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[CT 8243]

Law Offices
HUB LAW OFFICES
711 Sir Francis Drake Boulevard
San Anselmo, California 94960
(415) 258-0360

FORD GREENE, Bar # 107601

Attorney for Defendant
GERALD ARMSTRONG

 

[stamped]
FILED
SEP 18 1995
HOWARD HANSON
MARIN COUNTY CLERK
by J. Steele, Deputy
[signed]

 

SUPERIOR COURT OF THE STATE OF CALIFORNIA

FOR THE COUNTY OF MARIN

 

 

CHURCH OF SCIENTOLOGY INTERNATIONAL,
a California not-for-profit religious corporation,

Plaintiff,

vs.

GERALD ARMSTRONG; MICHAEL WALTON;
THE GERALD ARMSTRONG CORPORATION,
a California for-profit
corporation; DOES 1 through 100,
inclusive,

Defendants.


 

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No. 157 680

DEFENDANT'S OPPOSITION TO
MOTION FOR SUMMARY
ADJUDICATION ON THE THIRTEENTH,
SIXTEENTH, SEVENTEENTH, AND
NINETEENTH CAUSES OF ACTION

 

 

Date: September 29, 1995
Time: 9:00 a.m.
Dept: One (1)
Trial Date: None Set

 

 

 

   

 

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[CT 8244]

1. INTRODUCTION

With respect to Armstrong's opposition to the thirteenth, sixteenth, seventeenth and

nineteenth causes of action, Armstrong specifically adopts and incorporates all facts and legal

arguments set forth in his opposition to Scientology's motion for summary adjudication of the

twentieth cause of action.

II. STATEMENT OF FACTS

Prior to the execution of the settlement agreement in later 1986, Gerald Armstrong had been

the subject of the unrelenting application of Scientology's fair game policy. (Sep.St. Defendant's

Evidence ¶ 141) Armstrong had not subjected Scientology to fair game and did not have any such

policy. (Sep.St. Defendant's Evidence ¶ 142) Scientology contracted with Armstrong's former

counsel, Michael Flynn, to not represent or defend him in the event that Scientology continued to

attack Armstrong. (Sep.St. ¶ 143) The liquidated damages provision applied to over seventeen years

of Armstrong's life concerning which it was not possible for him to be silent. (Sep.St.¶ 44)

Although Scientology induced Armstrong to enter the agreement by promising to cease its fair game

activities, it had no intention of so doing. In fact, its true intention was to publish its own false

accounts of Armstrong's history. (Sep.St. ¶ 145) Immediately after the "settlement," Scientology

provided its account of Armstrong's history, and documents regarding that account, to the Los

Angeles Times and to the London Sunday Times. (Sep.St.¶ 46)

By virtue of paragraph 4-B of the settlement agreement Scientology was going to appeal

Judge Breckenridge's decision against it unopposed by Armstrong, which it did. Thus, through the

acts of Scientology and its lawyers at the time of the settlement, Armstrong's entire history which

was contained in the trial court record, became a public record in the court of appeal. (Sep.St.

Defendant's Evidence ¶ 47) Since Scientology maintained its appeal of judge Breckenridge's

decision, and concomitantly subjected Armstrong to further fair game actions, it fomented

controversy and the potential for further litigation. (Sep.St. ¶ 148)

Scientology was not damaged in any way monetarily by any statement made by Armstrong

prior to the settlement. (Sep.St. ¶ 49) There is no relationship between the actual damages

suffered by Scientology and the $50,000 liquidated damages provision. (Sep.St. ¶ 150) In its first

 

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[CT 8245]

amended complaint, Scientology sought $950,000 for a single letter written by Armstrong on

December 22, 1992 pursuant to the liquidated damages provision. (Sep.St. ¶ 75) In Scientology's

instant motion it claims that Armstrong spoke multiple times with anti- Scientology lawyer Graham E.

Berry, met with a cadre of other anti-Scientology witnesses, and discussed his experiences in

Scientology. Armstrong also provided two declarations to Mr. Berry. For this alleged misconduct

Scientology claims $50,000 in liquidated damages. (Sep.St. ¶ 76)

All of the money that Scientology has spent on litigation concerning Armstrong has been to

further its fair game goals in violation of Armstrong's basic human and civil rights, not on repairing

the "damage" that Armstrong has "done." (Sep.St. ¶ 51)

Before he signed the settlement, Armstrong saw the liquidated damages provision as wrong

and his attorney agreed. (Sep.St. ¶ 52-53) Armstrong's former attorney, Michael Flynn, cannot

testify on Armstrong's behalf because he fears Scientology's retaliation. (Sep.St. ¶ 54)

