RELIGIOUS TECHNOLOGY CENTER, CHURCH OF SCIENTOLOGY INTERNATIONAL, INC., et al.,
Plaintiffs-Appellants,
v.
Robin SCOTT, et al., Defendants-Appellees.
No. 87-5766.
United States Court of Appeals,
Ninth Circuit.
Argued and Submitted Sept. 16, 1988.
Decided March 10, 1989.
Exclusive licensee and church brought action against alleged copyright
infringers that used allegedly infringing documents in their church and
religious practice. Licensee and church moved for preliminary injunction. The
District Court for the Central District of California, 660 F.Supp. 515,
Mariana R. Pfaelzer, J., denied motion and church appealed. The Court of
Appeals, William A. Norris, Circuit Judge, held that prior determination that
church's scriptures did not qualify as trade secrets did not establish law of
the case.
Reversed and remanded.
Cynthia Holcomb Hall, Circuit Judge, dissented and filed opinion.
[1] FEDERAL COURTS
District court's denial of temporary restraining order and order to show a
cause was appealable, insofar as denial was after a nonevidentiary
adversary hearing at which all parties were represented, making denial
tantamount to denial of a preliminary injunction. 28 U.S.C.A. s 1292(a)(1).
[2] FEDERAL COURTS
Court of Appeals' prior determination that church scriptures did not qualify as
trade secrets under California law, because church did not claim that
scriptures gave it a commercial advantage over competitors, did not establish
the law of the case as to whether church could be entitled to a preliminary
injunction once it claimed that scriptures had economic value or on any other
state law theories advanced against rival church.
*1307 Earle C. Cooley, Cooley, Manion, Moore & Jones, Boston, Mass., for
plaintiffs-appellants.
Jerold Fagelbaum, Shea & Gould, Los Angeles, Cal. and Gary M. Bright, Bright &
Powell, Carpinteria, Cal., for defendants-appellees.
Appeal from the United States District Court for the Central District of
California.
Before NORRIS, HALL and KOZINSKI, Circuit Judges.
WILLIAM A. NORRIS, Circuit Judge:
This appeal arises out of litigation initiated by the Church of
Scientology [FN1] ("Church") against the Church of the New Civilization [FN2]
("New Church"). The focus of the litigation is certain scriptural material
allegedly stolen from the Church by the New Church. [FN3] Early in the
litigation, the district court granted the Church a preliminary injunction
restraining the New Church from using the disputed scriptures. That injunction
was vacated on appeal. Religious Technology Center v. Wollersheim, 796 F.2d
1076, 1084, 1089-91 (9th Cir.1986), ("Wollersheim "), cert. denied, 479
U.S. 1103, 107 S.Ct. 1336, 94 L.Ed.2d 187 (1987). The Church then filed a
second application for interlocutory relief, which was denied by the district
court on the ground that it was foreclosed by Wollersheim. The Church now
appeals that denial. We reverse and remand to the district court for further
proceedings in light of this opinion.
FN1. Formally, the plaintiffs and appellants are Religious Technology
Center, Church of Scientology International, Inc. and Church of Scientology
California, which are related entities constituting the Church of
Scientology founded by L. Ron Hubbard. For convenience, we refer to the
plaintiffs/appellants collectively as the Church.
FN2. Defendants and appellees are the Church of the New Civilization and
various individuals involved with the Church of the New Civilization. For
convenience, we refer to the defendants/appellees collectively as the New
Church.
FN3. See generally, Religious Technology Center v. Wollersheim, 796
F.2d 1076, 1077-79 (9th Cir.1986), cert. denied, 479 U.S. 1103, 107
S.Ct. 1336, 94 L.Ed.2d 187 (1987) for discussion of the underlying facts in
this litigation.
I
BACKGROUND
In its complaint, the Church stated claims against the New Church for
racketeering under the Racketeer Influenced and Corrupt Organizations Act
(18 U.S.C. s 1962(c)) ("RICO"), trademark infringement under federal and
common law, unfair competition, receipt of stolen property, and various other
state law claims. The Church sought damages as well as injunctive relief to
prevent the New Church from disseminating the contents of scriptural materials
which the Church claimed had been stolen from its Denmark offices by adherents
of the New Church.
In an Ex Parte Application for Temporary Restraining Order ("TRO") and Order
to Show Cause ("OSC"), the Church sought interlocutory relief on the ground
that its scriptures were trade secrets and that it would suffer irreparable
harm if its trade secrets were disseminated by another organization such as the
New Church. The Church did not characterize the alleged harm as commercial or
economic, but rather characterized it as "spiritual" harm. Essentially, the
Church argued that its adherents *1308 would suffer irreparable spiritual
injury if the New Church were free to disseminate the disputed materials. See
Wollersheim, 796 F.2d at 1079.
