY DISOBEYED THE ORDER. THE COURT NOTES THAT THERE ARE TWO OUTSTANDING BENCH WARRANTS WHICH RESULTED FROM TWO PREVIOUS CONTEMPT CONVICTIONS WHICH ALSO AROSE OUT OF ARMSTRONG'S VIOLATION OF THE ORDER. THE COURT WILL NOT IMPOSE THE SPECIFIC PUNISHMENT AT THIS TIME. HOWEVER, THIS COURT RETAINS JURISDICTION AND AT SUCH TIME AS ARMSTRONG IS APPREHENDED HE IS TO BE BROUGHT BEFORE THIS COURT FOR CONSIDERATION OF ADDITIONAL SANCTIONS FOR THE AFORESAID ACTS OF CONTEMPT AFTER HEARING FROM BOTH SIDES.

SO I'M THINKING WHAT MAY MAKE SENSE, FROM A LITIGATION ECONOMY STANDPOINT, I SEE THAT JUDGE SUTRO HAS RECUSED HIMSELF FROM THE 152229 CASE AND I NOW HAVE THAT IN THIS DEPARTMENT. AND I'M THINKING THAT WHAT MAKES SENSE IS TO CONSOLIDATE THESE TWO MATTERS AND HAVE THE CONTEMPT -- FURTHER HEARING ON CONTEMPT CITATION HEARD AT THE SAME TIME AS THE TRIAL ON THIS MATTER.

MR. GREENE: WE WOULD HAVE NO OBJECTION TO

THAT.

MR. WILSON: NEITHER WOULD WE.

THE COURT: ALL RIGHT. SO WHY DON'T YOU TAKE A LOOK AT THIS. I'LL GIVE YOU A MOMENT TO TAKE A LOOK AT THIS ORDER. LET'S TAKE A TEN-MINUTE RECESS AND THEN WE'LL RESUME.

ALL RIGHT. THE REST OF THE FILE IS NOW IN COURT. SO IF ANYBODY WANTS TO LOOK AT IT IT'S HERE.

(WHEREUPON, A RECESS WAS TAKEN.)

THE BAILIFF: REMAIN SEATED. COME TO ORDER.

COURT IS NOW IN SESSION.

THE COURT: YOUR CLIENT IS WHERE?

MR. GREENE: I THINK HE JUST WENT OUT IN THE HALLWAY.

THE COURT: WELL, I WOULD LIKE TO HAVE HIM HERE BECAUSE I'M GOING TO --

MR. GREENE: LET ME GET HIM.

THE COURT: ALL RIGHT.

SO ONE OF THE ISSUES BEFORE US IS THIS ONE ABOUT THE OUTSTANDING WARRANTS.

SO MR. ARMSTRONG IS PRESENT IN COURT TODAY.

SO I'M GOING TO TAKE HIS PRESENCE AS AN APPEARANCE ON THE WARRANTS.

MR. GREENE: YES, WE'D LIKE THAT.

THE COURT: ALL RIGHT. I AM GOING TO ORDER HIS PERSONAL PRESENCE DURING THE TRIAL OF THIS MATTER WHICH MEANS YOU ARE NOT -- YOU MUST COME TO COURT EVERY DAY THAT WE ARE IN SESSION. TO NOT COME TO COURT WOULD

BE A VIOLATION OF THE -- OF MY ORDER FOR WHICH ADDITIONAL BENCH WARRANTS COULD ISSUE. OKAY. ALSO BECAUSE I AM TREATING THIS NOW AS A HEARING ON THE SENTENCING THAT JUDGE SMITH SET.

ALL RIGHT?

MR. GREENE: YES.

THE COURT: OKAY.

SO LET'S SEE, YOU WERE DOING YOUR OPENING, AND MAYBE WE CAN FINISH THAT.

MR. GREENE: I CAN.

MR. WILSON: MAY I -- I'M A LITTLE BIT CONFUSED. THE SENTENCING -- SO THIS IS THE SAME PROCEEDING?

THE COURT: I THINK IT MAKES SENSE RATHER THAN HAVING TWO HEARINGS ON THE SENTENCING THAT WAS SET BY JUDGE SMITH.

MR. WILSON: I THINK IT MAKES SOME SENSE. I'M CONCERNED BECAUSE ALL OF THESE THINGS WERE ALREADY BROUGHT UP FOUR, FIVE TIMES BEFORE.

THE COURT: WHICH DOES NOT, AS I MENTIONED, DOES NOT -- WE STILL HAVE THE ISSUE OF RES JUDICATA.

MR. WILSON: RIGHT.

THE COURT: BUT THE ISSUE ON CONTEMPT --

MR. WILSON: I UNDERSTAND.

THE COURT: -- COULD BE SLIGHTLY DIFFERENT.

IN OTHER WORDS --

MR. WILSON: I UNDERSTAND.

THAT'S WHY I URGE THE COURT TO RULE ON THE

MOTION IN LIMINE AS SOON AS POSSIBLE.

THE COURT: I UNDERSTAND.

