3.5.14 Hearing Transcript

1 RIVERSIDE, CALIFORNIA; WEDNESDAY, MARCH 5, 2014

2 BEFORE THE HONORABLE EDWARD D. WEBSTER

3 THE COURT: I'll call RIC1112557, Kaatz, Beach, and

4 Bradley versus Graham, et al.

5 I guess if plaintiffs' counsels could introduce

6 themselves.

7 MR. McCUNE: Good morning, your Honor. Richard McCune

8 and Michelle Vercoski for the plaintiffs.

9 THE COURT: Okay. Hold on.

10 MR. DAGGETT: Good morning, your Honor.

11 THE COURT: I'm sorry. What is your name, ma'am?

12 MS. VERCOSKI: Michele Vercoski.

13 THE COURT: How do you spell your last name?

14 MS. VERCOSKI: V, as in Victor, e-r-c-o-s-k-i.

15 THE COURT: And who will be the person answering

16 questions or making on oral presentation?

17 MR. McCUNE: I will, your Honor.

18 I would like to make one request. My paralegal is

19 here, and there's a lot of documents. Would you mind if she came

20 up to counsel table to assist?

21 THE COURT: I don't have a problem with that.

22 MR. McCUNE: Thank you.

23 THE COURT: You all have, I think, a different idea of

24 how this is going to be run than my idea. And since I'm the

25 Judge, I get to set the rules about that. So, again, with no

26 disrespect -- you put a lot of work into this, and it deserves to

27 be commended, the amount of hours and time and research -- and I

28 do commend you -- but, again, it's not particularly helpful for

TRINA N. FEHLMAN, CSR, RPR, CRR1

1 me to have people restate what's already been addressed in their

2 arguments. Because I've already come to some pretty firm

3 conclusions based what I've already read. And so it's rare -- I

4 don't say it never happens, but it's rare that oral argument in

5 motion for summary judgment affects any change in the ultimate 6 decision that I already have running around in my head. It may

7 not be the right decision, I grant you that. But it's the best I

8 can do.

9 But, again, at this point in time, you reach a certain

10 point, I don't know if it's the eight-hour mark or the nine-hour

11 mark, of reading material, where you've decided pretty much this

12 is the way you're going to decide it.

13 Now, I'm grateful that there's a Court of Appeal,

14 because if I'm wrong, you'll have a chance to have them correct

15 any errors I made. And, again, this is the kind of case that I

16 would expect will go to the Court of Appeal, and I'm, kind of, a

17 waystation. I'll explain why in just a minute. 18 All right. So if I can have your name, Counsel.

19 MR. DAGGETT: Your Honor, my name is Jon Daggett.

20 That's J-o-n, D-a-g-g-e-t-t. And I represent Defendants Ricardo

21 Graham, Daniel Jackson, and Larry Blackmer.

22 THE COURT: You represent Graham --

23 MR. DAGGETT: Jackson and Blackmer, your Honor.

24 THE COURT: All right. Graham is the chairman of the

25 board of trustees for the PUC. And --

26 MR. DAGGETT: LSU, your Honor.

27 THE COURT: LSU. Right. LSU. And then, Mr. Blackmer

28 is the head of the North American Division of the Seventh-day


1 Adventist Church. And Mr. Jackson's the head of --

2 MR. DAGGETT: Jackson is the president of the North

3 American Division. And Blackburn is the vice president in charge

4 of education for the North American Division.

5 THE COURT: And you are?

6 MR. CONNALLY: Good morning, your Honor. Michael

7 Connally, C-o-n-n-a-l-l-y, of Lewis, Brisbois, Bisgaard & Smith,

8 for the Defendants La Sierra University, the Pacific Union

9 Conference of Seventh-day Adventists, and the North American

10 Division Corporation of Seventh-day Adventists.

11 THE COURT: All right. Thank you.

12 The first order of business, I think, is some material

13 was submitted to me which I did read, apparently stipulated. And

14 would you like me to sign the order so it's part of the record?

15 MR. McCUNE: I would, your Honor. Thank you.

16 THE COURT: Any objection? 17 MR. DAGGETT: No objections, your Honor. 18 THE COURT: All right. Mr. McCune, if you wish to make

19 an oral argument, you may do -- well, I guess it should be

20 Mr. Daggett or Mr. Connally.

21 Are you both going to address issues at this point?

22 MR. CONNALLY: We would like to, your Honor. We'd be

23 informed by -- if your Honor has a tentative ruling, we could

24 focus our arguments rather than going over things that would be

25 redundant.

26 THE COURT: No, I want you to make your argument now.

27 MR. CONNALLY: Okay.

28 THE COURT: And then what I will do is I will give you


1 my ruling, because there will probably be a ruling at that point

2 in time, after I hear your argument. And then I will answer any

3 questions how I came to it. And I'll try to give you as complete

4 a record as possible.

5 I want to indicate that there's so much material that I

6 don't think I could ever be as certain as I want to be that it's

7 the correct ruling. But I would certainly give you my best shot

8 and explain to you how I got to those decisions and, again, with

9 the understanding you may well disagree with me and I don't

10 begrudge your disagreement. Okay.

11 MR. CONNALLY: Thank you, your Honor.

12 I'd like to focus first, your Honor, on the Motion for

13 Summary Judgment and Adjudication of Issues by North American 14 Division and Pacific Union Conference. That motion presents its

15 own unique set of circumstances and is, in many respects,

16 narrower than the other motion. So it merits, we believe,

17 separate attention. And even within those, North American

18 Division, which -- if your Honor will accept the shorthand, I'm

19 going to refer to it as "NAD," and Pacific Union Conference, I'll

20 refer to as "PUC."

21 THE COURT: I will do so as well.

22 MR. CONNALLY: NAD is, in particular, in a different

23 set of circumstances and, therefore, we believe, merits its own

24 specific ruling in that North American Division is the general

25 church. The contentions that plaintiffs have attempted to raise

26 to try and create triable issues of fact don't apply to NAD, in

27 particular, because NAD was not in the room with the plaintiffs

28 when the resignations were requested. Much of the area where


1 plaintiffs have attempted to create a triable issue of fact by

2 contradicting their own deposition testimony in declarations,

3 which we've argued separately is not permitted, does not have any

4 effect on our argument as it relates to NAD.

5 The essence of the causes of action involving NAD --

6 THE COURT: Well, I think the causes of action against

7 NAD are fairly simply stated. They're saying that NAD operated

8 through Blackmer and Jackson, and that Graham was their agent.

9 And, therefore, Graham's actions are attributable to NAD. I

10 don't buy it. But again, maybe I can cut you short.

11 MR. CONNALLY: Ah. Well, we acknowledge that that's

12 part of their argument. But the problem with that is their whole

13 contention, is that the communication of the, quote, "principle,"

14 in that to the agent is all protected free speech, religious

15 governance, and association.

16 THE COURT: And there's also a Civil Code section about

17 interested parties. So, again, you don't have to beat that dead

18 horse unless you'd really like to.

19 MR. CONNALLY: No. We just wanted to make sure that it 20 merited its own separate attention because --

21 THE COURT: If I don't do it in my ruling, then you can

22 come back and ask me questions or supplement the comments. Can I

23 suggest that?

24 MR. CONNALLY: That makes perfect sense, your Honor.

25 Then the only other observation I would make at this

26 point in time, I think the papers have laid out in great detail

27 our position, but the key factor is that despite plaintiffs'

28 contentions that they are not arguing religious doctrine or


1 religious governance, it's very clear, at every turn, that where

2 they contend there's a triable issue of fact, it requires a Court

3 to interject itself into adjudicating church governance and 4 doctrine issues.

5 For example, they --

6 THE COURT: I understand that as well.

7 MR. CONNALLY: All right.

8 THE COURT: Because the overlying issue relating to

9 creating the earth in seven days as opposed to evolution was the

10 reason that Mr. Jackson, I guess it was, met with the parties

11 initially, before the surreptitious recording occurred at

12 Mr. Beach's home. So believe me, I've read more than just the 13 work-up.

14 MR. CONNALLY: Okay. Then at this point, I think it

15 would be best if we heard -- I'll defer to other counsel. But I

16 think our papers lay it out, and I reserve only time to address

17 issues, if need be, after we've heard your Honor's ruling.

18 THE COURT: All right. Mr. Daggett?

19 MR. DAGGETT: Thank you, your Honor.

20 I'm not going to rehash because, as you know, NAD could

21 only act through Jackson and Blackmer. I'm going to address

22 their issues first. So pretty much the same arguments.

