Headley Labor Case - Defendant's Memo In Opposition To Summary Adjudication

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1 ANTHONY J. ONCIDI, SBN 118135 [email protected] 2 HAROLD M. BRODY, SBN 84927 [email protected] 3 G. SAMUEL CLEAVER, SBN 245717 [email protected] 4 PROSKAUER ROSE LLP 2049 Century Park East, 32nd Floor 5 Los Angeles, CA 90067-3206 Telephone: (310) 557-2900 6 Facsimile: (310) 557-2193 7 KENDRICK L. MOXON, SBN 128240 [email protected] 8 MOXON & KOBRIN 3055 Wilshire Boulevard, Suite 900 9 Los Angeles, California 90010 Telephone: (213) 487-4468 10 Facsimile: (213) 487-5385 11 ERIC M. LIEBERMAN, admitted pro hac vice [email protected] 12 RABINOWITZ, BOUDIN, STANDARD, KRINSKY & LIEBERMAN, P.C. 13 111 Broadway, 11th Floor New York, NY 10006 14 Telephone: (212) 254-1111 15 Attorneys for Defendant, CHURCH OF SCIENTOLOGY 16 INTERNATIONAL 17

UNITED STATES DISTRICT COURT

18

CENTRAL DISTRICT OF CALIFORNIA

19 20 MARC HEADLEY, 21 Plaintiff, 22

v.

23 CHURCH OF SCIENTOLOGY 24 INTERNATIONAL, a corporate entity, Defendant. 25 26 27 28 0047/21051-004 Current/15661533v1

) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )

Case No. CV09-3986 DSF (MANx) DEFENDANT CHURCH OF SCIENTOLOGY INTERNATIONAL’S MEMORANDUM OF POINTS AND AUTHORITIES IN OPPOSITION TO PLAINTIFF’S MOTION FOR SUMMARY ADJUDICATION Hon. Dale S. Fischer Date: September 28, 2009 Time: 1:30 p.m.

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TABLE OF CONTENTS

1

Page 3 INTRODUCTION ....................................................................................................... 1 4 FACTS ......................................................................................................................... 2 2

5 ARGUMENT............................................................................................................... 7 I. MINIMUM WAGE LAWS DO NOT APPLY TO CHURCHES 6 TO THE EXTENT THAT THEY DO NOT ENGAGE IN ORDINARY COMMERCIAL BUSINESS VENTURES IN 7 COMPETITION IN THE COMMERCIAL MARKETPLACE ............ 7 8 A. The FLSA Does Not Apply .......................................................... 7 9 B. The California Labor Code and Wage Orders Also Do Not Apply .......................................................................................... 10 10 C.

11 12

II.

THE MINISTERIAL EXEMPTION PROHIBITS APPLICATION OF MINIMUM WAGE LAWS TO NONSECULAR CHURCH WORKERS OR MEMBERS OF A RELIGIOUS ORDER........................................................................... 15

III.

THE ACTIVITIES OF THE RELIGIOUS WORKERS AT CSI AND GOLDEN ERA, INCLUDING HEADLEY’S, CANNOT BE CONSIDERED PART OF A COMMERCIAL “ENTERPRISE” ................................................................................... 18

IV.

HEADLEY WAS A MEMBER OF A RELIGIOUS ORDER AND HIS DUTIES PLACED HIM WITHIN THE MINISTERIAL EXCEPTION..............................................................23

13 14 15 16 17 18

Headley Misconstrues the Applicable Cases..............................12

19 CONCLUSION.......................................................................................................... 25 20 21 22 23 24 25 26 27 28 0047/21051-004 Current/15661533v1

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TABLE OF AUTHORITIES Page(s)

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3 FEDERAL CASES v. Catholic Archbishop of Seattle, 4 Alcazar 2006 WL 3791370 (W.D. Wash., Dec. 21, 2006)........................................ 16, 17 5 Ashwander v. Tenn. Valley Auth., 297 U.S. 288 (1936) ........................................................................................... 11 6 v. Catholic Univ. of Am., 7 EEOC 83 F.3d 455 (D.C. Cir. 1996) ............................................................................. 17 8 EEOC v. Roman Catholic Diocese of Raleigh, NC, 213 F.3d 795 (4th Cir. 2000)..................................................................16, 17, 25 9 v. Sw. Baptist Theological Seminary, 10 EEOC 651 F.2d 277 (5th Cir. 1981)........................................................................ 17, 18 11 Elvig v. Calvin Presbyterian Church, 375 F.3d 951 (9th Cir. 2004)........................................................................ 14, 15 12 v. Calvin Presbyterian Church, 13 Elvig 397 F.3d 790 (9th Cir. 2005).............................................................................. 14 14 Hollins v. Methodist Healthcare, Inc. 474 F.3d 223 (6th Cir. 2007) .............................................................................. 16 15 v. Salvation Army, 16 McClure 460 F.2d 553 (5th Cir. 1972)............................................................15, 18, 19, 20 17 Murdock v. Pennsylvania, 319 U.S. 105 (1943) ...............................................................................21, 22, 24 18 v. The Charming Betsy, 19 Murray 6 U.S. (2 Cranch) 64 (1804) ............................................................................... 11 20 NLRB v. Catholic Bishop of Chicago, 440 U.S. 490 (1979) ........................................................................................... 11 21 v. Gen. Conference of Seventh-day Adventists, 22 Rayburn 772 F.2d 1164 (4th Cir. 1985)............................................................................ 17 23 Ross v. Metro. Church of God, 471 F. Supp. 2d 1306 (N.D. Ga. 2007) .............................................................. 16 24 v. Salvation Army, 25 Schleicher 518 F.3d 472 (7th Cir. 2008) (Posner, J.)..................................................... 10, 16 26 Shaliehsabou v. Hebrew Home of Greater Washington, 363 F.3d 299 (4th Cir. 2004)..................................................................16, 17, 18 27 and Susan Alamo Foundation v. Secretary of Labor, 28 Tony 471 U.S. 290 (1985) ...............................................................................12, 14, 15 0047/21051-004 Current/15661533v1

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1 STATE CASES 2 Catholic Charities of Sacramento, Inc. v. Superior Court, 32 Cal. 4th 527 (2004)........................................................................................ 15 3 Hope Int’l Univ. v. Superior Court, 4 119 Cal. App. 4th 719 (2004).......................................................................17, 24 5 Hoppman v. Workers’ Comp. Appeals Bd., 226 Cal. App. 3d 1119 (1991)...................................................................... 10, 11 6 Mendoza v. Town of Ross, 7 128 Cal. App. 4th 625 (2005)............................................................................. 11 8 Ramirez v. Yosemite Water Co., 20 Cal. 4th 785 (1999)........................................................................................ 18 9 Roman Catholic Archbishop of Los Angeles v. Superior Court, 10 131 Cal. App. 4th 417 (2005)............................................................................. 15 11 Schmoll v. Chapman Univ., 70 Cal. App. 4th 1434 (1999).......................................................................15, 18 12 Silo v. CHW Med. Found., 13 27 Cal. 4th 1097 (2002)...................................................................................... 16 14 Turner v. Church of Jesus Christ, 18 S.W.3d 877 (Tex. App. 2000) ....................................................................... 24 15 16 17 FEDERAL STATUTES 18 26 U.S.C. § 501(c) (3) ............................................................................................... 8 19 29 U.S.C. § 201, et seq. ............................................................................................. 7 20 29 U.S.C. § 203(r)...................................................................................................... 9 21 Pub. Law 75-718, 52 Stat. 1060 (1938)..................................................................... 7 22 Pub. Law 87-30, 75 Stat. 65 (1961)........................................................................... 8 23 24 FEDERAL REGULATIONS 25 29 C.F.R. § 779.214...............................................................................................7, 9 26 27 28 0047/21051-004 Current/15661533v1