MR. WILSON: I'M SURE YOU KNOW THAT ALREADY.

THE COURT: I DO KNOW THAT, BUT IT NEVER HURTS TO BE REMINDED.

ALL RIGHT. MR. GREENE.

MR. GREENE: THANK YOU.

THE COURT: SO OBVIOUSLY THERE HAS BEEN A LOT OF LITIGATION RELATING TO THE PARTIES IN THIS ACTION, NOT ALL OF IT IS NECESSARILY RELEVANT.

MR. GREENE: CORRECT. I DON'T INTEND TO --

THE COURT: THANKS.

MR. GREENE: -- BRANCH OUT ANY MORE THAN I HAVE.

SO WHEN -- AFTER MR. ARMSTRONG HAD TELEPHONE CONVERSATIONS WITH MR. HELLER, WHERE HELLER TOLD ARMSTRONG THAT IF ARMSTRONG RESPONDED TO THE SUBPOENA HELLER WOULD CONSIDER IT TO BE A VIOLATION OF THE AGREEMENT, HELLER BROUGHT A MOTION FOR PROTECTIVE ORDER.

THE ONLY REASON I'M BRINGING THAT UP IS BECAUSE IN THE MOTION FOR PROTECTIVE ORDER, AND IN HELLER'S SUPPORTING DECLARATION, HELLER, ONE OF THE LAWYERS THAT WAS INVOLVED IN CRAFTING THE AGREEMENT, HELLER MAKES THE REPRESENTATION THAT THE AGREEMENT WAS NOT A ONE-WAY PROPOSITION AGAINST ARMSTRONG. THAT THERE WAS SOME BILATERAL AFFECT WITH RESPECT TO BOTH SIDES STAYING QUIET AND, IN HIS WORDS, KEEPING PEACE.

THAT, IF THE COURT GETS BEYOND THE FOUR

CORNERS OF THE DOCUMENT, RAISES AN IMPORTANT ISSUE OF FACT. ONE OF THE -- DURING THE BREAK, WHEN I WAS READING THE CONTEMPT ORDER, WHAT CAME PRIMARILY TO MIND IS THE ISSUE OF WHETHER OR NOT, WHEN CONFRONTED WITH BEING ATTACKED OR DISPARAGED BY SCIENTOLOGY, MR. ARMSTRONG IS CAPABLE OF KEEPING HIS MOUTH SHUT. I DON'T THINK THAT HE IS. I DON'T THINK ANY HUMAN BEING COULD BE.

IT'S SOMETHING LIKE SOMEONE WHO HAS BEEN A RAPE VICTIM, AND BEING TOLD YOU CUT A DEAL WITH YOUR RAPIST AND YOU HAVE TO KEEP YOUR MOUTH SHUT ABOUT IT.

THERE IS SOME THINGS I THINK THAT GO TO THE GUTS OF BEING HUMAN. THERE ARE SOME THINGS THAT IN THE GUTS OF BEING A HUMAN HAVE TO DO WITH TELLING THE TRUTH, HAVE TO DO WITH BEING A GOOD PERSON, HAVE TO DO WITH HELPING PEOPLE WHO HAVE BEEN HURT IN A WAY THAT -- WITH RESPECT TO WHICH ONE HAS INTIMATE FIRST-HAND KNOWLEDGE. AND WITH RESPECT TO THAT, I DON'T KNOW IF IT'S HUMANLY POSSIBLE TO SUPPRESS JUSTICE IN ONESELF, TO SUPPRESS LOVE OF PEOPLE IN ONESELF, TO SUPPRESS LOVE OF THE TRUTH IN ONESELF AND TO SIMPLY SAY I NO LONGER AM WILLING OR CAN DO THE RIGHT THING.

I DON'T KNOW, IN GENERAL, FOR AN HONEST PERSON, WHETHER THAT'S POSSIBLE. FOR MR. ARMSTRONG, I DON'T THINK THAT IT IS. IT'S LIKE THERE'S DECADES OF HIS LIFE AND THOSE DECADES ARE SUPPOSED TO DISAPPEAR. THOSE DECADES THAT HAD EVERYTHING TO DO WITH HIS IDEALISM, HAD EVERYTHING TO DO WITH, AS A YOUNG MAN,

DEVELOPING HIS SENSE OF RIGHT AND WRONG, ARE SUPPOSED TO BE CUT OUT AND DISCARDED. MAYBE HE COULD DO THAT IF HE DIDN'T GET HAMMERED AND LIED ABOUT. BUT WHEN HE DID, I DON'T THINK THERE'S ANY WAY THAT HE COULD KEEP HIS MOUTH SHUT.

SO WHAT'S GOING ON, IN MY VIEW, HERE, IT'S NOT CONTRACT. IT'S ONE MAN WHO'S HAD THE COURAGE TO STAND UP AGAINST A HORRIBLY PERNICIOUS ORGANIZATION AND TELL THE TRUTH IRRESPECTIVE OF THE CONSEQUENCES. IN ONE PERSON'S EYES HE MAY BE A HERO, ANOTHER PERSON'S EYES A SCOFFLAW AND A BAD GUY.

