Dan Leipold: Wallersheim Motion
Magoo
Dan Leipold-Wallersheim court motion.( Rich in data on Scn corporate
restructuring)
From: michael pattinson (kare...@aol.com)
Subject: Reposted classics 36; Dan Leipold-Wallersheim court motion.( Rich
in data on Scn corporate restructuring)
Newsgroups: alt.religion.scientology
View: (This is the only article in this thread) | Original Format
Date: 2001-07-29 14:36:53 PST
From: Joel J. Hanes (joe...@home.com)
Subject: [SIGNAL] Scientology Legal Fictions Exposed - Wollersheim
1997
Newsgroups: alt.religion.scientology
View complete thread (6 articles)
Date: 2001-05-20 08:16:24 PST
> From hkhe...@netcom.com (Keith Henson)
> Date Sat, 19 Apr 1997 04:31:09 GMT
----------------------------------------------------------------------------
This is the hottest news of the week--so far. Keith Henson]
April 18, 1997 in Los Angeles Superior Court, in a totally unexpected action
the Church of Scientology International paid $480,000+ dollars on behalf of
the Church of Scientology of California into the court for sanctions and
court costs as a partial payment for the Wollersheim SLAPP suits. In their
oral briefing the week before in front of the same judge the Church of
Scientology International admitted on the record that it had funded the
(frivolous) law suit for the Church of Scientology of California lawsuit
against Wollersheim. The reason the Church of Scientology International made
such a startling admission and immediately paid the money into the court was
in exchange for a fast deal with the judge that the following court brief
would not be filed in the existing SLAPP cases because they were going to
pay off the Wollersheim judgments in full. <gloat, gloat>
Scientology's highest management has told its members for years" not one
thin dime for Wollersheim," but it blinked and reacted in a panic. It raced
to get the money into the court to stop the filing of the following brief by
Wollersheim's lawyers. This is *such* a nice piece of work thought that we
just had to share it with the long suffering readers of a.r.s. :-)
MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF
MOTION TO AMEND JUDGMENTS
1. BASIS OF MOTION.
Defendant Larry Wollersheim seeks to amend the June 3, 1994
and November 8, 1996 final judgments awarding him costs and
attorneys' fees, to add Religious Technology Center ("RTC") and
Church of Scientology International ("CSI") as real party
plaintiffs and judgment debtors. Those judgments are for the
amounts of $132,676.57 and $298,039.74, respectively.
Overwhelming evidence shows that RTC and CSI are the alter
egos of plaintiff Church of Scientology of California ("CSC") and
have been since RTC and CSI were incorporated in the early
1980s. As a matter of Scientology doctrine, a single
individual, "Sea Org" Captain and RTC's Chairman of the Board,
David Miscavige, wields unchallenged control over all Scientology
matters -- including the instant litigation -- unhampered by such
bothersome details as corporate boundaries.
As a result, the unity of interest between Scientology's
corporations is so pervasive as to expose the notion of their
independent existences as an utter ruse. CSC, in particular, is
nothing more than a shell. RTC and CSI have financed and
controlled CSC's case against Mr. Wollersheim since its
inception.
The equities in this matter fall squarely on the side of
Larry Wollersheim and demand that this motion be granted. If
not, an inequitable result will follow, because CSC's assets have
been willfully depleted, leaving it without adequate means to
satisfy the judgments against it.
2. FACTUAL AND PROCEDURAL HISTORY.
a. Mr. Wollersheim's Scientology Experience.
Larry Wollersheim joined the Church of Scientology in 1968
and participated in its exercises for years before leaving.
While associated with Scientology, Mr. Wollersheim experienced
severe psychological distress and eventually contemplated
suicide. Finally, having decided his problems were directly
related to his Scientology activity, he resisted the coercive
measures designed to keep him in the organization, and quit.
In 1980, Mr. Wollersheim filed suit against CSC for fraud
and infliction of emotional injury (hereinafter, that case is
referred to as "Wollersheim I"). When the case was tried in
1986, a unanimous jury found Scientology had subjected him to
"fair game," a form of punishment by which Scientology enemies
may be "injured by any means," including being "tricked, sued or
lied to or destroyed." SS-2.
In addition to the psychological torture he endured, both
while in Scientology and after fleeing it, Mr. Wollersheim's
evidence established Scientology's effective scheme to ruin his
successful photography business. The business went bankrupt. In
July of 1986, the jury awarded him $30 million.
