Joint Rule 26 Report

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BARRY VAN SICKLE - BAR NO. 98645 1079 Sunrise Avenue Suite B-315 Roseville, CA 95661 Telephone (916) 549-8784 E-Mail [email protected] Attorney for Plaintiff CLAIRE HEADLEY

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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CLAIRE HEADLEY,

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Plaintiff,

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vs. CHURCH OF SCIENTOLOGY INTERNATIONAL, a corporate entity, RELIGIOUS TECHNOLOGY CENTER, a corporate entity AND DOES 1 - 20

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Defendants.

CV 09-03987 DSF (MANx) JOINT RULE 26(F) REPORT DATE October 19, 2009 TIME 1100 am PLACE Roybal Federal Building, Courtroom 840 ASSIGNED TO THE HONORABLE JUDGE DALE S. FISCHER

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A.

STATEMENT OF THE CASE Plaintiff’s operative Complaint alleges three causes of action. The

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Complaint was filed in state court and initially based primarily on California law.

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The Complaint includes an allegation that defendants coerced and intimidated

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Plaintiff into providing labor and services in violation of 18 U.S.C. 1589. This

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created federal jurisdiction. Defendants removed the case to this court.

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The three present causes of action are for restitution of wages under

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authority of state unfair business practice law, a request for injunctive relief

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prohibiting coerced abortions by female workers, and the forced labor claim for

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violations of the federal human trafficking laws and, in particular, the forced

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labor statute(18 UCS 1589).

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Plaintiff submits that the forced labor allegations will present questions of

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fact for a jury. The definition of “serious harm” at 18 USC 1589 (c) (2) is

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particularly pertinent to Plaintiff’s allegations, although Plaintiff submits that all

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four means of illegally obtaining labor set forth in section 1589, numbers 1-4 are

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used by defendants and were used to illegally obtain labor or services from

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Plaintiff.

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Plaintiff claims that she was an employee of defendants and was therefore

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entitled to be paid minimum wage and overtime for her work for defendants. Both

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defendants controlled Plaintiff’s hours, wages, and working conditions. That is

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sufficient to create an employee/employer relationship under California state

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labor laws.

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The Fair Standards Labor Act (FSLA) presents an alternative and

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additional requirement that defendant pay employees minimum wage and

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overtime. The application of the federal law, FSLA, is somewhat more

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complicated than application of state labor law.

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The FSLA covers persons engaged in commerce and persons who work for an employer engaged in commerce. Coverage of persons who directly work in 2 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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commerce or production of goods for commerce is called “individual” coverage.

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Coverage of workers who work for an enterprise involved in commerce is called

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“enterprise” coverage. See, e.g. 29 CFR 776.0, 776.3, 776.8, 776.9, 776.11, and

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776.14.

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Plaintiff contends that she qualifies for coverage as an employee of the

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Scientology enterprise, and both defendants in particular, under state,

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“individual” and ‘enterprise” coverage. The law provides three alternative

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grounds for finding Plaintiff entitled to the protection of labor laws. Plaintiff

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alleges that she qualifies under all three grounds; however, she only needs to

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qualify under one of the three types of available coverage to prove entitlement to

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minimum wage and overtime. See also, Bowrin v. Catholic Guardian Soc., 417 F.

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Supp. 449, 457-8, 465, & 467 (S.D.N.Y. 2006).

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Plaintiff contends that, under the state and federal labor laws as properly

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applied, the nature of defendant’s business, and the entities included within the

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Scientology enterprise, are only applicable to “enterprise” coverage. However,

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Plaintiff further contends that the Scientology enterprise, including both

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defendants as members, qualifies as an “enterprise” under the federal labor laws

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Therefore, Plaintiff contends that she qualifies for ‘enterprise’ coverage as well as

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state and ‘individual” coverage.

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Plaintiff contends that the case most directly on point is Mitchell v. Pilgrim

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Holiness Church Corp., 210 F.2d.879 (7th Cir. 1954). Mitchell is apparently the

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source of references in regulations to the rule that a non-profit entity is subject to

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the federal labor laws if it engages in “commerce”. The commerce in Mitchell

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was the operation of a printing house and the distribution in interstate commerce

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of religious materials. This is essentially what CSI and RTC was doing in Golden

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Era Productions.

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Further, Plaintiff contends that the Scientology enterprise, including both defendants, have the common business purpose of promoting, selling, and 3 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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stopping competition form selling, the intellectual property of L. Ron Hubbard.