SO I DON'T THINK I NEED TO SAY ANY MORE.

THE COURT: THANK YOU. ALL RIGHT.

MR. WILSON: YOUR HONOR, AT THIS TIME WE MOVE FOR JUDGMENT. MR. GREENE HAS NOT SAID ONE THING THAT AMOUNTS TO A DEFENSE IN THIS CASE.

FIRST OF ALL, THERE HAS BEEN NO OFFER OF ANY PROOF THAT THE BREACHES DIDN'T OCCUR. SO WE CAN GET BEYOND THAT. THEY OCCURRED.

THE ONLY THING WE'VE HEARD, ESSENTIALLY, IS THAT MR. ARMSTRONG WAS HOODWINKED BY HIS PRIOR COUNSEL, OR PRESSURED BY HIS PRIOR COUNSEL.

NOW, LET'S JUST ASSUME THAT WASN'T ALREADY LITIGATED A ZILLION TIMES. I'M EXAGGERATING, THERE WAS ONLY THREE. LET'S ASSUME IT WASN'T LITIGATED THREE TIMES. IT'S NOT A DEFENSE. THERE IS NO DEFENSE TO A CONTRACT THAT SAYS IF YOUR LAWYER MISADVISES YOU, YOU DON'T HAVE TO PERFORM. SUE YOUR LAWYER. AS WE KNOW

PEOPLE ARE NOT EXACTLY RETICENT TO DO THAT. IF THAT WAS THE PROBLEM, HE COULD SUE HIS LAWYER.

THE ONLY OTHER STUFF WE'VE HEARD IS WHAT HAPPENED BEFORE 1986. NOW, I WON'T CONCEDE THAT IT'S RELEVANT FOR THE CONTEMPT, BUT LET'S JUST ASSUME THAT IT IS AND THAT'S WHY WE'RE GOING TO TALK ABOUT IT. IT'S SURE NOT RELEVANT FOR THE DEFENSE OF THIS ACTION. THAT IN FACT SHOWS WHY THE CONTRACT SHOULD BE ENFORCED. WE HAD BITTER LITIGATION. THERE WAS A REASON FOR THE CHURCH TO SETTLE. NO ONE DENIES THAT. THERE WAS A REASON FOR MR. ARMSTRONG TO SETTLE. NO ONE DENIES THAT.

TO TRY TO ENGRAFT WHAT MR. GREENE'S DEFENSE IS, IS THAT HE SAYS, WELL, REALLY THIS CONTRACT DIDN'T SAY WHAT IT SAID, IT REALLY SAID SOMETHING ELSE, IT REALLY SAID THAT THE CHURCH SHOULDN'T SAY ANYTHING ABOUT MR. ARMSTRONG.

WELL, OF COURSE IT DIDN'T SAY THAT. AND WHAT IT DID SAY WAS THAT IT WAS AN INTEGRATED AGREEMENT.

SO THAT IS NOT A DEFENSE. TO SAY THAT AN INTEGRATED AGREEMENT SAYS SOMETHING THAT IT DIDN'T SAY, IS NOT A DEFENSE. AND THERE'S -- THERE'S NO ARGUMENT, NO EVIDENCE, THAT IT WAS AMBIGUOUS. THERE'S NOTHING IN THIS AGREEMENT THAT EVEN COULD BE CONSTRUED OR STRETCHED TO SAY THAT THE CHURCH HAD TO REMAIN SILENT. AND THAT'S REALLY ALL THAT MR. GREENE HAS SAID.

AND I THINK THE MOST TELLING THING THAT MR. GREENE SAID WAS AT THE END OF HIS STATEMENT WHERE HE SAID, "THIS IS NOT ABOUT CONTRACT." WELL, EXCUSE ME, IT

IS. THERE'S A COMPLAINT. IT SAYS YOU BREACHED THIS AGREEMENT. HE ADMITS HE BREACHED THE AGREEMENT. IT'S NOT A DEFENSE TO COME IN AND SAY IT'S NOT A CONTRACT.

SO EVEN IF THERE WAS NO PRECLUSIVE AFFECT OF RES JUDICATA OR COLLATERAL ESTOPPEL, MR. GREENE HAS NOT TOLD YOU ANY FACT, NOT ONE, THAT WOULD BE A DEFENSE TO THIS AGREEMENT. AND THEN OF COURSE I'M NOT GOING TO REITERATE THE ARGUMENTS THAT WE MADE IN OUR MOTION IN LIMINE, BUT I WOULD JUST MENTION THEM THAT IN FACT EVERY SINGLE ARGUMENT THAT MR. GREENE HAS MADE, HAS INTIMATED, HAS SUGGESTED, WAS MADE BEFORE. AND TWO JUDGES OF THIS COURT RULED AGAINST HIM.