CSC filed the present lawsuit, seeking to set aside the
Wollersheim I judgment, in 1993, nearly seven years after the
jury in that case reached its verdict. In the intervening years,
the underlying case wound its way through the appeals courts, a
process in which Mr. Wollersheim consistently prevailed. When
CSC's appellate road was near its dead end, this case surfaced.
/ / /
b. After Many Years as Scientology's Chief Organization,
CSC Was Gutted, and RTC and CSI Were Incorporated,
Diverting Funds Away from CSC Largely to Frustrate Mr.
Wollersheim's Ability to Collect a Judgment.
When Mr. Wollersheim filed suit against CSC in 1980, it was
the dominant Scientology entity. SS-4. Incorporated in
California in 1954, CSC was Scientology's "mother church." SS-5.
As of July 1981, CSC's net worth was $340 million. SS-6.
Beginning in late 1981, Scientology underwent an ostensible
reorganization. As a result of this project, which was called
"Mission Corporate Category Sort-Out" ("MCCS"), 60 to 70 percent
of CSC was divested by the end of December 1981. SS-7. When, in
1985, it appeared to Scientology that Mr. Wollersheim might win
his lawsuit, the decision was made to strip CSC of what was left.
SS-8. Thus, the remaining 30 to 40 percent of CSC was gone by
May of 1985. SS-9. A year later, Wollersheim I would go to
trial.
After the MCCS reorganization, CSC was no longer the central
entity. Instead, CSI had been formed to become the new "mother
church," overseeing most other Scientology organizations,
including CSC. SS-10. Under the new hierarchy, the only entity
superior to CSI was RTC, which purported to own and license
certain rights to CSI and other entities. SS-11.
While the reorganization was engineered partly to defraud
the government, the looting of CSC's assets was specifically
designed to prevent Mr. Wollersheim, among others, from ever
collecting a judgment. SS-12. At an October 1982 conference of
"mission holders" (franchisees), Scientology officials Lyman
Spurlock and David Miscavige, both of whom were founding trustees
of RTC in 1981, announced the goal of the reorganization: to make
Scientology "impregnable." SS-13.
Elaborating on this message, Miscavige assured the meeting's
attendees that the MCCS project had resulted in a "corporate
structure [which] assures Scientology being around for eternity."
SS-14.
Before the reorganization, the most prosperous units in
Scientology were included under CSC's corporate umbrella, and CSC
received regular income from them. SS-15. For example, prior to
1981, local Scientology branches such as those in San Francisco
and Los Angeles paid monthly management fees to CSC. SS-16.
After the corporate "sort-out," however, those payments -- which
range from five to 10 percent of weekly receipts from 98
organizations -- were routed to the newly formed CSI. SS-17.
The result: 25% of CSI's revenue consists of "management
payments" received from Scientology organizations. SS-18.
That these management payments are significant is seen in
the example of the Flag Service Organization, a one-time branch
of CSC. In 1981, it became a separate corporation known as
Church of Scientology Flag Service Organization (CSFSO). SS-19.
Like Scientology's other organizations, CSFSO began making its
payments to CSI after the MCCS project; by 1989, CSI was
receiving some $200,000 per week in fees from CSFSO alone. SS-20.
Its income stream having been stripped from it, CSC became a
"dormant" corporation devoid of activity. SS-21. In its 1993
application for 501(c)(3) tax exempt status, CSI represented
that CSC had been inactive since at least 1991 -- two years
before it filed this lawsuit. SS-22. As CSC's president, Neil
Levin, has testified, this "inactive" status means CSC has no
employees and transacts no business. SS-23. President Levin
himself, who last received a salary from CSC the year before this
lawsuit was filed, devotes no time to the performance of CSC-
related duties. SS-25. Instead, his energy is spent on his true
employment -- within CSI's Office of Special Affairs. SS-26.
Just as the use of CSC as a repository of revenue was
aborted, so have its assets been depleted -- an action taken
expressly to thwart efforts by Mr. Wollersheim to collect a
judgment. SS-12. As of April 1986, CSC claimed a net worth of
$18.6 million. SS-30. In July of that year, just after Mr.
Wollersheim won his $30 million verdict, one of CSC's directors,
Lynn Farny, agreed on the record that CSC would not dispose of
its assets except in the ordinary course of business. SS-33. Of
course, by the time of Mr. Farny's pledge, CSC's "ordinary course
of business" no longer included any revenue-generating activity
-- all income was now being routed to CSI and/or RTC.