The district court granted the Church a TRO and later extended it to a
preliminary injunction, prohibiting the New Church from "using, distributing,
exhibiting or in any way publicly revealing" the scriptures. Id. The
preliminary injunction was based on the district court's finding that the
scriptures were trade secrets and entitled to protection under both RICO and
California law.
On appeal, we vacated the preliminary injunction. We held that the scriptures
did not qualify as trade secrets under California law because of the failure of
the Church to claim that the scriptures had any commercial value. We rejected
the Church's argument that the scriptures qualified as trade secrets because of
their spiritual value. Id. at 1090-91. [FN4]
FN4. In Wollersheim, we also held that the Church's RICO claim could
not provide the basis for injunctive relief. Id. at 1077.
The Church returned to the district court and filed a second Ex Parte
Application for Temporary Restraining Order and Order to Show Cause, again
asking the court to restrain the New Church from using the scriptural
materials. This time, the Church argued that the scriptures qualified as trade
secrets because they had economic value. Specifically, the Church contended
that if the New Church was not enjoined from using the scriptures,
"[p]laintiffs will be forever at a loss to protect the confidential nature and
resultant economic value of these materials. Defendant will obtain an economic
advantage that they would not otherwise possess which will be used to divert
parishioners, the value and goodwill of which cannot be monetarily measured for
plaintiffs." Excerpt of Record ("E.R."), Vol. 1:347 at 29. (Emphasis added.)
After a hearing, the district court denied the application "solely based upon
the Ninth Circuit's ... decision [in Wollersheim ]." Id. Vol. 3:421 at
2.
II
JURISDICTION
This court may hear appeals from interlocutory orders of the district
court which grant, continue, modify, refuse or dissolve injunctions. 28
U.S.C. s 1292(a)(1). [FN5] Ordinarily, an appeal does not lie from the denial
of an application for a temporary restraining order; such appeals are
considered premature and are disallowed "[i]n the interests of avoiding
uneconomical piecemeal appellate review." Kimball v. Commandant Twelfth
Naval District, 423 F.2d 88, 89 (9th Cir.1970).
FN5. 28 U.S.C. s 1292(a)(1) provides:
"[T]he courts of appeals shall have jurisdiction of appeals from: (1)
Interlocutory orders of the district courts of the United States, the
United States District Court for the District of the Canal Zone, the
District Court of Guam, and the District Court of the Virgin Islands, or of
the judges thereof, granting, continuing, modifying, refusing or dissolving
injunctions, or refusing to dissolve or modify injunctions, except where a
direct review may be had in the Supreme Court; ..."
We have recognized, however, that a denial of a TRO may be appealed if the
circumstances render the denial "tantamount to the denial of a preliminary
injunction." Environmental Defense Fund, Inc. v. Andrus, 625 F.2d 861, 862
(9th Cir.1980). See also Kimball, 423 F.2d at 89. In Andrus we held the
denial of the TRO was tantamount to the denial of a preliminary injunction
because of the presence of two factors: the denial of the TRO followed a "full
adversary hearing" and "in the absence of review, the appellants would be
effectively foreclosed from pursuing further interlocutory relief." Id.
[1] The rationale of Andrus applies with equal force to this appeal.
Here the district court denied the Church's renewed application for a TRO and
an OSC following a hearing at which all parties were represented. The
transcript of the hearing and the court's written order denying the application
make it unmistakably clear that the order was tantamount to a denial of a
preliminary injunction. During the hearing, the district judge was emphatic in
her *1309 view that our decision in Wollersheim foreclosed any
interlocutory relief on the grounds advanced in the Church's new application:
"I don't believe that the appellate court feels that in this case an injunction
is appropriate.... I would say that we don't have anything much to talk
about." Supp.E.R. at 6-7. In her written order she denied the application
"solely based upon the Ninth Circuit's August 1986 decision...." E.R.Vol.
3:421 at 2. The futility of any further hearing was thus patent; there was
nothing left to talk about. In these circumstances, we hold, as we did in
Andrus, that the denial of the TRO and the OSC was "tantamount to the denial
of a preliminary injunction." 625 F.2d at 862. Accordingly, the district
court's order is appealable under 28 U.S.C. s 1292(a)(1). [FN6]
FN6. Arguably, one could read Andrus as laying down a black-letter rule
that "a full adversary hearing" is a necessary, if not a sufficient,
condition to the appealability of a denial of a TRO. We reject this wooden
reading of Andrus. The teaching of Andrus is that a denial of a TRO
is appealable if the circumstances make it unmistakably clear that the
denial "is tantamount to the denial of a preliminary injunction." There
the circumstances included "a full adversary hearing," which presumably
means an evidentiary hearing; here the circumstances included a non-
evidentiary adversary hearing at which all parties were represented. The
record below makes it clear that an evidentiary hearing would have been
pointless; in light of the district judge's ruling that Wollersheim
barred all interlocutory relief, it would have been a waste of party and
judicial resources to have conducted an evidentiary hearing.