23 THE COURT: You said Blackburn or Blackmer?

24 MR. DAGGETT: It's Blackmer.

25 THE COURT: Right.

26 MR. DAGGETT: So as the agents of North American

27 Division, of course, any actions NAD took would be through them.

28 I would like to emphasize a couple items, one of them


1 being that in the opposition -- plaintiffs' opposition, there's a

2 lot of discussion -- or, really, characterization of the facts to

3 try and show that there was some kind of direct employment

4 action, and that there was some involvement in coercion,

5 misrepresentation, et cetera, on the part of Jackson and

6 Blackmer. But really, at the end of the day, all they have done

7 is communicated the contents of the transcript and the recording

8 to Graham, who is the board chair. And so we think as that

9 communication, they had -- there's no allegations, really, that

10 there was any coercion -- no factual allegations there was any

11 kind of coercion or misrepresentation in that.

12 So we believe that the First Amendment certainly should

13 apply, to protect their ability to communicate on a religious

14 matter with the board chair of La Sierra in a matter of concern.

15 Another point that I'd like to point out, which wasn't

16 exactly covered in depth in the papers due to space, but the

17 plaintiffs refer -- or actually attach the trustee handbook as

18 one of their exhibits. And we'd give some attention -- both

19 defense counsel give quite a bit of attention to the provisions

20 in the bylaws that make it clear that LSU is an Adventist

21 organization. I'd like you to focus on a couple of things, your

22 Honor, if you would. I'd request that you focus on a couple of

23 things, one of them being the New v. Kroeger case, which makes it

24 very clear that corporate --

25 THE COURT: At 167 Cal.App.4th 800?

26 MR. DAGGETT: I can confirm that for you --

27 THE COURT: I have that here.

28 MR. DAGGETT: Yes. There's language in that case that


1 makes it very clear. And I'm not going to read it, but it's

2 mostly at page 820. And there's some other --

3 THE COURT: Right. "As the California Supreme Court

4 has explained, religious corporations are merely 'permitted as a

5 convenience to assist in the conduct of temporalities of the

6 church. Notwithstanding incorporation, the ecclesiastical body

7 is still all important.'"

8 MR. DAGGETT: Right, your Honor. And we didn't quote

9 the paragraph before that, but I think that also applies because

10 the plaintiffs' focus -- really, it seems to me, all of their

11 eggs in the basket of LSU being separately incorporated and,

12 therefore, independent. But even the prior paragraph says that

13 you can't look at the Corporations Code in a vacuum. Religious

14 corporations are different for a reason. And then it goes into

15 that description.

16 Another point is, if you look at the bylaws, like I

17 said, it's clear it's an Adventist organization. And the trustee

18 handbook has separate provisions. It flat-out says LSU is a

19 church institution. And it says that the chair is expected to

20 communicate with the church about objectives of the university, 21 and it's part of their job to try and coordinate the university 22 with the church's mission.

23 I don't see how that could happen if they can't

24 communicate with the church about what that might be. Plaintiffs

25 distinguish between persuasion and orchestration. But really,

26 the only definition of that, by looking at the plaintiffs'

27 papers, is orchestration is persuasion that someone doesn't agree

28 with. They have the right to talk about these things under the


1 First Amendment. They did so. And to find that there could be

2 tort liability for that, disregarding the First Amendment, really

3 makes it untenable for a church to run its institutions in the

4 way that it seems federal and California law have accepted as a

5 way a church is run. They may incorporate, but they can talk to

6 each other and operate towards a common mission.

7 As to Jackson and Blackmer, again, I'm not going to

8 rehash as to why they're not a stranger. Those are all clear in

9 the papers. I would like to bring up one specific issue as to

10 Graham. There's two causes of action as to Graham that are not

11 alleged against Jackson and Blackmer. One of them is the

12 interference with prospective economic advantage which, of

13 course, we point out there was no lawful conduct involved which

14 would justify that. The other, of course, breach of fiduciary 15 duty, that really, in its essence, seems to me impossible for a

16 Court to wade into without determining what are these interests.

17 It's clear that there's religious interests involved in both

18 institutions. And the Court is being asked to look at what are

19 those interests, do they conflict, did Graham properly exercise

20 his authority. I don't see how that can happen under the cases

21 involving the First Amendment, that it would be clear excessive

22 entanglement.

23 The last point I'd like to make is that punitive

24 damages, we've done a motion for a summary adjudication on the 25 issue. It is unopposed from the plaintiff. So I would urge that

26 the Court grant that adjudication as to that issue, in 27 particular, since it's unopposed.

28 THE COURT: I do have a question for you, Mr. Daggett.


1 MR. DAGGETT: Yes, your Honor.

2 THE COURT: I'm not sure it's even necessary to get to

3 the First Amendment issues here. But it seems to me the cases

4 seem to talk about a -- and give special deferences to churches

5 that have hierarchical organizational structure. And one of the

6 points is -- that you argued was that the Seventh-day Adventist

7 does have a hierarchical authority with the General Counsel, then

8 the North American Division, which is one of 13 Divisions?

9 MR. DAGGETT: That's right, your Honor.

10 THE COURT: And then, subdivide it further into the

11 different unions, of which there are nine North American

12 Divisions. And then, I assume from reading other cases that

13 below that, there are individual parishes that are organized

14 separately.

15 And LSU, we'll refer to that for Loma Linda --

16 MR. DAGGETT: La Sierra.

17 THE COURT: -- La Sierra University, is essentially

18 controlled by and, for all purposes, owned by the Pacific Union

19 Conference as opposed to the lower levels. Because if La Sierra

20 is dissolved or its property sold, the assets go to Pacific Union

21 Conference. And it looks to me, also, the way the bylaws are set

22 up, the people are elected, that the Pacific Union Conference

23 essentially has the majority voice in the trustees or running the 24 board of trustees. I think 22 or 23 of the trustees have to be

25 Seventh-day Adventist. You have to pick some from Arizona, pick

26 some from so forth. But it suggests to me, in practical terms,

27 and, also, what I gathered from the conversations that I

28 overheard between Mr. Graham, Mr. Beach, and the other gentleman,


1 that, obviously, the -- the union representatives or church

2 representatives are fairly significant.

3 So the question is -- with that argument, Mr. McCune

4 says, well, in another filing involving a personal injury in 5 Ventura County, you were stressing how separate every

6 organization is, independent. And, therefore, it seems to be

7 that you're talking out of both sides of your mouth in one

8 context or the other.

9 So I would just like to hear you address that issue. 10 Because that's the import I got is, here, you're talking about

11 how hierarchical they are and how they're so related and have

12 such a common interest, and, obviously, they have to talk. And

13 we're talking about basic First Amendment issues. And then they

14 say, well, wait a minute. Over here, you talk about how separate

15 they are and how unrelated they are and how, therefore, since

16 La Sierra University is a religious institution with tenure and

17 so forth and its own rules, it should be looked at completely

18 separately. That's the thrust I get with that argument. So if

19 you could just address that for me. 20 MR. DAGGETT: Happily, your Honor. Just a quick

21 clarification on the ownership issue. The Adventist Church is

22 unique in that it is theologically hierarchical. In a thumbnail

23 sketch of Adventist history, there's a lot of suspicion of

24 hierarchical churches, like the Catholic Church. So the

25 Adventist Church is kind of set up like a reverse hierarchy.

26 MR. McCUNE: I would object to argument outside of the 27 record, your Honor.

28 MR. DAGGETT: It's in the rec- -- okay. That's fine,


1 your Honor. I don't have a problem with that. The point is that

2 it's very clear in the papers. We're talking about a -- it is a

3 hierarchical -- theologically. The distinctions in the pleadings

4 that have been submitted by plaintiff to support their case is

5 that the church is not being inconsistent when it says it has no

6 control over the lower -- it admits it can't hire and fire people

7 in the lower entities. It can't direct what type of program

8 they're going to run in the spheres, for example, which property

9 it may buy or things like that. But it is very clear, including

10 in the papers that were -- I believe, the Marquez Motion for

11 Summary Judgment was one of the documents. It's very clear that

12 the church argues theologically, we're a single-unified church.

13 The fundamental beliefs show that. The statements of the people

14 who are the officers show that. And on theological issues,

15 certainly, they have the ability to require adherence to a

16 particular standard and act accordingly if things are not upheld

17 to that religious standard. But they do not have operational

18 control.

19 That's kind of the crux, I think, of plaintiffs'

20 argument, is they're trying -- because of that agreement on both

21 sides that NAD cannot operate LSU, they're trying to say that

22 there was something wrongful in the way the individual defendants

23 and NAD participated in this act. But the issue here is this is

24 a religious communication. They're theologically unified, and

25 they certainly have the ability, per their own governing

26 documents, to communicate about what that church mission is and

27 how to fulfill it.