Two months later, in September of 1986, CSC moved the trial
court for a waiver of Code of Civil Procedure 917.1's
requirement that a bond equal to twice the amount of the judgment
be posted to stay its enforcement on appeal. In his minute
order, Judge Ronald Swearinger, ruling on CSC's motion, rebuffed
CSC's claim of indigency:
"Proof has shown that [CSC] transferred virtually all
of its assets and functions out to other Scientology
entities subsequent to the filing of this action and as
late as just before a scheduled trial date in this
case. If the defendant is indeed indigent, it is an
indigency of its own making. Proof has shown that
Scientology as an overall entity is comprised of
numerous operating entities, including defendant, and
that they are all inter-related, being parts of a
monolithic whole. Transfers of assets and functions
from one entity to other entities are more pro forma
than actual. In the case of the transfers in question
here, they are seen as mere 'jiggery pokery.' The
power to transfer out to a sister entity is the power
to transfer back in 'when the heat is off,' so to
speak. The claim of relative indigency is not believed
by the court and the court has had ample opportunity to
examine and consider the credibility of the defendant
during 5-1/2 months of trial and extended post-trial
proceedings." SS-34.
The depletion of CSC's assets was attributable in part to
the settlement of other lawsuits against it. One such
settlement, in the amount of $800,000, was achieved in late 1986
on behalf of ex-Scientologist Gerald Armstrong. SS-35. In a
stunning move which unmistakably reveals the unity of interest
among Scientology's corporations, the 1986 settlement agreement
with Armstrong was executed by CSI, a non-party. CSC, the actual
cross-defendant in the case, was merely named as a beneficiary of
that agreement. So was RTC. SS-36.
Not surprisingly, by May 1995, CSC's assets had dwindled to
$35,000, on deposit in a Luxembourg bank. Another account had
been opened at a New York bank on CSC's behalf -- with CSI funds
-- in order to pay a sanctions award issued against CSC. SS-38.
CSC now holds neither real estate nor personal property
anywhere in the world. SS-39. Thus, in keeping with
Scientology's goals, plaintiff CSC has become just a ransacked
shell whose only purpose is to sue Larry Wollersheim.
c. The Unity of Interest Between CSC, CSI and RTC is
Clear; In Scientology, the Parameters of the Corporate
Structure are Ignored in Favor of a Supreme Authority
Called the Sea Org.
Its 1981 "reorganization" notwithstanding, all of
Scientology's professed labyrinth of corporations is a sham. As
noted, both the Wollersheim I trial judge and the Ninth Circuit
Court of Appeals, in U.S. v. Zolin, 905 F.2d 1344 (9th Cir.
1990), have denounced the fraudulent purposes underlying
Scientology's corporate scheme. Even more fundamentally, the
United States Claims Court, in attempting to untangle the
corporate web in Church of Spiritual Technology v. United States,
26 Cl. Ct. 713 (1992), aff'd., 991 F.2d 812 (Fed. Cir. 1993),
finally declared:
"After carefully examining the record and attempting to
understand the nominal corporate structure of
Scientology it is apparent to the court that it is
something of a deceptis visus. Real control is
exercised less formally, but more tangibly, through an
unincorporated association, the Sea Organization, more
commonly referred to as the Sea Org.
....
"[Church of Spiritual Technology ("CST")] staff and
officers are required to be members of the Sea Org,
which gives CST the distinction of being a Sea Org
Church. CSI, RTC, ..., in short, all high ranking
organizations are Sea Org Churches." (26 Cl. Ct. at p.
718.)
As the Claims Court recognized, the seat of power in
Scientology resides firmly in the Sea Org. It is from the Sea
Org that the strings in all Scientology organizations --
irrespective of corporate boundaries -- are pulled. SS-42. The
compliance of Scientology corporations with orders from the Sea
Org is ensured by the policy of appointing only Sea Org officers
to the corporations' highest posts. SS-43.
The highest ranking Sea Org officer is Captain David
Miscavige. SS-44. As previously noted, Miscavige was also a
founding trustee of RTC and is now its chairman of the board.
SS-45.
Importantly, although Miscavige presently associates himself
with RTC, his corporate affiliation is actually immaterial; it is
as the most senior officer in the Sea Org, that he runs the whole
Scientology show. Thus, in the mid-1980s, Miscavige reigned
over Scientology from his position as chairman of Author
Services, Inc. (ASI), a for-profit corporation ostensibly created
as a literary agency for L. Ron Hubbard. SS-47. In 1987, during
an IRS investigation of ASI's ties to Scientology's non-profit
corporations, Miscavige simply moved the seat of power to RTC and
appointed himself chairman of the board. SS-48.
d. David Miscavige and Other Sea Org Officers Within RTC
and CSI Have Controlled This Litigation and the Defense
of the Underlying Wollersheim I Case All Along.