Nancy Rhodes, another one of Flynn's clients who participated in the " universal settlement,"

signed a settlement agreement for which she was paid $7,500. Her agreement includes a $50,000

liquidated damages provision. (Sep.St. ¶ 55-56) Flynn also told Ms. Rhodes that the agreement was

not enforceable. (Sep.St. ¶ 57-60)

Michael Douglas, another one of Flynn's clients who participated in the " universal

settlement," signed a settlement agreement for which he was paid $7,500. His agreement includes

a $50,000 liquidated damages provision. (Sep.St. ¶ 63-64)

In an agreement among Flynn and the multiple clients he represented in the "universal

settlement" no mention is made of any relationship between the money each was to receive and

the rights that each person was giving up, or how much damage each person could cause by speaking

out about Scientology. (Sep.St. ¶ 65)

At the time of settlement, Armstrong's bargaining power was not at all equal to Scientology.

(Sep.St. ¶ 67) Without ever seeing the agreement, Armstrong was flown from Boston to Los Angeles

where he was positioned as a deal breaker with respect to a multitude of other persons, also

represented by Flynn, that were part of the settlement. In addition, if Armstrong did not sign, fair

game would continue against him and the other settlement participants. (Sep.St. ¶ 68) At the time of

 

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[CT 8246]

settlement, Armstrong's net worth was zero while Scientology's worth was $500 million. (Sep.St. ¶

69) Before Armstrong arrived in Los Angeles, Mr. Flynn had signed an agreement with Scientology

promising not to represent Armstrong in the future which for practical purposes caused Armstrong

not to be represented. (Sep.St. ¶ 70) Scientology had millions of dollars and a formidable litigation

machine in place and operating which had compromised Armstrong's own attorney. (Sep.St. ¶ 71)

When Armstrong objected to the liquidated damages provision, Mr. Flynn told him that it was not

worth the paper it's printed on. (Sep.St. ¶ 72-73) If Flynn had told Armstrong that the liquidated

damages provision was valid and enforceable, Armstrong would not have signed the agreement.

(Sep.St. ¶ 74)

LEGAL ARGUMENT

III. THE LIQUIDATED DAMAGE PROVISIONS ARE UNENFORCEABLE PENALTIES

A. The Analysis Is Controlled By Civil Code Section 1671 (d) Because

Armstrong At All Relevant Times Was a Consumer Of Scientology

Civil Code section 1671 prescribes two alternative standards for determining the validity of a

liquidated damages provision. Under subdivision (b), the provision "is valid unless the party

seeking to invalidate the provision establishes that the provision was unreasonable under the

circumstances existing at the time the contract was made." ( Hitz v. First Interstate Bank (September

14, 1995) 1995 Cal.App. LEXIS 890, 19) Under subdivisions (d), the provision "is void except that

the parties to such a contract may agree therein upon an amount which shall be presumed to be the

amount of damage sustained by a breach thereof, when, from the nature of the case, it would be

impracticable or extremely difficult to fix the actual damage." (Id. at 21) Subdivision (d), rather

than (b), controls to consumer contracts. (Ibid.)

It is without question that Armstrong was a consumer of Scientology's technology from 1971

through 1981 and that the original Armstrong litigation arose in the context of this relationship.

Thus, subdivision (d) controls.

For liquidated damages to be valid under subdivision (d) of Civil Code section 1671, it
must have been "impracticable or extremely difficult to fix the actual damage." (Civ.
Code
§ 1671, subd. (d).) Further, the amount of liquidated damages " must represent
the result of a reasonable endeavor by the parties to estimate a fair average
compensation for any loss that may be sustained. (Garrett v. Coast &Southern Fed.

 

 

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[CT 8247]

Sav. & Loan Assn., supra, 9 Cal.3d at p. 739.) Absent; either of these elements, a
liquidated damages provision is void, although breaching parties remain liable for the
actual damages resulting from the breach. (Beasley v. Wells Fargo Bank, supra, 235
Cal.App.3d at p. 1390.)

(Id. at 27-28)

Since Scientology has failed to come forward with any evidence of having engaged in a

reasonable endeavor to estimate compensation for any breach, the liquidated damages provisions

are void.