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RTC and CSI have claimed in litigation that the trademarks, copyrights and trade

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secrets of Scientology have commercial value. Scientology is not a charitable

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organization. The Scientology enterprise sells services and training based on the

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writings of its founder. It collects license fees and other income for allowing

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some organizations to use Hubbard works while preventing other organizations

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and persons from using Hubbard’s works. RTC and CSI essentially have a

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monopoly on certain Hubbard trade marks, copyrights, and purported trade

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secrets. It generates income by conducting interstate “commerce” in the sale or

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licensing of Hubbard works. The Scientology enterprise uses “lower level”

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materials to promote the sale of more expensive “Advanced Technologies” and

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“confidential” teachings of Hubbard. Millions of dollars are generated in

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connection with this business. Plaintiff contends that there is much more to the

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story on the business aspect of scientology, however, just the basics show that it

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is a commercial enterprise. Accordingly, it must comply with labor laws.

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Plaintiff anticipates that defendants will claim waiver and religious

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defenses such as a minister exception. Plaintiff signed her first contract as a

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minor, was under coercion and intimidation, and had labor law rights that could

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not legally be waived. Further, Plaintiff was a clerk and office worker with little

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or no contact with the public or public Scientologists. Plaintiff’s work was not

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ministerial in nature or function.

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Plaintiff was coerced into having two abortions to keep her job and avoid

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punishment. Plaintiff was threatened with serious harm if she did not obey RTC

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and CSI. It is RTC and its purported Chairman of the Board—COB-- who puts

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the fear into workers such as Plaintiff.

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The leader of the Scientology enterprise was, and is, David Miscavige.

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While he holds the title of COB of RTC, he reports to no board or person. Mr.

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Miscavige directly, and indirectly through RTC, is the real boss of RTC, CSI, and 4 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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the entire Scientology enterprise. Mr. Miscavige, and his business RTC,

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ultimately controls wages, hours, working conditions, and punishments used to

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keep workers such as Plaintiff under his control.

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B.

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SUBJECT MATTER JURISDICTION The court has subject matter jurisdiction by reason of the forced labor

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claim. See 18 USC 1595(a). The forced labor claim is related to the minimum

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wage claim as both relate to labor and services furnished by Plaintiff to the

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scientology enterprise under what Plaintiff claims to be illegal conditions.

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Therefore, the court has supplemental jurisdiction over the state law claims.

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C.

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LEGAL ISSUES 1. Whether California labor law applies and mandates payment of

minimum wage and overtime to Plaintiff for the work in question.

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2. Whether Plaintiff qualifies for “individual” coverage of the FSLA.

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3. Whether Plaintiff qualifies for “enterprise’ coverage of the FSLA.

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4. Whether Plaintiff may recover punitive damages and/or emotional

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distress damages for forced labor violations.

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5. Whether the underlying state cause of action under Business & Profession Code 17200 et. seq. accrues upon discovery as under current state law.

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6. Whether defendants may violate labor laws and avoid responsibility by claiming First Amendment protections.

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7. Whether the court may enjoin defendants’ practice of forcing pregnant workers to have abortions.

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8. Whether Plaintiff may waive her rights to minimum and overtime wages.

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9. Whether restitution recovery for unjust enrichment and labor code

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violations is limited to contract damages, or is measured by a different standard or

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rule.

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The case includes legal issues and disputes on what is relevant. Plaintiff

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submits that the Sea Org is irrelevant to the case. Plaintiff did not work for the 5 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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Sea Org. Further, the true nature of the Sea Org is disputed. If the Sea Org

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becomes relevant, Plaintiff will attempt to show the true nature, purpose, history,

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and activity of the Sea Org.

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Similarly, Plaintiff contends that not only is the business nature of RTC

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and CSI relevant, inurement to the boss is also relevant. This would include, in

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Plaintiff’s view, that the driving goal is to make money and that the wealth of the

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Scientology enterprise inures to the benefit of its sole leader, David Miscavige.

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Plaintiff submits that the financial power, significant salary, hidden income, and

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benefits of running the Scientology empire show the commercial nature of the

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enterprise and that it is the personal business of Mr. Miscavige. Defendant

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presumably disagrees.

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D.

PARTIES, EVIDENCE, ETC.:

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The parties are Plaintiff Claire Headley and defendants RTC and CSI. The

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potential percipient witnesses are too numerous to list. That could include all of

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the persons who worked with Plaintiff at Gold Base. Plaintiff submits that there

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are 15-20 percipient witnesses of importance and that the testimony of several

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such witnesses would be cumulative.

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Key percipient witnesses would include Plaintiff in these cases, former

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executives who have left the group and are willing to speak out such as Marty

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Rathbun, and witnesses such as Maureen Boustead who were physically

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restrained when they tried to escape from Gold Base.

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Key documents would include documents in which defendants refer to

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Plaintiff and other as ‘employees”, documents that refer to workers having

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employment contracts, and LRH writings that show the business nature of

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Scientology including the key directive of making money and selling services,

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references to pay by LRH, and similar documents. Plaintiff have not conducted an

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exhaustive search for admissions or other useful documents in the LRH or

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Scientology library. 6 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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E.