AND WHAT WE'RE GOING TO HAVE IS THIS UNFOCUSED -- IF OUR MOTION ISN'T GRANTED, IF THE MOTION IN LIMINE ISN'T GRANTED, JUDGMENT ISN'T ENTERED -- IS AN UNFOCUSED CIRCUS OF IRRELEVANCY, UPON IRRELEVANCY, UPON IRRELEVANCY.

FOR EXAMPLE, MR. GREENE SAYS WE HAVE THIS FAIR GAME POLICY. WELL, THAT POLICY WAS CANCELLED IN 1968, '69. I'M NOT SAYING THAT SO THAT YOU'LL BELIEVE ME THAT IT WAS. I'M JUST SAYING THAT THAT'S WHAT WE'RE GOING TO BE PROVING.

SO WE'RE GOING TO TAKE WHAT IS A VERY SIMPLE CASE AND TURN IT INTO BARNHAM AND BAILEY.

THE COURT: HOW MUCH HAS THE CHURCH RECOVERED IN LIQUIDATED DAMAGES ON THE AMOUNT OF THE SETTLEMENT?

MR. WILSON: ZERO.

THE COURT: HAS GOTTEN A JUDGMENT?

MR. WILSON: WE GOT A JUDGMENT WHICH MR. ARMSTRONG DISCHARGED IN BANKRUPTCY.

THE COURT: THAT WAS FOR HOW MUCH?

MR. WILSON: 300,000.

THE COURT: OKAY.

ANYTHING ELSE?

MR. WILSON: NO.

WELL, ACTUALLY I ALSO -- WE ALSO HAVE A MOTION TO EXCLUDE ALL EVIDENCE WHICH IS SIMILAR TO A MOTION FOR DIRECTED VERDICT WHICH WE WOULD MAKE AT THIS TIME. IF I CAN HAND IT TO THE COURT AND HAND IT TO MR. GREENE.

IT'S SIMILAR TO THE MOTION IN LIMINE, IT'S PRETTY MUCH THE SAME ISSUE. BUT I DID WANT TO --

THE COURT: $300,000 IN THE JUDGE THOMAS ACTION?

MR. WILSON: YES.

THE COURT: OKAY.

MR. WILSON: THAT WAS THE SUMMARY JUDGMENT, YOUR HONOR.

THE COURT: OKAY.

SUBMITTED?

MR. WILSON: YES.

THE COURT: YES?

MR. GREENE: IN RESPONSE.

PARAGRAPH 7(I).

THE COURT: OF THE SETTLEMENT AGREEMENT?

MR. GREENE: YES.

HAS LANGUAGE IN IT TALKING ABOUT HOW THE PURPOSE OF THE AGREEMENT IS THAT THE SLATE NOW, BETWEEN ARMSTRONG AND SCIENTOLOGY, IS TO BE WIPED CLEAN.

THE COURT: RIGHT.

MR. GREENE: THAT WAS NEVER LITIGATED. THAT'S LANGUAGE OF MUTUALITY. THAT'S, I SUBMIT, SUFFICIENTLY AMBIGUOUS TO ALLOW FOR RESORT TO EXTRINSIC EVIDENCE IN ORDER TO MAKE A DETERMINATION OF WHAT THE INTENT OF THE PARTIES WAS.

OUR -- AS I STATED, I'M NOT GOING TO REITERATE WHAT I STATED. OUR POSITION SIMPLY IS THAT IT WORKED BOTH WAYS. AND THAT AT THE POINT THAT SCIENTOLOGY STARTED TO TALK ABOUT DISPARAGE ARMSTRONG, THEY COULD NO LONGER ENFORCE THE SAME THING AGAINST HIM.

THE COURT: SO IN OTHER WORDS --

MR. WILSON: MAY I RESPOND?

THE COURT: IN A MINUTE.

IN OTHER WORDS, THERE IS NO DISPUTE BUT THAT THE 131 VIOLATIONS OCCURRED, BUT THERE IS A DISPUTE AS TO WHETHER THEY WERE JUSTIFIED?

MR. GREENE: THAT'S A FAIR WAY TO PUT IT.

THE COURT: ALL RIGHT.

MR. GREENE: TO CHARACTERIZE IT IN MY OWN LANGUAGE, THERE IS NO DISPUTE ABOUT MR. ARMSTRONG HAVING ENGAGED IN THAT CONDUCT. HOW THAT CONDUCT IS TO BE INTERPRETED IS WHAT'S AT ISSUE.

WE ARE NOT ADMITTING THAT THAT CONDUCT VIOLATED ANYTHING.

THE COURT: I UNDERSTAND.

ARE YOU DONE?

MR. GREENE: YES.

THE COURT: YES.

