Church of Scientology of California v. Adams

• Decision Date: 23 October 1978
• Docket Number: No. 75-1954,75-1954
• Citation: 584 F.2d 893
• Parties: 4 Media L. Rep. 1986 CHURCH OF SCIENTOLOGY OF CALIFORNIA, a Nonprofit California Corporation, Plaintiff-Appellant, v. James E. ADAMS, Elaine Viets, Pulitzer Publishing Co., Inc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 893

584 F.2d 893

4 Media L. Rep. 1986

CHURCH OF SCIENTOLOGY OF CALIFORNIA, a Nonprofit California Corporation, Plaintiff-Appellant, v. James E. ADAMS, Elaine Viets, Pulitzer Publishing Co., Inc. et al., Defendants-Appellees.

No. 75-1954.

United States Court of Appeals Ninth Circuit.

Oct. 23, 1978.

Richard M. Coleman (argued), Los Angeles, Cal., for plaintiff.

Theodore B. Olson (argued), Gibson, Dunn & Cruther, Los Angeles, Cal., for defendants.

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

Before CHOY and KENNEDY, Circuit Judges, and PALMIERI, ^* District Judge.

KENNEDY, Circuit Judge:

The Church of Scientology of California (California Church), a California corporation, appeals from a judgment dismissing its action for libel. The suit is against the Pulitzer Publishing Co., publisher of the St. Louis Post-Dispatch newspaper, and James E. Adams and Elaine Viets, principal authors of the newspaper articles in question. ¹ The district court dismissed the action against appellees for lack of personal jurisdiction and ruled, alternatively, that the complaint fails to state a claim upon which relief may be granted. We hold that the trial court was correct in concluding that it did not have jurisdiction over the appellees, and it is not necessary for us to address the district court's alternative ruling.

The Post-Dispatch published a series of five articles about Scientology on March 3 through 7, 1974. The articles discussed Scientology generally and made particular reference to the Church of Scientology of Missouri. In preparing the articles, Adams and Viets interviewed local leaders of the Missouri Church of Scientology and former members of that Scientology branch as well as former staff members of the Toronto Scientology office. The articles were written in St. Louis and at no time did the reporters enter California for research or any other purpose. At the suggestion of a staff member of the Missouri Church, the reporters did interview Emily Watson, who was connected with a national Scientology office located in California, while she was visiting in St. Louis. No reference to the California Church or any of its individual members was made in the articles.

Two months after the articles were published, the California Church filed this action in a California superior court. Notwithstanding the lack of any reference to the California Church in the articles, the complaint attempted to establish that they pertained to the appellant. We summarize the complaint's allegations of libel, which were specific and lengthy, as follows:

(1) that Scientology is not a religion but rather a commercial enterprise and that appellant is a commercial business;

(2) that appellant exploits individuals for money and confers no benefits of a spiritual, religious, or other nature on its members (3) that appellant is operated solely for the personal and financial aggrandizement of L. Ron Hubbard, the founder of Scientology, at the financial and emotional expense of its members;

(4) that appellant is operated by "a group of paramilitaristic fanatics who motivate and control members by instilling a fear of reprisal, and who drive members insane and harass members" who leave the organization (quoting from complaint).

Further, it was alleged that appellant was defamed by reason of untruthful and highly derogatory remarks about Scientology's founder, L. Ron Hubbard.

The appellees filed a motion to dismiss for lack of personal jurisdiction, and the motion was heard in the federal district court to which the action had been removed. In contesting the motion, the California Church did not dispute the facts adduced by appellees as to their respective contacts with the State of California. It is thus agreed that Pulitzer makes no attempt to market the Post-Dispatch in California. Circulation in California to mail subscribers and to a few independent news dealers amounts to 0.04% Of the newspaper's total circulation. Approximately 156 copies of one of the allegedly libelous publications and 121 copies of each of the other articles reached California in this manner. The Post-Dispatch does not direct any advertising whatsoever to California readers, but California companies do advertise in the paper to reach markets in Missouri and elsewhere. It is agreed that 2.91% Of the newspaper's general advertising revenue is from this source. In addition, Pulitzer owns approximately 17% Of Million Market Newspapers, Inc., an advertising firm licensed to do business in California, which solicits advertising for Pulitzer and other newspaper publishers by providing potential advertisers with information about the newspapers and their market areas. Finally, the reporters are residents of St. Louis County, Missouri, and neither has been in the State of California during the last fifteen years.

