Religious Technology Center, Church of Scientology Intern., Inc. v. Scott

• Decision Date: 10 March 1989
• Docket Number: No. 87-5766,87-5766
• Citation: 869 F.2d 1306
• Parties: RELIGIOUS TECHNOLOGY CENTER, CHURCH OF SCIENTOLOGY INTERNATIONAL, INC., et al., Plaintiffs-Appellants, v. Robin SCOTT, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1306

869 F.2d 1306

10 U.S.P.Q.2d 1379

RELIGIOUS TECHNOLOGY CENTER, CHURCH OF SCIENTOLOGY

INTERNATIONAL, INC., et al., Plaintiffs-Appellants, v. Robin SCOTT, et al., Defendants-Appellees.

No. 87-5766.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Sept. 16, 1988.

Decided March 10, 1989.

Earle C. Cooley, Cooley, Manion, Moore & Jones, Boston, Mass., for plaintiffs-appellants.

Jerold Fagelbaum, Shea & Gould, Los Angeles, Cal. and Gary M. Bright, Bright & Powell, Carpinteria, Cal., for defendants-appellees.

Appeal from the United States District Court for the Central District of California.

Before NORRIS, HALL and KOZINSKI, Circuit Judges.

WILLIAM A. NORRIS, Circuit Judge:

This appeal arises out of litigation initiated by the Church of Scientology ¹ ("Church") against the Church of the New Civilization ² ("New Church"). The focus of the litigation is certain scriptural material allegedly stolen from the Church by the New Church. ³ Early in the litigation, the district court granted the Church a preliminary injunction restraining the New Church from using the disputed scriptures. That injunction was vacated on appeal. Religious Technology Center v. Wollersheim, 796 F.2d 1076, 1084, 1089-91 (9th Cir.1986), ("Wollersheim "), cert. denied, 479 U.S. 1103, 107 S.Ct. 1336, 94 L.Ed.2d 187 (1987). The Church then filed a second application for interlocutory relief, which was denied by the district court on the ground that it was foreclosed by Wollersheim. The Church now appeals that denial. We reverse and remand to the district court for further proceedings in light of this opinion.

I BACKGROUND

In its complaint, the Church stated claims against the New Church for racketeering under the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. Sec. 1962(c)) ("RICO"), trademark infringement under federal and common law, unfair competition, receipt of stolen property, and various other state law claims. The Church sought damages as well as injunctive relief to prevent the New Church from disseminating the contents of scriptural materials which the Church claimed had been stolen from its Denmark offices by adherents of the New Church.

In an Ex Parte Application for Temporary Restraining Order ("TRO") and Order to Show Cause ("OSC"), the Church sought interlocutory relief on the ground that its scriptures were trade secrets and that it would suffer irreparable harm if its trade secrets were disseminated by another organization such as the New Church. The Church did not characterize the alleged harm as commercial or economic, but rather characterized it as "spiritual" harm. Essentially, the Church argued that its adherents The district court granted the Church a TRO and later extended it to a preliminary injunction, prohibiting the New Church from "using, distributing, exhibiting or in any way publicly revealing" the scriptures. Id. The preliminary injunction was based on the district court's finding that the scriptures were trade secrets and entitled to protection under both RICO and California law.

would suffer irreparable spiritual injury if the New Church were free to disseminate the disputed materials. See Wollersheim, 796 F.2d at 1079.

On appeal, we vacated the preliminary injunction. We held that the scriptures did not qualify as trade secrets under California law because of the failure of the Church to claim that the scriptures had any commercial value. We rejected the Church's argument that the scriptures qualified as trade secrets because of their spiritual value. Id. at 1090-91. ⁴

The Church returned to the district court and filed a second Ex Parte Application for Temporary Restraining Order and Order to Show Cause, again asking the court to restrain the New Church from using the scriptural materials. This time, the Church argued that the scriptures qualified as trade secrets because they had economic value. Specifically, the Church contended that if the New Church was not enjoined from using the scriptures, "[p]laintiffs will be forever at a loss to protect the confidential nature and resultant economic value of these materials. Defendant will obtain an economic advantage that they would not otherwise possess which will be used to divert parishioners, the value and goodwill of which cannot be monetarily measured for plaintiffs." Excerpt of Record ("E.R."), Vol. 1:347 at 29. (Emphasis added.) After a hearing, the district court denied the application "solely based upon the Ninth Circuit's ... decision [in Wollersheim ]." Id. Vol. 3:421 at 2.