MR. WILSON: THE PARAGRAPH THAT MR. GREENE POINTED YOU TO, PARAGRAPH 7(I), SPECIFICALLY SAYS THAT THE PARTIES AGREE, IN THE EVENT OF ANY FUTURE LITIGATION, THEY WON'T RAISE ANYTHING THAT'S HAPPENED BEFORE. THEN THE LAST SENTENCE SAYS, IN OTHER WORDS, THIS SLATE IS WIPED CLEAN. IT'S VERY CLEAR THAT PARAGRAPH APPLIES TO LITIGATION. AND IN FACT THIS IS ANOTHER ISSUE THAT JUDGE THOMAS SPECIFICALLY RULED ON IN WHICH HE SAID, I THINK I READ IT TO YOU EARLIER, THAT PARAGRAPH 7(I) APPLIES IN LITIGATION. AND THERE HAS BEEN NO SUGGESTION THAT IN LITIGATION THE CHURCH HAS DONE ANYTHING THAT'S IN VIOLATION OF PARAGRAPH 7(I), ALTHOUGH I THINK YOU JUST SAW MR. GREENE VIOLATE IT TODAY.

THE COURT: SUBMITTED?

MR. WILSON: SUBMITTED.

MR. GREENE: PARAGRAPH 4 AND PARAGRAPH 17(D) AND (E) ALSO GO TO AMBIGUITY.

THE COURT: PARAGRAPH 4?

MR. GREENE: FIRST SENTENCE.

THE COURT: TALKING ABOUT MUTUALITY?

MR. GREENE: YES.

THE COURT: AND 17?

MR. GREENE: AND 17(D) AND (E) WHICH IS ON PAGE

15.

THE COURT: THAT THERE ARE MUTUAL OBLIGATIONS THAT EACH OF THE PARTIES ARE UNDERTAKING.

MR. GREENE: YES. AND THAT THEY WILL FOREBEAR AND REFRAIN FROM DOING ANY ACT OR EXERCISING ANY RIGHT INCONSISTENT WITH THE AGREEMENT.

THE COURT: ALL RIGHT. ALL RIGHT.

I'M GOING TO TAKE THIS MOTION UNDER SUBMISSION. I'M GOING TO TAKE A CLOSER LOOK AT SOME OF THE DOCUMENTS.

SO DON'T GO ANYWHERE. I'M JUST GOING TO GO TO MY CHAMBERS AND READ SOME OF THESE MATERIALS CLOSER.

MR. WILSON: THANK YOU.

(WHEREUPON, A RECESS WAS TAKEN.)

11:33 AM

THE COURT: ALL RIGHT.

BACK ON THE RECORD IN CHURCH OF SCIENTOLOGY VERSUS ARMSTRONG.

THIS IS WHAT MY INTENTION IS, THEN I'LL HEAR FROM COUNSEL AFTER I LET YOU KNOW WHAT MY THINKING IS.

THE COURT AGREES WITH THE MOTION FOR DIRECTED VERDICT ON THE DEFENSES. THAT IS THAT NONE OF THE CIRCUMSTANCES THAT WERE DESCRIBED IN THE OPENING STATEMENT BY MR. GREENE AMOUNT TO A DEFENSE IN THIS CASE. AND IT APPEARS THAT THERE IS NO QUARREL BUT THAT THESE 131 ACTS DID OCCUR. AND IT'S QUITE CLEAR FROM EXHIBIT NUMBER 1, THAT THE SETTLEMENT AGREEMENT DID PROVIDE FOR LIQUIDATED DAMAGES FOR VIOLATING THE TERMS

OF THE SETTLEMENT AGREEMENT. AND IT ALSO IS QUITE CLEAR FROM THE COURT'S JUDICIAL NOTICE THAT THIS MATTER HAS BEEN THOROUGHLY LITIGATED AND THAT A TRIAL IS NOT REQUIRED FOR A FINAL RESOLUTION OF THE MATTER. SO I DO BELIEVE THAT THESE DEFENSES HAVE BEEN PREVIOUSLY LITIGATED, PREVIOUSLY RULED UPON, AND IN ADDITION THE COURT HAS LISTENED TO THE OPENING STATEMENTS OF THE DEFENSE. AND EVEN IF THOSE THINGS WERE PROVEN TO BE TRUE, THERE IS NO AMBIGUITY IN THE SETTLEMENT AGREEMENT. AND DEFENDANT, IN ACCEPTING THAT MONEY, DID UNDERTAKE TO ABIDE BY THE TERMS AND CONDITIONS OF THE SETTLEMENT AGREEMENT. AND THAT PARTICULAR PROVISION WAS NOT BILATERAL, IT WAS UNILATERAL. SO THAT EVEN IF THE CHURCH SAID HORRIBLE THINGS ABOUT MR. ARMSTRONG, HE IS NOT JUSTIFIED TO VIOLATE THE TERMS OF THE SETTLEMENT AGREEMENT, BUT WOULD HAVE OTHER REMEDIES UNDER THE LAW.

SO WHERE DOES THAT LEAVE US?

HERE IS MY THOUGHT.

MR. ARMSTRONG RECEIVED A BENEFIT UNDER THE SETTLEMENT AGREEMENT OF $800,000. AND I THINK IT WOULD BE UNCONSCIONABLE TO PUNISH HIM BEYOND WHAT THE BENEFIT WAS THAT WAS CONFERRED TO HIM. HE'S PREVIOUSLY BEEN SANCTIONED IN THE SUM OF $300,000.

