Religious Technology Center v. Wollersheim

• Decision Date: 08 August 1986
• Docket Number: No. 85-6547,85-6547
• Citation: 796 F.2d 1076
• Parties: , RICO Bus.Disp.Guide 6332 RELIGIOUS TECHNOLOGY CENTER and Church of Scientology International, Inc., Plaintiffs-Appellees, v. Larry WOLLERSHEIM, et al., Defendants, and Church of the New Civilization, Harvey Haber, Dede Reisdorf, Jon Zegel and David Mayo, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1076

796 F.2d 1076

55 USLW 2112, RICO Bus.Disp.Guide 6332

RELIGIOUS TECHNOLOGY CENTER and Church of Scientology International, Inc., Plaintiffs-Appellees, v. Larry WOLLERSHEIM, et al., Defendants and Church of the New Civilization, Harvey Haber, Dede Reisdorf Jon Zegel and David Mayo, Defendants-Appellants.

No. 85-6547.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 5, 1986.

Decided Aug. 8, 1986.

Joseph Yanny, Herzig & Yanny, Beverly Hills, Cal., Earle C. Cooley, Cooley, Manion, Moore & Jones, P.C., Boston, Mass., for plaintiffs-appellees.

Michael J. Treman, Santa Barbara, Cal., Richard C. Brautigam, McCutchen, Doyle, Brown & Enersen, San Francisco, Cal., for defendants-appellants.

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

Before PREGERSON, POOLE and THOMPSON, Circuit Judges.

PREGERSON, Circuit Judge.

The Church of the New Civilization ("new church") is a splinter from the Church of Scientology ("Church"). The Church alleged that certain scriptural materials offered by the new church were copies of materials stolen from the Church. Recognizing federal jurisdiction under the Racketeer Influenced and Corrupt Organization Act ("RICO"), the district court held that the Church's materials constituted a trade secret and granted the Church a preliminary injunction ordering the new church to desist from using or disseminating the disputed materials.

We reverse the district court's order granting a preliminary injunction. Pursuant to this court's order, the district court advised that it issued its preliminary injunction "on both the plaintiffs' 18 U.S.C. Secs. 1861-1968 [1961-1968] ("RICO") claim and on plaintiffs' state law trade secrets claim." We resolve the appeal, therefore, under both these theories. We hold that injunctive relief is not available to a private plaintiff in a civil RICO action. Additionally, we hold that the California courts would conclude that sacred scriptures do not meet the definition of a trade secret under California law.

FACTS

The Church of Scientology teaches that a person's behavior and well-being are improved by removing "engrams" from the unconscious mind. Engrams are impressions recorded by the unconscious mind in times of trauma in this life or in previous lives. Engrams return in moments of similar stress to the detriment of the person's behavior. Removing engrams from the unconscious permits the person's analytical mind to function unhindered.

Engrams are located and purged through "auditing." Auditing uses the "technology" and "advanced technology" of the Church. An "auditor" directs a set of structured questions and drills ("rundowns") at the Church adherent. The adherent's responses are measured on a "Hubbard E-meter" which reflects changes in "skin voltage." The auditor's aim is to detect the "buttons" which indicate a conscious or subconscious response to the rundown and enable the adherent to identify his or her engrams. The adherent must proceed through a series of increasingly sophisticated technologies of closely structured questions and answers to reach "a higher spiritual existence."

The Church asserts that the unsupervised, premature exposure of an adherent to these materials will produce a spiritually harmful effect. ¹ The Church keeps the Defendant David Mayo was apparently at one time a close associate of Church founder L. Ron Hubbard, and assisted in the preparation of the Church's higher level materials. ² Following an acrimonious dispute between Mayo and other senior Church officers, Mayo left the Church and, in July 1983, established the Church of the New Civilization. The new church embraces beliefs and provides counseling and training to its adherents which are essentially identical to those offered by the Church.

higher level materials in secure places, and makes the materials available only to adherents who agree in writing to maintain their confidentiality. The Church stated to the district court that it does "not safeguard these materials from any commercial consideration."