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1 STATE STATUTES 2 Cal. Gov’t Code §§ 12900, et. seq........................................................................... 11 3 Cal. Labor Code § 3352(i)....................................................................................... 10 4 Cal. Labor Code § 3352(b) ...................................................................................... 10 5 6 CONGRESSIONAL MATERIALS 7 106 Cong. Rec. 16703 ............................................................................................... 8 8 107 Cong. Rec. 6255 ................................................................................................. 8 9 H.R.Rep. 87-75, 87th Cong. 1st Sess. 8 (1961)........................................................... 9 10 S. Rep. 86-1744, 86th Cong. 2d Sess. 28 (1960)........................................................ 8 11 S. Rep. 87-145, 87th Cong. 1st Sess. 41 (1961).......................................................... 9 12 13 OTHER AUTHORITIES 14 Brief for the Department of Labor, 1985 WL 669832 ............................................ 13 15 DLSE Opinion Letter 1988.10.27............................................................................ 11 16 Wage and Hour Division, U.S. Dep’t of Labor, Field Operations Handbook § 10b03(b) ............................................................10 17 18 19 20 21 22 23 24 25 26 27 28 0047/21051-004 Current/15661533v1

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INTRODUCTION In a motion for “summary adjudication” brought even before a Scheduling

3 Conference has been held, Plaintiff Marc Headley asks this Court to make a Rule 56 4 determination of the central issue of this litigation: whether, as a staff member of 5 defendant Church of Scientology International (“CSI”), Headley was covered by 6 federal and state minimum wage and overtime laws. Headley’s motion rests on a 7 single piece of evidence — his own declaration — and a single legal proposition 8 that he intones at every opportunity: that in determining if someone is a covered 9 employee, the only thing that “counts” is the so-called “economic reality” of the job, 10 i.e., covered “[e]mployees are those who as a matter of economic reality are 11 dependent upon the business to which they render service.” (Pl.’s Mem. at 12:1212 14). Headley argues that because CSI allegedly controlled the terms of his putative 13 employment and provided for his room, board, and living expenses, it follows that 14 he must have been a covered employee. 15

Headley is wrong, both on the law and the facts. He can make his motion

16 only by omitting any explanation as to how he came into CSI’s service, distorting 17 the nature of the work that he did and misconstruing or ignoring the applicable law. 18 As demonstrated below, for over 15 years Headley was a member of a Scientology 19 religious order, the Sea Organization (“Sea Org”), which admits to its membership 20 only those who, like Headley, have expressed and demonstrated an abiding 21 commitment to the Scientology religion and a sincere desire to devote their lives to 22 its service. As is common for members of religious orders of other denominations, 23 Sea Org members volunteer their service to whatever tasks the Church believes will 24 best serve its mission with no expectation of compensation. The Church provides 25 them with food, lodging, uniforms and small stipends for necessities. 26

While in the Sea Org, Headley held a number of positions, but spent almost

27 all of his time at Golden Era Productions, an unincorporated division of CSI, where 28 he worked primarily on the production of religious films, videos and other media 0047/21051-004 Current/15661533v1

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1 that form the backbone of the Church’s efforts to teach and spread its faith. Neither 2 CSI nor Golden Era engage in ordinary commercial and business activities in 3 competition with other business enterprises, and (with only de minimis exceptions) 4 all the work Headley performed was on the production of religious and proselytizing 5 materials distributed by Scientology churches throughout the world as part of their 6 religious mission or on the technology the churches use for that purpose. 7

Based on these facts, CSI, Golden Era and Headley (while in CSI’s service)

8 were not subject to federal and state wage-hour laws for two reasons. First, neither 9 CSI nor Golden Era, in whole or in part, constituted an “enterprise” or “employer” 10 within the meaning of the statutory framework. Second, because Sea Org members 11 are members of a religious order and their work is critical to the Church’s mission of 12 teaching and spreading its faith, the terms and conditions of their service are not 13 subject to state or federal regulation as a matter of settled First Amendment 14 jurisprudence and statutory construction. 15

At the appropriate time, CSI will demonstrate its entitlement to summary

16 judgment. For now, however, CSI demonstrates that Headley’s significant 17 omissions and mischaracterizations of material facts and misstatements of 18 applicable law require denial of his motion. 19 20

FACTS 1.

The essential facts concerning CSI and Golden Era are set forth in the

21 declarations of Allan Cartwright (“Cartwright Decl.”) and Catherine Fraser (“Fraser 22 Decl.”), and in CSI’s Separate Statement. In summary: 23

CSI is the “Mother Church” of the Scientology religion, and is dedicated to

24 the advancement and dissemination of the religion. CSI’s ecclesiastical authority 25 extends to overseeing the proper administration of all Scientology churches and 26 missions worldwide, disseminating the beliefs and practices of Scientology and 27 providing religious services and training to its own staff members. The United 28 0047/21051-004 Current/15661533v1

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1 States Internal Revenue Service recognizes CSI as a tax-exempt “church” under 26 2 U.S.C. §501(c) (3). (SGI Nos. 24-27.)1 3

All CSI staff belong to the Scientology religious order known as the Sea

4 Organization, or Sea Org. The United States Department of Homeland Security has 5 found “that the Sea Org qualifies as a religious order [under written federal 6 guidelines], and that its members practice a religious vocation,” thereby permitting 7 Sea Org members to enter the country under that rubric. (Id., Nos. 28-29.) Sea Org 8 members sign a symbolic commitment of one billion years of service, reflecting 9 their religious dedication and their awareness of themselves as immortal spiritual 10 beings. Sea Org members devote their lives to service in furtherance of the 11 Scientology religion and the salvation of humanity. None of these staff members 12 serve in the expectation that he or she will receive material compensation, a fact 13 they all know before becoming members of the Sea Org. (Id., Nos. 30-32.) 14

All CSI staff members work in one of three capacities: (1) providing or

15 overseeing spiritual counseling and religious training to Church staff and 16 parishioners; (2) dissemination of the religious beliefs and practices of Scientology; 17 and (3) ecclesiastical management and administrative support for CSI and 18 Scientology churches and missions. No CSI staff members engage in commerce or 19 the production of goods for commerce. No activity of CSI or its staff members 20 competes in any manner whatsoever with the sale of goods and services by secular 21 commercial enterprises. (Id., Nos. 33, 37, 40-42.) 22

Golden Era plays a vital role in CSI’s propagation, dissemination and

23 expansion of the Scientology faith and the attainment of the religion’s humanitarian 24 goals through the compilation and dissemination of the scriptural material and 25 teachings of L. Ron Hubbard, Scientology’s Founder, to Scientology churches, 26 27 28 0047/21051-004 Current/15661533v1

1

As required by the Court’s Standing Order, we cite to the evidence as collected in CSI’s concurrently-filed Statement of Genuine Issues, abbreviated as “SGI.”