28 THE COURT: Okay. That's fine.


1 Mr. McCune, did you wish to be heard?

2 MR. McCUNE: Yes, your Honor, I would. I would -- for

3 demonstrative purposes, I need to address -- sounds like, first,

4 the part you don't buy, which is the directive through Graham by

5 Blackmer and Jackson. And I'd like to provide your Honor with a

6 demonstrative, if I could, to go through that.

7 THE COURT: Okay.

8 MR. McCUNE: So I -- this may be a different order than

9 I started with. So on the issue as to whether this was a

10 directive by Jackson and Blackmer -- and I mean no disrespect by

11 calling them their last names, but I want to make this go a

12 little easier. If you start on the left, your Honor, this is all

13 through 2011. Now, on May 30, Larry Blackmer provided Daniel

14 Jackson a transcript. Then Blackmer and Jackson met with their

15 lawyers. And then that -- that is just the process of getting 16 the transcript. No problem. Plaintiffs' not complaining about

17 that at all.

18 That evening, Daniel Jackson calls past midnight, at

19 1:00. He calls Blackmer twice to complain about this transcript

20 and sends an e-mail that says that he is very angry and there

21 would be more to come later.

22 So he then -- he's, then, in California. He then

23 provides the transcript in person to Mr. Graham, and provides it

24 with instructions that this is an employment matter, and this is

25 something that should be dealt with by La Sierra. So if

26 that's -- as the defense would describe it, that was -- that was

27 the end of the involvement, that Jackson may have gotten worked

28 up, but he provides a transcript to Graham. And then both the


1 declarations of Graham and -- and Jackson are -- well,

2 essentially, at that point, it was now Graham's job to figure out 3 what to do with the transcript.

4 But the evidence shows something very different than

5 that, your Honor. On the very next day, twice, Jackson calls

6 Graham, which is in Exhibit 15 and then the newer Exhibit 39.

7 The following day, June 3, Jackson again calls Graham. We've

8 gotten the telephone records, so we know this. Over the weekend,

9 it's quiet.

10 On the 6th of June, Jackson then, who now says that

11 he's completely at peace and he's all comfortable and Graham's

12 handling it, provides a transcript to one of his employees at the

13 NAD and asks him to do something and to review it and make

14 recommendations, which that employee does and provides to him on

15 the 7th.

16 That same day, Jackson again e-mails Graham. The

17 following day, Jackson calls Graham, which is now the 8th.

18 On the 9th, Jackson once again calls Graham. They then

19 set up a conference call between Graham and Blackmer, counsel.

20 And that's where we believe that the instructions to Graham were

21 finalized. Then Graham goes forward the next day.

22 If you were to listen and read the argument made by the

23 defense, there would be nothing in between Graham provides a

24 transcript to -- or Jackson provides a transcript to Graham and

25 Graham terminates plaintiffs. But, in fact, there is much more

26 than just passive action. This -- clearly, the inference that 27 can clearly be drawn from the activity initiated by Jackson

28 supports that there is a disputed fact as to whether this was


1 Graham's action, taken alone on his own volition, or if this was

2 directed by Jackson.

3 That -- the final piece of that puzzle is immediately

4 after this meeting. The first thing that Graham does, he calls

5 Jackson to report how it went. And Jackson gives him a "good

6 boy."

7 We believe that those facts support an inference that

8 this was action not initiated or completed by Graham but,

9 instead, by Jackson.

10 The other telling aspect of that was the decision to

11 exclude the -- the administration of the university and the

12 non-church board members from that.

13 The issue on the independence, the Court describes this

14 as a personal injury matter, the Ben case. And where it is 15 different than that, in our view, is -- we're not saying the

16 cases are the same. But what we are saying is that the

17 admissions and declarations made in that case are relevant.

18 They are -- the church defendants now have a -- a

19 motivation to say that they are one. But when they had a

20 different motivation -- if you -- Exhibit 11, if I could read

21 from that, your Honor, it states -- paragraphs 14 through 17.

22 And this is a case involving a Seventh-day Adventist institution,

23 Caribbean Union, that's in the same position as La Sierra

24 University. The declaration provided by the church defendants

25 was the subordinate organizations are independent, are nonprofit,

26 educational, charitable, or religious institutions. These

27 entities each maintain a separate legal existence, and each is

28 responsible for its own legal obligations.


1 The issues related to other cases where the church owns

2 and controls these institutions are much different than that.

3 And, in fact, that could be no more highlighted than the

4 church -- Seventh-day Adventist Church actually owns and operates

5 three institutions, one of them that's ten miles away from here,

6 which is Loma Linda University. It has chosen to own those

7 institutions. It has chosen to set these institutions up as

8 separate institutions.

9 THE COURT: Does the PUC own La Sierra University?

10 MR. McCUNE: It does not. It does not contend it owns

11 La Sierra University. It contends it has potential ownership

12 interest if, in fact, La Sierra folds its -- its doors. It has

13 no right to encumber that land. It has no right to do anything

14 with that land.

15 THE COURT: Well, essentially, if the board of

16 trustees, 22 out of 23 which have to be members of the

17 Seventh-day Adventist Church, decides to end the existence of

18 Loma Linda -- La Sierra University, they could do so. And the

19 property then becomes the assets of the Pacific Union Conference;

20 correct?

21 MR. McCUNE: That is absolutely correct.

22 THE COURT: All right. Go ahead.

23 MR. McCUNE: But that's different than PUC having

24 ownership interest in it -- the ownership of it. And I might add

25 that the board structure was set up so that the Adventist voice

26 would be heard within the university. But -- but this isn't a

27 subsidiary, like in -- Toyota has a subsidiary for USA, where

28 it's a separate legal corporation, but the subsidiary answers to


1 the parent corporation, has full control. There -- it's

2 undisputed here from all parties that none of these defendants,

3 absent La Sierra University, has the right to hire, fire, demote,

4 supervise any of the employees of La Sierra University.

5 THE COURT: Well, except for the president and the

6 other people in administration, they do.

7 MR. McCUNE: Of La Sierra University.

8 THE COURT: Correct. The subordinate trustees can't,

9 directly.

10 MR. McCUNE: The board of trustees can, through

11 consultation with the president.

12 THE COURT: No, no, no. The board of trustees has

13 direct responsibility for evaluating the president and the

14 administration of the church. I think that is in the handbook

15 that you submitted to me.

16 MR. McCUNE: And that is -- that is correct, but with

17 consultation with the president.

18 THE COURT: No, not -- why would you consult with the

19 president if you are going to evaluate him himself? It doesn't

20 say that. It does say about faculty and tenure and so forth,

21 they're to consult with him and he's to act. But in terms of

22 reviewing his administration, I think it's different. Let me

23 see. Which -- somebody submitted the trustee --

24 MR. McCUNE: The trustee handbook, your Honor, is

25 Exhibit 2 to Plaintiffs' Evidence of Support of its Motion for

26 Summary Judgment. And I would -- it's on page 4. Well, that's

27 one of the issues.

28 THE COURT: Hold on. Let me find it first.


1 Does anybody have a copy of the trustee's --

2 MR. DAGGETT: You're looking for the trustee's handbook

3 or the bylaws?

4 THE COURT: Yes, trustee's handbook.

5 MR. DAGGETT: Yes, your Honor. Because I could find it

6 right away. Because I made a copy, the overview of trustee's

7 responsibilities. And I also made a copy -- I don't know what I

8 did with it -- that one section.

9 MR. McCUNE: It's Section 6.9 of the bylaws, your

10 Honor, which is Exhibit 1 to the plaintiffs' --

11 THE COURT: Right. Then there is also a B, at page 4,

12 which says, The power of the trustee in the operation of the

13 university is limited to policy-making level. The involvement of

14 the trustee in operational matters is strictly -- is restricted

15 primarily to establishing standards for evaluating, then engaging

16 in evaluations of the university president and university

17 administration.

18 MR. McCUNE: Correct.

19 THE COURT: That sounds to me almost like an

20 independent authority they have.

21 Now, I would assume they'd want to talk to the

22 president about those things. But it sounds to me like that's

23 independent responsibility.

24 MR. McCUNE: Your Honor, how I -- I believe that those

25 are reconciled is that the board of trustees is responsible for

26 supervising the president. The president is responsible for

27 supervising and managing the campus and making recommendations to

28 the board. The ultimate authority is with the board.