It must be remembered that, as a purportedly indigent and
"dormant" entity, CSC could not have prosecuted the instant
lawsuit on its own behalf. Management of the case had to have
come from somewhere else, and it did: Sea Org officers operating
within RTC and CSI have controlled CSC's litigation with Mr.
Wollersheim for more than 15 years.
The central figure in the collaborative scheme to manipulate
CSC's litigation with Mr. Wollersheim is Sea Org Captain David
Miscavige. Before moving to RTC, Miscavige managed the defense
of Wollersheim I from his post at ASI, assisted by other Sea Org
officers. SS-49. So interested was Miscavige in the
Wollersheim I case that he attended the trial. SS-51.
During the discovery phase of Wollersheim I, Vicki Aznaran,
a Sea Org officer and managerial official of RTC who later became
its president, received a command to destroy certain documents
which the court had ordered CSC to produce to Mr. Wollersheim.
SS-53. The directive to destroy them was issued by David
Miscavige. SS-55.
Next, in keeping with L. Ron Hubbard's "scriptural" edict to
use litigation as a weapon against Scientology enemies, the
Wollersheim II case emerged. Filed in November of 1985 -- by RTC
and CSI -- the case sought to derail Mr. Wollersheim's lawsuit
against CSC. In it, plaintiffs alleged that the possession and
use of certain documents by Mr. Wollersheim, his attorneys and
experts in the case against CSC constituted RICO violations and
copyright infringement, among other things. SS-57.
Although RTC and CSI would be its plaintiffs, the decision
to file the Wollersheim II case was made by, among others, Sea
Org officers David Miscavige, Norman Starkey, and Marty Rathbun
-- all of whom were then associated with ASI, a purportedly
separate corporation! SS-50, 58. Also participating in this
decision was RTC officer Vicki Aznaran. SS-58.
Among the attorneys representing RTC and CSI in Wollersheim
II was Earle Cooley, who was simultaneously defending CSC in
Wollersheim I. SS-59. Incredibly, both RTC and CSI claimed, as
elements of their damages in Wollersheim II, the costs and
damages arising out of Mr. Wollersheim's case against CSC! SS-
60. The RICO statement containing this claim was signed on
behalf of RTC and CSI by Attorney Kendrick Moxon, who also
represented CSC in Wollersheim I post-trial matters, and who
again represents CSC in this case. SS-61.
In May of 1990, District Court Judge James Ideman dismissed
the Wollersheim II complaint, adopting the recommendations of
Special Master James Kolts, who had found:
"The plaintiffs' case against the [] defendants borders
on the frivolous and malicious, boiling down to
penalizing an attorney simply for conducting necessary
discovery to represent his or her client's case."
(Emphasis added.) SS-64.
Ever litigious, RTC and CSI appealed the dismissal of
their claims against the Wollersheim II defendants; curiously,
their Amended Notice of Appeal was filed on behalf of not only
RTC and CSI, but CSC -- a nonparty -- as well. SS-66. The
Ninth Circuit affirmed. SS-67.
Once the Wollersheim I trial was over, a discussion among
high-ranking Scientology officials was led by Sea Org officer
Marty Rathbun. Rathbun, who would soon become RTC's president
and a trustee of CSI (SS-50), told the group of a plan to steal
the medical records of Charles O'Reilly, one of Mr. Wollersheim's
attorneys. SS-68. This plan was ordered by David Miscavige.
SS-70. The goal was to obtain information which might be useful
in blackmailing O'Reilly into easing off the $30 million verdict.
SS-71.
e. CSI Provided the Financial Support Needed to Defend
Wollersheim I and Prosecute the Present Action.
By its own admission, the looting of CSC left it without any
resources -- and certainly not enough to bring or maintain this
action. Enter CSI, which all along had been providing the
financial support CSC needed to litigate against Mr.
Wollersheim. SS-72.
Scientology maintains a "central reserve system" to fund
such things as legal affairs and "emergencies." SS-73. Among
the entities participating in this system are CSI and CSC. SS-
74. The fund is administered by a committee consisting entirely
of CSI staff members. SS-75.