The New Church argues that Granny Goose Foods, Inc. v. Brotherhood of
Teamsters, 415 U.S. 423, 433 n. 7, 94 S.Ct. 1113, 1121 n. 7, 39 L.Ed.2d
435 (1974) forecloses our treating this as an appeal from an order denying
a preliminary injunction. We disagree. Granny Goose is simply
inapposite. That case had nothing to do with the appealability of a denial
of a TRO or any other question of appellate jurisdiction. It stands for
the unremarkable proposition that a TRO issued by a state court remains in
effect after removal to federal court only so long as it would under state
law, notwithstanding the literal requirement of 28 U.S.C. s 1450 that
all orders issued prior to removal remain in effect "until dissolved or
modified by the district court." We fail to see how the holding of
Granny Goose has any bearing on the issue of the appealability of the
denial of the TRO in this case. However, we do agree with the New Church's
apparent concern that we could not enjoin the use of the scriptures without
giving the New Church a meaningful opportunity to file opposing papers and
present evidence in a full adversary hearing. Whether this court may grant
certain relief, however, is quite a different question from whether we have
jurisdiction in the first place to review a TRO that is tantamount to a
denial of a preliminary injunction.
III
LAW OF THE CASE
The denial of a preliminary injunction is subject to a limited standard of
review. Colorado River Indian Tribes v. Town of Parker, 776 F.2d 846, 849
(9th Cir.1985). We reverse the denial only when the district court abused its
discretion or based its decision on an erroneous legal standard or on clearly
erroneous findings of fact. Id. In the instant case, the district judge
explained that she was basing her decision to deny the application for TRO and
OSC--which we treat as the denial of a preliminary injunction--solely on our
decision in Wollersheim. She interpreted Wollersheim as foreclosing
interlocutory relief on any of the grounds raised by the Church in its second
application, even though the Church advanced new state law theories and for the
first time offered evidence that the scriptures in fact had economic value. Of
particular importance to the instant appeal, the district court apparently
interpreted Wollersheim as holding that the religious scriptures could not
qualify as trade secrets under California law, regardless of whether they had
commercial value.
[2] With all respect, we believe that the district court read more
into Wollersheim than we intended. Putting aside that part of the opinion
which addressed the Church's claim to injunctive relief under RICO, the
remainder of the opinion was fairly narrowly drawn. The only question before
the court was whether a religious scripture could qualify as a trade secret
under California law if it conferred a spiritual, as opposed to an economic,
advantage on its owner. We determined that California law did not recognize
information as a trade secret unless it conferred on its owner an actual
economic advantage over competitors. *1310 796 F.2d at 1091. Because
the Church made no claim that the scriptures gave it a commercial advantage
over its competitors, we held that the scriptures did not qualify as trade
secrets under California law. Wollersheim turned, therefore, on the absence
of any claim of economic advantage at the preliminary injunction stage. While
we expressed doubts about whether the Church could allege the competitive
market advantage required without "rais[ing] grave doubts about its claim as a
religion and a not-for-profit corporation," id., we did not decide one way
or another whether the scriptures could qualify as trade secrets should the
Church allege and prove economic advantage. Nor did we express any opinion as
to whether the Church could be entitled to a preliminary injunction under any
of the other state law theories advanced in its first application for
interlocutory relief. Thus, Wollersheim did not establish the law of the
case on either of these questions.
Accordingly, we REVERSE the district court's order denying the TRO and OSC and
REMAND to the district court for further proceedings in light of this opinion.
In so doing, we express no view as to whether the district court should
exercise its discretion and decline to consider this second application for
interlocutory relief on grounds that the Church is needlessly burdening the
courts with repetitive applications for the same relief.
CYNTHIA HOLCOMB HALL, Circuit Judge, dissenting:
I agree that we have jurisdiction to hear this appeal and that the district
court erred in construing our decision in Wollersheim I so broadly. I
cannot join the majority opinion, however, because a remand to the district
court for further evaluation of the appropriateness of preliminary relief
constitutes an enormous waste of judicial resources.
In Wollersheim I, the Church of Scientology (the "Church") sought and
obtained a preliminary injunction, based in part on its claim that the Church
of the New Civilization (the "New Church") stole its protected trade secrets.
The Church alleged that New Church adherents took certain scriptural materials
from the Church when they left to form the New Church. The Church, however,
did not characterize the alleged harm as commercial or economic. Instead, the
Church alleged only that its followers would suffer spiritual injury if the New
Church was permitted to retain and use the scriptures. On appeal, we held that
the Church's failure to allege or offer proof that the scriptures had economic
value meant that the scriptures did not qualify as trade secrets under
California law.