1 THE COURT: What happens if there's a concern of

2 misconduct by the president or other people in the administration

3 since -- as I think one of the gentleman's deemed, doesn't the

4 board, through the chairman of the board, have the independent

5 right to do that investigation under that section?

6 MR. McCUNE: I would say that the board chair does not,

7 independently. The board, as a whole, does. And that's not what

8 happened here.

9 THE COURT: All right. You may continue.

10 MR. McCUNE: The -- the fact that separates this case

11 from the other cases that deal with First Amendment issues -- and

12 I understand that the Court has had a more preliminary point on

13 this than that. But there are separate board bylaws, there's a

14 separate board, there's a separate administration. And the

15 Seventh-day Adventist Church has -- owns and operated its own

16 universities.

17 And then you combine that with -- the church defendants

18 have taken positions -- specific positions in declarations that

19 are admissions and useful for this case. That, in fact, the

20 educational institutions are independent makes this very

21 different.

22 The -- the issue that -- the next issue I'd like to

23 address for the Court is the apparent -- the comment the Court

24 made as to "stranger," that, I assume, is taken out of the

25 Applied Equipment Corporation. It -- as I attempted to interpret

26 the Court's comments was that if, in fact, the church defendants

27 had an interest in La Sierra University, then that provided them

28 the cover to have these kind of communications that I've been


1 discussing. Maybe that's putting words in the Court's mouth, but

2 that was my interpretation of it.

3 And I take that from some of the language that is in

4 Applied Equipment Corporation regarding what constitutes

5 interference with a contract from another company. And the

6 Applied Equipment Corporation was -- which is a Supreme Court

7 case from 1994, was the Court was dealing with the issue could a

8 contracting party be liable for interference of the contract that

9 it is a party to?

10 And what that Court said was, no, only strangers to

11 that contract could. But as pointed out in Woods v. Fox

12 Broadcasting, which is a 2005 case, which is 129 Cal.App.4th 344,

13 that -- that Applied also used the word "stranger"

14 interchangeably with noncontracting parties and third parties,

15 and that, specifically, the Applied case had not considered when

16 a noncontracting party that had some interest -- whether that

17 would prevent it from going forward with that.

18 The other case that -- that -- and your Honor, I --

19 this may be in our opposition and it might not be, but this was

20 something raised heavily on the reply, the Applied Equipment

21 case, is Powerhouse Motorsports versus Yamaha Motor Corporation,

22 which was just decided in November of 2013, which is 221 23 Cal.App.4th 867. And that involved a manufacturer and its

24 dealer. And there was a dispute as to the contract situation.

25 And the claim -- the defendant's claim was because of this

26 relationship between the manufacturer and the dealership, that

27 they were not strangers to the contract, that they had an

28 economic interest in the contract. So therefore, they could not


1 be strangers to the contract under Applied. The Court

2 specifically rejected that argument, and said that that's not 3 what Applied Equipment Corporation said. And it relied on

4 Woods v. Fox Broadcasting, the case that I just listed, for -- 5 for the indicated.

6 And it -- it -- in a case -- there is not a case that

7 says having an interest in one of the parties gives that party

8 the right to interfere with the contracts. That is a misreading

9 of Applied Equipment Corp. And that's a misreading of Applied

10 Equipment Corp. that both Woods and the Powerhouse Motorsports

11 Group, in cases in 2005 and 2013, have made clear.

12 The line that the defendants are attempting to walk by

13 saying, we are all one in theology, but we are not one in our

14 legal relationship between one another except when we might be

15 sued for the conduct of one of the other entities, is one that is

16 not found in any of the other cases and is not found in the law.

17 The right to have ownership and control are what is relevant in

18 vicarious liability cases. The same thing that has provided them

19 the ability to escape liability for Caribbean Union College or

20 its publishing house or its conferences are (sic) exactly the

21 same thing that -- that provides them the position that they are

22 now, which they should have to answer, at least to a jury, on 23 these issues of fact as to whether there's responsibility. They

24 are -- they've taken a position that we want -- we don't want any

25 of the responsibility for La Sierra University. We don't want

26 any of the legal responsibility. But yet, when we don't like

27 what they're doing, we want to bypass that and take over control

28 of La Sierra University.


1 The issue as to whether they did that is a -- is a

2 question of fact that this Court is not in a position to answer,

3 as it is a triable issue of fact.

4 The defense didn't talk about whether the resignation

5 letters were properly obtained. I don't know if the Court wants

6 to hear me on that. But there's some indication that the issue

7 as to whether the use of that recording was wrongful had been

8 decided in the low -- in the demurrer action adverse to

9 plaintiff, and that is not correct. The -- the plaintiffs were

10 allowed to keep the wrongful language in the allegations. What

11 they were prevented from doing is making a claim under the Penal

12 Code that requires intentional action.

13 The use of a private conversation that was recorded

14 without information and knowledge is, in fact, an element that

15 the Court needs to consider as to whether these resignation

16 letters were voluntary. That is in connection with the issues as

17 to coercion and misrepresentations that include that there was no

18 advance notice of the reason for the meeting. Mr. Graham proudly

19 described it as he sprung it on the plaintiffs, that the --

20 Mr. Graham would not give a copy of the transcript not only to

21 the -- to the plaintiffs, but to the president of the university,

22 who was there.

23 And I might add, your Honor, that going back to the

24 issue as to what if the board had an issue with the

25 administration, there is no indication that the board and

26 Dr. Graham, in particular, had any reason to believe that there

27 was an issue with Randal Wisbey, the president of the university.

28 He was not one of the four people on the -- the recording. The


1 reason to bypass him did not have anything to do with he was

2 involved in the situation.

3 The -- the indication, by Dr. Graham, that if -- if the

4 three -- the three plaintiffs did not sign the letters of

5 resignation, he would release this private recording. And I

6 think the most egregious, at least from my viewpoint, is not

7 giving these three employees, that had been at this institution

8 for over 100 years, the weekend to think about it. This

9 transcript had been out for almost -- the defendants were aware

10 of this transcript for close to 45 days. There was absolutely no

11 reason that it couldn't have waited the weekend. They chose not

12 to do that because they wanted to put the pressure on the

13 plaintiffs to sign this letter of resignation without the

14 information, without counsel.

15 The First Amendment issues, there is not a case, and

16 there's not any of the cases cited by the defense, where an

17 institution that is affiliated but not owned or controlled is

18 found to be in a position of the sameness with the church, in

19 order to make a First Amendment argument right -- or argument.

20 The New versus Kroeger case cited by defense is -- is

21 so far off point. It is -- it was a case in which there was a

22 fight between congregation members who were on the board as to

23 control of the institution. That Court said, we're not going to

24 get involved in that. But the case of Sacramento Sikh Society

25 Bradshaw Temple versus Tatla, 219 Cal.App.4th 1224, specifically

26 said, "The fact that issues of church membership may fall within

27 the purview of church authorities does not mean that is always

28 the case. The question is whether resolution of the membership


1 issue requires reference to church doctrine rather than neutral

2 legal principles."

3 And that's where I'd like to finish here, your Honor,

4 is this talk about creation versus evolution. This Court is not

5 being asked to make a decision as to applying the fundamental

6 beliefs of the Seventh-day Adventist Church. That is a red

7 herring in the most large -- in its most significant way. This

8 has to do with whether these employees, none of which were

9 ministers, none of which were teaching religion, were required --

10 that had to answer to the defendants, outside of La Sierra. The

11 issue of answering to La Sierra is different.

12 Finally, just as a housekeeping matter, Counsel 13 indicated the plaintiffs had not addressed punitive damages and

14 had filed a nonopposition. I would invite the Court to look at

15 page 19, line 24 through 25 of our opposition. And there wasn't

16 specific time spent on that, because the fact section dealt

17 extensively with the facts that plaintiffs support -- that, I

18 believe, supports that claim.

19 So unless the Court has any questions of me.

20 THE COURT: I did have a couple of questions before you

21 sat down. I assume that Leonard Darnell's deposition was taken?

22 MR. McCUNE: It was, your Honor.

23 THE COURT: Did Jackson and Blackmer know their meeting

24 with the plaintiffs was being recorded?

25 MR. McCUNE: I have no reason to believe that, your

26 Honor, that they knew. I don't believe that they knew.

27 THE COURT: So then Mr. Darnell was surreptitiously

28 recording the conversation he had with Mr. Jackson and


1 Mr. Blackmer? Isn't that a violation of the Penal Code?

2 MR. McCUNE: I'm unclear of what the Court is referring

3 to. I don't --

4 THE COURT: Well, if Mr. Darnell is recording the

5 initial meeting had between the plaintiffs and Mr. Blackmer and

6 Jackson, unbeknownst to the people there, Jackson and Blackmer,

7 isn't that potentially a violation of the Penal Code?