II JURISDICTION

This court may hear appeals from interlocutory orders of the district court which grant, continue, modify, refuse or dissolve injunctions. 28 U.S.C. Sec. 1292(a)(1). ⁵ Ordinarily, an appeal does not lie from the denial of an application for a temporary restraining order; such appeals are considered premature and are disallowed "[i]n the interests of avoiding uneconomical piecemeal appellate review." Kimball v. Commandant Twelfth Naval District, 423 F.2d 88, 89 (9th Cir.1970).

We have recognized, however, that a denial of a TRO may be appealed if the circumstances render the denial "tantamount to the denial of a preliminary injunction." Environmental Defense Fund, Inc. v. Andrus, 625 F.2d 861, 862 (9th Cir.1980). See also Kimball, 423 F.2d at 89. In Andrus we held the denial of the TRO was tantamount to the denial of a preliminary injunction because of the presence of two factors: the denial of the TRO followed a "full adversary hearing" and "in the absence of review, the appellants would be effectively foreclosed from pursuing further interlocutory relief." Id.

The rationale of Andrus applies with equal force to this appeal. Here the district court denied the Church's renewed application for a TRO and an OSC following a hearing at which all parties were represented. The transcript of the hearing and the court's written order denying the application make it unmistakably clear that the order was tantamount to a denial of a preliminary injunction. During the hearing, the district judge was emphatic in her

                view that our decision in Wollersheim foreclosed any interlocutory relief on the grounds advanced in the Church's new application:  "I don't believe that the appellate court feels that in this case an injunction is appropriate....  I would say that we don't have anything much to talk about."    Supp.E.R. at 6-7.  In her written order she denied the application "solely based upon the Ninth Circuit's August 1986 decision...."  E.R.Vol. 3:421 at 2.  The futility of any further hearing was thus patent;  there was nothing left to talk about.  In these circumstances, we hold, as we did in Andrus, that the denial of the TRO and the OSC was "tantamount to the denial of a preliminary injunction."    625 F.2d at 862.    Accordingly, the district court's order is appealable under 28 U.S.C. Sec. 1292(a)(1). 6
                

III LAW OF THE CASE

The denial of a preliminary injunction is subject to a limited standard of review. Colorado River Indian Tribes v. Town of Parker, 776 F.2d 846, 849 (9th Cir.1985). We reverse the denial only when the district court abused its discretion or based its decision on an erroneous legal standard or on clearly erroneous findings of fact. Id. In the instant case, the district judge explained that she was basing her decision to deny the application for TRO and OSC--which we treat as the denial of a preliminary injunction--solely on our decision in Wollersheim. She interpreted Wollersheim as foreclosing interlocutory relief on any of the grounds raised by the Church in its second application, even though the Church advanced new state law theories and for the first time offered evidence that the scriptures in fact had economic value. Of particular importance to the instant appeal, the district court apparently interpreted Wollersheim as holding that the religious scriptures could not qualify as trade secrets under California law, regardless of whether they had commercial value.

With all respect, we believe that the district court read more into Wollersheim than we intended. Putting aside that part of the opinion which addressed the Church's claim to injunctive relief under RICO, the remainder of the opinion was fairly narrowly drawn. The only question before the court was whether a religious scripture could qualify as a trade secret under California law if it conferred a spiritual, as opposed to an economic, advantage on its owner. We determined that California law did not recognize information as a trade secret unless it conferred on its owner an actual economic advantage over competitors. 796 F.2d at 1091. Because the Church made no claim that the scriptures gave it a commercial advantage over its competitors, we held that the scriptures did not qualify as trade secrets under California law. Wollersheim turned, therefore, on the absence of any claim of economic advantage at the preliminary injunction stage. While we expressed doubts about whether the Church could allege the competitive market advantage required without "rais[ing] grave doubts about its claim as a religion and a not-for-profit corporation," id., we did not decide one way or another whether the scriptures could qualify as trade secrets should the Church allege and prove economic advantage. Nor did we express any opinion as to whether the Church could be entitled to a preliminary injunction under any of the other state law theories advanced in its first application for interlocutory relief. Thus, Wollersheim did not establish the law of the case on either of these questions.

Accordingly, we REVERSE the district court's order denying the TRO and OSC and REMAND to the district court for further proceedings in light of this opinion. In so doing, we express no view as to whether the district court should exercise its discretion and decline to consider this second application for interlocutory relief on grounds that the Church is needlessly...