SO MY THOUGHT IS TO ENTER JUDGMENT FOR THE PLAINTIFF, ON THE ADMITTED VIOLATIONS, OF $500,000. AND IN MY VIEW THE BENCH WARRANTS THAT HAVE BEEN PREVIOUSLY ISSUED ON THE CONTEMPT CITATION, WHICH CALL FOR, LOOKS

LIKE, AROUND 30 DAYS IN JAIL, I WOULD DISCHARGE THE JAIL AND THE CONTEMPT CITATION, THE CONTEMPT PUNISHMENT, WITH THE ENTRY OF THE JUDGMENT OF $500,000.

I DON'T KNOW THAT THERE IS ANYTHING LEFT TO TRY, BUT BY GRANTING A DIRECTED VERDICT ON THE DEFENSES DOESN'T NECESSARILY MEAN THAT PLAINTIFF GETS A JUDGMENT, BUT IT SEEMS THAT THERE HAS BEEN AN ADMISSION OF THE VIOLATIONS. SO I DON'T KNOW THAT THERE IS ANYTHING TO TRY. SO I'LL HEAR FROM COUNSEL NOW.

MR. WILSON: WELL, I AGREE WITH EVERYTHING BUT THE LAST PART.

THE COURT: WHICH WAS THE JAIL?

MR. WILSON: WHICH WAS -- NO. WHICH WAS, I GUESS, THE LAST TWO PARTS.

FIRST OF ALL, I THINK THAT WE'RE ENTITLED TO A JUDGMENT OF 50,000 FOR EACH OF THE BREACHES. IF WE'RE ENTITLED TO A JUDGMENT FOR 50 FOR ONE OF THEM, WE'RE ENTITLED TO A JUDGMENT OF 50,000 FOR EACH OF THEM.

EVEN IF -- I DON'T THINK THERE'S ANY AUTHORITY TO NOT DO THAT.

THE COURT: WELL, LIQUIDATED DAMAGES HAVE TO BE REASONABLE. I THINK IT'S UNREASONABLE TO GO BEYOND THE AMOUNT THAT WAS PAID TO MR. ARMSTRONG.

MR. WILSON: IF THAT'S YOUR DECISION, I WOULD ASK THAT YOU RECOGNIZE THAT THE FIRST 300,000 WAS DISCHARGED IN BANKRUPTCY.

THE COURT: HE'S ENTITLED TO DECLARE BANKRUPTCY.

MR. WILSON: I UNDERSTAND THAT, BUT WHAT YOU'RE SAYING IS THAT THEN HE CAN GO DECLARE BANKRUPTCY AGAIN, GET OUT FROM THE 500. I THINK AT LEAST IT SHOULD BE $800,000 ON THEORY THAT HE DISCHARGED THE FIRST 300.

THE COURT: ALL RIGHT.

MR. WILSON: NOW LET ME TALK ABOUT THE CONTEMPT. THIS WASN'T A CONTEMPT OF THE CHURCH.

THE COURT: COURT ORDER.

MR. WILSON: THAT'S RIGHT. IT WAS A CONTEMPT OF THE COURT, NOT ONCE, NOT TWICE, THREE TIMES. THREE TIMES. AND WHAT'S HIS EXCUSE? WHAT WAS MR. ARMSTRONG'S EXCUSE FOR THAT? HIS EXCUSE WAS THAT THE CHURCH AND

JUDGE THOMAS WERE IN CONSPIRACY.

THE COURT: WELL, I THINK HIS EXCUSE WAS MORE THAN THAT.

MR. WILSON: WELL, THAT WAS ONE OF THE REASONS.

I MEAN, THE IDEA THAT MR. ARMSTRONG CAN -- ALTHOUGH YOU'VE RULED FOR US, I UNDERSTAND THAT, I APPRECIATE IT. WHAT YOU'VE BASICALLY DONE IS SAY, OKAY, GO AHEAD, LEAVE, YOU'LL NEVER HAVE TO PAY THE CHURCH ANY MONEY. YOU'LL NEVER HAVE TO SERVE ANY TIME FOR HAVING DELIBERATELY VIOLATED THREE -- VIOLATED THE COURT ORDER THREE TIMES.

HE NEEDS TO BE PUNISHED FOR THAT OR ELSE WHAT YOU'RE SAYING IS THAT ANYBODY CAN DO IT.

THE COURT: SOME PEOPLE MIGHT CONSIDER A $800,000 JUDGMENT AGAINST THEM TO BE PUNISHMENT.

MR. WILSON: MR. ARMSTRONG DOESN'T. HE TOLD

YOU HE DOESN'T. HE TOLD YOU HE'S GOING TO KEEP DOING IT.

THE COURT: OKAY.

MR. WILSON: AND THE ONLY WAY -- THE ONLY WAY THAT THE CHURCH CAN GET ANY SATISFACTION, OR HAS ANY CHANCE OF HAVING MR. ARMSTRONG STOP THIS IS FOR THE COURT TO TELL HIM WE'RE SERIOUS. WE ORDERED YOU TO STOP, WE MEANT IT. STOP. GO TO JAIL. DO NOT PASS GO. DO NOT COLLECT $200. HE NEEDS TO BE PUT IN JAIL NOT BECAUSE HE SPOKE OUT, BECAUSE HE THUMBED HIS NOSE AT THE COURT.