B. Pursuant To Civil Code Section 1671 (b) The

Liquidated Damages Provisions Are Not Enforceable

Subdivision (b) of the 1977 amendments to the statute was " designed to favor enforcement

of liquidated damage clauses by shifting the burden of proof to parties who wish to invalidate

liquidation provisions." (H.S. Perlin Company, Inc. v. Morse Signal Devices (1989) 209 Cal.App.3d

1289, 1298) The factors to be considered when analyzing the validity of liquidated damages under

subdivision (b) are set forth in the Comment to the statute. Thus, the

"validity of the liquidated damages provision depends upon its reasonableness at the
time the contract was made and not as it appears in retrospect ... All the
circumstances existing at the time of the making of the contract are considered,
including the relationship that the damages provided in the contract bear to the range
of harm that reasonably could be anticipated at the time of the making of the contract.
Other relevant considerations in the determination of whether the amount of
liquidated damages is so high or so low as to be unreasonable include, but are not
limited to, such matters as the relative bargaining power of the parties, whether the
parties were represented by lawyers at the time the contract was made, the
anticipation of the parties that the proof of actual damages would be costly or
inconvenient, the difficulty of proving causation and foreseeability, and whether the
liquidated damages provision is included in a form contract."

(Civil Code 1671 at Law Revision Commission Comment, 1977 Amendment).)

Given the fact that Judge Breckenridge found Armstrong to be " credible, [and] extremely

persuasive" the only way that one can view the harm that would flow from Armstrong telling the

world about his experiences in Scientology would be in conjunction with Scientology's promise to

cease its fair game actions against Armstrong and others. The rationale for this would be that if

Scientology had changed by no longer promulgating and practicing the fair game doctrine, it would

 

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[CT 8248]

be unfair and harmful to it for its criminal past 1, to constantly resurface and undermine its efforts in

the present to rehabilitate itself and act properly. Otherwise, how could Scientology be damaged by

Armstrong telling the truth about its abuses and those of its founder?

The relationship of the parties at the time the agreement was entered into was disparate.

Scientology had practiced fair game on Armstrong and his attorney, Michael Flynn, for years.

Armstrong did not have any fair game policy of his own that he used to attack Scientology. His

approach to Scientology was then, as it is now, dedication to the truth and faith in God. The

amount of the damages per utterance are extremely high, $50, 000. Such would support an

inference that the parties were not in any equality of bargaining power.

Although Armstrong was putatively represented by Michael Flynn at the time he entered into

the agreement, Flynn had already made a deal with Scientology promising never to represent

Armstrong in the future. In addition, Flynn had Armstrong come out to Los Angeles from Boston for

the purpose of executing the agreement even though no copy of the agreement was first provided to

Armstrong. After Armstrong had been presented with a copy of the agreement and balked,

particularly with respect to the liquidated damages provisions, he was positioned as a deal breaker

with respect to the 15 people who were involved in the same universal settlement transaction.

Indeed, Flynn was settling his own claims against Scientology as part of the universal settlement.

Thus, Armstrong was not represented by an attorney with undivided loyalty.

IV. THE LIQUIDATED DAMAGES PROVISIONS ARE UNCONSCIONABLE

Civil Code section 1670.5 provides in part

(a) If the court as a matter of law finds the contract or any clause of the contract to
have been unconscionable at the time it was made the court may refuse to enforce the
contract, or it may enforce the remainder of the contract without the unconscionable
clause, or it may limit the application of any unconscionable clause as to avoid any
unconscionable result.

The doctrine of unconscionability applies to all provisions of all contracts. ( H.S. Perlin, supra,


1 In this regard, the Court is not only referred to Judge Breckenridge's decision, but also to the
case where a number of high-ranking Scientology officials pleaded guilty to burglarizing federal
government offices and obstruction of justice, United States v. Heldt (1982) 668 F.2d 1238), and
the case wherein it was held that certain Scientology attorney-client communications fell within the
scope of intended illegality in relation to the crime-fraud exception to the attorney client privilege.
(U.S. v. Zolin (9th Cir. 1990) 905 F.2d 1344 , 1345.)

 

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[CT 8249]

209 Cal.App.3d at p. 1300.) It has both a procedural and substantive element.

The procedural element focuses on two factors: "oppression" and " surprise."
[Citations.] "Oppression arises from an inequality of bargaining power which results in
no real negotiation and "an absence of meaningful choice." [Citations.] ... no precise
definition of substantive unconscionability can be proffered. Cases have talked in
terms of "overly harsh" or "one-sided" results. [Citations.] One commentator has
pointed out, however, that "... unconscionability turns not only on a 'one- sided'
result, but also on an absence of 'justification' for it [citation] . . . The most detailed
and specific commentaries observe that a contract is largely an allocation of risks
between the parties, and therefore that a contractual term is substantively suspect if it
reallocates the risks of their bargain in an objectively unreasonable or unexpected
manner. [Citations.] But not all unreasonable risk allocations are unconscionable;
rather, enforceability of the clause is tied to the procedural aspects of
unconscionability [citation] such that the greater the ... inequality of bargaining
power, the less unreasonable the risk allocation which will be tolerated.