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1 parishioners and the general public. (SGI, Nos. 48-50.) Golden Era produces 2 religious films, videos and other media from at its state-of-the-art studios near 3 Hemet, California that are used to introduce the religion’s basic concepts to the 4 general public and to explain and depict different aspects of the Scientology religion 5 that are vital to the training of Scientology ministers, called Auditors. (Id., Nos. 506 52.) Golden Era also produces religious booklets, brochures, posters, still 7 photography and artwork, as well as television, radio and Internet ads and feature 8 length programs, all exclusively for use in proselytizing the faith. (Id., No. 53.) 9 Musicians on Golden Era staff compose, arrange, record and mix religious music 10 and provide music soundtracks for all films and videos. (Id., No. 54.) 11

Golden Era makes Mr. Hubbard’s 3,000 recorded Scriptural lectures available

12 by mixing, editing and reproducing them on cassette and, until recently, reproducing 13 the majority of these lectures on compact discs. (Id., No. 56.) Mr. Hubbard 14 recorded these lectures about Scientology, and it is Golden Era’s religious duty to 15 make these lectures available to Scientology churches, missions and parishioners 16 now and for future generations. (Id., Nos. 57-58) The magnitude of the number of 17 these lectures and the technical difficulties incumbent upon audio storage in the 18 1950s, as well as the number of languages into which the lectures must be 19 translated, have created an enormous amount of work for Golden Era’s staff. Just as 20 medieval monks once toiled copying bibles and tracts by hand and illuminating 21 religious works and bibles, the members of the modern-day religious order at 22 Golden Era toil to preserve Scientology’s scriptural materials and to mass produce 23 them for Scientologists worldwide. (Id., Nos. 55, 59.) The methods are different, 24 but the purpose is not: to broadly disseminate and spread the religion. (Id., Nos. 4925 53.) 26

Scientology’s central religious practice of auditing, while roughly analogous

27 to confessional pastoral counseling, is very different in specifics. Scientology 28 auditing is accomplished with the use of a religious artifact, the Hubbard 0047/21051-004 Current/15661533v1

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1 Electropsychometer, or “E-Meter.” (SGI, Nos. 64-65.) Mr. Hubbard wrote a 2 number of film scripts for teaching the proper use of the E-Meter; these films are 3 produced by Golden Era for distribution solely to Scientology churches for training 4 of the clergy, including auditors and course supervisors. (Id., Nos. 66-67.) 5

The Scientology religion has several important annual events, during which

6 Church ecclesiastical leaders inform Scientologists of current events, new 7 compilations and translations of scriptures, expansion news, new Church-backed 8 social betterment campaigns, biographical information about the Founder, and other 9 matters of religious concern. These events are mainly staged live in Los Angeles, 10 Tampa, Florida, East Grinstead, England, and on board the Sea Org motor vessel, 11 Freewinds, which is a religious retreat for the Church. Golden Era provides the 12 technical staff, music and production equipment, and records these events for replay 13 at all the churches and missions around the world, so all Scientologists may have 14 access to them and obtain the information about their religion. (Id., No. 14.) 15

2.

Plaintiff Headley was raised as a Scientologist. (SGI, No. 71.) In

16 1985, Headley began religious training by taking religious courses at several 17 Scientology churches in the Los Angeles area, in the evenings, weekends and 18 summer vacations. (Id., No. 72.) He also received religious counseling (“auditing”) 19 as a teenager in these churches. (Id., No. 73.) 20

In 1989, while in high school, Headley applied to join the Sea Org. (SGI, No.

21 74.) Because of his youth, Headley was queried especially closely to verify his 22 desire to do so. The procedure required firm representations regarding his 23 qualifications and history, approval from his parents, but most of all his own 24 personal commitment. (Id., No. 75.) In his application, Headley represented that he 25 had participated in auditing on his own initiative; that he received spiritual benefits 26 from Scientology training and auditing; that none of his family members objected or 27 criticized his decision to join the Sea Org; and that he was joining the Sea Org, 28 0047/21051-004 Current/15661533v1

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1 “[b]ecause [I] want to clear the planet.”2 At his deposition, Headley testified he was 2 sincere when answering these questions. (SGI, No. 76.) 3

In May 1990, Headley was assigned to be a staff member at Golden Era. At

4 the time he wrote, “I joined the Sea Org because I know that this would be the only 5 way that I would be able to fully contribute to clearing this planet. . . .” (Id., No. 6 82.) On May 31, 1990, he executed the Sea Org’s covenant of religious 7 commitment, which stated, inter alia: 8

I am joining staff and becoming a member of a religious order, of my

9

own free will, solely to help forward the religious goals and tenets of

10

the Scientology religion and the Church and not for monetary gain,

11

auditing or training. (Id., Nos. 3, 83.)

12 When Headley arrived at Golden Era on that date, he knew that he would be paid a 13 stipend of $50 a week, plus room and board and incidentals. (Id., Nos. 3, 85.) 14

In 2002, Headley executed another covenant of religious commitment to the

15 Sea Org. According to Headley, the covenant, “says you were affirming your vows 16 in the Church to help forward the religious goals and tenets of Scientology religion.” 17 (Id., No. 80.) 18

Headley held several positions while in CSI’s service between 1990 and

19 2005, all of which furthered Golden Era’s central purpose of disseminating and 20 spreading the Scientology religion. (Id., Nos. 86-87, 106.) As Headley testified, he 21 spent the majority of his time at Golden Era “on copying and production of lectures 22 by L. Ron Hubbard, and packaging lectures by L. Ron Hubbard, and then 23 24

2

It is a fundamental goal of Scientology to “Clear the Planet,” meaning disseminate Scientology to enough people around the world through evangelical activities that the aims 25 of Scientology are achieved. (SGI, No. 77.) Those aims are: “A civilization without insanity, without criminals and without war, where the able can prosper and honest beings 26 have rights, and where Man is free to rise to greater heights . . . .” (Id., No. 78.) Headley admitted that Clearing the Planet meant to spread Scientology over the world, so that all 27 will experience the benefits of being a Scientology “Clear”: a high level of spiritual awareness and ability in the religion. (Id., No. 79.)

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1 overseeing as a producer the creation of films, technical films, event films, event 2 videos, lectures, and E-meters,” and making videos “for International Scientology 3 events,” with about half of that time spent on the creation of Scientology films. (Id., 4 No. 88.)3 5

ARGUMENT

6 I.

MINIMUM WAGE LAWS DO NOT APPLY TO CHURCHES TO THE

7

EXTENT THAT THEY DO NOT ENGAGE IN ORDINARY

8

COMMERCIAL BUSINESS VENTURES IN COMPETITION IN THE

9

COMMERCIAL MARKETPLACE

10

A.

11

The Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. (“FLSA”), was first

The FLSA Does Not Apply

12 enacted in 1938. Pub. Law 75-718, 52 Stat. 1060 (1938). It applied only to 13 individuals who worked directly in interstate commerce or in the production of 14 goods for interstate commerce, and not to entire businesses or enterprises. If a 15 business were engaged in interstate commerce but employed workers who did not 16 work in that part of the business, those workers were not covered. Workers who 17 were engaged in “nonprofit, educational, religious and eleemosynary activities . . . 18 were not regarded as [employed] for a business purpose” and thus were not covered. 19 29 C.F.R. § 779.214. 20

In 1960, a bill was introduced in Congress to expand the scope of FLSA to

21 include “enterprise” coverage, under which all employees of a business enterprise 22 engaged directly in interstate commerce or in the production of goods for interstate 23 commerce would be covered. The chief Senate sponsor and floor leader for the bill 24 was Senator John F. Kennedy. While the bill was not enacted in that Congress, it 25 26 27 28 0047/21051-004 Current/15661533v1

3

Headley’s positions with Golden Era and their significance in the dissemination of Scientology are summarized at SGI Nos. 89-105.