THE COURT: OKAY.

MR. WILSON: THANK YOU.

THE COURT: MR. GREENE.

MR. GREENE: IF I CAN JUST HAVE A MOMENT.

YOUR HONOR, FIRST WE -- GIVEN YOUR REASONING, AND WITH RESPECT TO HAVING, IN EFFECT, NO DEFENSE, WOULD AGREE WITH WHAT YOUR INTENDED SOLUTION IS.

I WOULD, IN RESPONSE TO MR. WILSON'S COMMENTS, SAY THAT BY THE FACT OF MR. ARMSTRONG'S APPEARANCE HERE SHOWS THAT HE'S NOT THUMBING HIS NOSE AT ANYBODY. HE'S HERE BECAUSE HE RECOGNIZES THE SERIOUSNESS OF THE PROCEEDING. HE CAME FROM CANADA TO MARIN COUNTY KNOWING THAT THERE WERE THE PRIOR CONTEMPT CITATIONS. HE'S NOT A SCOFFLAW, OR SOME SORT OF BAD GUY. HE IS A MAN OF PRINCIPLE. AND GIVEN THE FACT THAT YOU, IN ADDITION TO THE OTHER COURTS, HAVE INTERPRETED

THE AGREEMENT AS -- TO BE AS ONE-SIDED AS IT IS, WE HAVE NO OBJECTION TO YOUR PROPOSED RESOLUTION.

MR. WILSON: MAY I ASK A QUESTION?

IF I FELT -- LET ME PROCEED BY STATEMENT.

IF I FELT THAT MR. ARMSTRONG WOULD GO FORTH AND VIOLATE THE INJUNCTION NO MORE, OR IF I FELT THERE WAS SOMETHING -- LET PUT IT THIS WAY. IF MR. ARMSTRONG LIVED IN MARIN COUNTY AND YOU SAID TO HIM, OKAY, I'M GIVING YOU A FREE PASS, I WOULDN'T BE AS EXERCISED AS I AM BECAUSE I FEEL THAT IF YOU DID THAT, AND HE DID IT AGAIN, I WOULD BE IN HERE AND HOPEFULLY YOU WOULD SAY, OKAY, I SEE WHAT YOU MEAN, IT DIDN'T WORK. BUT HE'S GOING TO GO BACK TO CANADA. HAVEN'T HEARD AN APOLOGIZE, HAVEN'T HEARD I SHOULDN'T HAVE DONE IT, HAVEN'T HEARD I WON'T DO IT ANY MORE.

THE COURT: BUT YOU TOLD ME THAT THE CHURCH WAS WILLING TO DISCHARGE THE --

MR. WILSON: WE WOULD RESCIND THE AGREEMENT.

THE COURT: RESCIND THE AGREEMENT IF HE GAVE YOU THE MONEY BACK. THE COURTS ARE NOT RESPONSIBLE FOR COLLECTION. ALL WE CAN DO IS ISSUE ORDERS. BUT GIVEN THE CHURCH'S POSITION I THINK RETURNING TO THE CHURCH THE BENEFITS THAT WERE CONFERRED TO MR. ARMSTRONG REACHES THE SAME RESULT.

MR. WILSON: WELL, IT WOULD IF HE PAID IT.

THE COURT: RIGHT.

MR. WILSON: RESCINDING THE AGREEMENT DOESN'T MEAN YOU GET A JUDGMENT AND IT DOESN'T GET PAID.

RESCINDING THE AGREEMENT MEANS YOU PAY THE MONEY BACK.

THAT'S NOT WHAT YOU HAVE DONE. I MEAN I -- LOOK, I UNDERSTAND WHERE YOU'RE TRYING TO GO. I RESPECT IT. I UNDERSTAND THE REASONING.

THE COURT: YOU JUST DON'T THINK IT'S GOING TO DO ANY GOOD.

MR. WILSON: IT'S NOT GOING TO DO ANY GOOD.

YOU KNOW, IF HE'S GOING TO PAY THE MONEY BACK, FINE, WE'LL TAKE THE MONEY, HE CAN DO WHATEVER HE WANTS.

THE COURT: IT'S A COMPLICATED ARRANGEMENT THE PARTIES FIND THEMSELVES INTO. THEY HAVE A LONG HISTORY.

THERE'S ONLY SO MUCH THE COURTS CAN DO.

SO I UNDERSTAND THAT THE PLAINTIFF WOULD LIKE TO HAVE HIM JAILED AS A RESULT, BUT --

MR. WILSON: YOUR HONOR, IT'S NOT --

THE COURT: YOU WANT -- WHAT YOU WANT --

MR. WILSON: JUST ABIDE BY THE AGREEMENT.