8 MR. McCUNE: Whether it is, that would be on

9 Mr. Darnell, who's not my client. But I might add that that's a

10 public meeting with, literally, I think, hundreds in attendance.

11 So I -- I don't think the expectation of privacy would apply.

12 THE COURT: And what did he say was the reason why he

13 recorded that meeting?

14 MR. McCUNE: I don't know the answers to that, your

15 Honor.

16 THE COURT: And why did he send it to the Spectrum

17 website, which was accessible to the public generally?

18 MR. McCUNE: Related to the faculty meeting?

19 THE COURT: Uh-huh.

20 MR. McCUNE: Based on what he has said, it related to

21 that there was widespread interest in the Seventh-day Adventist

22 community about what was happening at La Sierra University.

23 THE COURT: All right. So there is no indication that

24 they wanted to get their side out and, essentially, publicize the

25 controversy, to gain whatever positional benefit they would get

26 from that.

27 MR. McCUNE: I would take -- I would take exception to

28 they, your Honor. If you're talking about Mr. Darnell, I don't


1 know what Mr. Darnell's motivation was. But to lump Mr. Darnell

2 in with my clients is not -- is not something that happened here.

3 THE COURT: Well, except that they were drinking and

4 laughing together --

5 MR. McCUNE: That they had a --

6 THE COURT: -- at Mr. Beach's house.

7 MR. McCUNE: Well, I would say that the description of

8 that as drinking and laughing together is not quite accurate

9 either.

10 THE COURT: I'll look through it and I'll explain to

11 you from the transcript where that appears, and we'll talk about

12 that later.

13 I'll go ahead and address the rest of this. All right.

14 First thing is, I'm going to read from the work-up that was done.

15 The work-up was done by Erin Orzel, who's here in court, and I'm

16 not going to take credit for it. I went through it and I looked

17 at the authorities. And I agree that she writes and expresses

18 herself, more often than not, better than I can, and she's

19 obviously brighter than I am. And I appreciate that. She's

20 probably brighter than almost anybody that does this calendar.

21 So I want to express to her thanks. I've disagreed with her in

22 the past, and I want to indicate that, to be sure. But again,

23 the work she did here, I thought, was extraordinary. So I can't

24 say it any better. So I'm going to state her work-up almost

25 verbatim at certain parts.

26 When that's done, I will also then go through what my

27 general impressions are about this case, because I think this

28 case is extraordinarily ill-advised for a lot of different


1 reasons. But I will be granting the four motions for summary

2 judgments and adjudications on all issues, as requested. I 3 believe that then makes it a matter of law, and the Court of

4 Appeal will independently review the matter. And so,

5 essentially, I am a waystation on the way to the Court of Appeal,

6 which does not bother me one bit. They have more time, they have

7 more resources, and they have the benefit of three justices to 8 talk the matter over, to come to a more proper decision, if I'm

9 wrong. Whatever they decide, I will certainly go along with.

10 I would guess, given the length of the trial, what's

11 happened here, that the attorneys' fees might be approaching as

12 much as a quarter of a million dollars. So I can't imagine the

13 case would end at this point. So I would think that since the

14 briefing is done, the issues are clear, it's a matter of law,

15 there shouldn't be a whole lot of additional cost to have the

16 Court of Appeal review my decision. I would encourage the

17 parties to do so.

18 At any rate, I'm reading now. And she makes this valid

19 point. This is Ms. Orzel. She says, quote, "In large, though,

20 nonconstitutional doctrines are sufficient to dispose of these

21 motions, and," quote, "'a fundamental and longstanding principle

22 of judicial restraint requires that courts avoid reaching 23 constitutional questions in advance of the necessity of deciding

24 them,'" citing Santa Clara County Local Transportation Authority

25 versus Guardino, spelled G-u-a-r-d-i-n-o, 11 Cal.4th 220, at 223.

26 So she did make a conscious effort to avoid the First

27 Amendment wherever possible. And this is what she writes -- and

28 I agree -- "As indicated above, all parties but LSU argue that


1 plaintiffs' claim against them are barred by the common interest

2 privilege, which states that -- which states that privilege

3 attaches to," quote, "'a communication, without malice, to a

4 person interested therein, (1) by one who is also interested,

5 or (2) by one who stands in such a relation to the person

6 interested as to afford a reasonable ground for supposing the

7 motive for the communication to be innocent, or (3) who is

8 requested by the person interested to give the information.'"

9 And that's Civil Code Section 47(c). "This privilege is most

10 often invoked in cases in which an employer talks to current

11 employees about the behavior or reasons for discipline of a

12 former employee. (See Civil Code Section 47(c), Deaile,

13 D-e-a-i-l-e, versus General Telephone Company, 1974, 40

14 Cal.App.3d 841, 846.) In fact, the opposition's sole argument

15 against application of this privilege is that it's been reserved

16 for employers who want to," quote, "'preserve employee morale and

17 job efficiency,'" citing to the opposition to the MSJ/MSA by PUC 18 and NAD at page 15, line 20.

19 "To the contrary," quote, "'the common interest of the

20 members of a church in church matters is sufficient to give rise

21 to a qualified privilege to communications between members on

22 subjects relating to the church's interest.' (Brewer versus 23 Second Baptist Church of Los Angeles, 48" -- I'm sorry -- "1948

24 case, 32 Cal.App." -- sorry -- "32 Cal.2d 791, 796, (Brewer).)

25 There appears to be no dispute that Graham, who is the president

26 of PUC and chair of LSU's board of trustees, Jackson, who is the

27 president of NAD, and Blackmer, who is NAD's vice president of

28 education, count as members of the church for these purposes.


1 Plaintiffs completely ignore the possibility that Graham,

2 Blackmer, and Jackson communicated with each other about

3 plaintiffs out of concern that the recording, which had gone

4 public, would damage the church because it appeared to contain

5 proof that plaintiffs had violated church tenets. In fact,

6 plaintiffs don't dispute that Jackson has the right to offer

7 opinion and counsel to LSU. (Response to NAD and PUC's separate

8 statement, Fact Number 38.)"

9 In fact, I think I read somewhere that the church --

10 they called it suasion -- I never heard of that word, but I guess

11 it's short for persuasion, s-u-a-s-i-o-n -- is common. So it's

12 inconceivable to me that if you have a recording like this, that

13 the president of the North American Division would not be

14 communicating with everybody connected with the church about

15 what's going on here and what's the right thing to do. And I

16 don't see why you wouldn't expect the North American Division

17 to -- to try to persuade and make its position clear as to what

18 they think the right thing should be to do. People do that all

19 the time within areas of concern to them. And I would think that

20 this recording would be a matter of legitimate concern to

21 everybody connected to the Latter -- to the Seventh-day Adventist

22 Church. But I'll continue.

23 "In my view, NAD and PUC meet their initial burden of

24 proving the common interest privilege absolves them of liability

25 on any claim alleging communications as the basis for liability

26 because they offer declarations from Jackson, Graham, and

27 Blackmer, who assert that they became involved with the

28 transcript because Blackmer obtained it, was dismayed at what he


1 heard, and passed it on to Jackson, who got upset and gave it to

2 Graham, who also became dismayed and decided to request

3 resignation letters from plaintiffs." That's Graham's

4 declaration, paragraph 7, page 255 of electronic copy of exhibits

5 accompanying NAD and PUC's motion; Jackson's declaration, at

6 paragraph 7 to 10, pages 262-263 of electronic copy of exhibits;

7 Blackmer's declaration, paragraph 6, page 266 of exhibits. "I

8 don't think plaintiffs met their opposing burden for the reasons

9 set forth below.

10 "Plaintiffs offer no reason of any kind why the

11 conversations these individuals had with each other about the

12 recording aren't subject to the common interest privilege, even 13 though the conversations were motivated by a fear about the

14 effect of the recording's release upon the church. Instead, they

15 attempt to show that Blackmer and Jackson did more than just hand 16 the matter over to Graham so he could decide how to handle

17 disciplining plaintiffs, and alleged that they, in fact, ordered

18 Graham to get rid of plaintiffs. In my view, this does no more

19 than to highlight the extent to which Blackmer and Jackson were

20 concerned about their church, since all plaintiffs arguably show

21 is that they made efforts to have the recording transcribed and

22 that Jackson really, really wanted LSU to start complying with

23 church doctrine regarding teaching creation. Plaintiffs offer

24 testimony from Robert Andringa," A-n-d-r-i-n-g-a, "Ph.D., who at

25 some point consulted with some of the parties about the propriety

26 of LSU's actions, because he opines that Graham acted

27 improvidently in requesting resignations, but they make no effort

28 to show why this lone opinion means that Blackmer, Graham, and


1 Jackson weren't concerned church members who wanted to address

2 public perceptions of impropriety.