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1 was taken up again following Senator Kennedy’s election to the Presidency, and 2 enacted in 1961. Pub. Law 87-30, 75 Stat. 65 (1961). 3

The contemporaneous understanding and intention of Congress and the

4 continuing and consistent interpretation by the United States Department of Labor 5 was and is that the FLSA does not apply to the activities of churches and other non6 profits except to the extent, and only to the extent, that such entities engage in 7 ordinary business activities in economic competition with other commercial entities. 8 When enterprise coverage was suggested in 1960, Congress recognized that only 9 such commercial activities of churches and non-profits would be covered. See S. 10 Rep. 86-1744, 86th Cong. 2d Sess. 28 (1960). Indeed, during the floor debates led 11 by Senator Kennedy, Senator Barry Goldwater offered an amendment that would 12 have excluded from the definition of employer any organization exempt from 13 taxation under 26 U.S.C. § 501(c) (3). Senator Kennedy objected that if a non-profit 14 organization owned a commercial business (for which it might pay unrelated 15 business income tax), to that extent it should not be excluded from coverage under 16 the amendment to the FLSA. See 106 Cong. Rec. 16703. Senator Goldwater agreed 17 that “a church that has a business operation on the side . . . would not be exempt” 18 for those activities. Id. 19

The following year, when the legislation was again considered and this time

20 enacted, Senator Curtis proposed the same amendment that Senator Goldwater had 21 the previous year. Senator McNamara, chairman of the committee that reported the 22 bill, explained that the committee had declined to provide a blanket exception to tax 23 exempt nonprofits because of concern that some nonprofit entities might “compete 24 with private industry to such a degree that the competition would have a very 25 adverse impact on private industry.” 107 Cong. Rec. 6255 (1961). The Senate and 26 House reports on the 1961 legislation thus did not accept the blanket exception for 27 tax exempt nonprofits, but emphasized the intended distinction between the covered 28 ordinary commercial activities of nonprofits as opposed to their religious or 0047/21051-004 Current/15661533v1

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1 educational or eleemosynary activities that do not compete with businesses and that 2 are excluded from coverage under the Act’s definition of “enterprise”: 3

Eleemosynary, religious, or educational and similar activities [are] not

4

included in the term “enterprise” [because] such activities performed by

5

non-profit organizations are not activities performed for a common

6

business purpose.

7 H.R.Rep. 87-75, 87th Cong. 1st Sess. 8 (1961); S. Rep. 87-145, 87th Cong. 1st Sess. 8 41 (1961). 9

After enactment of the amendment, the Department of Labor issued

10 regulations, consistent with the congressional debates and committee reports, that 11 made clear that only the commercial activities of a non-profit or church would be 12 considered to be an “enterprise” subject to the Act; such activities, to the extent a 13 non-profit carried them on, would not subject the other activities or acts of the non14 profit to enterprise coverage. Thus, after recognizing that the “[a]ctivities of 15 eleemosynary, religious or educational organizations may be performed for a 16 business purpose” and thus treated as an “enterprise,” the regulations specify that: 17

[T]he nonprofit, educational, religious and eleemosynary activities will

18

not be included in the enterprise. . . . Such activities were not regarded

19

as performed for a business purpose under the prior Act and are not

20

considered under the Act as it was amended.

21 29 C.F.R. § 779.214 (emphasis added). 22

Indeed, so clear-cut was the distinction between the religious and the ordinary

23 commercial activities, if any, of a church or other nonprofit that in 1966 Congress 24 enacted an amendment to provide FLSA coverage to employees of church-operated 25 schools, responding to the fact that such employees ordinarily would not be 26 considered to engage in a business or commercial activity. See 29 U.S.C. § 203(r). 27 The amendment left undisturbed the general exclusion from FLSA coverage of non28 business activities by nonprofits, particularly churches. 0047/21051-004 Current/15661533v1

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In addition, the Department of Labor has recognized that certain unique

2 categories of religious workers historically and constitutionally must be deemed to 3 be excluded from the Act’s scope. Thus, the Wage and Hour Division’s Handbook 4 adopts and implements the congressional intention to exclude ministers and 5 members of religious orders: “Persons such as nuns, monks, priests, lay brothers, 6 ministers, deacons and other members of religious orders who serve pursuant to 7 their religious obligations . . . shall not be considered to be ‘employees.’” Wage and 8 Hour Division, U.S. Dep’t of Labor, Field Operations Handbook § 10b03(b). 9 Service in a religious order traditionally brings little in the way of material gain, but 10 like a “vow of poverty”, such “is a hallowed religious observance; an intent to 11 destroy it cannot reasonably be ascribed to the draftsmen of the Fair Labor 12 Standards Act.” Schleicher v. Salvation Army, 518 F.3d 472, 476 (7th Cir. 2008) 13 (Posner, J.). 14

B.

15

As Headley acknowledges, “the Federal and California minimum wage and

The California Labor Code and Wage Orders Also Do Not Apply

16 overtime laws are ‘analogous,’ ‘complementary,’ and essentially equivalent in 17 application”, particularly in their definitions of “employer,” “employee” and 18 “employed.” (Pl.’s Mem. at 14:23-25 (quoting Bureerong v. Uvawas, 922 F. Supp. 19 1450, 1470 (C.D. Cal. 1996)). California’s Labor Code, in the Workers’ 20 Compensation Act, recognizes that individuals who agree to engage in religious 21 work on behalf of churches or religious organizations without meaningful 22 compensation are not covered by the minimum wage provisions of state law. Labor 23 Code § 3352(b) excludes from the definition of employee anyone performing 24 services for a religious or charitable organization “for aid and sustenance only.” 25 Section 3352(i) excludes anyone performing “voluntary service” for a nonprofit 26 organization who “receives no remuneration for services other than meals, 27 transportation, lodging, or reimbursement for incidental expenses.” See Hoppman v. 28 Workers’ Comp. Appeals Bd., 226 Cal. App. 3d 1119, 1123 (1991) (workers’ 0047/21051-004 Current/15661533v1

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1 compensation coverage not extended to person who performs voluntary service for a 2 nonprofit organization and receives no remuneration for the services other than 3 meals, transportation, lodging, or incidental expenses).4 4

In that same vein, in 1988, the California Division of Labor Standards

5 Enforcement (“DLSE”) opined that “members of religious orders or ‘volunteers’” 6 are exempt from the California Minimum Wage Orders when “the person intends to 7 volunteer his or her services for . . . religious . . . objectives, not as an employee and 8 without contemplation of pay . . . .” DLSE Opinion Letter 1988.10.27 at 1 9 (emphasis in the original).5 10

Finally, application of California’s minimum wage law to church religious

11 workers would raise serious questions under the First Amendment. See Point II, 12 post, discussing the ministerial exception. In such contexts, courts can and will seek 13 to interpret a statute in such a way as to avoid constitutional infirmity. Murray v. 14 The Charming Betsy, 6 U.S. (2 Cranch) 64, 118 (1804); Ashwander v. Tenn. Valley 15 Auth., 297 U.S. 288, 341 (1936) (Brandeis, J. concurring). Where, as here, these is a 16 significant risk of infringement on First Amendment rights, courts will require a 17 clear expression of legislative intent to regulate religious activities. NLRB v. 18 Catholic Bishop of Chicago, 440 U.S. 490, 500, 507 (1979). Research discloses no 19 clearly expressed intention by the California Legislature that the Labor Code, and in 20 particular its wage-hour provisions, are to apply to religious workers. 21 22 23 24 25 26 27 28 0047/21051-004 Current/15661533v1