In December 1983, Robin Scott, and two others (all of whom are unrelated to this action) stole certain higher level materials from Church offices in Copenhagen, Denmark. Danish authorities subsequently convicted Scott of burglary. While the stolen materials were returned, the Church maintains that copies were made and that the new church later acquired these copies. The district court found that the higher level materials offered to its adherents by the new church are "essentially identical" to the stolen Church materials. ³

The present suit was filed on November 4, 1985. The Church states that, in late October 1985, it learned that the new church intended to disseminate the contents of the materials stolen by Scott "in a non-confidential setting." Counsel for defendant Larry Wollersheim, a former Church adherent who has a pending California state tort action against the Church, had obtained copies of the higher level materials during the deposition of defendants Margaret Singer and Richard Ofshe. Singer The district court first granted a temporary restraining order preventing the state court plaintiff and the new church from disclosing the confidential materials. The court then conducted an evidentiary hearing lasting two days, and, on November 23, 1985, granted the Church the preliminary injunction that prompted this appeal.

had obtained the materials from defendant Leta Schlosser. Schlosser testified that she had received the materials from an adherent of the new church. On November 1, 1985, the Los Angeles Superior Court hearing Wollersheim's suit against the Church refused a Church request to seal its records including the Church's higher level materials. Three days later, the Church brought this suit in federal court against the new church, its principal officers, Wollersheim, his counsel, and those allegedly involved in passing the materials to Wollersheim's counsel. The suit based jurisdiction on the RICO claim and stated six pendent California state law claims including misappropriation of trade secrets.

The injunction prohibited the new church, its officers "and those persons in active concert or participation with them or who are acting at their request or insistence ... from using, distributing, exhibiting or in any way publicly revealing" any version of certain enumerated higher level Church materials. The enjoined parties were required to return all such material in their possession to the court under seal. The court also required the Church to post a bond of $100,000.

In supplementary findings of fact, the district court stated that it "views this as a stolen document case." The court recognized that both parties accepted that adherents must be exposed to the materials in strict progression. On this basis, the court concluded that Church adherents may suffer irreparable harm from the unsupervised dissemination of the materials, thus justifying preliminary injunctive relief. In additional comments from the bench, the district court held the materials to constitute a misappropriated trade secret but noted that the Church was not arguing commercial disadvantage as an injury. The court also recognized its jurisdiction under RICO "based on the idea that the documents were stolen and that they found their way into their present use."

The new church filed a timely appeal. We denied the new church a stay pending appeal, but heard the appeal on an expedited schedule. We have jurisdiction under 28 U.S.C. Sec. 1292(a)(1).

STANDARD OF REVIEW

Determining whether a private remedy should be afforded for violation of duties mandated by a statute that does not expressly create a suitable private remedy causes the concepts of "standing," "subject matter jurisdiction," and "implication of a private cause of action" to "overlap ... even more than they ordinarily would." National Railroad Passenger Corp. v. National Association of Railroad Passengers, 414 U.S. 453, 455-56, 94 S.Ct. 690, 691-92, 38 L.Ed.2d 646 (1974). The issue is best described as falling within the generic problem of "federal jurisdiction" without attempting to characterize it with greater specificity. See generally 13 C. Wright, A. Miller, and E. Cooper, Federal Practice and Procedure Sec. 3531.6 at 494-506 (2d ed. 1984). We are obligated to raise a jurisdictional issue sua sponte as a threshold question before considering a matter on its merits. See Solano v. Beilby, 761 F.2d 1369, 1370 (9th Cir.1985); Othman v. Globe Indemnity Co., 759 F.2d 1458, 1462-63 (9th Cir.1985). Interpretation of the statute under which an injunction has been issued is a question of law, which we review de novo. California ex rel. Van de Kamp v. Tahoe Regional Planning Agency, 766 F.2d 1308, 1312 (9th Cir.1985). We review matters of state law de novo. In re McLinn, 739 F.2d 1395, 1403 (9th Cir.1984) (en banc).

I. Is Injunctive Relief Available to a Private Party in a Civil RICO action?

A.

The Church's basis for federal jurisdiction is 18 U.S.C. Sec. 1964 ("civil RICO"). ⁴ Civil RICO permits both the government and private plaintiffs to sue for violations of substantive provisions of the Racketeer Influenced and Corrupt Organizations Act, which formed Title IX of the Organized Crime Control Act of 1970, Pub.L. 91-452, 84 Stat. 941 (1970), as amended, codified as 18 U.S.C. Secs. 1961-1968. Neither party questioned before the district court, nor in briefs before this court, whether injunctive relief is available under civil RICO. We ordered the parties to submit supplemental briefs on this issue.

Civil RICO is directed at "racketeering activity," which it defines as any act "chargeable" under several generically described state criminal laws; any act "indictable" under numerous specific federal criminal provisions, including mail and wire fraud; and any "offense" involving narcotics or bankruptcy or securities fraud "punishable" under...