3 "The common interest privilege affects the following

4 causes of action in the following ways.

5 "The fifth cause of action for interference with

6 contract is alleged against PUC, NAD, Graham, Blackmer, and

7 Jackson. Plaintiffs allege each of these defendants disregarded

8 LSU's corporate structure and caused LSU to breach their

9 employment agreements. TA -- Third Amended Complaint, paragraph

10 153. As to Blackmer and Jackson, however, the most plaintiffs

11 have alleged is that they talked to Graham about their concerns.

12 As set forth above, these comments can't create liability to

13 the -- due to the common interest privilege. I recommend

14 granting the motion as to Blackmer and Jackson as to -- and as to

15 NAD, because it's only alleged vicariously liable for the actions

16 of Blackmer and Jackson.

17 "Graham is a bit more complicated. I think there's

18 probably something to the idea that Graham's act of demanding

19 resignations goes beyond what he said, such that the common

20 interest privilege can't apply. However, as set forth below, I

21 think Graham's actions are subject to managerial privilege, which 22 generally relieves employees with managerial authority of

23 liability for inducing breach of an employment contract by the

24 employer. (See Halvorsen, H-a-l-v-o-r-s-e-n, versus Aramark

25 Uniform Services, Inc., 65 Cal.App.4th 1383 at 1391, 1392.)

26 Plaintiffs' opposition brief insists Graham stood to individually

27 benefit from his actions, such that he can't claim protection

28 from managerial privilege. (See, namely, Graw, G-r-a-w, versus


1 Los Angeles County Metropolitan Transportation Authority,

2 (C.D.Cal. 1999) 52 Fed.Supp.2d 1152.) However, they present very

3 little evidence on this point. The most they offer is that he

4 was up for renomination as president of the PUC, such that he had

5 an incentive to follow his superiors', (i.e., Jackson and

6 Blackmer's) orders. Even if Jackson was sitting on the committee

7 charged with deciding whether to renominate Graham, there's no

8 evidence that Jackson or Blackmer were, in fact, Graham's

9 superiors. The bigger problem I have is that this line of

10 argument ignores the fact that Graham submitted plaintiffs'

11 resignations to the LSU board, which then accepted them. The

12 resignations, then, weren't just an act taken by Graham, 13 individually. I see no evidence that Graham's decision to demand

14 resignations was an act of self-interest rather than an act

15 motivated out of concern about the effect of what was said on the

16 recording on the university and/or church. I recommend granting

17 the motion as to him and PUC, which is allegedly vicariously

18 liable for Graham's actions, due to the managerial privilege.

19 This leaves no defendants remaining on this cause of action.

20 "The sixth cause of action for interference with

21 prospective economic relations is premised on the theory that the

22 PUC" -- I'm sorry -- "that PUC and Graham exerted improper

23 influence over LSU and thereby interfered with its economic

24 relationship with plaintiffs. (Third Amended Complaint,

25 paragraph 162.) Because Graham is PUC's president, I see no

26 allegation about any other PUC employees. It looks like PUC can"

27 act -- I'm sorry -- "it looks like PUC can only be vicariously

28 liable if Graham is liable. Based on the above discussion, any


1 attempt to make Graham liable for discussing the recording with

2 plaintiffs or any church member is barred by the common interest

3 privilege.

4 "I'm aware of no authority allowing the Court to extend

5 the managerial privilege outside the context of a cause of action

6 for interference with contract. This cause of action may not be

7 barred by any immunities, but it fails for an independent reason.

8 The elements of a cause of action for interference with

9 prospective economic advantage are, quote, '(1) an economic

10 relationship between the plaintiff and some third party, with the

11 probability of future economic benefit to the plaintiff; (2) the

12 plaintiffs' (sic) knowledge of the relationship; (3) intentional

13 acts on the part of the defendant designed to disrupt the

14 relationship; (4) actual disruption of the relationship; and (5)

15 economic harm to the plaintiff proximately caused by the acts of

16 the defendant.'" And that's citing Korea Supply versus Lockheed

17 Martin Company, 2003, 29 Cal.4th 1134, at 1153. "In addition, a

18 plaintiff must allege some act by the defendant that was, quote,

19 'independently wrongful,' (Ibid., et seq. page 1158.) "Quote,

20 'An act is independently wrongful if it is unlawful, that is, if

21 it is proscribed by some constitutional, statutory, regulatory,

22 common law, or other determinable legal standard,' end quote

23 (Ibid., at 1159). Here, plaintiffs make much of the fact that

24 Graham, by himself, lacked authority to terminate them because

25 only LSU's board could do that. The problem is that they point

26 to no prohibition on his asking them to resign and then

27 submitting the resignations to the board for approval. In other

28 words, there's no proof that Graham actually disregarded LSU's


1 corporate structure because there's no evidence he did something

2 he wasn't authorized to do. I don't see an act that's wrongful

3 by independent legal standard. I recommend granting the motion

4 as to the sixth cause of action for interference with prospective

5 economic advantage.

6 "The seventh cause of action for inducing breach of

7 contract is based on the theory that PUC, NAD, Blackmer, Jackson,

8 and Graham met with Wisbey, LSU's president, and, quote,

9 'persuaded him,' end quote (sic), that it would be to LSU's

10 advantage to sever its ties to plaintiffs." That's Third Amended

11 Complaint, paragraph 167. "As pled, this cause of action falls

12 squarely under the common interest privilege because it seeks to

13 hold defendants liable for what they said out of concern about

14 the recording and plaintiffs' continued employment. I recommend

15 finding the seventh cause of action to be barred by the common

16 interest privilege.

17 "The eighth cause of action for intentional infliction

18 of emotional distress is alleged against all defendants and

19 alleges they engaged in outrageous behavior by publishing the

20 recording and using it to fire or threaten to fire plaintiffs.

21 Again, the Third Amended Complaint, at least in part, attempts to

22 create liability based on what they said. Any such claim is

23 barred by the common interest privilege. To the extent to which

24 the plaintiffs also allege defendants acted outrageously by

25 discharging them, as separate from talking about them, they have

26 to show that this action was, quote, 'extreme and outrageous,'

27 end quote." Cite: Alcorn versus Anbro Engineering, Inc., 1970,

28 2 Cal.3d 493, at 497, 498. "I have a hard time seeing how


1 plaintiffs meet this definition because, as set forth above,

2 they've presented no reason why Graham was prohibited from asking

3 them to resign. It is also extremely hard for me to divorce the

4 act of demanding resignations from the context of a discussion

5 about the propriety of allowing plaintiffs to continue in their

6 positions at LSU despite their divergence with the church about

7 evolution and the acts either committed in or admitted to in the

8 recording. There's also substantial overlap here with the First

9 Amendment defense I discuss below. Because there's enough of a

10 connection between what was done and concern for the church to

11 justify applying the common interest privilege to what the 12 defendants said, I have a hard time saying that any of what they

13 did qualifies as extreme and outrageous. I recommend granting

14 the motion as to the intentional infliction of emotional distress

15 claim, whether because of the common interest privilege or the

16 First Amendment doctrines discussed below.

17 "Finally, the ninth cause of action is for breach of

18 fiduciary duty against Graham solely. Plaintiffs allege he

19 committed this tort by ignoring LSU's structure and disciplinary

20 guidelines and allowing his conflict of interest to cloud his

21 judgment about what was good for LSU, as opposed to what was good 22 for the church. Plaintiffs make much of the fact that LSU is a

23 religious corporation that's separate from NAD and PUC, but they

24 ignore that the bylaws say that LSU is, quote, 'operated by its

25 board of trustees as an integral part of the PUC,' and that the

26 trustees are required to, quote, 'guide the university wisely in

27 fulfilling its mission in higher education in the context of the

28 educational, occupational, moral, spiritual, and social needs and


1 challenges of the Seventh-day Adventist Church,' end quote, and

2 to carry out their duties 'consistent with the policies of the

3 PUC.'" And that's PUC and NAD Exhibit Number 2, paragraph 6.9,

4 6.9w, page 22, 23 of electronic copy. "In addition, officers of

5 PUC and other church organizations are required to be LSU board

6 members." Again, ibid., at page 6 -- I'm sorry -- ibid.,

7 paragraph 6.2, page 21 of electronic copy. And Madam Reporter,

8 I'll give you this when I finish. "Finally, plaintiffs don't

9 dispute that Blackmer's duties include acting as advisor to

10 Seventh-day Adventist universities in North America, including

11 LSU." And that's response to PUC and NAD's separate statement,

12 Fact Number 29. "I again see no acts by Graham that actually

13 exceed his powers and responsibilities as the chair of LSU's

14 board. I recommend granting the motion as to the ninth cause of

15 action.