EITHER ABIDE BY IT, OR GIVE US THE MONEY BACK. THAT'S WHAT WE WANT. WE DON'T WANT TO PUT THE GUY IN JAIL.

AND IF HE SAID -- HE HASN'T EVEN SAID HE'D STOP. WHAT HAPPENS WHEN HE DOES IT AGAIN?

THE COURT: I'M SURE WE'LL FIND OUT.

MR. WILSON: WELL, IT WOULD BE NICE TO SEE IF WE COULD -- TO DO SOMETHING. AND I THINK IF HE SERVES SOME TIME IN JAIL AT LEAST HE'LL KNOW YOU'RE SERIOUS, AT LEAST HE'LL KNOW THAT'S WHAT'S GOING TO HAPPEN. BUT RIGHT KNOW HE'S GOING TO WALK OUT OF HERE THINKING, HEY, I GOT A PASS.

THE COURT: OKAY. SUBMITTED?

MR. GREENE: ALMOST.

I'D JUST LIKE TO ADD, IN TERMS OF THE COURT'S DISCUSSION OF KIND OF THE QUID PRO QUO. SCIENTOLOGY STILL RETAINS THE SUBSTANTIAL BENEFIT OF ARMSTRONG'S CROSS-COMPLAINT NEVER HAVING GONE TO TRIAL. NEVER THERE BEING ANY JUDGMENT. NEVER THERE BEING THE TYPE OF PUBLICITY THAT THAT WOULD GENERATE. THAT'S A SUBSTANTIAL BENEFIT.

THE COURT: ALL RIGHT.

JUDGMENT IS ENTERED IN FAVOR OF THE PLAINTIFF AND AGAINST THE DEFENDANT IN THE SUM OF $500,000. AND THE TIME THAT WAS ORDERED ON THE CONTEMPT CITATIONS IS DEEMED SERVED.

MR. GREENE: THANK YOU, YOUR HONOR.

THE COURT: THANK YOU.

MR. WILSON: AND YOU DIDN'T SAY IT, BUT I ASSUME NO SENTENCE ON THE THIRD CONTEMPT.

THE COURT: THE SENTENCE THAT --

MR. WILSON: THAT WAS NEVER SENTENCED.

THE COURT: IT WAS -- I THOUGHT IT WAS -- FURTHER SENTENCE WAS --

MR. WILSON: WAS WITHHELD.

THE COURT: LET ME JUST MAKE SURE.

THERE IS A -- SO THE COURT DID NOT IMPOSE ANY SENTENCE ON THIS?

MR. WILSON: RIGHT. SO IF I CAN TAKE A THIRD BITE AT THE APPLE. SENTENCE HIM ON THAT ONE. SOMETHING.

THE COURT: ALL RIGHT.

SO ON THE ORDER OF CONTEMPT ISSUED JULY 13TH, 2001, THE COURT SENTENCES YOU TO FIVE DAYS IN JAIL AND A FINE OF $1,000. THE FINE IS -- THE FINE IS CONCURRENT WITH THE JUDGMENT THAT'S BEEN RENDERED IN THIS ACTION AND THE JAIL TIME IS DEEMED SERVED BY YOUR APPEARANCE IN COURT HERE TODAY.

MR. GREENE: THANK YOU, YOUR HONOR.

THE COURT: THANK YOU.

MR. WILSON: THANKS FOR YOUR TIME, YOUR HONOR.

THE COURT: THANK YOU VERY MUCH.

(WHEREUPON, THE PROCEEDINGS WERE CONCLUDED.)

STATE OF CALIFORNIA

COUNTY OF MARIN

)

) SS.

)

I, DEBORAH S. BARTUNEK, DO HEREBY CERTIFY THAT I AM AN OFFICIAL COURT REPORTER OF THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, IN AND FOR THE COUNTY OF MARIN, AND THAT AS SUCH I REPORTED THE PROCEEDINGS HAD IN THE ABOVE-ENTITLED CASE, AT THE TIME AND PLACE SET FORTH HEREIN; THAT MY STENOTYPE NOTES WERE THEREAFTER TRANSCRIBED INTO TYPEWRITING UNDER MY DIRECTION; THAT THE FOREGOING PAGES, NUMBERED 3 THROUGH 63, INCLUSIVE, CONSTITUTE A FULL, TRUE AND CORRECT TRANSCRIPTION OF SAID NOTES.

DATED: SAN RAFAEL, CALIFORNIA, THIS 21ST DAY OF APRIL, 2004.

_________________________________

CSR 4822, DEBORAH S. BARTUNEK

Scientology v. Armstrong

Reporter's Transcript of Proceedings

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Armstrong 8

Armstrong 7

Armstrong 6

Armstrong 5

* On October 6, 1993, Armstrong 2 and 3 were consolidated. On September 12, 1994, Armstrong 2 and 3 were consolidated with Armstrong 4 under Marin SC No. 157680. All are now called Armstrong 4. On April 9, 2008, Armstrong 4 was consolidated with Armstrong 7.

Armstrong 4 *

Armstrong 3 *

Armstrong 2 *

Armstrong 1

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