4

Mendoza v. Town of Ross, 128 Cal. App. 4th 625 (2005), is also instructive. There, the court, citing to Hoppman, held that a volunteer was not an “employee” for purposes of the Fair Employment and Housing Act (“FEHA”), Cal. Gov’t Code §§ 12900, et. seq., and noted that FEHA and the workers’ compensation statutes “should be construed together in a harmonious fashion” as both are “‘designed to provide workplace protections for employees . . . .’” Id. at 635 (quoting Shephard v. Loyola Marymount Univ., 102 Cal. App. 4th 837, 846 (2002)). It would be incongruous to construe the wage-hour portions of the California Labor Code, which also are designed to provide workplace protections for employees, any differently. 5 Available at http://www.dir.ca.gov/dlse/OpinionLetters-byDate.htm.

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1

C.

2

Headley is either unaware of or has chosen to ignore the history and context

Headley Misconstrues the Applicable Cases

3 discussed above. He instead has chosen to argue in blunderbuss manner that there 4 exists no exclusion or exception to the coverage of federal and state minimum wage 5 laws with respect to churches, and that all church staff members are covered by such 6 laws. In support, Headley relies extensively on the Supreme Court’s opinion in 7 Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (1985). 8 According to Headley, in Alamo “[t]he Supreme Court has found that minimum 9 wage law [sic], FLSA, is applicable to workers of religious or non-profit 10 organizations.” (Pl.’s Mem. at 12:21-23.) 11

Headley is fundamentally mistaken. The Alamo Court essayed no such broad,

12 all-inclusive holding. Rather, the Court, following closely arguments made by the 13 Solicitor General on behalf of the Department of Labor, and the Labor Department’s 14 contemporaneous interpretation of the law, engaged in a careful and nuanced 15 analysis consistent with the history and congressional intent as discussed above. 16 The entire thrust of the Supreme Court’s opinion in Alamo clearly recognized that 17 commercial business activities of churches, if any, were quite different from their 18 religious activities, and that the latter were not covered by the FLSA. 19

The critical factor in Alamo was the nature of the commercial activities that

20 the Alamo Foundation was conducting: ordinary businesses in direct competition 21 with other commercial enterprises, such as service stations, grocery stores, motels, 22 construction companies, and hog farms. These clearly commercial activities were 23 akin to the kinds of activities that Senator Goldwater acknowledged must be subject 24 to the Act, and fell into precisely the category of activity that Congress feared might 25 “compete with private industry to such a degree that the competition would have a 26 very adverse impact on private industry.” 107 Cong. Rec. 6255 (1961). It was these 27 activities, and these only, that the Labor Department argued were within the 28 mandate of FLSA. In the words of the Solicitor General: 0047/21051-004 Current/15661533v1

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1

It must be emphasized at the outset that this enforcement proceeding

2

applies solely to work performed in the commercial businesses of the

3

Foundation. The case does not touch in any way upon the

4

Foundation’s core religious functions of worship, liturgy, doctrine,

5

prayer, preaching, or internal organization, in which government may

6

play no part . . . .

7 Brief for the Department of Labor, 1985 WL 669832, at *14. See also id. at *17 8 (“This enforcement proceeding . . . does not apply to the Foundation’s religious or 9 charitable work, or to any work performed internally for the benefit of the 10 Foundation’s uncovered activities . . . .) 11

The government emphasized that “since the definition of ‘enterprise’ is

12 limited to an organization’s activities engaged in for a common business purpose, it 13 follows, however, that not all employees of a non-profit organization that is engaged 14 in interstate commerce are necessarily covered.” Id. at *3. The brief then quoted 15 the Department of Labor regulation stating that “the non-profit educational, 16 religious, and eleemosynary activities will not be included in the enterprise.” Id. at 17 *4. Finally, the government responded to the Alamo Foundation’s argument that to 18 apply FLSA’s recordkeeping requirements would constitute an ongoing 19 entanglement between state and church in violation of the Establishment Clause by 20 stating that “[t]he recordkeeping requirements pertain only to the employer’s 21 commercial activities; the Foundation need make no report about its associates’ time 22 spent in witnessing, praying, preaching, or other religious activities.” Id. at *45. 23

The Supreme Court’s opinion closely followed and adopted the Solicitor

24 General’s arguments that only the ordinary commercial activities of a church or non25 profit would be considered to be part of an “enterprise” subject to FLSA coverage. 26 First, the Court emphasized that the activities at issue, which the Solicitor General 27 repeatedly stated were the sole basis for the enforcement proceeding, all “serve the 28 general public in competition with ordinary commercial enterprises . . . and the 0047/21051-004 Current/15661533v1

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1 payment of substandard wages would undoubtedly give petitioners and similar 2 organizations an advantage over competitors.” 471 U.S. at 299. The Court clearly 3 contrasted such commercial activities with the non-commercial activities performed 4 by those working for nonprofit groups: “[t]he activities of nonprofit groups were 5 excluded from coverage only insofar as they were not performed for a ‘business 6 purpose.’” Id. at 297 (quoting S. Rep. 86-1744). The Court made clear that “The 7 Act reaches only the ‘ordinary commercial activities’ of religious organizations, 8 [citation], and only those who engage in such activities . . .”, id. at 302, and adopted 9 the Labor Department’s position that a church need not even keep records with 10 respect to the activities of its workers that were not directed at ordinary commercial 11 activities. Id. at 305 (“These [recordkeeping] requirements apply only to 12 commercial activities undertaken with a ‘business purpose,’ and would therefore 13 have no impact on petitioners’ own evangelical activities . . .”). See also general 14 discussion, 471 U.S. at 296-99. 15

The conclusion to be drawn from Alamo, therefore, is quite different from that

16 postulated by Headley.6 Churches can be subjected to minimum wage laws only if, 17 18 19

6

Headley also cites to Judge Fletcher’s concurrence in the denial of a petition for

20 rehearing en banc in Elvig v. Calvin Presbyterian Church, 397 F.3d 790, 792 (9th Cir.

2005), while ignoring the opinion of the court, 375 F.3d 951 (9th Cir. 2004), an important

21 decision recognizing the ministerial exception to state and federal labor laws discussed post. Judge Fletcher’s concurrence, citing Alamo, unremarkably stated, “The First

22 Amendment does not exempt religious institutions from laws that regulate minimum wage . . .” Elvig had nothing to do with a minimum wage claim; it involved a Title VII sexual

23 harassment claim. Judge Fletcher had no occasion to consider whether or under what

circumstances a church might be covered by minimum wage laws. As discussed above,

24 there certainly are circumstances where a religious institution might be covered, i.e., where it carries on a commercial business in competition with commercial enterprises. Alamo

25 makes clear that the First Amendment is no bar to such coverage in such limited

circumstances. Alamo, however, implicitly suggested that the Establishment Clause

26 entanglement prohibition might well bar application of a minimum wage law to the

religious, non-commercial activities of a church. 471 U.S. at 305. See discussion, ante.

27 Indeed, the opinion of the court in Elvig similarly suggests that the constitutionally 28 0047/21051-004 Current/15661533v1

mandated ministerial exception likewise would apply in such a circumstance.