The reserve's expenditures are considerable. In each of the
years 1987 and 1988, for example, the committee authorized $12
million for expenses related to lawsuits and "defense of the
activities" of Scientology. SS-76.
Whether through this fund or by some other route, CSI paid
CSC's defense costs arising from Wollersheim I. SS-72. CSI has
also financed the present litigation. SS-77. And, as CSC
President Levin has testified, he recalls no written agreement
between CSI and CSC for the repayment of attorneys fees. SS-78.
Consequently, although Mr. Wollersheim won his 1986 verdict
of $30 million against CSC, it was CSI which mounted the
counterattack. Its funding of the present lawsuit was part of
the strategy to prevent Mr. Wollersheim from enforcing his
judgment -- a campaign which has been successful to this day,
more than a decade after the verdict. "Not One Thin Dime For
Wollersheim" was and is the battle cry. SS-79.
Nor, according to CSI, would any claimant be paid a dime; in
a 1982 bulletin to Scientology "orgs," CSI claimed the "new,
totally secure corporate set-up" would protect Scientology as
follows:
"Not one individual has successfully obtained one dime
in any effort to attack the Church. Strong legal
precedent set in recent months ensures they never will.
"Whereas in 1981 the Church was faced with several
dozen court cases of major proportion, we are now
handling - and successfully - just the last handful
with ease. The Church and its members have gained a
great deal of respect as law abiding organizations and
citizens.
"THUS ALL POSSIBLE LEGAL THREAT TO THE CHURCH OR THE
FOUNDER ARE BEING HANDLED FAVORABLY." (Underscore and
capital lettering in original; bold type emphasis
added.) SS-80.
Perhaps the most interesting aspect of this bulletin is its
reference to lawsuits against "the Church" -- rather than against
the individual corporations. Clearly, Scientology approaches
litigation against any of its entities as something to be dealt
with by all of them.
This is further illustrated by a balance sheet, submitted by
CSI to the IRS in 1993 in connection with Scientology's bid for
501(c)(3) tax-exempt status. Listed as a liability of CSI's on
that document is a "$30 million judgment on appeal" -- the same
judgment Mr. Wollersheim had won against CSC. SS-81.
f. RTC's Retributive Efforts Against Mr. Wollersheim Based
on His Judgment Against CSC Continue to the Present
Day.
The interest of RTC in CSC's litigation with Mr. Wollersheim
persists even today. In the ongoing Wollersheim V case, the
Colorado District Court matter involving claims of copyright
infringement and trade secret misappropriation, plaintiff RTC
began by petitioning the magistrate, in August of 1995, for an ex
parte Writ of Seizure as authorized under federal copyright
laws. SS-82. Among the lawyers representing plaintiffs in
case is the same Earle Cooley who tried the Wollersheim I matter
and appeared in both Wollersheim II and III. SS-84.
The petition having been granted, agents of RTC raided
the home of Larry Wollersheim, purportedly for the authorized
purpose of locating L. Ron Hubbard-authored material whose RTC-
owned copyrights were allegedly being infringed. SS-86. As part
of the raid, RTC ran a word search of Mr. Wollersheim's computer.
Amazingly, among the keywords used in the search were
"Swearinger" (the judge in Mr. Wollersheim's case against CSC)
and "O'Reilly" (Mr. Wollersheim's attorney in that case). SS-87.
Another of RTC's search terms was "Leipold," referring to
Mr. Wollersheim's attorney in this case. SS-87. The results
of such a search, as RTC and its counsel well knew, could only
have turned up material relevant to Mr. Wollersheim's litigation
with CSC (material protected by the attorney-client privilege or
attorney work product doctrine) -- but absolutely nothing
authorized by the magistrate's narrow order allowing a search for
specific, copyrighted material. Nor could RTC's use of these
search terms have produced anything relevant to its current
claims against Mr. Wollersheim.
Moreover, attached to RTC's verified first amended complaint
in Wollersheim V is a copy of a "confidentiality agreement"
executed solely between CSC and Mr. Wollersheim. SS-89. That
RTC has a copy of that agreement, and claims to be its
beneficiary, is telling; it seems even Scientology's corporations
themselves forget they are supposed to be separate.
3. EQUITY DEMANDS THE FINAL JUDGMENTS AGAINST PLAINTIFF CSC,
AWARDING COSTS AND ATTORNEYS FEES TO DEFENDANT WOLLERSHEIM,
BE AMENDED TO INCLUDE RTC AND CSI AS JUDGMENT DEBTORS
BECAUSE THE EVIDENCE FIRMLY ESTABLISHES RTC AND CSI HAVE
MANIPULATED AND CONTROLLED CSC'S LITIGATION WITH LARRY
WOLLERSHEIM FROM THE BEGINNING.