16 "If the Court agrees with the above analysis, then no

17 claims remain against NAD, PUC, Graham, Blackmer, and Jackson.

18 This renders moot the individual defendants' attacks on the

19 request for punitive damages because there are no surviving

20 causes of action to support an award of such damages."

21 And she goes on to discuss number two. And again, I

22 want to thank you personally, Ms. Orzel.

23 Let me read. "With the exception of the eighth cause

24 of action for intentional infliction of emotional distress, which

25 is alleged against all defendants, none of the above-discussed

26 causes of action is alleged against LSU. I recommend granting

27 its motion as to the intentional infliction of emotional distress

28 claim for the reasons stated above (i.e., I don't see any conduct


1 that qualifies as extreme and outrageous and, as described below,

2 the Court lacks jurisdiction over any inquiry into whether the 3 defendant -- the individual defendants stated concerns about the

4 recording were sincere.)

5 "The causes of action against LSU are the first four,

6 for breaches of express or implied contract, constructive breach

7 of employment contract, and breach of implied covenant of good

8 faith and fair dealing. Plaintiffs' main opposition to the First

9 Amendment argument is that LSU is not a church or, because it's

10 organized separately, a church-run school. They also complain

11 that the motions improperly ask the Court to revisit its ruling

12 on demurrer, but this is a speaking motion on which the Court can

13 look at extrinsic evidence. The work-up on the demurrer was

14 quite clear that the Court might need to look beyond the

15 pleadings to decide the First Amendment issue, such that

16 resolution needed to wait for a later date.

17 "First, it's important to note that, as the replies

18 argue, this is not about what's known as the ministerial

19 exception. The lead case on that doctrine is now Hosanna,

20 H-o-s-a-n-n-a, dash, Tabor Evangelical Lutheran Church & School

21 versus Equal Employment Opportunity Commission, 2012, 132

22 S.Ct.Rptr. (sic) 694, in which the Court held that the exception

23 operates as an affirmative defense in favor of religious

24 employers sued under employment discrimination laws. (Ibid., see

25 page 699, found at 705-706; see also Henry versus Red Hill

26 Evangelical Lutheran Church of Tustin, 2001, 201 Cal.App.4th

27 1041, at 1049, 1050 [exception to the Fair Employment and Housing

28 Act, in parentheses, (FEHA)]. And then there's Parker-Bigback


1 versus St. Labre, L-a-b-r-e, School, 2003. That's 301 MT 16, at

2 20 [exception to state law prohibiting discrimination in

3 employment].) Here, there are no statutory employment claims.

4 Instead, plaintiffs ground their causes of action against LSU in

5 contract and the implied covenant of good faith and fair dealing.

6 Hosanna-Tabor, supra, explicitly held that it was 'expressing no

7 view on whether the exception bars other types of suits,

8 including actions by employees alleging breach of contract or

9 tortious conduct by their religious employers.'" And that's 132

10 S.Ct.Rptr. (sic) at 710. "I've found no authority indicating

11 that the ministerial exception is the only framework for

12 analyzing claims -- for analyzing claims based on that -- I'm

13 sorry -- claims nonstatutory, based on employment.

14 "What is at stake here, and where I found authority, is

15 the extent to which the Court has the power to decide questions

16 relating to church doctrine. Even some of the statutory

17 employment cases provide insight into this more global question.

18 For example, in Equal Employment Opportunity Commission versus

19 Mississippi College, 5th Cir. 1980, 626 Fed.2d 477, the Court

20 considered whether Section 702 of Title 7, which makes the

21 statutory scheme inapplicable to certain religious employers,

22 prevented enforcement of a subpoena in an action brought by the

23 Equal Employment Opportunity Commission" -- that's the EEOC --

24 "after it received allegations that a college owned and operated

25 by the Baptist 'Convention' had a practice of discriminating

26 against African-Americans and women in employment." That's 626

27 Fed.2d at 484. "The college argued it had refused to grant

28 full-time employment to particular female employee -- to a


1 particular female employee not because she was female, but

2 because she wasn't a Baptist, and that the Court lacked

3 jurisdiction to say the school couldn't enforce a policy of 4 preferring Baptists in hiring decisions. The Court wrote:

5 "'We conclude that if a religious institution of the

6 kind described in s 702 presents convincing evidence that the

7 challenged employment practice resulted from discrimination on

8 the basis of religion, s 702 deprives the EEOC of jurisdiction to 9 investigate further to determine whether the religious

10 discrimination was a pretext for some other form of

11 discrimination. This interpretation of s 702 is required to

12 avoid the conflicts that would result between rights guaranteed

13 by the religion clauses of the First Amendment and the EEOC's

14 exercise of jurisdiction over religious educational 15 institutions." And it's ibid., at 486. "In other words, not

16 even allegations of pretext will evade the jurisdictional bar the 17 First Amendment poses when it applies.

18 "Plaintiffs' opposition relies exclusively on

19 Mississippi College and Winbery versus Louisiana College,

20 3d. Cir. 2013, 124 So.3d 1212, in both of which the Court found

21 that the sectarian nature of the schools that employed the

22 plaintiffs meant that some portion of the First Amendment

23 defenses asserted there fail. (Mississippi College, supra,

24 626 Fed.2d, at pages 486, 488; Winbery, supra, page 1215 at 1218

25 (sic).) Oddly, Mississippi College performs this analysis under

26 the establishment clause, while Winbery does so under the free

27 exercise clause, but this particular type of confusion isn't

28 unusual.


1 "What plaintiffs omit, and what the replies point out,

2 is that both Winbery and Mississippi College actually support

3 application of the First Amendment defense in this case.

4 Mississippi College arises in an odd context because it's really

5 a discovery dispute. The opinion's disposition was an order of

6 remand to the District Court for determination of, among other

7 things, whether the part-time teacher had been refused the

8 full-time position because she wasn't a Baptist. If so, the

9 Court agreed that Section 702 of Title 7 would apply and the

10 Court would lack jurisdiction." That's 626 Fed.2d, at page 486, 11 489. "An elucidating footnote offers a hypothetical and

12 indicates that it would be permissible for the college's practice

13 of preferring Baptists to disparately" -- I read this part, and I

14 think the point was that if the college essentially only

15 recruited at white Baptist schools to avoid hiring blacks, there

16 might still be a litigation. But if, essentially, they fairly go

17 to all Baptist schools and hire just Baptists, it then would be 18 outside the jurisdiction of Section 702. But I'll continue: 19 "Even though Section 702 and Title 7 aren't at issue here, the

20 same reasoning underlying the above analysis applies here. It's

21 very much worth noting that the Court reached these conclusions

22 despite the fact that it emphatically found that the college was

23 sectarian.

24 "Similarly, in Winbery, supra, the Court held that

25 while the free exercise clause of the First Amendment poses no

26 bar to jurisdiction, the establishment clause did. The 27 plaintiffs there alleged causes of action for defamation and

28 breach of a settlement agreement that was executed in an earlier


1 lawsuit they filed against their university employer." That's

2 124 So.3d, at 1213. "It's interesting that the free exercise

3 claim was that the ministerial exception barred jurisdiction 4 because the teachers qualified as, quote, 'ministers,' end quote,

5 within the church. This cuts against my earlier recommendation

6 that this exception only applies to statutory employment claims.

7 But given the reply's assertions that the defendants here aren't

8 arguing the ministerial exception, this wrinkle is immaterial.

9 What's helpful from Winbery is its discussion of the entanglement

10 doctrine, which, quote, 'provides that a court must decline

11 jurisdiction over a lawsuit when the dispute is so intertwined 12 with matters of religion that a proper resolution cannot be made

13 without interpreting or choosing between competing religious

14 principles or doctrines,'" ibid., at 1218. "The Court then

15 rejected the plaintiffs' claims that the case could be resolved 16 according to 'neutral principles of law without excessive

17 entanglements,' end quote. This was because, quote, 'to

18 determine whether the accusations that professors were teaching

19 errant views, the Court would have to 'delve deeply into the

20 Baptist theology,' and the other causes of action would require a

21 similar analysis of church doctrine.