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1 and only to the extent that, they engage in ordinary commercial activities that 2 compete with those of other businesses.7 3 II.

THE MINISTERIAL EXEMPTION PROHIBITS APPLICATION OF

4

MINIMUM WAGE LAWS TO NON-SECULAR CHURCH WORKERS

5

OR MEMBERS OF A RELIGIOUS ORDER

6

The federal and state courts have recognized that the First Amendment

7 religion clauses mandate a “ministerial exception” to state and federal statutes 8 regulating employment, wages, and hours. Elvig v. Calvin Presbyterian Church, 9 375 F.3d 951, 960-61 (9th Cir. 2004); Catholic Charities of Sacramento, Inc. v. 10 Superior Court, 32 Cal. 4th 527, 543-44 (2004); Schmoll v. Chapman Univ., 70 Cal. 11 App. 4th 1434, 1442-44 (1999). The ministerial exception was first stated in 12 McClure v. Salvation Army, 460 F.2d 553, 558-59 (5th Cir. 1972): 13

Just as the initial function of selecting a minister is a matter of church

14

administration and government, so are the functions which accompany

15

such a selection. It is unavoidably true that these include the

16

determination of a minister’s salary, his [or her] place of assignment,

17

and the duty he [or she] is to perform in furtherance of the religious

18

mission of the church.

19 (Emphasis added). “[T]he ministerial exception doctrine is based on the notion a 20 church’s appointment of its clergy, along with such closely related issues as clerical 21 salaries, assignments, working conditions and termination of employment, is an 22 inherently religious function because clergy are such an integral part of a church’s 23 functioning as a religious institution.” Roman Catholic Archbishop of Los Angeles 24 25

7

Contrary to Headley’s assertion, the Alamo Court’s unremarkable statement that “[t]he test of employment under the [FLSA] is one of ‘economic reality’” does not lead to a 26 contrary result. (Pl.’s Mem. at 13:5-7 (citing Alamo, 471 U.S. at 301).) As described above, the Court’s opinion was limited to a church’s commercial operations, and its 27 reiteration of the long-established test of employment under the FLSA did not thereby undo the careful limitations it had earlier placed on the reach of its opinion.

28 0047/21051-004 Current/15661533v1

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1 v. Superior Court, 131 Cal. App. 4th 417, 433 (2005) (emphasis added) (citing Werft 2 v. Desert Sw. Annual Conference, 377 F.3d 1099, 1101 (9th Cir. 2004)). Allowing 3 the state to intrude in such matters “results in excessive entanglement with religion 4 in violation of the establishment clause”, and would also “violate the free exercise 5 clause, which ‘is guaranteed not only to individuals but also to churches in their 6 collective capacities, which must have power to decide for themselves, free from 7 state interference, matters of church government as well as those of faith and 8 doctrine.’” Silo v. CHW Med. Found., 27 Cal. 4th 1097, 1106 (2002) (quoting 9 Schmoll, 70 Cal. App. 4th at 1442-43). 10

“[T]he ministerial exception . . . is robust where it applies”, precluding “any

11 inquiry whatsoever into the reasons behind a church’s ministerial employment 12 decision.” EEOC v. Roman Catholic Diocese of Raleigh, NC, 213 F.3d 795, 801 13 (4th Cir. 2000). It encompasses all facets of a church’s employment relationship 14 with its clergy employees and has been applied to virtually all federal and state 15 antidiscrimination statutes. See Hollins v. Methodist Healthcare, Inc. 474 F.3d 223, 16 225 (6th Cir. 2007); Ross v. Metro. Church of God, 471 F. Supp. 2d 1306, 1309 17 (N.D. Ga. 2007) (collecting cases). 18

Most significantly for current purposes, the ministerial exception bars

19 application of federal and state minimum wage laws to a church’s relationship with 20 those coming within the exception. Alcazar v. Catholic Archbishop of Seattle, 2006 21 WL 3791370, at *7 (W.D. Wash., Dec. 21, 2006) (exception applies to state 22 minimum wage law); Schleicher v. Salvation Army, 518 F.3d at 475, 478 (and 23 “adopt[ing] a presumption that clerical personnel are not covered by the FLSA” and 24 suggesting “the ministers exception is better termed the ‘internal affairs’ doctrine” 25 because it is not limited to ministers); Shaliehsabou v. Hebrew Home of Greater 26 Washington, 363 F.3d 299, 305 (4th Cir. 2004). Indeed, the Fourth Circuit has held 27 that the ministerial exception exists as a statutory matter under FLSA as “derived 28 from the congressional debate [about the FLSA] and delineated in guidelines issued 0047/21051-004 Current/15661533v1

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1 by the Labor Department’s Wage and House [sic] Administrator” that exclude 2 clergy or members of religious orders as “employees” under that act. Id. (quoting 3 Dole v. Shenandoah Baptist Church, 899 F.2d 1389, 1396 (4th Cir. 1990)). The 4 FLSA’s ministerial exception for clergy and members of religious orders is 5 “coextensive in scope” with the constitutionally-mandated ministerial exception 6 applied in other contexts. Shaliehsabou, 363 F.3d at 306. 7

Equally significant, the ministerial exception is applied broadly to all church

8 workers, except those engaged in activities with a “strictly secular purpose.” EEOC 9 v. Sw. Baptist Theological Seminary, 651 F.2d 277, 283 (5th Cir. 1981). Accord, 10 Alcazar, 2006 WL 3791370, at *7 (“the ministerial exception applies to both state 11 and federal claims and prohibits a court from inquiring into the decisions of a 12 religious organization concerning the . . . rate of pay . . . or any other employment 13 related decision concerning ministers and other non-secular employees”) (emphasis 14 added)); EEOC v. Catholic Univ. of Am., 83 F.3d 455, 463 (D.C. Cir. 1996) (“the 15 ministerial exception encompasses all employees of a religious institution, whether 16 ordained or not, whose primary functions serve its spiritual and pastoral mission”). 17 Thus, the exception applies to “individuals whose duties for a church not only 18 involve traditional public functions, but who are also, functionally, paid to actively 19 proselytize on a church’s behalf.” Hope Int’l Univ. v. Superior Court, 119 Cal. App. 20 4th 719, 736 (2004) (citing Alicea-Hernandez v. Catholic Bishop of Chicago, 320 21 F.3d 698, 703 (7th Cir. 2003) (non-ordained press secretary whose duties included 22 outreach to local community found within the ministerial exception)). The test is 23 whether the worker’s “‘primary duties consist of teaching, spreading the faith, or 24 supervision or participation in religious ritual and worship.’” Roman Catholic 25 Diocese of Raleigh, 213 F.3d at 803 (emphasis added) (quoting Rayburn v. Gen. 26 Conference of Seventh-day Adventists, 772 F.2d 1164, 1169 (4th Cir. 1985)). 27 Accord, Hope, 119 Cal. App. 4th at 734 (same language) (quoting Schmoll, 70 Cal. 28 App. 4th at 1439). 0047/21051-004 Current/15661533v1

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As the language quoted above suggests, in determining whether a religious

2 worker comes within the ministerial exception, every court, state and federal, that 3 has considered the applicability of the ministerial exception has employed the 4 “primary duties” test. See, e.g., Schmoll, 70 Cal. App. 4th at 1439; Shaliehsabou, 5 363 F.3d at 306 (test compelled both by First Amendment and legislative history of 6 FLSA). Under that test, courts look to whether the worker’s primary duties fall 7 within the exception; if they do, “he or she is exempt regardless of how much time 8 the individual actually spends performing the primary duty.” Ramirez v. Yosemite 9 Water Co., 20 Cal. 4th 785, 798 n.4 (1999) (emphasis added). Thus, for example, so 10 long as the worker potentially could be assigned such critical religious duties, he or 11 she comes within the exception, regardless of the worker’s assignment at the time of 12 the alleged adverse employment action. See EEOC v. Sw. Baptist Theological 13 Seminary, 651 F.2d at 284 (explaining McClure and holding that plaintiff who “was 14 functioning primarily as a secretary at the time she was discharged” was subject to 15 the ministerial exception because this was simply “the staff duty assigned to her” at 16 the time, and she “was still fully qualified and authorized to perform the ceremonies 17 of the [Salvation] Army . . . .”). 18 III.