In ruling on appellees' motion to dismiss for lack of personal jurisdiction, it was correct for the district court to apply California law. California law permits state courts to exercise personal jurisdiction over nonresident defendants to the full extent permitted by the Constitution.

A court of this state may exercise jurisdiction on any basis not inconsistent with the Constitution of this state or of the United States.

Cal.Civ.Proc.Code § 410.10 (West 1973). The California courts have ruled that this statute permits state courts to exercise the broadest possible jurisdiction, limited only by constitutional considerations. Sibley v. Superior Court of Los Angeles County, 16 Cal.3d 442, 128 Cal.Rptr. 34, 546 P.2d 322 (1976), Cert. denied, 429 U.S. 826, 97 S.Ct. 82, 50 L.Ed.2d 89 (1978). "Thus, the usual two-step analysis (in inquiries respecting personal jurisdiction) collapses into a single search for the outer limits of what due process permits." Forsythe v. Overmyer, 576 F.2d 779, 782 (9th Cir. 1978).

The California Church concedes that Pulitzer and the individual appellees do not have such substantial contacts with the forum that they are present there for purposes of defending against all types of actions. See Perkins v. Benguet Consolidated Mining Co., 342 U.S. 437, 72 S.Ct. 413, 96 L.Ed. 485 (1952). If a defendant is not present for all purposes in the forum, due process requires that jurisdiction be based on contacts which have some nexus to the cause of action alleged. Forsythe, 576 F.2d at 782. The Supreme Court has described "the relationship among the defendant, the forum, and the litigation" as "the central concern of the inquiry into personal jurisdiction." Shaffer v. Heitner, 433 U.S. 186, 204, 97 S.Ct. 2569, 2580, 53 L.Ed.2d 683 (1977).

We dispose at the outset of the claim that Pulitzer's revenues from California advertisers are a sufficient basis for jurisdiction in this case. The advertising revenues are unrelated to appellant's action for libel. Pulitzer earned that revenue by giving California advertisers an opportunity to reach persons outside of California. Those contacts with California companies are not evidence of an intent to publish in California or of an effort to reach readers there.

Pulitzer's relationship to Million Market Newspapers, Inc. is also an insubstantial basis for jurisdiction. Pulitzer owns only seventeen percent of the stock in the California company and no parent-subsidiary relationship exists. Even in cases where the contacts of a parent or subsidiary corporation are sufficient to subject it to personal jurisdiction, we recognize that the activities of one related corporation are irrelevant to the issue of jurisdiction over the other, so long as a separation between the corporations has been maintained. Uston v. Grand Resorts, Inc., 564 F.2d 1217, 1218 (9th Cir. 1977). Nothing in the record indicates that the California advertising corporation is not operated wholly independently of Pulitzer.

The sole contact between appellees and the forum which is relevant to our jurisdictional inquiry is thus the distribution in the forum of approximately 150 copies of each allegedly libelous article.

It is the "quality and nature of the defendant's activity," Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958), in relation to the cause of action alleged which determines whether or not the exercise of personal jurisdiction comports with "fair play and substantial justice," International Shoe Co. v. Washington, 326 U.S. 310, 320, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Where there have been commercial dealings between the parties, jurisdiction in large part depends upon whether consensual activity potentially touched the forum state, as this indicates whether or not there is "some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum," Hanson,357 U.S. at 253, 78 S.Ct. at 1240. See, e. g., Forsythe v. Overmyer, 576 F.2d 779 (9th Cir. 1978). In an action based on tort, however, the inquiry necessarily extends beyond whether there has been submission to the sovereignty of the forum by some consensual act, and it requires an examination of the expected consequences of the defendant's conduct. In such cases we have held that the demands of due process are satisfied when jurisdiction is asserted over a defendant who "purposefully sets his product or his designs into the stream of commerce, knowing or having reason to know that they will reach the forum state and that they create a potential risk of injury." Jones Enterprises, Inc. v. Atlas Service Corp., 442 F.2d 1136, 1140 (9th Cir. 1971); Accord, Duple Motor Bodies, Ltd. v. Hollingsworth, 417 F.2d 231, 235 (9th Cir. 1969).

In products liability cases, this determination resolves into an inquiry as to whether the defendant could reasonably foresee that his product, when injected into the stream of commerce, would come to rest in the forum. See, e. g., Duple Motor Bodies, supra; Buckeye Boiler Co. v. Superior Court of Los Angeles County, 71 Cal.2d...