(Id. at 1301) 2

In the instant case, there is serious unconscionability in the procedural sense given the

inequality of bargaining power between Scientology and Armstrong, as discussed above and set

forth in greater detail; in Armstrong's separate statement. What is most obvious is the substantive

unconscionability. It is clear that as Scientology seeks to have it enforced the agreement is one-

sided: Scientology can slander Armstrong and he must remain mute or get hit with a $50,000

liquidated damage assessment: What is the possibly justification for such a one- sided agreement? If

you listen to Scientology, it is because Armstrong is a liar and fomenter of anti-Scientology litigation.

But if what Scientology says is true, you must throw out the decision of Judge Breckenridge which

has been affirmed on appeal in a published decision. That makes no sense. It makes no sense to

accept the characterization of an organization that has a long recorded history of abuse of

individuals and the legal system and to disregard a well-respected superior court judge.

The only way that the liquidated damage provision makes sense is if Scientology had in fact

foresworn its policy and practice of fair game. If that, in fact, was true, then Scientology could be


2 The first court to have reviewed the settlement agreement said, "So my belief is Judge
Breckenridge, being a very careful judge... if ,he had been presented with that whole agreement and
if he had been asked to order its performance, he would have dug his feet in because that is one ...
I'll say one of the most ambiguous, one-sided agreements that I have ever read. And I would have
not ordered the enforcement of hardly any of the terms if I had been asked to, even on the threat
that okay, the case is not settled. [¶] I know we like to settle cases. But we don't like to settle cases
and, in effect, prostrate the court system into making an order which is not fair or in the public
interest." (Sep.St. ¶ 100)

 

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[CT 8274]

hurt by the constant resurgence of its dirty past. Assuming without conceding the truth of the

forgoing proposition, Scientology never gave up fair game because it proceeded to slander

Armstrong almost as soon as the ink had dried on the paper in an effort to dead agent him through

black propaganda. This being the case, there is no objective harm that the liquidated damage

provisions could cure because what Armstrong had to say was the truth. The only way that the truth

could be harmful to Scientology was if Scientology was trying to suppress the truth while continuing

to engage in illegality and misconduct which then brings one back to the argument that the

agreement is void because it violates public policy.

In sum, whichever way one analyses the liquidated damage provisions, one can only

conclude that one way or the other said provisions are unconscionable and should not be enforced.

V. CONCLUSION

Based on the foregoing, Defendant Gerald Armstrong respectfully requests that the motion for

summary adjudication should be denied.

DATED: September 18, 1995

By:

HUB LAW OFFICES

[signed]
Ford Greene

Attorney for Defendant
GERALD ARMSTRONG

 

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[CT 8251]

PROOF OF SERVICE

I am employed in the County of Marin, State of California. I am over the age of eighteen years and

am not a party to the above entitled action. My business address is 711 Sir Francis Drake Boulevard, San

Anselmo, California. I served the following documents:

DEFENDANT'S OPPOSITION TO MOTION FOR SUMMARY ADJUDICATION ON THE
THIRTEENTH, SIXTEENTH, SEVENTEENTH AND NINETEENTH CAUSES OF ACTION;
ARMSTRONG'S SEPARATE STATEMENT OF DISPUTED AND UNDISPUTED FACTS IN
OPPOSITION TO MOTION FOR SUMMARY ADJUDICATION OF THE TWENTIETH CAUSE OF
ACTION ON THE SECOND AMENDED COMPLAINT; DEFENDANT'S EVIDENCE IN OPPOSITION
TO MOTION FOR SUMMARY ADJUDICATION ON TWENTIETH CAUSE OF ACTION

on the following person(s) on the date set forth below, by placing a true copy thereof enclosed in a

sealed envelope with postage thereon fully prepaid to be placed in the United States Mail at San

Anselmo, California:

Andrew Wilson, Esquire                      BY HAND

WILSON, RYAN & CAMPILONGO
235 Montgomery Street, Suite 450
San Francisco, California 94104

LAURIE J. BARTILSON,ESQ.
Bowles & Moxon
6255 Sunset Boulevard
Suite 2000
Los Angeles, California 90028

[X] (Personal Service)

I caused such envelope to be delivered by hand to the offices of the
addressee.

 

[X] (By Mail)

I caused such envelope with postage thereon fully prepaid to be placed
in the United States Mail at San Anselmo, California.

 

[X] (State)

I declare under penalty of perjury under the laws of the State of
California that the above is true and correct.

 

DATED: September 18, 1995

 

 

 

[signed]
Ford Greene

 

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