THE ACTIVITIES OF THE RELIGIOUS WORKERS AT CSI AND

19

GOLDEN ERA, INCLUDING HEADLEY’S, CANNOT BE

20

CONSIDERED PART OF A COMMERCIAL “ENTERPRISE”

21

As shown in our statement of facts, ante, and in the declarations and Separate

22 Statement submitted with this memorandum, CSI’s activities are exclusively 23 religious in nature and are devoted to the provision of religious services, the 24 ecclesiastical management and supervision of churches of Scientology, and the 25 propagation and dissemination of the Scientology religion to existing Scientologists 26 and to potential new Scientologists in the outside world. (SGI, Nos. 33, 40, 49, 50, 27 68-70.) Its staff members are all members of the Sea Org, a religious order 28 recognized by the United States government (id., Nos. 28-29), and therefore clearly 0047/21051-004 Current/15661533v1

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1 within the ministerial exception. It does not engage in business or commercial 2 activities, let alone activities that compete with commercial businesses in the sale of 3 goods or services to the public. (SGI, No. 42.) 4

Golden Era’s function, purpose and activities likewise are exclusively

5 religious in nature. Golden Era’s mission is to make the content of the Scientology 6 religion broadly available not only to all Scientologists, but also to the outside 7 world. (Id., Nos. 50-52.) Scientology is an evangelical religion. It is a fundamental 8 tenet of Scientology that only by spreading the religion throughout the planet 9 (“clearing the planet”) can man hope to achieve a peaceful and just world. (Id., Nos. 10 77-78.) Thus, it is an essential function of CSI, as the senior ecclesiastical church, 11 to reach out to the outside world to bring new parishioners and followers into the 12 faith and to actively participate in it. Golden Era therefore produces considerable 13 materials directed at such a potential audience. In doing so, it is carrying forward 14 the command of the Scientology scriptures. (Id., Nos. 49-51.) 15

In today’s world, The Word is not spread merely by sermons in church or

16 reading a bible. People get their information through a broad and ever-expanding 17 range of media, including film, video, audio, CDs, DVDs, computer media, smart 18 phones, etc. Golden Era produces such media with an explicitly Scientology 19 content. It includes, inter alia, lectures and demonstrations about Scientology by 20 the religion’s Founder and author of its scriptures, L. Ron Hubbard; speeches, 21 sermons and presentations by Scientology religious leaders concerning religious 22 topics and matters of concern; instructional materials and demonstrations 23 concerning the proper ministration and presentation of Scientology practices for the 24 use of Scientology’s clergy, including its auditors and course supervisors; and 25 materials explaining the origins, philosophy and practice of the Scientology religion. 26 (Id., Nos. 13, 51-60.) Headley conceded that almost all his activities at Golden Era 27 were on such matters: 28 0047/21051-004 Current/15661533v1

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1

Q. So let me get the main categories, tell me if I'm wrong. You worked

2

on creating films, on copying and production of lectures by L. Ron

3

Hubbard, and packaging lectures by L. Ron Hubbard, and then

4

overseeing as a producer the creation of films, technical films, event

5

films, event videos, lectures, and E-meters, is that pretty much the gamut

6

of what you did at Gold?

7

A. Yeah, that pretty much sums it up.

8

Q. And one of the things you also did was making films for

9

International Scientology events?

10

A. Videos, yeah.

11 (SGI, No. 114.) 12

Headley does not directly address these facts or the legal analysis applicable

13 to them. Instead he broadly suggests that Golden Era is a commercial enterprise 14 because it receives payments or fees for many of the materials it creates, and that his 15 activities at Golden Era therefore were commercial. (Pl.’s Mem. at 18:20-19:2.) 16 His assertions are conclusions, not facts. For “facts,” Headley purports to testify 17 that Golden Era “sells” its religious products and systems to other Scientology 18 churches for significant sums. Not only are Headley’s statements misleading and 19 grossly exaggerated, they are not material and miss the point entirely. 20

Golden Era not only produces a vast body of religious media, but distributes it

21 to Scientology churches, missions, organizations, and ministers. (SGI, Nos. 13, 4822 58.) Headley himself agrees that every such product is produced to further the 23 dissemination of Scientology. (Id., No. 13.) It is the latter group who then make the 24 various media available to the intended audiences, often by using the audio visual 25 systems and film rooms also created and distributed by Golden Era. (Id., Nos. 3, 6026 61.) Churches paid fees to Golden Era to cover the considerable costs, expenses and 27 overhead necessary to produce the materials. As is inherent in the IRS’s recognition 28 of CSI as a tax exempt church, no part of such fees inure to the private benefit of 0047/21051-004 Current/15661533v1

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1 any individual or non-church entity, but rather are used to further the exclusively 2 religious purposes of CSI. With respect to Golden Era, any fees generated are used 3 to create additional religious media to further spread the Scientology religion. (SGI, 4 Nos. 13, 25, 60-62.) 5

The fact that Scientology churches raise money from parishioners and that

6 CSI and Golden Era receive payments from such lower churches for religious 7 materials in no way converts the activities of the lower churches or of CSI and 8 Golden Era into ordinary commercial activity, let alone in direct competition with 9 commercial businesses. “[A] religious organization needs funds to remain a going 10 concern.” Murdock v. Pennsylvania, 319 U.S. 105, 111 (1943). As long as the 11 activity by which the funds are raised consists precisely of the provision or 12 promotion of the religion itself, it furthers the exclusive religious purpose of the 13 church and is therefore itself a religious activity. As the Supreme Court pointedly 14 observed in Murdock with respect to the sale of religious literature by Jehovah’s 15 Witnesses solicitors: 16

The mere fact that the religious literature is ‘sold’ by itinerant preachers

17

rather than donated does not transform evangelism into a commercial

18

enterprise. If it did, then the passing of the collection plate would make

19

the church service a commercial product.