California law strongly supports Mr. Wollersheim's effort to
amend the June 3, 1994 and November 8, 1996 judgments awarding
him costs and fees, to add RTC and CSI as judgment debtors.
a. Courts Have Broad Discretion to Amend Judgments to Add
Additional Judgment Debtors as Justice Requires.
First, the Court is vested with discretion to use all means
to carry its jurisdiction into effect by Code of Civil Procedure
187. Included among the courts' powers under Section 187 is the
authority to amend a judgment at any time to add additional
judgment debtors. (NEC Electronics Inc. v. Hurt (1989) 208
Cal.App.3d 772, 778; Mirabito v. San Francisco Dairy Co. (1935) 8
Cal.App.2d 54, 57.)
Moreover, "[t]he greatest liberality is to be encouraged in
the allowance of such amendments in order to see that justice is
done." (Carr v. Barnabey's Hotel Corp. (1994) 23 Cal.App.4th 14,
20.)
Justice cries out for amendment of the judgments awarded to
Mr. Wollersheim in this case. As the Court of Appeal observed in
upholding the anti-SLAPP judgment of dismissal herein:
"...an examination of the history of the underlying
litigation reveals that the instant action is
consistent with a pattern of conduct by the Church to
employ every means, regardless of merit, to frustrate
or undermine Wollersheim's petition activity." (Church
of Scientology of California v. Wollersheim, supra, 42
Cal.App.4th 628, 648; emphasis added.)
One of the many means Scientology has used to undermine Mr.
Wollersheim's victories is the "corporate reorganization." It is
no coincidence that the razing of CSC in favor of RTC and CSI
began just after the Wollersheim I case was filed and was
completed just before it went to trial.
The case at bar is simply a further manifestation of
Scientology's continuing campaign to punish Mr. Wollersheim. The
only way justice will be done is to deny RTC and CSI the fruit of
their endeavors.
b. Mr. Wollersheim's Mountain of Evidence Far Exceeds the
Burden of Proof He Must Sustain to Prevail.
The standard of proof in a motion of this type requires the
moving party to overcome the presumption of the separate
existence of the corporate entity. (Mid-Century Insurance Co. v.
Gardner (1992) 9 Cal.App.4th 1205, 1212.) The judgment is
properly amended where the movant shows substantial evidence that
a party's alter ego should be held accountable for that party's
wrong. (NEC Electronics, supra, 208 Cal.App.3d at p. 777;
Ukegawa Brothers v. Agricultural Labor Relations Board (1989) 212
Cal.App.3d 1314, 1323.)
By any measure, Mr. Wollersheim's evidence is substantial,
providing dramatic proof that Scientology is but one
organization, run by its Sea Org officials. Moreover, the
veracity of the evidence can hardly be challenged: the
overwhelming majority of it comes from the mouths, and word
processors, of Scientology officials themselves.
c. Application of the Alter Ego Doctrine is Warranted
Where, as Here, a Sufficiently Strong Unity of Interest
Exists Between the Entities in Question and Failure to
Apply the Doctrine Would Lead to an Inequitable Result.
In general, when determining whether to employ the alter ego
doctrine, two factors should be considered: 1) whether there is
such unity of interest and ownership that the separate
personalities of the corporation and the purportedly "distinct"
entity no longer exist, and 2) whether, if the acts are treated
as those of the corporation alone, an inequitable result will
follow. (Sheard v. Superior Court (1974) 40 Cal.App.3d 207, 211-
212.)
There is no litmus test to determine when an entity's
corporate veil should appropriately be pierced; rather, the
result depends on the circumstances of each particular case.
(Mid-Century Insurance Co., supra, 9 Cal.App.4th at p. 1212.)
Where some conduct amounting to bad faith makes it inequitable
for an entity to hide behind the corporate veil, the alter ego
doctrine is properly employed. (Id. at p. 1213.)
RTC and CSI have surely set a new standard for conduct
amounting to bad faith. Intent on keeping Scientology
"impregnable," they have used CSC as both a sword and a shield.
After first gutting it of assets to thwart the enforcement of Mr.