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DAMAGES Plaintiff seeks full damages at the reasonable value of her services as

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authorized by the forced labor statute or, alternatively, restitution of at least four

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years of back pay at minimum wage and overtime rate, with interest under the

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Business & Professions 17200 claim. Plaintiff also seeks interest, punitive

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damages for forced labor and attorney’s fees. Using a $10 an hour reasonable

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value for services rendered, 100 hour weeks, and the California overtime rule,

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which requires double time after 12 hours and for work in seven days out of

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seven, puts Plaintiff wage claim in the approximate amount of $100,000 per year

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before considering interest, penalties or other damages. Plaintiff worked for

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defendants for over 10 years. Accordingly, just back pay at reasonable rates

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recoverable under 18 USC section 1595 puts damages in the low seven figures.

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F.

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INSURANCE None

G.

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MOTIONS Plaintiff does not presently plan on moving to add parties, amend

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pleadings, or transfer venue. It should be noted that the court has not ruled on

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defendants’ motions to dismiss and strike parts of the complaint. Plaintiff may

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seek to make adjustments in response to the courts’ ruling on submitted motions.

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The Plaintiff does expect that discovery motions will be needed to address

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defendants’ anticipated objections to discovery demands.

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H.

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MANUAL FOR COMPLEX LITIGATION Not applicable

I.

STATUS OF DISCOVERY Plaintiff has been deposed one day and two more days are scheduled in

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early November. Plaintiff’s husband, Plaintiff in a related case, has been deposed

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for two days in the state court action and one day in this action. Plaintiff

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responded to numerous document requests prior to removal of this case. 7 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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Plaintiff has requested production of defendants’ entire file on Plaintiff.

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Defendant has produced documents and withheld documents. Defendant CSI has

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refused to produce certain types of documents on claim of religious privilege.

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J.

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DISCOVERY PLAN Plaintiff plans to take the depositions of David Miscavige, Shelly

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Miscavige, and the depositions of witnesses disclosed by defendant or suggested

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by documents produced in discovery.

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Plaintiff will seek financial records of defendants including records of

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sales, license fees, trade secret agreements, contract work, salaries, and inurement

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to David Miscavige. Plaintiff will also seek documentation of the license

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agreements and similar documents under which RTC and CSI control access to

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the trademarks, copyrights and purported trade secrets of L. Ron Hubbard.

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Plaintiff will also seek all documents evidencing an employer/employee

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relationship between the scientology enterprise and its workers both collectively

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and individually.

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K.

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DISCOVERY CUT-OFF July 1, 2010.

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EXPERT DISCOVERY

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Plaintiff has not made a final decision on using an expert. Plaintiff

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contends that an expert is not essential but may assist the jury in understanding

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the emotional and psychological effects of what Plaintiff experienced as a result

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of their experiences and observations while working for the Scientology

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enterprise. Plaintiff requests that expert disclosures be deferred.

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M.

DISPOSITIVE MOTIONS

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Plaintiff expects to bring motions on the application of the labor laws, and

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to dispose of affirmative defenses such as waiver, minister exception, and lack of

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subject matter jurisdiction should the Answer in this case be identical to the

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answer in the related Marc Headley case. 8 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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N.

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SETTLEMENT There have been no settlement talks.

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TRIAL ESTIMATE

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Plaintiff anticipates calling approximately 10 witnesses and reasonably

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expects that the case will take four weeks for trial. Plaintiff requests a trial by

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jury.

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P.

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Barry Van Sickle for Plaintiff. Q.

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INDEPENDENT EXPERT OR MASTER Not applicable

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TRIAL COUNSEL

TIMETABLE Attached

S.

OTHER ISSUES

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This case has unusual issues. There are now a large number of former

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workers who have potentially relevant evidence, however, an unknown number of

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the former workers, and potential witnesses, are afraid to speak out. Some have

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signed “confidentiality’ agreements with penalty clauses labeled liquidated

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damage agreements, and believe that they can be sued for telling the truth about

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their scientology adventure. (Plaintiff was forced to sign such an agreement when

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she was demoted from RTC.) There are potential witnesses who have been

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essentially bought off with forgiveness of purported debt known as “freeloader

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debt. At least one witness is not in this suit because of threats made against his

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family relationships. There are witnesses who reasonably believe they will be

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declared suppressive persons and labeled “fair game” if they testify for Plaintiff.

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Plaintiff contends that defendants should be forced to disclose the persons

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involved in this activity, the identity of potential witnesses and claimants

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contacted the identity of all who signed agreements or waivers of this nature, and

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all of the documents and purported confidentiality agreements generated by this 9 PLAINTIFF’S OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS

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inappropriate activity. Plaintiff may then move for relief and seek an order that

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will assure witnesses that they cannot be penalized thousands of dollars for

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serving as witnesses in this case.

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T.

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MAGISTRATE JUDGES The parties have not agreed on this issue.

October 9, 2009

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