20 Id. 21

Headley claims that while at Golden Era, he worked on the creation of

22 audiobooks based upon works of fiction written by L. Ron Hubbard. (SGI, No. 14; 23 Headley Decl. ¶¶ 19, 20, 22.) At his deposition, Headley testified that he performed 24 such work in the early 1990s, at the latest in 1993. (SGI, No. 14.) Headley also 25 claims to have worked on the creation of video materials relating to the release of 26 certain Hubbard fictional works, as well as a video concerning the making (by an 27 independent production company) of a feature movie, based on a novel by Mr. 28 Hubbard. (Headley Decl. ¶ 21.) 0047/21051-004 Current/15661533v1

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While Golden Era did help produce certain audiobooks derived from Hubbard

2 fictional works, such production was de minimis, amounting to 1.8% of all the 3 audiocassettes and CDs Golden Era produced from 1990 to 2004. (SGI, Nos. 14, 4 112.) In addition, Golden Era produced several videos announcing the release of a 5 few of Mr. Hubbard’s fiction books-on-tape, to be shown as a small portion of an 6 overall program at Scientology events. Less than 0.4% of all videos produced by 7 Golden Era were of this nature, for which Golden Era received no payment. (Id., 8 Nos. 14, 112.) The rationale for doing so in both contexts was that by promoting 9 Mr. Hubbard’s fictional works, listeners would become interested in exploring his 10 religious writings about Scientology. (Id., No. 113.) There certainly was a rational 11 basis for Golden Era to reach such a determination. (Id.) Indeed, Headley 12 acknowledges that such materials were produced to help disseminate Scientology. 13 (Id., No. 13.) 14

Likewise, in 1999, Golden Era produced a short video of interviews with

15 Jonathan Kramer, the co-producer of “Battlefield Earth.,” and with John Travolta, 16 the star of the movie. This video was exclusively shown, without fee, to a 17 Scientology audience because of their obvious interest in a work by the religion’s 18 Founder. It was not sold to anyone, and was not shown to the public. Again, the 19 effort spent on producing the video was an insignificant and minuscule portion of 20 Golden Era’s activities. (Id., Nos. 116-121.) Indeed, as already shown, Headley 21 himself agrees that his activities on all matters relating to fictional works of L. Ron 22 Hubbard were an insignificant portion of what he worked on. (Id., No. 114.) 23

Finally, Headley testified that he worked on the production of Public Service

24 Announcements (“PSAs”) and videos on behalf of certain affiliated, not-for-profit, 25 non-Church organizations, as well as on a series of PSAs called “The Navigator.” 26 Golden Era indeed sometimes produces PSAs for public audiences and videos to be 27 shown at Scientology events on behalf of several other non-profit, tax-exempt 28 organizations engaged in programs to combat drug addiction, illiteracy, 0047/21051-004 Current/15661533v1

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1 delinquency, psychiatric abuses, and to promote human rights. These church2 sponsored charities carry on programs that further the mission and purpose of the 3 Scientology religion, as stated in the writings of L. Ron Hubbard. They are staffed 4 mostly by Scientologists, including, in some instances, Sea Org members. By 5 producing materials to support such non-profit organizations, Golden Era certainly 6 is not engaging in ordinary commercial activities constituting an “enterprise”; in 7 fact, it is furthering the goals and purposes of the Scientology religion, in the same 8 manner as does any church that encourages its parishioners to contribute time or 9 money to church-sponsored charities. Finally, “The Navigator” PSAs provided a 110 800 number to call for referral to a local Scientology church. (SGI, Nos. 110-111.) 11

As CSI and Golden Era were not engaged in commercial activities or

12 activities that competed with any business enterprises, they were not an “enterprise” 13 or an “employer” in whole or in part, and hence were not subject either to the FLSA 14 or California Labor Code. At minimum, Headley has failed to demonstrate the 15 absence of significant factual disputes, thus making summary adjudication 16 improper. 17 IV.

HEADLEY WAS A MEMBER OF A RELIGIOUS ORDER AND HIS

18

DUTIES PLACED HIM WITHIN THE MINISTERIAL EXCEPTION

19

We have shown extensively, ante, that Headley, as a member of a religious

20 order, the Sea Org, performed religious functions whose purpose was to further the 21 dissemination of the Scientology religion both to existing Scientologists and to non22 Scientologists, pursuant to the Scientology religion’s evangelical goal to “Clear the 23 Planet.” Headley’s own testimony makes this abundantly clear. For example: 24 ·

When Headley joined the Sea Org, he acknowledged that he was joining a

25

religious order to aid the Church in its mission to “clear” the planet (SGI,

26

Nos. 76, 79, 82); membership in the Sea Org had (and has) the attributes

27

traditionally associated with membership in a religious order: Headley and

28

his colleagues took solemn vows of religious service; were housed in CSI-

0047/21051-004 Current/15661533v1

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1

supplied living units; wore distinctive uniforms; were expected to devote at

2

least two and one-half hours each day to religious study or participation in

3

ritual; and volunteered with no expectation of compensation but were

4

provided with food, shelter and a modest stipend to cover other necessities.

5

(SGI, Nos. 3, 34-38);

6 ·

By his own admission, the “gamut” of Headley’s activities consisted of

7

“creating films, . . . copying and production of lectures by L. Ron Hubbard,

8

and packaging lectures by L. Ron Hubbard, and then overseeing as a producer

9

the creation of films, technical films, event films, event videos, lectures, and

10

E-meters,” as well as “making films for International Scientology events.”

11

(Id., Nos. 87-88, 114);

12 ·

In addition, Headley helped produce the audio and video systems used by

13

local Scientology churches to play such films, CDs, and DVDs for current

14

and prospective Scientologists. (Id., Nos. 104-105.)

15

According to Headley, “[a]ny ‘religious order’ argument is spin without a

16 proper factual or legal basis and is simply irrelevant to the duty to pay employees 17 proper wages.” (Pl.’s Mem. at 13:1.) He can so argue only by ignoring the cases. 18 As demonstrated above, neither state nor federal law regulates the wages and hours 19 of members of a religious order whose “primary duties” are non-secular. In fact, 20 cases involving “members of religious orders suing in regard to their relationship in 21 the order” are among the “relatively easy cases where a court can be certain of the 22 applicability of the ministerial exception as a matter of law based on the very nature 23 of the plaintiff’s job . . . .” Hope, 119 Cal. App. 4th at 735, 736 (citing Rosati v. 24 Toledo, Ohio Catholic Diocese, 233 F. Supp. 2d 917 (N.D. Ohio 2002) (novitiate 25 released from order because she had breast cancer)); Turner v. Church of Jesus 26 Christ, 18 S.W.3d 877 (Tex. App. 2000) (termination of Mormon missionary 27 because of illness). 28 0047/21051-004 Current/15661533v1

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Finally, Headley’s suggestion that the ministerial exception could apply only

2 if Headley were “preaching the gospel of L. Ron Hubbard” (Pl.’s Mem. at 13:3-4) is 3 also wrong as a matter of law. As demonstrated above, the exception has been 4 broadly applied to those whose primary duties, like Headley’s, “consist[ed] of 5 teaching, spreading the faith, or supervision or participation in religious ritual and 6 worship.” Roman Catholic Diocese of Raleigh, 213 F.3d at 803 (emphasis added). 7 Evangelizing activities can take many forms, including the production of the media 8 of which Scientology makes heavy use to fulfill its mission to disseminate its faith 9 and increase its membership. While this issue will later be ripe for determination on 10 CSI’s motion for summary judgment, at this juncture the existence of numerous 11 material, factual disputes renders summary judgment inappropriate. 12 13

CONCLUSION For all the foregoing reasons, Headley’s motion should be denied.

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DATED: September 4, 2009

Respectfully Submitted, MOXON & KOBRIN

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-andRABINOWITZ, BOUDIN, STANDARD, KRINSKY & LIEBERMAN, P.C.

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– and – PROSKAUER ROSE LLP

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By:

/s/ Harold M. Brody Attorneys for Defendant, CHURCH OF SCIENTOLOGY INTERNATIONAL

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