Wollersheim's hard-won multimillion dollar judgment, they then
used it as a weapon to, in the appellate court's words, "bludgeon
[Mr. Wollersheim] into submission." (CSC v. Wollersheim, supra,
42 Cal.App.4th at p. 649.) There can be no more appropriate
circumstances than these in which to amend a judgment to add
alter egos.
1. The Absolute Unity of Interest Between CSC, RTC
and CSI Forecloses the Notion That They Retain
Separate Personalities.
As has been conclusively demonstrated, there is just one
Scientology, a clandestine society proffering imaginary corporate
lines to keep the public confused and at bay. Even if its
corporations are taken at face value, it is clear the same Sea
Org officers, starting with David Miscavige, wield power over all
the entities. Plainly, these Sea Org leaders have, through RTC
and CSI, financed and controlled CSC's litigation with Mr.
Wollersheim.
None of the cases located by Mr. Wollersheim's counsel, in
which the alter ego doctrine was held applicable, even come close
to involving the volume or quality of evidence Mr. Wollersheim
places before the Court. For example, in Carr v. Barnabey's
Hotel Corp, supra, the plaintiff sued a corporation (Barnabey's)
and obtained a judgment, later learning a partnership
(Peppercorn) was the true principal. In upholding the amendment
of the judgment adding Peppercorn as a defendant, the court first
noted that Peppercorn's failure to advise the plaintiff an entity
other than Barnabey's owned the hotel in question "approached a
fraud on the court." (23 Cal.App.4th at p. 20.) The court
further observed:
"The same lawyer represented Barnabey's and Peppercorn.
Although the record does not tell us who paid for the
defense, we know that Barnabey's, in whose name the
defense was conducted, had no assets." (23 Cal.App.4th
at p. 21.)
Here, there is an overlap in legal representation between
CSC, RTC and CSI, as was true in Carr. Also, as in Carr, CSC's
assets have long since been depleted, leaving it unable to pay
its litigation expenses. But here, there is more: we do know who
has paid CSC's legal bills -- CSI. Finally, and importantly, the
dissipation of CSC's assets was undertaken for the specific
purpose of warding off Mr. Wollersheim's anticipated collection
efforts. Thus, the evidence at bar is much weightier, and
demonstrates a greater degree of fraud, than that which warranted
the amendment of the judgment in Carr.
Indeed, Mr. Wollersheim's evidence suffices no matter which
of California's published alter ego cases is used as the
yardstick. For example:
In Thomson v. L. C. Roney & Co. (1952) 112 Cal.App.2d
420, a corporation was held to be the alter ego of the
defendant/judgment debtor, where 1) all of defendant's
assets had been transferred to the corporation prior to
commencement of the action, but the entities retained an
interlocking directorate and mutual officers and gave no
outward indication of a change; 2) the corporation had
furnished defendant with large sums of money without formal
resolution; 3) the corporation had the power to take action
which was binding on defendant; and 4) both entities had the
same attorney. (112 Cal.App.2d at pp. 428-429.)
In Mirabito v. San Francisco Dairy Co. (1935) 8
Cal.App.2d 54, a corporation which had assumed the
defendant's assets was its alter ego, where: 1) the entities
shared a president, vice-president and secretary; 2) the
secretary had verified the answer; and 3) the defendant was
a "nonoperating" company but appeared active because the
alter ego corporation conducted business in the name of the
defendant. (8 Cal.App.2d at p. 58.)
In Jack Farenbaugh & Son v. Belmont Construction (1987)
194 Cal.App.3d 1023, the doctrine was properly applied to an
individual who, according to the declaration of movant's
attorney, participated in the litigation by taking a
deposition, trying the case and attending the judgment
debtor exam. (194 Cal.App.3d at p. 1030.)
As in these cases, Mr. Wollersheim's evidence establishes
that: RTC and CSI officials actively participated in his
litigation with CSC; CSC is a nonoperating shell funded by CSI;
the same attorneys have represented all three entities (in some
cases simultaneously); and, all of the corporations share common
goals. Of course, Mr. Wollersheim has an additional bit of
crucial evidence: CSC was gutted, and RTC and CSI were formed,
specifically to defraud Mr. Wollersheim and others.
Thus, the "unity of interest" factor, as set forth in Sheard
v. Superior Court, supra, weighs solidly in favor of defendant
Wollersheim.
/ / /
2. The Equities Fall Entirely On the Side of
Defendant Wollersheim.
The unity of interest between RTC, CSI and CSC having been
solidly established, the next question under Sheard is whether an
inequitable result will follow if the judgments are not amended.