22 "California law is in accord, and California courts

23 emphasize that, quote, 'Civil courts cannot interfere in disputes

24 relating to religious doctrine, practice, faith, ecclesiastical

25 rule, discipline, custom, law, or polity.'" And that's New

26 versus Kroeger, 167 Cal.App.4th 800, at 815. "This deference to

27 churches is at its height when the church is considered, quote,

28 'hierarchical,' end quote, or, quote, 'one in which individual


1 churches are organized as a body with other churches having

2 similar faith and doctrines, and a common ruling convocation or

3 ecclesiastical head,' end quote, 'vested with ultimate

4 ecclesiastical authority over individual congregations and

5 members of the entire organized church,' end quote. Here,

6 plaintiffs don't really dispute that the SDA is a hierarchical

7 church (see the responses to LSU's separate statement, Fact

8 Numbers 3 and 4.) They do complain that LSU isn't like other

9 educational institutions the SDA Church runs. But, as above,

10 they ignore the bylaws requiring LSU's adherence to SDA tenets.

11 Therefore, it looks to me like the SDA, as a hierarchical church,

12 is entitled to the utmost deference when it comes to selecting

13 who represents the church publicly, whether at SDA schools or

14 otherwise.

15 "Kroeger, supra, is particularly instructive as

16 described below. There, after a group of dissidents purported to

17 resign their memberships and join a different church, loyalist 18 members of an Episcopalian Church filed a complaint under the

19 Corporations Code Section 9418 seeking a declaration that they

20 were, quote, 'the true and lawful directors,' end quote, of the

21 parish in which the dispute arose. The Court held that it could

22 apply neutral principles of corporations law to decide whether

23 the dissidents had properly resigned from the church. However,

24 the Court then held that it must, quote, 'defer to the acts of

25 the representatives of the Episcopal Church in determining who

26 were the true members of the church, and, under canon law, who

27 were the lawful directors of the parish corporation." And that's

28 ibid., at 827. "This is because:


1 "Quote, 'Ecclesiastical decisions are not reviewable by

2 the secular courts ... Where the subject matter of a dispute is 3 purely ecclesiastical in its character, a matter which concerns

4 church discipline or the conformity of its members to the

5 standard of morals required of them, the decision of the church

6 tribunal will not be interfered with by the secular courts either

7 by reviewing their acts or by directing them to proceed in a

8 certain manner, or, in fact, to proceed at all.'" That's ibid.,

9 824.

10 "Similarly, plaintiffs here are asking the Court to

11 decide causes of action against LSU that necessarily require

12 delving into church doctrine. On the causes of action based in

13 contract, LSU" -- I'm sorry -- "plaintiffs argue LSU breached the

14 agreement by constructively discharging them before the end of an

15 express or implied term of employment. LSU responds that it had

16 grounds to terminate, if that's in fact what it did, because the

17 faculty handbook states that any faculty member could be

18 terminated for things such as 'neglect of responsibility' and

19 'flagrant and overt disharmony with or subversion of the

20 philosophy, objectives, and lifestyle expectations of the 21 university, as determined by the board of trustees and delineated

22 in its current mission statement.'" That's Exhibit 15 to motion,

23 paragraph 6.4(b), page 299 of electronic copy. "Plaintiffs don't

24 dispute that they agreed to such terms of employment and instead

25 contend they didn't violate any of these grounds." That's

26 response to LSU's separate statement, Fact Number 68. "The

27 problem with this approach is that, under the authorities cited

28 therein -- cited herein, the Court lacks jurisdiction to say


1 whether any violations of SDA tenets occurred on the recording,

2 or whether any such violations were flagrant and overt. Because

3 I see no way for the Court to adjudicate the causes of action for 4 breach of contract (and, therefore, the one for breach of the

5 implied covenant of good faith and fair dealing, which uses the

6 same arguments by plaintiffs) without having to decide questions

7 of church doctrine, I see no way for the Court to have

8 jurisdiction over these claims." 9 We're going to take about a ten-minute recess for the

10 court reporter. And then we'll resume again in ten minutes.

11 (Recess.)

12 THE COURT: I'll recall RIC1112557, Kaatz, Beach, and

13 Bradley versus Graham, et al. All the counsel are present.

14 I'll continue. And I'm almost done. As I've told

15 jurors when I read jury instructions, it's difficult to pay 16 attention even if you are potentially interested in and, unless

17 you had a photographic memory, remember everything that was said.

18 So I do apologize to some degree. Reading to people is probably

19 the most ineffective way of communicating. But this is -- I'm,

20 in a sense, making a record that I want to be clear, and I

21 couldn't say it any better. So just bear with me. I'm almost 22 done.

23 And I'll continue exactly where I left off: "It is

24 immaterial that plaintiffs weren't teaching religion. For

25 example, in Silo versus CHW Medical Foundation, 2002, 27 Cal.4th

26 1097, 1103, the Court reversed rulings allowing the claims of a

27 janitor at a Catholic-owned hospital for termination in violation 28 of public policy, even though his religious employer was exempt


1 from FEHA, to proceed. The termination occurred because the

2 janitor was -- had a practice of proselytizing at work even 3 though the hospital wanted to be open to people of all faiths."

4 Ibid., at 1101. "The Court wrote the following in response to

5 the argument that the plaintiff was just a janitor: 6 "'Silo's argument that he was merely a low-level

7 employee who did not help to shape CHWMF's religious message does

8 not assist him. CHWMF's problem was not that Silo failed to

9 properly perform a religious function that had been assigned to

10 him, but rather he was engaged in religious communications --

11 proselytizing and other forms of religious speech -- that the

12 employer neither authorized nor considered appropriate.'" Ibid.,

13 at 1108.

14 "Similarly, it seems here that the extent to which

15 plaintiffs actually taught religion or otherwise acted as

16 'ministers' is completely irrelevant, because even if they

17 didn't, the church is entitled to make its own decisions about

18 how to respond when employees of a church-run school are deemed

19 to have violated SDA doctrine.

20 "For all these reasons, I think the Court lacks

21 jurisdiction over the breach of contract and implied covenant 22 claims. The same analysis leads me to the same conclusion on the

23 intentional infliction of emotional distress" -- I'm sorry. "The

24 same analysis leads me to the same conclusion on the intentional

25 infliction of emotional distress claim, which is the only other

26 cause of action alleged against LSU. In order to find that LSU

27 or any defendant has acted in an extreme or outrageous manner,

28 the Court would have to find that church doctrine wasn't actually


1 violated, or that it -- or that it wasn't violated enough to

2 justify the defendants' collective reactions. 3 "All in all, then, I recommend granting all four

4 motions. This is an interesting case with an odd fact pattern,"

5 and she has little doubt that it will end up on appeal.

6 Now, as to the evidentiary rulings, "Plaintiffs made no

7 evidentiary objections except, occasionally, in their response to 8 defendants' separate statements. I recommend ignoring these

9 because they don't comply with California Rules of Court, Rules

10 3.1352 and 3.1354, which require a separate filing following a

11 particular format. Defendants did lodge objections, but it's all 12 to evidence I didn't use. The objections are, therefore, moot, 13 and I recommend overruling them," which I do.

14 As to joinder, "Blackmer, Jackson, and Graham all 15 purported to join each others' motions. Because I recommend 16 granting their motions on the merits, their joinders are needless 17 and irrelevant. They also fail procedurally" as -- "they also

18 fail as procedurally improper because they didn't file separate

19 statements or explain why the motions by the other parties apply

20 to them with equal force. This is reason to deny their attempt

21 to benefit from the work of a codefendant."

22 Now, it is true that in some of the motions -- and I

23 thank you for that -- rather than repeating them, they just 24 reference what was said before in terms of argument. That's not

25 the same thing as incorporation, and I did not think it as such.

26 Now, let me step back and speak from my larger

27 impressions of this case. First of all, I'm not a Seventh-day

28 Adventist. I think some of the specific beliefs, as part of


1 church doctrine, are not things that I believe in. I would think

2 that, in my personal view, evolution is probably taught in

3 biology and creationism is probably taught in a religious course.

4 I think, however, that the Seventh-day Adventist Church

5 does a great deal of good. They're obviously a positive force in

6 terms of their teaching and the values they teach. But there are

7 lots of churches similar to the Latter-day -- the -- I keep

8 saying Latter-day Saints because, again, I have the same feeling

9 about the Latter-day Saints. I think some of their beliefs are

10 kind of strange and I don't buy into them. But again, I think

11 they do good work and are a positive force, and the same for most

12 religions.

13 But again, the thing that's clear is people are

14 entitled to have their religions, practice their religions, allow

15 them to set up high schools, colleges, universities essentially

16 within the guidelines of wha

Documents

3.5.14 Hearing Transcript