Following our decision, the Church returned to the district court to
again seek an injunction against the New Church's use and distribution of the
disputed scriptures. This time, however, the Church alleged that the
scriptures had economic value: "Plaintiffs will be forever at a loss to
protect the confidential nature and resultant economic value of these
materials. Defendant will obtain an economic advantage that they would not
otherwise possess which will be used to divert parishioners, the value and
goodwill of which cannot be monetarily measured by plaintiffs." The district
court denied this second request for preliminary injunctive relief, construing
our decision in Wollersheim I as precluding an injunction before a final
hearing on the merits.
The Church made a tactical choice not to allege in its original application
that the scriptures had an economic value. The Church cannot now avoid the
consequences of that choice by burdening the district court with a second
application for preliminary relief, and this court with a second interlocutory
appeal. Where the Church easily could have alleged in its initial application
that the scriptures had an economic value, we should hold that it is estopped
from appealing the denial of its subsequent application for preliminary relief
under California trade secrets law. [FN1]
FN1. The Church alleged several other state law theories of recovery in
this and its prior application for preliminary injunctive relief. We did
not specifically analyze these other claims in Wollersheim I. During
oral argument in the present case, however, counsel for the Church, with
commendable candor, acknowledged that the only argument made before this
court to support the first injunction was that the scriptures conferred a
spiritual advantage on the Church and its followers. The courts need not
be at the Church's beck and call to now analyze the relevance, if any, of
the Church's new allegations of commercial advantage to these other state
law theories.
*1311 The doctrine of judicial estoppel, sometimes referred to as the
doctrine of preclusion of inconsistent positions, is invoked to prevent a party
from changing its position over the course of judicial proceedings when such
positional changes have an adverse impact on the judicial process. See 1B
Moore's Federal Practice P .405[8], at 238-42 (2d Ed.1988). "The policies
underlying preclusion of inconsistent positions are 'general consideration[s]
of the orderly administration of justice and regard for the dignity of judicial
proceedings.' " Arizona v. Shamrock Foods Co., 729 F.2d 1208, 1215 (9th
Cir.1984), cert. denied, 469 U.S. 1197, 105 S.Ct. 980, 83 L.Ed.2d 982
(1985) (citations omitted). Judicial estoppel is "intended to protect against
a litigant playing 'fast and loose with the courts.' " Rockwell
International Corp. v. Hanford Atomic Metal Trades Council, 851 F.2d 1208,
1210 (9th Cir.1988) (citations omitted). Because it is intended to protect the
integrity of the judicial process, it is an equitable doctrine invoked by a
court at its discretion.
I recognize that this is not the prototypical case for invoking judicial
estoppel. Judicial estoppel is most commonly applied to bar a party from
making a factual assertion in a legal proceeding which directly contradicts an
earlier assertion made in the same proceeding or a prior one. See generally
Note, Judicial Estoppel: The Refurbishing of a Judicial Shield, 55
Geo.Wash.L.Rev. 409, 410-12 (1987); Comment, Precluding Inconsistent
Statements: The Doctrine of Judicial Estoppel, 80 Nw.U.L.Rev. 1244 (1986)
[FN2]. Nevertheless, I find the policies underlying the doctrine of judicial
estoppel to make this an equally appropriate case for its application.
FN2. Finley v. Kesling, 105 Ill.App.3d 1, 60 Ill.Dec. 874, 433 N.E.2d
1112 (1982), is cited by the latter article as a paradigmatic case for the
invocation of judicial estoppel. In Finley, a declaratory action filed
by the former owner of the Oakland Athletics baseball team to resolve
ownership interests in the family corporation, the plaintiff asserted that
he was the beneficial owner of 71% of the stock. The court estopped him
from taking that position because, in a divorce action eight years before,
he had testified under oath that he owned only 31% of the stock and that
his wife and children owned the rest. Finley, 105 Ill.App.3d at 10, 60
Ill.Dec. at 881, 433 N.E.2d at 1119.
Considerable judicial resources were expended in resolving the novel
question of state law presented by the Church's original argument that
information could be a trade secret if it conferred a spiritual advantage on
its creator. But instead of laying the question of interlocutory relief to
rest, our decision in Wollersheim I that California law protects trade
secrets only if they have commercial value, simply prompted the Church to start
the process all over again by arguing in a new application for a TRO that the
scriptures did have commercial value after all. As a result of the Church's
actions in pursuing two successive applications for injunctive relief, instead
of a single application based upon alternative theories of spiritual and
commercial value, there is no question but that the courts as well as the
defendants have been needlessly burdened.
The integrity of the judicial process would be seriously undermined if every
litigant could compel the courts to hear and decide repetitive requests for the
identical relief. The Church should not be permitted to use the courts as a
laboratory in which to experiment. The doctrine of judicial estoppel was
fashioned to prevent just this sort of litigation strategy which plays fast and
loose with the judicial process.