Initially, in weighing the equities, it is crucial to remember
that Mr. Wollersheim is the defendant in this lawsuit. Unlike
the plaintiffs in the alter ego cases cited infra, he had no role
in determining which entity would be on the opposite side of the
lawsuit from him!
If Mr. Wollersheim knew from the outset of this case that
RTC and CSI were the proper plaintiffs, there was initially no
reason for him to seek the court's affirmation of the point; he
was not the party seeking redress. It is only since the
judgments awarding him costs and attorneys fees have become final
that Mr. Wollersheim has had a stake in seeing that the proper
parties are present in this litigation.
Inequity has stalked Mr. Wollersheim for the entire history
of his involvement with Scientology. He has weathered years of
brutal litigation with the organization -- bravely prosecuting a
claim that a unanimous jury and every subsequent reviewing court
has agreed was worth multi-millions of dollars -- only to be
harassed at every turn. Rather than receiving the proceeds from
his fairly-won judgment, he has received four summons and
complaints, three of which have been ruled meritless so far.
Nearly eleven years after the verdict he persevered to win, Larry
Wollersheim has yet to collect a dime.
Instead, he has dodged another bullet, launched at him in
the form of this case, and has come away with two more money
judgments in his favor.
The analysis of the Court of Appeal, examining the history
of this litigation and the underlying Wollersheim I matter,
reveals that the inequity wrought by Scientology's behavior is so
severe as to have undermined Mr. Wollersheim's constitutional
rights:
"The Church argues that it has every right to exhaust
its legal remedies, including appeal rights. We agree.
However, when a litigant continuously and
unsuccessfully uses the litigation process in filing
unmeritorious motions, appeals and lawsuits, such
actions have constitutional implications..." (CSC v.
Wollersheim, supra, 42 Cal.App.4th at p. 649.)
The unmeritorious motions, appeals and lawsuits about which
the appellate panel spoke were not financed by the "indigent"
CSC; they were paid for by CSI. They were managed by RTC. They
have caused Mr. Wollersheim untold years of torment and, as the
CSC v. Wollersheim panel found worthy of note, the litigation has
cost him at least $300,000 of his own money and put him another
$900,000 in debt. (Id. at p. 649, fn. 6.)
There can be nothing inequitable about saying "Enough!" to
Scientology's "jiggery, pokery" tactics and holding the true
parties, RTC and CSI, responsible for the judgments rendered in
this case. An observation by the court in Mirabito v. San
Francisco Dairy Co., supra, is particularly apt in this case:
"To hold otherwise upon the facts herein would be to
deny respondent the fruits of fairly contested
litigation, place a premium upon acts and conduct which
have misled a litigant, and frustrate the very purpose
of our jurisprudence." (8 Cal.App.2d at p. 60.)
d. Granting This Motion Will Not Offend the Due Process
Rights of RTC or CSI.
The amendments Mr. Wollersheim seeks do not give rise to due
process concerns because, as alter egos of CSC, RTC and CSI
controlled this litigation and thus were virtually represented in
the lawsuit. (See, Ukegawa Brothers, supra, 212 Cal.App.3d at
pp. 1322-1324; Carr, supra, 23 Cal.App.4th at pp. 21-22.)
In Farenbaugh & Son v. Belmont Construction, Inc., supra,
194 Cal.App.3d 1023, the appellate panel noted the "new"
defendant's active participation in the original trial "satisfies
the elements of fair trial as required by due process." (194
Cal.App.3d at p. 1031.)
To add RTC and CSI as plaintiffs and judgment debtors will
not be to add new parties; rather, it will merely serve the
equitable purpose of correcting the judgment to reflect the names
of the true parties who took part in the litigation all along.
(See, i.e., NEC Electronics, supra, 208 Cal.App.3d at p. 778.)
4. CONCLUSION.
As the evidence conclusively demonstrates, Mr. Wollersheim's
victories in this case have been won against at least three
entities, RTC, CSI and CSC, even though only one of them has
cared to call itself a plaintiff. RTC's and CSI's control of
this case having been firmly established, and the equities
falling entirely on the side of Mr. Wollersheim, he respectfully
requests that the Court grant this motion and add Religious
Technology Center and Church of Scientology International as
judgment debtors on the two final judgments dated June 3, 1994
and November 8, 1996.
Dated: April __, 1997
HAGENBAUGH & MURPHY
By____________________________
DANIEL A. LEIPOLD
Attorneys for Defendant, Larry Wollersheim
Curt West - Webmaster
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